RACV Insurance Pty Ltd v Unisys Australia Ltd [2001] VSC 300

2. This is a claim for damages arising from a computerisation project that went wrong.

5. The idea was simple enough. A substantial motor vehicle insurer with claims operations conducted at seven locations processing 70,000 or so claims per annum involving about 1,000,000 pieces of paper, seeks to reform its work processes to produce speedier and more efficient handling of claims, cost savings and increased client satisfaction. How is this to be achieved? The answer is: re-design the processes involved in handling claims and then implement the changes by way of a new computer-based system incorporating the imaging of documents and the electronic storage and retrieval of information. That leads the insurance company to deal with a corporation of substantial size and experience in computer technology and commercial solutions, which agrees to design, supply and install the desired workflow management system based on the imaging of documents. This system, with the electronic storage and retrieval of information to a screen at the employee's desk, would replace the existing paper-based system under which files were stored, retrieved and handled manually. Conceptually it seemed clear.

8. Yet from a contract in December 1993, to the complete failure of a system handed over as complete in March 1995, to the termination of work on the second attempt in June 1996, and then to the present litigation, there is nothing to see, apart from the bitter experience, but years of wasted money and effort. As if that was not enough, these two corporations, apparently possessed of sufficient if not spare resources to enable them to do so, have now devoted relatively huge amounts of time and money in slugging it out in court for 32 days in an unedifying and possibly pointless fight over past events, in a contest as to who was at fault. The insurer was RACV Insurance Pty Ltd ("RACVI"), a subsidiary of Royal Automobile Club of Victoria ("RACV"). The party who contracted with RACVI to design, supply and install the computer system was Unisys Australia Ltd ("Unisys"), a United States corporation registered in Australia. RACVI claims that Unisys contravened s. 52 of the Trade Practices Act 1974 or broke the contract, and claims damages accordingly.

11. The writ was filed on 20 December 1996. There were two plaintiffs and three defendants. The plaintiffs were RACVI and RACV Group Services Pty Ltd ("RACVGS") formerly called RACV Data Processing Pty Ltd. RACVGS is also a subsidiary of RACV.

14. RACVGS was the entity within the RACV group that was responsible for the procurement of computers and related equipment for entities in the group. It also provided information technology services to RACVI. As long ago as 23 February 1979 it had entered into a written agreement with RACVI for the provision of data processing services. Hence RACVGS employed persons skilled in information technology. Further, although RACVI was the named contracting party in the written contract with Unisys the equipment was, in fact, to be acquired by RACVGS on behalf of RACVI. To that end, RACVI provided finance for the purchase of the equipment. In the result RACVGS made payments to Unisys and to third parties and devoted considerable effort and staff time to the project. It was joined as a plaintiff to recover these costs.

17. In addition to Unisys, which was the first defendant named in the writ, Deloitte Ross Tohmatsu and Deloitte Touche Tohmatsu, were respectively named as the second and third defendants. This is the accounting firm commonly (and in this judgment) referred to as Deloittes. It was sued in the name of the firm as it was called at different times in the relevant period. Deloittes involvement arose out of the fact that pursuant to an engagement from RACVI it assisted and advised RACVI on the matter of the new workflow management and imaging system both prior and subsequent to the engagement of Unisys.

20. The plaintiffs and Deloittes reached a settlement prior to the trial. They signed terms of settlement on 29 August 2000. Deloittes agreed to pay the plaintiffs a stipulated sum on 15 September 2000 in full settlement of all claims. The settlement sum was not appropriated to the claims, interest or costs. If Unisys is liable to pay damages there is an issue as to the extent to which the settlement sum is to be brought to account in reduction of as to defect the amount payable by Unisys. It is common ground that for that purpose the GST on the settlement sum paid by Deloittes is to be ignored. The plaintiffs derived no benefit from it as they paid the amount to the Commissioner of Taxation and Deloittes is entitled to a credit for the amount. I have not mentioned the settlement sum in view of a confidentiality clause in the terms.

23. It is appropriate to make some reference to the nature and size of the trial which took 32 sitting days. The trial was conducted on witness statements with a court book. By the end of the trial the plaintiffs had called 10 witnesses and Unisys 12 one of whom had not provided a witness statement. In addition, six witness statements and one affidavit were received into evidence by consent without the necessity to call the witness. There were three witness statements from one witness and two from another. The evidence was of a factual and technical nature concerning the computer system. To the close of evidence the transcript ran to 2,731 pages. It extended to 3,178 pages by the close of final addresses in which counsel spoke to written submissions which ran to 378 pages and five supporting files of authorities. Then, six weeks later, on 15 May 2001 Unisys applied for leave to amend its defence to raise a new point; following a hearing the application was withdrawn (see [54] below). At the outset of the trial the court book consisted of 49 lever arch files (vol. 1 devoted to the pleadings) which contained 18,935 pages. I also was given another lever arch file which contained the December 1993 agreement and which seemed to comprise several hundred pages at least. When finally tendered at the conclusion of evidence the court book was reduced, by the agreed discarding of thousands of pages, to 28 volumes including vol. 1 containing the pleadings. I am, however, left with many thousands of pages of oral and documentary evidence. In the practical world, in which other litigants are prevented, by litigation such as the present indulged in by parties with deep pockets, from getting their cases on, or whose cases are refixed because of limited judicial resources, there must be a limit on the extent of the time I can take to discuss and analyse the documents and the evidence in this judgment, let alone scour the thousands of pages to see what is there to which little or no reference has been made. I am, as I must be, guided by counsel's final addresses in identifying the issues and the relevant materials. I emphasise though, that even then, they did not at that stage refer to every possible piece of evidence. That is for the obvious reason that it was impractical to do so and because so much of it was not necessary to refer to for the resolution of the issues as they were finally left for determination. I do emphasise that in arriving at these reasons for judgment I have read and considered, subsequent to their making, all that counsel said in final addresses, both oral and written, and in their opening addresses, and the evidence of the witnesses.

27. In this judgment the following expressions bear the following meaning and relate to the following facts and matters:

Means the Motor Vehicle Claims Workflow Management Study prepared by Deloittes in December 1992.

Means the Functional Specification dated March 1994 prepared by RACVI

Means a set of hardware and software products used in combination to constitute a product called InfoImage provided by Unisys and customised for clients.

Means the Unisys response to the RFP dated July 1993.

Means the local area network of RACVI consisting of a network of cabling, hubs and routers connecting the personal computers of claims officers to the Unisys workflow system.

Means the supplementary Unisys response to the RFP dated October 1993.

Means the Project Management Plan dated 24 December 1993.

Means the document issued by RACVI titled Workflow Management Project - Motor Vehicle Claims, Vendor Symposia Briefing dated March 1993; and referred to as the request for information.

Means the document issued by RACVI titled Workflow Management and Imaging System, request for proposal dated June 1993.

Means the contract made 24 December 1993 between RACVI and Unisys.

Means a software package developed by RACVIS to operate as the interface between the RACV mainframe computer and the Unisys WMS system.

Means the Workflow Narrative dated May 1994 version 2.2 approved by Unisys and accepted by the plaintiffs

35. The following witnesses were called by the plaintiffs:

(a) Robert Alexander Mitchelson who was general manager of RACVI at all relevant times until he retired in December 1995. He was the senior management person responsible to the board of RACVI and to the chief executive officer of RACV. He signed the Unisys contract on behalf of RACVI.

(b) David Charles Hurford who from 1992 was assistant general manager of RACVI reporting to Mitchelson and in January 1996 was appointed general manager following Mitchelson's retirement. He continued in that position until 30 March 2000 when he retired from RACVI.

(c) Paul Arthur Lang who was employed by RACVI as claims services manager between September 1992 and December 1996 inclusive when he retired from RACVI. He reported to the general manager.

(d) Lisa Joy Chesson-Kistas who was employed by RACVI as a claims consultant in the motor vehicle section. By reason of her expertise in the claims area she was involved in the project from 1992 and on a full-time basis from at least November 1993 to its end in June 1996.

(e) Craig Donald Haw who as an employee of RACVGS worked full-time on the project from February 1994 until it ended in June 1996. He was responsible for technical input in respect of the interfaces between the Unisys workflow and electronic imaging system and the existing RACV computer system. He was not responsible for any aspect of the Unisys system including its design, functionality and performance. He is now employed by RACV as Unix administrator.

(f) Justin Taylor Doherty (formerly Clack) who was employed by RACVI from 2 February 1993 until 15 August 1997. He was project assistant and later project operations manager for RACVI during the implementation of the Unisys WMS system. He was responsible for RACVI's day to day operational issues relating to the WMS. He worked full-time on the project from August 1994 until the start of July 1995 except for November 1994 and from July 1995 to end June 1996 was almost full-time.

(g) Dennis Hakme, who as an employee of Memorex Telex conducted an analysis of the LAN in the March to May 1996 period.

(h) Peter Malcolm Jenkins who was finance manager of RACVI in 1996 and is now employed by RACV. He produced accounting records of RACVI relating to and recording the payment of various accounts and wages information to establish items in the plaintiffs' particulars of loss and damage.

(i) Gregory Errol Blashki, an independent accountant, who as an expert gave opinion evidence to establish a general increase in labour costs suffered by RACVI as a result of the Unisys contract.

(j) Peter George Thorne, a consultant and a principal fellow in the Department of Computer Science and Software Engineering at the University of Melbourne. He was formerly head of the school of computer science located in the science and engineering faculty and deputy dean of the latter, although having moved from being a full-time staff member to more of an associate capacity with some teaching and research, he retains the rank of reader and associate professor.

(k) The following three witnesses whose evidence in witness statement form was tendered by consent without the need to call the witness:

(i) Glen Williamson who as an employee of FileNet tested the Unisys system in November 1997. The statement was provided following a critical comment on the testing in a report of an independent expert engaged by Unisys, Brian Bertram Hesom.

(ii) Benjamin Connell, an employee of RACVGS, whose brief witness statement was likewise directed to dealing with statements in Hesom's reports.

(iii) Heath Jarrad Sheftz who in 1996 was employed by RACVGS as a PC support technician and whose brief statement dealt with an issue raised in two Unisys witness statements as to the effect of the RACVI PCs on the performance of the WMS system in terms of response times.

44. The following witnesses were called by Unisys:

(a) Craig Mitchell Felsenthal, an employee of Unisys, who in 1993 was customer relationship manager, and who was the first at Unisys to become aware of the RACV project.

(b) Brian Patrick Josephson, who was employed by Unisys from April 1987 until May 1996. He became the marketing manager for InfoImage shortly before its launch in October 1989 and in 1994 and 1995 was the lead sales specialist for the product. His involvement in the RACV project commenced in early 1993 and concluded shortly after the Unisys contract was signed.

(c) Ruth Elizabeth Willis, an employee of Unisys with a background in mainframe development of software. She had no experience with the InfoImage product when she became involved in the RACVI project. She was bid manager for the production of Unisys' response to RACVI's request for proposal and worked on the bid until the contract and subsequently as a project manager to manage the environment (but not the technology) including risk and issue management. She scheduled staff to perform the technological aspects of the implementation, gave tasks and a completion date and checked what they had done. Her involvement ceased in April 1995 following RACVI's acceptance of the system. She is no longer employed by Unisys.

(d) Vincent Joseph Wall who from 1994 to 1996 was employed by Unisys in the management consulting group to work in imaging and workflow. He was involved in several aspects of the RACV project from the commencement of his employment in early 1994 until sign-off in March 1995.

(e) Neil John McFarlane, an employee of Unisys who was involved with the WMS project at several points. Pre-contract he provided advice as to the capacity of the LAN at RACV to support a WMS system which used InfoImage; and in mid 1994 and again in or around March 1996 he was called into to consider the LAN.

(f) John Thomas Chmura, who for some years until 5 December 2000 was an employee of Unisys and its predecessor companies. In his last position he was the systems architect specialising in image document management, workflow and records management and under various titles had worked in that area of computer processing since 1991. His involvement with the RACV project was to run three courses for RACV and Unisys staff at the Unisys office and at the request of Willis work full-time at the RACV from 5 September to 7 November 1994 as a consultant in building the InfoImage solution taking into account the customised functionality. This involved defining the InfoImage application for RACVI, that is, telling the InfoImage system how to behave in doing its work. He taught two more courses late in November 1994 to RACV and Telstra personnel, after which his involvement was almost ended. He returned to RACVI in June 1995 to review problems with the system.

(g) Geoffrey Edmund Olsen, an employee of Unisys between 1991 and 1999. He worked on the project from the first to the last. He assisted in the demonstration in May 1993 and thereafter worked on technical aspects as a member of the team and in that respect on the configuration of the system to be installed and following the award of the contract he was engaged full-time on the implementation of the InfoImage system until the project was terminated in June 1996. He gave evidence over five days.

(h) Kenneth Ross Johnson who commenced employment with Unisys on 23 May 1994 as a consultant for the imaging services division. He said he was employed with a view to becoming a systems administrator for RACVI system and as such be on site during the warranty period. He was assigned to the RACV project in June 1994 at RACVI's office, read materials on InfoImage and attended lectures by Chmura, and performed a variety of tasks in developing the system. In August 1995 he attended a meeting at Plymouth in the United States to discuss the rebuild of the system. He continued to be involved up to termination of the project in June 1996.

(i) James Joseph Esmonde, who since December 1994 has been employed by Unisys as the service delivery manager in Cross Industries. He became involved with the RACVI project in May 1995. While Birthisel was on the technical side, Esmonde worked on the business management side. His role, he said, was not "getting involved deeply into the technical aspects of products; it was to ensure that we had resources available to do that sort of thing". An instance is that he requested Birthisel be appointed to project manage the team. He also performed a liaison role with RACVI. He was involved to termination in June 1996.

(j) David Vernon Birthisel, a Manager in Unisys' systems integration practice who has been employed in various roles by Unisys since March 1986. His involvement with the RACV project commenced in May 1995 when he succeeded Willis as Project Manager. He reviewed the system that had been accepted in March 1995. He recommended that RACVI stop adding new claims (which meant handling them on the old manual paper-based process) and shortly thereafter recommended that the Unisys system be abandoned altogether and that RACVI fully return to the manual system, and that the Unisys system be rebuilt. He was involved through the subsequent rebuild of the system until the termination of the project in June 1996.

(k) The following witnesses whose evidence in witness statement or affidavit form was tendered by consent without the need to call the witness:

(i) Kevin d'Souza who has been employed by Unisys since 1993 as a technical specialist with a background in designing and developing operating systems. In a short witness statement he referred to specific involvements with the RACVI project, initially at the request of Willis in or around late 1994 when over a couple of months he completed some self-contained tasks in conjunction with Wall and Olsen, and some time later at the request of Birthisel.

(ii) Daniel Rouqueirol who has been employed by Unisys since 1986 and is a program manager. His involvement commenced in early 1994 when he was primarily responsible for getting a team together to work on the RACVI project. He chose people who had been involved in the pre-sale, and who included Willis, Olsen and Wall. His short witness statement referred to a few matters and said his involvement ended when the system was accepted and went live around April 1995.

(iii) William H. Maier, a former employee of Unisys Corporation who retired in November 2000. He had been a software support manager since 1991. He described the support group system in the United States and how it operates including sending analysts to customer installations overseas and, after a brief reference to the number and range of customers using InfoImage and to the Unisys or NT platform, he referred generally and with somewhat broad observations, to the RACV project.

(iv) Michael Aaron Bromberg who, as associate general counsel for Unisys Corporation, produced the following copy licence agreements: an agreement between Unisys Corporation and FileNet Corporation dated 3 August, and an agreement between Unisys Corporation, Sigma Imaging Systems Inc. and Empire Blue Cross and Blue Shield Inc. dated 17 March 1990.

(l) Brian Bertram Hesom, an independent consultant with experience in computer technology including process redesign and the implementation of new processes. He gave opinion evidence as to a report he had prepared (which was tendered) in which he answered a series of questions put to him by Unisys' solicitors.

(m) Duncan Nicholas MacCallum who is now a partner in Deloittes Consulting but who at the times relevant to this case was employed by Deloittes as a principal consultant and whose expertise was in information technology. In August 1992 Deloittes was engaged by RACVI to provide consultancy services in the re-engineering of the process and systems in its motor claims business. MacCallum was the lead person for Deloittes. He was involved both pre and post-contract although not continuously in the post-contract period. He gave evidence on a variety of matters. A witness statement had not been provided for him as a result, as I understood it, of Deloittes having settled on confidential terms and his reluctance, however inspired, to confer with Unisys' lawyers.

50. What is produced is a very large body of evidence in various forms, written, oral and documentary, and of wide scope and content. The question arises as to the convenient way to deal with it. There is too much to set it out, witness by witness, as to do so with references to the documents would involve an exposition of enormous length and time in preparation. I judge an exercise of such a kind to be unnecessary in the resolution of this case. The appropriate course is to identify the issues in the pleadings, then to set out the background facts in sufficient detail to provide the context in which the dispute arises, and in the course of which make findings of fact, and then identify and resolve the issues counsel left for determination and in the course of doing so deal with the facts relied on and make any necessary findings. I shall proceed accordingly.

53. I conclude this section by noting an attack that each side made on the other in final addresses as to not calling witnesses and the inference to be drawn in consequence. Counsel for the plaintiffs said that without explanation Unisys had failed to call a series of witnesses who had a significant role in events, and identified them as Andrew Walker, Rudra Kumar, Bruce Wilson, Barry Hughes, Bill Walsh, Murray Bergin, David Lupton, Mike Weise, and the seven persons (other than Olsen) named by Willis as having technical knowledge on the Unisys project team. Counsel submitted that the inference to be drawn is that if called none of these persons would have given evidence to assist Unisys' case.

56. Counsel for Unisys objected, in effect, that this submission was a case of the pot calling the kettle black. That was because there were a number of persons who had been involved in the project and who the plaintiffs did not call without satisfactory explanation for the failure. This point was made during the trial, when evidence was being given. It is sufficient in this respect to refer to Robinson, Monument, Lourdes, Rutzou and Wilson. In Robinson's case, a witness statement had been served but he was not called. From time to time counsel also referred to Green but in doing so he overlooked the evidence that he died several years ago.

59. It was clear to me that the parties devoted considerable time and resources to the preparation of this case including consideration as to who should give evidence and as to the scope of their evidence. In the result there were witnesses that each side might have called but did not, and without explaining why. I consider it difficult to say that in this respect one side erred to a significant degree more than the other. It is impossible to speculate as to the evidence that any such person might have given. The simple fact is that on each side witnesses who might have been called were not called and the inference is properly to be drawn that if they had been called their evidence would not have assisted the respective case. Beyond that the honours are about even and neither side gains advantage under this head of attack. It was a closely fought case with each side engaging in a deal of considered forensic finessing and adversarial position taking.

64. The statement of claim was amended several times, the last being during the trial. It was an elaborate and complex document. In addition to incorporating particulars provided from time to time it included two annexures, the first being particulars under para. 20 of representations made by Unisys, the second being particulars of loss and damage. In all, the pleading runs to 143 pages. To this pleading Unisys filed a defence and counter-claim and to that, in turn, there is a pleading in reply.

67. By the end of the trial the parties had abandoned a number of the claims or allegations in the pleadings or otherwise clarified their position. It is thus necessary to identify those parts of the pleadings that were relied on at the end of the case and those that were not. Without that clarification it would be impossible to appreciate, from a mere perusal of the pleadings, which issues the parties left for determination.

70. The plaintiffs' claim against Unisys was pleaded on three alternative bases: negligent statements, contravention of s. 52 of the Trade Practices Act, and breach of contract. It was pleaded that Unisys made negligent statements and contravened s. 52 both in the period leading up to the December 1993 contract and subsequently in the period to termination in June 1996. There was but the one plea of breach of contract. This structure of pre and post-contract pleas is explained by the presence in the contract of provisions which limited the amount of damages payable by Unisys (cl. 19(a)(ii)); required termination to be preceded by a notice of default and a failure to rectify within 60 days (cl. 22(a)(ii)); and an entire agreement provision which excluded from the contract written or oral communications not in the written document (cl. 24(d)). The post-contract pleas may be understood as an attempt to avoid these exclusionary or limiting provisions.

73. When the case was opened counsel for the plaintiffs said that primary reliance was placed on the claim under s. 52. The negligent statement case was embraced by the s. 52 case and was unlikely to arise for separate consideration. The claim in contract was alternative and secondary and was complicated by issues concerning the contract provisions just referred to, and issues concerning the two plaintiffs. Hence, counsel proposed that I should deal with the s. 52 claim first and, if that claim succeeded, not deal with the other bases of claim, including the post-contract claims. Consistently, in his final address, counsel for the plaintiffs' placed primary reliance on the claim under s. 52. He said that the contract claim was "subsidiary" and a "fall-back". He addressed no separate submission on the negligent statement case and I take it to be abandoned; counsel's position was that if the plaintiffs could not succeed on the s. 52 claim they would not succeed in negligence.

76. With that introduction I now turn to the pleadings. I do so as summarily as possible. I omit reference to the pleadings concerned with the claim of negligent statements.

80. The pleading of the s. 52 case commences in para. 19. This claim is made by both RACVI and RACVGS. It is alleged that between March and December 1993 Unisys provided information to RACVI (or RACVI and RACVGS) and responded to the RFI and the RFP with a proposal for the supply of hardware and software for a WMS system utilising a suite of products called InfoImage. In extensive particulars "the Unisys proposal" is said to be contained in the July and October 1993 responses, certain correspondence, the InfoImage brochure, and the demonstrations and conversations. In para. 20 it is alleged that in the "proposal" Unisys made a number of representations all of which, in para. 21, are alleged to have been false. They are called the "proposal representations". In his final address counsel for the plaintiffs abandoned reliance on the representations alleged in sub-paras. (i), (l), (m), (n), (q), (r), (s) and (t) of para. 20. The representations relied on are:

(a) the Unisys proposal would: (i) Provide a technically sound solution and platform capable of meeting the business requirements of RACVI and/or RACVGS then and in the future (sub-para. (a)). (ii) Meet the performance and reliability criteria set out in the RFP (sub-para. (b)). (iii) Provide a WMS system catering for the number of staff requiring access to documents (sub-para. (c)). (iv) Provide adequate storage capacity to provide, on a "date-forward" basis, for all open claims on-line, all claims near-line for three months following closure, and closed claims older than three months off-line (sub-para. (d)). (v) Provide high speed image access for on-line claims with a retrieval time in the vicinity of 2-4 seconds (sub-para. (e)), and image access for near-line claims with an expected response time in the vicinity of 20 seconds maximum (sub-para. (f)). (vi) Provide image access using the WMS system which would provide improved customer service for RACVI through faster response and more efficient operations (sub-para. (g)). (vii) Provide a system performance that would not degrade during peak load but would offer highest performance at peak times (sub-para. (h)). (b) Unisys had appropriately skilled staff to work on the WMS project trained in workflow and image management (sub-para. (j)), and in large project implementation (sub-para. (k)). (c) In relation to any prototype demonstration by Unisys - (i) it would utilize the same techniques as Unisys would use in live system developments (sub-para. (o)), and (ii) it would be a live Stage One system for immediate use by RACVI should the project schedule so determine (sub-para. (p)).

84. Moving on in the pleading for a moment, para. 29 pleads the entry into the Unisys contract on 24 December 1993 for the design, supply and installation of a WMS system. It is alleged that RACVI entered into the contract on its own behalf or on behalf of itself and RACVGS. In final address the plaintiffs abandoned the allegation that RACVGS was a party to the contract. That concession was correctly made. It meant that RACVGS was a plaintiff only in respect of the s. 52 claims.

87. In para. 29A(a) it is alleged that RACVI entered into the contract in reliance upon the proposal representations. In sub-para. (b) it is alleged that RACVI entered into the contract in reliance upon representations and advice of Deloittes; understandably enough, RACVI did not pursue that allegation, nor did Unisys seek to establish that in its case.

90. The next part of the pleading to note is para. 29C in which it is alleged that Unisys engaged in conduct in contravention of s. 52. This is the pre-contract plea. The conduct relied on is the making of the proposal representations, or the making of them in a positive and unqualified manner, or (as alleged in paras. 22 and 23) the silence of Unisys in relation to the qualification appearing on p. 10-1 of the July 1993 response or the location of that qualification in the response document without drawing it to the attention of the plaintiffs. Insofar as the proposal representations were with respect to future matters, the plaintiffs rely on s. 51A of the Trade Practices Act (para. 29D).

93. The plea in para. 22 is a little awkward to express in a few words. In essence it alleges:

(a) The qualification on p. 10-1 of the July response was intended by Unisys to negate:

(i) the mandatory performance requirements of the RFP,

(ii) all performance requirements for the WMS system and the contract,

(iii) the proposal representations as to performance alleged in para. 20(a)-(f).

(b) At all times relevant to the contract Unisys was aware from the RFP that the plaintiffs:

(i) required the WMS system to meet the mandatory performance requirement dated in the RFP,

(ii) believed the Unisys proposal met such requirements,

(iii) were unaware of the matters in (a).

(c) Unisys was under a duty to make the plaintiffs aware of its intention in (a) above, but did not do so.

(d) RACVI would not have entered into the contract if it had been aware that the qualification on p. 10-1 would be relied on by Unisys to have the effect referred to in (a).

99. The plea in para. 23 is another way of trying to get to the same result under s. 52. Essentially the allegation is that by placing the qualification on p. 10-1 away from the part of the response where one would have expected the qualification to appear, and not drawing attention to it, Unisys was aware that the qualification might not come to the notice of the plaintiffs or alternatively they might not regard it as negating the representations in the Unisys response as to performance and retrieval times.

102. In para. 29E the plaintiffs allege that they suffered loss and damage as a result of Unisys' contravention of s. 52.

105. The statement of claim then turns to the contract and pleads the terms thereof in para. 30(a)-(k). Of these sub-paras. (b)-(h) inclusive and (k) correspond to the proposal representations in para. 20(a)-(h) and (o), which are summarised in (a), (b) and (c)(i) above at [21]. Two other terms are alleged in para. 30: one is that the hardware and software when designed, delivered and installed would be capable of handling the functional requirements of RACVI (sub-para. (a)); the other, in sub-para. (j), corresponded to one of the abandoned representations and I take it to be abandoned. Indeed I note that in final address counsel for the plaintiffs addressed only on the terms in sub-paras. (a)-(f), (h) and (i) of para. 30.

108. One has now arrived at the point at which the statement of claim concerns itself with post-contract events. Paragraph 31A pleads post-contract conduct and repres-entations for the alternative s. 52 case; this section of the pleading continues to para. 31X with the balance of the s. 52 pleading in paras. 32-33A. For the reasons mentioned the separate pleading of the post-contract negligence case (in paras. 31Y-31ZE) may be ignored. Finally, paras. 36, 37 and 39 concern the claim of breach of contract.

111. In final address counsel for the plaintiffs stated how and to what extent they relied upon the matters alleged in the post-contract s. 52 pleas in paras. 31A-31X. If the plaintiffs succeeded on the pre-contract s. 52 claim there would be no need to separately consider the post-contract s. 52 claim as the former would pick up the several events and facts alleged in relation to the latter and the damages that would apply as a result. Hence, if the pre-contract s. 52 claim succeeded, the post-contract s. 52 claim would not have to be considered. Nor would the post-contract s. 52 claim need to be considered if the breach of contract claim succeeded without cl. 19(a)(ii) applying to reduce the damages. The post-contract s. 52 claim would arise for consideration only if the pre-contract s. 52 claim failed and the contract claim failed altogether or succeeded but cl. 19(a)(ii) limited the damages to an amount less than the actual loss. Only then did the plaintiffs pursue the post-contract s. 52 claims in paras. 31A-31X and, even then, as counsel stated, only to a limited extent. Counsel pursued only the allegation in para. 31I that is alleged to arise from the failure to inform RACVI of the matters set out in para. 31H.

114. The allegation in para. 31H is that in the course of redesigning the WMS system from July 1995 Unisys concluded or ought reasonably have concluded that a WMS system implemented in conformity with such redesign would not comply with the proposal representations and performance criteria in the Unisys proposal and/or the contract. In para. 31I it is alleged that by engaging in the redesign work without informing the plaintiffs of those matters Unisys expressly or impliedly represented that the WMS system when redesigned would comply with the proposal representations and the performance criteria. It is alleged that this conduct contravened s. 52 (para. 32), that s. 51A is relied upon if necessary (para. 32A), that relying upon and induced by the representation the plaintiffs did not terminate but pursued the project with Unisys and expended money and devoted staff time to it (para. 33), and as a result suffered loss and damage (para. 33A).

117. Finally, on the contract claim, it is alleged that Unisys broke the terms alleged in para. 30 (para. 36), that on 27 June 1996 RACVI terminated the contract (para. 37), and had suffered loss and damage. I note that in final address counsel for the plaintiffs contended only for a breach of the terms alleged in para. 36 (a)-(f), (h) and (i). They did not pursue the terms referred to in sub-paras. (g), (j) and (k).

120. It is now appropriate to set out the damages sought. Counsel provided two lists, one for the s. 52 claim and the other for the contract claim.

123. On the s. 52 claim $3,618,773 was sought, made up as follows:

There is no dispute as to the quantum of the amounts in (a) paid to Unisys. Nor, save as to the amount paid to Deloittes, is there an issue as to the quantum of the amounts in (b) paid to the third parties. The issue with Deloittes is not how much Deloittes was paid, but, rather, as to the amount that is properly to be claimed on this account. Item (b)(iv), capital expenditure, was fixed by agreement during the trial at $500,000. Thus while Unisys disputes liability, and with the one exception of item (b)(i) there is no issue as to the quantum of the amounts in items (a) and (b). Item (c) is in a different position. It is disputed in its entirety.

128. It is convenient to note that if the plaintiffs were to succeed on the post-contract s. 52 claim referred to at [29]-[31] a question would arise as to whether any of these amounts, or any part thereof, was not recoverable because the loss was incurred prior to the occurrence of the relevant breach or contravention. In final address counsel for the plaintiffs identified the damages sought under this head of claim as:

The claim is put on the basis that by July 1995 Unisys should have informed RACVI of its knowledge or awareness of the inadequacy of the WMS system referred to in para. 31H (see [31]), that if it had done so RACVI would have terminated the contract and thus would have avoided the subsequent incurring of the above expenses. As it was Unisys did not advise RACVI which continued with the project in ignorance of the truth and incurred the above expenses. Hence the claim.

133. On the alternative contract basis of claim $5,393,855 is sought made up of:

As mentioned above, the quantum of item (a) is admitted. Item (b) is disputed.

138. The statement of claim sought interest pursuant to the principles in Hungerford v Walker. Counsel for the plaintiffs abandoned this claim in his opening address. Also abandoned in opening was a pleaded claim for exemplary or aggravated damages.

142. Commencing for present purposes with the pre-contract s. 52 case, the defence, inter alia, admits that in meetings between March and December 1993 Unisys employees provided information to RACVI employees, admits that Unisys responded to the RFP with "the Unisys proposal" (the expression in para. 19 of the statement of claim), refers to the terms of the proposal for its meaning and effect, alleges it did not provide information to RACVGS and otherwise denies the allegations in the said para. 19. The denial of dealing with RACVGS was repeated throughout the defence.

145. Then, in relation to the pleading of the proposal representations in para. 20 of the statement of claim, the defence:

(a) refers to the Unisys proposal and in particular p. 10-1 of the July response and point 12 on p. 7 of the PMP; (b) denies it made the representations; (c) alternatively, if it made any representation, claims - (i) none was made to RACVGS and RACVGS was not entitled to rely or act upon any such representations; (ii) as to response times, any such representation was negatived on p. 10-1 and point 12 of the PMP which stated that response times were to be finally negotiated once the system required by the functional specifications was installed; (iii) otherwise, if any representation was a matter of opinion, the opinion was honestly held on reasonable grounds; and if it was as to a future mater Unisys had reasonable grounds for making it; and (iv) the representations were not false.

See paras. 14-15J which plead to paras. 20-23 of the statement of claim.

150. Later (in para. 25) the plea of a contravention of s. 52 is denied. An important allegation in paras. 15E and 15J is that even if (as alleged in paras. 22(5) and 23(5) of the statement of claim) it was true that RACVI would not have continued to deal with Unisys or entered into the contract if the plaintiffs had been aware that the qualification on p. 10-1 would be relied on by Unisys to negative performance requirements, the plaintiffs caused their own loss by entering into the contract without reading all the contract documents or understanding their terms and effect. This plea is based on the failure to appreciate the effect of the qualification on p. 10-1 of the July response and point 12 on p. 7 of the PMP. It is further alleged in para. 23 that the plaintiffs did not rely on the proposal representations in entering into the contract but, rather, relied on their own assessment and on representations and advice of Deloittes. Counsel for Unisys did not seek to establish the latter point concerning Deloittes and I took it to be abandoned.

153. In relation to loss and damage, the defence raises an issue of causation. It is alleged that the plaintiffs were the cause of their own loss by entering into the contract without reading the documents constituting it or understanding their terms and effect. This plea is based on the failure to appreciate the effect of the qualification on p. 10-1 of the July response and point 12 on p. 7 of the PMP. It is further alleged that the plaintiffs relied on their own assessment in entering into the contract and on representations and advice of Deloittes.

156. The claim for loss and damage is not admitted in any respect. That is, of course, subject to the admissions or concessions at trial and referred to earlier.

159. The contract is admitted in para. 22 as one wholly in writing. In para. 33 the defence addresses the terms of the contract. It does so briefly. It relies on the written word in the contract documents; refers in particular to cl. 24(d) of the contract (the entire agreement clause), the said p. 10-1 of the July response and point 12 on p. 7 of the PMP; and otherwise denies all the terms alleged by RACVI. Similarly, in relation to breach of the contract, the defence denies the allegation and relies on the terms of the contract and in particular, in relation to response times, on the said p. 10-1 and point 12 (para. 70).

162. I now refer to some parts of the defence which pleaded to the post-contract s. 52 claim. In para. 34 Unisys admits that between December 1993 and March 1995 it undertook design work. In paras. 37 and 38 Unisys alleges that it delivered a WMS system to RACVI in about March 1995 pursuant to and in compliance with the terms of the contract. It referred to the "Acceptance Sign Off" signed by Lang dated 29 March 1995. It denied the allegation of the plaintiffs that it did not comply with the proposal representations and performance criteria in the proposal and/or the contract.

165. It is important to point out here that at an early stage of the trial counsel for Unisys conceded that in fact the system delivered in March 1995 failed, and had to be re-designed before it could function. If the facts had been made admitted in the defence the plaintiffs might properly have required particulars of the respect or respects in which, or as to the reason or reasons why, the system failed and had to be re-designed. By not admitting in the defence what was an undeniable fact, as counsel conceded, Unisys avoided committing itself on the issue pre-trial. The consequence of the denial of the issue in the defence, was that the pleading was misleading and obfuscated on an important issue. Unisys was thus enabled to avoid giving particulars of the fact. It was an important issue for the light it might have thrown on what had happened, and the admission and particulars would have assisted the plaintiffs pre-trial. It would also have saved time at the trial. In any litigation, but in particular litigation such as the present in which the costs must be enormous, the course taken by Unisys was unacceptable and is to be recorded with condemnation.

168. In para. 31G Unisys admitted that it undertook work on the WMS system from in or about mid-October 1995. Unisys denies the allegations in paras. 31H and 31I of the statement of claim; these are the post-contract pleas the plaintiffs rely on. Further to that denial Unisys alleges that if it made the representation in para. 31I it had reasonable grounds for making it and any opinion involved was honestly held (para. 66).

171. In para. 69 Unisys denied that the plaintiffs had suffered loss and damage as a result of the alleged post-contract contravention of s. 52. That general denial stands. But in final address Unisys' counsel expressly abandoned reliance upon the plea in para. 68 that the cause of any such loss and damage was the negligence or breach of contract by Deloittes or its contravention of s. 52.

174. As to the termination of the contract on 27 June 1996 Unisys alleges (in paras. 70 and 71):

(a) It was not then in breach. (b) If it was then "in default of any material condition" of the contract as referred to in cl. 22(a)(ii) thereof, RACVI was entitled to terminate if Unisys had "not rectified the default within 60 days of written notice from you of the default". As RACVI had not given such a notice it was not entitled to terminate the contract. Further, if there was any "default" it would have been rectified within 60 days.

(c) Hence, RACVI had not been entitled to terminate and its actions constituted a repudiation of the contract which Unisys accepted.

181. From this point the defence proceeds to raise some specific matters and then moves to the counterclaim. The remaining matters in the defence are:

(a) On the contract claims cl. 19(a)(ii) was relied on to limit any liability to pay damages to the greater of $100,000 or the total amount paid to Unisys in the 12 months prior to the default giving rise to liability (para. 75A(e)). Counsel for Unisys did not rely on this clause in respect of the s. 52 claim.

(b) The plaintiffs did not mitigate their loss by correcting outstanding problems (para. 75A(f)).

(c) A plea of contributory negligence (para. 76). As expressed the plea was directed, and confined to, the circumstance of a finding that the plaintiffs had suffered loss or damage as a result of any "breach of duty" by Unisys. As thus expressed the plea was made in relation to the claims of negligent statement based in tort. It was also clear from statements of counsel that contributory negligence was not available in respect of the claim in contract and had been considered not to be available in respect of the claim based on a contravention of s. 52. Counsel abandoned the plea in final address.

(d) Further on causation, any loss or damage was caused by RACVI's failure to comply with cls. 5(a) (paras. 76A-76C) and 15(a) (paras. 76D-76F), and by providing numerous system change requests ("SCRs") under cl. 5(c) of the contract (paras. 76G and 76H). Clause 5(a) required RACVI to provide a functional specification. It is alleged that the failure to provide it meant that Unisys could not properly develop the software in accordance with cl. 5(b). Clause 15(a) required RACVI to provide an operating environment in accordance with specifications provided by Unisys and which RACVI did not provide in respect of the LAN and Woozle. Compliance with the SCRs is alleged to have required Unisys to design a system that was fundamentally different to the WMS system as originally proposed by RACVI in the RFP. In para. 76J it is alleged that "accordingly" any loss and damage suffered by the plaintiffs was caused by these matters.

187. In final address counsel for Unisys abandoned the plea in para. 76J. He also abandoned the plea in paras. 76D-76F. That left paras. 76C and 76G and he relied on them only as factors which went to explain why Unisys was on the job as long as it was seeking to perform its task. He did not press paras. 76C and 76H in the sense of pressing reliance on them and seeking affirmative answers in terms of the allegations. For one thing, the claim in para. 76H was not established. That case was not run. More importantly, they were only pleas to establish the defence in para. 76J and that was abandoned.

190. This brings me to the counterclaim. As against RACVI a claim is made:

(a) For $162,968 as the balance owing on invoices rendered by Unisys.

(b) In conversion or detinue for the value of the replacement server provided to RACVI and alleged to remain the property of Unisys, the value being claimed at the Unisys invoice price of $385,360.

(c) For $32,129 for work carried out in accordance with system change requests agreed by the parties.

(d) For $25,738 for the services agreed in or about 19 October 1995 to be performed by an employee of Unisys Geoffrey Edmund Olsen to assist with the development of restart/recovery procedures and test plans. This claim was abandoned in final address.

196. Finally, there is a counterclaim against RACVGS. It is made on the basis that Unisys is found liable to RACVI. It claims contribution in the amount of any liability including interest and costs. The claim is based on the breach by RACVGS of its retainer by RACVI to provide services in relation to the workflow management project. It is alleged in para. 99 that if RACVI suffered any loss and damage as it alleges, the loss and damage was caused by RACVGS's breach of duty and retainer. Counsel for Unisys did not press this claim, indeed it was not mentioned at all in their lengthy and detailed final address. I take it to be abandoned.

200. Little need be said at this stage about the reply and defence to counterclaim. Issue is joined on the defence. In the defence to counter-claim:

(a) It is admitted the amount of $162,968 was not paid but liability is denied on the basis that no benefit was received, or that under the Trade Practices Act the obligation to pay the amount should be set aside or the amount should be added to the damages payable by Unisys.

(b) Possession of the server is admitted. It is alleged that Unisys provided it pursuant to its obligation to rectify a defect. Clause 18(a) and (b) of the contract relating to a warranty period is relied on by RACVI in this respect. There was no separate agreement for its purchase. Hence the server became the property of RACVI. In the alternative, if it remained the property of Unisys, RACVI claimed a lien over it until Unisys met its liabilities, at which time it may be collected; this claim of a lien was not relied on in final address and I take it to be abandoned.

(c) The system change requests are admitted but liability is denied as in (a) above.

206. I conclude this section with a reference to the application to amend the defence made on 15 May, six weeks after the conclusion of final addresses. I referred to this at [8]. The application was inspired by the decision of the Queensland Court of Appeal in I. & L. Securities Pty. Ltd. v. HTW Valuers (Brisbane) Pty. Ltd. [2000] QCA 383, delivered on 22 September 2000, in which it was held that under s. 87(1) of the Trade Practices Act a court could reduce the damages payable to a plaintiff on account of the plaintff's own fault in causing the loss in question. I was informed that counsel for Unisys were not aware of the decision until shortly after the trial. The amendments sought by counsel were:

(a) to para. 76 to extend the plea of contributory negligence to the case of loss or damage suffered as a result of a breach of the Trade Practices Act, and

(b) to add a new para. 76AA to contend that any damages under s. 82 or s. 87 of the Trade Practices Act should be apportioned by taking into account the contributory negligence of the plaintiffs or either of them, and/or causes of the plaintiffs' loss or damage for which they were responsible.

212. After a short hearing on 15 May I adjourned the further hearing of the application for two days. The adjournment gave Unisys an opportunity to further consider the application and address further submissions in light of matters raised in the hearing thus far. Later in the morning on 15 May my Associate was informed by counsel for Unisys that the application was withdrawn. No further hearing was had on the matter.

216. RACVI conducted business as a motor vehicle and general insurer. To give a broad picture of the claims area as it was: in 1993 the claims process was paper based, each claim having its own paper file; the system was labour intensive and considered inefficient, the ability to locate and retrieve files being a problem with inability or delay in doing so producing inefficiency in handling claims and telephone inquiries; seven separate branches of RACVI handled claims although in 1993 the claims work was centralised in the Melbourne office; there were approximately 90 claims consultants divided into six groups each with a team leader; in 1992 they handled approximately 75,000 claims which involved about 1,000,000 documents. The system of working was described by the general manager, Robert Alexander Mitchelson, in an evident understatement, as "logistically complex", and that it was "essential (for RACVI) to keep abreast of development of systems and procedures which would enable efficient physical handling of the volume of insurance paperwork and generation of relevant management information". A possible solution to the problem of handling an increasing number of claims, and to do so in a cost-effective and efficient way with improved service, was to introduce new technology which might include document imaging. That would involve computerisation and a system of electronic retrieval of documents. At Mitchelson's instigation in 1990 RACVI began to consider the issue.

219. Following an overseas trip for the purpose Graham Snooks, finance manager for RACVI, recommended to Mitchelson that RACVI proceed further to investigate workflow managing and imaging. He authorised a team of Snooks with Roger Green and Shayne Lourdes of RACVGS to move the issue forward. Green, who died several years ago, was then information technology manager. At the time the aim was to develop an internal solution which would be led by Green's department. The committee worked through 1991. In November 1991 an analysis was prepared of the steps in the handling of a motor claim. It was essential to have a narrative, or diagrammatic, statement of the existing workflow process before one could decide how that process might be made more efficient and, in turn, to know what any computerised system had to accommodate.

222. By the end of 1991, as a result of concerns as to the ability of RACVGS to manage the project, Mitchelson authorised Snooks to approach a consultant to assist RACVI in the implementation of information technology. In March 1992 Snooks approached Duncan Nicholas MacCallum, a consultant employed by Deloittes. MacCallum is not an accountant, his background is information technology. MacCallum wrote to Mitchelson who authorised Snooks to continue preliminary discussions with Deloittes. A particular matter of concern was the ability of RACVI and RACVGS not merely to determine on the appropriate course of action to result in the design and implementation of an appropriate system but also to work together effectively in that regard.

225. In the meantime, in April an internal RACVI committee called the Workflow Committee had been set up to examine a report on the user requirements for a workflow/imaging system. The committee produced a report dated 7 May 1992. The report identified the committee's brief as being to specify claims procedures, determine workflow priorities, determine workgroups within the system and to establish software and hardware requirements. The members of the committee were Shayne Lourdes as chairman, Paul Robinson, an operations analyst as secretary, Julie Dean, a manager of customer service in motor claims, Teresa Segota, a supervisor in motor claims, and Lisa Joy Chesson-Kistas, a claims officer in motor claims. Subsequently Lourdes became part of the RACVGS information technology group. In her evidence Chesson-Kistas said that Lourdes and Robinson were in a group in RACVI that was "looking at technology and the way in which we could move"; her input was as to the motor claims process. The report recommended that RACVI commit to developing workflow/imaging technology to replace the existing paper-based system. The committee considered that an expert in the field should be engaged to assist in developing the system. The report noted that functional specifications would be attended to as part of the design phase of the project, and that the user must be able to add to, modify and generally make any system appropriate for day to day business needs. The report detailed a number of basic functions of the system. Conveniently, it defined Workflow Management as a software program that enables a user to monitor and control the flow of work electronically. Document imaging was the best form of putting information into the system and removed the need to maintain the paper file system. The report dealt with issues in a general way.

228. On 30 July 1992 Snooks recommended to Mitchelson that an external consultant be appointed "to guide us in this particular project (of a new claims system) and to train our staff in all facets of project management and related subjects". Mitchelson agreed and, in the result, on 6 August 1992 he received from MacCallum a proposal for the appointment of Deloittes to provide consultancy services in relation to the implementation of a document management and workflow management system involving image processing for the claims administration function. Mitchelson met MacCallum on 7 August and then, or by September 1992, RACVI engaged Deloittes to provide consultancy services. MacCallum had the carriage of the project for Deloittes. The consultancy was broad but basically required Deloittes to assist in the re-engineering of RACVI's claims process and systems and, once the best business processes were identified as those to put in place, to assist in determining who would help in providing the appropriate system. As MacCallum said in evidence, the aim was to increase the efficiency of the processes, including by reducing the time to process a claim, reducing the costs to RACVI of the processes, and providing improved service to RACVI's members.

231. Following the appointment of MacCallum, Paul Arthur Lang, then claims services manager of RACVI, co-ordinated the foundation of a group within the RACVI by drawing together representatives from RACVI claims and from RACVGS information technology ("RACVGS IT") to assist MacCallum. This group became known as the New Claims Process Team. In her witness statement Chesson-Kistas said the group consisted of Lourdes, Robinson, Vernon Spelderwinde, John Monument, Adrian Wilson and herself. It would seem from Lang's witness statement that some others were involved. MacCallum was to work with the Team. At a meeting he informed them he had been appointed by RACVI to document the work of the motor claims department as the first stage of the process leading to the introduction of imaging and workflow. He said that a project team comprised of personnel from user, operations and IT (being RACVGS), had been appointed to work in conjunction with him. In the first stage they would interview personnel throughout the claims operation and review procedural and systems documentation. In this he would have input from the RACVI members of the team. Chesson-Kistas, for instance, said she would provide the user perspective and comment on the extent to which the technology as demonstrated would fit with RACVI's business requirements and processes in the claims department. The IT staff seconded to the Team were concerned with the interface between workflow/imaging technology and the existing IT systems. MacCallum said he would endeavour to diagram and describe workflows with the new technology. He also said that if the project went forward he would be responsible for detailing user requirements to potential vendors and evaluating the systems proposed leading hopefully to selection of a candidate.

234. Chesson-Kistas assisted MacCallum in his work in establishing requirements. She gave him the reports of November 1991 and May 1992. She also developed, at his request, an analysis of document numbers titled Analysis of Documentation on Motor Vehicle Claim Files, dated September 1992. The objective stated in the report was to analyse and determine the documentation on a claim file by claim type. It was stated that, in respect of a predicted 70,000 claims in March 1993 it could be expected that the motor vehicle claims department would generate 734,038 documents per annum and receive 314,562 documents per annum.

237. MacCallum produced a two-volume report titled Motor Vehicle Claims Workflow Management Study. He presented it to the Team in December 1992. It was read and discussed at meetings. Chesson-Kistas thought it contained a good summary of the existing processes. The report indicated improved customer service and productivity as well as increased efficiencies and cost savings. Lang was impressed at the potential for substantial gains in these areas. Mitchelson was careful to consider these aspects as there had to be a justifiable return on investment if the project was to proceed. The report is too long and detailed to refer to it at length but there are two parts that should be mentioned as they will arise later. The first reference is to the requirements for the image services facility. Under the heading Referal and Access it was required that there be "High speed access to documents through pre-staging and magnetic caching", and that there be "Access to active claim documents within 2 to 4 seconds, from the magnetic cache, or, other pre-staging area. It not pre-staged, then access within 30 seconds". The second respect to note is that in Section Five Benefit/Cost Analysis there appeared a summary table prepared by MacCallum, which presented a four year cash flow analysis without allowance for any tax benefits resulting from investment in a computerised workflow management/imaging system. It will be necessary to return to this in dealing with an item in RACVI's claim for damages. In short, the report clearly pointed to the need for a technology solution. The report recommended the appointment of a project taskforce including representatives of RACVI and RACVGS IT to plan and undertake subsequent stages of the project. Mitchelson accepted the recommendation and authorised Lang and Robinson (as project co-ordinator) to put the team together. This was the New Claims Process Team.

240. On 5 March 1993 MacCallum met with Lang, Robinson and Chesson-Kistas to discuss technical initiatives, the plan proposed by Deloittes, dates and the process going forward. It was a preliminary meeting.

243. On 11 March 1993 Robinson advised the project team that the first meeting would be held on 18 March. He sent the note to John Monument of RACVGS IT, Chesson-Kistas and Wilson with a copy for information to Spelderwinde, Lang, Lourdes and MacCallum. The note attached a list of meeting dates to the stage of approval of provider, as follows:

Review draft request for information document and confirm demonstration/site visit schedule

247. As far as Chesson-Kistas was concerned, she was to work on the project full time from March until December 1993. The Team (comprising those persons to whom the notice was sent) met on 18 March. During the meeting MacCallum spoke about the request for information document which he was then developing. The minutes record it would be circulated to the Team the following week. It was to set out the user requirements which the vendor of a workflow management and imaging system had to meet. He also addressed on the presentations and key evaluation criteria. He provided a proposed schedule of software demonstrations by 10 providers including Tower Technology, Filenet, Unisys and Kodak. Each demonstration would be held over half a day and be based on information requirements in the RFI. In discussion at the meeting it was allowed that RACVGS IT might also seek to be the provider or vendor.

250. On 25 March the team met Mr Schmidt of DBV Insurance. This was a German company which had recently installed Unisys' workflow/imaging technology called InfoImage. Unisys had brought this fact, and Mr Schmidt's presence in Melbourne, to MacCallum's attention and he arranged the meeting on the basis that gain could come from hearing his experiences with the Unisys system in an insurance environment. Unisys was represented at the meeting by Brian Patrick Josephson who since 1989 had been employed by Unisys as a marketing manager and then as a sales specialist for InfoImage. There are issues between Chesson-Kistas and Lang on the one hand and Josephson on the other as to statements of Josephson at the meeting. I find that the former had a more accurate recollection and accept their evidence. The purport was that the Unisys technology had been successfully used in the USA and Europe, Schmidt said it provided efficiencies and good returns and Chesson-Kistas spoke of the large volume of claims and the need to process them on a daily basis and to have speedy access to stored information.

253. The New Claims Process Team met next on 30 March. It would seem that by this time MacCallum had completed the request for information document (the RFI). It is a 71 page document titled Workflow Management Project - Motor Vehicle Claims, Vendor Symposia Briefing and dated March 1993. Having been read and approved by the Team it was provided to the 10 selected potential vendors.

256. The purpose of the RFI was to provide relevant information concerning the project to the potential vendors, including the requirements of the demonstration and the criteria by which they would be assessed. It provided a common basis to facilitate a comparative evaluation of the demonstrations. Hence it set out the background to the project and the intention of RACVI to provide a more efficient service for clients by approving the claims process and developing and implementing a computerised workflow management system. It stated time goals to be attained in handling claims. It described the existing system and with diagrams and narrative referred to a new proposed process.

259. Section Four of the RFI was concerned with technical requirements. In this section it was stated, inter alia:

"Workflow Management Architecture The major considerations in establishing the architecture for the provision of workflow management facilities to a centralised claims process, with some supporting activity in the current branch environment, are: * Performance and reliability * Security and integrity of data, indexes, process scripts, etc. * Ease of end user operations * Communication infrastructure * Development and database environments. These factors, combined with the centralisation of claims and the need to ensure consistent work practices, suggest that a centralised workflow management architecture is the most appropriate solution." "Image Services Architecture The major considerations in establishing an image services facility are: * Retrieval and distribution requirements * Performance and reliability * Security and integrity of data, indexes, and images * Communication infrastructure * A central image storage facility with connectivity to the Amdahl mainframe host application and/or the Workflow management System * Role of optical and magnetic storage." "Workflow Management Functionality The Workflow Management environment must provide for development and execution of automated workflow paths or scripts. The following functions are considered minimal: * Application Programmer's Interface (API) and user exits (or, remote procedure calls) * Data Manager, or, standard relational database product with SQL (Structured Query Language) interface * Portability of operating software (client and server) * Activity, or, workflow map builder * Workflow simulator for performance analysis * Status monitor for displaying the status of work flowing through the system * Audit trail to track the history of activity in the system * Case and folder management functions * Queues definition * Activities definition * Routing - dynamic - guaranteed - parallel - rendezvous * Support of rule-based routing * Management reporting utilities * Support for forms and screen design * Recognition technology for machine printed characters or codes on forms * System administration for users, groups, authorities, security and other operational requirements. Image Service Functionality The Image Services environment must provide the following minimum functionality: * Image capture (scanning and committal) of varying documents, including double sided multi page * Availability of automated indexing techniques * Management of colour photographs * Support minimum scanning resolution of 200 dpi * Support background drop-out * Input/output via a fax gateway * Standard relational database manager for document indexes * Association of annotations with images and folders * Full audit trail of folder and document activity * Ability to associate text and data object with folders * On-line storage of all current, active claims, and near line storage of all inactive claims within a pre-determined time frame * Security profiles for image access * Optimisation techniques for retrieval performance * Multiple document display * Image caching at client and server * Open access from mainframe host applications and the proposed Workflow Management System." "Integration It is mandatory that the Workflow Management System and Image Services Facility are capable of integrating with RACV's existing applications environment."

263. Section Seven set out the key evaluation criteria for determining the most appropriate workflow management and image services solution, as:

* "The ability to demonstrate an understanding of and a focus on the business requirement of the project * The ability to provide a technically sound solution and platform, capable of meeting the business requirement, now and in the future * A demonstrated track record in the successful implementation of workflow and imaging systems similar to the RACV Insurance requirement * The local capability to implement and support sites and systems * A highly competitive, or, advantageous pricing structure to maximise the return to RACV Insurance. * A compliance with best in industry standards relative to hardware, software, database, user interface, connectivity, communications, etc. * The ease of use and flexibility of both the development environment (for workflow management and image services) and management reporting."

267. On 4 May 1993 Unisys presented its demonstration to the Team. Unisys employees present included Josephson, Craig Mitchell Felsenthal and Geoffrey Edmund Olsen. Josephson made a presentation. There was a demonstration of Unisys' document imaging technology using a PC set up in the presentation room. Document retrieval was demonstrated. It was virtually instantaneous between command and appearance. Olsen set up electronic "folders" and scanned documents into folders. He showed the movement of documents from one user to another. I accept that Josephson used the term "sub-second" in relation to retrieval of documents. I also accept the evidence of Chesson-Kistas as to statements of Josephson at the meeting. I also accept that he spoke in general terms about the Unisys product being flexible and able to meet the needs of RACVI. At that stage those needs had not been precisely defined. Hence what Josephson said is to be understood in that context. So understood, Josephson spoke favourably of Unisys' ability to meet the requirements of RACVI as set out in the RFI, and he said that the Unisys product was very flexible, integration of virtually anything was possible, the technology was reliable, stable and easy to use, Unisys had a strong change management philosophy for the success of such a product, had local capability and a support staff of 45 in Melbourne trained in the product, it was one of the biggest, best and most experienced vendors in the field in the world and could provide the system required. Josephson handed out a brochure titled InfoImage Folder-The File Holder Management System with Vision ("the InfoImage brochure"). It was a promotional brochure extolling the advantages of the InfoImage product. At one point the brochure stated that a benefit of the electronic handling of documents was "Increased productivity through immediate, simultaneous access to complete and accurate file folders holding critical business information".

270. On 5 May the Team met to evaluate the Unisys demonstration. The minutes and an attached evaluation sheet record the views on the several aspects of the evaluation. The Team attended other demonstrations by potential vendors in May 1993. The process extended over seven weeks and covered the 10 vendors. On 27 May the Team met and ranked Unisys second behind Kodak.

273. At Lang's request, on 28 May 1993 MacCallum prepared recommendations for further action. His report became a memorandum from the Team (signed by Wilson) to Lang dated 1 June 1993. It included an evaluation summary sheet and recommendations for action. Lang, and then Mitchelson, accepted a recommendation that the project proceed to the next stage by adoption of a shortlist of five vendors, Kodak, Unisys, IBM, Filenet and Tower in conjunction with RACVGS IT and issuing a request for proposal by 7 June 1993.

276. MacCallum then drafted the RFP. He explained it to Lang and it was discussed in detail at a meeting of the Team on 8 June. I accept Lang's evidence that the RFP accurately reflected RACVI's business requirements, his focus of course being on those requirements rather than technical issues. A most critical business requirement was the ability to quickly and reliably retrieve files and documents. Lang sent the RFP to Unisys and the other vendors on 10 June 1993.

279. The RFP extended to 66 pages and consisted of five sections and seven appendices. The sections were: introduction; evaluation and methodology; terms, conditions and vendor instructions; statement of requirements; and implementation strategy. The appendices were: definitions; vendor questionnaire; requirements questionnaire; product questionnaire; project experience profile; summary and detail pricing schedules; and prototype development requirement. It provided vendors with information as to the WMS project and specified the matters upon which it required responses. As with the RFI the intention was to have responses on a common basis in the sense that each vendor was required to provide the like information in a particular format that would facilitate the evaluation of the responses. For this purpose it was stated in Section Three, inter alia, that the response "must" take the form specified, and that "all" requirements in Section Four and appendix C "should" be addressed stating whether the response fully, partially or not at all complied or the requirement was not relevant to the vendor's solution. It stated that the Section Four and Five responses permitted detailed explanation or support of the vendor's products and solution. It then stated that:

"Responses to Questionnaires, Profiles, and Schedules must adhere to the format and tables provided in the appendices of this proposal. Any need to reference additional information can be done by placing a note in the 'Comments' field of the tables, against the appropriate item, and provide the information in the 'Product, Support, and Services Material' section."

283. Section Two listed the major evaluation criteria (which were similar to, if no more than a somewhat developed expression of the criteria in the RFI) and stated that a prototype demonstration, which was "particularly important" in the evaluation process, was required and that it "be capable of addressing performance and security requirements as deemed appropriate".

286. Section Four contained a statement of requirements the system had to meet. I refer only to the section concerning Image Service Functionality. It was stated that:

"The Image Services environment must provide the following minimum functionality: . . . 14. On-line storage of all current, active claims, and near-line storage of all inactive claims within a pre-determined time frame. . . . 16. Optimisation techniques for retrieval performance. . . . 18. Image caching at client and server."

It is to be noted that the word "must" was used in stating these minimum requirements. "Must" was used in other parts of Section Four in relation to other requirements and was given a defined meaning in Section Three which stated that, in addition to the list of relevant terms and definitions in appendix A, "vendors must be aware of the following classification of requirements:

"Mandatory - also indicated by 'must' and 'shall' Highly Desirable - also indicated by 'should' Desirable - also indicated by 'might' and 'may'."

Further on in Section Four, under the heading Configuration it was stated that:

"Vendors must configure adequate storage capacity, magnetic and optical, to implement on a 'date forward' basis, retaining all open claims on-line, all claims near-line for 3 months following closure, and closed claims older than 3 months off-line."

In Section Five a timetable of events was set out which ended with systems being totally operation by end June 1994.

295. The definitions in appendix A included the following:

Describes a requirement or condition where compliance is preferred but not mandatory.

A set of one or more pages permanently related to each other will be known as a 'document'.

A file is a physical collection of claim related documentation, correspondence, and data.

A set of document images and other information in varying forms, which are related to each other.

Describes a requirement where compliance is strongly preferred.

Describes a requirement that must be met for the system to be considered as a solution.

Image access from local optical storage. Expected response times in the vicinity of 20 seconds maximum.

High speed image access from local server cache, magnetic storage or on-line optical drive. Expected response times in the vicinity of 2 to 4 seconds."

299. Having received the RFP Unisys set about readying itself to respond and plan the prototype demonstration. It is pertinent to note who was involved at this point for Unisys. As noted at [72] Josephenson, Felsenthal and Olsen attended the 4 May 1993 demonstration. I accept Josephenson's evidence that at the time when the RFI came in and the demonstration occurred the insurance industry was a key focus for Unisys for sales of its InfoImage program and that RACV's business was the type Unisys planned to address using that technology.

302. The line of reference at Unisys seemed to be this. In or about March 1993 Felsenthal, who was customer relations manager, was informed by MacCallum of RACV being in the market place for an imaging system and he provided him with the RFI. It seems also that MacCallum gave him the Deloittes December 1992 study. Felsenthal was employed on the sales or marketing side. He was not a technical person. He called in Josephson who was the sales expert for products using Unisys imaging capabilities and the product manager for InfoImage. They considered the RFI together, and worked together on the project although Felsenthal had the supervision of the customer relationship with RACV and the ultimate responsibility. In re-examination he said that his job was to put the bid together and co-ordinate the relationship with the customer. He was involved through to the formation of the contract and beyond in dealings with RACV. A team was assembled to work on the RACV project. In addition to Felsenthal and Josephson, as non-technical members, the team comprised the following as technical members: Ruth Elizabeth Willis, who acted as bid manager to manage the production of the Unisys response to the RFP, Olsen, Glen Williamson, Rudra Kumar and Bruce Wilson. The technical members were responsible for that part of the bid.

305. Members of the team commenced work with a view to preparing a response and providing a prototype demonstration. In this process the RFP and the Deloittes December 1992 study were considered and information was obtained in meetings with RACVI personnel and MacCallum. One meeting occurred on 29 June 1999 when Josephson, Felsenthal, Willis, Olsen and Wilson attended at the RACV at Noble Park. In this period other Unisys technical people were involved including Neil John McFarlane who at the request of Willis assessed the adequacy of the size of the LAN at RACV to support the installation of a WMS system which used InfoImage. Another technical person involved was Andrew Walker. This is a sufficient reference to the Unisys personnel involved.

308. Olsen worked with Walker to prepare the technical side of the response including the proposed configuration, and preparation of the prototype demonstration. He said in evidence that when it had been prepared he sent the proposed configuration to Unisys Corporation in the United States for approval. In cross-examination he fixed the date of sending as about 30 June 1993 by reference to an e-mail of that date. It is important to note that what he sent over for approval was not discovered or produced at the trial. Olsen had no copy of it and could not remember the configuration it proposed.

311. On 5 July 1993 Unisys forwarded to RACVI its response in writing to the RFP ("the July response"). In her evidence Willis said that the response had been checked by Unisys' quality assurance team to ensure that nothing was stated that could not be delivered, or be misinterpreted.

314. The response was provided under cover of a letter dated 5 July signed by Felsenthal and Josephson. They looked forward to the next phase of the project in which Unisys would be able to assess the detailed requirements of RACVI. The letter further stated that to enable Unisys to provide a complete and fully researched solution "we will require an intensive and detailed analysis be performed to complete the existing study". The response itself is a long document, consisting of about 120 pages, and included a number of brochures and printed information including the 1992 annual report of Unisys Corporation.

317. As required by the RFP, the response directed itself, in sequential sections, to the RFP. I now refer to some parts of it.

320. It commenced with an "Executive Summary" in which it was stated that

"As Unisys has had limited access to RACV, this document does not represent a firm recommendation nor final proposal to RACV Insurance. Unisys strongly recommends, however, that RACV and Unisys undertake a joint Requirements Definition Study in order that Unisys may gain a comprehensive understanding of the RACV insurance requirements, and so deliver a proposal based on a clear financial business case."

A little further on it stated that Unisys proposed its InfoImage Folder products and services as "appropriate to RACV's requirements detailed in the Request for Proposal document". It further stated that when implemented within RACV the InfoImage solution "gives those using it the opportunity to improve customer service through more effective claims processing. Further, it provides the capability to ... increase productivity through improved record retrieval".

InfoImage Service/Storage Hardware to support 100 workstations

InfoImage Server/Storage Software to support 100 workstations

With InfoImage Workstation Hardware and software for 100 Production workstations (including scan, fax, gateway and print servers but excluding PC base units, cabling and connections.

In relation to the Requirements Definition, it was stated that:

"Unisys is requesting to undertake a joint Requirements Definition Exercise with RACV. It is this process which will confirm the estimates provided in the RFP response as well as forming a basis on which to provide RACV with a Response for the prototyping/development and implementation of the project, including a detailed presentation of costs, benefits and return on investment. The detailed configurations and pricing included in this document are, as previously agreed with RACV, estimates only for budgetary purposes."

329. The July response continued with a response to the several sections in the RFP. The Section Four response commenced by saying:

"Unisys is responding to the RACV RFP document as it has been presented and in the context of several brief conversations with RACV personnel and consultants. Unisys has not had the opportunity to assess the detailed requirements of RACV. This document is a direct response to the specific points and questions raised in the RFP document, as requested by RACV. The format of this response is that requested by the RACV."

It then proceeded through Section Four item by item commencing with Workflow Management Architecture in the course of which it described what it offered. In an early part, on p. 2-1, it was stated, under Performance and Reliability, that:

"Unisys InfoImage systems utilise a distributed architecture of scalable processors, guaranteeing the optimum performance and reliability where and when required, for the intensive transaction processing demands of workflow management and image processing."

On p. 2-9, under the heading Image Services Architecture it was stated, in relation to Retrieval and Distribution, that:

"The InfoImage Folder product is designed for the total and efficient management of Image based information. The product ... enables Workstation based Clients to retrieve Image's or related Image System objects (Folder/Case File, and Scanned in Batches) from anywhere within a logical Local Area Network. Images are distributed to these Workstations on request ..."

On p. 2-10 it described the role of optical and magnetic storage thus:

"As a rule, magnetic storage - often called 'cache' - is used to store information that is needed on a more immediate or frequent basis than some other information. An example is a current,open claim compared with a closed, archived claim. The Unisys InfoImage system automatically keeps information that is in current use in the cache area. Information that is archived is sent to the permanent optical storage disks. As well, some housekeeping data used by the system is not required for long term storage, and is only kept on a temporary basis on magnetic cache. Unisys InfoImage optimises the retrieval of documents by prefetching page images from optical disk and storing them on magnetic disk at the U6000 Director Server for faster user access and for more immediate customer service."

At p. 2-15 it was stated, in relation to case and folder management functions, that the InfoImage Folder Product provided the facilities to assemble groups of related documents with electronic "Folders". It also referred to a large amount of information being collated by the claims consultant over the life of a typical claim, and stated it was "vital that all of this information is available quickly and conveniently to the Consultant or for other purposes".

340. At p. 2-29 the Section Four part of the response commenced to deal with Image Service Functionality. In the first paragraph it was stated that:

"Unisys recognises that workflow and image management of the scope envisaged by RACV is a matter of effective transaction processing. Unisys has thus configured a system which can comfortably handle the committal and retrieval rates expected from the volumes outlined in the RFP and Vendor Symposia Briefing documents."

Then, in relation to points 14, 16 and 18 (see [78]), it was stated that:

"14. Unisys InfoImage supports fully automatic document management including the use of caching on both servers and work stations. The system configuration in this response allows for the on-line and near-line storage requirements outlined in the RFP document. Question 18 below. 16. Supervisor Tools are available in the system to optimise the workload of various users as required. They system also maintains a fully automatic series of 'housekeeping' functions to best utilise the facilities available. Retrieval requests have the highest document management system task priority. The system also utilises prefetch facilities to speed documents to user desktops. 18. Unisys InfoImage utilises caching techniques at server and work station to optimise user time. Movement of information around the system is fully automated, without the need for conscious user intervention."

346. Immediately following was a description of Cache Services. This was stated to provide for storage and retrieval of images and other data on magnetic disk. It was stated that the InfoImage Folder system used four types of cache, namely:

provides protected storage for uncommitted batches

stores retrieved document pages, which are ageable; and page images for committed documents awaiting migration, which are 'locked' in cache until migration succeeds

Provides permanent, locked storage for 'system objects' which contain information required by the work station applications.

Retrieved images requests are ageable so that the oldest (least recently used) objections can be deleted from cache as the system requires space for new entries.

Print and FAX requests are removed after they are sent to the Print Server or FAX Server.

Batch Services, Document Services, and Print Services utilise Cache Services as a temporary storage area. The configuration of a cache (including its maximum size) is done during system set-up."

351. On p. 2-43, the concluding page on Section Four, it was stated that as the configuration included in the response had been provided without a Requirements Definition Study by Unisys, "Unisys does not propose that this configuration is recommended to meet the needs of RACV".

354. Many pages later (at p. 9-1) Unisys stated under Prototype Development Methodology that it will utilise precisely the same techniques in developing the RACV prototype as it does in live system developments.

357. The response concluded with a section titled Product, Support and Services. The first page of this section is 10-1 and it extends to 10-19. Page 10-1 has a sub-heading Terms and Conditions. It commences by stating that the response has been prepared in accordance with Unisys' understanding of RACV's requirements, that all recommendations are the best estimates based on RACV supplied data, that Unisys will submit a firm proposal after completion of an agreed Requirements Definition Study by Unisys and RACV, and that the final determination as to the suitability of the proposed products and services is RACV's responsibility. It then required confidentiality, stated the response was valid for 60 days, stated the dollar exchange rate on which equipment prices were based and made provision for variation, and recommended RACV take hedge cover. It then concluded with the following paragraph on p. 10-1:

"Unisys is not at this stage able to commit to any response time or availability levels as set out in this request for response as we will require further information regarding response time criteria including number of users, definition of what is being measured etc. With respect to availability we will need to review availability in the context of the support plan being contracted for and the configuration over which availability is being measured. Any response times or availability levels which are finally negotiated will only be measured on the system we are contracting to supply."

I mention that in final address counsel for Unisys said that the word "this" in the phrase "as set out in this request" meant and should be read as "the". It seems obvious that is correct, and I so read it. The balance of the section dealt with matters under the sub-headings Training (on p. 10-2) and Maintenance, Backup and Support (on p. 10-14).

362. At Lang's request MacCallum provided an initial assessment of all the responses to the RFP on 19 July 1993. He ranked Unisys last behind Tower and then the other three vendors who he ranked equally. But there was still to be the prototype demonstration, checking of references and a refining of information. In the assessment document MacCallum said that the demonstration was a practical demonstration and workshop of the vendors' development capability, products, and prototype of the sub-set of the solution, and that it was a critical factor in the assessment process.

365. On 21 July 1993 Unisys personnel (Josephson, Felsenthal and Willis) met RACV personnel (Lang, Chesson-Kistas, Adrian Wilson and Lourdes) at RACVI's office. I have said Willis attended which is what Chesson-Kistas said in evidence, but perhaps it was Bruce Lakin (and not Willis) as Josephson stated in an e-mail; neither Chesson-Kistas nor Josephson were cross-examined on the point and I pass over it. The purpose of the meeting was to enable Unisys to obtain further information concerning the claims process to facilitate the pending presentation. I accept the evidence of Chesson-Kistas that she gave Josephson some sample documents, that she said they wanted to see claims processes from lodgment to completion, and to see how easily new users could be set up and old users deleted, and that Josephson said they would be covered.

368. On 2 August the Team met with MacCallum to discuss Unisys pre-demonstration issues. A letter was drafted, signed by Robinson as project co-ordinator and sent to Josephson. It listed issues to be addressed and information to be provided.

371. The demonstration was conducted at Unisys' office on 4 August 1993 in a room especially set up for the purpose. Those present from Unisys included Willis, Olsen, Felsenthal, Josephson and Kumar, while those from RACVI and RACVGS were Lang, Robinson, Chesson-Kistas, Monument, Wilson and Lourdes. MacCallum also was present.

374. There was an oral and physical demonstration of a prototype system on which documents obtained from RACVI had been placed. There was also discussion between different participants not involving the whole group. The evidence of those of the participants who gave evidence included their recollections of the meeting. Chesson-Kistas said a deal about it, Lang much less, in their witness statements and they were cross-examined on the matter.

377. Chesson-Kistas made notes during the demonstration. She said that in introductory remarks Josephson said that Unisys believed it could meet RACVI's requirements and would demonstrate that. He recapped on what was in the July response and said that the InfoImage system was ideal for RACVI's requirements and would meet its business needs. She said that in the demonstration Olsen showed document retrieval to be virtually instantaneous and within 2-4 seconds. The prototype system was demonstrated on about 6 PC's. Documents were scanned into a PC, files were made up, routed to a claims officer, correspondence was produced and a claims folder accessed, all movements working faultlessly and quickly. Josephson said that Unisys could provide the system RACVI required and at the response times demonstrated were indicative of response times that could be expected for on-line and near line claims on an installed system. In discussion after lunch Josephson said that Unisys had the skills in process change and change management to implement the system as it had done successfully before. He said that Unisys had training facilities at its office and that Unisys staff were qualified to train system administrators. To a statement by Chesson-Kistas, in a discussion at the end of the day, that the prime need of any system was to access files very quickly, Josephson said the system would meet the requirement for timely customer inquiries. Olsen told her that the system was flexible and could meet RACVI's needs. Chesson-Kistas particularly recalled that the response times were virtually instantaneous and met the requirements of the RFP. Altogether the demonstration confirmed the system would be suitable for the claims department.

380. Chesson-Kistas was cross-examined on this evidence. She said the demonstration showed an instantaneous movement of documents from screen to screen and retrievals and that such movement was described as indicative by Willis and Josephson. Unisys had set up a lot of documents in folders and in queues. They were shown many pieces of equipment but she did not know what was being used in the demonstration. She did not know if an optical disk facility was being used. No retrieval took anything like 20 seconds; it was immediate or within a second or so. She did not measure the time but agreed it was quite a speedy response. She was questioned about her evidence that Josephson said the response times demonstrated were indicative of what could be expected for on-line and near line claims on an installed system and said they were not his actual words but a summary of what he had said to her in a discussion between them. He may not have used the words "on-line and near line claims" as distinct from saying it was indicative for active claims. She was "mainly concerned about active claims, on-line claims, and that's what we were talking about". To the next question she said they were talking about active and finalised claims. To a further question she said he used the words "on-line and near line claims". Josephson spoke of claims and not images. She heard the word cache mentioned and optical disk retrieval but did not understand those matters fully. In relation to her evidence that Josephson said the system would meet the requirement for timely customer inquiries, she said that Josephson did not specify a response time of 2-4 seconds. She also said that in her presence Josephson was not asked if Unisys was going to achieve the response time of 2-4 seconds. But she imagined there may have been discussion about response times from cache. She did not know if the demonstration included recovery from optical or near-line disks.

383. In his witness statement Lang said the demonstration showed individual documents being retrieved from an electronic file; "the documents popped up instantly". No Unisys representative made any qualification as to response times or volume capacity. In his witness statement he said that Felsenthal, Josephson and Kumar acknowledge the need for virtually instantaneous retrieval of documents; "They used the words sub-second to indicate the sort of retrieval times that could be expected". In view of the summary nature of that part of the witness statement I required Lang to give that part of the evidence orally and in chief. He said that the conversation was predominantly with Josephson who did most of the talking on these issues. The substance of what he said (he could not recall the specific words) was that what we were seeing was what we would get and that they understood the need for that type of response given the volumes RACVI had. This conversation occurred when the demonstration was largely complete and they were having informal discussions in small groups. Returning to the witness statement, he said that Josephson said that the demonstration was indicative of response times that RACVI could expect for on-line claims. Josephson acknowledged that Unisys understood RACVI's business requirements set out in the RFP. The demonstration was seamless in showing how files were loaded onto the system and accessed by a claims officer.

386. In cross-examination Lang agreed, in terms of the question put to him, that the demonstration was to demonstrate the functions the system could perform. He knew the system would have to be custom built to RACVI's requirements. The documents which Unisys had scanned in for the purpose had been provided by RACVI and some were double sided. Documents of a magnitude of 9-15 pages also had not been provided. Unisys called up to the screen individual and several images. He agreed that Josephson spoke in generalities as to how the system would work. Josephson's statement as to the demonstration being indicative of the response for on-line claims was made when they were talking about "a full-blown system as opposed to a demonstrated system". Lang did not then understand what cache was or optical disks were.

389. I turn to the defendants' witnesses. It is convenient to commence with Josephson. He expanded on his witness statement in oral evidence in chief. He remembered attending presentations of the InfoImage product to RACV but did not specifically recall attending a meeting at this time (4 August 1993). He recalled that as a result of advice of implications of the Trade Practices Act he was cautious about what he said. He said that the demonstration to RACV showed a document retrieval occurring within a 2-4 second period. He was certain he said that the documents were being retrieved in a short time period because the image was being retrieved from magnetic disk. He said he explained that the retrieval time would depend upon the media in which the images were located. He did not deny saying that the response time demonstrated was indicative of response times that the RACV could expect for on-line claims, however he said this could only be expected for on-line retrieval (that is, retrieval from cache) and would not be expected from optical disk. He did not say that all images would be stored in cache. He did not deny saying that Unisys had technical expertise to implement the InfoImage system. He did not recall saying that Unisys could meet RACVI's requirements and would show that in the demonstration or that Unisys considered the InfoImage system was ideal for RACVI's requirements and would meet its business needs. He did not specifically recall Chesson-Kistas saying that one of the most significant issues for RACV was locating a file when dealing with claims on the telephone or that it was important to locate and access a file very quickly. He said (by way of explanation but not as recounting a discussion with Chesson-Kistas) that retrieval was only one part of the InfoImage technology which enables business process re-engineering, that it was possible to access data to deal with telephone inquires without looking at an image, and that the ability to view an image was only one component of the entire package and successful implementation of the product required a commitment to business process change by RACV.

392. All of this is what Josephson said in his witness statement (paras. 25-31) concerning the 4 August 1993 demonstration. One of those paragraphs, para. 28, was struck out of the statement because it was objectionable in form. It went as to what he had explained "on a number of occasions to RACV and other prospective customers" as to retrieving a document from a magnetic disk and optical disk. Being within the group of paragraphs concerned with the 4 August 1993 demonstration it appeared he was speaking of something said at that time. It was instructive as to his memory and the accuracy of the witness statement to note Josephson's oral evidence in chief when counsel sought to have him deal with the area of this paragraph. Counsel asked him whether at any demonstration regarding RACV in 1993 he could recall any conversation regarding retrieval times from optical or magnetic disks. Josephson said he could and that he could "recall that at the beginning of at least the initial demonstration" in May "and as was my usual way of doing things and giving demonstrations" he put the demonstration in perspective and described the technology being used and the broad impacts of the various parts of those technologies. That included describing the impact on the retrieval of images of different pieces of the technology, such as optical disk or within the PC. Different retrieval or response times were inherent in the technology. He said he would have said this to Robinson and Chesson-Kistas at least. It was the standard thing as a description of what the system did and was capable of doing, that it had certain response times for images that were sitting in the cache of the server or resident on the optical disk. This is consistent with what he had said in para. 27 of the witness statement. He also said he described the flow of documents from how they got to cache, to optical disk and were retrieved.

395. To the first question in cross-examination he said that he believed that conversation occurred at the first demonstration. I interpolate by way of reminder that that was in May 1993. He was then asked to state the retrieval times that he gave in the conversation. His answer was: that retrieval from PC cache was sub-second, generally speaking, that is what it is capable of; 2-4 seconds from cache on the server; up to 20 or 30 seconds from optical disk off-line; and from optical disk on-line would be much quicker and depending on the activity on the system, the number of users and the final configuration, could be up to 10 seconds. Much later the cross-examination returned to this conversation and Josephson said that he probably explained what a jukebox was, that there were different sizes, and referred to response times from the jukebox. Further on, he said that he regarded retrieval times as important and that he volunteered the information without being asked. Later he said that his advice as to retrieval or response times was said at the demonstration meeting "whenever that was" and that he considered that significant to selling an InfoImage system. Later again, almost at the end of his cross-examination Josephson was taken to his witness statement and to that of Chesson-Kistas dealing with the 4 August demonstration. I accept that he recalled there was a demonstration after the July response, and another which Mitchelson attended, but he could not recall dates. His evidence was they were all important in the process of winning the contract. With the following exceptions he agreed with the words or substance of Chesson-Kistas's version. The exceptions were that he did not say that the retrieval time from near line was the same as on-line, he said near line was 20-30 seconds approximately; and, in relation to para. 60 he did not recall Chesson-Kistas saying the prime need was to access the file very quickly or that he said the system would meet the requirements for timely customer requirements. He knew they discussed those topics, "but not like that".

398. Willis said little in her witness statement as to the discussion at the demonstration. That reflected the fact, as I find it to be, that she had little memory of the event. It was also affected, I find, by a defensive attitude in giving evidence doubtless the result of the fact that she played an important role in a failed project. She said that for the demonstration it was not possible to do what the RFP required and build all the RACVI workflows as that would have required in effect the building of a whole system. MacCallum had agreed it was acceptable to develop one of the workflows. She further said that the demonstrations had to be indicative of the product and not "replicate" the finished product as Chesson-Kistas had said in para. 48 of her witness statement. Chesson-Kistas was not cross-examined as to her use of the word "replicate" but she agreed in cross-examination that essentially the vendors were asked to demonstrate functional, technical and integration compliance and not hardware and software configurations.

401. Willis said she did not remember Josephson saying words to the effect stated by Lang and Chesson-Kistas in their witness statements, that Unisys could provide the system RACV required and that the response times were indicative of the response times RACV could expect for on-line claims. Nor did she recall Josephson saying words to the effect that Unisys had the technical expertise and experience in implementing the system, although she considered that was in fact the case. That Willis did not remember words to this effect is to be ascribed, I find, to the matters concerning her mentioned above. I find that words to that effect were spoken by Josephson at the demonstration. I note that in cross-examination she said she believed she was at the majority of the demonstrations between July and the signing of the contract in December 1993 and did not recall any talk about response times. That evidence was a reflection of a lack of memory as distinct from being a statement of fact that the matter was not discussed.

404. Felsenthal's witness statement referred generally to "demonstrations" but not specifically to any particular one, let alone as to what was said and by whom at the August, or any other, demonstration. Not surprisingly he was not cross-examined on that matter.

407. Olsen referred to the August demonstration in paras. 25-37 of his witness statement. He said the demonstration was to illustrate at a conceptional level the integration between InfoImage and RACVI applications in a way that simulated RACVI's working environment. He had been on a tour of RACVI's Noble Park office and collected sample documents which were used in demonstrating how the system functioned. The demonstration used a U6000 server which held the cache, which, he said, was where images are stored. He explained that images were also stored on optical disks in the jukebox, but a jukebox was not used in the demonstration. He recalled that Kumar demonstrated how information may be transferred from one screen to another, and that various other steps were demonstrated. He explained that this was to show how the tool could be used. He said the demonstration showed basic functionality only, that the demonstration was only a simulation and that InfoImage would require a significant amount of customisation before certain features could be used in a live environment. He then (in paras. 34-36) said he did not recall words to the effect set out being used by Josephson or Chesson-Kistas. I take his evidence as to his recollection into account but do not accept it as accurate.

410. In cross-examination Olsen described as "very low" the likelihood of talking about response times at the May demonstration. He said that at that time the retrieval time from a disk on-line was not known, but estimates could be made. He considered that a response time of 2-4 seconds was implicit in an on-line system. It may be added that he did not know of any Unisys instruction, which Willis referred to, not to talk about response times. (I refer later to the fact that in her oral evidence Willis corrected her evidence to this effect in her witness statement.) Olsen did not know if any of the three matters referred to in an internal Unisys e-mail dated 21 July 1993 were discussed at the demonstration.

413. MacCallum said he recalled Walker and Olsen saying the response times demonstrated would be indicative as it was not a production system. He said that response times were observed in the demonstration. The demonstration was set up on a local server and run through two or three PC's. They were trying to demonstrate the flow of work through the WMS as well as image retrieval in that context. The demonstration was capable of demonstrating that which would be installed in that it would show the functions as required within the WMS and the capability to retrieve images. It would also show their capability in terms of resources locally available to develop such a prototype in a short time frame. It showed single image retrieval from the local server which was connected to a jukebox.

416. Regarding the matter overall and being impressed as I was with Chesson-Kistas and Lang as honest and reliable witnesses, and having regard to the evidence of the other witnesses, in particular Josephson, I accept the evidence of Chesson-Kistas and Lang as generally reflecting the substance if not the terms of the discussion at the August demonstration. I do however find, notwithstanding some evidence of Chesson-Kistas, which I do not accept as complete in this respect, that Josephson's account in his oral evidence as to what he said concerning retrieval or response times at the May demonstration was in fact said by him at the August demonstration. (If it was not said in August it was said at the May demonstration.) I was impressed by the clarity and evident sense of Josephson's evidence in that regard. He impressed me as an "up-front" and frank witness. Objectively considered, there is a consistency between the nature of the things he said and the evidence of Chesson-Kistas and Lang on the matter.

419. On 9 August 1993 the New Claims Process Team met to evaluate the Unisys demonstration. The Team were impressed. There was a concern on cost. MacCallum did not express any technical reservation. He said there was discussion concerning response times. Lang wanted to ensure they were appropriate, what was asked for. The response from people such as Chesson-Kistas was that they were reasonable, they were in the 2-4 second requirement in the documents. MacCallum said the Team felt they had seen a good response in terms of response times, that they were happy with them. MacCallum said they were indicative and may not be the response times you get in production. It would have to be monitored closely. Lang reiterated the importance of the response times and they would keep an eye on that as things progressed.

422. On 18 August 1993 Josephson wrote to Robinson as the project co-ordinator at RACVI with advice on a number of issues. The first issue concerned clarification of the configuration proposed in terms of where appropriate reduction in overall cost can be made. The letter said that in the absence of a requirements definition study the initial system sizing estimate was based on information open to several interpretations, but that subsequent communications between RACV and Unisys had clarified volume detail somewhat and this had resulted in an alternative configuration. The clarification highlighted a reduction in transaction processing and archival volumes. A schedule of equipment and costs was attached which reflected the alternative configuration and price.

425. On 19 August Josephson wrote another letter to Robinson, this time with information relating to Unisys' plans for managing and resourcing the program. He assured Robinson that Unisys was resourced capably with staff to design, develop, implement and support the system. On 20 August the New Claims Process Team met to develop a matrix of the final evaluation criteria. By 24 August the evaluation had taken place and documents circulated that day by Chesson-Kistas to the Team showed that on the criteria of user requirements, support, prototype demonstration, project management and technical requirements, but excluding cost, Unisys ranked first followed by Kodak and Tower. However, including cost Unisys ranked second to Tower.

428. On 3 September Lang provided a report on the process to Mitchelson and recommended, on the basis of meeting the strict requirements of the system outlined in the RFP and the associated cost structure, that Tower provide the workflow and imaging system on certain stated conditions, and, if Tower do not satisfy the criteria, negotiations be commenced with Unisys and then Kodak.

431. Mitchelson read the report. He noted no unfavourable comment was made about Unisys. He met with Lang on 3 September and Lang explained the matter. Mitchelson accepted the recommendation.

434. On 17 September Josephson met Lang with a view to seeking clarification of the position and reinforcing the interest of Unisys. Later that day Josephson wrote a letter in which he sought the opportunity to clarify deficiencies and referred to local staff support for the project.

437. Negotiations were had with Tower but broke down on price. On 22 September Lang so advised Mitchelson and recommended that negotiations commence with Unisys and Kodak. Mitchelson agreed with the recommendation.

440. It should be noted that RACVGS IT had wished to be the supplier of the system and was unhappy it had not been selected. Mitchelson received a report on the matter dated 24 September. He did not support RACVGS IT as he did not believe it had the capacity to produce the required system.

443. On 29 September Robinson wrote to Unisys advising that Tower was no longer the preferred supplier and that RACVI wished to commence negotiations with it and Kodak. The letter requested a final submission for provision of the workflow and imaging system by 15 October 1993. The letter stated that the submission should include final costings, details of project management and reference sites. Team members were available for discussion.

446. A meeting was arranged with Unisys and Kodak on 7 and 11 October respectively.

449. The meeting on 7 October was attended by Lang, Robinson, Wilson, Lourdes, Chesson-Kistas and MacCallum from RACV and Walker, Josephson, Felsenthal, McMullen, Olsen, Wood and Willis from Unisys. It was to enable Unisys to obtain information as to RACVI's requirements to facilitate the preparation of Unisys' final submission.

452. On 15 October Unisys provided a submission, dated October 1993, in response to the requirements outlined in RACVI's letter dated 29 September. It ran to well over 100 pages. It was stated that the document built on information provided to RACVI in earlier documents, in particular the July response to the RFP. It continued to propose the InfoImage Folder products and services detailed in the document as appropriate to RACV's requirements. It was stated that the Unisys InfoImage Solution was ideally suited to the aggressive time scales of the project, and that its development methods were geared to provide high quality prototype and final results within the proposed deadlines. A costing was provided of three different configurations to facilitate RACVI's consideration of where to locate the hardware. The configurations were centralised and distributed as requested by RACV and a third configuration recommended by Unisys. The recommended configuration was $1,878,000; the higher of the other two was $2,180,000. The reduction in price was consistent with Willis' evidence that she had been told to submit a second response on the basis that Unisys would charge $1.7M, which was "far below our initial costing". She said, and I accept, that Unisys had decided to forego its normal gross profit margin on the deal, as it wanted to buy imaging market share and wanted an insurance reference site in Australia. To achieve this Unisys now proposed three smaller Unix servers in lieu of the single large server originally proposed, which reduced hardware costs from approximately $2.15M to approximately $1M or less.

455. On the same day Unisys made a presentation to the Team including MacCallum at its office. Present for Unisys were Wood, Walker, Josephson, Olsen and Willis. In his opening remarks Josephson said that Unisys had done this type of project before and was ideally suited to meet RACVI's needs. Much of the discussion was focused on project management and staff capabilities. Josephson referred to the need for close co-operation in business process re-engineering, training and implementing the new technology. He proposed that Willis act as project manager and she spoke about the project. She said Unisys would deliver a system within the required time frames and that it had the resources available. She said that all staff were suitably trained and skilled in the area. Unisys could do the job. Olsen made a presentation from the technical perspective, saying the system was flexible and could be modified, was resilient and could perform the job. He said the jukebox should be located at RACVI's Collins Street premises and referred to options in respect of configuration. There was also a presentation by Walker.

458. On 19 October Josephson wrote to Rutzou advising further details of the three configurations presented on the 17th. It listed the hardware and software for each configuration. Also on the 19th MacCallum sent Robinson a comparative analysis of the pricing of the vendors Unisys, Kodak and Filenet. On 19 October the Team met.

461. Unisys had nominated Telecom as a reference site where it had performed work. Accordingly, and one of the key evaluation criteria in the RFP being proof of successful implementation of a workflow management and imaging system, a site visit was made to Telecom on 25 October. Telecom had nothing adverse to say about their dealings with Unisys which had come in on budget and on time. Telecom was happy with the way the project had been implemented and the way the system worked.

464. Chesson-Kistas also referred to a video supplied by Unisys which showed its system in use including that it had improved the efficiencies of an insurer whose business also involved multiple claims and the need to process them quickly.

467. By late October Deloittes' role was coming to an end. The selection process was being finalised in the course of which Deloittes ensured a reasonable configuration was put forward and advised on the vendor's fulfilment of RACVI's requirements. Deloittes was not engaged to negotiate the contract. MacCallum said that effectively, subject to some follow up matters, the retainer was complete by the end of October. In the final stages MacCallum gave Monument and Rutzou a memorandum dated 22 October on matters they should attend to prior to contracting with Unisys. In conclusions in the memorandum he stated that on the basis of his analysis there was no reason to suspect the configurations proposed, and the stated scaleability of configuration, will not meet RACV's requirements. He emphasised that RACV and the chosen vendor must agree performance and service measures and levels, and finalise configuration as part of contract negotiations leading to contract signing. MacCallum said he also discussed the matters in his memorandum with Lang at about the same time. MacCallum said Lang agreed they needed to be conscious of this in their contract negotiation and he would push RACVGS IT to be on top of it. (I note that counsel for the plaintiffs said that they (the plaintiffs) should be treated as one entity from the point of view of such communications.) Apart from some follow up matters, Deloittes was not brought back in until around March 1994.

470. On 1 November Josephson wrote two letters to Lang, following up a meeting that morning. He provided information on pricing and noted that a sample contract had been left with Lang; to save time Unisys and RACV staff would meet to discuss contractual terms and conditions. On 8 November Felsenthal wrote to Lang confirming details of the price of the server.

473. The board of RACVI approved a budget allowance on a WMS system of $4.1M on 9 November. That was subject to management being satisfied as to the approp-riateness of the expenditure. In that respect the final decision was left to Mitchelson.

476. In November the Team met to determine a file recommendation. They selected Unisys as the preferred vendor. This decision was based on their evaluation of all the information that Unisys had provided. On 23 November Lang sent a memorandum to the Steering Committee advising the decision of the Team and recommending that contractual negotiations be commenced with Unisys. He attached a draft form of contract which Josephson had given him, and which, he said, could form the basis of the negotiations. The memorandum stated that comments of Johnathon Breedon on the contract were attached. Breedon was a lawyer in the employ of RACVI; he was referred to in various ways - on the whole "claims legal manager" would seem the most accurate. What the evidence disclosed as being enclosed was the draft from of contract with a few hand written suggestions endorsed thereon. An executive briefing took place at the RACV Noble Park office on 26 November with personnel from RACVI and RACVGS IT and MacCallum. Each person who had been involved made a presentation. The information included a letter from MacCallum dated 26 November in which he stated that Unisys had exhibited the best solution and great understanding of the business requirements of RACVI and proposed a detailed project and changed management approach, supported by highly qualified staff, for the implementation of the system. Basically, the letter was MacCallum's sign-off on Deloittes' retainer.

479. Mitchelson wished to be satisfied for himself that the system would perform the tasks stated and meet RACVI's business needs. Accordingly, at his request, MacCallum arranged for Unisys to demonstrate the system to senior management. The primary purpose was to demonstrate the system to Mitchelson who was to make the final decision. Mitchelson also viewed the video provided by Unisys called Document Imaging which indicated improvements to the claims system and saving of costs. The demonstration occurred on 2 December. Lang attended the presentation; he said it was in effect an enhancement and repeat of the previous demonstrations. Josephson and Willis were present and gave some evidence about it; others from Unisys were also present and involved in the demonstration. The agenda shows that the meeting was to occupy 1 ½ hours. According to Mitchelson, Josephson, who addressed the approach of Unisys to RACV's requirement, said that Unisys proposed to replace the manual handling of documents by electronic images and electronic claim forms using the InfoImage system which was suitable and ideal for RACVI's purposes. He spoke about the partnership between RACVI and Unisys and said that Unisys had professional project implementation experience second to none. He referred to the implementation at Telecom. He talked about the InfoImage product, saying the architecture was ideal, flexible, fitted in well with existing environments and was proven. Kumar gave a prototype demonstration which illustrated the life cycle of a claim. It showed how documents were converted to images. Documents were moved from screen to screen, and retrieved from memory, simultaneously. Documents were created simulating a telephone claim. The system was easy to use and stable. Mitchelson was very impressed; the system looked what was needed to streamline RACVI's claims processes and meet its business requirements. Walker made a presentation on how the project would be managed. The teams and structure of authority were shown on the slides. Mitchelson was impressed that a professional team had been put together. I do not accept the evidence of Willis that this was not put forward as a commitment to make the nominated people available. Mitchelson said that Unisys personnel expressed no qualification about its ability to produce the system required by RACVI, including as to response times. Willis gave evidence that she did not recall any statement regarding response times. She said that Unisys sales personnel are instructed not to make such statements; that evidence was not correct and I reject it. The truth is, as she stated in cross-examination, that sales personnel are instructed not to make statements they cannot deliver on. That is an entirely different thing. They were not instructed never to make a statement regarding response times. I add further that I accept Mitchelson's evidence; he impressed me as an honest and reliable witness. Overall he was impressed with Unisys and the product. He agreed with the recommendation of the Team and that the matter should move forward with Unisys.

482. I also accept Lang's evidence. It was along the same lines as Mitchelson. For instance, he said documents were accessed instantly, functionality was seamless and no qualification was expressed about the capability of the system. He had seen it before but was reassured by the demonstration and presentation. He believed that what he had seen in relation to instantaneous response times was what RACVI would get for live claims. Unisys had not stated any reservations in relation to volume/response times at the demonstrations. On the contrary, Josephson and Felsenthal had told him that he would get what he had seen. I find that Mitchelson also understood that Unisys would provide a system that responded in a timely way as required by RACVI and demonstrated to him by Unisys.

485. The matter then proceeded towards a contract. It will be recalled that Josephson had provided Lang with a sample form of contract with a view to commencing discussion of terms and conditions of contract. Lang gave the contract to Breedon who, as I follow it, endorsed some comments on it; Lang sent the contracts so endorsed to the Steering Committee on 23 November. The comments were suggested changes to cls 7 and 17. (If there were other comments of Breedon which Lang forwarded to the Committee, they were not put into evidence.)

488. Unisys prepared a Project Management Plan for the project, a document of some 42 pages. It states that it was prepared by Willis on behalf of Unisys Information Services "based on details as provided in the RFP". The distribution list is stated to be Lang, Robinson and Rutzou on the RACV side and Willis and Josephson. It states that the first draft was released on 20 December, followed by a page numbering correction on the 22nd and legal adjustments on the 23rd. It was incorporated as a contract document. The evidence as to its receipt and consideration by RACVI was incomplete. Lang recalled being given a copy of the PMP. He believed he "gave it a cursory read". He satisfied himself it accorded with his understanding of what was necessary and went no further. He was not asked and did not say when he received it. He believed that the legal adjustments referred to on the face page of the PMP were the adjustments made by Breedon. I understood that to be a reference to changes to the draft contract but not to the PMP itself. Certainly, I had no evidence as to any changes to the PMP suggested by Breedon, or of changes otherwise suggested to the PMP by RACVI. Lang himself did not recall communicating with Unisys about alterations to the PMP. I accept that the reference to "legal adjustments" was a reference to changes to the draft contract. That is consistent with Lang's evidence that he did not give Breedon a copy of the PMP, and that Breedon's role was purely to look at the contract.

491. On 23 December Lang sent to Breedon "the amended contracts for your suggestions" and asked him to check he was satisfied with the changes and advise as soon as possible. Breedon replied later that day saying it was okay to sign "subject to your approval of the [PMP], product schedule and services schedule as complete and accurate". He requested that Mitchelson and the witness initial the two amendments. I accept Lang's evidence that all he sent Breedon were two parts of the contract without the PMP or the July and October responses.

494. The PMP stated (in cl. 1.1) that it would form the terms of reference for all contributing parties to the project and that the purpose of the plan was to present a statement of all deliverables, work allocations and responsibilities, an overview of resources, schedules and costs, identify activities to be undertaken, assumptions and commitments. In cl. 1.2 it was stated that the work practices of RACVI claims to be image enabled had been formally defined in the Deloittes December 1992 study and in the July 1993 response. In cl. 1.3.A it was stated that RACVI would sign off at the conclusion of certain phases, the first being a Detailed Functional Specification to be provided by RACV or its delegate. In respect of that phase, the Detailed Functional Specification, it was stated that RACVI had already undergone the Requirements and Functional Design phase and that the proposed system "is designed based on the information provided thus far", and that some detail necessary to proceed to the next stage is not available. An estimated 168 hours was needed to provide the necessary detail level to feed into the next phase, and that was to be undertaken by RACV and completed by four weeks after project commencement. Under the heading Major Gaps Identified a list of 15 matters, broadly expressed, were identified by Unisys as missing or deficient for the purpose of progressing to detail design and implementation of the system. Three of the items were:

" 1. A clear picture of the system - including topology and functionality. 2. Detail of document image types and volumes, retrieved to which work stations and when. 12. Performance objectives."

That is a sufficient reference to the PMP, at least at this point. It is point 12 that Unisys relies on in its defence; see [39]-[41] and [43].

499. The contract including the product and services schedules was signed at Unisys on 24 December 1993. Mitchelson signed for RACVI with Lang as his witness. The services schedule provided that the July and October responses to the RFP, the PMP and a schedule of payment milestones formed part of the contract and were to be read in conjunction with it. With the exception of the RFP responses the attachments were to prevail, in the event of inconsistency, over the terms of the contract. The RFP responses were to be read subject to the contract terms. The PMP was signed by way of acceptance by Lang and G. Dober of RACV Information Systems.

502. The contract itself is called Consolidated Agreement. It identifies RACVI as the Customer. It seems tolerably clear that the Consolidated Agreement was with some adaptations, originated in a set of terms and conditions of contract developed by Unisys. If one was to look only at the Agreement itself one would not be informed as to the substance of the contract in the sense of being informed as to what the venture was that the parties was setting out on and the purpose they were seeking to achieve. Regard must be had to the RFP responses to seek to understand what the engagement was about and what Unisys and RACVI were setting out to achieve. Curiously, although the responses referred to the RFP and reference is required to be made to it to properly understand the responses and the engagement, the RFP was not incorporated as a contract document. Further, the PMP also referred to the RFP, again emphasising that the RFP was a document to which reference may need to be made to understand a relevant matter and the basis on which the parties contracted. I pass from this point to make further reference to the provisions of the Consolidated Agreement.

505. Clause 1 was called Overview of Agreement and stated that Unisys will sell and provide the products and services and "you, the Customer," agree to purchase or acquire those products and services itemised in the schedule on the terms and conditions contained in the Agreement. The term "the Customer" is used throughout the Consolidated Agreement to refer to RACVI. In that and other respects the terminology reflects the standard form nature of the Consolidated Agreement. The extent to which the terms and conditions were modified or adapted for the purpose of the RACVI contract was not established by the evidence.

508. Clause 2 is a definition clause. "Product" was defined to mean the equipment, software and related documentation. "Equipment" meant the hardware itemised in the schedule; "Software" meant the objective code version of computer programs identified in the schedule and any related documentation, and includes customised software; "Customised Software" meant software or modifications written in accordance with an agreed set of functional specifications; "Functional Specifications" meant the specifications agreed for the customised software which was referred to in the schedule or written by "us" pursuant to cl. 5(a); and "Related Documentation" meant all materials other than the software supplied by Unisys including operating instructions. The word "System" meant the software and equipment. "Services" meant all forms of installation, integration, maintenance services for the system and training as noted in the schedule. "Maintenance Services" meant the equipment maintenance and software support services identified in the schedule. "Requirements Definition" meant a document written by RACVI or jointly with Unisys describing the functionality required for the customised software. "Acceptance" meant the system has passed the acceptance tests, and "Acceptance Test(s)" meant the mutually agreed tests based upon objective criteria designed to test the compliance of the products and/or system with the functional specifications and/or published specifications and which will be referenced in the PMP. It is to be noted that in section 2.4 of the PMP, which is concerned with acceptance, it is stated that the test plan for acceptance testing will be jointly prepared by RACVI and Unisys, and that acceptance testing to prove the capabilities of the system in accordance with the contract must be performed in a planned and controlled manner in order to quickly and effectively confirm the suitability of the system for production. It was also stated (in section 2.4.2) that RACVI will develop acceptance test procedures and a plan that proves that acceptance criteria are satisfied with assistance from Unisys.

511. Clause 3 provided that the agreement will continue in effect until it is terminated in accordance with cl. 21. Clause 4 provided that Unisys will supply the products and perform the services referred to in the clause which are identified in the schedule and may be defined in the PMP. The services included installing the products at site and ensuring they operated together as a system. Clause 5 provided for RACVI to develop and provide a functional specification sufficiently detailed to allow Unisys to develop the customised software, which will be done on a fixed price to be confirmed on signing off of the functional specification; a system change request would thereafter be required to alter the functional specification or PMP during development of the customised software. Clause 6 provided for the establishment of a project management committee, and cl. 7 concerned acceptance tests.

514. Clause 8 provided for the sale of the equipment at the prices in the schedule on the terms in the Agreement, title to pass on receipt of full payment, and risk in the system to pass on delivery of the equipment to RACVI's site or passing of the acceptance test whichever occurs later. Clauses 9 and 10 provided for software licence and clause 11 for the provision of maintenance services.

517. Of the remaining provisions, cls. 12-24, I refer to the following. Clause 18 provided for a warranty. Clause 19 was a restriction on liability clause. Subject to sub-clause (c), cl. 19(a) provides that if either party is in beach of the Agreement such that the other is entitled to damages, "regardless upon which basis the claim is brought whether it be negligence, breach of contract or misrepresentation" they will only be liable to the other for the amount of any loss or damage up to the greater of $100,000 or the total value of all charges paid under the Agreement in the 12 month period preceding the date the fault occurred. Liability for "indirect loss which may include loss of profits, actual or anticipated" was excluded by cl. 19(b). Clause 19(c) is concerned with the case where liability arises in connection with a condition or warranty implied by the Trade Practices Act; that provision is not relied on by Unisys.

520. Clause 22 provides for termination. Relevantly, it provides (in sub-clause (a)) that RACVI may terminate the Agreement if Unisys is in default of any material condition of the Agreement and has not rectified the default within 60 days of written notice of default.

523. Shortly after the contract was concluded Josephson's involvement with the RACVI project came to an end. In the hierarchy at Unisys it was Felsenthal as the customer account manager who was responsible for entry into orders. In his witness statement Felsenthal said that the contract negotiations were unusual in that RACVI requested only "minimal" changes to Unisys' standard contract. He recalled that the contract was sent to RACV's legal department for review and was reviewed by Unisys' legal department. He did not recall any specific negotiations about performance requirements. He was not cross-examined on that evidence. I do not have evidence as to the contract negotiations, such as they might have been, and a quick perusal of the draft contract available in November and the final contract reveals little change in terms although there is far more change in the schedules. I accept the substance of Felsenthal's evidence although on the evidence I conclude that the reference to RACV's legal department is more precisely to be understood as a reference to Breedon who was the legal manager in claims. It is apparent, and counsel for the plaintiffs acknowledged it to be the fact, that RACVI was not as attentive to its interests in obtaining legal advice on the terms of the contract as the ordinary dictates of prudence might have required. It is evident, and I find, that RACVI management placed a significant degree of trust in and reliance upon the skill and competence of Unisys.

526. The PMP did not specify a start date of the project but the parties swung into action, the project requiring much work in a short overall time frame. In fact Unisys had commenced working on technical issues including configuration and design before the contract was signed, their consideration of the project including technical issues now reaching back many months. RACVI had to produce a functional specification. Unisys was concerned both to press this activity, and to have its technical people working on implementation. A Steering Committee for the project was set up and met on 7 February 1994. The personnel were from RACVI, RACVGS IT, Unisys and MacCallum. The minutes of the first meeting record its role was to provide direction to the project and to resolve issues brought to its attention by the Project Team and the Change Management Team. According to Chesson-Kistas the committee met weekly.

529. A memorandum from Lang to Robinson dated 3 March 1994 records that the Unisys project team had indicated that integration may be more difficult and costly than first thought. It is evident that Unisys was giving the project a deal a thought. It is unnecessary, both at this stage and subsequently, to set out the detail of the comings and goings and who was doing what and when.

532. On 16 March MacCallum wrote to Lang recommending that Deloittes' involvement in the project be extended as set out. This was because historically such projects involve a difficult process and the RACV team was young and inexperienced in relevant areas. The recommendation was accepted.

535. RACVI completed the functional specification in March. It was a substantial document of over 700 pages in five volumes, dated March 1994, and titled Functional Specification - Gap analysis of Deloittes study to Unisys requirements. In the introduction it was stated that acceptance of the document by Unisys represented completion of phase 2 of the implementation of the workflow management and imaging system. The objective of the document was stated to be to provide a clear picture of the system - including topology and functionality, and detail of document image types and volumes, retrieved to which work stations and when. The projected annual growth in the number of claims is 10 per cent.

538. An issue raised in witness statements of Unisys was whether the functional specification was provided to Unisys. It would seem strange, indeed inexplicable, if it was not provided, and I would find that it was and that Unisys regarded the workflow description as insufficient. For their part counsel seemed to pass over the issue, and perhaps, in the event, it does not matter. Either it was provided and was found not to sufficiently state RACVI's business processes or technical requirements for the system, or there was a need for a document that did or did so more sufficiently. In the result, Willis proposed that Unisys and RACVI work together to produce a workflow narrative and this was done involving input from RACVI employees. The result was the Workflow Narrative, marked version 2.2, and dated May 1994. The purpose of the Narrative was stated to be to clearly outline the functionality of the workflow management system. It noted that some business practices had changed since the Deloittes 1992 study, and that some business decisions needed to be made and documented by RACVI. It was necessary to clarify outstanding issues for Unisys to progress to the detailed design phase to ensure that what was built was needed. To that end the Narrative had been created. It stated that final acceptance of the document by RACV will complete phase 2 of the Unisys PMP. It further stated that by signing the document the parties agree that the document forms the baseline for the definition of the workflows to be built in the workflow management system. It was signed by RACVI and Unisys on 19 May 1994. According to Wall, that was three weeks after its completion.

541. Unisys charged and was paid a separate fee for its work on the Narrative. That was because the work was outside Unisys' contract.

544. I note that Rouqueirol said in his witness statement that the Narrative had "very significant value because it formed the foundations for the scope of the functions of the system which Unisys was to deliver"; I accept that as a correct statement.

547. I further note that in cross-examination Olsen, who was involved in preparation of the Workflow Narrative, said that in retrospect, and even at the time, it was not a functional specification. Wall, who worked with Olsen in preparing the Narrative in conjunction with RACV personnel gave similar evidence. He said it did not cover the detail normally found in a functional specification. Whether or not those observations had substance the Narrative described itself in the terms referred to above and it was approved by Unisys and accepted by RACVI as such, and Unisys was prepared to move forward under the contract on that basis. Olsen also ventured the view that he now believed the Narrative did not contain all that it should have, but when asked to say in what way it was deficient he said he did not recall specifically but guessed the level of detail was an example. By that he meant not the articulation of the business processes but specific details like the volume of transactions or page sizes or the number of documents at different points in the process flows. It seems clear that this evidence was hindsight, and perhaps included an element of blame shifting, as he said that at the time he believed the Narrative was sufficient. Furthermore, the Narrative was signed off on that basis.

550. Work then proceeded on the detailed design of the system. Much evidence was given concerning this stage in which Unisys and RACVI and RACVGS IT personnel were engaged, and in particular as to aspects of concern and certain things that arose. A deal of Unisys' evidence was critical of the skills and competence of RACVI and RACVGS IT personnel, technically and in their assistance and understanding of what the project involved. A deal of the Unisys evidence described the work or aspects of it undertaken by its employees. In this time too Unisys gave instruction to RACVI employees in the InfoImage system. I do not overlook the evidence but judge it appropriate in this background to now pass on to the stage of acceptance of the system.

553. I do not propose to describe all that happened in the course of the parties respective efforts to implement the project as it advanced towards apparent completion. They included RACVI taking steps to have staff ready to use the system on hand over. The task was complex and much effort was applied in various directions on both sides. In this process, in particular the design of the system, it was Unisys and not RACV employees who worked out the size of the cache, the number of optical drive juke boxes and drives for the system; they applied their skill and expertise in doing so, that is to say, in adapting the InfoImage product to RACVI's business requirements. Haw said, and I accept, that he relied on Unisys to design and provide whatever was required. Olsen was unable to recall the detail of the actual design.

556. On 27 March 1995, following testing, an Acceptance Signoff was signed by Lang as acceptance for RACVI and by Rouqueirol as approval for Unisys. The acceptance constituted an acknowledgment that the system had been delivered in accordance with the Workflow Narrative and PMP subject to certain exceptions. The document stated that, in lieu of the warranty period stated in the Consolidated Agreement, the warranty period will commence on 27 March and terminate on 19 May 1995. The matter apparently being complete, on 30 March Deloittes rendered their account.

559. Also in March, in anticipation of the system going "live" Doherty prepared a plan for the implementation of the new system. It dealt with a range of matters including training of staff and the staggered movement of groups of staff to the system, and thereby the conversion of the paper based system to the image retrieval based system. Files were to be run in parallel in the initial implementation period, it being anticipated that the majority of paper files would be finalised within three months following implementation, and the paper files would be totally removed quickly thereafter.

562. The first day of production using the new system was 12 April 1995. In a review for the period to that date from 21 March 1995, Willis noted that the functionality of the system had gained acceptance on 27 March, and that with the exception of one or two problems with standard letters the first day of production use had gone well. Willis finished with the project in April 1995. She used the expression "functionality"; similarly Wall said the system was "up to specification and was functioning" with only a few outstanding exception reports. It was then a matter of seeing how it operated in practice.

565. Functionality and performance problems were encountered from the outset, and they became worse in nature and magnitude as the number of users and volume of material on the system increased. Johnson was responsible for monitoring the system for Unisys and assisting with problems. He recalled problems with folders not arriving when requested or arriving slowly, and to the duplication of records in the rendezvous queue. Haw, who I regard as an impressive and honest witness, was observing the operation and performance of the system. He observed retrieval times of a requested item of one minute or more. There was also a problem with stability in that the system would stop processing requests for retrieval or sometimes the server would lock up completely. This sometimes required a server reboot and at other times involved Unisys having to restart, fix or apply a patch fix, often with help from Unisys in the United States. There was also data loss with documents scanned in not being correctly filed, and there were folder movement errors with folders being sent to the wrong queues or not being retrieved from a diary function queue.

568. The situation got worse. The contemporaneous records, including internal Unisys documents, disclose a sorry tale. For instance, in an internal email on 26 May 1995 Rouqueirol advised that RACV was on world wide alert, "The system has been down several times this week . . . We still do not know why the system is crashing. We need to focus the few trained resources we have on this issue to get it resolved. ... The worrying aspect in this issue is the apparent dearth of expertise, even in the US". Skipping over, in an email on 9 June Esmonde referred to limping along with on-going problems at RACV and being no closer to a solution; "we have little knowledge of the internal workings of the product to be able to pinpoint the cause". These are examples only and I pass over other Unisys and other RACV documents that refer to problems encountered with the system.

571. The warranty period passed, but that was hardly relevant. Unisys had delivered a system which did not work. Unisys was seeking to stay with the project and, it is clear, sought to avoid RACVI terminating their further involvement. Unisys searched on for reasons for the failure of its work. For that is what is was, a failed contractual performance, as counsel conceded at the trial.

574. In letters to Lang dated 21 and 23 June 1995 Esmonde recommended that RACVI agree to the appointment of Birthisel as project manager to control and co-ordinate the "considerable" effort required "to limit the elapsed time and deliver the benefits of a fully functional system that meets your needs". He would be required for a minimum of three - six months, commencing immediately, at a charge rate of $1,200 per day. A further cost to RACVI. Mitchelson agreed and Birthisel, in effect, replaced Willis as project manager.

577. On 26 June it was decided at an RACVI Unisys project meeting to implement a main frame change to prevent new claims being processed by the new workflow system. It was also decided that RACV be provided with a statement as to when new claims will re-commence being processed by the workflow system. In other words, the problems being encountered, and the consequent administrative difficulties and disruptions, were such that on 27 June no new claims were to be placed on the Unisys system; they were to be handled in the old paper based way.

580. At a further project meeting on 28 June Olsen reported that the system was losing information (including folders) and that attempts were being made to retrieve it by reorganising the data. Advice to Birthisel from other Unisys personnel was that items were being lost because the system did not know what to do with them.

583. In late June David Lupton from Unisys corporation made a visit to Australia to assist.

586. In July Unisys undertook an investigation of the system. Olsen was the key technical person involved, although other Unisys personnel were engaged. Among other things in this period, on 7 July Doherty noted in a memorandum to all workflow users that a number of the operating components of the system had been switched off in order to try to keep the system running. An internal Unisys email from Esmonde to William Maier in the United States dated 10 July 1995 requested Dave Lupton return from the United States to assist. It was stated that major table integrity problems had forced Unisys to close down event manager to avoid further damage and the system was no more than 30 per cent functional. Esmonde advised that "We will be given one opportunity to fix this problem or face litigation for a system the customer has little faith in". He said that RACV had been "extremely patient". In late July Mike Weise came out from the United States to help him try to work out the problems. At one point, Birthisel said (in about July or perhaps later) that a line by line analysis and evaluation of the code confirmed that the code was failing due to insufficient error trapping and resolution when the application was confronted with error. I accept there was such a failure but not that that was the cause of the failure of the system. I make no finding as to the specific defects or insufficiencies of the Unisys system. The fact is the delivered system failed and had to be re-designed and re-engineered. Unisys commenced that task.

589. On Lang's recommendation Deloittes was re-engaged by RACVI, in view of the enormous difficulties evident with the Unisys product, to monitor the re-design and re-engineering and ensure the system would be delivered as represented. Lang was concerned that RACVI was not getting the full story from Unisys on the solutions they were promised.

592. Outwardly Unisys expressed confidence it could get the system to work. On 19 July Mitchelson met Murray Bergin the managing principal of Unisys Information Systems (Birthisel said that Bergin was the managing principal of Unisys in Australia). Bergin was embarrassed by the situation but said that Unisys stood behind its product, that it would resolve all issues and was bringing one of its most experienced workflow managers to Australia. RACVI would receive the system it required. In a confirmatory letter dated 21 July Bergin said that "a detailed project plan has been developed to ensure the delivery of a high quality system which will provide RACV Insurance with the benefits that were originally envisaged". He referred to the system being operational on 13 November and processing new claims through the system on 17 November 1995. The implementation will be complete by end January 1996 with final training of claims officers. I note that Birthisel described this letter as being the delivery to RACV of Unisys' recommendation to rebuild the system. If that was the purpose of the letter it was not so expressed. The letter referred to current difficulties and spoke of "the need for enhancements to some aspects of the system". It was not a frank letter. The explanation is that Unisys was working very hard to keep the project on foot, and in particular to seek to avoid RACVI terminating further work under the contract. In his witness statement Birthisel said, and I accept it as the fact, that "By this stage", which was in the July/August period, "Unisys was projecting a loss on the contract and by recommitting to the contract, Unisys did so in the knowledge that it would increase its losses".

595. Problems continued and on 15 August RACVI decided that it should withdraw completely from use of the Unisys system. That meant that all live claims on the system would be printed out and revert to the old paper based manual system. The decision could not be implemented immediately as it was necessary to recreate the files in a paper form. The decision was taken because of the burdens placed on RACVI's claims processes by the failed system. It was intolerable to continue using it. In an internal Unisys email from Felsenthal to Bergin and others dated 16 August 1995 he referred to this decision and to the fact that Deloittes had been contracted to assist with the development of comprehensive testing plans "to ensure that the system we deliver later this year meets the requirement". He said that Deloittes and RACV "have come to understand that the existing system does not match the signed system designed spec which in turn does not match the functional spec (system narrative). This has clearly made them very nervous about what we did deliver and what they are to test against in the revised system".

598. Birthisel himself recommended both the step taken earlier to stop adding new claims to the system, and subsequently that RACVI abandon the system altogether and convert all claims in the Unisys system to paper files. Unisys employed and paid for casual staff to reconstruct the paper files. The magnitude of the task is indicated by advice of Chesson-Kistas to Doherty on 28 August 1995 that there were 5,859 folders in the Unisys system of which 4,019 were open, 9 had been re-opened, 99 had no status recorded and 1,732 were finalised. Moving ahead a little, on 11 September 1995 RACVI claims officers and ancillary staff reverted back to hard copy claim files. The Unisys system would remain on-line for two weeks as a querying facility only while the remainder of the documents in the system were printed. The system would then be used as a testing platform for re-development work. By this time there was a back log of claims work due to problems with the Unisys system and wasted staff time in dealing with electronic and paper files at the same time.

601. On 14 August Esmonde wrote to Lang confirming a recent discussion "to extend the no charge period" for Birthisel's services as project manager until the roll out of new claims scheduled for 17 November.

604. On 23 August Bergin advised Mitchelson that the problems with the system would be overcome by the end of the year. Mitchelson was prepared to allow the time; he had no alternative as RACVI needed the system.

607. From 28 August to 1 September 1995 a high level meeting was held in the United States with personnel from Unisys Corporation and Filenet with Sigma and Wang personnel contributing by telephone. Johnson, d'Souza and Del Gannon (project director on the RACVI account) attended from Unisys. Johnson gave evidence about the meeting. In his witness statement he said the meeting was to discuss the rebuild of the WMS at RACV. A document was prepared as an "informal recap" of all the issues discussed. It stated that the objective of the taskforce was to: define the problem, and differences between the standard product and RACV implementations; identify short and long term alternative to stabilise the system and make it supportable; review existing and proposed design for stability and long term supportability; suggest design alternatives, given constraints imposed by the project schedule, particularly for long term supportability; validate the design with Wang/Filenet and ISD personnel; identify the risks and means to manage the risk. Under Findings and Recommendations it was noted that the team worked under the basic constraint that any short term solution must be implemented by November 1995. The existing solution had several major shortcomings, most of which were mitigated by a new design presented by the RACV team. The new design was more efficient from a performance perspective. Johnson's evidence was that the part of the InfoImage product called event manager did not provide the essential functionality needed to deal with situations created when users did not follow the defined processes, and the object of the visit was to get permission from event manager experts to build their own unique processes. The source code to event manager was obtained which then permitted the functions to be built using existing functionality. The notes identified the major risks in the plan as: schedule risk as the integration and stress testing time (four weeks) leave little room from recovering from any major errors; hardware under configuration risk, as there is no easy way to model the new design; related to that, the adequacy from a performance perspective is unknown. I interpolate that in cross-examination Johnson said that the reference to performance was not to retrieval times as the focus was primarily on how to make event manager more efficient and in that respect he referred to moving folders out of the diary queue to the claims officer in a more timely manner. Then, in a section that listed root causes of existing instability and performance issues, it was stated that no capacity planning or performance analysis has been done on the existing system, so performance is a big risk when the customer goes full volume. I interpolate that in his evidence Johnson said that at that time there was no way to measure how the system would react under load. Further on in the notes, under the heading Performance, it was stated that the existing solution is manifesting itself as a major performance issue for the customer, the main performance perceptions for the customer being: diary documents not sent to the desktop on the diary date, but sometimes they are a day late or not sent out at all; it may take more than one minute to file a document into a folder; it can take several minutes to retrieve a folder onto a desktop. In his oral evidence Johnson said that that reference was related to getting things out of the diary, getting folders back to the user, into their queue, so they could retrieve them, whether the user was on the telephone or had received correspondence. That was "causing a lot of problems". In his witness statement Johnson said that these matters were discussed and that the performance issues were addressed during the rebuild. Johnson gave some elaboration of these matters in cross-examination.

610. Unisys continued work on the design and rebuild of the system. RACV were also working on the project which had various facets. I do not detail all the steps on the way, before and since this time, but refer to some, not on any sort of selective basis, but as reasonable indicators of the course of the events. I do not overlook matters such as the LAN and the Woozle which Unisys pointed to as creating problems and causing delay. But the case is not put as one of delay. Rather, the case put by the plaintiffs is that in March 1995 Unisys delivered a product which did not work. Put simply, Unisys failed to perform its contract. Unisys continued to work on the project in the hope of delivering a product that met its contractual responsibility and was still attempting to do so in June 1996 when RACVI called a halt.

613. On 18 September Birthisel informed Haw of a proposal to replace the existing Unisys multi-server configuration with a single server. This was a new suggestion of Unisys. It originated with Olsen and, he said, resulted from improved technology. In his witness statement Birthisel said this was to provide the most powerful solution possible during the rebuild. The matter was discussed over a period, in the course of which Esmonde wrote to Doherty on 17 October 1995 advising that Unisys anticipated a single server system which significantly improve performance and recommending installation as soon would possible. To avoid delay to the current schedule Unisys intended to proceed with procurement of the equipment by 25 October and welcomed input by that date. On 2 November 1995 Hurford wrote to Esmonde and accepted the recommendation. About 20 November 1995 Unisys supplied and installed a single server in lieu of the multi-server configuration at no charge to RACVI. It seems the value of the server and associated software was $385,360.

616. In October the date for completion was revised to March 1996. That involved delivery on 4 March and two weeks for retraining.

619. On 26 October Deloittes provided the parties with a draft volume/stress test strategy document. The document stated the system being redeveloped will be subject to a more rigorous acceptance testing regime which will include three phases: functional testing, restart/recovery testing and volume/stress testing. The document set out a program for the last type of testing which was designed to test the robustness of the system under conditions of expected peak workload. The aim was to ensure that the functionality and physical configuration of the system was capable of supporting peak work loads. It was stated that when performing volume testing indicative response times will be collected.

622. The document underwent analysis by Unisys which sought to clarify the likely volumes of documents including by their class. Unisys prepared a document dated October 1995 titled "Volume Documentation" containing their thoughts on volumes. It stated that the aim was to ascertain if the current configuration will cope with the business needs of RACVI's claims process. To this end Unisys reviewed all documentation with references to volumes, commencing with the RFI and proceeding through the RFP, the July and October responses, the contract, the Deloittes 1992 study, the PMP, the RACVI functional specification, the Workflow Narrative and subsequent detailed design.

625. On 27 October, Mitchelson, MacCallum, Lang and Dober met with Bergin, Gannon and Felsenthal. The purpose was to receive a report from Unisys on progress towards achieving completion. Bergin apologised for failure of the system to achieve functionality but said every effort was being made to resolve all issues. Mitchelson accepted the explanation; it was given by a senior executive and the system was required.

628. Olsen was cross-examined on a confidential memorandum he sent to Esmonde and some other Unisys personnel including Birthisel, Felsenthal and Gannon in or about October 1995 in which he identified and commented on a series of issues he thought required discussion. They concerned difficulties being encountered in implementing the project. One issue was to implement the single server configuration. Another was that the InfoImage Folder product suite was being considerably stretched to meet RACV's requirements; he meant that as customisations were effected to meet RACVI's unfolding requirements, and which had not been planned for in advance, Unisys was pushing the limits of its knowledge as well as the basic functionality of the system. He was concerned about version 3 of InfoImage being in its twilight and the need for a plan for RACVI to migrate to the next version. He also referred to inadequate staff resources and product support. He said in evidence that the memorandum resulted in additional support for the project.

631. On 8 December 1995 Esmonde wrote to Lang advising that the initial stress test of the system scheduled for the next day had been delayed due to problems with Woozle, which was an RACV responsibility, and that 18 December was a tentative date for the stress test run. It was expected that full acceptance testing will be underway on 3 January 1996 and there will be an impact on the 4 March deadline. In his evidence Haw said that Unisys was partly to blame for the delay; that is, that it was not solely attributable to problems with Woozle.

634. Volume testing was undertaken on 18 December; system problems were encountered and further volume testing was to be in 1996.

637. On 19 December Mitchelson, Hurford and MacCallum met with Bergin and Felsenthal to review progress on the re-engineering of the system. Mitchelson explained that Hurford was taking over the project. Hurford said in evidence the meeting was serious in tone because the failure to complete was a serious problem for RACVI. Hurford conveyed to the meeting the concerns of the managing director of RACV as to why the system was not operational and that Unisys commit to ensuring the system would operate to meet all requirements in a specified period.

640. Felsenthal said the project was on track, there was no need for concern, and he and Bergin assured Hurford the system would accord with RACVI's requirements and specifications. But Hurford was concerned because, he said, it was apparent the project was in trouble with functionality and timing. As a result executive meetings were put in place and there was correspondence setting out the respective positions.

643. On 21 December design documents/functional specifications were completed and delivered.

646. Volume testing occurred in January 1996, but was not successful. Correspondence ensued on 30 and 31 January. RACVI expressed concern, sought explanations of the volume tests, said that Unisys must ensure the system is fit for acceptance, stated that "continuation of problems will place this project at risk", requested an immediate response to a request for detailed plans of Unisys's current testing program to ensure delivery of the system for acceptance, and stated that the impact of the delay due to the last volume test problems will delay acceptance by at least a further two weeks with the effect to implementation being assessed but with an expectation that it will be delayed to 13 May 1996. Finally, RACVI's letter stated that communication as to the commencement of the warranty period will not be considered until a system is delivered to RACV that is functionally acceptable and stable. Felsenthal's letter in reply re-assured RACV and anticipated delivering a system for acceptance testing next week.

649. In early February acceptance testing was scheduled to commence on 28 February. That date could not be achieved and on 28 February Doherty advised Hurford that in lieu the following dates were indicated:

* performance of preliminary volume / stress test 6 March

* performance of full scale volume / stress test 29 April - 4 May

In relation to these stages there was no point in proceeding to a full scale volume/stress test unless and until the system was stable and functional. Doherty noted that there was little confidence in the project team that Unisys could work through the above phases without stability or performance problems.

657. This is a convenient point at which to mention the role of Deloittes in developing a volume/stress test plan. MacCallum described the plan as a very detailed framework of functional integration and volume/stress testing. A draft plan (of some 18 pages) was prepared dated 14 February 1996. MacCallum said the plan was prepared by Deloittes staff under his supervision, reviewed by him and handed to RACV for comment. The draft went through a revision dated 27 February 1996 to what still seems a draft dated 20 March 1996 (exhibit AA). MacCallum did not know if there was a later version of the plan. The plan document was in six sections with three appendices. Following Section One, which was introductory, was Section Two concerned with the test environment and special requirements. Section Three made provision as to the population of the database, Section Four as to a preliminary volume/stress test run, Section Five on roles and responsibilities of the test team and Section Six as to test schedule and procedures. In Section One it was stated that the aim of the volume/stress testing was to achieve heavy throughput in common functional areas of the WMS thereby ensuring it will physically and functionally operate under expected peak work loads with the number of users available for testing. The testing will highlight any serious problems and allow correction prior to production implementation. The database was to be populated with 20,000 to 40,000 new claims.

660. It was stated that acceptance of the WMS will be based on the success of six stated key components which included functionally sound software, operation of software/hardware without critical problems which cause the system to halt, and response times based on 27 types of basic key transactions for each of which a response time in seconds or minutes was stated. The stipulated times were based on all current claims being on-line, that is, in cache or on mounted optical disk. The effect of MacCallum's evidence is that he assumed that the times had been provided to his staff by RACV as the times RACV wanted. Timings were to be taken during the testing.

663. It is not clear to me that the document became final or was provided to Unisys.

666. Minutes of a project meeting on 29 February 1996 record major concerns as a lack of confidence in achieving the 24 June milestone due to continued instability of the system and the effort required to rectify bugs, the inability of Unisys to provide suitable system performance under full load conditions and the ability and commitment of Unisys to provide support after implementation. Hurford met with Walsh on the 29th, possibly at the project meeting although that is not clear and nothing turns on it. Hurford was wanting a formal guarantee that the performance of the system would reach RACVI's expectations without fail in the above time frames. He told Walsh that 24 June 1996 was the final date for RACVI and that he would not condone or agree to any further time slippage. They both wanted the project to be completed. Walsh agreed to the following key dates:

Hurford asked Walsh to record his agreement in writing.

676. On 7 March 1996 Walsh wrote to Hurford confirming the milestone dates agreed on 29 February. The letter set out a detailed milestones table. It referred to a number of matters including that acceptance testing would commence in earnest following a successful six hour processing run on 15 March. It also referred to effort required of RACVI. The letter included the statement that performance criteria had not yet been agreed but expressed the view of Unisys that "the system will comfortably meet the performance criteria originally specified in the contract". It stated that Unisys was working with RACV to develop more specific business based performance targets for the system which hopefully "we can agree...and make a full commitment to their achievement." He concluded the letter by saying that Unisys fully understood and supported the urgency in bringing the project to an early and successful implementation, and committed Unisys to providing the resources necessary to fulfil all requirements expected of it, and looked forward to working together to achieve the 24 June deadline.

679. In cross-examination Hurford was asked about the statement that performance criteria had not been agreed. He could not recall his reaction at the time. He said he did not then or now understand the implication of the statement because he understood performance standards had been agreed. He did not know why Unisys would say performance criteria had not been agreed. He did not take the statement to specifically mean what it said. He discussed it with Doherty but did not himself take the matter up with Unisys. Other aspects of the paragraph in particular as to meeting performance criteria in the contract gave him comfort. Hurford said that response times was a constant issue of discussion with himself, Lang, Doherty and members of the Unisys team. It is appropriate to say that I was impressed by Hurford as an honest witness. I accept his evidence.

682. On 12 March Doherty recorded advice of Esmonde that further problems had been encountered with the printing and faxing solution. Doherty recommended that that facility not be incorporated into the system until after the implementation of the first team, and noted it was essential to have a stable platform by 15 March. Hurford described that as a concession to allow Unisys to deliver the more serious and fundamental elements of the system to be delivered by 24 June.

685. On 13 March Doherty sent a memorandum to Birthisel outlining RACVI's requirements for performance of event manager saying that they will be incorporated in the volume test criteria within the test plan. The requirements concern the level of priority in which documents will be processed, and the response times. As to the latter it was stated that:

"Acceptance will be based on the success of achieving the following response times: Folder retrieval (by File Notes) * From Diary 10 seconds * From File Cabinet 5 seconds Folder to Investigations 10 seconds New Total Loss 10 seconds New Claims 20 seconds Default routes from Manual Cheque Queue 1 minute Sent to diary 2 minutes Undiary by expiry 5 minutes Finalised claims (to Review Q) 2-5 minutes Review to File Cabinet overnight".

689. It may have been prior to this that MacCallum met with Doherty and discussed the matter of response times. MacCallum recollected a discussion around early May. Having regard to his account of the discussion, to Doherty's 13 March memorandum, and the Deloittes volume/stress plan, it seems probable that the meeting was somewhat earlier and nearer to the March time frame, if not before the memorandum. MacCallum said he convened the meeting as he was concerned as to the response times expected on the tests. It was important that expected response times were stated against the tests and he told Doherty it was very important given there was nothing contractual he was aware of that they (RACV) put something down as their expectations. Doherty said they would in conjunction with their IT department and they would be available before the volume/stress tests. They discussed some of the transaction type scenarios. He reflected on his earlier discussions in 1993 as to 2-4 seconds in some of the scenarios not being reasonable and should be adjusted upwards. Doherty said he would resolve the matter with the IT department.

695. On 18 March Hurford wrote to Walsh to confirm the current position. He referred to RACVI's need for the workflow management system and stated that RACVI had budgeted for the 1996/97 year on an expected productivity gain exceeding 20 per cent on the basis of the system. He stated that:

"The key milestone dates, based on the introduction of a production system on 24 June 1996, must be met, with the successful completion of all tasks along the way. After the discussions with Ted Johnson on Friday 15 March I have no alternatives but to ensure that this date is achieved. If any problems occur during the Acceptance Test period that in our view jeopardise the meeting of this date, RACV will have no hesitation in ceasing this project prior to 24 June 1996. We recognise that a number of measures have been taken over the past couple of weeks to improve system performance. However, the inability to deliver the print/fax facility and filing options by agreed dates, and the problems that arose during the preparation of volume testing on 15 March, do not provide me with any level of confidence. I am advised that that current timeline is extremely tight, and that the previously mentioned problems have removed the two week contingency period that you referred to."

699. Also on 18 March Doherty provided Haw with a record of response timings for a variety of retrieval situations from the volume test on 15 March. These were listed against expected response times. Some of the response times were significantly greater than the expected time. In a memorandum Doherty said that the figures pose some considerable concerns and identify the problem as the LAN. He said the system could not be implemented if it performed as it did on Friday 15 March.

702. Chesson-Kistas also received a copy of Doherty's memorandum. From her perspective as a user timings of the order of five minutes plus to retrieve a folder from a filing cabinet were unacceptable. A customer on the telephone could not be expected to wait for such a period to receive an answer to a query.

705. On 19 March Doherty and Haw gave Hurford a memorandum advising delay in receiving a component from Unisys that controlled the filing of documents into a claims folder which meant that PC's could not be configured and therefore that acceptance testing could not commence. This meant that functional testing could not commence until 26 March. It was thought the implementation date of 24 June could be achieved although there was now no slack in the timetable.

708. In his witness statements Haw said that by March 1996 Unisys had rebuilt the system on a single server but there were still poor response times. On Tuesday 19 March he conducted a test to work out what was the bottleneck causing the system to be slow. He conducted the test sitting at a PC accessing the single server system. His record of the test and the retrieval times he measured is at page 7319 in the court book. The tests had two objects. The first was to compare the time it took the system to retrieve folders and documents from cache with retrieval from the optical disks. The second was to compare the retrieval time at different times of day when the traffic demand on the LAN would vary. When the test was conducted the system was not in production use nor under stress testing. He found no appreciable difference in the response times and concluded that the level of LAN traffic and the capacity of the LAN system was not related to the problem with response times for the system, in other words, the LAN was not causing the problems. On the basis of these tests and for other reasons Haw's opinion overall was that the LAN was not responsible for slow response times in the system. It is convenient to note that he thought LAN problems delayed the project but only by a matter of days.

711. Haw was cross-examined on his recorded times in the course of which an exercise was performed of calculating an average of the response times in each of the three time bands in which he had conducted the tests and then comparing the three averages with one another to see if there was an appreciable difference. This was to obtain an indication as to the involvement, if any, of the LAN in causing slow response times. I accept Haw's evidence that the exercise did not accurately reflect what was happening in the test. They were not true comparisons. I also accept Haw's evidence as to the conclusions he expressed. It is convenient to mention that there is a history, both before and after this time, of Unisys stating that the LAN was causing problems and delays to the project and contributing to the slow response times. Birthisel continued to assert the performance of the LAN was affecting the system. This led Haw to arrange for Dennis Hakme of Memorex Telex to perform a review of the LAN in March/April 1996 and then to report on the LAN's performance during volume testing on 15 May 1996. I accept Hakme's evidence, and as mentioned, Haw's evidence. The LAN was not affecting the performance or functionality of the Unisys system.

714. On 22 March Doherty reported to Hurford advising of certain problems and advising that all parties were working in co-operation to ensure the delivery dates were met. A delay of a couple of days would place the 24 June implementation at serious risk.

717. On 25 March Hurford received a letter from Walsh in answer to his letter dated 18 March. The letter is too long to quote and I refer to it in summary. It acknowledged the economic incentives of the system for RACVI and expressed disappointment that the intended business value of the project had been delayed. It stated that given the role of Unisys (and that of RACVI) described in the 7 March letter Unisys was unable to guarantee "the overall project delivery or actual achievement of business value." It stated that Unisys was now in a support role to react to problems with the software, hardware and other services it had delivered for RACV's acceptance testing. He understood that Unisys caused some delays that reduced the originally planned two weeks and said that the contingency was affected by delays to PC configuration, and to LAN performance and problems with Woozle which were RACV's responsibility. It stated that RACV may at its sole option cease the project at any point, that system stability was dramatically improved and it was reacting well to increased loads - the one problem in this area was related to queuing and this will be solved prior to incurring any schedule delays. A plan for implementing the print/fax facility will be presented. Unisys was committed to the successful and timely completion of the project and would bring any potential problems or delays likely to affect the 24 June deadline to Hurford's attention as soon as possible. He proposed meeting weekly to review progress.

720. On 27 March Doherty gave Birthisel a memorandum concerning volume/stress test acceptance criteria. It referred to a meeting last week and set out in table form "a list of performance criteria that I regard as mandatory to ensure that expected benefits of the system are achieved. The meeting of the following response times are also critical in ensuring that the system is accepted by Claims staff. This list will be used as a component of the acceptance of the system from a volume and stress perspective. The other acceptance measures are outlined in the Volume/Stress Test Plan." The table that followed listed nine types of transaction commencing with retrieval of folder from file cabinet and in relation to each transaction set out timing details (that is, the first and final step in each measurement of the transaction) and the response times required which in the case of the first transaction was five seconds. It is not necessary to set out the full table; it is at page 8579 in the court book.

723. Birthisel passed Doherty's memorandum to Olsen to attend to from a technical point of view. Birthisel was project manager and not involved in the detail to be able to deal with response times.

726. In his evidence Birthisel said that it was not until about March 1996 that he became aware of the matter of response times. That was when RACV issued a document prepared by Doherty that said he wanted 2-4 seconds. Birthisel said it came from nowhere and he was taken aback. He had been "solely focussed on delivering to RACV the best system the team could put together that would meet the business requirements and basically get through the volume and stress tests." By "best system" he meant the first priority was to get a stable, functioning system. A little later he said that "we always looked at giving RACV the best possible response times that we could get out of the system. We had not up until March looked at timings. Two to four seconds was not even considered". He had not read the RFP prior to Doherty's notification of response times. He read the RFP in March and then the Unisys responses of July and October 1993. He had not looked at these documents before. He did not recall reading the RFI in March 1996. He had previously read the contract itself and the acceptance test document but neither mentioned response times. He saw the reference to on-line and near line and timing of two to four seconds in the RFP. Having done so he maintained the position that the performance target to meet RACVI's business requirement was to get the best performance he could out of the system when operating as best it could. His approach to the rebuild of the system had been to retain the basic architecture of the InfoImage system with optical disks and a jukebox which involved storing active claims on optical disks which were spun and down as required.

729. On 11 April Esmonde wrote to Doherty in response to his memorandum dated 27 March. The letter followed discussions between Birthisel and Olsen. The letter stated:

"In response to your memo of March 27th regarding Volume/Stress Criteria for the Workflow Management System, we have reviewed the required response times and make the following observations. As you are aware, our current arrangements with you do not include specific response criteria. However, Unisys is committed to providing you with a system that is tuned to give the best possible performance whilst recognising reasonable limitations of standard hardware and software architecture. It must also be recognised that comparisons with on-line transaction processing systems bear little resemblance to the technology and type of processing employed in an Imaging Workflow system. I have tabled below our best estimates of expected performance based on our observations from recent integration and Acceptance Testing. A 'Y' rating indicates our confidence in being able to substantially meet the times you have specified. An 'N' indicates our belief that we will be unable to achieve the response time using the existing architecture."

There then followed a table in the same format and including the same details as that in Doherty's memorandum under reply but to which was added a further column headed Unisys Conformance and under which in relation to each transaction type there appeared either the letter N or the letter Y. The letter continued:

"Unisys will continue to identify and respond to opportunities for further performance improvements during the remainder of Acceptance Testing and User Training. The next Volume test will also help to provide a basis for establishing a benchmark for further analysis and system tuning."

The letter concluded with an expression of optimism that Unisys will be able to deliver performance that will satisfy RACVI's business objectives.

736. The matter was discussed at a meeting on 12 April which Hurford and Walsh attended. Walsh said the project was on target. The matter of system performance criteria was discussed and Doherty's memorandum of 27 March and the Unisys response dated 11 April were tabled. I accept Hurford's evidence that he told Walsh that the response times for retrievals set out in the RFP were mandatory and that other response times could not be accepted. In evidence he said that he thought that what was set out in the 11 April 1996 memorandum reflected the RFP. And that while he used the word "mandatory" a further second or so would not have caused him difficulty. Hurford said that neither at the meeting nor at any time was there a discussion he could recall in which any senior Unisys person said there were no performance criteria in the contract. The whole basis of the business case for RACVI going into the system was that it would achieve the sort of outcomes set out in the RFP. Hurford said that the thrust of the conversation was about the types of retrieval times viewed by RACVI as being necessary for the system to pass the test. A further meeting was held on 22 April. Walsh said the project was on track. Hurford told Walsh that he required the system to perform in accordance with criteria in the original documents and nothing less was acceptable. There was to be further testing. There are notes of the meetings. They reflect that Unisys was to respond to the performance requirements of RACVI, then the effect of performance on business functions was to be discussed; then it was identified the system performance could not meet four criteria; then there was to be tabled a document stating required performance levels, a business case and estimated possible performance, to be updated in light of stress testing and alternative approaches were the system unable to provide sufficient performance. As to these notes of meetings, which were not signed as verification of accuracy or acceptance, I find that they indicate discussion but I do not accept that RACVI or Hurford in particular went along with a proposition that RACVI would accept the Unisys system even if at the time of delivery it could not meet "the four criteria that current system performance cannot satisfy" and that long term options be considered after production rollout. It seems that it was hoped that by 29 April(when there was to be another meeting) required performance levels for individual transactions would be established.

739. On 26 April Doherty sent a report to Hurford which noted that the acceptance testing phase had commenced on 18 March, a large number of new problems had been encountered, and in functional retesting on 22 April two programs released for acceptance testing had not run correctly, with one not running at all and the other failing in execution and deleting a number of production version files. On 23 April the testing team encountered a number of significant problems with basic functionality. He referred to other problems and expressed "great concern" at the number and severity of problems being experienced in the acceptance testing phase. The ability to reach the deadline of 24 June was in danger. He developed his concerns, stated that there appeared no chance Unisys could provide an acceptable system for a 24 June implementation and recommended the project be terminated. In cross-examination he was asked about a paragraph in the report in which he said that no specific details exist in the contract on the issue of performance and volume testing, and that any communication with Unisys regarding its inability to provide an acceptable system be on the basis of functionality concerns as mentioned and RACVI's strong belief the testing plan cannot be concluded in the agreed time. He had added that he believed there are and will remain significant performance problems which will be compounded by adding volume. He said, in answer to counsel, he did not know the basis of his statement as to what was in the contract. (This may have reflected MacCallum's statement to him.) He further explained that he had a strong belief that Unisys would not be able to pass the volume and stress test or the functionality test.

742. Hurford was not willing to terminate the contract until Unisys had had every chance to perform in accordance with the agreed timetable. And Walsh had assured him the system would perform by the due date. He asked Doherty to continue working with Unisys to see if functionality could be achieved.

745. In the meantime Unisys - I find by Olsen - was giving consideration to the response times in Doherty's 27 March memorandum. At page 9823 in the court book is a table prepared by Olsen which sets out Unisys' estimated response times for the transactions specified by Doherty. The estimate is at 29 April 1996. The estimates represented a target. There were differences in the estimates, some of the Unisys times being appreciably longer than those specified by Doherty.

748. I instance one or two transaction types. The first was retrieval of folder from file cabinet for which the RACVI required response time was 5 seconds and the Unisys estimate was 5-15 seconds. In separate comments the business case for that transaction was stated to be: "Retrieval usually initiated by a phone call. With caller waiting on the line, and quick response is imperative". It was stated that the current time for the transaction was 15-20 seconds. The estimate of 5-15 seconds could be achieved if a stated option (or perhaps hope) as to reducing the number of documents being retrieved from optical disk or magnetic cache was implemented by 10 May. I note that Birthisel described as obvious the imperative of a quick response to such a phone call. He was correct in saying that. The business case of RACVI in that context was obvious and always was from the start of the project (that is, pre-contract). It is convenient to mention some evidence of MacCallum on the estimate of 5-15 seconds for the above transaction type. Allowing for the fact of differences in document characteristics, an on-line system with the optical disk mounted under the reader could be expected to retrieve the information in 8-12 seconds. That would not be achievable with a near line configuration; whether 5-15 seconds would be would depend on matters such as whether the relevant optical disk was mounted when the request was made and the queuing situation. A near line system meant that a reasonable 8-12 second retrieval time would not be achieved. I accept that evidence of MacCallum.

751. Birthisel said, and I accept, that Olsen's estimates were the first document of Unisys which indicates consideration by it of the matter of the general performance investigation raised at the meeting in the United States in August/September 1995. That was because, Birthisel said, "we were focussed on the redesign". Furthermore it was in fact, as Birthisel said, the first indication over the entire contract of estimates of this type. Birthisel further said that "there is no reference to any timings at all prior to that one I got from Justin".

754. The estimates were discussed at an internal Unisys project control meeting on 9 May at which Birthisel, Esmonde and Sharon Matthews were present. Birthisel said that at the time Unisys was still at the stage of development and had not been able to test the system under load. Subject to that, the estimates were "what we thought we could get".

757. In final address counsel for the plaintiffs accepted that Doherty was given Olsen's estimates about the end of April/early May. There is a question as to when and by whom the information was provided. Birthisel thought Esmonde provided the information; Doherty gave no evidence on the matter. At this point it is necessary to refer to some further evidence which counsel for Unisys drew attention to late in the trial. He referred to a meeting to be held on 29 April at which, it seemed, Unisys was to respond to the business requirements of RACVI (see the reference to meetings in April at [212]), and to a document obtained from RACVI's discovery of Doherty's files headed Volume Test Criteria 29 April 1996. The document appears to provide information of the type referred to at [212] in respect of the required response time, the business reason and Unisys' current expectation of response time for four types of transaction. The document was admitted as exhibit 15. No person had given evidence about the document. I was told that counsel for the plaintiffs was seeking to contact Doherty about it and they may be able to say more about it. Counsel did not return to the matter. The suggestion was that this document too was provided to Unisys in late April 1996. The times it records as Unisys expectations are the same (although only four transaction types are referred to) for the same four transactions in Olsen's document with one exception. In Olsen's document the Unisys time for retrieval of folder from file cabinet is 5-15 seconds whereas in the further document it is 10-15 seconds.

760. It is convenient to refer to the third last item under the heading Outstanding Issues in Section 2.1 of the papers for the 9 May meeting states:

"RACV Insurance prepared a list of timings for thirty different functional tasks within the application. After negotiation with RACV Insurance, this list has been reduced to four major functional task timings. RACV Insurance has been informed that two of the major functional tasks are architectural issues and cannot be improved. The remaining two major functional tasks are affected by the customised software developed by Unisys. No further modifications to the application will be performed to address these customised components until after the application goes live. This has been agreed to by RACV."

765. Testing continued and in the course of it various problems were encountered. On 16 May Doherty sent Birthisel and Esmonde a memorandum on the subject of performance indicators. The memorandum attached response time recordings from the volume/stress test conducted on 13 May. He asked Birthisel to ensure that the figures, as well as additional tests carried out that week, are reflected in the system performance standards document. He said that to continue the analysis of solutions available to reduce the time of key transactions a number of points needed to be clarified. He then set out a number of points concerning retrieval of folder from file cabinet/in-box and folder retrieval from file cabinet/diary queue. The attached time recordings were divided into three categories: major criteria (of which there were four transaction types: retrieval of folder from filing cabinet, retrieval from folder from in-box, folder retrieval from diary queue, and folder retrieval from filing cabinet), back end timings (of which their were four transaction types) and front end timings (of which there were 13 transaction types, some having multiple timings). For each transaction an expected response time and actual recorded times were stated. In some instances, including each of the major criteria types, both best and worst recorded times were appreciably slower than the expected response times. The memorandum and the response time recordings are at pp. 9868-9872 in the court book.

768. In the part of the memorandum dealing with folder retrieval from file cabinet/diary queue, Doherty referred to further investigating the option of utilising a client application to move a folder into the user's queue. He stated that the need for file notes to be used to retrieve folders is a major shortcoming of the system, that this alternative was required as a consequence of problems encountered when reserving folders retrieved from the File Cabinet, and that in his view this solution is not final. The final solution would involve a more direct access to the Diary Queue and File Cabinet. He said that on the basis the use of file notes is an interim solution some shortcomings in transaction times can be accepted, however RACV needed a commitment from Unisys that investigations will proceed post implementation to provide direct access to File Cabinet and Diary Queue.

771. On 17 May Esmonde wrote to Doherty on the matter of the impact of the General Protection Fault problem on the schedule. It had been encountered six times in the past two weeks and investigations were being conducted by Unisys to identify the source of the problem. He discussed the bearing of costs.

774. In a memorandum dated 20 May from Doherty to Rob Hagan of RACV IT, Doherty said that significant concerns with the timing of various transactions arose from the 13 May volume/stress test results. Doherty expressed particular concern with the use of optical disks in retrieving folders from the File Cabinet. He noted comments of Memorex Telex (presumably Hakme) that the manner in which opticals are used will lead to performance degradation. This was because of the need for platter swapping to retrieve documents that make up a folder. He was also concerned about claims that last for a lengthy period and finalised claims given the likelihood of having platters for them. He said this needed to be examined "as soon as possible" given the focus of RACV on performance criteria and long-term improvements required to address performance shortcomings. At least in the short term processes needed to be in place to ensure RACV was achieving optimum performance capabilities. He asked that an IS representative review the situation and provide recommendations.

777. Hurford met Walsh on 20 May to review progress. The system was not functioning as required and testing had been unsatisfactory. He told Walsh that to be acceptable the system had to perform in accordance with agreed requirements.

780. On 22 May an internal RACV memorandum noted that the volume test will now be conducted on Saturday 1 June between 9am and 4pm. Between 20 and 30 staff were required to ensure a true volume testing environment.

783. On 23 May Walsh wrote to Hurford. The letter runs over two pages and reported generally on the status of the project and specifically on several aspects. He expressed confidence the system delivered can be quickly rolled into a production environment. Under the heading Hardware it was stated that Unisys had provided a server as a replacement of dual servers "to achieve the desired performance requirements as outlined in the original RFP document". Under the heading Performance it was stated that:

"The RACV Insurance Workflow Management System we have delivered meets the performance criteria set out in our initial agreement. We have recently worked to further improve the performance of the system, on a best endeavours basis, as a result of 'targets' outlined by Justin Clack in his memo of March 27. The outcome of our efforts and the resultant system capability is that most of the 'targets' have been met. It has been agreed with RACV that other work to further enhance performance will be considered after project completion. Our position is that this additional work is out of the scope of our current arrangements and will need to be covered under new commercial arrangements."

In cross-examination Birthisel said he did not know to what the phrase "performance criteria set out in our initial agreement" referred. In his cross-examination Esmonde said Walsh was his manager and that he had some input into the letter. He understood the phrase "performance requirements" and "performance criteria" to refer to the volume throughput of the system, that is, the ability to handle the stipulated number of claims in a year. He said that RACV added performance criteria concerning speed of response "in the last three months of our tenure". He said that Unisys was not under a contractual obligation to provide any particular response time performance. But he otherwise considered Unisys had an obligation to work towards performance responses down to the levels RACV had tried to establish and that that was what they were trying to do.

788. On 28 May Doherty sent a memorandum to Birthisel on the use of optical disks. This was based on his concerns arising from the volume test on 13 May. He sent a copy to several others including Hurford. Hurford could not recall receiving it but he agreed that Doherty was responsible for the day to day management of the project by RACVI. In the memorandum Doherty said his concerns were that the use of optical disks, and the swapping of platters, contributed significantly to the transaction times recorded, and that there was a significant discrepancy between retrieval time in the morning and afternoon. He had discussed this with Birthisel and made some preliminary investigations from which "it is clear that the very nature of the optical disk technology is not going to allow us to achieve the response times RACVI requires." He said there may be some measures that will make significant improvements to response times and to finalise the issue he required clarification on seven points set out in the memorandum. Birthisel provided a written response on 7 June; I refer to it below.

791. MacCallum sent a letter to Hurford dated 29 May. He expressed some concerns about the project. One was the lack of total agreement to performance requirement targets when acceptance testing was in its final stages. Hurford read the letter but at this time Deloittes was not involved in the project and their opinions did not cut much ice with him. His respect for MacCallum's professional opinion had diminished by this time.

794. On 30 May Esmonde wrote to Doherty confirming outcomes from the meeting that week regarding his response to Walsh's letter to Hurford dated 23 May. In fact Hurford wrote to Walsh in response to his letter on the next day, 31 May. For the moment I refer to Esmonde's letter. I note in cross-examination Hurford said he had no recollection of seeing the letter before; I accept that evidence.

797. In his letter Esmonde dealt with several matters. Under the heading Performance he said that performance relating to Filenote retrieval is regarded as a limitation that will restrict the flow-on of full business benefits. He then said:

"Whilst it has been agreed that there are four performance criteria that are to be addressed after implementation, it is acknowledged by both RACV and Unisys to give priority to seeking solutions for these as soon as possible. A resolution is required to determine (a) who will do the work and (b) what the commercial arrangements will be."

Under Deferred Functionality it was stated that RACV has agreed to the terms outlined for implementation of the print/fax enhancement and that prioritisation of system change requests and performance improvements will need to be provided to Unisys to enable commencement of billable work on 6 June. Under Warranty it was stated the warranty is to apply from 25 June and be used to correct all error reports considered within scope as defined in the Functional Specifications and design document. Under Outstanding Tasks it was stated that the remaining tasks and required completion dates are agreed. That is a sufficient reference to the letter.

802. It is necessary to say something about the letter. The first point to note concerns the matter of an agreement as to who would carry out and pay for the cost of the work referred to under Performance. Even assuming there was agreement that four performance criteria to be addressed after implementation, no agreement was ever made on the matters which Esmonde said required resolution. I find that Hurford would not have accepted financial responsibility for such work. His position was that it was for Unisys to perform its obligations under the contract and that included meeting the time performance requirements of RACVI. On that basis the situation is that, assuming that there was "agreement" to defer four performance criteria until after implementation, a stipulation of Unisys as to such an agreement was resolution on the matters stated and there never was such resolution. I will now refer to the evidence of Esmonde and Doherty in relation to the letter but before doing so refer to some evidence of Esmonde.

805. In para. 43 of his witness statement Esmonde said that about 30 May (that is how I read the reference ) RACV informed him they wanted five second response times for near line claims. He then gave a technical explanation of what that meant. If the document was not in cache but on optical disk, the disk holding the required imaged document had to be under the reader in the jukebox to produce such a response. That was because of mechanical limitations on the time it took to get a disk under the reader. That limitation was inherent in the technology used by Unisys and resulted in a slower process than if, for instance, there was more cache. This was a technical explanataion apparently beyond Esmonde's expertise, but it was correct.

808. Dealing first with Doherty, he said he recalled a meeting around that time in Hurford's office with Walsh and, he assumed, Esmonde. In response to a question as to what were the four performance criteria, he said he could not recall. Nor could he recall if he sent a letter in reply. That was all he was asked. In para. 36 of his witness statement Esmonde referred to his letter to Doherty dated 11 April and in para. 37 said that, as far as he could recall, the issue of performance times remained unresolved and in that respect referred to his letter to Doherty dated 30 May. He did not otherwise develop those statements or those in his letter. In cross-examination he was asked what the four performance criteria were; as he recalled they were to do with folder retrieval and filenote retrieval. He was not asked about his statement in para. 37. His contention was that Unisys was not required by the contract to meet specific response criteria and that that remained the case. The RACVI position is to the contrary.

811. On 31 May Hurford wrote to Walsh in reply to his letter dated 23 May. The letter runs to three pages and I do not refer to all of it. He commenced by saying he confirmed RACVI's position on the items raised. He was concerned Walsh's letter did not reflect RACV's understanding of the current status of the project. Tests will be carried out over the weekend but RACV could not be forced to "sign off" with matters outstanding. He then dealt with the items in Walsh's letter. Under Hardware he said that RACV was still to be convinced the current hardware platform will provide the performance necessary to deliver an acceptable system. Walsh's reference to procuring additional hardware was premature. Under Performance he said:

"Unisys agreed to supply a system that met RACV's business requirements. How can Unisys now try to exclude performance criteria when Unisys have been aware of the business case driving the desired timing throughout the project? Throughout redevelopment of this system we have outlined our expectations regarding performance. The meeting of these expectations has been the focus of numerous discussions over the course of this year. Unisys have provided estimates of response times for those transactions outlined as mandatory performance requirements. From the volume tests that we have performed to date, these expectations have not been achieved. It remains our view that acceptance is dependant upon the delivery of a system that is functionally acceptable and delivers reasonable response times. It is expected that further measures will be taken by Unisys to ensure that our performance expectations can be met under a fully operational production environment."

This is not consistent with an agreement by RACVI to defer any performance requirements. He then referred to various matters under the headings Deferred Functionality, Warranty, Outstanding Tasks, and Service Level Agreement that required completion before acceptance could be contemplated. The letter concluded as follows:

"Summary Bill, RACV Insurance remains unconvinced that the system currently in testing will provide the business objectives that Unisys has agreed to meet. My concerns on Unisys meeting their requirements is heightened by your reference to further payments being made for Unisys work to continue. Unisys must complete the work that it agreed to carry out - that is supply a Workflow Management System that is fully operational and meets RACV's business requirements. I look forward to working further with you, but I must advise you that RACV has no option but to reserve all of its rights to make whatever claim it considers necessary should Unisys fail to complete development of the system by 24 June 1996."

817. Volume/stress testing was carried out on Saturday 1 June. The test was conducted between 10:00 a.m. and 12:36 p.m. with 31 participants, the object being to simulate an environment of maximum load by means of multiple users moving multiple documents around the system. That was the most individuals who had been on the system at one time. The test was supervised by Doherty. At 12:36 p.m., while the test was being conducted, a `system failed' message appeared on all PC's. Testing was halted for one hour to allow Unisys to discover and resolve the error. After discussion with Birthisel the test was stopped. Unisys took a dump of the system at the time of the error and sent it to engineers in Sydney and the United States. The evidence of Birthisel and Olsen is that it was a Unix problem. On 7 June Unisys installed a patch to resolve the problem. During the test response times were taken over a number of transaction types. In Doherty's view they indicated that performance of the system remained unacceptable. There is a record of response times at pages 9930-9933 in the court book. In a memorandum to Hurford dated 6 June Doherty reported that the response times for the retrieval of folders remained in the range of 20-40 seconds on average, with the occasional retrieval taking up to two minutes. He noted then that the response times for other transactions are still to be collated. That collation may be in the above record of response times. He noted that claims staff continually commented on the slowness of the response times. Chesson-Kistas, who was present during the test, said that the response times got slower as the test progressed and that they were unacceptably slow. In his report Doherty also referred to a problem on functionality of the creation of multiple copies of a document in a folder. The PC had to be switched off to stop it happening. That had occurred when the system went live in 1995 but had not been observed through the extensive testing in the past two months. Unisys had referred this to Sigma in the United States. An error or exception report was raised for that and another matter. I note the evidence of Chesson-Kistas that on 26 June 1996 Birthisel told her that Unisys was awaiting a response from the United States about the problem of the system producing multiple copies of documents.

820. On 5 June Hurford met with Walsh and Felsenthal. The meeting was to see if Walsh and Hurford could find common ground further to their letters dated 23 and 31 May respectively. Hurford made a note of matters discussed. He spoke about the expectations of RACVI, that the WMS system produce tangible benefits of increased productivity, staff reductions and reduced costs of claims processing, and a system in which claims files were found more quickly than if an operator had to go and find them in a filing cabinet. There was no advantage in a new system that was not quicker than manual retrieval. Walsh said that Unisys maintained its high level of confidence the system would meet RACVI's business requirements. He said that might not happen on 24 June but certainly at a later date and with some enhancements, the cost of which would need to be discussed. In cross-examination Hurford said, and I accept, that the reference to enhancements was not elaborated by Unisys and he was not sure what they were coming at. The solution to the 1 June problem was awaiting analysis in the United States (as stated above, a patch was effected on 7 June.) Walsh also acknowledged there were errors of importance awaiting solution, including the general protection fault. Hurford's notes go on to record that the parties agreed to work towards a definition of "success" and would together answer the question: what can be achieved by 24 June for the implementation of a production model? Hurford said he was looking for a situation in which he was able to go into production, perhaps being less rigid, but "success" was never defined. There was reference to the trial of a more powerful PC to determine if the performance criteria could be improved, Hurford pointing out that RACVI had installed equipment advised by Unisys. Hurford said that the situation had to be resolved before 24 June, and that he had to report on the outcome to the board on 26 June and this would be to abandon the system altogether and pursue compensation, or use the system wholly or in part. Walsh agreed to state in writing what could be achieved by 24 June, in particular if timely retrieval could be made as required.

823. On 6 June Hurford received from Doherty the report as to the 1 June test referred to above. The performance indicated by the memorandum was not acceptable to Hurford.

826. Also on 6 June Doherty received from Birthisel a memorandum in response to the memorandum of the former, dated 28 May, which raised concerns about the use of optical disks and their effect on response times. The memorandum answered the seven questions in Doherty's memorandum. These, it will be recalled, arose out of the test on 13 May. To question one, Birthisel advised that the significant improvement in retrieval time observed during that day was the result of introducing a facility that allowed two platters to be read at one time. Birthisel described the change to the optical jukeboxes during the test; after lunch each of the two jukeboxes was loaded with one platter under the drive, whereas before lunch one jukebox had been enabled with two platters but with only one drive. It was explained that in the after lunch situation multiple simultaneous document transfers were possible, in the pre-lunch situation if documents in the folder selected were spread across more than one platter, the re-direct request was not serviced until the appropriate platter was removed from its slot in the jukebox and returned to the drive for reading. There was a delay if other read requests were waiting, and as a result of platter spin up and spin down time and the actual platter exchange time. To question two, Birthisel advised that it was likely some multiple-platter swapping had occurred in previous volume and stress tests.

829. In question three Doherty asked if cache will include all the contents of a user's inbox. The answer was no; inbox objects that have not been requested to be viewed by the user may not be in magnetic disk cache. If they have not been flushed from cache to make room for active requests it is possible they are still in cache but there is no way of guaranteeing this.

832. To question four he advised platter swap times; this was technical information obtained from Olsen. It is important and I set out the question and answer:

"Question 4: What is the current expectation for the length of time to swap optical platters? Response: The following information is provided on platter swap times (single document retrieval): Action Approx. time Platter spin down 2.0 seconds Platter spin up 4.0 seconds Load to drive from home slot 2.0 seconds Unload from drive to home slot 2.0 seconds Prepare to read time 0.5 seconds Read transfer rate 700 KB/second Critical read delay 60.0 seconds (wait time before a request becomes critical) NB: After which time the scheduler decides which platter to load. Although it is possible to provide such detailed times on platter exchanges it should be noted that the actual exchange delay is effected by combinations of several other factors including but not limited to: * the number of read requests outstanding * the spin down delay time (how long to wait before spinning down a platter) * the number of write requests outstanding (highest priority if cache is filling) * the percentage of magnetic cache available at the time (changes behaviour) * the maximum time a platter can be in a drive (time-out period if writes exist) * the location of the target platters (in another unit, or slot)."

836. The next question was about the use of pre-fetch cache, viz:

"Question 5: It is undesirable to perform a backup without deleting agebles. This presents a problem the next day when folders will be initially retrieved through optical, at all times. This will increase retrieval time for these folders. As I understand the use of pre-fetch cache would remove this problem. In previous discussions you mentioned that some investigations had taken place through the site in Vienna. Could you update me on the status of these investigations? Response: The planning and implementation of an overnight pre-fetch program inbox objects requires further analysis and investigation. We are aware of one such program in use in another Unisys site but it has been tailored for their specific needs and environment. A pre-fetch program of this type may be applicable for RACV. It could be constructed to bring into magnetic disk cache a percentage of all objects likely to be used the following day based on the contents of users inboxes; desktop objects that have been flushed out of cache; objects scheduled to come out of diary for that day, etc."

840. Passing over, although not ignoring question 6, the final question asked if there were any alternatives or improvements that could be made to the system. The answer was:

"There are several other InfoImage Folder tunables that we are hoping to test under load, when appropriate. At this stage it is not possible to quantify what impact this may have on the system throughput or performance."

844. As the days went by Unisys was dealing with exception reports raised concerning the system and various other matters including testing work were being attended to.

847. On 7 June Esmonde sent Doherty a letter which "attached the results of our meeting with you earlier today to determine the list of tasks to be completed by 24 June". The letter stated that the "attached list of workplans and scheduled activities is subject to confirmation by our technical resources of their ability to resolve nominated ER's by the June 24 deadline." Esmonde had "also outlined the major Acceptance Criteria for the June 24 deadline and the steps that are being taken to finalise any remaining issues". It was trusted that the information was sufficient for Doherty to present to Hurford "as our joint plan".

850. The three attached pages listed acceptance criteria achievable pre and post 24 June, a program for dealing with outstanding exception reports and a project schedule. The first document concerning acceptance criteria stated:

RACV Claims Processing System Acceptance Criteria - Achievable By June 24th

Critical Volume/Stress related ER's to be completed by 15/6. Remaining Stage 1 ER's to be completed by June 24th. Refer attached list of Outstanding ER's. Clean run required on 15/6 without significant functional or environmental problems.

RACV to complete review by June 12th. Document to be updated by Unisys and signed off by June 14th.

To be reviewed by Unisys and RACV by June 14th. To be signed off by June 24th.

There will be no further significant performance improvements prior to June 24th. Unisys to document outcome of analysis conducted to date in Performance Criteria document by June 15th. Go forward options/rational, estimates to be presented to Justin Clack.

All documentation to be completed for sign-off by June 21st. Config to be included in Sign-Off document. Unisys to confirm appropriate acceptance of LAN config.

Acceptance Criteria - To Be Completed Post June 24th

Restart/Recovery/Testing to be completed as parallel activity during Training.

RACV to complete during initial Training commencing June 24th.

To be completed by RACV during initial Training commencing June 24th.

The second document provided for the outstanding exception reports to be dealt with in four stages, stage 1 being to 24 June, stage 2 to 9 July, stage 3 (print/fax) to 24 July, stage 4 being August/September and after that monitor performance in relation to general performance faults and six specified exception reports. The project schedule provided, among other things, for a volume/stress test on 15 June and the first day of training on 24 June.

858. In his witness statement Esmonde noted that the acceptance criteria do not include performance requirements. As an observation that is correct in that no particular response or retrieval timings are referred to, but that is all. Further, the statement as to no further significant performance improvements prior to 24 June is premised on matters not disclosed. It is relevant too that at this time there were significant differences between RACVI and Unisys on the matter of response times, that RACVI's developing knowledge of the effect on response times of using optical disks was a relevant matter in this respect, and that Unisys was seeking to place itself in a favourable position under the contract whether or not the contract was terminated by RACVI. Doherty did not respond in writing to Esmonde's letter. In that respect it is to be borne in mind that in June there was much pressure, much to be considered and dealt with and events were moving quickly. I do not accept that Esmonde's letter reflects a withdrawal of the requirement of RACVI that the system meet its performance requirements concerning response or retrieval times. I conclude that what is stated as acceptance criteria concerning what is Performance is reflective of the position of Unisys that it could not effect a significant improvement to performance by 24 June. It was seeking to have RACVI accept that position, and accept the InfoImage system on that basis.

861. In his witness statement Esmonde said that during the testing phase in June 1996 RACV "kept pressuring us to commit to response times and kept asking us for statistics. The requests were a bit pointless without knowing how the system would perform in an operating environment and at that stage we were concentrating on stress testing rather than response times". I accept this as reflective of the fact. His reference to "pointless" is a reference to the need to first bring the system to a functional and stable state in an operating environment. While Unisys had been able to improve "a number of response criteria they had set" more was required by RACVI and there was little point in talking about response times until the system was functional and stable. That was the point Esmonde was making, but for its part RACVI had been stating that it would not accept a system which did not meet its business requirements which included satisfactory response times, and the deadline was 24 June.

864. Esmonde went on to say that Unisys was not charging for its work in rebuilding the system and that Walsh was coming under some pressure regarding the large amount of expenditure. Walsh wanted to get on the front foot with RACV. He wanted Unisys Corporation to wind up their level of support even further so that re-introduction of the system at RACV could take place without further delay. He therefore asked Esmonde to write to Doherty in the terms of his letter dated 14 June. Esmonde also said in cross-examination that the letter was written in response to an outstanding request of RACVI. The 14 June letter is important for what it states and I set it out in full:

"Dear Justin, Further to our discussion yesterday regarding outstanding system performance issues, I would like to outline a go-forward plan that will allow us to work towards a satisfactory resolution. The four performance standards, where major variations between RACV requirements and existing system capability limitations have occurred, have been categorised as Filenote Retrievals and Folder Retrievals. With the research we have conducted to date, including input from sites in Austria and the US, we do not believe there are opportunities for major improvements to Folder retrievals, due to hardware and software constraints. I understand David Birthisel has discussed the use of pre-fetch processing with you to assist in providing consistent performance regardless of the number of expected users. We will therefore investigate further the use of pre-fetch as a means of sustaining a 20 to 40 second retrieval time. There has been preliminary discussion on various options to improve Filenote retrievals. Before Unisys is in a position to recommend the most appropriate option, we propose to conduct a technical feasibility study, commencing on Wednesday of next week. The study will be undertaken by Geoff Olsen and Leon Pearl and we would like also to obtain input from your IS team to assist with the assessment and review process. It is expected the work will be completed within two weeks from the start date, given current commitments. We anticipate being able to significantly reduce the current performance in this area and expect to provide more specific information at the conclusion of this study. The objectives of the study will be to assess various options, to determine the likely impact on existing functionality and performance and to estimate the effort required to specify, develop, test and implement the solution. Unisys is prepared to conduct this exercise at nil cost. However, before progressing to the development stage, we will need to confirm funding arrangements. I would appreciate confirmation of your acceptance of the above and the availability of an IS resource to participate in the feasibility study."

868. In summary, the letter referred to four performance standards categorised as Filenote Retrievals and Folder Retrievals and commented about each category. On the latter, no major improvement was possible "due to hardware and software constraint". Birthisel agreed with that statement; indeed I find the letter had been discussed with him. It is to be noted that the letter was non-specific as to any retrieval time whether actual, expected or in respect of which there might be any and what improvement or no improvement at all whether "major" or otherwise. Esmonde explained the reference to hardware constraint as referring to the configuration of optical disks in a jukebox, and the software constraint as referring to the way documents were indexed and the way parts of the system were written around that. The letter then stated in effect that a pre-fetch process may improve performance and that Unisys will investigate the use of pre-fetch as a means of sustaining a 20-40 second retrieval time. Pre-fetch was a new idea, not part of the contract, but was the only suggestion of Unisys to improve Folder retrieval performance. Esmonde explained the reference to 20-40 seconds for Folder Retrieval as a time that was then being experienced but that there were variations (that is, longer times) in retrieval of that transaction type and the suggestion of investigating pre-fetch was that it might enable the 20-40 second time to be sustained as an average. It is to be noted that this was the first intimation of a retrieval time to RACVI.

871. The second category was Filenote Retrievals in respect of which Unisys proposed a technical feasibility study to assess options.

874. Esmonde described the letter as "our initial thoughts" as it was only in the few weeks before that Unisys was in a position to start thinking about performance. He added that "we had an agreement that they would be tackled after the implementation".

877. Doherty immediately referred Esmonde's letter to Hurford. A proposed retrieval time of 20-40 seconds, even if it was achievable, was not acceptable to him. Hurford wrote to Walsh on 17 June.

880. A volume/stress test was conducted on Saturday 15 June between 9:00 a.m. and 3:00 p.m. with 23 claims officers participating. It was supervised by Doherty whose report is in the Court book at page 9935. Three personnel used stop watches to record retrieval times. Doherty included these times in his report which he said, and I accept, correctly recorded events on that day. The report refers to 157,808 documents as "total documents processed". The word "processed" may be misleading: it refers to the number of documents in the Oracle database of the system and not to the number of documents retrieved to the desktop of PC's during the testing (see the witness statement of Ben Connell, para. 4). The report stated that no Unisys hardware/network related problems were observed. Three functionality exceptions were raised (one concerning the problem of the creation of duplicate documents) and analysis of queue contents after the test disclosed two matters, all of which issues needed to be addressed prior to acceptance of the system. Tables of response time recordings show that in the case of two transaction types, retrieval of folder from filing cabinet and retrieval of folder from inbox, timings were taken prior to 10:00 a.m., between 10:35 a.m. and 11:40 a.m., and between 12:45 p.m. and 13:45 p.m. A deal of evidence was given as to the reason for variations in the timings thus obtained. The recorded response times for those transaction types, and the transactions retrieval of scanned documents from inbox and open batch on desktop, were appreciably slower than the expected response time: the other five transaction types matched or were in the order of the expected time. In relation to the retrieval of folders, the report noted that the retrieval times for folders from the inbox were significantly higher prior to 10:00am and that at approximately 10:00am adjustments were made to the positioning of optical platters which resulted in a significant decrease in response times. The report noted that a more detailed report of the need for this work is required from Unisys. It also noted that the response times for folder retrieval - folder in diary could not be ascertained as the folders that file notes had been sent to had previously come out of diary. The report then gave a summary of results from performance as follows. A number of improvements were observed with the performance of the system from the test conducted on 1 June. These improvements included:

* Acceptable response times for non-critical activities. The report noted there was a general stabilisation of response times for "mandatory" performance indicator, meaning a more concentrated range of response times were observed for most transactions. However, the overall performance of the system remained unacceptable in that:

* Mandatory performance requirements were exceeded - 15 to 20 seconds above the desired time.

* Retrieval of folders from the file cabinet to the reopen Q takes an excessive amount of time - these folders did not enter the reopen Q until the following morning.

* Opening of batches on the user's desktop took an unacceptable amount of time (24 sec average) which was significant given the high volume of processing at indexing workstations expected each day.

887. Then, in summary of the 15 June test, the report stated that performance of the system remains unacceptable. While no environmental problems exist with the system, the volume test must be considered unsuccessful on the basis of functionality problems and the performance observed.

890. In the report Doherty then expressed an overall summary as follows:

"Overall summary On the basis of the volume/stress tests performed RACV could not accept the Workflow Management System on a number of counts the system does not meet the business requirements that have been previously outlined: _Stability: T_he failure of the 1 June test further illustrates problems with stability of the system. Given the proximity of these tests to the scheduled implementation, changes to the operating environment to address these stability problems remains a significant concern. While the 15 June test did not provide any environmental issues, confidence levels remained low as to stability. Previous testing indicates the stability problems are intermittent in nature. Confidence levels in the system could not be regained until such a point in time that another successful volume test was conducted, and the successful implementation of all Claims staff was observed. Performance: The response times shown throughout both tests indicate that system performance is far from acceptable. It is RACV's expectation that the performance of functions with the system would be improved compared to current processes. As a condition of acceptance it is expected that performance of the system will match the reasonable expectation of RACV to allow its business objectives to be achieved. Until such time that response times match the desired times previously document, and are sustained at that level under load, the system cannot be accepted. Functionality: The performance of the two tests indicate that functionality problems are closely linked to volume on the system. The occurrence of errors not previously encountered in functionality testing replicates a problem encountered in the live system last year: that a production system will encounter numerous and new errors as load is increased. As referred to in this document the functionality problems that have been recorded must be addressed as a condition of acceptance."

894. Chesson-Kistas was present during the test. While the system performance had improved, it remained unacceptable in her view. She wrote the exception reports referred to in Doherty's report. Two of the reports concern cheque requisitions, and in relation to one of them (No. 252) concerning cheque requisitions Birthisel told her on 26 June that he was awaiting feedback from the United States. Chesson-Kistas also took issue, in paras. 7, 8 and 9 of her statement in reply, with certain statements of Johnson and Olsen on the matter of the system passing functional and volume testing. She said it did neither. Functional testing from 13 March to 26 June 1996 produced 272 errors. I note that a list of those outstanding at 24 June 1996 was prepared by Haw and Doherty and is in the court book at pp. 10,104-10,105. I accept the evidence of Chesson-Kistas in para. 8 of her statement and reply. I also accept the evidence in para. 9 of her observations as to the system being slow and the screen freezing.

897. In his witness statement Birthisel said the 15 June test was successful. Johnson said the tests identified a couple of issues that needed resolution but the observed problems were extremely unlikely to appear in a live environment. I return later to this and other evidence dealing with the situation at the time when RACVI terminated the contract.

900. I now refer to the letter which Hurford sent to Walsh dated 17 June. It is a long letter in which Hurford unequivocally stated RACVI's position in relation to acceptance of the Unisys system. The letter commenced by referring to their meeting on 5 June and the action plan presented in Esmonde's letter dated 7 June. I quote some parts and where practical summarise others. Hurford stated that:

"The reasonable expectation held by RACV is that the Workflow Management System will deliver tangible benefits by way of improved productivity, staff reductions and subsequently reduced costs associated with claims processing. After reviewing the plan in the letter from Jim Esmonde I remain unconvinced that the system currently in testing will provide the business objectives that Unisys has agreed to meet. Following the lines of the project objectives that have been previously defined the specifics of my expectation for acceptance are: Volume /Stress Testing The original schedule for volume/stress testing allowed for the completion of two tests. The time frame now presented details the completion of only one test. While that test, performed on the weekend, provided some positives with regards to system stability, the nature of the errors identified to date indicate that confidence in functionality, and the environment, can not be achieved without the successful completion of more than the one test. It is our expectation that the system be able to survive two volume tests without any environment issues, and with minimal functionality problems."

904. The letter then dealt with the matter of a sign-off of functional specifications and to a current review of a design document. Then, under the heading Performance the letter proceeded as follows:

"As discussed previously our view remains that the delivery of reasonable response times is an essential component of acceptance. While it is noted that a suggestion has been presented to perform a technical feasibility study on suggested performance enhancing opportunities, the reference to there being no further significant performance improvements prior to acceptance remains a major concern. It remains our expectation that an acceptable system should provide productivity improvements to current processes. Tests recently performed by Justin Clack indicated that the average File Cabinet retrieval time in current processes is between 8 to 10 seconds. The time taken to retrieve a folder in Workflow is 30 to 40 seconds. A similar difference in time exists with retrieval of folders from the in-box. The productivity benefits that have been associated with this project have relied on an expectation that the timing of processes would be improved in all instances. On average a Claims Officer will need to retrieve a folder from the file Cabinet twenty and thirty times a day and will handle seventy folders from their inbox a day. Based on current expectations of the Workflow system the timing difference relates to four to five FTEs. It remains our expectation that Unisys will deliver performance, at its expense, in order to achieve our reasonable expectations."

908. The letter then required that all currently outstanding exception reports be resolved as a condition of acceptance, referred to the matter of support by Unisys when the system was in production and to the undesirability of running restart/recovery backup testing at the same time as RACVI staff were training on the system. There was also reference to satisfaction of outstanding requests for information as to additional hardware requirements referred to in a memorandum from Birthisel and to reports sought by Doherty on the resolution of the General Protection Fault and details of the patches and the impact on the system installed as a consequence of the failure on 1 June. The letter concluded in the following terms:

"Summary Bill, in light of the plan presented, the system that will be delivered to RACV on the 24 June will be unacceptable. I will not consider 'sign off' of this project while the matters that are listed above are outstanding. Furthermore, we will have no alternative but to return the system to you if, by 24 June, it is unable to function in a way that clearly meets RACV's functional requirements. In return, we will require a refund of all amounts paid to Unisys for the system, and costs and expenses incurred since December 1993. We have no choice but to assess the losses incurred over the period that Unisys was to provide RACV with a fully operational system. We hope that such action will not be necessary and that Unisys will be able to meet its requirements by 24 June 1996. While the plan provided is unacceptable, RACV will continue to carry out the review of the past weekend's volume test and continue with functionality testing this week."

912. Walsh replied by a letter dated 21 June. It responded to the specific points in Hurford's letter. In relation to Volume/Stress testing he said that:

"We believe that problems previously experienced have been addressed by changes implemented last week. An exhaustive process with our local and overseas technical specialists was recently conducted to eliminate possible causes of system failure that could be reasonably anticipated. We do agree, however, that a further volume/stress test will raise your understanding of the system's stability and we are willing to complete this exercise with your team before 24 June."

The letter then dealt with the matter of the sign-off of the functional specifications and under the heading Performance said:

"Unisys' commitment under our agreement is to deliver a system which meets the Functional Specification. The purpose of the Acceptance Tests is to measure the system's compliance with those Functional Specifications. The Functional Specifications do not include any performance commitments. Performance levels are determined by a combination of the functional requirement and architectural constraints. In the case of RACV, the system currently being acceptance tested has achieved 'reasonable performance levels', in accordance with these factors. The Functional Specifications called for complete folders to be accessed, not single documents. The response times experienced are consistent with this approach and are also consistent with industry expectations, given the number of documents per folder. In our attempts to consider viable options for performance improvement in this area, we have been provided with varied opinions by RACV on the requirements of Claims Officers, regarding the depth of current and historical information to be made available at the desktop. We suggest that a detailed analysis be conducted by RACV to specify the precise functionality now required. We have, however, indicated the potential for Filenote retrieval improvements. We are surprised that you are now requiring outstanding performance criteria to be addressed prior to 24 June as it has previously been agreed that we would schedule the remaining four outstanding performance criteria to be addressed after implementation. We have also previously explained that performance of the system, as RACV currently propose to measure it, is outside the scope of what we are empowered to control in that we do not control the network, LAN, host etc. We have also, in a previous meeting, requested clarification from RACV on the accountability for 'end to end' performance. As yet, no assignment has been communicated to us. What RACV is now requesting is a fundamental change to what was originally requested and as such is an unreasonable expectation."

Passing over, but not ignoring, other matters, Walsh expressed confidence, under the heading Outstanding Requests that changes Unisys has made to the front end software will avoid future occurrences of General Protection Fault problems associated with its software and a further stress test will provide the opportunity to monitor and verify that. Then, under the heading Summary it was stated that:

"As you know this system was originally accepted by RACV on 14 April 1995 at which time it passed all acceptance tests required by RACV to be met. While we acknowledge that after acceptance, the system did incur severe technical problems, Unisys has, in response, expended considerable resources, time and money to rectify those problems. The system in its current form meets the Functional Specifications as set out in our Agreement. We are of the opinion that we can meet the commitments made in this letter and our obligations under our Agreement by 24 June 1996. Accordingly, we will strongly defend any action by RACV to terminate the contract based upon the fact that we do not meet the objectives stated in your letter."

920. On 25 June final functionality tests were conducted. A report on this is in the court book at pp. 10,049-10,052. By way of overview it stated that functional testing had been conducted over a number of months to identify areas of functional compliance and non-compliance with RACV's specifications and that due to errors encountered, re-testing had been necessary since April 1996. The final functionality tests were conducted on Wednesday 25 June 1996. It was noted that of the 272 error reports raised in the acceptance test phase, 62 remained outstanding at 26 June covering both the functional and volume testing stages. The outstanding reports are itemised and shortly described in a list. In a summary, it was stated that with the error reports currently outstanding it is impossible for RACV to continue into acceptance of the Unisys system. It was further stated that in light of the problems and heartache experienced by both the WMS Project Team and users, without a stable environment and without consistent functionality, the idea of moving into training is not a consideration.

923. It is convenient to note evidence of Haw that just prior to the end of the workflow project in June 1996 he and Doherty went through the outstanding error reports and observation reports maintained by Doherty to see what functional issues were outstanding at 24 June. This was to ensure there were no significant outstanding reports in the areas for which Information Systems (meaning RACV IT) was responsible. A list was prepared which is at pp. 10,104-10,105 of the court book. It identifies those for which Unisys was responsible and those for which RACV IT was responsible. In cross-examination Haw said, and I accept, that the table describes the status of the functions and responsibilities but does not imply that there was a problem with all of them; he was not taken through them on that point. He further said in cross-examination (but without being particular) that some functionality questions were not specified and that some were and were agreed to be delayed. To an open-ended question of no precision or detail (and of little or no utility), he said he could not identify an issue that could not have been solved. The cross-examiner did not seek to relate that answer to any particular exception report or functionality issue, let alone explore the time, effort and cost of solving any such matter.

926. Olsen and Birthisel were cross-examined about the report on the final functional specification test, although not on the above list prepared by Haw in discussion with Doherty. The cross-examination was directed to some of the errors and, in particular, to their seriousness, such as the General Protection Fault.

929. Also on 25 June Doherty sent a memorandum to Birthisel with an attached list of exception reports that according to his list were outstanding on 24 June. He said he would continue to test the scenarios that gave rise to the reports as part of the continuation of functionality testing. Until all the reports were resolved and the overall system worked "as per our previously documented expectations" acceptance will not be considered. He referred to the General Protection Fault which in discussions Birthisel had inferred might now be rectified, and said that given the serious nature of that exception report and as previously requested, he insisted that he be presented with a document that outlines the reason for the problem and the measures taken to resolve it. Given the irregular nature of the problem he could not close the exception report without that information. He also noted that the attached list did not include exception reports raised during testing that day.

932. On 26 June Esmonde wrote to Doherty in response to his memorandum of 25 June regarding the resolution of exception reports. He recorded his understanding that in particular the prioritising of exception reports was conducted on the basis of being able to continue moving forward without impacting the project schedule. He believed this was a reasonable approach being taken by RACVI to maintain momentum for the completion of outstanding testing and preparation for training. He was aware of subsequent discussion between Doherty and Hurford to discuss RACVI's stringent acceptance criteria, which were obviously driven with different objectives in mind. As Doherty was aware, Unisys had consistently indicated the likelihood of exception reports occurring during testing and after implementation as users explored in depth all parts of the system. Esmonde concluded that the stance being taken by RACV to insist on all exception reports being resolved is unreasonable and further restricts the ability of Unisys to implement the system. He was happy to discuss the matter further.

935. Hurford decided to terminate the contract with Unisys. He was of the view that Unisys had been given every chance to provide a system that met the business requirements of RACVI but had failed to do so despite promises that it would. The letter from Unisys dated 14 June remained unacceptable. On Thursday 27 June 1996 he wrote to Walsh advising that Unisys was not to carry out any further in relation to the development or integration of the system or make any further attempt to make the system operational. He advised that RACVI must seek damages from Unisys for breach of s. 52 and breach of contract. He advised losses of $3.6M and said he would like to meet to discuss reimbursement but, failing resolution, RACVI had no alternative but to issue proceedings seeking compensation for its loss and damage. In the letter he referred to the system failing RACVI's acceptance tests on 24 June 1996, to agreement that 24 June was a deadline for the system to be operational, and which was an extended date reluctantly agreed to for completion of development and integration of the system. He further said that a claim made by Unisys prior to the entry into the contract that it could provide a system which met RACVI's requirements had proven to be false. As requested, Unisys ceased work and left RACV's site. The project was thus abandoned.

938. On 1 July Walsh wrote to Hurford advising that Unisys was reviewing its position in light of his letter. He rejected the allegations made and denied a breach of the Trade Practices Act or breach of contract. Unisys sent a fuller letter to Hurford on 12 July. It rejected the claim that the system failed acceptance testing on 24 June. It stated that the system passed volume/stress testing on 15 June. It stated that Unisys had "largely" met RACVI's requirements in relation to the system by 24 June. It had not agreed that completion of any outstanding work was an essential term under the contract nor that if certain requirements were not met by that date RACVI could terminate or rescind the contract. The system delivered to RACVI met the contractual requirements in that it complied with the Functional Specifications. It was acknowledged that a small number of exception reports were outstanding but these did not prevent the system from being operational and Unisys was prepared to rectify them. It was stated that Unisys had provided a system substantially in accordance with the contract and that to an extent it had met performance requirements of RACVI over and above the contract. The failure to meet other performance requirements of RACV was not a breach of contract. There was no breach of the Trade Practices Act or of the contract. Unisys remained prepared to rectify the outstanding exception reports and discuss any further warranty or maintenance requirements of RACVI but did not acknowledge any liability for losses claimed in Hurford's letter.

941. In July RACVI approached Price Waterhouse Urwick ("Price Waterhouse")with a view to obtaining advice on how to efficiently handle the claims process without the assistance of the workflow system. Lang said that having persevered for so long with the Unisys system, it was not commercially viable to go back to the way things had been done before. The paper based system had not been improved during the period of the Unisys contract. The result was that RACVI had a claims process that was two and a half years behind its competitors. Accordingly it obtained a submission from and engaged Price Waterhouse to advise on a customer driven and cost effective claims process.

944. On 20 December 1996 the plaintiffs filed the writ which commenced the present proceeding.

Submissions on s. 52: a narrow case introduced?

948. I summarised the statement of claim concerning the pre and post-contract s. 52 case at [24]-[31]. In their final address counsel for the plaintiffs refined the way in which the claim was put under s. 52.

951. Counsel put the case in two ways, broadly speaking. The first was based on the proposal representations. The second way, which was counsel's primary way of putting the s. 52 case, might be called the configuration case. As I understand it, the case may be summarised as follows. Unisys knew that RACVI entered upon the WMS project with the aim of re-organising the claims handling process so as to produce more efficient and productive systems including document imaging that involved fewer staff and lower cost. Putting aside the complexity of re-organising the numerous processes involved, the system of electrical retrieval of images to the claims officers' screen, often while attending to a telephone inquiry concerning a claim, was intended to save time that the claims officer would otherwise spend in manually locating and retrieving the file and having to make a return call to the inquirer. To achieve this the computer imaging system had to be functional and stable. It also had to be efficient in terms of speedily retrieving images to the screen of the claims officer. Unless there was an appreciable improvement in this respect the business purpose of RACVI in entering into the contract with Unisys would not be met. To meet this business purpose the system had to be one which enabled images to be retrieved in a time consistent with an efficient on-line system. It happened that retrieval under such a system was in the vicinity of 2-4 seconds. Hence, it was submitted, Unisys had to configure the system as an on-line system for current claims. Timely image retrieval would follow as a consequence. Thus the primary way in which the case was put was on the basis of this configuration requirement rather than on the basis of a representation (or term of the contract) as to a retrieval or response time in the vicinity of 2-4 seconds. Notwithstanding its awareness of these matters Unisys configured a system in which current claims were partly on-line and partly near line. The result was that information sought by a claims officer could be contained on several disks, not necessarily then in page cache or in the claims officers' PC and not under a reader. The information could be spread over several disks which meant that retrieval of it could involve the spinning up and down of platters in a jukebox. The foreseeable consequence was response times of 20 seconds or so to minutes or more depending on the circumstances. The effect of response times of that magnitude on the ability to handle telephone inquiries without unreasonable delay, and the need to return calls, and otherwise for claims officers to work in an efficient way, is obvious. The system did not meet the business requirements of RACVI simply because Unisys adopted an inappropriate configuration. In seeking to establish a functional and stable system Unisys overlooked the fundamental requirement that information pertaining to current claims be retrieved more speedily and efficiently than under the existing system.

954. Counsel for Unisys objected in reply that this primary way of putting the s. 52 case had not been pleaded or opened. He described the submission as the plaintiffs' "narrow" case as distinct from the "wide" case. The narrow case was that the system was never properly configured to hold all current claims on-line. The wide case, which was the case pleaded, was that the system could never be made to work. Counsel submitted that the wide case was flawed on the evidence and that the narrow case had been introduced to salvage something from the wreck of the wide case.

957. The way in which the plaintiffs had departed from the pleading and the opening was explained as follows. It was said that the case moved from one of insufficiency of cache to the effect on retrieval times of the configuration in which current claim images were recorded on optical disks not under a reader in a jukebox and on cache (magnetic disk), but with constant movement from cache to optical disk. Counsel traced the development of the "narrow" case to an answer of Josephson in cross-examination when he said that optical could mean on-line under a mounted head. It was said that counsel for the plaintiffs seized on that and that the idea of configuration was introduced in cross-examination of Unisys witnesses. In developing his submission counsel for Unisys referred to passages in the plaintiffs' opening address in which reference was made to cache and to a report of Dr Thorne relied on by the plaintiffs in particulars to the plea of breach of contract in para. 36 of the statement of claim. In this report Dr Thorne concluded that the capacity of the cache was too small and of little value in reducing the time to access folders. Counsel said that Dr Thorne's logjam theory was only concerned with slow response times and optical disks and that the theory went when Dr Thorne agreed in cross-examination that it was possible to increase cache capacity so that all current claims were on magnetic disk. This answer, counsel submitted, established that when RACVI terminated the contract all that was required to improve performance was to add sufficient cache to have all current claims on magnetic disk. This, it was said, was a relatively simple exercise and would have cost about $40,000 or so. It got over Dr Thorne's logjam theory and provided an effective answer to the case which the particulars to para. 36 had based on Dr Thorne's report.

960. In the course of this argument counsel for Unisys also relied on a further answer of Dr Thorne in cross-examination that he believed that performance times "could have been improved given further time and effort". Counsel did not seek elaboration of the time and effort which Dr Thorne might have had in mind or the cost thereof. It was left in the air. In re-examination Dr Thorne clarified that the analysis in his report concentrated on issues of response time and performance. They were the issues in category D in his report (see p. 4 of Exhibit T) which concerned problems unresolved at the time the project ceased and apparently insurmountable.

963. Upon reflection I remain of the view which I had during the trial that counsel for Unisys sought to have the case resolved on their identification of the issues. That is not to be critical as it is good advocacy particularly in a heavy case containing many issues to seek to establish an identification of issues and hold the opponent to them. But the pleadings were wide and included a representation or term under which Unisys had to design a system that could meet the performance criteria in the RFP and that all open claims be on-line with response times in the vicinity of 2-4 seconds. These allegations immediately pointed to the design of the system including whether it had been configured so as to meet such requirements. Then, the Thorne report did not merely refer to and express a conclusion about the lack of size of cache. That conclusion was preceded by a substantial discussion of the limitations of the optical disk storage system designed and supplied by Unisys in meeting throughput and response time requirements. The report discussed the effect on response times of the Unisys configuration and then discussed cache.

966. The plaintiffs also relied, in the particulars to para. 36, on Esmonde's letter dated 14 June. The reference in that letter to hardware and software constraints is sufficient to refer to the design and operation of the Unisys system which did not require current claims to be on-line or provide for retrieval of them in a time in the vicinity of 2- 4 seconds.

969. In my view counsel was not precluded by the pleading of the statement of claim or his opening from relying on the so-called "narrow" case submission. It must always have been part of, or most relevant to, issues in the case to ascertain how Unisys had configured the system in relation to the ability of the system to offer performance in terms of response times that RACVI required in terms of an on-line system for current claims as referred to pre-contract or subsequently prior to June 1996. Moreover, it borders on the incredible to suppose that Unisys was not aware, both before and during the trial, of the effect of its configuration on response times in returning images of current claims. Counsel's submission concentrated on the size of the cache provided by Unisys and the ability to add cache. But the system is the whole thing and cache and the jukebox with current claims spread over optical disks not all under a reader was the configuration incorporated in the Unisys design. It is a very narrow and in my view unrealistic approach to a case with the breadth of pleading and facts as this to fasten on the aspect of cache as the relevant issue and exclude from the issues the other aspect of the consequence of the chosen configuration which so immediately and directly affected response times.

972. I reject the Unisys submission. I would add that, in any event, I would regard it as just to permit the so-called "narrow" case submission to be made. I am of that view having regard to the breadth of the issues in the pleadings, the conduct of the case and the absence of prejudice in Unisys. The effect of the configuration was always an issue for consideration and explanation. It was also a matter directly in the knowledge of Unisys as the designer and supplier of the system, and the expert in the area.

975. Subject to that it should be noted that in their written submission counsel said that there were four broad aspects of the InfoImage system where the misleading conduct or breach of contract was to be found. They were:

1. The Unisys system did not meet the requirement that the system be reliable or technically sound. The system crashed on 1 June 1996 and there were a substantial number of unresolved functional problems when the contract was terminated. 2. As configured the system did not meet the mandatory requirement of the RFP to store current claims on-line 3. As a result of the failure to configure the system to store current claims on-line, the system did not retrieve folder or document images within the time required. The problems with the system were such this failure had not been addressed by the date of termination in June 1996. 4. Unisys lacked the support and skills to address the problems.

Subject to this broad categorisation, and to the primary way in which the case was put, the plaintiffs press their case under s. 52 on the basis of the proposal representations referred to at [21] and the post-contract conduct referred to at [30] and [31]. The corresponding contract terms are referred to at [28] and [32]. I now turn to some specific issues raised by Unisys in its defence.

981. At an early stage of the trial, Unisys amended its defence to plead a reliance on a passage on p. 10-1 of the July response and point 12 on p. 7 of the PMP. The former is quoted at [93], and the latter at [138]. Reliance on these statements was pleaded at several points: in para. 14 as an answer to the plea of the proposal representations in para. 20 of the statement of claim; in para. 15A it was admitted that the intent and effect of the passage on p. 10-1 was that Unisys did not commit to any response times as part of the contract or otherwise (this admission related to the plea of misleading conduct by silence in para. 22(1) of the statement of claim); and it also relies on p. 10-1 and point 12 in para. 15D which pleads to para. 22(4) of the statement of claim. These paragraphs plead to the pre-contract s. 52 case. Then, in pleading to the allegation of a breach of contract it refers to p. 10-1 and point 12. The plea in para. 70 in relation to breach is more specific. After denying breach it is alleged in respect of the breach alleged in para. 36(f) and (g) (response times) that Unisys relies in particular on p. 10-1 and point 12 as providing that response times were to be finally negotiated once the system required by the functional specifications was installed. In summary, the defence relied on the passage on p. 10-1 and point 12 to establish that there was no representation or term as to response times from the system. The defence also stated that response times were to be negotiated once the system required by the functional specifications was installed. It is not clear whether that contention was alleged to be stated at either point or was to be implied or is in the nature of a contention. The reference in the defence to para. 36(f) and (g) was the only specific reference to the proposal representations and terms of contract alleged in the statement of claim. Paragraph 36(f) and (g) corresponds to para. 20(e) and (f); see the summary at [21]. The allegation in those paragraphs was that the system provide high speed image access for on-line claims with a retrieval time in the vicinity of 2-4 seconds and image access for near line claims with an expected response time in the vicinity of 20 seconds maximum.

984. The pleas in paras. 22 and 23 of the statement of claim (see [25] and [26]) were also included by amendment during the trial. They were made following the intimation of counsel that Unisys relied on the passage on p. 10-1 of the July response and point 12 on p. 7 of the PMP to exclude any commitment in relation to response times, and the subsequent provision of draft amendments to the defence. Prior to that intimation Unisys had not stated that it relied on these matters as a defence to the claim. When, following discussion in court, the terms of the amendments to the defence were settled, the plaintiffs prepared amendments to the statement of claim to deal with the point in anticipation as it were. It was convenient to have the issues raised in that way rather than by way of reply and a rejoinder.

987. In the result the plaintiff sues on matching representations and terms of contract as to response times and the defendant relies, inter alia, on the passage on p. 10-1 and point 12 to exclude any such representation or term. Then, against the risk the defendants point be held correct, in paras. 22 and 23 the plaintiffs raise two pleas to circumvent the defendants reliance on the passage on p. 10-1. Each is a further and separate plea of misleading and deceptive conduct under s. 52. It is to be noted that whereas the positive pleas in the defence indicate the significance of the matters raised is to the representations and terms as to response times, paras. 22 and 23 apprehend the defendants' reliance on the passage on p. 10-1 to extend to a negation of the mandatory performance requirements of the RFP, all performance requirements for the system and the contract, the proposal representations as to performance alleged in para. 20(a) to (f) (see [21]), and (in para. 23) the proposal representations relating to performance and retrieval times. It is clear enough that paras. 22 and 23 treat the proposal representations in para. 20(a) to (f) as relating to performance and retrieval times.

990. The parties addressed submissions on the construction and operation of the relevant parts of the passage on p. 10-1 and point 12. The contention of Unisys was that these references were intended to and did exclude from the contract any requirement as to performance or response times that the system must meet. Unisys also submitted that the RFP, which RACVI relied on for the specification of an on-line system for current claims with response times in the vicinity of 2-4 seconds, was not incorporated as a contract document and hence could not be the source of any relevant contractual obligation on Unisys.

993. The statement of claim pleaded the contract and terms in paras. 29 and 30. At [139] I referred to the documents which were incorporated in the contract. They were not attached to the signed contract but were incorporated by express reference. They were the July and October responses, the PMP and a schedule of payment milestones. They were to be read with the contract and with the exception of the responses were to prevail, in the event of any inconsistency, over the contract terms.

996. The statement of claim alleged that the contract was in writing and implied. No particulars were given of the respect in which, or the basis on which, the contract was implied. The defence admitted the contract was in writing and otherwise denied the plaintiffs' allegations. The statement of claim then went on (in para. 30) to allege express or implied terms of the contract; I refer to these at [28]. In particulars it is stated that the terms were in writing and implied, and that the statements and implications were to be drawn from the matters set out in the particulars to para. 20 annexed to the statement of claim. It was further stated that the RFP was by necessary implication incorporated into the contract. If one moves from that statement of particulars in the pleading to the particulars in annexure A one finds extensive reference to and reliance upon the RFP and other materials including the RFI, Unisys brochures and statements of persons.

999. It was clear from the statement of claim and particulars that the plaintiffs relied on the RFP in both the s. 52 and breach of contract cases, in the former case as being a constituent of the relevant conduct and in the latter case as being a source of terms of the contract. In its defence Unisys responded to each aspect of the statement of claim, and in particular by advancing its reliance on the passage on p. 10-1 and point 12, as referred to above.

1002. At [140] I pointed out that regard must be had to the RFP responses to understand what the engagement under the December contract was about and what Unisys and RACVI were setting out to achieve. The contract itself was a narrow document in that respect. It was, as I said, curious that although the responses referred to the RFP and it is necessary to refer to it to understand the responses and the engagement, the RFP was not expressly incorporated as a contract document. The PMP also referred to the RFP. As I have said elsewhere RACVI was not as attentive to its interests in the contract negotiation stage as it should have been.

1005. Nevertheless, Unisys submitted that on the principles applicable to the implication of a term in a contract neither the RFP nor any provision of it could be implied in the contract. In any event, such an implication was precluded by the entire agreement clause in the contract (cl. 24(d)). Finally, there was reference to authority to the effect that a formal contract is assumed to contain all the terms agreed upon, and that any inconsistency between an extrinsic document incorporated by reference into a contract and the principal document itself is resolved in favour of the latter (see para. 30 of the Unisys written submission on the contract). Hence, it was submitted, it could not be held that the RFP was incorporated in the contract. Even if it was so incorporated any inconsistency between it and the contract documents must be resolved against the RFP. But, at most, the RFP could only be referred to as part of the matrix of surrounding circumstances to resolve some ambiguity in the terms of the contract.

1008. The next step in the Unisys submission was to identify the contractual performance criteria pleaded by RACVI, consider these in relation to the July and October responses, and conclude that (a) the matters relied on by RACVI either were not incorporated in the contract or had no meaningful content as performance criteria and (b) the contract contained no performance criteria. Therefore, it was submitted, RACVI had failed in its case that Unisys had not complied with contractual performance criteria. I now deal with these contentions commencing with the submission concerning the pleading of performance criteria.

1011. The Unisys submission identifies the performance criteria pleaded by RACVI in the following way. It goes to para. 31E of the statement of claim in which it is alleged that the system delivered in or about March 1995 "at all times failed to comply with the representations referred to in para. 20 and performance criteria contained in the Unisys proposal and/or the WMS contract". The particulars provided to this merely refered to and repeated the allegations and particulars in para. 36. No particulars were given in para. 31E of the "performance criteria". The Unisys submission then noted a reference to "the performance and reliability criteria set out in the RFP" in paras. 20(c) and 30(c) of the statement of claim. I note there was a similar reference in para. 36(c) which contains the allegation of breach of contract, in particular that Unisys had failed to design and supply a system which could meet "the performance and reliability criteria set out in the RFP". It was noted that particulars under para. 20(c) were given in annexure A. It was assumed they may be taken as particulars of the performance criteria referred to in para. 31E. In my view the assumption is not correct. That is because, to start with, the submission refers to the wrong sub-para. The reference should be to para. 20(b) the particulars to which do refer to matters of performance including response times, and other matters. Further, other of the proposal representations, and their particulars, refer to matters concerning performance.

1014. Unisys then submitted that the only matter of contractual non-compliance raised at March 1995 was in respect of performance criteria. This is plainly incorrect. It is contrary to the plea in para. 31W of a failure to comply with the proposal representations and the incorporated allegations and particulars in para. 36 which go beyond matters of "performance criteria". It is also contrary to the way in which the case was conducted.

1017. I also reject the submission that properly construed the statement of claim alleges a narrow non-compliance with performance criteria in March 1995 and a wider non-compliance, not only with performance criteria, but also with other contractual requirements up to June 1996. The statement of claim is not to be read in the narrow way required by the submission. A pleading has to be read in a practical way, and with common sense, having regard to its terms. In this instance the submission has chosen, inadmissibly in my view, to ignore that part of the plea in para. 31E which alleges a failure to comply with the proposal representations. They include a number of representations which may be said to be concerned with performance including response times or, to use other but undefined words, performance criteria. The representations are also concerned with other matters, in the same way that the plea of breach is. Further, the particulars to para. 31E refer to and rely upon the allegations and particulars in para. 36. These allegations go to the wide range of matters, including but not limited to matters of performance, that are the subject of the proposal representations referred to in para. 31E.

1020. The Unisys submission then proceeds as follows. On the basis that the contractual performance criteria pleaded in the statement of claim are those set out in the particulars to para. 20(c) in annexure A, those particulars or criteria are analysed to ascertain their contractual effect, if any. I have already pointed out that the correct reference should have been to para. 20(b), but I proceed to note the submission. The submission comments upon the five heads of particulars referred to in annexure A. Items 1 and 2 refer to matters of performance stated in parts of the RFP. Item 4 refers to Robinson's letter to Josephson dated 29 September 1993 referred to at [121]. Items 3-5 refer to the July and October responses. It was submitted that by reason of their derivation items 1, 2 and 4 were not part of the contract and should be disregarded accordingly. Items 3 and 5 were derived from the responses which were contract documents. It may be noted that while other particulars under para. 20 relate to matters of performance and response times, it is unnecessary to refer to them as the approach of Unisys would be on the lines indicated.

1023. The Unisys submission then considered the terms of the passages in the responses referred to in items 3 and 5 in the context of other passages in the responses, and submitted that the passages relied on could not be regarded as containing any meaningful performance criteria under the contract. Having done so, the Unisys submission then considered the construction of the passage of p. 10-1 and point 12. I now deal with the submissions. At the outset it should be emphasised that the submission proceeds on the premise that from the point of view of contract the only documents that may be referred to are the contract documents and that the only performance criteria pleaded by the plaintiffs and which may be relied upon to establish the case are those referred to in items 3 and 5 above. In other words, the submission thus far is that the RFP is not a contract document and, accordingly, nothing contained in it as to performance could (unless it was also contained in one of the contract documents) constitute a contractual requirement. On that basis counsel addressed the first part of the submission.

1026. Items 3 and 5 in the particulars set out certain parts of the July and October responses respectively. Dealing first with item 3, the parts of the response relied on are set out at [87]-[89]. These are passages concerning the appropriateness of the InfoImage product for the RFP requirements and its capabilities and benefits.

1029. Unisys submitted that these passages had to be read together with other passages of general qualification. These passages include those set out in [87]-[88], [91] and [93] preceding the reference to the concluding paragraph on p. 10-1. Unisys also referred to another passage of the same nature appearing on p. 1-2 of the response.

1032. It was submitted that when read in context the matters relied on in item 3 could not be regarded as containing any meaningful performance criteria under the contract. I disagree. It is true that the response was a document whereby Unisys sought to sell itself and its product, but it was more than that. It was a serious document responding to a carefully drafted RFI. Unisys knew it would be relied on for its accuracy by those accessing the responses, and it was so relied on. The essential matter to which the statements of qualification relied on by Unisys relate is the need for a better statement of the requirements to be met by the WMS and the effect a more precise understanding of the requirements may have on the detail and cost of the system proposed. Subject to that Unisys put its InfoImage product forward with positive statements as to it being appropriate for the requirements detailed in the RFP and as to the system configuration allowing for the on-line and near line storage requirements outlined in the RFP. Reasonably understood they were intended to be relied on as an indicator of what the product offered, and they were. I do not further elaborate the relevant passages.

1035. Item 5 set out three passages in the October response. I refer to this at [124]; as stated there this further response proposed the InfoImage Folder products and services detailed in the document as appropriate to RACV's requirements detailed in the RFP. In addition it stated that the system had been designed to deliver the required performance every day during normal business hours, virtually without interruption, and that "best of breed" hardware and software technology and a sound design were intended to combine to offer the highest performance even during peak load. These statements were referred to in item 5. Unisys submitted that in terms these statements went no further than those in item 3. They were generalised statements which could not be regarded as "performance criteria" (the expression counsel picked up in para. 31E). It was also submitted a statement on p. 1 of the response as to the response building on information already provided to RACV including in the July response meant that the qualifications in that response were continued. I make the same comments on the submission as I have in respect of the July response.

1038. On its analysis thus far Unisys submitted that on the proper construction of the documents there were no performance criteria in the contract. The matters relied on by RACVI in annexure A either were not incorporated in the contract or, if they were, they had no meaningful content as performance criteria. It was implicit in this conclusion that there was no contractual performance criteria regarding response times, that is, the time taken to retrieve an image from storage to the user's desktop computer. On this basis the case must fail insofar as it relied on establishing that Unisys had not complied with contractual performance criteria.

1041. If this was correct it was not necessary for Unisys to rely on the passage on p. 10-1 or point 12 to exclude any requirement as to response time as a term of the contract. Lest the submission not be correct, counsel advanced a submission to support the pleaded reliance of Unisys on those references in the defence. I interpolate that it would have been odd indeed in Unisys had not addressed a submission to establish this aspect of the defence. That is because the making of the point (for the first time) at an early stage of the trial had appreciable consequences in time and cost in that it led to amendments to the pleadings, to repeated references to and reliance on the point during the trial and to extra time being taken with witnesses and in the final addresses.

1044. The question is whether the passages relied on by Unisys have the effect of excluding any commitment to response times from the on-line storage system of current claims referred to in the RFP; see the statement of the mandatory requirement the system had to meet at [78] and the definitions of on-line and near line at [79]. In its July response Unisys said the InfoImage system offered allowed for the on-line and near line storage requirements outlined in the RFP; see at [89]. There were of course the other statements referred to at [87]-[93]. The present point is not so much as to what was said in a number of statements in the response. The point is whether the passage on p. 10-1 or point 12 expressly negatived any representation or commitment with respect to response times. As noted the defence indicates in this regard that response times were to be finally negotiated once the system required by the functional specifications was installed. The latter element is not stated in either the passage relied on at p. 10-1 or in point 12. It would seem to be based on some statement in the July response although that is not stated in the defence. Effectively the plea in the defence is that the two passages relied upon negative any representation or term which respect to response times. To put it more precisely, on their proper construction, did either reference exclude any commitment by Unisys to provide a system that would give response times that accorded with the mandatory requirements in the RFP?

1047. In submitting that it did Unisys relied on the following indicators in the response document. The only other reference to response times in the Product, Support and Services section is on p. 10-16 in a section headed Maintenance, Backup and Support in which Unisys described the sort of post-implementation support and maintenance for the system it could provide. The first and highest level of support is called A la Carte Services and in that it was stated in relation to Priority Response that Unisys will give priority to answering service calls. There was then a statement of the "response time" of Unisys to service calls over the past 15 months. Unisys relied on the fact that the reference to "response time" and "response times" on p. 10-1 was in the earlier section headed Terms and Conditions. It was submitted that the subject matter of these parts being different the meaning of "response time" or "response times" on p. 10-1 could not be governed by the references on p. 10-16.

1050. Then, it was submitted, on the assumption that the reference to "response times" on p. 10-1 was ambiguous, the ambiguity may be resolved by reference to surrounding circumstances including the terms of the RFP. The relevant terms of the RFP include the definitions of on-line and near-line which contain the expression "response times". This was an indication that it was response times of that nature that were referred to.

1053. Then a reference was made to the statement towards the end of Section Three of the RFP, on p. 8 under the heading Vendor Instructions, that is quoted at [76]. It was submitted that in accordance with this note the appropriate place in the response for Unisys to have excluded any commitment to response times as stipulated by RACVI in the RFP, or at all, was in the Product, Support and Services section. It was submitted that that was the intention of the passage on p. 10-1 and that it should be construed accordingly.

1056. These were the submissions of Unisys on the point of construction. Counsel for RACVI also addressed on the point but before referring to those submissions or expressing a conclusion I should refer to some other submissions of Unisys of a construction nature made at a different part in the final address.

1059. These other submissions concern the requirement for on-line storage of current, active claims and near line storage of all inactive claims in point 14 quoted at [78] and the definitions of on-line and near line quoted at [79]. It was submitted there was an awkwardness in reading the definitions into the reference to on-line and near line in point 14, and that point 14 addressed storage but "not access times at all". I reject the submission. In my view the definitions and the requirement in point 14 sit well together and state a mandatory requirement that the system proposed by the vendor provide for current and inactive claims to be stored (that is, the images to be stored) on-line and near line as stated respectively and with the expected image response times in the vicinity of those respectively stated. That is sufficient to dispose of that submission.

1062. I now refer to the submission of the plaintiffs' counsel. At the outset it was said that even if the passage on p. 10-1 related to response times that did not meet the primary way in which the case was put which is that Unisys was required to but did not configure the system so that all current claims were on-line. Putting that point to one side counsel made the following points on construction, in summary. As part of Section Ten the passage at p. 10-1 was concerned with post-implementation services and the time Unisys might take to respond to calls concerning problems; it was not concerned with the time taken by the system to respond to the request of a user for information. Matters of the technical performance of the system were dealt with earlier in the response. Further, the possible levels of support were referred to later in Section Ten and until the level of post-implementation services and support was agreed to there could not be a commitment to a response time. The response time was related to the level of service and support agreed on. The reference to "availability levels" was consistent with this understanding of "response time"; the availability level was expressly related to the support plan being contracted for and the word was used on p. 10-17 in relation to backup support. This construction is supported by references to maintenance services in the July response. There was also evidence which established that the expression "response time" or "response times" was commonly used to refer to the time it took to respond to a request to correct a problem post-implementation. Counsel also pointed to the fact that no witness called by Unisys explained the drafting of the passage or said that it was intended to have the effect now contended for by Unisys. It is correct there was no such evidence but, in any event, the issue of construction is to be determined on an objective basis.

1065. Taking account of all that counsel said, and regarding the passage as it stands in Section Ten and in the response as a whole I conclude that the proper construction is that contended for by the plaintiffs. I accept the submissions of the plaintiffs and add the following observations.

1068. At the appropriate point in the response Unisys stated the product it offered met the on-line and near line requirements in the RFP, which meant the configuration would provide the response time stipulated in the definitions. I reject the argument that the appropriate place to negative this commitment was at p. 10-1. That was some 64 pages on, on my count, and in a different section. Neither common sense nor a sense of fair dealing or reasonableness which one might have considered Unisys brought to the task of preparing the response, nor the wording of the RFP quoted at [76], required that the passage be placed at p. 10-1, assuming that in fact it was intended to exclude any commitment or preparedness to commit to the time in which the system would respond to the request of a user and bring an image to his or her screen. It was suggested by counsel for Unisys that the placing of the statement on p. 10-1 accorded with the requirement quoted at [76]. I do not agree. In the first place Unisys was required to deal with technical matters in Section Four. If the response was that it would not or could not commit to the on-line and near line requirements it would surely, acting reasonably and responsibly, have then and there said so. It beggars belief that Unisys would have offered the commitment in Section Four but sought to negative it in a later section much further on without a specific statement that that is what it was doing. Moreover, to so structure the response carried the risk that a reasonable reader might have been mislead. I would assess that risk as real and foreseeable. Indeed I note that Chesson-Kistas read the passage and understood it to relate to support; I note that but do not take that into account in determining objectively the point of construction. Nevertheless what she said, which I accept as her reaction on reading the passage, accords with what I would have regarded as the probable reaction of the reasonable reader. In my view, if the passage was truly intended to have the meaning contended for by Unisys its placement in Section Ten carried a real risk, indeed probability, of misleading and deceiving RACVI. The fact is that if the passage was intended to have and convey that meaning it would surely have appeared in appropriate terms in Section Four so as to clearly inform RACVI that Unisys would not or could not commit to the technical requirements of the on-line and near line system stipulated in the RFP. Further, if the passage was meant to have the effect contended for, it was not merely stating "additional information". Rather, it was negating the position stated in Section Four. So understood it seems incredible that Unisys could have intended to have indicated one thing in direct response and, much later, said the opposite in indirect response. In expressing these conclusions I do not overlook the various statements in the response mentioned earlier which in summary concerned the need for more definition of the requirements and to further consider the matter and that there may be changes. They do not meet the present point which is whether the passage on p. 10-1 excludes any commitment or preparedness to commit to response times which, in turn, takes one to the requirements in Section Four.

1071. Counsel for the plaintiffs relied on some further factors as supporting this conclusion. The passage at p. 10-1 being general in its terms should not be read as derogating from the earlier specific positive representation relating to response times; see Forbes v Git [1922] 1AC 256, 259, and Joyce v Vaughan (1965) 66 SR (NSW) 156, 161 and 165. This is particularly so where the later clause is a standard form clause (Lewison, The Interpretation of Contracts, 2nd Ed. (1977) para. 6.04 and 8.08) which Josephson agreed it was. Then there is the principle that a general clause will not be interpreted so as to destroy the main object of the contract which here was concerned with improved efficiency in retrieving and handling files; see Margetson v Glynn [1892] 1QB 337, 334, and The Interpretation of Contracts, supra, para. 8.09. On its submission Unisys made no commitment to meet any retrieval requirement. Then there is the approach, particularly in a commercial context, that in the case of ambiguity of expression the parties are taken not to have intended an absurd or unreasonable result. Such a result would obtain if RACVI entered into the contract with no commitment from Unisys as to response times, and under which in terms of response times it would get whatever the system might come to provide. It is unlikely in my view that a potential vendor such as Unisys would have intended in its response to state that it would not commit to the stipulated response times, or, indeed, to any at all. If it had done so it would reasonably have expected that RACVI would not have further dealt with it, as it would in effect have been stating that it could not satisfy a critical element of RACVI's business purpose. While the RFP was not in itself a contract or deed between parties, it was nevertheless a document put forward in response to a request and Unisys intended it be relied on as a step to gaining a possible contract. Allowing for that, it is yet appropriate to bear these sort of considerations in mind in approaching the reading and construction of the July response.

1074. For all of these reasons I conclude that the passage at p. 10-1, on its proper construction, was not intended to mean and did not mean that Unisys was thereby excluding any commitment to response times in the sense of the on-line and near line requirements of RACVI or otherwise concerning the time it would take a user to retrieve an image to his or her screen. In my view the response times or availability levels referred to concerned the matter of post-implementation service and support.

1077. That brings the discussion to the second passage relied on, point 12 on p. 7 of the PMP. I refer to this at [138]. All that is stated in the point is that a gap in information exists in respect of "Performance objectives". I reject the contention that this statement negatived any representation or term with respect to response times. The quoted expression is not defined. It could well have been intended to refer to matters concerning performance of the system other than in respect of response times. It should not therefore be construed so as to impliedly negative an earlier specific representation as to response times.

1080. The statement in the PMP can be traced back to a facsimile from Walker to Josephson dated 12 December 1993 in which he referred to a gap concerning performance objectives. He referred to it in the bare way that it was carried into the PMP. Walker attached to the facsimile a list of detailed information required but the list did not refer to the matter of response times for the retrieval of images to a users' screen. Nor did the facsimile state what information was missing concerning performance objectives. However Walker had the RFP and he was aware of the response time requirements contained in it, and the number of users and the volume of documents stipulated in it. Walker did not give evidence to explain what he was referring to.

1083. It was submitted, and I accept, that the retrieval time for document or folder images was only one thing that Walker might have had in mind. It was unlikely that that was what he had in mind given that he had the requirements in the RFP, and the subsequent Functional Specification and Workflow Narrative did not deal with retrieval times. This is consistent with the reference in Walsh's letter dated 23 May 1996 to achieving the performance requirements outlined in the RFP.

1086. For these reasons I reject the contention that point 12 negatived any representation or term with respect to response times for the system.

1089. I now return to the issue whether the RFP was incorporated by reference as a contract document. Unisys strongly pressed the contention that the RFP could not be held to have been so incorporated; the contract was clear as to what documents were incorporated in it, the RFP was not one of them, and, accordingly, it did not stand as part of the contract.

1092. The submission is readily understandable but it is curious in a way, just as the express non-inclusion of the RFP as a contract document may have been more unfortunate and productive of contention than wise or helpful. The position is this, commencing with (but not repeating) my observations at [140]. The contract was non-informative in that it did not state what the parties were setting out to achieve. The content or substance of what the system was to be able to do had to be found elsewhere. The contract documents which inform a reader of those matters are the July/October responses and that is perhaps why they were incorporated as contract documents, although that is speculation. But neither response is complete in itself. Each is responsive to and refers to the RFP. The responses cannot be fully understood or given full meaning without also reading and having regard to the contents of the RFP. It is thus correct in my opinion that even if the RFP does not possess the character of a contract document yet regard must be had to it to understand and give meaning to the responses. No amount of sophistry can avoid that consequence. It means that even if the RFP is not to be regarded as a contract document, it yet has effect in that way in explaining and giving content to the responses and hence understanding the nature of the task entered upon. The consequence is inescapable in my view that as a result of reading the responses with the RFP a contractual obligation may be identified or discerned with greater clarity than might otherwise have been the case. That is so, I consider, whether, strictly speaking, the RFP is considered as a contract document in itself as a result of necessary incorporation by reference in the responses (or perhaps even the PMP) or as a document to which necessary reference may be had to give content and meaning to a specified contract document otherwise uncertain, incomplete or lacking in understanding of the content or subject matter. The entire agreement clause does not stand in the way of that approach in this case.

1096. Unisys submitted that the evidence established that Doherty and Birthisel agreed that the issue of improving response times be deferred until after implementation of the system. On that basis the issue was not to be addressed during the volume/stress tests in May and June 1996. Hence, whether or not the system could be made to conform with the response times required by RACVI would stand over until post-implementation. That being so, the plaintiffs could not rely on any slowness in response times to justify termination of the contract. The plaintiffs case is that no such agreement was made.

1099. The evidence of Birthisel (in para. 100 of his witness statement) is that sometime after acceptance testing in early 1996 he had a conversation with Doherty about further modifications to the system. Doherty agreed that there be no further modifications until after the application went live, as long as the volume stress testing was successful. He said that matters such as the print fax facility and improving response times could be put off until the application had gone live. Birthisel said that the note in the papers for the 9 May meeting (quoted at [220]) referred to the agreement.

1102. It is to be noted that the condition as to the volume stress testing being successful is not referred to in the quoted note, but perhaps it is implicit. It is also to be noted that Birthisel's evidence is non-specific as to the occasion or circumstances of the conversation. It was not recorded in a contemporaneous writing of or between Birthisel and Doherty. In cross-examination Birthisel referred to having an agreement with Doherty "that we could do performance after we had achieved the volume and stress tests".

1105. In his witness statement Esmonde said he recalled the issue of retrieval times was raised for the first time by Doherty and Hurford in or around March/April 1996. They asked for information about retrieval times. At some points in cross-examination he said there was an agreement to look at response times after implementation. The evidence was hearsay based on advice received, as he was not a party to the alleged conversation between Doherty and Birthisel.

1108. It will be recalled that on 13 March 1996 Doherty wrote to Birthisel stipulating required response times, and followed this with a further memorandum on 27 March with a list of transaction types and response times. Birthisel passed the latter memorandum to Olsen and that led to Esmonde's letter to Doherty dated 11 April and to Olsen preparing estimates of response times on or at 29 April 1996 which were discussed at the Unisys meeting on 9 May. The estimates were provided to Doherty by a person and in circumstances not established by evidence, in the end April/early May 1996 period.

1111. Unisys also relied on some documents as supporting the agreement. They were an internal Unisys risk management document dated 8 May 1996 which states that in consultation with the customer the system will remain in its current state until it goes live; the quoted note in the papers for the 9 May meeting; Doherty's memorandum to Birthisel and Esmonde dated 16 May (see at [221]); Walsh's letter to Hurford dated 23 May (see at [227]); Esmonde's letter to Doherty dated 7 June (see at [245]); and Walsh's letter to Hurford dated 21 June (see at [262]). Unisys relied on references to the alleged agreement in the letters from Walsh dated 23 May and 21 June. It was submitted that RACV had never denied the agreement.

1114. Unisys also relied on evidence of Doherty and Hurford. Doherty said nothing about the issue in his evidence in chief. In cross-examination he was asked whether he disagreed with the evidence of Birthisel in his witness statement. He said that it seemed strange, on the basis of the various memos he had sent to Hurford and others around that period of time expressing his concerns in regard to stress testing, that he would have "actually agreed to accept those response times while I was still writing emails and David Hurford expressing concerns in regards to them". He was then pressed as to whether he denied an agreement was made as stated by Birthisel and he replied "I can't recall one way or the other whether the agreement was made".

1117. In cross-examination Hurford was directed to Walsh's letter dated 23 May and in particular to the reference to an agreement in the passage under Performance quoted at [227]. He was asked if he agreed there had been such an agreement and he agreed there had.

1120. On these materials Unisys submitted that if it were bound by the December contract to achieve the response times in the RFP, a variation was agreed which relieved it of that obligation until after the system was installed. Since RACVI terminated the contract thereby preventing installation, there was never a breach of any obligation in respect of response times.

1123. The facts require some greater analysis to determine whether an agreement was made as Unisys contends.

1126. I first note that the allegation in the agreement was not pleaded in the defence. If it had been the usual particulars would have been given of the allegation and they would have aided in fitting the making of the agreement into the chronology and relevant context. However neither the defence nor Birthisel's evidence offered such factual detail. At what point then, is it to be concluded that the alleged agreement was made? The submission of Unisys is that it was made "in about April 1996". The lack of precision in that submission, in terms of pinpointing the date of the alleged conversation, is obvious. It reflects the lack of substance and detail in the evidence, and of a contemporaneous written record by Birthisel or Doherty, of the alleged agreement. Yet the reference to April seems correct in that the probability is that it would have followed the raising by Doherty of the matter of response times in March and April. It is also probable that it would have followed the realisation of Unisys in April (if not before) that the system could not meet the required response times. This, I find, was immediately a matter of serious concern to Birthisel and Unisys. Birthisel immediately realised he had a significant problem. This became clearer when Olsen provided his 29 April estimates.

1129. The mention of the Olsen estimates raises again the issue as to when they were given to Doherty and by whom? There is no evidence on the issue. It may have been Birthisel or it may have been Esmonde who, according to Birthisel, was the person who was "managing that dialogue" with Doherty so that Birthisel could concentrate on the other things. In any event, it is conceded the estimates were provided to Doherty. At one point counsel for the plaintiff submitted that the apparent improvement involved in the Unisys estimated times might explain the suggestion that Doherty went along with the idea of performance enhancements after the system went live. As to why Doherty might have been so induced, counsel pointed out that for the first transaction type the estimate of 5-15 seconds took 10 seconds off the then minimum. If achieved, that would have been a very significant reduction. The submission draws attention to the total absence of evidence from Birthisel as to the alleged conversation, beyond the conclusionary assertions in his witness statement and oral evidence. It is left in the air. In effect, the plaintiffs' submissions suggested that the Olsen estimates were used to encourage Doherty to take a course in relation to response times that would defer that problem area until, hopefully, Unisys could succeed in having RACVI otherwise accept the system. Set in the context of the written communications and Hurford's attitude, and the evidence of Hurford, which I accept, that he had no knowledge of such an agreement, it is improbable that Doherty would have made the alleged agreement. I add that in the circumstance of the significant pressure he (and Unisys) was under knowing that its system could not provide the required response times and being desperately anxious (as I find he was) to avoid the obvious and looming possibility of the contract, which was already a loss situation for Unisys, being terminated, I find that Birthisel, and Esmonde, took every course possible to try to advantage Unisys in the circumstances. I readily find that they endeavoured to persuade Doherty to a position favourable to Unisys and that the Olsen estimates were provided accordingly. That does not mean, however, that the alleged agreement was made. It does, however, reflect a situation in which, as I find, Unisys would seek to create and fasten onto whatever point might be available and press that on RACVI in an attempt to protect and salvage its position.

1132. Turning to the documents relied on by Unisys, the first two were internal to Unisys; I therefore proceed to the other documents which passed between the parties. First is Doherty's memorandum to Birthisel and Esmonde dated 16 May which is referred to [221-222]. Unisys relies on the reference to acceptance of some shortcomings and investigations post implementation. I find that the reference to some shortcomings in transaction times referred only to the particular type of transaction of retrieving a folder. Doherty described the problem in cross-examination as being the lack of a facility to do a direct file retrieval which meant that one had to work around the system which increased the transaction time. The memorandum does not support a position that action on performance requirements was generally postponed to post-implementation.

1135. The next document relied on was Walsh's letter to Hurford dated 23 May. Unisys relies on the reference to an agreement in the letter. I referred earlier to Hurford's evidence in which he accepted that an agreement had been made to defer work to enhance performance. Earlier in cross-examination he said, and I accept as correct, that he had no knowledge of such an agreement having been made before the contract was terminated. He was aware there were discussions about enhancements but not an agreement having been made as alleged. That means that Doherty did not advise him of such an agreement. His answer as to their having been an agreement came later. I am of the clearest view having observed Hurford give evidence that he was an honest witness and that neither answer reflected adversely on his credit. The question to which he assented was a general one which referred to a supposed agreement with respect to open-ended matters including "other work", "further enhance" and "consider". It was already clear he had no knowledge of any such agreement. I find he was in the dark and in giving the answer relied on he was going on the letter from Walsh. Further in his evidence, reflecting on the situation, Hurford said that he did not know that Unisys would be given a further opportunity to improve the system, but 24 June was getting closer, it was becoming apparent that not all of the timing requirements were going to be met, and obviously some consideration was being given to enhancing the system after 24 June. But whether or not there was "an agreement", by his letter Walsh stipulated the condition that what he called "this additional work" be "covered under new commercial arrangements". In other words, he wanted RACVI to bear all or part of the burden or cost of the work. RACVI never agreed to that. Hurford considered as ludicrous the notion that RACVI would pay Unisys for work which it was asked to do in the first place. Hurford's view was that there was a primary requirement on Unisys to deliver the system before any additional work was to be considered and performed. Hurford put it thus:

"We had agreed that 24 June was the date at which the system had to be operational, functional and meet with RACV's requirements".

1139. The final document relied on by Unisys is Walsh's letter to Hurford dated 21 June. This referred to an agreement to schedule the four outstanding performance criteria after implementation. I note that there was a similar reference in the letter of Esmonde to Doherty dated 30 May which I dealt with at [231-232]. It would seem that reference should also be made to Esmonde's letter dated 7 June.

1142. Unisys submitted that despite it twice having alleged the agreement in correspondence RACV never denied it. I think the point gets nowhere. Hurford's position throughout, stated at meetings and in correspondence, was that the Unisys system had to be completed and delivered on 24 June. His position was that Unisys was obliged under its contract to provide a system that met RACVI's business requirements and that included a system with response times of the order being requested by Doherty. The position he stated was not consistent with the existence of the alleged agreement. It is commercially unrealistic to suppose that in the formal and serious way in which Hurford and Walsh were handling the matter, with the real prospect of contractual termination, and the obvious seriousness with which RACVI regarded the situation and the agreed deadline of 24 June, that RACVI would have agreed to a situation in which it might take delivery of the system on not much more than a wing and a prayer that the fundamental matter of response times could be satisfactorily addressed subsequently.

1145. The probabilities do not favour the conclusion that in such circumstances Doherty intended, or would reasonably have been understood by Unisys to have intended, to agree that RACVI accept that the matter of response times stand over for consideration after implementation. Such an agreement would have placed him at odds with Hurford, and been contrary to his own stated requirements. It may be possible that the Olsen estimates gave him some measure of comfort but it is to go another step to conclude that he made an agreement whereby RACVI became bound to defer the matter of response times as alleged. Moreover, of course, there is a world of difference between an agreement in the sense of a concluded and binding legal agreement and a working discussion in which a suggestion might be made or a possibility explored. It is at this point that one returns to the telling absence of evidence, indeed the elusiveness, as to the actual conversation in which the agreement was alleged to be made. In all, the evidence as to the alleged agreement is unsatisfactory in its insufficiency. I find that Doherty did not say to Birthisel (as he asserts in his witness statement) that improving response times could be put off until after the application went live. I find that Birthisel's evidence in that regard was false. I found him an unsatisfactory witness in that at times he engaged in self justifying, defensive and argumentative answers, and answers that at times were affected by emotion, were over-long and lacking in responsiveness. I find that in an attempt to cover its weakness in the matter of response times and in an attempt to avoid termination by RACVI, Unisys elevated into an "agreement" remarks of Doherty that did not in fact constitute an agreement. The attempt fails. Doherty was an honest witness. So was Hurford. Birthisel was not. There was no agreement.

1148. For the sake of completeness I mention a further point relied on by the plaintiffs. The submission was made on the assumption that the alleged agreement was made. On that assumption, Esmonde's letter to Doherty dated 14 June constituted a termination of the agreement. That was because it said in effect that the system could not be made to produce the response rates required by RACVI. The letter did not assert the agreement but counsel for Unisys submitted that in fact the letter accorded with the agreement. Whether or not the letter constituted a repudiation of the agreement or operated to negate the agreement because it established the agreement was pointless in that no effective improvement could ever be achieved under it, the letter is consistent with their being ongoing discussions on a matter of response times. It also said there would have to be an agreement on funding. It is not necessary to consider the submission further.

1152. The submissions differed as to the relevance of the response times achieved in the tests conducted in 1996. The response times in question were those recorded on 13 May (see at [221]), 1 June (see at [236]), and 15 June (see at [254]-[256]). There were also response times recorded by Doherty on 15 March (see at [201]) which led to Haw conducting tests on 19 March (see at [204]).

1155. Counsel for the plaintiffs submitted that the tests produced retrieval times for current folders or documents far slower than 2-4 seconds. It was also submitted that an improvement in the times that occurred during the tests on 13 May and 15 June resulted from a single disk being mounted under the reader in each jukebox, as distinct from two disks in one jukebox earlier in the day. The former configuration would not be representative of the system in which current claims were stored on-line.

1158. Counsel for Unisys submitted that whatever were the response times, the tests were not a reliable guide to the response times achievable by the system. That was because for the purpose of the tests the system was set up with a view to it being tested under maximum load and pushed to the limit. For this reason cache was emptied before each test in May and June. That meant that the early retrievals at least were all or mainly from optical disk. This was not how the system would operate in production. Retrieval from cache or mounted optical disk was "about twice as fast" as retrieval from an unmounted optical disk. Further, counsel disputed that the achievement of faster times during the 13 May and 15 June test resulted from an adjustment of the optical disks in the course of the tests. It was submitted that it was not established by RACVI that each disk was mounted under a reader on those days.

1161. The recorded response times do show times in excess of times stipulated by Doherty and in excess of 2-4 seconds. The same is true of times taken on 15 March. I have given the court book references to the tests. I will not set the various times out.

1164. The basis of the Unisys submission that the tests were not a reliable guide to the response times achievable was that the test was for a different purpose. That was, according to Unisys, to see if the system was functional or stable. Olsen said their primary attempt in the volume and stress tests leading up to 15 June was to test the integrity and stability of the system and in that regard to work it as hard as possible. Olsen thought (and this accords with other Unisys evidence) it was then premature to deal with performance aspects. For the purpose of the test they cleared batch cache and page cache of all documents, thus providing a known state at the start and which meant that reports could be run at the end that identified the work done and its integrity. This also enabled an unusual throughput of documents through cache. In other words, there was a special configuration for testing purposes. It was not a test under ordinary operating conditions, as with images in cache. Nor was it configured to meet the full business requirements of the operating system. They were not testing the system as it would finally be installed for hand over. Clearing cache meant that all image retrievals came from optical disks. The same optical disks with the same documents were used for each test. There was then about one or two gigabytes of disk space. The intent was to work the system as hard as possible to understand any weaknesses in the system design. Taking account of the numbers involved he estimated there was two to three times a normal load on the system. He said that performance times were taken by RACVI and while he was not disregarding them it was not a performance test and his primary focus was on integrity and stability. He wanted to see if the system broke down under load. Birthisel referred to Doherty on 15 June going from terminal to terminal with a list taking times - it was his "sole objective".

1167. I accept that cache was cleared for the tests as Olsen described. That would mean that at the start of each test there would be no image in cache and, I find, in a user's PC. All retrievals would be from optical disk. When a document was retrieved it would be brought into cache and if again requested would probably still be there which would make a subsequent retrieval quicker than if it was located on one of several unmounted optical disks in a jukebox. That leads on to the question of the number of optical disks in use during the tests.

1170. The submission of the plaintiffs is that only two optical disks were used. Unisys said that was not established on the 13 May test and that for the June test Birthisel's evidence and an RACV document established three or four disks were used. I now deal with those contentions.

1173. I find that on 13 May the number of primary platters in the system was two and that they were configured as stated in Birthisel's memorandum to Doherty dated 6 June 1996. Thus the improved times were achieved after the disks were mounted on-line after lunch. There are two points to note about that. Times were improved but were still significantly slower than the RACVI expected response time. Further, while the RFP had required an on-line system for current claims, Unisys had designed and proposed to deliver a system in which current claims were stored on-line and near line. Hence the improved times after lunch were not representative of, and were faster than would be produced by, the type of system intended to be delivered to RACVI. It was for this reason that RACVI submitted that the faster times after lunch, even though unacceptable in themselves, were better than the near line system would have achieved in production.

1176. The evidence of Birthisel was that in the June tests three or four optical disks were used. He did not recall how many were in each of the two jukeboxes. Nor did he recall the 13 May tests. But he recalled the June tests and seeing the optical drives working very hard, which indicated there was more than one disk in each jukebox. He recalled the drives being altered during the morning to better balance the reading of the disks. It was probably Olsen who made the adjustment. Birthisel himself would not know how to change the drives.

1179. Olsen could not recall the configuration of the disks on the previous tests or on 15 June. He understood from Birthisel's evidence that on 15 June there were at least two disks in one of the drives at the start of the test. He was not able to say that more than two disks were used. Doherty's report (at p. 9943 of the court book) noted that at 10.00 am the optical platters were adjusted which resulted in a significant decrease in response times. I find that there was an adjustment and that Olsen effected the change or was involved in it. He did not recall. He understood from other evidence that one of the active platters was put in the second jukebox and that jukebox was brought on-line. I find that that jukebox then had one disk under the reader.

1182. Olsen accepted that if two disks were mounted vertically in a single jukebox the retrieval time would be expected to be in minutes as in the 15 May timings. He accepted it was an inference that the improved timing on 15 June following the adjustment was due to there being two disks in use with one in each jukebox under the reader. I agree and regarding the evidence overall conclude that that inference is open and it accords with the probabilities including the course of the response times on 13 May. I find that at about 10.00am Olsen mounted the only two active disks one under each of the two readers.

1185. I do not accept Birthisel's evidence as to three or four disks working hard. I do not repeat my earlier criticism of his evidence. The logic and probabilities indicate the conclusion I have reached above. In my view Birthisel was mistaken but, more than that, I incline to the view that he gilded the lily. He had no memory of the 13 May test notwithstanding his careful memorandum of 7 June and then, by contrast, spoke of a memory of the June tests in respect of which he had no such record. Moreover, Olsen was the technical person, not Birthisel, and I conclude his evidence as to three or four disks working hard was lose and imprecise. It was also in the interest of Unisys and in defence of the project of which he had been in charge that he gave the evidence that he did.

1188. Counsel for Unisys relied on a brief note in the court book at p. 9989 as supporting Birthisel's evidence that four disks were used. The note is headed Volume Test - 15 June 1996 It then sets out in two numbered points certain matters that occurred during the test, then states that all Woozle transactions OK, and concluded with the following paragraph:

"Re-aligned Optical Disks at 10.00 a.m. Swapped 1st primary, 2nd primary, 3rd primary and Tran Log. Problem due to write and reading timings. Will continue to write and queue upreads (ie/. retrievals)."

1192. The document bears no signature or other signification of authorship or date of making. When a question arose as to whose document it was, the original was obtained by counsel for the plaintiffs and received in evidence as exhibit BB. The original established that the RACVI emblem appearing on the copy was only part of a sticky that had been attached by RACVI in the discovery process. The original document remained as one bearing no signification or date of authorship. The document in the court book was discovered by the plaintiffs and, it was said, from Doherty's files. But counsel for the plaintiffs said that it was not known who was the author of the note, and it was never admitted that any employee or agent of the plaintiffs was the author. The point was not revisited. No witness, including Doherty, was asked about the note when they gave evidence. I have noticed myself on reading the court book that the two numbered points in the first part of the note are word for word set out in Doherty's report on the 15 June test at p. 9936 of the court book. He there sets out the two points as matters indicated by an analysis of queue contents after the test. But the balance of the note as to Woozle transactions and the quoted passage concerning re-alignment of the optical disks is not set out in Doherty's report at p. 9936. It was not submitted that I should infer from the report at p. 9936 that Doherty was the author of exhibit BB. Nor do I think I can do that. I do not know that the platters were re-aligned by Doherty - indeed it is likely it was Olsen - or his involvement in or personal knowledge of what was done in that regard. Further, exhibit BB could have been prepared at some time subsequent to the Doherty report and by some other person on the basis of information provided by another person. In short, the authorship and the document is not established and nor is the date and circumstances of its making. The author of the document not having given evidence as to the note the contents remain a hearsay assertion. The note is not admissible, in particular as an admission by RACVI.

1195. It follows that the on-line system used after adjustment at 10.00 am on 15 June meant that the system was not configured as the near-line system that Unisys had designed and was to be provided to RACVI. Hence, the timings produced after the change were not times to be produced by the near line system intended to be delivered to RACVI.

1199. This section addresses the state of the system at termination at 27 June 1996 and whether it could have been made to provide response times of the order required by RACVI. The parties are poles apart on this issue. It is an area that would have been appropriate to refer to a special referee. Indeed at a pre-trial hearing on 11 December 2000, which was my first acquaintance with the case, counsel for Unisys said an issue was whether, and how, the computer system could have been remedied. I asked counsel whether that issue should not be referred to an expert special referee. At that time the parties were already engaged in preparation for the trial which had been fixed for early February and I did not have a knowledge of the case that could have warranted me ordering a reference without consent. Neither counsel considered a reference was necessary. The view seemed to be, as stated by counsel for the plaintiffs,

"that it is common ground that the system didn't work in particular respects and that the real question is whether or not the respects in which it didn't work found actions for breach of contract or for breach of s. 52".

That was an over-simplification as is amply demonstrated by the nature and range of the matters discussed in this section. It would have been appropriate to order a reference to an expert. Nevertheless, that course was not taken. The parties preferred to leave the matters to me to determine and I do so on the balance of probabilities and for the reasons discussed below.

(a) the system delivered in March 1995 never worked and despite the efforts of Unisys was not stable, reliable or functional at 24 (or 27) June 1996, and

(b) as a result of Unisys adopting a configuration in which current claims were stored near line rather than on-line timely retrieval of images was impossible.

1210. Unisys' case is that when RACVI terminated the contract the computer system was stable and functional and any outstanding problems were readily able to be rectified. Further, any slowness in response times would easily and relatively inexpensively have been cured by adding more cache to the system. It was also put that response times could have been improved by other action such as the use of pre-fetching and upgrading PC's.

1213. I refer, without repeating, to the reference to Doherty's report on the 15 June test and other evidence at [254]-[258] and [263]-[267]. In addition, as part of their final address counsel for the plaintiffs provided a written reference to evidence marked Annexure A, in particular outstanding exception reports as at June 1996, to aid in establishing that the system was not stable, reliable or fully functional at 24 June 1996. I accept the accuracy of the references and facts in the document. In a written reply Unisys submitted that none of the evidence overcame the evidence of Dr Thorne that any outstanding problems of reliability and functionality could have been overcome. Unisys further said that Haw could not say that any of the outstanding functionality issues could not have been solved.

1216. The evidence of Dr Thorne relied on by Unisys was given at the same part of the transcript as his evidence discussed at [275]-[276]. The particular evidence was in fact contained in his report where he said it seemed likely that the issues of unreliability and lack of functionality which existed in mid 1996 could have been resolved with further time and effort. As with his evidence concerning performance times there was no further question to elaborate on the issues or the time or effort involved in resolving them. The evidence of Haw relied on by Unisys is referred to and dealt with at [264].

1219. In summary, at 24 June there were unresolved issues of functionality. It seems that the issues could have been resolved, but as to when and with what effort and cost it is not possible to make a finding. I prefer and accept the evidence of the plaintiffs witnesses on the issue of functionality and stability of the system. The overall performance of Unisys in seeking to provide a computer system inspires no confidence in its ability to have expeditiously resolved all issues. I do not accept that the situation was that acting reasonably RACVI ought have accepted the system and gone live with it, with the unresolved problems. I do not accept the evidence of Johnson (or other witnesses) as to going live with the problems. Johnson's evidence as to that was quite unrealistic. People had to come from the United States to fix the problems: as that did not happen he could not say if the problems could have been fixed. In his evidence Birthisel confirmed reliance on the United States to fix the outstanding functional errors, assuming they could be fixed. By contrast, Olsen's view was that the system would have been ready to go live in four to eight weeks. I find that the system was not ready to go live on 24 June and that an indeterminate time would have passed before it could have achieved that position. I repeat that it is not possible to find when that might have been. I reject as entirely lacking in credibility, tested against its performance during the contract, evidence of Unisys in that regard. The matter is speculation.

1222. I accept the records of response times of Doherty and Haw and their evidence concerning them as accurate. Without rehearsing the evidence, there were important transaction types in respect of which Unisys could not meet the response times required by RACVI. Unisys wanted to defer the matter of consideration of how to improve response times until after delivery of the system on 24 June. There was reference to four performance criteria and on 30 May Esmonde wrote with reference to them saying it had to be determined who will do the work and what the commercial arrangements will be. There was no agreement on those matters or, as I have found, as to deferral of further consideration of performance criteria. Then there was Hurford's letter dated 31 May objecting to exclusion of performance criteria and requiring completion by 24 June. Then, passing over but not ignoring other matters, there is Esmonde's letter dated 14 June which makes it clear that in relation to critical areas of filenote retrievals and folder retrievals the prospect of improved response times was bleak indeed. The suggestion for filenote retrieval was a feasibility study to take about two weeks to determine the appropriate option. The only suggestion for folder retrieval was to investigate the use of a pre-fetch process as a means of providing a 20-40 second retrieval time; otherwise the InfoImage hardware and software precluded "major improvements". I discussed this letter at [250].

1225. Notwithstanding that the matter had been put in that way (and as is otherwise referred to in the background facts) Unisys submitted that any slowness in response times could have been overcome relatively easily and inexpensively. The suggestion most relied on was the adding of additional cache to the system. Other options suggested were the use of pre-fetching and upgrading the PC's. Another was index clustering. I consider each of these in turn.

1228. I first instance the following as indicative of the content and tenor of the Unisys evidence. In his witness statement Birthisel said there were only two major issues outstanding at termination, the print fax facility and response times. In his opinion both were capable of being resolved within about two to three weeks, and cheaply. The print fax facility only required some additional software, which was easily available. A number of options were available to improve response times such as increasing the size of cache, increasing the number of optical disks, pre-fetching and PC reconfiguration. In his opinion one or more of these options would have improved response times to acceptable levels. I reject Birthisel's conclusion that there were only two "major" issues and that they could have been resolved cheaply within two to three weeks. I find that the evidence was a self serving assertion. The print fax matter had been around for some time and if it was as simple as he states the remedy would surely have been applied previously.

1231. In turning to the suggested methods of dealing with response times I observe that if the solution was always so simple why was it not applied by Unisys along the way? That applied with great force to the suggestion concerning cache. This was hammered throughout the trial as the simple resolution to the problem, as one that was always known to Unisys as being available. It was as though the trial was to be laughed off on the basis that by the mere expedient of increasing cache at a cost of about $40,000 or so the response time matter would have been cured. But it was never put to RACVI prior to termination that if it would only spend this further $40,000 or so the response time problem would be overcome, and quickly, by adding more cache and thus having all current claims on-line. Let it be emphasised, it was never said by Unisys in the time in which they were seeking to perform their contractural obligations that by this supposedly simple expedient the whole response time issue would have been overcome. If it was as simple as Unisys contends, why was it not part of the design of the system, or, if not part of the design of the system, was it not implemented or suggested to RACV by Unisys when the difficulty with response times arose. The simplistic answer seemed to be that that was not how the InfoImage system worked, or had been designed for the RACVI application, and that Unisys did not think of it during the course of the work. I accept that as being the fact. It was not considered by Unisys prior to termination of the contract. It subsequently came to the mind of Unisys as an answer to the litigation.

1234. On the issue of increasing cache I refer to Dr Thorne's evidence at [275]. Witnesses called by Unisys also said that cache could have been increased so that it held all current claims. On that basis inactive claims could all have been stored near line.

1237. In his evidence MacCallum said that in designing the system cache would be defined. In this respect he meant the area of cache reserved for storing document images. The designer had to ensure that there was a sufficient and suitable area allocated in cache for that purpose. It should also be contiguous and not split into parts. Further, when it was in use the system could monitored and tuned to ensure the right balance of cache and the right balance of on-line optical drives. If necessary the capacity of cache could be scaled up to hold a greater number of images or current claims. Another solution may be to consider more optical disc drives. In other words, a system can be configured so as to meet the requirements of the user.

1240. All this may be accepted but the fact is that Unisys did not provide enough cache to store all current claims. Perhaps the explanation, at least in part, is that the InfoImage system is a part archival near line system which uses optical drives not mounted under a reader in a jukebox. The inference which I draw is that it was never configured to hold all current claims on-line in cache or on optical disk in drive.

1243. The actual configuration of cache in this respect was never exposed by Unisys. Olsen said he could not remember the parameters of cache. Unisys submitted that it was not established that cache was too small in June 1996 to hold images from all current claims. In this respect evidence of Birthisel was relied on that he believed the size of cache then was about two gigabytes. Birthisel had not set the parameters of cache and the estimate most relied on seemed to be that of Dr Thorne of about one to nine gigabytes. The next step in the Unisys submission was that the original estimate of one million documents for current claims in the RFP was not applicable by June 1996 because reforms to the claims process had reduced the number of documents. This referred to the introduction of the electronic claim form, standard letters in electronic form, electronic check lists and final notes and an assessment booking system. There was also less reliance on colour photographs. It was then said that Dr Thorne's conclusion that cache was too small in June 1996 was based on the premis that one million documents were required to be scanned into the system.

1246. The point of the submission seemed to be that having regard to the reforms to the claims processes by June 1996 cache was or may have been sufficient to hold images for all current claims. If that was so, why would Unisys have so strongly contended that the answer to the response time issue was to add more cache? Perhaps that was a sort of fall-back position by which the issue was to be resolved on an onus of proof point and which went something like this. We, Unisys, either do not know or will not tell you (the plaintiffs and the Court) the amount of cache we provided to hold document images and as you have been unable to establish the allowance we made, you the plaintiffs have not established that in June 1996 cache was too small to hold all images from current claims. The comment might be made that such an attitude is surprising from a supposed reliable expert possessed of integrity in the field, but there it is. It might also be noted that at no time since termination had Unisys sought to inspect or conduct any test upon the InfoImage computer system it had left behind at RACVI. In that respect I note that some change or other had been made to it subsequent to termination, but the point remains.

1249. As I have said, the view of Dr Thorne that there was about one to nine gigabytes seemed to be accepted. He considered much more cache was required having regard to the volume of documents referred in the RFP. His view, and that of Hesom, was that about 12 gigabytes of page cache was required. On this basis the deficiency in cache was 10.5 gigabytes. Unisys' case is that that deficiency could have been resolved by the provision of an extra 10.5 gigabytes or so of magnetic storage space at a cost of about $40,000. It may be accepted that reforms to the claims processes would have resulted in the reduction in the number of images required to be held. The extent of the reduction was not calculated and would be speculation for me to venture an opinion upon. But whatever the reduction might have been found to be if the system had gone into production, it is a long stretch to suppose that it represented in the order of 10.5 gigabytes of magnetic storage space. It is safe to find, as I do, that the reduction was not of that order. At all times up to termination in June 1996 there was an observed slowness in response times which Unisys was not able to overcome. In all the circumstances, including the argument now made that the answer was to increase cache, the probability is that as at June 1996 cache was too small to hold all document images for current claims and I find that to have been the case. Reference may be made in this respect to evidence of Olsen that if, as I find to be the case, there was between one and two gigabytes of cache in June 1996, he believed it would not hold all current claims. In that regard too I note the concern expressed by McFarlane in October 1994 that there be enough cache to hold all current claims. The problem goes back to the fact the Unisys configured the system on the basis that cache was to be used as a transitory holding area rather than to hold all current claims; in effect as an archival system with current claims going near line. In any event, the result was that the system was never configured with sufficient cache to hold all current claim images on-line. To adopt the method now suggested, of adding cache to ensure that all current claim images could be held on-line, would have been possible but would have constituted a changed design philosophy from that adopted throughout by Unisys in applying the InfoImage product for RACVI's business purposes.

1252. The next suggestion is pre-fetching. This facility enables a user to request documents in advance and have them in a folder on the users desk, say for the next day. The facility was referred to in the July response; see point 16 quoted at [89] where Unisys advised that the InfoImage system utilised pre-fetch facilities to speed documents to desktops. It is axiomatic that the facility is ideally suited to an office in which the daily work routine is orderly and predictable. It would seem not to be so well suited to a work routine which requires immediate attention to ad hoc inquiries. In such an environment a system user can anticipate the work for the next day only to a limited extent, and even then interruptions caused by ad hoc inquiries may result in the pre-ordered material not being considered and perhaps having to be re-ordered. That may mean unnecessary requests in the system or prolonged holding of material in cache. However, I note evidence of McFarlane in re-examination that there are ways to use pre-fetches in respect of ad hoc inquiries. He was not asked, and did not say, what those ways were and whether or to what extent they or any of them might have been appropriate for use in the RACVI application. The more important fact is that Unisys did not include a pre-fetch facility in its design and a possibility of pre-fetching was not raised until very late in the piece; see Esmond's letter dated 14 June 1996. Even then, the suggestion was rather bleak in terms of any improvement in response time for folder retrievals, and it did not overcome the constraints inherent in the InfoImage product. Further, all the letter was saying was that Unisys would investigate the use of pre-fetch to see if it was "a means of sustaining a 20-40 seconds retrieval time" in respect of folder retrievals.

1255. It is important to note that when Unisys was considering pre-fetching it was not, by definition as it were, considering increasing cache to a size sufficient to hold all current claim images on-line. This follows as night follows day because if all documents are on-line a pre-fetch facility is not necessary. This was made clear by Birthisel. A pre-fetch facility is understandable in the context of an application of the InfoImage product because, although cache may be increased, that product is based on an archival storage system with optical disks in a jukebox. Hence this option is an alternative to the first option of increasing the size of cache. But pre-fetch was, and increasing cache was not, suggested to RACVI in June 1996.

1258. In his witness statement Olsen said that the system was not able to pre-fetch when the contract was terminated. He said that contact had been made with Unisys Austria which had an InfoImage reference site using pre-fetch. He estimated it would have been possible for the RACVI system to have had the ability to pre-fetch in a fairly short period of the date of termination. In cross-examination Olsen disclosed that his only experience of pre-fetch was in discussions "with technical staff in other countries". He did not specifically know of any reference site other than the one in Austria to which they had been referred by the United States team. Hence, Olsen had no personal experience of the implementation of a pre-fetch facility, let alone its use in a context such as RACVI. Nor, it seems evident, did any other Unisys personnel then in Australia. All this explains the general and not very encouraging reference to a pre-fetch facility in Esmond's letter dated 14 June 1996. The issue of considering the application of pre-fetching to the RACVI system was at an early stage when the contract was terminated. Olsen's evidence does not take the matter far.

1261. Nor in my view does the evidence of Chmura concerning the InfoImage installation at the Massachusetts Department of Revenue in Boston. He recalled the system used two 120 disk jukeboxes each with three readers and writer, two small 5 disk jukeboxes with one reader and two insert single disk optical readers. Every disk was demountable and there was no software locking any particular disk in. Everything was on optical disk. The system retrieved documents, not entire folders. By making changes to the system Chmura was able to reduce the response time to retrieve single documents to the 3-4 second range, with the peaks below 10 seconds. He said that he achieved the reduction using many things, among which was pre-fetch. Without pre-fetch it was highly probable it would have taken longer. In re-examination Chmura said that there are ways that pre-fetching can be used in respect of ad hoc inquiries. He was not asked and did not say what they were. In particular he was not asked to and did not address how any particular application of pre-fetching was able to be implemented in the RACVI system, whether as an on-line system resulting from increasing cache to hold all current claims or the near line archival type system designed by Unisys. That absence of evidence may be explained by the fact that in June 1996 he was in the United States and did not know the state of the RACVI system. Further, the system in Massachusetts was for single document retrieval. He did not explain how pre-fetch could be used to aid the retrieval of folders.

1264. Of course it was possible for Unisys to come to decide to recommend installation of a pre-fetch facility but I do not accept that an informed recommendation or installation would have been made in a fairly short period. Moreover, it is not established what effect on response times a pre-fetch facility would have had. It is speculation.

1267. Olsen also referred to index clustering as an option. That, he said, effectively linked all objects in a folder by using a key to put all of the documents from that folder onto one platter. As a result, all documents within a folder would be retrieved more speedily as claim documents would not be contained on several platters. He said that process would have taken several weeks to implement. Olsen's position on this matter was the same as with pre-fetching. No knowledge from any personal involvement in such an application. He relied on information obtained from other personnel. He agreed in cross-examination that this and pre-fetching were possible ways to increase performance times to retrieve folders. He added that "there are other advantages and disadvantages to each of these options as well". The matter was left there, unexplained, and was not returned to in re-examination. Accordingly, I was left unenlightened as to the disadvantages of pre-fetching and index clustering. I am left with a deal of suspicion of the Unisys case in this area. I am quite unpersuaded on the balance of probabilities by the Unisys case on both index clustering and pre-fetching. As far as index clustering is concerned, I reach like conclusions as with pre-fetching. I should say that I have considered the evidence relating to these matters and the various means being discussed to improve response times.

1270. The next suggested option was for RACVI to upgrade the PC's. Counsel for Unisys submitted the tests undertaken by Haw in June 1998 showed that a further 20% improvement was possible from up-grading the PC's. His evidence was also relied on to show that further improvements were available from changing the user groups. As it was put, the Unisys submission was based solely on evidence of Haw. But there was other evidence on this matter and reference must be made to it before referring to the evidence of Haw relied on by Unisys.

1273. The sequence of evidence is this. In their witness statements Johnson and Birthisel referred to PC's in the context of response times. The plaintiffs provided witness statements by Sheftz and Haw in reply. The statement in reply of Sheftz dealt solely with the point raised in the Unisys witness statements. His statement was admitted by consent without the need to call him to verify it. Hence he was not cross-examined. The statement in reply of Haw did not refer to the paragraphs in question in the witness statements of Johnson and Birthisel. What Haw did was depose to tests he carried out on 1 June 1998 and the opinion he formed on the basis of those tests. In his initial witness statement Haw had, in a single sentence, referred to the tests and stated that the results were consistent with his belief that the PC's were not the cause of the performance or functionality problems of the Unisys system. The final fact to mention here is that the PC's being referred to had been agreed in writing with Unisys on 7 September 1994 as the PC configuration to be used with the Unisys system. A memorandum of that date itemised the items of hardware and software constituting the PC configuration and stated that the configuration was suitable for claims processing in the new environment. The hardware included a Memorex Telex 8592-66 base unit PC, identified by Haw as 486 66 MHz CPU with 8 Meg total RAM. It ran on Windows software. The required number of PC's were duly acquired for use by RACVI staff and remained on hand in June 1996. In other words, the plaintiffs (or one of them) had incurred the cost of purchase. To the date of termination Unisys did not advise RACVI that the agreed PC environment should be changed by upgrading the existing PC's or going to other, and presumably, higher performance PC's. With that introduction I turn to the evidence.

1276. Johnson recalled that in or around April 1996 Unisys was asked to improve response times for new folders arriving into the system. He referred to tuning event manager and said that a number of options were considered for improving other response times such as increasing cache, PC re-configuration and pre-fetching to select documents into cache. He also referred to a possible diary function to put documents in cache the evening before they were required. He referred to but did not develop any of these matters in his witness statement. His reference to matters being considered means, I find, being considered by Unisys. Yet there is a fundamental difficulty in this evidence. The first option he referred to as "considered" was increasing cache to improve response times. But in cross-examination he made it clear that while "it has been mentioned since" he had no recollection of discussing that "at the time". It accords with other evidence of Unisys' witnesses that it was not discussed prior to termination of the contract. I reject his evidence to the contrary in his witness statement. It was a bald statement, obviously wrong, and gives cause for concern as to the accuracy of his evidence. He was not cross-examined on the matter of PC re-configuration. That was not surprising as all he had said was that it had been considered as an option.

1279. I move to Birthisel's witness statement. He said that as part of a thorough investigation of the WMS system installed at RACVI, Unisys investigated the possibility that re-configured PC's with more memory would assist system performance. He informed Doherty this was a possibility. He referred to an email of Haw to Doherty dated 30 October 1995 which referred to PC performance criteria and to how long the PC takes to do the functions specified in the software requirements document. Birthisel said this showed that RACVI considered the proposal. He also referred to another email from Haw to Doherty dated 24 November 1995 which stated that no conclusion had been made whether there should be 16 Meg on workflow PC's. It stated that performance improvements were available with more memory in a PC. Birthisel said that Doherty did not accept his assessment as to more memory assisting system performance and that the PC's were not updated or re-configured.

1282. At this point I refer to some evidence of Haw and to the evidence of Sheftz.

1285. Haw explained that his email to Doherty on 24 November 1995 was to get Doherty to think well ahead to budget for the cost of adding memory to the PC's. The 486 PC's had been purchased for the system, that was a significant investment and Doherty had an input to budgeting. Accordingly, he was pointing out to Doherty the need to consider the cost of upgrading the PC's in an ongoing way. In turn, that would entail improvements in performance.

1288. Sheftz gave the following evidence. In 1996 he was employed by RACV Group Services as a PC support technician. He was present in May or June 1996 when Unisys performed a test to determine whether the PC's being used with the WMS were affecting its performance. Unisys brought in its own high performance Pentium PC and connected it to the system. He assisted them connect it to the LAN. He observed a number of response time tests were performed, many of which showed response times that were slower than tests performed using RACV standard PC's. The performance of the Unisys Pentium PC was compared to two 486 RACV PC's. Overall the Pentium performed better than one RACV 486 PC and worse than the other. He also observed a test performed on a Unisys PC into which a disk drive with pre-configured RACV WMS software was inserted. This PC had slower response times than the RACV standard PC. He also observed a test was performed with a Cornerstone high performance video card in the Unisys PC and this made no difference to the response times. He took part in a discussion with Birthisel who was present during these tests. The substance of the discussion was that it was agreed that the RACV PC's were not affecting the performance of the WMS.

1291. I repeat that Sheftz was not cross-examined on this evidence. In other words, there was no challenge as to its accuracy and it was not suggested I should reject his evidence as unreliable in any way. Indeed his evidence was ignored by Unisys in final address. Furthermore, Birthisel did not address it when he gave evidence. In these circumstances I have no hesitation in accepting the evidence of Sheftz and I do so. It may be that in the previous year Birthisel raised a matter concerning the PC's with Doherty but the evidence of Sheftz is directed to the period when the matter of response times was a prime consideration and I accept that it established, and was regarded as the time as establishing, that the RACV 486 PC's did not affect the performance of the WMS in terms of response times. It is consistent with that, that Unisys did not advise RACVI to upgrade or re-configure the PC's.

1294. It is now possible to refer to the evidence of Haw relied on by Unisys. The evidence was contained in his witness statement in reply and cross-examination.

1297. On 1 June 1998 he carried out tests using the RACVI 486 PC and an IBM Pentium 100. The Pentium was a 1998 model high performance PC whereas the 486 was the standard RACV PC purchased for use with the WMS. He was trying to identify the reason for folder retrieval from cache falling within certain time periods. His opinion, formed on the basis of the tests, was that the results were consistent with his belief that the 486 PC's were not the cause of the performance or functionality problems of the Unisys system. He stated that the tests revealed little appreciable difference in the retrieval times between the two PC's. He identified the reason for a variation in the retrieval for folders of about 12 to 16 seconds or 20 to 35 seconds as related to the user group of the person who logged on to the WMS software. Using difference user ids he established that the user ids in the Super-Grp retrieved documents more slowly.

1300. In cross-examination his test results were analysed to show there was an "appreciable difference" of 4.64 seconds in the average times produced using the 486 (22.28 seconds) and the Pentium (17.64 seconds). That was in the order of a 20% difference or improvement using the Pentium. On this basis counsel for Unisys submitted that Haw's evidence showed that a 20% improvement on response times could be achieved by upgrading the PC's.

1303. In cross-examination Haw refused to retract his evidence as to no "appreciable difference". He recognised the difference in times but explained that the Pentium 100 was not available in 1996. For the purpose of the test he had used the current model Pentium. The fact that in 1998 the Pentium was the latest high performance computer which produced a difference only to the extent of 4.64 seconds on the average of his test results did not establish to him an "appreciable difference" between the two PC's. If the difference had been more it would have stood out. As it was, it did not indicate the problem was with the 486 PC's. This judgment or opinion of Haw is supported by the evidence given by Sheftz of the comparative test results in 1996.

1306. It is also to be borne in mind that the PC's that were to be connected to the Unisys system did not affect the reliability or functionality of that system to which they were connected. It was also submitted by the plaintiffs that the PC's did not significantly affect retrieval times, and I did not understand that submission to be controverted in final address. The more important factor was the operation of the hardware and software constituting the InfoImage product. Doubtless performance can be improved by upgrading a PC configuration from time to time as better and more powerful PC's become available and doubtless that would have happened if the Unisys system had been accepted in June 1996 and gone live. But that is not the question. The question is directed to the period June 1996 and that is the period to which the evidence of Sheftz relates and indicates that on the test Unisys undertook a Pentium PC was not demonstrated to produce improved response times of any significance.

1309. Nevertheless, seeking to make something of the situation, counsel for Unisys asked Haw if the Pentium which he used in June 1998 was available at the time and Haw replied it was not "to us within the project". He was asked if computers with the power and speed of the Pentium 100 were on the market in June 1996. Haw was not sure, but could not say there were not such computers. He did not specifically know what was available then. On the basis of this evidence counsel for Unisys submitted it was not established that Pentium chip 100s were not available in June 1996. This was to support the submission, based solely on the evidence of Haw, that a 20% improvement in response times could have been achieved if RACVI had upgraded the PC's to a computer with the performance of the Pentium 100.

1312. I note that counsel for Unisys did not identify, let alone establish, that any particular model computer was so available . Nor was any positive evidence put forward by Unisys on this matter. Counsel just asked Haw questions about Pentium computers and general questions seeking to get whatever he could. It was a negative attack without positive backing in the form of evidence to establish the point Unisys thought it might be able to make on Haw's evidence. The difficulty confronting Unisys here is that the 486 was what Unisys had signed off on as the appropriate PC for use with its InfoImage product and that, consistently with testing in the May/June 1996 period, remained the position in June 1996. Not only that, but RACVI had bought in the PC's for use in the system. In other words, the common position, implemented by RACVI with the knowledge of Unisys, was that the 486 PC's were to be used. Unisys did not seek to change that specification of the PC configuration in order to overcome the response time problem. Indeed its own investigations showed that no advantage was to be gained by changing the 486. The point which counsel was seeking to make against RACVI was that a PC of the power of the Pentium 100 was available in June 1996 and if RACVI had purchased Pentiums or another type of PC with similar performance it would have improved response times by about 20%.

1315. It seems a curious tack for Unisys to take to contend that on its own initiative RACVI should have upgraded the PC's to some other and more powerful PC, in lieu of the agreed 486 PC's, notwithstanding that Unisys' own testing had shown the 486 to be comparable to its high performance Pentium PC and that Unisys never advised to that effect to improve response times. The points sits ill in the mouth of Unisys in the circumstances. It is a negative, opportunistic type of point. But, apart from that, the submission seeks to place an onus of responsibility on RACVI to have upgraded the PC's by or in June 1996 or to at least have planned to do so shortly thereafter to improve response times. It may be accepted that the owner of a computer system will review and upgrade the system from time to time to keep pace with advancements. But in this case the system was yet to go into production and at the time when that was imminent testing conducted by Unisys established sufficiently that the 486 PC was satisfactory. Hence, as work proceeded towards 24 June Unisys neither advised there be a change to the PC configuration, and there was no change. In those circumstances it seems to me that if Unisys wished to establish a case that in or about June 1996 there were available other PC's that RACVI should have decided to use in lieu of the agreed PC, Unisys should by evidence have established what the substitute PC was and such matters as cost and advantages in order to put that to RACVI witnesses and give them a chance to respond on the issue why, without advice from Unisys, they did not expend the money to upgrade. Unisys might also have been expected to deal with the evidence of Sheftz. Unisys did not proceed in this way but rather sought to establish a point against RACVI in the way I have described. In my view the attempt fails.

1318. Haw impressed me as an honest and reasonable person. I accept his evidence. I accept his assessment of no appreciable difference. I also accept his further evidence that in June 1996 an upgrade to more powerful and faster PC's would have made only a very limited difference. I find that any such difference would not have been appreciable in terms of improving response times to the order required by RACVI. Doubtless this explains why Unisys did not recommend to RACVI that it replace the 486 PC's.

1321. Haw was also cross-examined on his evidence concerning the relationship of the user group to a variation in times. He said the problem could have been rectified and in his next answer said that people could have been moved away from the super group. That answer was relied as establishing that response times could have been improved by changing the user group. It is not clear to me that it was as simple as that. That is because Haw immediately said that he could not have corrected, and did not know whether it was possible to correct, the problem with the super group itself. He also did not know if that group was necessary for the functioning of the system. As counsel asked no further question the evidence remained unclarified. In the end the position seems to be that improvement in folder response times could have been achieved in respect of one user area, but there apparently remained a problem with that area. The problem was not elaborated, and perhaps Haw could not have provided elaboration, and I can not make a finding on the effect it might have had on response times. In consequence I do not think I can find that by moving people away from the super group the slow retrieval of documents to that group would be overcome at least to correspond to the time Haw found for other users.

1324. Data about the retrieval performance of the system when access was by a single user or a super user was obtained on tests carried out on the system by FileNet on 26 and 27 November 1997. This test was the subject of the statement of evidence of Glen Williamson which was admitted by consent without the need to call him. Williamson conducted the test and a copy of his report is in the court book at pp.10,567-10,569. I accept his evidence including the accuracy of his report. He was the only user on the WMS when the tests were undertaken and the load on the system was less than it would have been in production. Having referred to slowness in retrieval the report stated, in summary, that the main bottleneck throughout the investigation pointed to software and that indications were that improvements to the system could only be made by major software modifications in conjunction with increased server cache sizing.

1327. Dr. Thorne said of the FileNet tests that they showed a delay due to the Unisys software in the PC and that an investigation of the delay showed that the retrieval performance differed depending on whether one was accessing the system as a super user or as an ordinary (single) operator. For the former the accessing time is approximately a further 15 seconds. In relation to that there were the observed times of Haw in 1998. Dr. Thorne also noted that the FileNet study eliminated the LAN, Woozle or the PC's as the cause of inability to meet the time requirement. He noted too that FileNet found that the cache was of inadequate size and to be sufficiently large to handle three months of current claims would require the addition of about six times more cache. That would allow all current claims to be accessible from cache. It will be noted that this is the point ultimately latched onto by Unisys.

1330. There is one further point which Unisys relied on. It is not an option whereby to speed up the system. It is a different point. It concerns what it was that was to be retrieved. This concerns the difference between the retrieval of a single image and a folder of documents. Unisys submitted that if the RFP imposed any response time requirement it was for single image retrieval from cache. It was then submitted that the May and June 1996 tests produced single image retrievals in the 2-4 second range. That satisfied the RFP. The slower response times were for full folder retrievals which mostly came from optical disk. Unisys submitted that there was no contractual requirement or other relevant stipulation of RACV that required it to provide full folder retrieval in 2-4 seconds. I will consider this issue later as necessary but mention it now lest it be thought to be overlooked as having been relied on in the current context.

1333. In any event Hesom, the expert called by Unisys, concluded his report with the statement that the WMS was capable of consistently achieving a response time for images on-line of 1-5 seconds including as part of a folder if the following modifications were made:

(a) Increase the size of cache to include all current claims.

(b) Limit folders to externally generated documents, thereby reducing the size of folders.

(c) Modify the folder retrieval code so that no documents are displayed on retrieval, or only p. 1 of the first document is displayed, while the other documents were being retrieved.

(d) Improve data access to reduce the need to access images and hence the load on the WMS.

(e) Adjust the WMS client application to enhance performance of retrieval to remove apparent bottlenecks in executing requests for folders and images.

(f) Upgrade PC's to 16 MB RAM with a minimum of 10 MB of free disk space and the fastest processor. This would enable a faster display of images as more RAM would be available to cache the folder images and a faster CPU would aid unpackaging the image files.

(g) Tune the PC configuration to ensure no conflicts of address and best use of memory.

(h) Review query forms to enhance ability to access documents directly, thus reducing the need to review all of the folder and aid speed of retrieval.

1339. This evidence of Hesom assumed the system was functional and stable, and that the outstanding error reports could be attended to in a reasonable time.

1342. It is important that Hesom used the expression "on-line" as referring to a system configured to hold all images in magnetic cache. On that basis "on-line" did not include images held on optical disk, as provided in the RFP.

1345. The first modification was a consequence of Unisys having allowed an insufficient amount of storage for current claims on magnetic cache. Therefore the amount of magnetic disk for holding current claim images had to be increased. In addition the seven other modifications were required to produce a consistent achievement of 1-5 seconds. Hence it was not sufficient to have merely increased the size of magnetic cache.

1348. As this proposal was never considered by Unisys or RACVI prior to termination it is not known whether it would have been found practicable in every respect and, if not, what the consequence would have been in terms of response times.

1351. The structure of Hesom's report was to answer a series of questions put to him by the solicitors for Unisys. I do not set them all out, or the way in which he answered them. At times the evidence strayed to inadmissible comment on documents as distinct from expert opinion. Save for the opinion referred to above, in final address counsel for Unisys placed no express reliance on Hesom's evidence to establish any particular point. In his submissions in reply counsel defended Hesom's comment that the contract contained no performance requirements and further submitted that having regard to Hesom's experience in image retrieval systems I should find his evidence useful and that he was a fair and honest witness. There was no submission as to any particular respect in which it should be found useful and, as such, the submission is not really fair in a case as heavy as this, particularly when counsel for the plaintiffs subjected Hesom and his evidence to a severe attack, indeed submitted it should be rejected as worthless.

1354. There is much in Hesom's evidence that is consistent with or confirmatory of other evidence, such as differences between, and in response times from, images in magnetic cache and optical disk, and on-line and near line systems. And I accept he had skill and experience in the image retrieval area. But he had no experience in the InfoImage product, had not seen or trialled the system supplied to RACVI, had not spoken to Unisys employees other than in the "broadest terms" with Birthisel, based his report on what he gleaned from the documents supplied to him, and had not been provided with a number of Unisys documents that contained relevant information and a number of which gave him concern.

1357. Counsel for the plaintiffs submitted that it was remarkable that Unisys should choose as its expert a person with no experience in the system the subject of the litigation. I was invited to draw an inference that an expert with knowledge would not have assisted Unisys' case. Whether or not that is so may be a matter of conjecture, although it was not suggested by Unisys that there was no other such person who might have been called. Further, it is apparent that Unisys has considerable technical resources at its disposal, both in Australia and in other parts of the world particularly in the United States.

1360. I was further invited to infer that Hesom was carefully briefed with specific questions, and not provided with important documents, to ensure a favourable report. There is no doubt that the drafting of the questions controlled the content of Hesom's report and in that way the parameters of the report were set by the questions. Further, those questions were not necessarily those raised in the pleadings.

1363. An instance of a matter not stated in the report but which emerged in cross-examination was this. Hesom read the RFP and saw the requirement for current, active claims to be on-line and the definition of on-line and near line. He knew that a fast retrieval system required an on-line, and not a near line, configuration. The different configuration is very important because of the difference in retrieval times produced by the different configurations. He said that he did not know whether Unisys had configured active claims to be on-line or near line; this answer indicated he had not been told and had not asked, which seemed extraordinary. When asked why he did not ascertain the configuration in March 1995 he answered that in his report he pointed to the fact that it was deficient in cache. He then said that the deficiency in cache could not be made up by having the optical disk mounted under a reader. This was a surprising answer as it was contrary to the definition of on-line in the RFP and the evidence thus far. Then, after some further questions concerning the jukebox system, Hesom agreed that if active claims are on optical disk they are near line and not on-line. He then said that he assumed that the same hardware was being used in 1995 as in 1996, and that the way the system was configured active claims were near line and could not be on-line.

1366. A little further on in cross-examination Hesom said it was not his understanding from the contract that on-line was defined as magnetic cache or mounted optical disk. In his interpretation on-line is magnetic storage. Hence, his view was that all active claims were required to be in cache, otherwise they were near line. In Hesom's view Unisys had failed to configure the system in accordance with that contractual requirement. He said that he wrote his report on that basis. In other words, Hesom was of the view, having read the documents provided to him, that from the outset Unisys was required to and should have configured the system so that all current claims images were held in magnetic cache. Hence, the near line configuration adopted by Unisys was a clear failure to comply with the contract and one which, as Hesom acknowledged, inherently involved slower response times. Of course, it is now said by Unisys that the simple answer to the case is to increase cache. If that is so, and if Hesom is correct, the addition of cache would constitute the performance of the initial contract requirement.

1369. Hesom had not stated this in his report. When asked why he had not stated his view he said "Because I was asked to answer specific questions". This answer demonstrated a narrowness in Hesom's approach to his task and the way in which the pre-formulated questions operated to confine the breadth of his report and, indeed, reflect on the frankness with which he expressed his views to the Court. It is true that he ended up advising that cache should be increased but I conclude, having observed him closely, that his omission to set out his understanding of the contractual requirement and the failure of Unisys to comply with it was deliberate to avoid exposing a basis for criticism of Unisys. It is consistent with this that he did not express his advice to increase cache to support all current claims in terms of doing something required by the contract, but merely as something that could be done to improve response times. That did not suggest any want of compliance with a requirement of the contract. I conclude that Hesom did not leave the issue out merely because it was not required to be stated by a question, but deliberately in an attempt to conceal a point which he considered to be a potential embarrassment to Unisys.

1372. In my view Hesom fell into the error of being an advocate for the Unisys cause. This infected his opinions in answering the questions. I find that his opinions, particularly as to the state of the system in June 1996 and as to satisfying the exception reports, were slanted in favour of Unisys. Nor do they take account of evidence of the sort I have referred to above concerning the several options suggested by Unisys. In dealing with that evidence and expressing conclusions above, I have considered Hesom's opinions.

1375. On analysis, the options suggested by Unisys to improve response times are seen to be affected by uncertainty, vagueness and imprecision as to their probable effectiveness in terms of the extent to which they or any of them would have resulted in any and what improved response times, as to the extent of the further effort and time likely to have been involved to implement any such option, and as to any and what additional cost to be incurred by RACVI. These issues remain open-ended. In my view it would be speculation to make findings on these matters in relation to each option.

1378. There is an exceptional position with the option of increasing cache to convert the system to one in which all current claim images were held on-line in magnetic cache. Such an on-line system (which is not that specified in the RFP) would achieve reduced response times. But Unisys never gave consideration to this option, let alone suggested it to RACVI. Its thinking and design philosophy remained locked-in to the conventional InfoImage product based on optical disks not on-line. It seems that Williamson of FileNet was the first to raise the option of increasing cache. But whether or not that is so, the fact is that for Unisys the option was an after-thought brought forward and relied on as a means of meeting the case. As a result the option was never suggested to RACVI as a way of meeting the problem. Indeed Esmonde's bleak letter dated 14 June 1996 is to the contrary of the existence of any relevantly simple and cheap remedy. Hence the solution, accepting it to be such, was not tried and we have this litigation. If it had been tried, the answer as to its effectiveness, and the cost and effort involved in implementation, would be known. But it was not and it is difficult, having regard to all that happened in attempted implementation of the Unisys system, to be as confident of success as counsel for Unisys contend would have been the case. More particularly, in all the circumstances I am not persuaded on the balance of probabilities as to any actual or approximate period of time, or the effort, that would have been involved in adding sufficient cache to enable all current claim images to be held in magnetic cache. At one stage it was submitted I could find that the necessary work would have taken no longer than 60 days to perform. I am left with little confidence in Unisys' capacity to so act. In my view, on the evidence, it would be speculation to make that finding. I reject the submission.

1381. Proceeding from that point, Unisys submitted that RACVI had not established that the rebuilt system was not capable of achieving the response times set out in the RFP. It was further submitted that Unisys had established on the balance of probabilities that 2-4 second response times would have been achieved for single image retrieval from cache had the system still under development and testing in 1996 ultimately been installed. I note that this latter submission directs itself to single image as distinct from folder retrieval.

1384. I am prepared to accept that if Unisys and RACVI, with inexhaustible patience and a continuing application of resources, had kept working away at the project at some time Unisys could have delivered a system which met the requirements of RACVI. I reject the case that this would have occurred within a matter of weeks or even within 60 days. I find that it would have taken longer on the balance of probabilities. It is important to remember in this respect that the preferred option of adding cache, the point at the forefront of Unisys' case in this respect, was not in the mind of Unisys at any relevant time. It was the litigation that brought it to Unisys' mind. I find that if RACVI had not terminated the contract when it did, and Unisys had just kept soldiering on as it was, it would not in a proximate sense have considered the option of adding cache and changing the system to one in which all current claim images were held on magnetic disk. However easy to implement that change might be, it was fundamental and it was not an option in the Unisys mind. Even if it be assumed that at some time Unisys would have considered it, and recommended its adoption to RACVI, I am by no means prepared to find that that would have occurred within 60 days of 24 or 27 June or thereabouts. There were other options, such as pre-fetching and a study that Esmonde had in mind, which would have taken time to investigate. Then there were issues of functionality that needed to be resolved. Then there were unresolved issues as to who would bear the cost of enhancing performance of the system. The approach of the advocate that all one had to do was add magnetic cache and, as though with the wave of a wand, all would be resolved, was simplistic and unreal in context, in my view. Moreover, however complex the task was, and the complexity of the project is not to be gainsaid, the fact is that it was to be performed in a commercial context in which performance might ordinarily be required in a timely way. That is the element which the Unisys submission fails to meet. It speaks of having established that 2-4 second response times for single image retrieval from cache would have been achieved had the system "ultimately" been installed. Of course, there was also the issue of retrieval of documents in a folder. To the question, but when would "ultimately" occur?, the answer I find is no more precise than within the next year but certainly beyond the next 60 days or so.

1387. It remains to mention a few matters to complete this section.

1390. At points in the defence and the evidence Unisys raised some matters to suggest that the failure of the InfoImage system was attributable to an act or situation of or for which the plaintiffs were responsible. These included matters concerning the LAN, Woozle, the functional specifications, system change requests, indexes and the electronic claim form. In the end, none of these matters are the reason why the system did not provide response times in the order of those required by RACVI. I dealt with the LAN at [204]-[205]. Then, the abandonment of the pleas on causation referred to at [49] meant that Unisys abandoned any contention that the non-achievement of response times at 24 June was caused by the failure of RACVI to provide a functional specification, the LAN, Woozle or system change requests. I note further that in any event the point about the functional specification was met by the Workflow Narrative. I also note that in final address none of these matters was put forward as requiring to be addressed under any of the actions suggested by Unisys as required to improve the functionality and performance of the system. In the circumstances it is sufficient to say that I accept the plaintiffs' submissions on these matters. For the sake of clarity, I find that none of these matters had any effect on the functionality and performance of the system in June 1996.

1394. Unisys submitted that the parties agreed to postpone the implementation date of 24 June to 3 July 1996. The submission relied on a paragraph in an internal RACV memorandum from Haw dated 9 May 1996 to establish the agreement. It was submitted that the paragraph constituted an admission against the plaintiffs of the fact of the agreement. It was a short paragraph in a much longer memorandum which recorded various events. The paragraph stated:

"At the project Executive Meeting attended by Insurance, Unisys and I.S., it is stated that the system live date of 24 June 1996 has now moved to 3 July 1996. No contingency exists in the timeline to address this problem."

1398. The only other reference to such a deferral is found in the internal Unisys papers relating to the 9 May meeting referred to at [220]. These papers were not provided to the plaintiffs and Unisys does not rely on them to establish the agreement. While recognising that, it is appropriate to make reference to these papers. At an early point in them it is stated that due to delays encountered the live date has moved from 24 June to 3 July 1996 and that Unisys/RACV is evaluating the project schedule to determine whether the slippage can be corrected (p. 9803 of the court book), two pages on there is a schedule of major milestones in which the live date is shown as changed from a Current Baseline Date of 24 June to a Forecast Schedule Date of 3 July 1996 (p. 9805 of the court book), and at a later point 3 July is stated to be the estimated completion date (p. 9033 of the court book). Although I have given these references I repeat that counsel for Unisys did not rely on them to establish the agreement, and he could not have done so as they were contained in a document that was and remained internal to Unisys.

1401. It is useful to see how the point developed during the trial.

1404. In his cross-examination Olsen was referred to the above passage concerning deferral of the live date on p. 9803 of the court book. He said he was not aware during May and June 1996 that any particular deadline had been set by RACV.

1407. It will be recalled that Birthisel was one of the three attendees at the Unisys 9 May meeting. In cross-examination he was taken to the Unisys papers for the meeting, commencing with p. 9803 of the court book. After acknowledging that 27 June was a stipulated date he was asked why it was stated that the live date had been moved to 3 July 1996. He said he did not have an answer to the question. Counsel for the plaintiffs then stated that there was nothing to show RACV knew about that deferral and he asked Birthisel if he had told them. Birthisel could not remember. After being referred to the above reference at p. 9805 and it again being suggested that RACV was not told of the deferral he said he did not know and could not remember. He said that all he had had in his mind was the 24th. He said that the document he was being asked about was something he had put together but he did not remember telling RACV of the deferral. That exchange took place during the morning of 15 March. At the end of that day the hearing was adjourned to 19 March with Birthisel still being cross-examined. On that day the cross-examiner returned to the Unisys 9 May papers. Birthisel identified the words "Live date defn." as his writing on the second page of the pages (p. 9799 in the court book). He said he could only assume that was what was talked about before, and that was potentially 24 June or the live date on 3 July "which we had changed, as you pointed out earlier, on 9805". In giving that evidence Birthisel did not claim to have, or rely upon, a memory of such a change; he was relying on what counsel had pointed out to him in the papers.

1410. Birthisel did not return to this matter of the deferral of the live date, and no other Unisys witness gave evidence about it. That means that no Unisys witness gave evidence of an oral or written agreement between Unisys and the plaintiffs whereby it was agreed that the date when Unisys was to deliver the system "live" be postponed from 24 June to 3 July. Although the Unisys 9 May papers are not admissible to establish the alleged agreement, and were not relied on in that respect, it will be noticed on close examination it is not stated that RACVI had agreed to the live date being moved to 3 July.

1413. Moreover, it was not put to any of the plaintiffs' witnesses that they had agreed to or concurred in the deferral. At the conclusion of Birthisel's evidence counsel for Unisys explained this omission on the basis he had no forewarning that counsel for the plaintiffs would suggest that RACVI had not been advised of the deferral and that there was no evidence to establish advice of the deferral. He then pointed to the passage in Haw's memorandum quoted above. If the issue had been foreshadowed he could have cross-examined Haw on the passage, but it was not and as a result when Haw gave his evidence there was no reference to the point. He referred to the need to recall Haw to establish the fact. Counsel for the plaintiffs then stated that he accepted the memorandum said what it said and counsel for Unisys said he took that as a withdrawal of the allegation. In the result no witness was called or recalled to give evidence on the issue.

1416. In final address counsel for Unisys submitted that the Haw memorandum showed that the live date was deferred to 3 July "by the agreement of both sides. If there was some contractually stipulated live date, it was clearly varied to 3 July".

1419. In his final address counsel for the plaintiffs made several submissions which may be summarised as follows. Whatever may have happened as to deferral at a meeting with Doherty could not have altered the date which Hurford and Walsh had agreed and which Hurford never wavered from in his dealings with Unisys. In other words, with knowledge of the requirement agreed by the principals on each side and insisted on by Hurford after 9 May, Unisys could not set up a contrary agreement between subordinates. It was further submitted that it could not be that Doherty went along with the suggestion that Unisys be given another week with consequent effect on RACVI's contractual right to terminate.

1422. At this point it is necessary to return to Haw's memorandum. The quoted passage refers to a project Executive Meeting attended by the parties. Haw may not have been present at the meeting, but, nevertheless, Unisys relied on the quoted passage as an admission by RACVI of the fact of the alleged agreement, and accordingly the passage must be considered further. The date of the meeting is not stated. Perhaps it was in the April/early May period, but whenever it was it must have been prior to 9 May. That underlines the fact that subsequent communications between the principals were on a contrary basis, namely, that the live date was 24 June. Nor is it established who was present at the meeting. Nor was I directed to any minutes or other record of the meeting. Nor is there evidence of the discussion on the matter in issue. The quoted passage merely states that at the project meeting "it is stated" that the system live date of 24 June has now moved to 3 July 1996. What does the quoted passage establish?

1425. I accept that at a meeting of which no record exists (or at least none that I was pointed to), a discussion occurred between persons (from the parties) who are not identified which included moving the live date of 24 June to 3 July. The quoted passage records it as having been stated that the live date has now moved to 3 July. Does this establish, or constitute, an admission of an agreement between the parties to move the live date to 3 July? In my view it does not.

1428. It would have been at odds with the position between the parties at senior level for an (unnamed) employee or employees of the plaintiffs to have so agreed. The making of such an agreement is improbable in the circumstances. Furthermore, if an agreement was made it was very quickly countermanded, in effect, between the principals in control of the transaction, although that is another matter as it is after the event. Then, to record something as having been "stated", without advice as to who stated it, and in what terms, and as to any response, is not necessarily to record a discussion between the parties in which they concluded an enforceable agreement to vary the live date of 24 June. It is consistent with the words used that a Unisys employee advised that Unisys could not meet the live date of 24 June and that 3 July was a more likely date to which it should be moved. Without evidence it is impossible to make a finding as to the tenor of the words or the level at which Unisys pitched the point. It is consistent with this being the approach of Unisys that there was reference to the lack of any contingency in the timeline but, even then, that sentence in the passage was not explained by evidence. It is also consistent with this understanding of the situation that the Unisys 9 May papers refer to 3 July 1996 as a forecast date and as an estimated date which Unisys hoped to meet. That is regarding the matter from Unisys' point of view. There is also a consistency with Birthisel having no memory as to the alleged change. In my view it is probable that he would have remembered the change if it had been agreed. In fact, he continued to have 24 June in his mind. It accords with the probabilities that Unisys, which knew it was in a tight and difficult situation, should try to get extra time but it does not follow that an attempt in that behalf was accepted in the sense of an agreement. I accept that Unisys did raise the issue and sought concurrence to a deferral but I do not accept that the quoted passage from Haw's memorandum, whether considered on its own or in the overall context, establishes that a variation agreement was made as submitted by counsel for Unisys or that as against the plaintiffs it constitutes an admission of the existence of the alleged agreement.

Section 52

1432. In this background of facts and circumstances I move to the issue of liability on the pre-contract s. 52 case. At [21] above I set out the proposal representations identified in the plaintiffs' final address as those which they rely on to establish the s. 52 case. The plaintiffs seek to establish that each representation was made and was false or, if in respect of a future matter, that there were no reasonable grounds for its making. The plaintiffs provided an extensive written submission to establish each representation. It submitted that it only needed to establish one of the representations to succeed on the claim. And, by way of overview, counsel for the plaintiffs submitted that Unisys' conduct (in contravening s. 52 or breaking the contract) was properly to be seen in the four broad aspects of the InfoImage system referred to at [281] above. The second of those aspects is the configuration point central to the so-called narrow case referred to at [273] above. I do not repeat what is set out and discussed at those earlier parts of the judgment.

1435. The plaintiffs had provided extensive particulars of the proposal representations. They referred to documents such as the RFP, the various demonstrations and statements of employees of Unisys, the July and October responses, and correspondence. Counsel for Unisys said that the particulars, and the proposal representations themselves, were couched in the most general terms which were so broad as to require an investigation of the conduct engaged in from May to December 1993. They submitted that the case can not be decided on the allegations in the pleading; that it can only be decided on the evidence. That submission foreshadowed what was to follow in the Unisys submission which was an examination of the evidence of the plaintiffs' witnesses to establish that none of the representations was made, relied on or caused loss and damage. The written submission on these matters ran to 54 pages with a separate written submission on damages and the contract claim. Counsel also spoke to the submissions. While I have regard to all that counsel said both orally and in writing I do not set it all out. It is impractical and unnecessary to do so.

1438. The same position obtains with the plaintiffs whose written submission on the pre-contract s. 52 case ran to 95 pages with a separate 49 page submission on Unisys' defences to that case, a separate 37 page submission on damages for that case, and a further submission dealing with the contract claim and other matters. Counsel also presented oral submissions. The written submission on the pre-contract s. 52 case identified the matters relied on as constituting each representation and why it should be found that the representations were false or that Unisys did not have reasonable grounds for making them. In dealing with the plaintiffs' case on the representations I consider the facts and matters relied on in the written submission as it is those, and only those, that were ultimately relied on as constituting the representation.

1441. Much of what the parties referred to in their final submissions is mentioned and dealt with elsewhere in this judgment, although not all matters are. Parts of the oral and documentary evidence have not been set out for the reason of achieving some measure of reasonable proportion in the judgment. There is also evidence in the conclusionary parts of the witness statements of Chesson-Kistas, Lang, Mitchelson and Hurford as to not entering into the contract if they had known or had an awareness of certain matters concerning Unisys and the InfoImage product. This evidence was subjected to analysis by Unisys. I have regard to all such matters. Indeed I have read and re-read all the final submissions, oral and written, and have regard to all that counsel relied upon.

1444. In their written submission the plaintiffs dealt with the proposal representations referred to at [21] above in the following order and groupings:

1. Technical soundness (a) performance and reliability (b), and not degrade under load (h).

5. Meet business requirements (a), cater for staff numbers (c), and efficiency (g).

1453. Notwithstanding their grouping, in accordance with which, and in the above order, the written submission dealt with the s. 52 case, in his oral address counsel for the plaintiffs spent a considerable time identifying and developing his primary or preferred submission referred to at [273] above. This is the configuration case which is covered by proposal representation (d). This being put at the forefront of the plaintiff's case, indeed being the primary or preferred way of establishing liability under s. 52, I will commence with it. I do not repeat what is said at [273].

1456. The plaintiffs' written submission states that the representation was made in the following parts of the RFP and the July response:

(a) In the RFP - point 14 as to providing on-line and near line storage of claims and the description of configuration quoted at [78] above and the definitions of near line and on-line quoted at [79] above.

(b) In the July response - the major (and substantive) part of the passage on p. 2-10 quoted at [88] above, and the response to point 14 quoted at [89] above.

1462. The plaintiffs submitted that the passage quoted at [88] was a clear representation that the system would keep current claims in cache and only use optical storage for archiving claims. If I can interpolate, it can readily be seen why Hesom, as a reader of the document, understood it to be saying that current claims would be stored in cache.

1465. Describing it as summarily as possible the plaintiffs' submission ran in this way. RACVI entered into the contract and continued with it relying on the representation of Unisys that it would provide adequate storage capacity for all open claims on-line. Such storage was critical to retrieving document images speedily and in producing a system that was more efficient than the existing manual paper based system. The importance of retrieval and reliance on the representation was also shown by the statement in Section Four of the RFP in relation to Image Services Functionality that a major consideration in establishing an Image Services Facility is "Retrieval and distribution requirements". The representation relating to on-line storage was misleading in that Unisys never configured the system to store all current claims on-line and did not have reasonable grounds for the representation. As a result RACVI terminated the contract and loss and damage was suffered.

1468. The submission is made in the context of the business purpose which RACVI was setting out to achieve which has been stated more than once but concerned the achievement of a more efficient and economic claims handling process and at the heart of which was the ability of claims officers to be able to process files and deal with ad hoc requests in a speedy manner. All that is obvious, and it was to Unisys at all times, as an underlying objective of the venture, and does not need repeating. In this regard proposal representations (a)-(c) and (e)-(h) are all concerned with the Unisys proposal being appropriate for the achievement of the business requirements of RACVI.

1471. Having thus identified the basis of the representation that open or current claims would be stored on-line, it is convenient to note how Unisys approached the issue in its submission. The approach was fundamentally different. It did not proceed by way of dealing with each proposal representation in turn. Rather, the path taken was to examine the evidence of Chesson-Kistas, Lang and Mitchelson as being the plaintiff's witnesses who gave evidence of representations and reliance on them. Hence, rather than go into the matters identified in the plaintiffs' particulars as constituting each representation, counsel for Unisys determined to approach the s. 52 case in the way I have mentioned. In this way they sought to avoid dealing with what they called global allegations couched in the most general terms which required the Court to investigate all conduct between May and December 1993.

1474. Hence, in an attempt to confine the case counsel for Unisys took the approach of going to the evidence of those witnesses to determine what representations were made and how they were relied on, if at all. It was irrelevant that representations were made in brochures, documents, videos or statements unless they were made to the three persons referred to and those persons allege they were misled. It is established by authority that it is not enough they might have been misled. Further, of those three witnesses, essentially the relevant evidence was given by Chesson-Kistas and Lang, and it was their evidence that counsel proceeded to scrutinise for its sufficiency for the s. 52 case. The way in which counsel did this was to consider the evidence at a number of points, the May 1993 demonstration, the July response, 4 August 1993 demonstration, then (after dealing with several matters) correspondence in September and the October response, then discussions and advice of MacCallum, reference site visits, contract negotiations, the 2 December demonstration and the contract. This is not an index of all matters discussed but a sufficient indicator of the chronological approach of the submission.

1477. There is a range of issues of fact in the submissions, some of which I have dealt with already. One such issue is Unisys' contention concerning the construction and operation of the qualification on p. 10-1 of the July response and point 12 on p. 7 of the PMP. The conclusion concerning the qualification on p. 10-1 is important because there is an underlying theme in the Unisys submission that by that qualification Unisys had excluded any commitment to response times and that the parties thereafter dealt with each other and entered into the contract on that basis and, also, with no commitment to any particular configuration.

1480. In the result the rival submissions approached the s. 52 case in different ways. The plaintiffs' oral address emphasised the so-called narrow case and their written submission had a separate section on each group of the proposal representations. On the other hand, the Unisys submission focussed on the response time, how was the system to be configured for current claims, issues. The submission did not deal seriatim with all the proposal representations.

1483. There is no criticism of either side in this. It was a heavy case and they had to work under considerable pressure and in a short time to prepare the submissions. I am in fact grateful to counsel and the solicitors for their hard work and application. But I have to find a practical way of dealing with the submissions. That seems to be to consider the proposal representations as put by the plaintiffs commencing with the representation as to open claims being stored on-line and then proceed to deal with such of them in sequence as may be necessary. In the course of doing so I will deal with a number of issues of fact raised in the respective submissions. I will then deal with contentions of Unisys in its submissions not already dealt with. I will at all times have an eye to those submissions.

1486. I now turn to the resolution of some issues concerning the representation that all open or current claims be held on-line. I do not repeat findings on issues such as the construction and operation of the qualification on p. 10-1 of the July response and point 12 on p. 7 of the PMP or other issues dealt with which concern the s. 52 claim. It is now necessary to deal with some issues of fact as to whether Unisys configured the InfoImage system to store all current claims on-line. I conclude that it never did. I should trace the issues.

1489. The first thing to understand is the architecture of the system designed by Unisys and at all times applied to that system for RACVI. I take the following description from the plaintiffs' submission and having regard to comments in the Unisys submissions.

1492. The first step is that a collection of documents known as a batch is scanned into the system in the mail room. The batch is sent to batch cache, part of a magnetic disk, in the server, to be indexed. Cache on the magnetic disk in the server is broken into four zones, batch, print, user and page. Batch cache receives the documents scanned in the mail room. Print cache contains documents requested by users that were in optical storage and being temporarily stored before being printed. User cache is very small, it stores information about user profiles and access information. Page cache is the balance and is available for document storage. Olsen said the documents in batch cache were indexed and copied to optical disk when an optical disk able to be written to was mounted. They were then flagged as belonging to page cache. This took seconds or minutes. The documents would remain in page cache until they were overwritten according to the rules of the system; that was when the system determined that additional cache space was required. At this point I add something to the account in the plaintiffs' submission. It appears that at different times pre and post-contract a calculation was made by Unisys (it seems by Olsen and Walker) as to when documents would move from page cache to optical disk. Olsen said he could not recall the detail of any calculation. Nor did he have a record of it. In his witness statement he described cache as a temporary holding area for electronic copies of images, the images being held in cache until it ran low of allocated space when documents which had not been accessed for some time would be sent from cache so as to clear space in the cache disk and allow new documents to be added. This was a general description and in that vein he said that the process was designed to occur frequently in which respect he said that if a document had not been viewed for say two weeks it was not likely to be held on the cache and more likely to be held only on the optical disk. In cross-examination he said cache was used for transitory storage. But, as mentioned, in this particular instance he could not recall the period of time calculated and applied in the design.

1495. The optical disks were in two jukeboxes each with one reader. Each jukebox had five platters, some of which could contain closed files, some could be blank and some could have current files. In each jukebox only one optical disk could be read at a time.

1498. Olsen said, and I find, that it was an integral part of the InfoImage product to have jukeboxes.

1501. The optical disks were not re-writable. Documents relating to a claim that were scanned in at different times would be written to different parts of an optical disk or to different optical disks. Thus documents could be spread over several disks. Information as to the location of documents was stored in the database.

1504. Olsen agreed that under this system a current claim had to be in server cache or in an already mounted optical disk to be on-line. But it was inherent in the Unisys jukebox architecture that a current claim document might be held on an unmounted optical disk when it was requested by a user. The spin up/spin down time would be increased if documents requested were held on more than one unmounted disk.

1507. In truth such a system was better described as a near line system. It was luck if, when it was requested by a user, a current claim document was held in cache or on a mounted optical disk. Such a system was not that stipulated in the RFP or described in the July response. The Unisys jukebox system was designed to send documents to a near line state. That was the vice in the system in that it operated to negate any requirement that all current claim documents be stored on-line. The only way to avoid this, as Olsen agreed, was to have all current claim documents held in cache. This was a matter of configuration which lay in the province of the designer. In this case employees of Unisys prescribed the parameters of cache.

1510. At this point there is an issue as to the amount of page cache which Unisys allowed. Unisys did not give evidence as to the allowance of page cache at any time pre-contract to the termination of the contract. Unisys submitted that it was for RACVI to establish what had been allowed and, further, that it had not established that the actual allowance was insufficient to hold all current claim documents on-line.

1513. I am firmly of the view, following a long and exhausting inquiry, that the resolution of this issue does not turn on which party did or did not discharge a burden of proof. It is clear to my mind on the probabilities, indeed beyond any reasonable doubt, that Unisys did not configure cache with the capacity to hold all current claim documents. Further, it is a consequence of the use of jukeboxes with multiple optical disks and one reader only in each jukebox, with current claim documents being sent to optical disk, that all current claim documents, by definition as it were, would not be stored on-line.

1516. All this is clear in my view from facts previously discussed and which may be briefly summarised. I have discussed how the total number of documents to be allowed for was reduced. The initial requirement was in the order of 12 gigabytes of page cache. Unisys did not allow that amount of cache. I find that the amount of page cache allowed with the single server from late 1995 was in the order of 1.9-2.0 gigabytes and that no more than that had been allowed previously. A reason for Unisys supplying the single server was because of its greater capacity and performance ability. This amount of space was not sufficient to store all current claim documents. This conclusion, which I arrive at with no doubt, is consistent with, indeed indicated by, the evidence and submission of Unisys that cache could have been increased to allow all current claims to be stored on-line and thereby have improved response times.

1519. In arriving this conclusion I have considered a submission of Unisys that Olsen gave evidence that he left post-contractual details of configurations of the system at RACVI when the contract was terminated. It was said that RACVI had not discovered the information or given an explanation for failing to do so. Olsen did not use the expression "post-contractual details" in his evidence and there may be some doubt whether he was referring to post-contractual information. Whether or not he referred to pre or post-contractual information or both and whether it was contained in documents or on the RACVI PC's, I do not understand Unisys to have brought an application that RACVI make particular discovery of such information. The information was relevant to the case and was discoverable by the plaintiffs, assuming Olsen's evidence as to it is true. Having regard to the resources and effort applied to the case it is singular that no such application was made. Even apart from an application of that sort, Unisys could have arranged for Olsen and others to attend RACVI's premises to inspect the system it left behind and even to seek to locate the alleged information. It never did any such thing. It was said by counsel for Unisys, in explaining why Unisys had not inspected the system, that some change had been made to the system after termination, but that was not explored in detail to establish that it would have been futile to have made any such inspection. Unisys did not have its expert, or any person, attend RACVI to inspect the system to ascertain information from any point of view. If Olsen, for instance, had re-acquainted himself with the system and perused information he said he left behind he might be expected to have had a better memory on matters such as cache configuration than he said he did when he gave evidence. His lack of memory and non-production of any records enabled Unisys to make a submission based on the onus of proof. Further, Unisys did not call Walker, who was involved in making calculations, and gave no explanation for that failure. In my view Unisys sought to gain an advantage out of this state of evidence. I reject any submission of impropriety by the plaintiffs in not discovering the information allegedly left behind by Olsen. Indeed in all the circumstances and having had the benefit of observing Olsen, I am not satisfied on the balance of probabilities as to just what he left behind. Further, is it to be assumed that what he left was in a form or manner of presentation that ought to have been recognised as containing what he claims? I conclude this section with a reflection on Olsen's claimed lack of recall of the design of cache and his sensitivity to admitting the fact, as I find it to be, that Unisys did not design the system to hold all current claims in cache. The former evidence strained credulity in my view, and I do not accept it. The latter was indicative of an awareness of a point embarrassing to Unisys.

1522. In relation to Unisys not, deliberately in my view, inspecting the system after termination, it is to be noted that subsequent to termination Dr. Thorne inspected it and Williams and Haw conducted tests, and each was able to provide relevant information. Dr. Thorne made the calculation of 1.9-2.0 gigabytes of cache which seems to be accepted. If Unisys doubted that, could it not have undertaken its own inspection and test? And, in that regard, it is to be noted that Hesom accepted the view of Dr. Thorne. I have accepted Dr. Thorne's evidence and concluded that the amount of cache provided for the storage of current claims was inadequate. I find that Olsen was aware that insufficient page cache had been allowed to hold all current claims and that his evidence reflected embarrassment on the issue.

1525. In his opening counsel for Unisys said that the cache had been nominated by RACV. I find this was not so.

1528. The situation then is that, contrary to the representation relied on, Unisys did not configure cache with sufficient space to hold all current claims. The representation was as to a future matter in that it concerned the system to be implemented for RACVI. The fact is that Unisys never configured the system to accord with the representation. To put it as the plaintiffs do, the system delivered in March 1995 was not so configured and Unisys did not thereafter rectify the configuration to accord with the representation.

1531. In these circumstances the onus is on Unisys to adduce evidence that it had reasonable grounds for making the representation. Under s. 51A(2) of the Trade Practices Act, unless Unisys did adduce evidence to the contrary, it shall be deemed not to have had reasonable grounds for making the representation. If it does not have reasonable grounds the representation shall be taken to be misleading; see s. 51A(1). Unisys submits that it did have reasonable grounds. It also submits that at the time when RACVI terminated the contract the time for performance had not passed.

1534. I now consider these issues commencing with the matter of reasonable grounds. This discussion is on the premise, contrary to Unisys' submission which I will come to, that there was a representation that current claims be held on-line. The plaintiffs submitted that Unisys had not adduced evidence that it had reasonable grounds for making the representation. What it should have done, but what it did not do, was lead evidence of the configuration it proposed in 1993 to hold all current claims on-line and then explain why it unexpectedly failed to do so in the system delivered in March 1995 or subsequently. On the evidence it should be concluded that Unisys never proposed to configure the system so that it held all current claims on-line. In my view this submission is correct. Let us note some of the evidence.

1537. If any witness for Unisys was to state the configuration in 1993 and subsequent to the contract it was Olsen, but he did not do so. He could not remember, he said, and we then had Unisys seeking to establish that the onus of proof of the configuration was on the plaintiffs. To refer to a few more points in Olsen's evidence, he did not know how much cache was required for active claims, he did not recall having made any calculations of the amount of cache required between January 1994 and March 1995, and he doubted that the system supplied in March 1995 or as it was in June 1996 was configured to hold all active claims in cache. His doubt, as I have found, was correct. I refer to another piece of Olsen's evidence. He had said that when designing the system he had a performance target in mind of 2-4 seconds retrieval time as in the RFP and 20 seconds for near line. In other words, he was aware of the statements in the RFP. But, when asked whether he configured the system so there was a reasonable expectation of meeting the target, he said "We didn't look as closely". I find that reflected the true situation. Unisys just applied its InfoImage product with unmounted jukeboxes instead of an on-line system. Andrew Walker worked with Olsen in relation to the configuration of cache but Unisys did not call him. I accept the plaintiffs' submission that if called his evidence would not have assisted the Unisys case in this regard. Birthisel never considered configuring the system so that all active claims were on-line. He understood, when he read the RFP in March 1996, that the RFP required all current claims to be on-line. But, much later in cross-examination, his evidence was that it was never intended by Unisys that the optical disks storing current claims would be in a fixed position mounted on their own readers. When he saw the section in the RFP about a 2-4 seconds response time, the focus was on getting the best performance for RACV rather than meeting that target. He said that from 1994 to 1996 the system was configured so cache was used as a transitory holding area rather than to retain all active claims, and that Unisys intended to hand it over in June 1996 in this state. It was an archival system with claims held near line rather than on-line. Josephson could not say how much disk space was allowed for cache in the originally proposed configuration, or subsequently.

1540. I find that at all times, pre and post-contract, Unisys never configured the system so that all current claims would be stored on-line, that it intended to hand the system over on that basis, and that it never had reasonable grounds for so configuring the system contrary to the representation. Quite simply, but unfortunately, conformity with the representation was put aside. I conclude that Unisys did not have reasonable grounds for the representation.

1543. At one point Unisys submitted that none of this mattered as the critical consideration concerning cache was that it be scalable, that is, that it can be increased to meet the requirements as they may be from time to time. Hence, if you require more cache just add more cache. Thus, Unisys submitted, it did not matter how much cache it had allowed, as long as the system was flexible and scalable in this respect. In my view this submission does not meet the point. As I have already stated, that the answer to the problem was to increase cache to ensure that all current claims could be held in page cache was an afterthought, with no relevance to the work of Unisys to the date of termination. At all times to then it was the intention of Unisys to deliver to RACVI a system configured as an archival near line type system referred to above. That was how Unisys had, and continued to intend to, perform the contract. It may be that at some time in the future, following delivery of the system to RACVI, extra cache might have been added to the system but the possibility of that occurring can not affect the configuration in fact adopted and intended to be supplied to RACVI. The consequence was a system which provided slow retrieval times inherent in a near line system.

1546. The next point raised by Unisys was that the time for performance had not arrived when the contract was terminated. I will return to this point.

1549. Thus far I have not considered the issue of reliance and the Unisys submission remains for consideration insofar as issues raised in it have not yet been determined. But before considering those matters it is convenient to consider the related proposal representations as to the retrieval time of on-line claims and near line claims. These are representations (e) and (f) referred to at [21] above. It is convenient to refer to them now as these representations are contained in the same part of the RFP as the representation that current claims be stored on-line. They are also part of the central focus of the Unisys submission.

1552. In the statement of claim the representations are pleaded in the following way, that:

(a) high speed image access would be available in a WMS system implemented in accordance with the Unisys proposal for on-line claims with an expected response time in the vicinity of 2-4 seconds;

(b) image access would be available in a WMS system implemented in accordance with the Unisys proposal for near line claims with an expected response time in the vicinity of 20 seconds maximum.

1558. The plaintiffs' written submission founded these representations on a string of evidentiary references in addition to the passages in the RFP quoted at [78] and [79] above and point 14 of the July response quoted at [89]. Several factual bases are stated for the first representation relating to on-line claims. The reliance on evidence other than the RFP or the July and October responses takes the case into areas of fact canvassed in the Unisys submission. Thus, in respect of the on-line representation of 2-4 seconds, there is reliance on evidence of Chesson-Kistas, Josephson and Lang as to statements at the 4 May demonstration, and of those witnesses as to statements at the 4 August demonstration and of MacCallum as to that day, passages from the October response, and Lang's evidence as to the 2 December demonstration.

1561. The plaintiffs founded the representation relating to near line retrieval time on the passages in the RFP relating to near line quoted at [78] and [79] above and in the first section quoted from the July response at [89] above.

1564. A consideration of the plaintiffs' case on the representation as to the on-line response time involves a consideration of evidence which is the subject of analysis in the Unisys submission.

1567. Each party's submission commences with the demonstration on 4 May 1993. I dealt with this at [72] above. In addition there was evidence of Josephson which concerned either this demonstration or the demonstration on 4 August 1993 and which at [112] I found to be the latter. Whatever it be, I have made findings as to each demonstration and do not repeat them. An initial point made by Unisys was that the 4 May demonstration was required by the RFI which neither specified any response times nor defined the meanings of on-line and near line. That is true but the RFI did state that the Image Services environment must provide on-line storage of all current, active claims, and near line storage of all inactive claims within a pre-determined time frame. Although a time frame was not stated I find that Unisys understood that an efficient on-line storage system would provide a response time of 2-4 seconds also. As Olsen said, a response of 2-4 seconds is implicit in an on-line system. That, I find, is how the requirement was understood by Unisys including by its employees who attended the demonstrations. They also understood that an on-line system provided faster response times than a near line system.

1570. Unisys submitted that if there was any misleading conduct in May the only consequence was to lead to Unisys being placed on a short list of vendors who received the RFP.

1573. The next step is the issue of the RFP in June 1993 with the references to on-line and near line storage referred to above. The plaintiffs point out, correctly, that the response times specified in the definitions are the sort of times Josephson represented; see at [105]. Josephson also said he understood the requirement to be mandatory. That reflects the clear language of the RFP and, I find, how it was understood by others involved at Unisys who read it.

1576. The next step is the July response. I referred to this extensively at [85]-[93]. The plaintiffs rely in particular on the part of the first paragraph in Section Four and on point 14 quoted at [89] above. Chesson-Kistas and Lang gave evidence of reading the RFP. Counsel for Unisys addressed several submissions about this. First, they attacked their evidence as made up, in effect, or tailored to suit the case. Secondly, it was submitted there was no evidence other members of the Team read the response or that they read it in the way Chesson-Kistas and Lang say they read it. Thirdly, read in context and considered objectively the response did not make any representation regarding response times. An element in this submission and in a submission that Chesson-Kistas had either not read or mis-read the response, was that if Chesson-Kistas had read the document she would have understood the qualification on p. 10-1 excluded any commitment to response times. I have already dealt with the p. 10-1 issue. In my view it does not carry the construction contended for. I should add my view that if it did carry that construction its expression and placement in the response, read as a whole, were such that a reasonable reader would not have appreciated, indeed have been misled, that Unisys was thereby stating it did not commit to providing a system with the on-line response time specified in the RFP.

1579. As to the first and second matters, I repeat (see [112] above) that Chesson-Kistas and Lang were honest and reliable witnesses. I find that they read the RFP and that the matters referred to in their witness statements were those considered relevant to this case. Both structured their witness statements by selecting and going directly to those matters considered to be relevant by their advisers. Quite simply, there was too much material for them or other witnesses to do otherwise. Chesson-Kistas and Lang further impressed me as intelligent people who were concerned that the project was handled correctly. Chesson-Kistas regarded the RFP from her particular experience as a claims officer and from that point of view the aspects she referred to were important. I find they read the response and did not mis-read it. The probability is that the other members of the Team also read the response and I find support for that being the case in the whole of the evidence. In the context of the overall situation, including the ongoing responsibility of the Team, which included evaluating the proposal, and the significance of the project, it is a reasonable inference, and one which I draw, that the other members of the Team read the response. While those other members did not give evidence it may be inferred, in my view, that they read it in the same way as Chesson-Kistas and Lang who read it and understood it in the way that was open and correct.

1582. The next step is the 4 August demonstration. I have dealt with this extensively at [97]-[112] where I have made findings concerning the evidence and the witnesses. I do not repeat the findings.

1585. In its submissions on the 4 August demonstration, Unisys drew particular attention to the need to have regard to the purpose of the demonstration. That is to say, whether a statement constituted a representation as to response times was to be assessed in the context of the purpose of the demonstration. That was to demonstrate functionality or what the system could do. Unisys was not asked to demonstrate response times. It was made clear by MacCallum, Josephson and Olsen that the system could only be indicative as actual response times could only be demonstrated after RACVI's requirements were fully known and the system was designed and installed. As the final requirements were not known Josephson could only say that what was demonstrated was indicative of what the system could do and not what it would do in production. This would have been understood by MacCallum and the RACV IT people present. Further, all that was demonstrated was retrieval of single images as distinct from a folder of documents. Hence, at best the indicative response time representations were limited to response times for single image retrieval from on-line storage, and 2-4 seconds is truly indicative of such retrieval. Accordingly, a representation of such a retrieval time was correct. A further submission made at this point was that there was no evidence in August 1993 that RACVI required a system to provide for whole folder retrieval in respect of every inquiry.

1588. The next step in the facts relied on by the plaintiffs in support of the representation is the October response which I referred to at [124] above. I do not set out the passages relied on. They are quoted in the plaintiffs' written submission.

1591. The final step in the plaintiffs' case is the 2 December demonstration. I refer to this at [133]-[134] above. The plaintiffs relied on the fact that the purpose of the demonstration was for Mitchelson to be satisfied the system was suitable for RACVI's needs and on Lang's evidence of being reassured by the demonstration and presentation and the instant access to documents.

1594. I have now referred to the specific matters relied on by the plaintiffs to establish the on-line 2-4 seconds retrieval time representation. In doing so, I have dealt with some matters raised by Unisys and referred to some others. There is more to refer to.

1597. The Unisys submission, after dealing with the 4 August demonstration, analysed the plaintiffs' s. 52 case as being based on an implied representation as to configuration. The Unisys submission is best understood by appreciating its premise that the RFP was not applicable either because the parts relied on by the plaintiffs were excluded from consideration by the qualification on p. 10-1 or it was not a contract document. Combined with that premise was the fact, submitted by Unisys, that up to and including the 4 August demonstration the plaintiffs had failed to establish a relevant express representation. In these circumstances the plaintiffs' case was to be understood as based on an implied configuration representation. The argument went along these lines. The plaintiffs contend that the representation that the observed response times of 2-4 seconds were indicative of what could be achieved in production, as well as statements that Unisys could meet RACVI's business requirements, necessarily amounted to implied representations that the system proposed by Unisys in August 1993 was a system that had a configuration that would allow all active claims to be stored on-line. At August 1993 that required more than 12.5 gigabytes of storage but the amount provided in March 1995 and subsequently was much less than that, and as a result the system could not store all current claims on -line.

1600. Based on this foundation the Unisys submission proceeded on with a series of contentions. While I now deal with them it should be made clear that counsel for the plaintiffs completely disavowed any such implied configuration representation. The relevant representation relied on by the plaintiffs was an express mandatory stipulation with which Unisys stated it would comply. It was not implied. Nor was it expressed in terms of storing all current claims in cache. It was a requirement that the system store all current claims on-line.

1603. I now proceed to refer to the matters mentioned in the Unisys submission in developing the implied configuration argument. The first submission to note is that in March 1995 RACVI accepted a system with whatever response times it provided, whether or not they were 2-4 seconds. I reject the submission. While the system was accepted, I find RACVI proceeded on the basis of having had delivered to it an efficient on-line system for all current claims which, as counsel for the plaintiffs put it, would provide a response time in the order of five seconds. Unisys also submitted that RACVI had not proved the then configuration was contrary to the representations made in August 1993 or that Unisys had engaged in misleading or deceptive conduct in relation to the system delivered in March 1995. The former point is answered by the finding already made that the configuration did not permit all current claims to be held on-line. To the latter point the plaintiffs' add that their case deals with the system delivered in March 1995 which Unisys subsequently, but unsuccessfully, attempted to rectify. It is therefore correct, as Unisys says, that the problem in 1995 was not response times. The problem was that the system was not functional or stable. Put bluntly, it was a failure.

1606. The Unisys submission then raises matters I have already dealt with. There is the alleged agreement to defer consideration of response times. There is the contention that the plaintiffs had not established the size of the on-line storage was inadequate for all current claims in June 1996.

1609. Then there is the submission that the plaintiffs failed to call evidence to establish they did not know or approve of the cache capacity in March 1995 and June 1996. It was also said that no plaintiffs' witness had said they were misled about the size of cache. This seems a surprising submission in light of the failure of any Unisys witness to state or recall the cache capacity at either, or any, time. I have regard to all that was said in relation to the submission including the failure to call witnesses. I find that Unisys did not advise the plaintiffs, and that the plaintiffs did not approve, of the cache capacity at either time. I further find that Unisys never advised the plaintiffs that the system had not been configured with the capacity to store all current claims on-line. Unisys never advised the plaintiffs of the true nature and effect of its configuration of the system in terms of it being, or not being, an on-line system for the storage of all current claims. I find that the plaintiffs acted on the basis of the on-line requirement in the RFP being provided.

1612. The topic of causation was then introduced in Unisys' submission. It was submitted that if Lang and Chesson-Kistas were misled about response times in August 1993 this had no causal effect on anything RACV did thereafter. There was no evidence the evaluation Team as a whole was misled about response times or about any implied configuration representation. I put the latter point to one side as it is disavowed as being any part of the plaintiffs' case. In relation to the Team, Unisys submitted that they did not evaluate response times as that was not part of the evaluation matrix and the vendors had not been asked to demonstrate response times. Unisys also submitted that there was no evidence that response times. Unisys also submitted that there was no evidence that response times or possible configurations were taken into account in any way in evaluating the vendor responses or prototype demonstrations. I reject these submissions. MacCallum made it clear that at its meeting on 9 August the Team discussed the matter of response times. I dealt with this at [113] above. I find that in evaluating Unisys the Team took account of what they had seen and heard from Unisys at the demonstration concerning response times.

1615. In their submissions counsel for Unisys sought advantage in the use by Josephson and MacCallum of the word "indicative" in relation to the observed response times. In this use "indicative" was to be understood as used in a loose or approximate sort of sense rather than an exact sense. This submission was coupled with an over-statement of some evidence of MacCallum. MacCallum's evidence referred to at [113] was that he advised the Team that the observed response times "may" not be got in production. In answer to the submission counsel for the plaintiffs pointed to the first meaning of "indicative" in the Oxford Dictionary as "stating a thing as a fact, wish, etc. of speaker; suggestive, giving indications". The Macquarie Dictionary gives a meaning to the same effect. In both dictionaries the word "indicate" includes the following meanings: to point out or point to; to show or make known. In my view that is clearly what occurred at the demonstrations. They were pointing out the thing as a fact in describing what the system did. The evidence including that of Josephson makes this clear. Then, as to MacCallum's evidence, in the written submission the word "may" was firmed to "could not expect the response times demonstrated from a production model" (para. 76) and to "they were expressly told by [MacCallum] they would not get those times" (para. 78). That was not what MacCallum said. What MacCallum advised the Team was that they may not get in production the response times which had been demonstrated. He did not state that the response times demonstrated could not or would not be provided.

1618. Continuing on with the Unisys submission for the moment, it then went to Josephson's letter to Lang dated 17 September 1993 referred to at [118] above. Unisys submitted that there was no evidence that any part of the letter relating to staff support was untrue or relied on by RACVI in any way. Then the letter dated 29 September referred to at [121] above was referred to. This was the letter which requested a final submission. It was submitted by Unisys there was no evidence of any representation regarding response times or configurations between the demonstration in August and that letter. That is correct and none is relied on by the plaintiffs. Unisys submitted that the approach to Unisys was therefore the result of the evaluation meeting in August. I have dealt with the evaluation meeting.

1621. Unisys sought to draw a point out of the 29 September letter. In relation to final costings the letter requested a firm and final cost on, inter alia, "Configuration (both centralised and distributed - as per attached)". The attached sheets diagrammatically depicted a centralised and distributed image system LAN layout. The Unisys October response answered the request; see at [124] above. Unisys submitted that it was free to make whatever configuration it considered appropriate, and that response times were not raised as an issue. It was submitted that the letter was evidence that no person at RACVI understood or represented any particular configuration at all. Of course the submission was made in the context of the reliance by Unisys on the qualification on p. 10-1, which I have dealt with. In my view the Unisys submission is without substance. All that RACVI's letter did was request a "final submission for provision of our Workflow/Imaging system". That was a reference to the system the subject of the RFP to which Unisys had provided a response in July followed by a demonstration. All that RACVI was now doing was providing Unisys - which had sought it - the opportunity to provide a final submission. But the submission nevertheless related to the subject matter dealt with, and the requirement stated in, the RFP. Further, the 29 September letter said nothing about the on-line requirement stipulated in the RFP and no advice or withdrawal or variation of that stipulation had been provided to Unisys by the plaintiffs. There was therefore no need to restate the requirement. It is obvious from the brevity of its terms that the letter is premised on the RFP. Moreover, the reference to configuration in the letter was not to the particular aspect of the architecture or design of the system that would result in current claims being stored on-line as stipulated in the RFP. It was configuration in an overall sense of centralised versus distributed and recommended, and costings, that the letter was concerned with.

1624. Unisys then moved to its further response provided on 15 October (see at [124] above). It will be recalled that the response stated that it built upon information provided to RACV in earlier documents, in particular the July response. Unisys submitted, in light of the qualification on p. 10-1 of the July response, that no reasonable person could have had any doubt that Unisys was not committing to response times by the time of the October response. For reasons already discussed I do not accept that submission. Nor do I accept the submission that the proper inference was that the discussions regarding configuration between MacCallum and the plaintiffs and the negotiations between Unisys and the plaintiffs in the period 15 to 22 October was against a common background that Unisys had not committed to response times or any particular configuration. I also reject the submission that the critical negotiations that led to Unisys being the preferred vendor were conducted by RACV on the basis that Unisys had not committed to response times.

1627. Then Unisys referred to MacCallum's 22 October memorandum referred to at [129] above. It was submitted that MacCallum told Lang he had to get Unisys to commit to response times and configurations in any negotiations with Unisys. Lang should have realised from his conversations with MacCallum that whatever Josephson had said at the prototype demonstration was not Unisys' present position. Whatever might have been implied in August 1993 about any particular configuration ceased to have effect. What was required was that the system be flexible and scalable, which the Unisys system was.

1630. There is a deal of looseness and error in this submission. First and fundamental is the fact that MacCallum's memorandum, and what he said to Lang and others at RACV, proceeded on the basis of an on-line configuration with optical disks permanently mounted. That is an on-line system within the meaning of the RFP. That is the premise of what he said and wrote. And just as he had not departed from that, nor had the plaintiffs. Secondly, as to what MacCallum said to Lang, I refer to the transcript reference (p. 2463) provided by counsel for Unisys. In his memorandum MacCallum advised that "RACV and the chosen vendor must agree performance and service measures and levels, and accordingly finalise configuration (with contingencies) as part of contract negotiation, leading to contract signing". At the transcript reference MacCallum said, after going through the memorandum, that he discussed the concerns the subject of the memorandum with Lang around the same time and that Lang agreed that they needed to be conscious of this in their contract negotiation and would push RACV IT to be on top of that. There was no express reference to response times as indicated in counsel's submission. It may, however, be accepted there was reference to performance levels and that such may include the matter of response times. But none of this establishes the submission that all that was required by this time was that the system be flexible and scalable, and that nothing said or demonstrated by Josephson any longer represented Unisys' position. I reject the submission.

1633. Unisys then referred to the visit to the Telecom reference site on 25 October; this is referred to at [127] above. Members of the RACV team also visited the Transport Accident Commission in relation to Kodak. It was submitted that at both sites they were told that the system "had slow response times". As far as Kodak was concerned, the submission was based on a handwritten comment "slower response times" to a question as to the user's assessment of the solution. There is no explanation of that statement. In any event, that was a Kodak reference site and the evidence did not travel into the area of an inquiry into the Kodak matter. Concerning the Telecom visit Chesson-Kistas made a note that one month after implementation response time was slow due to changing configurations. She did not recall how slow the times were and was not asked by counsel for Unisys to otherwise explain the circumstances in which slowness manifested itself or what had been done to overcome the slow response time. All one can say is they were significant enough for her to make that record which in itself is an indication of the importance of response times. In notes of the site observations prepared by MacCallum there is reference to some configuration and response time issues, particularly with mainframe payroll interface, and that Unisys pursued the problem at its cost. That it did so successfully is indicated by the overall satisfaction expressed by Telecom. Chesson-Kistas' note of the visit recorded that "No real problem can be attributed to Unisys". These are the facts and they indicate a situation which is not that sought to be conveyed by Unisys.

1636. Unisys submitted that any representation made by it about response times before the Telecom site visit must be taken to have been spent by the conclusion of that visit. I reject the submission. The evidence as to the reported slowness is nowhere near sufficient to warrant that conclusion, even assuming it provides support for it at all. There was, for instance, no evidentiary or other development or analysis of the area or areas of slowness in terms of the proposed RACVI solution. Finally, Unisys submitted that the fact the RACV team recommended Unisys, with knowledge of slow response times at Telecom, gave the lie to allegations that fast response times were an important consideration. I reject the submission. It fails for want of a substantive basis.

1639. Unisys then moved to the decision of the Team in November to recommend Unisys as the preferred vendor; see [132] above. It was submitted that there was no evidence the recommendation was made on the basis of any response times or configurations or any commitment to a response time by Unisys. I reject the submission. The evidence of Chesson-Kistas and Lang is that the decision was based on all information provided by Unisys in particular the information given at the demonstrations. Their evidence accords with the probabilities and my impression of the care and sense of responsibility which the Team brought to its task. I find the evidence to be probable and to accord with what would be reasonably inferred. The information provided by Unisys included the July and October responses and the matters stated and represented at the demonstrations. It is unnecessary to repeat the way in which in those documents, or on those occasions, there was reference to response times or to on-line configuration. It is sufficient to recall that Unisys dealt with such matters as I have referred to above, and the finding that the Team made its recommendation on the basis of all such information.

1642. Unisys then turned to negotiations between 23 November up to 24 December. It was submitted there was no evidence RACV negotiated the terms of the contract in the belief that Unisys had committed to response times or any particular configuration. In fact, it was said, the contrary is the case. The evidence suggests that RACV negotiated on the basis Unisys had not committed to response times and would only do so if such were specifically included in the contract. In this respect it was noted that the plaintiffs had not called Breedon to give evidence. That was significant because he appeared to have been the negotiator. As he was not called, and no other such person was called, there was no evidence that those who negotiated the contract thought Unisys' position was other than that set out in the July and October responses. The inference should be drawn that Breedon's evidence would not have assisted the plaintiffs' case if he had been called.

1645. It is apparent from the discussion and findings at [135]-[137] above that Breedon's role was limited. It is also apparent, and this is consistent with Unisys' evidence in respect of which it is sufficient to refer to Felsenthal's witness statement (para. 21) that any negotiation was minimal. Indeed, regarded overall, no rigorous negotiation process occurred. Felsenthal described the negotiations as "unusual in that RACV requested only minimal changes to Unisys' standard contract" and he recalled no specific negotiation about performance requirements. The explanation for this may be found in the way in which the matter was handled by RACVI as referred to above, which included a limited role for Breedon, and, regarded overall, a failure to sufficiently act in its own interests. I will return to the issue of the basis on which RACV acted in entering into the contract.

1648. Unisys then addressed the demonstration to Mitchelson on 2 December. It was submitted that only functionality was demonstrated and there was no representation about response times. In cross-examination Mitchelson agreed there was no mention of response times. I repeat the discussion, and findings, concerning the demonstration at [133]-[134] above.

1651. Then attention turned to Mitchelson signing the contract. It was within his authority to determine to sign the contract. The contract came to him with a recommendation in its favour. He signed the contract without reading it through. Unisys drew attention to Mitchelson not having given evidence of any discussion with Chesson-Kistas or Lang about response times. Unisys relied on his evidence in cross-examination that if the qualification on p. 10-1 had been brought to his attention he would not have signed the contract. It had not been brought to his attention. It was submitted that the cause of the plaintiffs' loss and damage was the failure of Mitchelson to read the contract, or to have the qualification on p. 10-1 drawn to his attention, before he signed it. On this point of causation there was also reference to evidence of Lang that he did not know what he would have done if he had read the contract and seen the qualification on p. 10-1 of the July response. Unisys further submitted that Lang would have signed the contract even if he had known Unisys was not committing to response times. This followed from the fact Lang had permitted the matter to proceed after MacCallum's advice around 22 October.

1654. At a point in his initial opening counsel for Unisys said that there were no representations as to retrieval times. At times this was developed to a proposition that what was provided by way of retrieval times would be what was available under the system as it came to be delivered. To put it another way, you will get what the system comes to deliver, whatever that may be. It was submitted that no retrieval time was required by RACVI and following the contract the issue was not raised by it until 1996.

1657. In their submissions the plaintiffs said this analysis was incorrect, and made reference to several passages in the evidence that indicate the actual thinking and approach of Unisys was to the contrary. There was the evidence of Josephson as to the demonstrations which was consistent with the requirement in the RFP and the Deloittes 1992 study. And Josephson's evidence constituted an acknowledgment that retrieval times were an important objective. They were important from the point of view of configuring the jukeboxes to provide the required retrieval speed. Schmura said the issue of retrieval times was raised with him within Unisys by Bruce Wilson (who was not called by Unisys) in early 1995 and Rouqeuriol in June 1995. The August meeting in the United States referred to folder retrieval to a desk top taking several minutes as a major performance issue. Johnson agreed that in August 1995 slow retrieval times were perceived as carrying a lot of problems. Olsen agreed a retrieval target of 2-4 seconds in some of the early demonstrations was an important factor. He regarded it as an achievable target when he was on the design team, and he had that view in July 1993. He also said that a purpose of introducing the single server was to enhance performance, of which one aspect was response times. Then, in an internal Unisys memorandum dated 18 October 1993 it is noted under the heading Major Problems that inaccurate sizing of the system will require upgrade. Then, moving to 1996, there are the letters from Walsh which referred to "the performance criteria originally specified in the contract" (letter 7 March) and "the performance criteria set out in our initial agreement" (letter 23 May). No performance criteria was specified or set out in the contract. The references must be, and I find they were, to the requirements of an on-line system specified in the RFP. The fact is, I find, that a fundamental premise of the engagement, understood by Unisys, was that the system implemented would provide retrieval in a timely manner. So much was obvious as required to meet the business purposes of RACVI. But over and above that was the requirement of an on-line system in which the retrieval times specified in the RFP were inherent. This was understood by Unisys and hence the explanations and representations of Josephson and Unisys' cognisance of the importance of retrieval time signified by the above references. I reject the submission that under the contract Unisys was to deliver, and RACV was to accept, a system with whatever retrieval times it might come to deliver.

1660. I have considered all that counsel put in their written and oral submissions. Having done so, and considering all the matters put on behalf of Unisys, both separately and regarded as a whole, I conclude that the representations as to the provision of an on-line system and as to response times were made. These are the proposal representations (d), (e) and (f). The representations were made with clarity by the written and oral statements relied on down to and including the August demonstration. I reject the contention of Unisys that by some act or other the representations were withdrawn by Unisys or put aside by RACVI.

1663. Issues still remain for determination before it can be concluded that the case on these representations succeeds or fails. In view of the way the case was conducted it is convenient to proceed with that consideration before saying anything about the other proposal representations.

1666. There is the matter of reliance by RACVI in contracting with Unisys and in proceeding to carry the contract into effect and by RACVGS in applying time, effort and money to the project. In their written submission the plaintiffs pointed to a number of matters which showed that the response time requirement in the RFP was important since a major purpose of the system was to eliminate the time that was wasted in retrieving paper files from filing cabinets and wherever else they might be. I accept the references as indicating reliance. I note the submission of Unisys that the reference to evidence of Birthisel cannot aid the plaintiffs in this respect as his observations were derived post-contract. But I find his observations to be correctly descriptive of the RACVI business as a "call centre" in which part of the process was the ability to answer and service an ad hoc phone call. That was the manner of conduct of the business at all material times and the evidence in question is reflective of the pre-contract fact. I accept that RACVI would not have contracted with Unisys if it had considered that by the contract Unisys excluded any commitment to response times. To the references in the written submission the plaintiffs added a reference to the Unisys 9 May papers in which it is stated a quick response to retrieval usually "initiated by telephone call" is "imperative". Birthisel said this was obvious, and so it was at all times including pre-contract.

1669. The plaintiffs further submitted that the commitment of Unisys to its providing a system that stored all current claims on-line and that achieved the represented response times was assumed from the July response, reconfirmed by the subsequent demonstrations, and relied on in entering into the contract and subsequently. As referred to earlier the representations are related in their effect. An efficient on-line system would have achieved response times of the order represented, whether or not there were the further representations as to response times. That those latter representations were made served to provide clarity and force to the requirement, indeed to emphasise the importance, that all current claims be stored on-line. The response time stipulated for current claims indicates an on-line system. The stipulation of an on-line system for current claims was understandable, and understood by Unisys, in the context of RACVI's business requirements. By the July response, and the demonstrations, Unisys represented that the system it supplied would meet the requirement. In all that Unisys thereafter said and did it did not give RACVI (or RACVGS) cause, acting reasonably, to comprehend that Unisys withdrew from that position and, in particular, to one in which it was not required to, and was not proposing to, provide a system that would achieve those response times or, indeed, that stored all current claims on-line. It was clear on Olsen's evidence, for instance, that merely to talk about the size of the magnetic disk in the server would not convey the amount of page cache since the disk is used for other things.

1672. I find that if RACVI had understood the position of Unisys to be that it was not committing itself to provide a system that met the requirements of these representations it would not have dealt with Unisys. It would not have entered into the contract. The statement of the mandatory requirement in the RFP was clear and understandable as fundamental to a system to meet RACVI's need for a more efficient system. In direct terms in the July response Unisys stated it would provide a system which "allows for the on-line and near-line storage requirements outlined in the RFP", and that Unisys had "configured a system which can comfortably handle the committal and retrieval rates expected from the volumes outlined in the RFP [and RFI]". Nothing could have been clearer. It seems a singular way of conducting business to then bring in aid some general statements as to the need for more precise information (which in itself was understandable) and a supposed qualification in a different section to negate the commitment. If that was truly the way in which Unisys approached the matter, to say one thing in direct response to induce the other party to have comfort in dealing with you, and at the same time, but without then and there squarely saying so, you use words elsewhere to give you the option of setting the system up how you like and contrary to the earlier commitment, then the seeds of contention were sewn early. But that is not how the plaintiffs read the RFP and, in my view, that is not how it was reasonably to be read and understood. It seems difficult to countenance that Unisys intended by the qualification on p. 10-1 to negate the earlier direct statement, and I have concluded against that construction. But if that was the intention there is room for the inference in my view that it was positioned where it was, up the back of the document and far removed from the earlier section, and obliquely expressed, in order that it not be seen for what it was and where it would not be expected. The misleading or deceptive nature of such a course is apparent. Further, in my view the other general words elsewhere in the July response were not reasonably to be understood, whether considered alone or in context with other Unisys statements, as negating the statements as to configuration as being statements of no intent or on which no reliance could be placed.

1675. It is thus, I find, that RACVI came to the contract. As I say, I find that RACVI would not have countenanced further discussions let alone contracting with Unisys if it had understood Unisys to be making no commitment to the matters represented.

1678. It is necessary to refer to the evidence of the plaintiffs' witness in cross-examination as to whether the contract would have been recommended or signed if they had read the qualification on p. 10-1. The evidence had an unreality about it. The fact is that the qualification had not been regarded as those who read it (and I find it had been observed) as carrying the meaning contended for by Unisys at the trial. Nor had Unisys directed the attention of the plaintiffs to it to ensure they appreciated the basis on which Unisys was acting (assuming they were so acting). Thus it was that the contract came up and was signed. It is a totally different situation to confront a witness during a trial with a question based on the supposed construction and operation of some words of which the witness had had no contemporaneous understanding and, on that basis, require the witness to say what he or she would have done if he or she had been possessed of such awareness at the time. There was a premise in the question which I have not accepted. But, if the premise be assumed correct, and Mithcelson had appreciated that the qualification in the July response operated to exclude any commitment by Unisys to the required on-line system with the response times referred to, the probability is he would not have signed the contract. Nor, in my view, would Lang have recommended it be signed.

1681. I have already referred to and discussed the matter of the response times achieved under the system subsequent to March 1995. I do not repeat the discussion and findings as to the response times found, tests in 1996, the suggestions and responses of Unisys and the state of the system in June 1996.

1684. I now return to a point relied on by Unisys which I referred to earlier. This is the submission that the RFP addressed the time to retrieve single images and not full folders. It was submitted that any requirement to retrieve document images in 2-4 seconds did not apply to full folder retrieval.

1687. The starting point for the submission was that while the August demonstration might have shown on-line retrieval of single images in 2-4 seconds, it did not show whole folder retrieval. Hence, what was said and shown could not reasonably have been considered as applicable to the latter type of retrieval. It followed that the mere fact whole folder retrieval took longer than 2-4 seconds did not establish that the representation about image retrieval at the demonstration in August 1993 was false.

1690. Unisys further submitted that there was no evidence that in August 1993 RACVI required a system where whole folder retrieval was required in respect of every enquiry. In fact, Unisys submitted, the RFP itself only spoke of retrieval of image access. It did not speak of folder access. This submission was based on the construction of the relevant sections of the RFP. Counsel said that the reference to "storage capacity" in the requirement to retain all open claims on-line referred only to storage and not access times. This is a point with no substance as the result of so storing open claims is to enable response times of a certain type. Then counsel went to the definitions. He submitted that "Document" and "File" referred to the paper based system although the definition of file also referred to data which, he said, was electronically based information. He then compared the definitions of file and folder. A file is a physical collection of claim related documents, correspondence and data whereas a "Folder" is a set of document "images" and other information in varying forms related to each other. Therefore a folder may include information other than document images. The word "image" is not defined but the definitions of near-line and on-line refer to "image access". Counsel said the reference to image access is in the singular in contrast to the reference to "document images" in the definition of "Folder". This indicated that the RFP was addressing single image access and not folder access. If folder retrieval had been intended appropriate language could have been used. As expressed, the RFP "seemed to be talking about single image access". That seemed clear, but if it was not that, then it was ambiguous as to whether it meant one image or more than one image.

1693. I do not accept this construction argument. The RFP addressed "claims" and a claim would usually comprise more than one document or image. Indeed the evidence establishes a varying number of documents or images may be in a claims folder, some one or more of which a claims officer could be anticipated to request, if not the whole folder. The RFP comprehended this by simply requiring the type of system (all open claims on-line etc) to be provided in Section Four and then providing some definitions. In combination they required that image access for an on-line claim was expected to be in the vicinity of 2-4 seconds. I do not think this is properly to be read, or would have been read and understood, as confined to a single image. In its response Unisys stated that it could meet the requirement.

1696. Further, I do not accept that what was said and done at the demonstrations was expressly, or should reasonably have been understood by the plaintiff as, confined to single image access. The distinction was not drawn. What was demonstrated and explained was how Unisys could provide an on-line system that met RACVI's requirements. Moreover, there are, as the plaintiffs submit in their written submissions on the matter of indexes, a string of references to folders in the RFP and the July response.

1699. Wall's evidence discloses how he approached the design of the system to provide manageable and timely image access. Unisys relied on this evidence to submit that RACV requested Unisys to build the system to provide for full folder retrieval. It was submitted that the slow response times obtained in the May and June 1996 tests were for such retrievals mostly from optical disk. By contrast single image retrieval from cache was largely in the 2-4 second range, and hence accorded with the RFP requirement. Putting the last point to one side, I now deal with the contention that RACV required the system be built to retrieve full folders.

1702. The contention needs some explaining by reference to the evidence. It is not that RACVI made a decision as to the design of the system with the intention of changing the requirements of retrieval in the RFP.

1705. A careful reading of Wall's evidence makes clear what happened. To start with, he was not involved pre-contract and did not purport to, and could not have, spoken of the contract or earlier documents as providing only for retrieval of an index and then a single document. He gave evidence about his work in designing the system. He said it was originally intended to build a system making extensive use of indexes and based predominantly on single image retrieval selected from the index. He proceeded on an assumption that an index would be sufficient. The assumption was not provided by RACV. He developed some prototypes for RACV to make a choice. It opted for folder retrieval and Wall accordingly changed the design to provide for retrieving the entire claim folder. The change was incorporated in the Workflow Narrative and the Detailed Design Document prepared in August 1994. There was no suggestion that this exercise and the RACVI decision was outside, or changed, the contract. No SCR was raised, which the plaintiffs suggest indicated that the decision did not change an RACVI requirement; on the other hand Wall explained the absence of an SCR on the basis the feature was to be built into the initial system. It is relevant at this point to note the evidence of Johnson that from the very beginning (he started with Unisys in May 1994) he was told that a core RACV requirement was that any one viewing the folder could see all the associated documents. He understood the folder of documents would be loaded to the desktop. However, returning to Wall's evidence, Wall did not explain to anyone at RACV that the selected option would be up to 10 times slower. He said it would have been demonstrated in the prototypes but I conclude from his evidence that the actual slowness would not have been apparent. I also find that it was not apparent.

1708. Counsel for the plaintiffs pointed out that no witness linked the index issue to a failure to meet the requirement for all current claims to be stored on-line or to retrieve folders or documents within 2-4 seconds. The logical difficulty in making such a submission lies in the slower retrieval times inherent in a system using unmounted optical disks for current claims. The result of configuring the system in that way was to increase the response times for folder retrieval as compared to that obtainable from an efficient on-line system. That vice, and consequent slowness, remained in the system until termination. Hence, even if the requirement was for single image retrieval a consequence of not having all images on-line was that images on an unmounted optical disk would not be retrieved in 2-4 seconds or near thereto, the actual time depending on the circumstances including the amount of information requested and the pressure of requests.

1711. I have found that the representations as to on-line and response times were made and were not withdrawn. I find the plaintiffs relied on them and that they were a material inducement to RACVI entering into the contract and RACVGS expending effort and money. I find that the plaintiffs acted on the basis that Unisys would observe the requirements of the representations when it designed and supplied the system. That was a reasonable expectation and was deliberately induced by Unisys. But Unisys acted in a contrary way, without explanation or approval of RACVI. It designed and supplied a system in which all current claims were not held on-line as defined in the RFP or even just in cache. It provided an archival near line system using unmounted optical disks in a jukebox. The consequence, which was foreseeable by Unisys, was a system that did not conform with the representations and in which slower response times were inherent. (By way of reminder, the retrieval time from an unmounted optical disk could be 20-40 seconds up to minutes.) The representations were broken. I have found that Unisys did not have reasonable grounds for the on-line representation and that conclusion applies equally to the response time representations. On the latter point, there is evidence in the Unisys case which supports the conclusion that Unisys did not have reasonable grounds for the response time representations; there is the experience at Telstra in 1993, McFarlane's query in October 1994 whether there was enough cache, which does not seem to be dealt with, and the admissions in Esmonde's letter dated 14 June 1996 of hardware and software limitations.

1714. I now return to a contention of Unisys that the time for performance had not arrived when the contract was terminated. I refer to this at [462]. The point made by counsel is this. The time when the future matter (compliance with the representations) was to come to pass was on delivery of the system. It is at that time that the falsity of the representation is to be tested. If it is false or broken the issue of reasonable grounds arises. It is clear there was a delivery in March 1995. It was then submitted that the problem with June 1996 (when the contract was terminated) was that "there had been no delivery of the system" which "was still to be completed, particularly as regard to response times". Counsel described this as "the Phase two system" and submitted that for it the time when the future matter had to occur had not arrived. Hence the claim of falsity, and the termination, was premature.

1717. Several points may immediately be made. First, the plaintiffs rely not merely on the matter of response times to establish that the system was not as it should have been on 24 June 1996. There were other matters and I have made findings about the state of the system. Secondly, I have found against the contention as to deferral of the matter of response times. Thirdly, following delivery of the system in March 1995 Unisys had sought to render it functional and stable and a system that would meet the requirements of RACVI (it is not necessary to refer to a contractual provision or representation in this respect). There were not two contracts or two contractual obligations, there was one contract with one delivery of a system which failed and which was subsequently worked on in an effort to bring it to a production state.

1720. After a time, and not surprisingly in my view having regard to the elapse of time, the labour and costs involved, and ongoing difficulties, RACVI required a date by when the system would be handed over. To that time RACVI had been patient in the face of an ongoing failure of Unisys to perform the contract. Somehow the situation had to be dealt with and a commercial solution achieved under which the computer system would either be delivered or it would not. I referred earlier to communications in which an implementation date was specified. In February 1996 the date indicated was 24 June. On 29 February Hurford told Walsh that was the final date and he would not condone or agree to any further time slippage, and they agreed on 24 June as the implementation or delivery date. I have referred to what passed between the parties, in particular between the principals Hurford and Walsh, in the background section. It is clearly seen that RACVI notified Unisys that the system must be implemented or delivered on or by 24 June. There was clear notice that Unisys must bring the system to that stage by that date and that if Unisys failed to do so RACVI would exercise its rights against Unisys as it be advised. The communications reflect an awareness of immediate termination and compensation as action that might follow. Furthermore, Unisys accepted the 24 June deadline, although in correspondence it is seen to seek to protect its position lest it not be met.

1723. Without mentioning all of the communications in this respect I summarily refer to the following. On 18 March Hurford wrote to Walsh saying the "key milestone dated, based on the introduction of a production system on 24 June, must be met, with the successful completion of all tasks along the way". He advised Walsh he had no alternative but to ensure the date was achieved. The message was clear and was understood by Walsh who was receiving legal advice. (It will be recalled Walsh did not give evidence.) On 25 March Walsh wrote in reply to Hurford (see at [207] above). In the letter he stated that "Naturally, RACV may at its sole option cease the project at any point". Then, moving forward, but not ignoring what occurred, there are the letters from Hurford to Walsh dated 31 May and 17 June and the letter from Walsh to Hurford dated 21 June.

1726. In his submissions counsel for Unisys observed that the termination in June 1996 would not have been premature if it was plain that when the future event was duly and at the appropriate time performed the representation would not be satisfied. He submitted that was not this case and on my analysis it is not necessary to decide this point. It is sufficient to refer to my findings on the state of the system. The findings I have made indicate that any requirement to give further notice, including under cl. 22(a)(ii) of the contract, was not necessary as the breach or non-compliance would not have been rectified within a reasonable time and certainly not within say the period of 60 days mentioned in that clause.

1729. To this stage I have dealt only with three of the proposal representations. I have done so because they lie at the heart of the s. 52 case addressed by counsel. It is important to note how counsel approached the case in final address. The first to address was counsel for Unisys. His oral address on s. 52 took the course of speaking to the written submission. At the outset he referred to the extensive statement of claim and particulars. They were very wide and postulated a global inquiry. To avoid this the inquiry whether a representation was made should be approached through the eye of the relevant plaintiffs' witnesses and not through the eye of the particulars. In thus approaching the matter counsel in fact concentrated on the evidence, and hence the representations, concerning configuration and response times. In other words he went directly to and concentrated on those matters. That reflected his appraisal of where the substance of the case lay. It was in that area. The result was that he clearly dealt with the representations I have dealt with. Having done so he did not deal with the other proposal representations and address them together or consecutively.

1732. In his submissions counsel for the plaintiffs spent some time identifying the important points relied on and addressing the so-called narrow case. Having done so counsel turned to their written submission on the pre-contract s. 52 case. In the order and in the groupings referred to above the written submission dealt seriatim with the proposal representations relied on. In each instance the written submission set out the acts and facts relied on to establish the representation and addressed matters such as breach, falsity, reliance and absence of reasonable grounds.

1735. In its reply Unisys provided a written summary of comments on the submission, but did not otherwise address the plaintiffs' submissions on the proposal representations as to providing an on-line system with the stipulated response times. In other words, I was left to labour myself through those parts of the plaintiffs' submission with the benefit only of a few brief summary comments in reply.

1738. I can understand why counsel for Unisys confined his submissions in this way. However the plaintiffs might seek to base the representations it might have seemed odd to deny them or at least a number of them. For instance, to deny that Unisys represented that its proposal would provide a technically sound solution and platform capable of meeting the business requirements of RACVI might not only seem odd in the circumstances but to have little point. In fact there was such a representation and it was relied on in entering into the contract, but that is not the point. From the advocate's point of view it would have sat ill for Unisys to deny it represented any such thing and that RACVI did not rely on any such thing in dealing with it. There are other such instances in the representations. The effect of denying their making, singly or collectively, might well have been feared by counsel to give an unfavourable impression of Unisys and to involve a risk of an adverse effect on the case. There is the risk that if some or all of the representations were established a string of denials would leave a bad impression. Then there was the risk of Unisys being drawn into unnecessary issues, particularly of a factual and credibility nature, as to whether representations were made or relied on.

1741. In any event, for whatever reason, Unisys conducted the case as it did, and by that means sought to confine the issues to what it assessed were the strictly relevant from its point of view.

1744. In these circumstances I do not consider it necessary for me to now labour through each of these other representations seriatim. I have read the submissions and the various references in them. I find that the representations were made and were relied on by RACVI in entering into the contract. In view of the conclusions I have already reached, and having regard to the way the case was conducted, it is not necessary to delve further into the allegations in the submissions.

1747. In view of these conclusions it is not necessary to deal with the contract claim or the post-contract s. 52 claim.

1750. For the sake of completeness I should refer to the plea of failure to mitigate loss in the defence (see [49]). In my view there was no unreasonable failure as alleged and particularised in the defence.

1754. The first point to be considered is the submission of Unisys that the plaintiffs had not suffered loss. If that is right there is no entitlement to damages. See Wardley Australia Ltd. v. The State of Western Australia [1992] HCA 55; (1992) 175 C.L.R 514; Marks v. GIO Australia Holdings Ltd. [1998] HCA 69; (1998) 196 C.L.R. 494 at [50]- [52]. Unisys drew on a reference in Marks to the party misled being "no worse off than it was before the contravention occurred"; see at [52]. The submission was that if you regard the position RACVI was in before the contract and as it was at the date of termination, it was no worse off.

1757. Unisys submitted that the evidence established that if the system had been installed it would have delivered enormous benefits to RACVI even if the response times for image retrieval were not as fast as had been represented. There were benefits in savings, in staff, storage, and the ready availability of claims information simultaneously through numerous operators. Even a response time of one minute would be a huge improvement on the 3-4 hour average response Chesson-Kistas spoke of under the paper based system. The submission is based on the fact as to what had been provided and was available to RACVI. To establish the factual premise for the submission counsel for Unisys in his oral address identified several assumptions to be made (see at p. 2031 of the transcript).

1760. The difficulty with the submission is in accepting the assumptions. This is apparent from the previous discussions and findings concerning the tests and state of the system in June 1996. The first assumption, that the system tested on 15 June 1996 was the system that was going to be delivered suffers from its very generality and the facts as to the range of work required and pending. Further, presumably the assumption means that the system is to stay with the then configuration and not be turned into a system in which current claims were on-line or solely in cache. Then again, perhaps it is an unexpressed premise that that change will be implemented.

1763. The next assumption seems clearly enough to be to accept as applicable the improved times received under test after the platters were moved. But this brought the system on-line and it is not how it was designed to operate.

1766. The next assumption is the evidence that response times could be improved, which presumably was a reference to the evidence so extensively discussed above. But the submission was non-specific as to any particular part of that evidence and in my view the discussion and conclusions leaves the assumption in a very doubtful state.

1769. The next assumption seemed to be to assume that on-line response times were got down to 10-20 seconds and from near line to 20-40 seconds, or even one minute for on-line. RACV would be better off, and thus have derived benefits from the system. It was in this sense that the reference was made to Chesson-Kistas' evidence. The system would have enabled RACVI to retrieve information and respond to telephone calls in a reasonable time. It may not be the time specified in the RFP but it would be faster than the average time mentioned by Chesson-Kistas to locate a file and respond to an inquiry. Of course this final assumption rests on the other assumptions. It is part of a set of assumptions which for reasons discussed I do not accept.

1772. The evidence and factual circumstances of the case do not permit the conclusion that RACVI was no worse off than it was before, indeed (according to Unisys) was better off. This was a large and complex project entered into on an understanding that was departed from at the outset in a critical respect. RACVI was misled into a transaction under which it paid large amounts of money in good faith for something which, in a fundamental respect, it did not receive. The circumstances do not permit the relative measure of benefit that must underlie the submission. I reject the threshold submission that no loss or damage was suffered.

1775. At another point in Unisys' submissions there was reference to evidence of Blashki and Haw establishing that RACVI had derived benefit from the project. I do not accept that the exercise concerning Blashki is a reliable indicator in that regard. Haw's evidence was given in cross-examination on his internal email dated 1 July 1996 in which he referred to benefits from the project. In cross-examination he said that some of these had a dollar value. No dollar value was suggested, no subsequent attempt was made to assess any, and in final address no figure or allowance was suggested by Unisys. It was submitted in written comments provided in reply that the value of benefits received by RACVI from the workflow project should be set-off against any damages. The submission was not developed and the basis or nature of the set-off was not explained. There is no claim for a set-off in the defence and, being raised as late as it was counsel for the plaintiffs said nothing about it. I would be prepared to treat the raising of the point as sufficient for that purpose and, if damages are awarded, to make allowance for such a set-off but limited to the matters identified by Haw as having some dollar value. They do not include the TCP/IP matter. It is not clear that it includes each of the other matters referred to in the email. I will hear counsel on the point.

1781. At [34]-[36] I set out the damages claimed on the s. 52 and contract claims. I now deal with each item commencing with the s. 52 claim. I will then deal with damages on the post-contract s. 52 claim and, to the extent indicated, the contract claim.

(a) Section 52

1785. For the contravention of s. 52 the plaintiffs seek damages under s. 82(1) on the basis that they be put in the position they would have been in had the contravention not taken place: see Gates v. City Mutual Life Assurance Society Ltd (1986) 160 C.L.R. 1; and Marks v. GIO Australia Holdings Ltd [1998] HCA 69; (1999) 196 C.L.R. 494. Unisys did not challenge this approach. The plaintiffs seek to recover the expenses and costs that flowed from Unisys being engaged and that otherwise would not have been incurred and wasted.

1788. Unisys did not challenge the proposition, which I find to be the fact, that if the alleged contravention had not occurred RACVI would not have contracted with Unisys. It is not that the parties might have entered into a contract on different terms such as a lower contract sum. RACVI would not have entered into a contract with Unisys at all. Further, it is speculation as to what the course of events might have been if Unisys had not been engaged. The uncertainty extends to whether RACVI would have contracted with any party for the provision of a WMS and imaging system, as to the nature of any such system and as to the nature and extent of the costs that might have been incurred. It is all speculation. To put it bluntly, if Unisys had put its cards on the table in a frank manner as to the difficulty, complexity, business interruption and time involved in seeking to implement the project, there was a likelihood, to the point (I find) of certainty for reasons of commercial sense, that RACVI would not have proceeded with the project. Furthermore, if as I have observed already, Unisys had conducted itself with such frankness subsequent to entry into the contract RACVI would have brought the project to an end. In my view, the position is therefore that stated by the plaintiffs, namely, that if the contravention had not occurred and RACVI had not dealt with Unisys at all, it is uncertain, and (I find) to the point of mere speculation, as to what RACVI would have done in the sense of knowing which, if any, other vendor might have been selected, at what cost and as to the nature and operation of the system to be supplied. It does not follow at all that the prolonged and unhappy experience had with Unisys would have been had with any other vendor who might have been selected.

1791. I now deal with the items in the s. 52 claim.

1795. The first item claimed is $431,250 paid by RACVI to Unisys. Unisys concedes this amount, if it is liable on the pre-contract s. 52 claim.

1798. Next is the claim by RACVGS to recover the amounts totalling $1,165,904 which it paid to Unisys between April 1994 and November 1995. RACVGS bases the claim on the pre-contract contravention of s. 52. There is no issue as to the amount paid and it is not surprising there is not. For the amount paid represents, to that extent, payment which RACVI was obliged to pay to Unisys on invoices issued under their contract. In other words, RACVGS did not pay the amount claimed under a separate and independent contract between itself and Unisys. The amount was payable by RACVI on invoices issued under its contract with Unisys and the payment by RACVGS represented performance of the obligation of RACVI in that behalf. Unisys denies any liability on the claim by RACVGS. I therefore turn to the rival submissions.

1801. Counsel for the plaintiffs submitted that to entitle RACVGS to recover damages, it was not necessary for it to have contracted with Unisys or that Unisys had made misleading or deceptive representations to it and upon which RACVGS had acted in paying the invoices. These submissions derive from the language of s. 82(1). Section 82(1) provides that a person who suffers loss and damage "by" conduct of another person in contravention (of s. 52) may recover the amount of the loss or damage from that other person. Counsel referred to Janssen-Cilag Pty Ltd v. Pfizer Pty. Ltd. [1992] FCA 437; (1992) 37 F.C.R. 526, in which Lockhart J held (at 530) that the preposition "by" in s. 82(1) indicated a requirement that there be a sufficient causal link between the respondent's conduct and the recoverable loss or damage. Lockhart J continued:

" 'By' is used in s. 52(1) in the sense of 'by reason of' or 'as a result of': see Munchies Management Pty Ltd v Belperio [1989] ATPR 50,026 at 50,037. Loss or damage must directly result from or be caused by the respondent's conduct. The respondent's conduct must be the real or direct or effective cause of the applicant's loss; it must have been 'brought about by virtue of' the conduct which is in contravention of s. 52: see Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1988) 20 FCR 164; Kabwand Pty Ltd v National Australia Bank Ltd [1989] 11 ATPR 50, 367 at 50,378 where Lockhart J said: '. . . The right to damages arises where the applicant to the court has suffered loss or damage 'by' the conduct that was in contravention of s. 52. The relationship between the damages and the impugned conduct is expressed by the word 'by' which signifies no more than that the loss or damage has to have been brought about by virtue of the conduct which is in contravention of s. 52 . . . ' "

1805. In that case the applicant had not dealt with the respondent and had not relied on the representation which was held to contravene s. 52. The applicant was a trade rival who claimed to have suffered loss and damage as a result of consumers being led to refer the respondent's product as a result of the respondent's misleading representations. Lockhart J held that the right to recover loss or damage under s. 82(1) was not restricted to a person who had himself relied on the representation which constituted the contravention of s. 52. For present purposes that is a sufficient reference to the case and the principles expressed in it. I note only the reference in Lockhart J's judgment to certain passages in the judgments in the High Court in March v. E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, as to causation being essentially a question of fact to be answered by reference to common sense and experience and in relation to which considerations of policy and value judgments necessarily enter; see per Mason CJ at 515-517, Deane J at 524, Toohey J at 524 and Gaudron J who agreed with the judgments of Mason CJ and Dean J. Lockhart J referred to the test of causation as so stated as being applicable to questions of causation under s. 82. A little over a month later the High Court gave judgment in Wardley Australia Ltd v. State of Western Australia [1992] HCA 55; (1992) 175 CLR 514. It was a s. 52 case. In the joint judgment of Mason CJ, Dawson, Gaudron and McHugh JJ it was stated that the word "by" in s. 82(1):

"... clearly expresses the notion of causation without defining or elucidating it. In that situation s. 82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v Stramare (E & M H) Pty Ltd, except insofar as that concept is modified or supplemented expressly or impliedly by the provisions of the Act" (at 525).

1809. Counsel for Unisys did not address such issues of law or indeed any cases on the present issue.

1812. I turn then to the facts of the case. First, there were the facts of the relationship between the plaintiffs referred to at [3]. Then there was the working relationship between the plaintiffs and between them and Unisys. RACVGS staff were involved both pre and post-contract in working on the development of the WMS project, as Unisys knew. Unisys also knew and understood that RACVI and RACVGS were separate but related entities under the RACV umbrella and that RACVGS was responsible for computer services for RACVI. RACVGS was even a party to the PMP which itself reflected RACVGS' involvement in the contract and its implementation and Unisys's knowledge of that involvement. Indeed during the trial Unisys placed reliance on the knowledge and expertise of RACVGS in relation to various matters as a fact establishing the knowledge and understanding of RACVI on relevant matters. It is evident that Unisys approached the matter from the point of view of dealing with RACV and did not pre or post-contract draw fine distinctions between the roles and work of those who strictly speaking were employees of RACVI on the one hand and employees of RACVGS on the other hand. In short, to the knowledge of Unisys, RACVGS had an active role as an RACV company associated with RACVI in the development of the WMS project and the implementation of the contract and in those matters it dealt with Unisys. It was in that context that RACVGS sent cheques to Unisys in payment of certain RACVI invoices. I find that it did so, and that it was induced to do so, by the representations I have found to have been made, of each of which RACVGS was then and there aware by reason of its involvement. I find that Unisys was aware that RACVGS acted in reliance upon it and in particular the representations. The making of the payments also followed from the fact of the relationship between RACVI and RACVGS and as a result of RACVI having been induced to select and contract with Unisys. In my view the payments directly resulted from Unisys' conduct in contravention of s. 52.

1815. The submissions of Unisys took a different tack. They did not address the facts relied upon by RACVGS and the causal relationship said to arise therefrom. Rather, the submissions focussed on the way RACVGS had pleaded its case. It was submitted that as pleaded RACVGS' entitlement to damages depended upon it being a party to the WMS contract. The steps were these: it was pleaded that RACVGS was a party to the contract (para. 29), that the plaintiffs entered into the contract in reliance upon the proposal representation (para. 29A(a)), that "pursuant to the WMS contract" the plaintiffs each paid monies to Unisys, utilised staff resources and incurred expenses (para. 29B). It was submitted that on this pleading the chain of causation relied on by RACVGS included the essential links of entering into the contract and making payments pursuant to it. Hence, it was submitted, the entitlement to damages depended upon establishing that RACVGS was a party to the contract. As that claim had been abandoned the claim must fail on the pleading. It should be noted, for completeness, that in the plea of loss and damage suffered as a result of the pre-contract s. 52 claim reliance was placed by RACVGS on paras. 29A(a) and 29B.

1818. These submissions accurately noted the actual words of the pleading. There are some points which should be immediately noted. First, the submission gives to the words "pursuant to the WMS contract" in para. 29B a literal reading which they cannot bear, and were obviously not intended to bear, when understood in light of the allegations in the several sub-paras. in para. 29B. Many of the things there referred to as having been done by the plaintiffs were not required to be done by the terms of the contract, as distinct from being something done following or consequent upon the contract, to note some meanings of the word "pursuant" in the Oxford Dictionary. Secondly, when the claim of a contract with RACVGS in paras. 29 and 29A was abandoned the statement of claim could have been, and still could be, amended if it were necessary in the interests of justice to do so, that is to say, to ensure that the matters truly in issue were raised for determination. Thirdly, once the abandonment was made, and RACVGS' s. 52 claim was still pressed, it was obvious that the expression "pursuant to the WMS contract" in para. 29B was to be read from the point of view of RACVGS as meaning "as a result of" or "because of". The sense of the thing, and the way in which RACVGS puts its claim, is obvious. So also was it obvious from an early stage of the trial, and it must have been to Unisys who at all times had denied that RACVGS was a contracting party, that the allegation would not succeed. The ultimate concession reflected the obvious; on the evidence the contract claim was hopeless. I record these matters to ensure a reality check in respect of Unisys' submission. In no sense could Unisys have been misled by the terms of the pleading in question to misapprehend the position it had to meet and as it was finally conceded, and in no way has the pleading and the pressing of the s. 52 claim following the abandonment of the contract claim caused any prejudice to Unisys in the presentation of its case. Rather, according to Unisys, RACVGS "has limited its case in a manner not required by the terms of the statute, but it cannot escape the consequences of its own pleading". It is a pleading point, and no more. It would be a denial of justice, indeed in the circumstances to the point of being a travesty, to uphold the submission.

1821. The Unisys submission went further in that counsel instanced ways in which RACVGS might have attempted to establish a necessary causal connection between the payment and the contract to establish the pleaded entitlement to damages. The submission instanced a contract with RACVI to lease the equipment or to make payments due under the WMS contract. In such circumstances it might be alleged that such engagements were entered into in reliance on the proposal representations. But no such case was pleaded or established.

1824. In fact the statement of claim did allege that RACVGS made payment of the amount claimed at the direction of RACVI (para. 1(d) and particulars). In its defence Unisys denied the allegation but the facts referred to at [3] and the evidence of the payments are sufficient to establish the plea.

1827. I conclude that RACVGS is entitled to bring its claim. It paid the amount in question at the request of RACVI and as a result of and relying upon the representations and conduct of Unisys in contravention of s. 52 and the contract, and relying on Unisys' performance under it conformably with the representations. It is clear that Unisys received the money in satisfaction of RACVI's obligations to it and knowing that RACVGS was, as part of the RACV group, performing an important role in relation to the implementation by Unisys of its contract with RACVI and from the point of view of being the entity within the group which provided and looked after information technology services. Unisys was also aware at all relevant times that RACVI and RACVGS relied on it (Unisys) and in making payments acted on the basis that Unisys would supply a WMS and imaging system that met its business requirements and satisfied the representations which it had made. In the circumstances, which in the context of this long judgment are in my view sufficiently developed, RACVGS has established a sufficient causal relationship between the payments and the conduct of Unisys in contravention of s. 52. Accordingly RACVGS is entitled to recover the total amount it paid Unisys as loss or damage for such contravention under s. 82(1).

1832. RACVI paid Deloittes the total amount of $422,615 by a series of payments the first of which was made in November 1992 and thereafter into 1996. RACVI submitted that the services provided by Deloittes ended up being of no benefit because the WMS system which Unisys was contracted to provide, as a result of its misrepresentations, was discarded. I now deal with the submissions.

1835. It is convenient to commence with the issue as to how the sum for which RACVI settled its claim against Deloittes should be treated. It was common ground that the relevant principles were stated in Banque Keyser Ullman SA v. Skandia (UK) Insurance Co Ltd (No. 2) [1988] 2 All E.R. 880; and Boncristiano v. Lohmann [1998] 4 V.R. 82. In short, when a plaintiff sues two defendants and settles with one but continues to judgment against the other, in the calculation of damages payable by the latter the plaintiff is entitled to treat the settlement sum as allocated first to any claim separate and additional to any claim that was common to the defendants, and the costs of that separate claim, and, secondly, any excess of the settlement sum necessarily referable to the common or overlapping claim is to be credited in favour of the second defendant. It will be recalled (see [5]) that the terms of settlement did not apportion the settlement sum to claim, interest or costs. Thus there is nothing in the terms of settlement that could affect the application of these principles.

1838. It is common ground that of the total amount paid to Deloittes, $84,070 was paid prior to RACV and Unisys entering into their contract. Counsel for Unisys submitted, and counsel for RACVI accepted, that in consequence that amount was not recoverable from Unisys.

1841. Counsel for RACVI nevertheless sought that the $84,070 be taken into account in RACVI's favour in working out how the settlement sum was to be treated. It was submitted that the amount was referable to a separate claim against Deloittes. On this submission counsel conceded that the claims against Deloittes and Unisys subsequent to the Unisys contract were common or overlapping. Counsel for RACVI submitted that as the $84,070 was attributable to a separate claim the settlement sum should first be allocated to it. Then, interest should be allowed on that claim and a calculation was produced which added $39,512 and produced a total sum of $123,582. After deduction of that amount from the settlement sum an excess remained. RACVI submitted that allowance should then be made for the costs of the separate claim. When that was done the balance remaining of the settlement sum would be identified, and that amount should be credited in favour of Unisys against the overlapping claims of $338,545 being the amount paid to Deloittes by RACVI after entry into the Unisys contract.

1844. These submissions were opposed by Unisys at every step in the argument. The immediate issue is whether the amount of $84,070 was in respect of a claim that was separate from the common or overlapping claims against the defendants. In my opinion it was not attributable to a separate claim. In identifying whether a claim is separate and additional to a common or overlapping claim the issue is not whether the claims are based on the same cause of action but, rather, "whether the claims against the various defendants are 'concurrent' in the sense that the relief sought is the same" (per Winneke P in Bonchristanio at 89). In the present case the loss and damage alleged to have been suffered by the plaintiffs and in respect of which damages are sought in the statement of claim, was identical. This has been clear since the statement of claim filed pursuant to O.14 on 30 June 1997 in which the prayer for relief claimed from Unisys and Deloittes the same items of loss, including the same amounts paid to Deloittes. The amount claimed as paid to Deloittes was stated to be $381,953. The same prayer for relief was carried forward in the amended statement of claim filed on 5 June 1998. In its subsequently amended forms the statement of claim omitted the prayer for relief, it would seem by oversight, but in its final form the loss and damage claimed to have been suffered as a result of the breaches or conduct of the defendants was stated to be set out in annexure B to the statement of claim. In the section of annexure B dealing with the amounts paid to Deloittes, the amounts were itemised and produced the total of $422,615. Quite plainly, that meant that the plaintiffs were claiming that amount from each defendant. Neither in the statement of claim nor in annexure B was a distinction drawn between the amount claimed from the defendants in respect of any of the items of loss and damage. The damages claimed against each defendant were identical. It follows that the claims against the defendants were common or overlapping and that there was no separate or additional claim against Deloittes in respect of the pre-contract payment of $84,070.

1847. That means that the settlement sum is not to be allocated first to that amount of $84,070 or interest thereon.

1850. The next issue is whether the settlement sum may be allocated against, and be reduced by, the amount of the party and party costs of the claim against Deloittes. Counsel for Unisys accepted that it was correct in principle to make such an allowance, and I proceed on that basis. It is at this point that RACVI meets a problem. That is because the terms of settlement did not stipulate any sum as the amount of the costs, the costs have not been taxed, and Unisys has not agreed to any amount in respect of them. Counsel for Unisys submitted that in these circumstances, and in the absence of evidence as to the amount of the costs, no amount had been established for the costs and, in consequence, no allowance for costs can be made.

1853. In answer, counsel for RACVI acknowledged the difficulty, including that the costs of the claim against Deloittes would have been "intermingled" with the costs of the proceeding against Unisys. He submitted that the present situation was "an instance of the Court doing the best it can, from its own knowledge of the expense of this type of litigation, to estimate the fees referable to the claim against Deloittes". There had been extensive pleading and it was submitted that I could reasonably estimate the costs at $200,000. I have perused the court file which runs to five folders and records numerous pre-trial interlocutory hearings. It is apparent that the case has occasioned a significant degree of contest. It was a complex case which would have involved considerable time and attention to the facts and discovery. In making these observations I have the benefit of having been the trial judge and thus derived much insight into the dispute, including having heard MacCallum give evidence, and an appreciation of the considerable burden of work that would have been involved for the practitioners. The settlement with Deloittes was not reached until August 2000, which was only several months short of four years of litigation. It was said that $200,000 was a very conservative sum, and that observation may be correct. My difficulty is that I do not possess the experience and knowledge of a Taxing Master and in the absence of evidence am unable to make a reliable assessment of the costs. What, then, is to be done? I do not disregard the fact that RACVI could have sought to establish by evidence the amount of the costs, and did not do so. It may be that the complexity and cost of the litigation was a factor in not adducing such evidence. But does the absence of probative evidence mean that RACVI's conceded entitlement to an allowance is to be denied for want of sufficient proof at this stage? In my view, in the circumstances of this case, the interests of justice are best served by orders which provide for a reference to the Taxing Master for the assessment by him of RACVI's party and party costs of the proceeding against Deloittes, the sum so assessed to be allowed against the settlement sum. The amount, if any, thus ascertained as the balance remaining of the settlement sum will then be allowed in reduction of any damages payable by Unisys in respect of the amount paid to Deloittes or of the damages generally (it is not necessary to decide which is the correct method although the latter would seem correct). As mentioned, RACVI cannot recover the amount of $84,070 paid pre-contract to Deloittes. Hence, as mentioned above, the amount of the Deloittes fee recoverable from Unisys is $338,545 and it is against that amount (or the damages generally) that any excess of the settlement sum is to be allowed.

1856. One point remains to be considered. Unisys submitted that the claim for the balance of the Deloittes payments, $338,545, must fail because the engagement of Deloittes would have continued if another party, say Kodak, had been awarded the contract. I reject the submission. In my view the submission falls into the category of speculation. It does not at all follow that if RACVI had contracted with another party, Deloittes would have been engaged post-contract or, if it had been, in the same way or in the same role as it was in the present case in the sense of what it did, or the fees it might have charged, or the benefit which RACVI might have derived. The facts are what they are. Deloittes' engagement was at an end at November 1993. It was brought back in about March 1994 and was involved (although not continuously) until May 1996. Deloittes' activity post-contract was directly related to the WMS project under the Unisys contract, and the work and requirements of Unisys under that contract, which had been entered into on the inducement of Unisys' representations. That contract led to the further engagement of Deloittes from which, in view of the failure of the project, it derived no benefit. In my view a sufficient causal nexus is established between the amounts paid to Deloittes post-contract and the conduct of Unisys in contravention of s. 52 which induced entry into the contract.

1860. I accept the evidence of Chesson-Kistas that in mid 1994 in anticipation of the delivery of the WMS system, all claims officers attended an introductory computer course including training on Windows conducted by Management Technology Education for which RACVI paid the admitted amount of $42,960. The purpose was to prepare the claims officers to be able to use the system Unisys was to provide which involved the retrieval of information to their desktop by their personal computer.

1863. The single point made against the claim by Unisys is that the training thus received would have provided benefits irrespective of the WMS project and given the members of staff training they would ultimately require in any event. It was submitted that I could "just about" take judicial notice that people employed in an office have to know how to operate a personal computer and use Windows. It was submitted the claim was not made out because RACVI had not demonstrated it did not receive a benefit from the training.

1866. I do not consider that I can take judicial notice that RACVI obtained a benefit as a result of the training of the claims officers such as to deny the claim. Doubtless there was a benefit to the claims officers in a personal sense in that they learned something. And that training meant they were, to that extent, possessed of wider skills as employees. But that does not answer the present case in which RACVI's claims system was paper based and which returned to being paper based when the Unisys system failed. Hence the claims officers reverted to a paper, and not a computer, based process. These are the actual facts and they do not give rise to, indeed in my view without more do not enable, an inference that RACVI gained benefit from the expense incurred on training.

1869. For the removal of any possibility of doubt, I find it to be the fact that the expense was incurred because of the need to ready the claims officers for the WMS system and not because of some unrelated but general desire to improve the skills of the claims officers. I should add that in terms of each claims officer who attended the course, no analysis was provided to me as to whether they continued in employment with RACVI and, if so, in the role of a claims officer, and as to any actual use of computers by them. Such matters are of course relevant to the suggestion that despite the return to the paper based system RACVI obtained a benefit, at least equal to the amount expended on the training, as a result of the training received by the claims officers. In my view RACV is entitled to recover the amount claimed.

1873. Following the termination of the Unisys contract in July 1996 RACVI engaged Price Waterhouse to advise as to how to efficiently handle the claims process without the workflow system which was to have been provided by Unisys. At that time claims were being handled on the paper based system. This had been the case since 11 September 1995 following the Unisys system being shut down completely on 16 August 1995.

1876. While RACVI had previously recognised that the motor vehicle claims handling processes had to be improved the preferred path of a WMS and imaging system had been tried and failed, and RACVI remained with the paper based system. Yet the need for reform had not gone away, and in fact had become greater as a result of RACVI having lost two and a half years (December 1993 to July 1996) in dealing with Unisys, and even longer if the earlier investigative and preparatory years are taken into account. According to Lang, whose evidence I accept, the paper based system had not been improved. In the result RACVI had a claims process that was behind its competitors. In other words, it had to make up lost time. Hence the engagement of Price Waterhouse.

1879. The Price Waterhouse report was not concerned with the Unisys system. That had failed and Price Waterhouse were not at all concerned to report as to it and their report does not refer to it. What Price Waterhouse were concerned with, and what they reported on, was the paper based process in use in August 1996.

1882. In seeking to support the claim counsel for RACVI sought to link the cost of the Price Waterhouse report with the engagement of Unisys. That is, that if Unisys had not been engaged by RACVI, Price Waterhouse would not have been required to review the situation in 1996. Hence, but for the engagement, which was induced by the contravention of s. 52, RACVI would not have incurred the Price Waterhouse cost. It followed that RACVI should recover the cost from Unisys in order to restore it to the position it was in pre-contract.

1885. There is a critical weakness in this argument. It is common ground that damages under s. 82(1) on the ground of a contravention of s. 52 are to be awarded on the basis the plaintiff be put in the position he or she would have been in had the contravention not taken place. Putting aside for a moment a claim for the cost of the Price Waterhouse report, if and to the extent that RACVI, or RACVGS, is held entitled to damages under s. 82(1) they will have been restored to their pre-contract position. That position is one in which the motor vehicle claims department used a paper based system. That was the system which RACVI had fully reverted to in September 1995 and in respect of which Price Waterhouse reported at the cost now claimed. In other words, in that situation RACVI is to be understood as being in the position it was in pre-contract with Unisys, and as though the step it took in terms of an external adviser was to engage Price Waterhouse to advise as to the efficient handling of the claims process. In these circumstances the cost of the Price Waterhouse report did not directly result from and was not caused by conduct of Unisys. The necessary causal relationship did not exist. Having terminated the Unisys contract, and being restored to its pre-contract position to the extent permitted by law, the cost of the Price Waterhouse report was incurred as a result of a separate and independent course of action determined by RACVI. Accordingly, the claim must fail.

1889. The submissions on this item were very brief. It represents the agreed expenditure by RACVGS on equipment for the WMS system that was not able to be used for any other purpose. In opposing recovery of this item counsel for Unisys relied on his submissions made earlier in respect of the claim by RACVGS to recover the amount it had paid to Unisys. He submitted that the item is not recoverable "on the case as pleaded". For the reasons stated in dealing with the earlier claim by RACVGS I am of the view that it is recoverable.

1893. Again, there is no dispute as to the amount of this claim. The work was performed by Joanne Vaughan of Ferntree Computer Systems at RACVI on various dates stated on the invoices to be between October 1994 and January 1995. I accept Haw's evidence that he was responsible for the work being performed by Vaughan and that she worked alongside him. What Vaughan did was to develop new standard letters for use in the computerised WMS system.

1896. Counsel for Unisys submitted that the claim should fail because RACVI had not established that the work was not required irrespective of the WMS, and that the work was wasted or lost because the WMS project failed. One imagines, counsel said, that the letters, being standard, were able to be used in any event.

1899. It is a reasonable inference, and one which I draw, that Vaughan was not engaged to simply draft the terms of standard letters to be used in the conduct of a motor claims file. Such standard letters would be common place in the conduct of a large motor claims insurance business such as that conducted by RACVI, and the amendment or drafting of standard letters to be used in the handling of a claim would hardly require the retainer of a person whose skill lay in computers as distinct from practical insurance or associated legal experience.

1902. The work Vaughan was engaged to perform was "referable to the workflow project", to use Haw's words. That is to say, I find, what Vaughan did was to develop standard letters able to be used in the new computer system. It is obvious that the letters would have had to be installed and formatted in an appropriate way for the proper utilisation of the new computer system. I infer that it was work of such a nature that Vaughan performed. That is different from merely drafting a standard letter to be used in a paper based file system. RACVI must already have had such standard letters.

1905. When the Unisys system was shut down and RACVI reverted to its paper based system, and handled claims without the new WMS computer system, the work which Vaughan had performed would not have been used. The work was thus of no value to RACVI. That in my view is a reasonable inference and it is the fact as I find it to be on the balance of probabilities. Accordingly, the claim succeeds.

1909. This claim by RACVGS is for the recovery of $10,213 being the amount of an invoice of Memorex Telex dated 18 April 1996. The invoice was addressed to and paid by RACVGS as it related to the LAN which was supplied by, and was the responsibility of, RACVGS. The LAN consisted of cabling, hubs and routers which connected the personal computers used by claims officers to the Unisys workflow system. The LAN is like a road network which connects various points to each other.

1912. In early 1996 RACVGS engaged Memorex Telex to analyse the LAN. The work was carried out by Dennis Hakme, an employee of Memorex Telex who specialised in the design and analysis of networks. He conducted an investigation and analysis of the LAN to determine its ability to support the Unisys WMS system. He prepared a draft report dated 11 April 1996, and a final report dated 15 May 1996 as to the performance of the LAN during stress testing of the WMS application. He also provided some clarifying advice by two facsimiles in April 1996. He concluded that the LAN was easily able to cope with the load that the WMS system was going to impose upon it. In short, Hakme's analysis and conclusions put the lie to suggestions of Unisys that inadequacy of the LAN was a reason for slow response times and problems with the WMS. It was those suggestions which prompted the engagement of Memorex Telex.

1915. I should add that Hakme was not cross-examined. At a later stage in the case, when counsel for the plaintiff was cross-examining Neil John McFarlane, a witness called by Unisys, he asked some questions about the work and report of Hakme. Then, in re-examination counsel for Unisys took McFarlane to Hakme's final report and asked him about two of the four key findings stated in it.

1918. The relevant context in which this re-examination occurred was this. In his witness statement McFarlane said that in about 1993 his main area of expertise was the administration and development of a LAN, and, among other things in respect of his involvement with the RACV project, he said that in or around March 1996 he was asked by Birthisel to investigate anomalies related to performance of the LAN, that he assessed there was an anomaly in the LAN which RACV should be requested to resolve, and he recalled that RACV brought in Memorex Telex to review the matter. The reference to Memorex Telex was not further developed in his witness statement and he expressed no opinion as to the correctness of their reports and conclusions.

1921. It was singular then, that the re-examination was concerned only with the key findings in Hakme's final report, none of which had been addressed by McFarlane up to then in his evidence. As stated above there were four key findings. Counsel for Unisys took McFarlane to the first two key findings. McFarlane criticised those two findings and stated that, on the basis of his opinions just expressed, the conclusions expressed in the report "can't necessarily be that way" and that a smaller sample size of one to three seconds should have been taken "especially if you are interested in response times in the order that they were looking for".

1924. These opinions of McFarlane had not been foreshadowed and had not been put to Hakme in cross-examination. Shortly after McFarlane's evidence was concluded counsel for Unisys conceded these opinions of McFarlane should have been put to Hakme. Counsel also raised the matter of Hakme being recalled to provide him with the opportunity of dealing with these matters. In the end Hakme was not recalled. In my view it was for Unisys to seek to recall Hakme to put McFarlane's evidence to him in further cross-examination, just as should have occurred in the first instance. That Unisys did not seek his recall to have that opportunity was clearly an advised decision. It is an obvious point, but it is one important to note, that McFarlane had an interest to give the evidence he volunteered in re-examination. He was an employee of Unisys and in March 1996 he directed blame to the network and not to the Unix equipment supplied by Unisys. Hakme had concluded to the contrary concerning the network. Hakme was an independent person while McFarlane was not independent and his evidence in re-examination sought to erode the conclusion in Hakme's final report and, by doing so, to bolster the position of McFarlane and Unisys concerning the matter of the LAN. Put bluntly, there was the interest of self-justification.

1927. Although Hakme was not in the witness box for long I was impressed by him. He had an obvious openness and directness in the way in which he gave evidence. I accept his expertise in the area, indeed it was conceded. I accept his evidence and the conclusion he stated. Without dealing generally with his evidence, I record that I do not accept the evidence of McFarlane in re-examination.

1930. Counsel for Unisys submitted that the claim should fail because the amount claimed was a cost to RACVGS for maintaining an area of its responsibility. It was also submitted that the evidence established there were problems with the LAN which had to be rectified irrespective of the WMS. It is correct that RACVGS was responsible for the LAN but it is important to distinguish between the particular work performed by Memorex Telex the subject of the claim, and other "problems" with the LAN. The submission confuses the two. The present claim arose in the particular circumstances described, namely the need to deal with concern raised by Unisys. On the particular investigation the LAN was not found wanting as suggested.

1933. Counsel for Unisys also submitted that the claim should fail for the same reasons as were advanced in respect of the claim by RACVGS to recover the payments made to Unisys. I reject the submission for the reasons stated earlier.

1936. In my view RACVGS is entitled to succeed on the claim. Not only is there a clear causal connection between the incurring of the cost and the conduct of Unisys leading to the contract, but the cost was incurred by RACVGS in dealing with an erroneous claimed raised by Unisys in the performance of the contract which was ultimately terminated.

1940. Counsel for Unisys submitted that this claim was similar to the Memorex Telex claim. It deals with Woozle, a software package developed by RACVGS to operate as the interface between the RACV mainframe computer and the Unisys WMS system. The two had to work together to exchange information relating to policies and claims.

1943. Haw gave evidence as to the circumstances in which Woozle came to be developed, of acting in accordance with information supplied by Olsen in that regard and of dealings with other Unisys personnel in para. 27 of his witness statement in reply. The work included the necessity for modifications to the software on further advice and instructions of Unisys. I accept his evidence.

1946. Also, in his initial witness statement Haw produced the invoices of Zoologic which were paid by RACVGS and make up the claim of $30,034. The work was carried out for Zoologic by Andrew Gelme who worked on site under Haw in the development of Woozle. The invoices record work carried out between September 1994 and July 1995.

1949. The cost was essential to enable the Unisys system to be implemented in the RACV context. If it were not for the Unisys contract and the consequent need for the RACV main frame and the Unisys system to operate together the cost would not have been incurred. The only purpose of Woozle was to link the two. Further, it was not submitted that once the Unisys contract was terminated, RACVGS derived benefit from Woozle.

1952. In the circumstances, for reasons given above in relation to other items, RACVGS is entitled to succeed on this claim. There was clearly a causal relationship between the incurring of the cost and the conduct of Unisys in contravention of s. 52.

1956. As noted at [34], under this item RACVI claims $608,839 and RACVGS claims $189,225. The former item is the product of two components which in dollar terms are $358,869 and $250,000. I shall at once explain the nature of these items and how the claim is put.

1959. The respective amounts of $358,869 and $189,225 are calculated on the same basis. The amount of $250,000 is arrived at in a totally different way and applies only to RACVI.

1962. Under the first two amounts the plaintiffs seek to recover the costs (being salary plus applicable payroll tax) of certain members of their staff engaged on the WMS project. In respect of RACVI there are eight and for RACVGS there are three members of staff.

1965. The claim by RACVI for $250,000 was advanced on the basis of evidence of an accountant, Gregory Errol Blashki. He made a calculation relying on certain assumptions provided to him by RACVI. The purpose of his exercise was explained by counsel in opening the case to be "to cross-check whether or not the claim for labour time seemed to make sense". For that purpose, acting on the basis of information provided to him by RACVI which he assumed to be correct, he carried out an analysis of increased staff costs in two periods, March 1995 to February 1996 and February to June 1996. He produced a calculation which showed that over those periods the labour cost of RACVI, after deducting an increase in the number of claims and salary increases in the period, had increased by $654,874. On his instructions, which were supported by evidence of Lang in this respect, the only factor that remained (after allowing for those two items) that could have caused this general increase in costs was the WMS project. That was because staff who were devoted to the project had to be replaced by other staff engaged for the purpose and by extra overtime.

1968. Counsel's statement in opening that the Blashki evidence was put forward in the nature of a cross-check was re-visited on two subsequent occasions. The first was in a discussion which arose out of an objection to Blashki's evidence, at the point when Blashki was to be called. The second was in final address.

1971. At the first point, there was an objection concerning Blashki's evidence. In the discussion which followed I inquired as to the use to be made of the evidence. At first counsel said, consistently with his opening, that the evidence was produced "effectively to support" the claim for wasted staff costs put forward by Doherty (who had given evidence the previous day and to which evidence I refer below) "and that's all". He said, correctly, that the calculations of Blashki and Doherty were done on a different basis and that if the amount calculated by Blashki was claimed separately "it would be a duplicitous claim". (It would be duplicitous because the labour costs which formed the basis of Blashki's calculation included the costs of the particular employees which the plaintiffs sought to recover under their claim for wasted staff costs which in part Doherty was called to advance.) But, in response to a further question, counsel changed his ground. He said that if the claim for wasted staff costs calculated by Doherty was not accepted, RACVI sought the amount calculated by Blashki. As finally presented by Blashki that amount was $654,874. I had the clear impression at this stage of the case that counsel was uncertain and somewhat feeling his way as to what would become of the claim and how and to what extent it might come to be presented in final address. In final address counsel changed his ground on the Blashki aspect. (He also changed ground on the matter of Doherty's evidence but I refer to that below.) He did not submit that RACVI was entitled to recover the $654,874 calculated by Blashki. Nor did he submit that the Blashki calculation was there to merely support the primary claim of wasted staff costs. Rather, and, it would seem, on the basis of accepting Blashki's evidence but doing a simpler exercise to establish the labour cost per claim increased in the periods March 1994 to February 1995 and March 1995 to February 1996, it was submitted that I could conclude that a figure "substantially less" than Blashki's figures "could be estimated by your Honour as a measure of the wasted labour costs as a result of the reduction in productivity during the time it was sought to implement the system". The figure put forward as that which could be estimated was $250,000. That is the amount claimed and that is how it was arrived at. It was not Blashki's figure. No witness, expert or otherwise, put it forward as a calculated estimate of loss, and it was not put forward as calculable from evidence given. It is a figure in the air put forward as a minimum or conservative estimate which I should feel comfortable in adopting.

1974. It is convenient to now conclude on this aspect of the claim. That is, the claim for $250,000. The first point to note is that while counsel still relied on Blashki's evidence RACVI did not seek to recover the amount calculated as RACVI's increased general labour costs. Hence, to the extent RACVI was ever seeking recovery of the amount thus calculated, the claim is abandoned.

1977. The second point is that having carefully considered the evidence I am not satisfied, on the balance of probabilities, that it does establish what Blashki concluded. That is because, in my view, the evidence is not reliable. Blashki assumed that the wage increases in the period in question were those advised to him by RACVI; and see the evidence of Peter Malcolm Jenkins as to those rates. A critical step in Blashki's calculation was to represent those wage increases as a percentage annual salary rate increase in the two periods in question. In cross-examination of Jenkins, based on actual wage records of RACVI, it was established that there were wage increases at appreciably higher percentage rates than advised to Blashki. Blashki could only say that he had accepted as correct the wage increases advised to him by RACVI. I find that the increases advised to Blashki were changes to the base salary, and not overall wage increases in fact. Furthermore, the figures provided to Blashki were not for all the workforce in the relevant departments. RACVI had no sound answer to the resultant criticism of the inadequacy of the information on which Blashki acted. It was not an answer to talk about the changing profile of a workforce with new employees coming in at the bottom and others going out at the top. Blashki was concerned with overall wages in the two RACVI departments in question and from them had to determine an annual salary rate increase. To only consider the changes in the base salary to part of the workforce without taking account of other movements in salary for all of the relevant workforce was to take account of part but not the whole of the relevant information. In cross-examination Blashki agreed that if the annual percentage rates of increase were those put to him by counsel for UNISYS his calculations would alter to the extent that on the logic of Blashki's exercise, RACVI not only had no additional labour costs as a result of the WMS project but had saved wages. The full extent of this saving was subsequently calculated and in final address put by counsel for Unisys at $240,000. It is important to note that the percentages put to Blashki by UNISYS's counsel were not challenged by RACVI. They were stated by UNISYS's counsel to have been calculated from RACVI's wages records, and I accept that as the fact. RACVI had ample opportunity to go to the records and demonstrate that UNISYS had misused them but RACVI never suggested that Blashki or myself had been misled with inaccurate information in this respect. To conclude this paragraph, whether it is the fact that RACVI saved an amount of about $240,000 would involve an analysis of its business of a more profound and rigorous kind than was provided to me. Nevertheless the exercise engaged in by counsel was sufficient to demonstrate the unreliability of the Blashki exercise.

1980. It is not a satisfactory answer on this aspect of the case to refer to evidence of Lang as to the WMS project being "an enormous drain on staff resources, particularly from April 1995, when Insurance tried to use the UNISYS system", or to the need to engage more staff, or to the inconvenience caused by trying to cope with the system and in reverting back to the paper based system; see Lang's witness statement paras. 51 and 52. He said that because staff were required for the WMS project a number of full-time claims officers, probably three or four, were employed late in 1993 and in 1994 who would not otherwise have been employed. This may be accepted as descriptive of the situation, but it does not establish, let alone provide, a reliable quantification of the claim. I have rejected Blashki's calculation, and it is not pressed by RACVI as quantifying the claim in question. Then, the figure claimed in lieu, $250,000, is an estimate in the air without sufficient evidentiary base. No such base was provided by the simple calculation of counsel which showed that the cost of labour per claim had risen; it is interesting that the items and figures which are the basis of that calculation were taken from Blashki's exercise. Hence Blashki could himself have put counsel's exercise forward as a basis of calculating a loss, but he did not do so. And, as UNISYS noted, the rate of increase under this calculation was explicable as being consistent with the evidence of increased wage rates in any event.

1983. I now return to the claims of the plaintiffs to recover the staff costs of particular employees.

1986. Extensive particulars of this claim were set out in annexure B to the statement of claim. There were numerous employees and in relation to each particulars were provided of their time spent on the project and their remuneration including overtime. The plaintiffs did not provide a witness statement by each such person to establish the relevant facts concerning them. In fact, only a few of such persons provided witness statements and gave evidence. In what way, then, did the plaintiffs propose to establish their claims? The answer was simple: principally by the evidence of Doherty. But the evidence of Doherty turned out to be insufficient, speaking generally, as was stated by counsel for the plaintiffs in final address. As counsel so bluntly, but sensibly and correctly stated in final address, I should "forget those particulars" in annexure B. It is unnecessary to go through the explanation why that was so, but counsel was correct in his concession. The cental point was that Doherty could not verify as correct the claim in the particulars. The result was that in final address counsel reduced the claim to a total of 11 employees, eight from RACVI and three from RACVGS. The question is whether in respect of those 11 persons there is evidence which establishes the claim as ultimately put forward by counsel in final address. I address that issue below. It should be noted that in respect of some of the employees counsel relied on particular evidence of Doherty as to the actual work, and period of work, of the employee. The 11 employees are -

1990. Before turning to the individual employees I should refer to an overall submission of UNISYS. The submission was that the claim was misconceived in that the true measure of the loss was to be found in the cost of the extra staff engaged to fill the gaps caused by the devotion of existing staff to the WMS project. The existing staff were not engaged for the purpose of the project. They would have been employed in any event at the wage levels applicable to them from time to time. They may have had some extra overtime due to the WMS project but that is not the claim; it is also conjectural. Hence, as damages under s. 82 for a contravention of s. 52 are to put a plaintiff in the position it would have been in had the contravention not occurred, the loss in respect of staff costs is represented by those costs attributable to the WMS project which it would not otherwise have incurred. I referred above to Lang's evidence of the numbers of new staff employed as a result of the WMS project. The plaintiff did not present or quantify a claim to recover the costs relating to such staff. In my view the UNISYS submission is correct and the claim should fail. Nevertheless, lest I be wrong in this conclusion, I make the following findings concerning the 11 employees.

1994. Ms Bearder did not give evidence. I accept that in 1994 she worked on the project but Lang said only that she and several other named employees worked "full-time on the workflow project during the whole or part of 1994". It was submitted that I could conclude that she worked full-time for a few months in early 1994 and, on that basis, that the amount proved was six fortnight's salary and payroll tax. I reject the submission. The claim must fail for want of proof as to the period of time she worked on the project. The evidence is insufficient to establish any particular or even approximate time. I am left in the position that any estimate of time on my part would be speculation and not arrived at on the balance of probabilities on the evidence.

1998. Mr Bearder did not give evidence. It was submitted that on the evidence I could be satisfied that he worked full time on the project from July 1995 to June 1996 but not be satisfied as to other times. I reject the submission. I accept that he worked on the project but the evidence is quite insufficient to establish that he worked full-time in the year in question. Counsel relied on evidence of Lang and Wall but that was addressed to an earlier period. He also relied on evidence of Doherty but that was insufficient because Doherty could not answer counsel's question as to the proportion of Bearder's time after August 1994 that he (Bearder) spent working on the WMS project. He had no memory. That is the evidence. The claim fails.

2002. I accept her evidence that she worked full-time on the project from signature of the contract in December 1993 to termination in June 1996. It is also the fact that she worked on the project prior to that time. The claim in respect of her wages is made from 1 November 1993 to 30 June 1996. I find that she worked full-time on the project throughout that period, and that her earnings and overtime in that period were $109,754, The claim was made as from 1 November 1993 on the basis that by at or about that time UNISYS was selected as the preferred vendor. It should be inferred, it was submitted, that if UNISYS had not made the representations in contravention of s. 52 another vendor would have been selected or the project would not have proceeded. On the basis of that inference, including its factual premise as to contravention, it seems open to commence the claim at 1 November. In any event I heard no opposing submission on the point and in the scheme of things the amount is too small to spend longer on it. The claim succeeds.

2006. I accept the evidence of Doherty that he worked full time on the project from August 1994 to the start of July 1995 except for the month of November 1994 and that from July 1995 to the end of June 1996 he was engaged 95 per cent of his time on the project. The claim succeeds but subject to allowance being made for November 1994 and on the proportional basis of 95 per cent for the year July 1995 to June 1996.

2010. He did not give evidence. I accept Doherty's evidence that Ellenport worked on the project for two months in 1994. The claim succeeds.

2014. He did not give evidence. Doherty recalled him being involved but could not say from his memory when he worked on the project or what proportion of his time he spent on it. Vincent Joseph Wall of UNISYS said Pipertzis worked in the testing phase which was in the order of "months, from the first test, through to going live on the training". He thought about October 1994 to about March 1995 sounded about right. The balance of his answers cast doubt on Pipertzis's efficiency but are confirmatory that he was engaged full-time in that period. I accept that he was so engaged. The claim succeeds.

2018. He did not give evidence. Doherty said he was engaged full-time on the project in the latter half of 1995 and throughout 1996. I accept that evidence. The claim succeeds as presented for the period commencing 1 August 1995 then concluding 31 May 1996.

2022. She did not give evidence. I am satisfied, on the basis of Doherty's evidence, that she was engaged full-time on the project in the year to determination in June 1996. Doherty used the word "almost" in the course of his answer but regarding his evidence overall I am of the view that he meant she was only engaged on the WMS project. The claim succeeds.

2026. He did not give evidence. I accept the evidence of Craig Donald Haw that he (Gill) worked full-time on the project from January 1995 to January 1996. The claim succeeds.

2030. He did give evidence. I accept his evidence that he worked full-time on the project from February 1994 to the end of the project in June 1996. The claim succeeds.

2034. He gave evidence by way of a witness statement that was tendered by consent. The statement did not say when he worked on the project. Doherty said in evidence that he (Connell) assisted Haw on technical issues, that he was involved "in the latter half of the project, close to if not 100 per cent", but he "would be having a very rough guess" and "couldn't give you a precise answer in regards to" how long Connell "worked close to if not 100 per cent on the project". The last part of his evidence was directed only to the "close to if not 100 per cent" part of the evidence. It did not qualify the evidence that that was the order of his time spent on the project. The evidence satisfied me on the balance of probabilities that Connell was engaged on the project in the period of the last 10 months to termination in June 1996, as RACVGS contends was the case. I accept that Connell worked close to 100 per cent of his time on the project but that an allowance should be made for his time spent on other matters and in that regard I allow 10 per cent as a conservative estimate. Subject to that the claim succeeds.

(b) Post-contract section 52

2038. I set out the claims under this head at [35]. The claims are self-explanatory in light of the early decision concerning the three items. It is necessary to mention only one matter concerning the claim for labour wasted. The claim is in respect of eight of the employees referred to in discussing the pre-contract s. 52 claim I have already considered their position. One of the eight is Stanley Bearder and for the reasons given earlier this claim would fail. The other seven - Chesson-Kistas, Doherty, Whitford, Wilson, Gill, Haw and Connell - succeeded earlier and they would succeed here.

2042. I now turn to RACVI's claim for damages on the alternate contract basis.

2045. I do so because the discussion refers to the commercial benefits in a financial sense which RACVI took into account in deciding to enter into the contract and proceed with the project. As such they relate to matters discussed earlier in the judgment and may aid in some relevant understanding. However, I do not consider the issues concerning the construction and operation of cll. 19(a)(ii) and 22(a)(ii) of the contract. That is consistent with the fact that I have not dealt with RACVI's contract claim.

2048. At [36] I identified the two items of loss claimed under this head as the amount paid to Price Waterhouse and $5M as estimated savings not made. I dealt with the former at [567]-[571]. The claim is rejected for the reasons given in that discussion. It remains to deal with the latter item of loss and to that I now turn.

2051. It is common ground that damages for breach of contract are to be awarded on the basis of putting RACVI , so far as one can with money, in the position it would have been in if the contract had been performed. Relevantly, on RACVI's case, that meant by providing by 1 July 1995 at the latest a system configured with current claims on-line in the sense it retrieved folders and documents within 2-4 seconds and was technically sound and reliable. With such a system RACVI would have had a more efficient claim system and saved considerable labour. Hence the claim for savings not made. The savings lost, and now being claimed, are the savings in reduced staff costs which would have been achieved if the system had been operational by 1 July 1995.

2054. But, what is the amount of these savings and how are they to be measured? The difficulty arises because the system never worked and, as a result, no savings in fact were achieved. In that situation it is necessary that RACVI establish the best estimate it can, with persuasion on the balance of probabilities, of the savings it would have made. It has sought to do that and I refer below to the basis of its claim for $5M. It is not fatal to the claim that RACVI cannot provide the figure which with logic it could have if the project had proceeded, and which would establish the amount of damages to be awarded on ordinary principles. The next step is to observe that even if RACVI is unable to establish its claim, it may yet be entitled to recoup its expenditure reasonably incurred under the contract, such being reasonably taken to be the detriment suffered by it as the innocent party. See The Commonwealth of Australia v. Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64. In their joint judgment in Amann Mason CJ and Dawson J stated, at 86, that:

". . . in a case where it is not possible to predict what position a plaintiff would have been in had the contract been fully performed . . . it is not possible as a matter of strict logic to assess damages in accordance with the principle in Robinson v Harman but the law considers the just result in such a case is to allow a plaintiff to recover such expenses as is reasonably incurred in a reliance on the defendant's promise. In this case, the law assumes that a plaintiff would at least have recovered his or her expenditure had the contract been fully performed. It will still be open to the defendant, however, to argue that . . . the expenditure claimed by a plaintiff would nevertheless not have been recovered. . ."

See too Deane J at 126. Further reference might be made to the judgments in Amann, including on the matter of the onus of proof falling on the defendant to establish that the net value of the plaintiff's benefits would not have covered the expenditure, but it seems unnecessary to go further into the discussions of principle in the case as counsel for Unisys referred to no authority on this claim and in reply in final address said nothing on the references made to Amann by counsel for RACVI.

2059. How, then, did counsel for RACVI seek to establish the claim for loss of savings? The answer is short. He relied on an analysis by MacCallum in the Deloittes December 1992 report titled Motor Vehicle Claims Workflow Management Study. The analysis was contained in Section Five titled Benefit/Cost Analysis. The analysis showed cumulative savings over a four year period of $5,063,000 which, for present purposes, counsel rounded down to $5M. Two other documents were relied on to support this analysis. The first document is a report signed by Lang on 27 August 1993 seeking an allocation of funds for the WMS system in the 1994/1995 capital budget. The author of the report is stated to be Shayne Lourdes, manager of insurance operations. The report included an analysis of savings in staff costs of $5,200,000 over four years. The second document is a memorandum from Lang to Mitchelson dated 7 September 1994 in which he advised the implementation of changes to work processes and structures relative to the WMS project, and provided a cost/benefit analysis summary which showed savings of $5,475,000 over four years.

2062. Each was submitted to be a reasonable estimation in terms of the apparent consideration given to the matter. I am satisfied that each represented a considered view held after taking into account available information. In that respect I have had the benefit of seeing MacCallum, Lang, and also Mitchelson give evidence. The first analysis of MacCallum was formed in light of the detailed analysis of the role of employees in the various categories in the claims process, the time devoted to aspects of their work and likely efficiencies and savings in effort as a result of the WMS system. The two subsequent estimates were evidently based on understandings similarly arrived at. In forming that view I take account of the fact that Lang did not address either document in his evidence. I have regard to the terms of the documents, the context and to my impression of Lang as a sensible and careful person. As far as the board of directors of RACVI is concerned, I find it to be a reasonable assumption that in determining to spend the amounts it did under and in pursuance of the Unsiys contract RACVI reasonably anticipated savings in staff costs in the order of $5M or so over a four year period. The minutes of the meeting of directors of RACVI held on 9 November 1993 record that the capital budget for 1994/1995 was approved and that some 75 per cent or $3M or more of the total approved amount related to the WMS project. This is consistent with the order of expenditures in the August 1993 memorandum signed by Lang. In fact total expenditures exceeded $3M and it is sufficient in that regard to refer to the items making up the claim at [34], and to the actual scale of the expenditure set out in annexure B.

2065. The submissions of counsel for Unisys were very brief. In essence it was submitted that there was no evidence that the savings claimed would have been made. MacCallum did not have an accounting background. His expertise was in information technology and particularly application systems and re-engineering. He described his analysis as being a fairly simple cost/benefit analysis. It was his assessment of where benefits would come from, putting a cost on the benefit to RACVI and weighing it up against the cost of implementing the manual and technology interventions involved in the WMS system. The analysis did not address tax or financing issues. It was, he said, kept "at a fairly simple level". Nevertheless he considered it a reasonable estimate having regard to the staffing levels pre and post the introduction of the WMS system. I have already observed that Lang did not address his memorandum of August 1993 in his evidence. Nor did a witness address the September 1994 document. In other words those documents went into evidence as part of the court book without evidence from a witness as to them, in particular without an explanation of the process that led to the statements in them. Moreover, there was no evidence from any other person, such as, for example, an independent accountant to provide an expert opinion as to the savings in the area of staff that might reasonably have been achieved.

2068. This does not lead me to conclude, as submitted, that it is established that "such savings" (meaning, I think, savings as claimed) were available to be made by RACVI. I find, on a balance of probabilities that savings were to be made. That, in my view, is well established when one stands back and regards the course of events overall. RACVI's entry into the Unisys's contract was preceded by the most careful and anxious consideration and ultimate confidence that when implemented the WMS project would achieve substantial benefits including greater staff efficiency and reduced numbers of staff per claim. It is consistent with that view that RACVI determine to proceed and incur the substantial expenditures involved. I find that without the expectation of benefits of the order of $5M or so that would not have occurred.

2071. It is, however, another question as to the level of the savings that might actually have been achieved. This is a matter of estimation and it must be allowed that actual savings may not have achieved the level of expectation or thereabouts in a reasonably proximate sense. Variables and contingencies must be allowed for, as a matter of commercial reality, but the present issue is at what level in terms of an ultimate dollar value? No submissions were addressed on this aspect, rather, the figure of $5M was urged upon me on the basis that I could be confident that without savings of that order RACVI would not have proceeded to a contract involving $3M plus of expenditure. The proposition is founded on evident common sense. But that alone does not constitute sufficient evidence to establish the claim. Finally, it was submitted that if I concluded the evidence was inadequate to establish the claim advanced "insofar as determining what the expected savings would have been", I could assume that the savings would have exceeded $3M because that was the sum to be expended to produce the savings.

2074. Having considered the evidence and all that counsel said, I conclude that it is not established on the balance of probabilities that staff costs of $5M or thereabouts would have been saved. No other figures were provided which could found an alternative but lower figure as savings forgone. In other words there is no cogent basis upon which I could find an amount between $3M and $5M. I am however satisfied that the expenses incurred by RACVI under and in pursuance of the Unisys contract were reasonably incurred and that it is properly to be assumed that RACVI would have achieved savings in at least that amount had the contract been performed. In my opinion it is just that RACVI succeed on its claim to that extent. It would be necessary to hear the parties as to the amount.

2078. I set out the items of counterclaim at [51] and relevant admissions and contentions in the defence to it at [53]. In final address counsel for Unisys put the claim on this basis, namely, that RACVI is liable for the amounts unpaid on invoices and system change requests if it is held to have wrongly repudiated the contract, otherwise not. The same approach was taken by counsel for RACVI who submitted on these items that RACVI "stands and falls with liability". It is common ground then that these items follow the event.

2081. That leaves the matter of the server. In final address counsel put this as a claim in detinue and sought the invoice value of the server. In fact the claim was also pleaded in conversion. A difficulty confronting the claim is that the invoice relied on pre-dated by months the alleged time of conversion or wrongful detention in August 1996, when the server remained in situ at RACVI's premises, and there was no evidence of value at that latter time. Doubtless there could be an enquiry as to value, although RACVI has no use for the server and is content for Unisys to collect it when the case is resolved. The more fundamental point, which is fatal to the claim, is that the server was provided by Unisys on the basis that RACVI would not be charged for it, and RACVI never agreed to pay for it. Unisys provided the server at its own suggestion and expense in lieu of the servers it had provided previously as part of the system that had failed. The original servers were paid for and Unisys did not refund the amount it received for their supply. Unisys provided the replacement server in seeking to make the failed system operational. When supplied and installed it became part of the system which RACVI (and RACVGS) paid for. The provision of the replacement server was a cost Unisys undertook in attempting to overcome the problems and honour its contractual obligations. The claim is rejected.

2084. For these reasons the counterclaim will be dismissed.

2088. Each plaintiff succeeds on the pre-contract s. 52 case and damages are allowed as claimed with the following exceptions. The relevant amount paid to Deloittes is $338,545 against which, or against the damages generally payable to RACVI, is to be allowed any excess of the settlement sum after assessment of RACVI's party and party costs against Deloittes. For that purpose and in default of agreement there will be a reference to the Taxing Master to assess the costs; see [561]. The claim to recover the amount paid to Price Waterhouse, and the claim for labour of the plaintiffs wasted, fails.

2091. If it be desired I will hear counsel on the matter of the set-off raised by Unisys in reply; see [537]. Otherwise the claim will not be allowed. The counterclaim fails.

2095. I will adjourn the further hearing for one week with a direction that counsel confer and submit minutes of orders in accordance with the judgment. I will hear counsel on any matters including costs and make final orders on the resumed hearing.