Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd

Catchwords

[2015] NSWCA 12 Austin v Hornby [2011] NSWSC 1059 Bahr v Nicolay (No 2) (1988) 164 CLR 604[1988] HCA 16 Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279[1990] HCA 11 Barnes v Addy (1874) LR 9 Ch App 244 Barnes v Forty Two International Pty Ltd (2014) 316 ALR 408[2014] FCAFC 152 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Berry v CCL Secure Pty Ltd (2020) 381 ALR 427[2001] NSWCA 61 Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty LtdIn the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778 Byrnes v Kendle (2011) 243 CLR 253[2011] HCA 26 Calverley v Green (1984) 155 CLR 242[1984] HCA 81 Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371[1974] SCR 592 Canny Gabriel Castle Jackson Advertising Pty Limited v Volume Sales (Finance) Pty Limited (1974) 131 CLR 321[1974] HCA 22 Carter v Brine [2015] SASC 204 Chan v Zacharia (1984) 154 CLR 178[1984] HCA 36 Clark v Macourt (2013) 253 CLR 1[2013] HCA 56 Cockell v Taylor (1852) 15 Beav. 103(1852) 51 ER 475 Commissioner of State Revenue (Vic) v Snowy Hydro Limited (2012) 43 VR 109

Judgment (136 paragraphs)

[1]

ited (2012) 43 VR 109; [2012] VSCA 145 Concrete Pty Limited v Parramatta Design and Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55 Disctronics Ltd v Edmonds [2002] VSC 454 Duffy Bros Fruit Market (Campbelltown) Pty Ltd v Gumland Property Holdings Pty Ltd [2007] NSWCA 7 Edmonds v Donovan (2005) 12 VR 513; [2005] VSCA 27 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd (1988) 2 Qd R 1 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Galafassi v Kelly (2014) 87 NSWLR 119; [2014] NSWCA 190 Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569; [2006] FCAFC 44 Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490; [1916] HCA 81 Hadid v Lenfest Communications Inc [1999] FCA 1798 Hastie Group Ltd (in liq) v Bourne [2017] NSWSC 709 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 Hungry Jack's v Burger King [1999] NSWSC 1029 In the matter of Tresdar Pty Ltd [2019] NSWSC 179 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd [2020] FCA 1018 John Alexander's Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19 Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kizbeau Pty Ltd v WG & B Pty Ltd (1995)184 CLR 281; [1995] HCA 4 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62; [2015] HCA 6 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23 Management Service Australia Pty Ltd v PM Works Pty Ltd [2017] NSWSC 1743 Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 McCrohon v Harith [2010] NSWCA 67 Meehan v Jones (1982) 149 CLR 571; [1982] HCA 52 Moore v Aubusson [2020] NSWSC 1466 Moratic Pty Ltd v Gordon [2007] NSWSC 5 Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110 News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410; [1996] FCA 870 Nguyen v Phan (No 2) [2015] VSC 634 Pavan v Ratnam (1996) 23 ACSR 214 Payne v Parker (1976) 1 NSWLR 191 Phipps v Boardman [1967] 2 AC 46 Redman v Permanent Trustee Co of NSW Ltd (1916) 22 CLR 84; [1916] HCA 47 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Reitano v Reitano [2012] NSWSC 1127 Rydledar Pty Ltd t/as Volume Plus v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7) [2019] QSC 241 Scammell (G) & Nephew Ltd v Ouston [1941] AC 251 Shevill v Builders Licensing Board (1982) 149 CLR 620; [1982] HCA 47 Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 Sinclair, Scott & Co v Naughton (1929) 43 CLR 310; [1929] HCA 34 Southern British National Trust Ltd v Pither (1937) 57 CLR 89 Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457 Swiss Bank Corporation v Lloyds Bank Ltd [1979] Ch 548 TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; [1988] HCA 44 Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278; [2006] HCA 6 United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1; [1985] HCA 49 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429; [1968] HCA 8 Vines v Australian Securities and Investments Commission (2007) 73 NSWLR 451; [2007] NSWCA 75 Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 Zugic v Vesuvius Australia Pty Ltd [2020] NSWSC 106 Texts Cited: Heydon and Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) Young, Croft and Smith, On Equity (2009, Thomson Reuters) Seddon and Bigwood, Cheshire and Fifoot Law of Contract (11th Australian edition, 2017, LexisNexis) Category: Principal judgment Parties: Stellar Vision Operations Pty Ltd (Plaintiff) Hills Health Solutions Pty Ltd (Defendant) Representation: Counsel: C Bova SC with J Burnett (Plaintiff) R Newlinds SC with T Epstein (Defendant)

[2]

Solicitors: Corrs Chambers Westgarth (Plaintiff) King & Wood Mallesons (Defendant) File Number(s): 2016/00284725 Publication restriction: Nil

[3]

Judgment

HER HONOUR: This matter involves a dispute arising out of arrangements entered into in 2013-2014 for the supply of "patient entertainment systems" (or PESs) to the Western Sydney Local Health District (WSLHD) following a tender process conducted by WSLHD.
In essence, the complaint by the plaintiff, Stellar Vision Operations Pty Ltd (Stellar Vision), is that the defendant, Hills Health Solutions Pty Ltd (Hills Health Solutions), wrongly appropriated for itself (to the exclusion of Stellar Vision) the benefit of a contract entered into with WSLHD in December 2014 for the supply of those PESs (the WSLHD Contract) following that tender process. In that regard, Stellar Vision contends that it tendered jointly (albeit that the response was solely in the name of the named tenderer, Questek Australia Pty Ltd (Questek)) with Questek for the supply of the PESs to WSLHD; that in February 2014, the joint tender was successful; that in April 2014 Hills Health Solutions acquired Questek's assets and, prior to so doing, acknowledged and agreed that it would split the profits of the WSLHD project with Stellar Vision; and that Hills Health Solutions has not done so.
Stellar Vision alleges in summary that, in the circumstances, a 50% interest in the benefit of the WSLHD Contract was held on trust for it by Hills Health Solutions; that Hills Health Solutions has breached fiduciary duties and contractual obligations owed to Stellar Vision; and that various estoppels (proprietary estoppel, promissory estoppel and conventional estoppel) arise in its favour, such that Hills Health Solutions is liable to it for the relief here sought (which includes damages and equitable compensation).
Hills Health Solutions denies each of the alternative claims brought against it. However, in the event that it is held that there was a contract between the parties, Hills Health Solutions contends that Stellar Vision repudiated that contract on the basis that Stellar Vision was not ready, willing and able to perform the contract in December 2014; and Hills Health Solutions says that thereafter, by its conduct, Hills Health Solutions validly terminated any such contract.
Further, if liability is established, there is a significant dispute between the parties as to the methodology to be used in the calculation of the alleged loss and the quantum of damages.

[4]

Stellar Vision

Stellar Vision is associated with the Stellar group of companies, which group specialises in in-flight entertainment. Stellar Vision is not a wholly-owned subsidiary of Stellar Group Pty Ltd (Stellar Group) but has some common directors and shareholders. Stellar Vision was established in July 2012 with the intention of providing a product similar to an in-flight entertainment system for "fly-in-fly-out" workers in the mining industry.
During 2013, Stellar Vision commenced the development of applications for entertainment systems outside of the mining industry, including, relevantly, in hospitals (where PESs are installed both for the use of patients and to provide access to medical records and health education resources). In the period from 2013-2014, Stellar Vision was in the business of supplying software and content for PESs.
Stellar Vision's PES is designed to operate with a terminal with a pre-loaded operating system, known as "thick client architecture" (rather than "to boot" from a server and load an operating system from the server), which as I understand it (and as explained by Stellar Vision's Chief Technical Officer, Dr Abul Rahman) means in practical terms that the terminals using Stellar Vision's PES require sufficient storage capacity to load the operating system and applications. (This is of some relevance when considering the allegations of repudiation which I address in due course.)
The relevant personnel at Stellar Vision at the relevant times were: Mr Brendan McCarthy, the Chief Executive Officer of Stellar Vision; Mr Peter McLaughlin, the Chief Executive Officer of the Stellar group; Mr Rob Lynch, the Chairman of the Stellar group; Dr Abul Rahman (referred to above). Also, Mr Bryan Curtin was engaged as a consultant to the Stellar group in around October 2013; was a director of Stellar Group from September 2014 to March 2016, and was a director of Stellar Vision from December 2015.

[5]

Questek

Questek, on the other hand, specialised in providing nurse call systems and, at the relevant time, had installed a nurse call customer base in a number of hospitals. Questek was owned by Brighton Technology Group Pty Ltd (Brighton Technology Group), a company owned by Mr Darren Brighton. Questek formed part of a group of companies that also included Brighton Technologies Pty Ltd (Brighton Technologies), and Questek Infotainment Pty Limited (Questek Infotainment).
As at October 2013, Questek was in the business of developing and implementing PESs for hospitals.
The relevant personnel at Questek at relevant times were: Mr Darren Brighton (referred to above); Mr Daniel Rhodes, the General Manager of Questek; Mr Daniel Linderman, the Technical Sales Manager of Questek at the relevant time (who subsequently became Operations and Sales Manager for Hills Health Solutions - see below).
In around April 2014, Hills Health Solutions, as Buyer, entered into a Business Purchase Agreement for the purchase of assets from Brighton Technologies, Questek and Questek Infotainment (the sale completing on the same day). After completion of the Business Purchase Agreement, Mr Linderman commenced employment with Hills Health Solutions.

[6]

Hills Health Solutions

Hills Health Solutions is a wholly owned subsidiary of Hills Limited (Hills), an ASX-listed company. In the period from September 2013, Hills Health Solutions acquired various businesses in the healthcare industry, including the business of Merlon Health Communications and Hospital Television Rentals (HTR) in or around September or October 2013, and the business of Questek in April 2014.
The relevant personnel at Hills and Hills Health Solutions at the relevant times were: Mr Edward Pretty (known as Ted), the Chief Executive Officer of Hills; Mr David Starkey, who from September 2013 to October 2016 was the Divisional Commercial Finance Manager for Hills Health Solutions; Mr Mark White, the director of Mergers and Acquisitions at Hills during 2014; and Ms Peta Jurd (an employee of Hills from January 2013 to April 2015, who became the head of Hills Health Solutions). Also employed in the business as a consultant was Mr Janarthanan Rajasingam.
Mr White and Ms Jurd together conducted Hills Health Solutions' due diligence in respect of Questek prior to the acquisition of its business by Hills Health Solutions.
As noted above, Mr Linderman became Operation and Sales Manager for Hills Health Solutions after it acquired Questek's business in April 2014. He resigned in February 2015.

[7]

Initial discussions between Stellar Vision and Questek

In mid-February 2013, Mr McCarthy (as noted above, the Chief Executive Officer of Stellar Vision) was approached by Mr Linderman (then the Technical Sales Manager of the entity which owned Questek) as to the possibility of Stellar Vision and Questek working together to provide PESs to hospitals.
As noted above, at around that time, Questek specialised in providing "nurse call systems" for use in hospitals. In 2013, Questek won a tender for the new Brisbane Children's Hospital (also known as Lady Cilento Children's Hospital), (to which I will refer as QCH), which was operated by Queensland Children's Health, for a combined nurse call system and PES. Questek did not have its own PES product. Mr Linderman requested Stellar Vision's assistance in providing a working model of a PES for demonstration at QCH.
From April 2013, representatives of Stellar Vision and Questek commenced discussions regarding the possibility of a joint venture between Stellar Vision and Questek. In essence, what was contemplated was that Questek (which had the reputation and experience working on government contracts and hardware installation in hospitals) would provide the hardware and Stellar Vision would provide the content and software for the PES (at that stage, the relevant PES being that which was required for the work for the QCH tender).

[8]

Outline of Agreement dated 23 May 2013 (Outline of Agreement)

Following an initial meeting on 10 April 2013, representatives of Stellar Vision and Questek negotiated a form of agreement to govern the work being undertaken for QCH and the proposed ongoing relationship between Stellar Vision and Questek.
On 3 May 2013, Stellar Vision sent to Questek a document entitled "Draft Outline of Contract for Discussion". On 6 May 2013, Questek provided a revised version of that document to Stellar Vision. The main issue in the negotiation appears to have been the extent to which Stellar Vision would be required to provide Questek with exclusive use of its software.
On 14 May 2013, representatives of Stellar Vision and representatives of Questek attended a meeting at which the terms of the draft agreement were discussed. The outcome of that discussion was that it was agreed that Stellar Vision would guarantee exclusivity for a period of one year from the date of the agreement.
On 23 May 2013, Stellar Vision and Questek executed a document entitled "Outline of Agreement" (the Outline of Agreement), which dealt with the services to be provided under the QCH project, as well as ongoing cooperation between the parties. (This is one of what Hills Health Solutions identifies as the two critical documents for the purposes of the present proceeding, the other being an Undertaking executed in March 2014 - see below.)
Relevantly, the Outline of Agreement included the following terms.
Under the heading "StellarVision's Obligations" the following appeared: StellarVision will provide: • Software for the server and Client terminals including all Client software to enable the functionality of specifications in Schedule B - Functionality Brief; • Unlimited use of the initial software for the life of the terminals; • Remote monitoring of the entertainment system; • Initial installation testing and ongoing support of the software for the Defect and Liability Period (DLP) of 2 years; • Onsite installation and commissioning of software as required until DLP expires; • Supply Questek with service faults via email to Questek support.
Under the heading "Questek's Warranties" the following appeared: Questek warrants that: • it has the capacity to support the warranties; • StellarVision will have continued remote access to the system subject to the Hospital Networks Security requirements; • it will not attempt to reverse engineer StellarVision's software systems or processes; • it is StellarVision's fiduciary with respect to the technical know-how and intellectual property which StellarVision is allowing Questec to use; • it will supply StellarVision with a SLA if the hospital takes up the opportunity; otherwise all service after the 2 year DLP will be a chargeable item; • the system will, when used, not breach the intellectual property rights of any other party; • the system will not be used to commit a criminal offence; • the system will not be used to breach any defamation laws

[9]

Stellar Vision demonstration at QCH - 11 June 2013

As noted above, Questek had been successful in winning a tender to provide PESs at QCH and had requested Stellar Vision's assistance in providing a working model of a PES for demonstration at QCH. Between April and May 2013, representatives of Questek and representatives of Stellar Vision exchanged emails regarding the demonstration; and Mr McCarthy and Dr Rahman worked together to complete the work in time for the on-site demonstration in Brisbane.
On 11 June 2013, Mr McCarthy, Mr Linderman and Dr Rahman conducted an on-site demonstration of the Stellar Vision PES at QCH. It appears that the demonstration was successful in that, from then, Stellar Vision continued to work with Questek in respect of the QCH project.

[10]

Discussions as to joint tenders and joint venture proposal - June-September 2013

Between June 2013 and September 2013 (as contemplated by the Outline of Agreement), representatives of Stellar Vision and Questek engaged in discussions regarding other requests for tender and the possibility of entering into a joint venture.
On 13 June 2013, Mr Linderman sent to Mr McCarthy a request for tender for PES as part another project, of the Box Hill Hospital Redevelopment Project, for which Questek wanted to tender, with a covering email that included: Please have a look at the requirements of the attached project can you please have a quick look at it as we are going for it and as discussed it's a short time frame. Please also have a think about the best way to manage the project from the Questek/Stellar view as discussed the more risk the bigger the return. Now you have seen the QCH project that should give you a good idea of what's required.
Mr McCarthy's evidence (see his affidavit sworn 12 July 2017 at [31]) is that at around that time he had a conversation with Mr Linderman to the following effect: Mr McCarthy: If we are actually putting in for a fresh tender here, without yet having a joint venture company in place, we have to make sure we brand all submissions with both Stellar and Questek logos. The bulk of the work will be done by you and me anyway. We just have to make sure the various hospitals know that. Mr Linderman: Of course, mate, of course.
Pausing here, it is evident from the above exchange that, as at mid-June 2013, Stellar Vision (i.e., Mr McCarthy) did not consider there to be a joint venture (at least formally) in place between itself and Questek.
On 27 June 2013, there was a meeting between representatives of Stellar Vision and Questek at which the work required to submit joint tenders was discussed; each project being described as a "bucket", with each party to contribute to that bucket.
On 6 July 2013, Mr McLaughlin sent an email to Mr Brighton, in which he set out the items that Stellar Vision would contribute to the "bucket", Stellar Vision's contribution there said to include: software, networks, headend streamers, media servers, data storage, "DRM", content, project management, business development and maintenance. Mr McLaughlin there said: … As I said this is a starting point if Daniel [Linderman] could progress from your end and the [sic] both he and Brendan [McCarthy] work this up where we can agree on all the items that would be great. We are currently evaluating a number of models for joint ventures that we have been involved with and once we have all the information we can progress. I want to point out that it is our intent to try and work this through to a satisfactory conclusion for both parties. Also we want to keep it as simple as possible. …

[11]

WSLHD Request for Proposal - September 2013

On 25 September 2013 (by which time there had still been no agreement reached between Stellar Vision and Questek as to the form of any joint venture arrangement between them - an equity arrangement still being under discussion at least from Stellar Vision's perspective), HealthShare NSW (an incorporated State Government body which I understand acts as the procurement arm of the NSW Department of Health) issued a Request for Proposal (RFP) for the provision or supply of a PES for WSLHD. An addendum to the RFP subsequently was issued on 18 October 2013. Mr Linderman forwarded both the RFP and the addendum to Mr McCarthy, at the time each was issued.

[12]

October 2013 communications in relation to proposed Questek/Stellar Vision joint venture

On 1 October 2013, a discussion took place between Mr McLaughlin and Mr Linderman, to which Mr Linderman made reference in an email sent on 2 October 2013 to Mr McLaughlin: Thanks for the catch up yesterday, as discussed Darren [Brighton] has advised me that we will not be able to do an equity share in Questek at this stage. Following on from that we would like to still look to a joint venture for Healthcare & Aged Care (StellaQuest) with the details discussed yesterday: 1. Stellar Group to supply StellaQuest with software code/system based around the QCH supplied project to build off. 2. Allow StellaQuest to operate in all countries that the parent companies operate in. 3. Allow StellaQuest to build the code and system for the Aged and Healthcare & Home Care market. 4. Stellar Group and Questek to supply Programming services as required according to StellaQuest requirements at lowest agreed rate. 5. Questek to supply Marketing, Sales, Art Work, [sic] Installations and Project management services to StellaQuest at lowest agreed rate. There are also other points you will need to add but this should be a good start.
On 9 October 2013, Mr McLaughlin (Stellar Vision) responded: Thanks for your note. I wish to point out that our greater interest would be for Stellar Entertainment to acquire an equity stake in Questek. We believe this is the best option and have engaged someone to evaluate this as our preferred option [it seems that this was Mr Curtin who had been engaged as a consultant in or around October 2013]. Is this totally off the table? As I see it, the sticking issue for a JV is around our IP. From our point of view this is not a negotiable item it stays with the company that owns it, and that is Starplex. StellarVision licenses any software from this company and we would only enter into an arrangement where the software is licensed. We have tried since Sept 5 to move forward on your proposed equity position with no reply till your phone call of Oct 1. We feel as though we are going around in circles. If any equity position is not on the table and based on our position that the IP for the software is not part of any JV deal, is there any point in pursing [sic] a JV relationship? Our position at this stage is to quote purely as a supplier and if an equity position is on the table then let's have a discussion. [my emphasis]

[13]

Position regarding the RFP

On 21 October 2013, Mr McLaughlin sent an email to Mr Brighton, in which he advised that Stellar Vision intended directly to tender for the WSLHD project: As I said our preferred position was an equity stake. …. The proposition below still requires a lot of detail and will take time to flesh out. The most pressing thing at the moment is the NSW hospital tender. Given we have not been able to agree on a path moving forward I need to inform you we will tender for this direct. As I said previously I feel we have gone around in a circle as it is our intent to have an agreement. However what is table [sic] needs a lot more discussion as it not what we are looking for. However happy to keep discussions going.
Mr McCarthy's evidence is that he understood that, by taking this position, Stellar Vision would "put some pressure on Questek to move forward with a joint venture". (Again, however, this makes clear that Stellar Vision did not understand there to be any formal joint venture in place at this stage insofar as it considered it was free to tender separately for the WSLHD project)
Mr Rhodes (of Questek) responded to this email on the same day, stating: I have been working with both Darren Brighton and Daniel Linderman to build a "go to market" plan with the Stellar Entertainment solution (that we have installed into QCH), both nationally and Internationally. It seems from your view, that the planned negotiations to work together for this market are failing, thus you perceive the best step forward is to quote installations into our agreed market yourselves. I ask that you honor [sic] our current agreement [presumably a reference to the Outline of Agreement which provided for bona fide discussions - see above] and work with me to conclude our negotiations within the next 7 days. …
The 21 October 2013 email from Mr Rhodes identified three options: an "exclusivity agreement", a "joint venture" (using a new entity with a 50/50 share agreement); and an equity purchase (though, as noted above, Mr Brighton had previously made clear that an equity purchase was "off the table").
There was some discussion internally within Stellar Vision as to how to respond to this proposal. On 22 October 2013, Mr Lynch (of Stellar Vision) wrote to Mr McCarthy, stating that "[m]y feeling is that we go it alone on this current tender…In the absence of a long term deal we thought it best wee [sic] do this one alone until we can conclude a deal , [sic] it could then be rolled into the deal if we are successful". Mr Lynch subsequently wrote that "[o]ur best chance is to do a joint bid but [presciently as it turned out] not until we have a tight shareholders agreement in place". Mr McCarthy responded that "I am working on the notion that the tender process [is] the beauty parade and if [we] get in front of them the more commercial discussions can be had. […] Agree joint bid higher probability".

[14]

Preparation of response to RFP

It is not disputed that Stellar Vision and Questek worked together in preparation of the response to the RFP. In particular, Mr McCarthy and Mr Linderman exchanged emails in respect of the RFP, and Mr Linderman was provided with shared access to the technical specifications document that Mr McCarthy and Dr Rahman were preparing in response to the RFP. Stellar Vision points to Dr Rahman's evidence (in his affidavit sworn 10 July 2017 at [20]) that "there were no secrets between Stellar Vision and Mr Linderman" in the process of preparing the response to the WSLHD tender and that Stellar Vision and Questek "shared every bit of information". That evidence was not the subject of any challenge (but is also not inconsistent with Stellar Vision simply taking the commercial risk that negotiations for a joint venture or other arrangement would not be concluded but wishing to be part of the "beauty parade").

[15]

Response to RFP - October 2013

On 25 October 2013, the response to the RFP was submitted. It is not disputed that it was in Questek's sole name (a sole tenderer being a requirement of the RFP). Stellar Vision says that it was primarily responsible for preparing the technical specifications forming part of the response; and that Questek was primarily responsible for the corporate and compliance parts of the response, and the executive summary.
The executive summary included in the response to RFP was provided on a letter bearing the logos of both Questek and Stellar Vision. Stellar Vision says that the text of the executive summary made it clear that the response to the RFP was a joint response from Stellar Vision and Questek, noting that there was extensive reference to both Questek and Stellar Vision, including reference to their "combined resources" and a description of the companies as a "truly unique partnership", as follows: Our submission combines the resources of two leading Australian companies from Healthcare and Entertainment. Questek is an Australian owned company with over 30 years experience in providing healthcare communication solutions… … Stellar Entertainment (Stellar) is also an Australian owned company with over 30 year of [sic] experience in Entertainment content, systems, software and solutions. … … The combined resources offer a truly unique partnership, leaders in Australian healthcare and entertainment technology and solutions, developers not integrators of hardware and software, direct access to the largest Hollywood studios, entertainment programming, and knowhow and a shared focus to provide simple, cost effective solutions that deliver the best experience for you and your patients. The combined resources also mean the support of over 60 dedicated staff and over $60 million in revenue per year.
The response included reference to the resources, experience and turnover of both Questek and Stellar Vision; financial information concerning the Stellar group; references provided to the Stellar group by Virgin Australia, Garuda Indonesia and Malaysia Airlines; and a document entitled "StellarVision PES Packages", which identified the available content and functions in respect of each identified package. The response also included images of PES terminals branded "StellarVision".
The response did not include any references or financial statements in respect of Questek. Mr McCarthy's evidence is that he included that material in respect of the Stellar Group in the response because he understood that was a requirement of submitting a compliant tender. (The relevance of this understanding is moot.)

[16]

November 2013 presentation

On 7 November 2013, Mr Linderman received an email inviting him to make a presentation in respect of the proposal. Mr McCarthy's internal report following receipt of this notification was that "Questek as principle [sic] (and thus StellarVisionas [sic]) have been short listed [sic] and move to the next round of the WSLHD Tender". Mr McCarthy and Mr Linderman worked together to prepare the presentation.
On 11 November 2013, Mr Linderman and Mr McCarthy attended the presentation at Westmead Hospital. Mr Linderman made the formal presentation and Mr McCarthy was involved in answering the questions that followed. Mr McCarthy's evidence was that, during the presentation, Mr Linderman said words to the effect: Questek and Stellar Vision are two companies with related and complementary strengths. While Questek, as you know, has over 30 years' experience in nurse call, Stellar Vision brings over 30 years of experience in content and entertainment. In coming together to make this joint bid and combining our individual strengths, we are confident we provide to you a unique made-in-Australia offering.
The PowerPoint slides used at the presentation featured the Questek and Stellar Entertainment logos (giving each equal prominence); included a slide headed "benefits of using Stellar / Questek"; and included images of PESs labelled "StellarVision" and "Questek Australia".

[17]

Hills' due diligence regarding Questek - November 2013 to April 2014

From November 2013 until April 2014 (when Hills Health Solutions acquired Questek's business), Hills conducted due diligence in respect of Questek and Stellar Vision. (Stellar Vision emphasises that this due diligence occurred in the context of Questek and Stellar Vision having submitted a "joint response" to the WSLHD tender, and in the context of Stellar Vision and Questek negotiating entry into a proposed formal joint venture agreement.)

[18]

Ongoing joint venture discussions

On 12 November 2013, Mr Curtin attended a meeting with representatives of Questek to discuss the options identified in Mr Rhodes' 21 October 2013 email (see above). At that meeting, Mr Curtin identified that the Stellar group was likely to favour a joint venture. Mr Curtin's understanding at the meeting was that Questek would consider that preference and would communicate its view to Mr Curtin.
On 19 November 2013, Mr Rhodes sent an email to Mr Curtin confirming Questek's position, which provided: Thank you again for your time last week to discuss the future of Stellar and Questek (BTG) moving forward. After our discussions, Darren [Brighton] and I have agreed that the best way forward, with the best outcome for each company, is a Joint Venture. Can you please start drafting what the JV would look like and the roles and responsibilities of each company?
By this stage, therefore, it seems that both parties had at least argued that the option best for each would be a joint venture but there was hardly an agreement as to how it was to be structured or the like.

[19]

Status of WSLHD tender in November 2013

On 25 November 2013, Mr Linderman sent an email to Mr McCarthy regarding the status of the WSLHD tender, referring to "Questek/Stellar": Re: WSLHD I spoke to Margaret from WSLHD today, The committee group have made their decision and have forward the details to the Head board to assess the "final decision" on who they wish to go with for the 1200 bed PES tender. This is a good thing at this stage I believe the running will now be out of [sic] Healthvue and Questek/Stellar. All going well she will be back to us by the 15th December 2013. Note: When I asked her how our tender was progressing she replied they had forward [sic] it on to the board.

[20]

Stellar Vision informed of Hills' offer for Questek

On 27 November 2013, Mr Curtin attended a further meeting with representatives of Questek to discuss the joint venture. During this meeting, Mr Curtin confirmed that drafting of a joint venture agreement was underway; and Mr Rhodes communicated that Hills had made an offer for Questek, and that Questek and Hills were likely to reach an agreement.
Mr Curtin sent an email to Mr Lynch on 28 November 2013 advising that: You may have heard that I met yesterday with Questek to discuss the terms of a Joint Venture. The discussion went well and we are in full agreement on the broad terms to be included in an agreement. The important news is that Hills are in discussions to purchase Questek and Hills are aware and in agreement with the JV with Stellar which will be part of the purchase. This should be of great benefit to StellarVision giving us a significantly stronger JV partner with prospects of more rapid market penetration given Hills [sic] customer base. I will discuss drafting of the JV Agreement with Wade today.
Hills Health Solutions points out (and I accept) that at this stage there were still ongoing discussions about arrangements other than a joint venture; noting that on 28 November 2013, Mr McLaughlin wrote to Mr Lynch, advising that "I got a call from Darren Brighton today confirming what Bryan [Curtin] has said. He went on to ask if we were interested in an equity stake in his business. My reply was that since the initial proposal we have moved on as we thought it was off the table. However we are more than happy with the JV and our commitment there".

[21]

Discussion regarding the documentation of joint venture agreement

On 2 December 2013, Mr Brighton sent an email to Mr Curtin stating: Thanks for your time last week, I believe we have the foundations for a great business JV and would like to ask of you to provide a timetable for the process to get this JV agreement done ASAP, based on our current opportunities My thoughts would be to make a simple one pager letter of intent to have a new JV agreement between Questek and Stella Group? and the following key points:- Name of the new Venture to be agreed by both parties (Questel or TED - Television Entertainment Distribution, as an example of some names) Shareholding to be equal between both investment Initial investment of $250k per partner Daniel Linderman and Brendan McCarthy to be paid equal base salary with commission structure based on set KPI If you would like to get together to discuss the next step, I'm keen to get this agreement tied up ASAP, as to have a clear picture moving forward.
A "JV template" was sent by Stellar Vision's lawyers on 3 December 2013 to Stellar Vision, and circulated to Questek.

[22]

Discussions as to the proposed deal between Hills and Questek

On 3 December 2013, Mr Brighton emailed Mr Curtin and Mr Rhodes, stating: Can I suggest we kick off the JV for 3rd February as the planned settlement for hills is February, unless your [sic] happy to get it done and started for Jan 1st and my funds will go in February and I simply pay Daniels salary until 3rd February. As soon as I get the agreement, I will pass to my lawyer for advice and hopefully we can get a heads of agreement signed prior and subject to legals being completed
Stellar Vision says that, by this time, it was apparent to it that Hills Health Solutions would be purchasing the assets of Questek.
On 24 December 2013, Mr McCarthy sent an email to Mr Curtin (and others): Dan [Rhodes] is telling me that the Questek / Hills commercials have been agreed again and some due diligence for them to do on some technology on nurse call side and then he feels the deal will be signed. Dan feels Darren [Brighton] received an extra $600-750k in his total price for the JV to be included in his deal. Previously Hills did not want to include any value for our JV and Darren advised he would do on his own and compete. Ted P [Pretty; CEO of Hills] came back to him and advised he does want the JV. Darren is thus keen for an update on where our JV agreement is at ? Bryan/Peter could you please send Darren an update on where agreement is at. [Emphasis as per Stellar Vision's submissions]
Mr Curtin's evidence is that, after receiving that email, he had a conversation with Mr Brighton during which they discussed the status of the joint venture agreement between Stellar Vision and Questek and Mr Brighton informed Mr Curtin that "[a]s Hills will be buying the communications assets, they will have input into the joint venture agreement". The content of this conversation was recorded in an internal email sent on 24 December 2013 by Mr Curtin to Mr McCarthy, Mr McLaughlin and Mr Lynch: I have spoken to Darren [Brighton] this morning. He confirmed he has now signed a Heads of Agreement with Hills with targeted finalisation date of 28 February 2014. We had already agreed to move forward on the JV Agreement which I have yet to send [to] him. After a hiatus following advice that the Hills deals was [sic] off or deferred, I am now marking up the template for Wade to amend after his Christmas break. Darren explained that Hills increased the price to include "the Communications assets" that Questek is including in the sale. He advised that Hills will have input into the JV Agreement. …

[23]

January 2014 preliminary meeting between Stellar Vision, Questek and Hills

On 21 January 2014, representatives of Stellar Vision, Questek and Hills attended a preliminary meeting, seemingly as part of Hills' due diligence in respect of its acquisition of Questek. At this meeting, Ms Jurd seems to have requested a demonstration of Stellar Vision's PES system (see below).

[24]

Draft "Shareholders Agreement"

On 23 January 2014, Mr Curtin sent a copy of a draft "Shareholders Agreement" to Mr Brighton (this apparently being what was then contemplated to be the joint venture agreement); and Ms Jurd was provided with a copy of this draft agreement around that time. Schedule 1 to the draft agreement set out the proposed respective obligations of Stellar Vision and Questek (subject to further negotiation): 1. Stellar's Obligations 1.1. In order to facilitate the proper conduct of the Business, Stellar will do all things necessary to ensure that provides [sic] to the Company [i.e., the proposed joint venture company] the following: (a) A Licence in the form attached … for the use of the Proprietary Software for the operation of a Patient Entertainment System as per the specifications outlined … 1.2 In order to facilitate the proper conduct of the Business, Stellar will provide to the Company, the following: (a) Initial installation of the Proprietary Software. (b) Initial testing of the Proprietary Software and the PES as a functioning network. 2 Questek's Obligations In order to facilitate the proper conduct of the Business, Questek will provide to the Company the following: (a) A transfer of all Questek's existing rights under the contract between Questek Australia Pty Ltd and the Queensland Children's Hospital [insert specifics of contract ie: precise entities and execution dates]. (b) [insert clause obligating Questek to refer all other potential contracts to the JV Company?] (c) Access to all Client premises as and when required for the initial installation and testing of the Proprietary Software and PES. (d) All relevant knowledge which may be required by the Company for the initial installation and test of the Proprietary Software and the PES in a hospital or aged care environment. …

[25]

Draft confidentiality agreement

On 28 January 2014, Ms Jurd sent an email to Mr McCarthy in respect of the proposed demonstration that had been scheduled for 30 January 2014. That email, which attached a draft form of confidentiality agreement, stated: Please find attached a mutual Confidentiality Agreement to cover both Hills and Stellar in relation to our discussions on Thursday. If you could execute before Thursday that would be great. Mark White and I would like to chat with you, and whomever else you believe is relevant, before the larger group joins on Thursday. We would like to understand what Stellar is looking to achieve from the JV with Questek and, along with Hills [sic] objectives, ensure that the structure is the most appropriate for both parties going forward. We are excited by what we heard last week and are looking forward to seeing the system live on Thursday.
Pausing here, it is clear from this that Ms Jurd did not understand that there was any binding agreement at that stage in relation to a joint venture between Stellar Vision and Questek since she is referring to ensuring that the "structure is the most appropriate for both parties going forward". (This is relevant in light of the submissions made by Stellar Vision as to the knowledge gleaned by Hills Health Solutions from its due diligence.)
The confidentiality agreement was not in fact signed before the demonstration (although it was subsequently executed by Stellar Vision, on 31 January 2014, and by Hills). The "Approved Purpose" was defined in the confidentiality agreement as: [T]o assist the [party receiving the confidential information] to assess the commercial feasibility of entering into a joint venture with respect to the provision of patient entertainment systems in the health and aged care industry sectors in Australia.
On 30 January 2014, prior to the meeting at which the demonstration was given, Mr Linderman emailed to Ms Jurd the Outline of Agreement, describing it as "the current agreement that Questek and Stellar are operating under".
On 28 January 2014, Mr McCarthy wrote to Mr Curtin, stating that "[a]s expected they [presumably Hills] are looking at options other than a JV eg license [sic] agreement only or some other structure". Mr Curtin responded, stating that "[i]t is not surprising that Hills are exploring an alternative structure. We anticipated Hills may want to eventually take all the direct relationship business with the hospitals and simply pay to licence the software. Questek took the view that we should pool our resources in a JV and not compete directly in the hospital market". There is no suggestion in this internal email that Stellar Vision understood there to be some binding joint venture arrangement already in place with Questek; or that Hills might not be free to negotiate its own terms for any ongoing arrangement with Stellar Vision.

[26]

Demonstration on 30 January 2014

On 30 January 2014, at Stellar Vision's offices in Glebe, Dr Rahman demonstrated to representatives of Hills and Questek including Ms Jurd and others the software that Stellar Vision had been developing to meet the WSLHD tender requirements. This included a full demonstration on an Android terminal. It is noted by Stellar Vision that no complaint was then made about any deficiencies with the demonstration.
Mr McCarthy's evidence is that Mr Fiorini (of Hills Health Solutions) and Ms Jurd said words to the following effect at the demonstration: Mr Fiorini: We previously reviewed Android players but we have found that they crash after a few minutes. It is quite impressive that you have been able to resolve this technical issue - this is the first one I have seen work. Ms Jurd: Yes, I agree. I have seen a few platforms both here and overseas and your one is the most impressive.
During that meeting, Ms Jurd discussed the status of the joint venture negotiations between Questek and Stellar Vision; and the WSLHD Contract. Ms Jurd indicated that she had reviewed the draft joint venture agreement; that Hills could not agree to the proposed exclusivity provisions given Hills' other businesses; and that Hills had a general policy against joint ventures.
Following the meeting, Mr White sent an email to Mr Curtin and Mr McCarthy: Thanks Bryan and Brendan for your time today. Peta and I will come back to you with suggested next steps re the workshop we mentioned to further discuss the market opportunity and potential GTM [go to market] options… ie JV, licencing [sic] etc

[27]

Tender request for information

On 3 February 2014, Ms Margaret Edwards Sutcliffe of HealthShare NSW sent an email to Mr Linderman raising a series of questions in respect of the WSLHD tender, including: Installation timeframe if Questek / Stellar International were successful for this business would be three (3) months
Mr McCarthy and Mr Linderman discussed the response to that request for further information. (Stellar Vision points out that HealthShare was there referring to "Questek / Stellar".)

[28]

February 2014 joint venture discussions

On 4 February 2014, Mr McCarthy sent Mr Linderman an email, asking: Is it worth both you and I sitting down with Peta [Jurd] to talk through the JV, how it came about, how we have been operating over the past 6 months as we worked towards its formalisation, and what our aim and plans where for it once formalised ?
Mr Linderman responded to this the same day that: I will ask her tomorrow. Tomorrow is not just based around stellar. Its more about the HTR business and what we are doing with it and we will discuss what they want out of stellar to ensure it fits in with there [sic] objectives. I will ensure you get the opportunity to talk with her prior to any direction being finalized [sic].

[29]

WSLHD tender awarded - 5 February 2014

On 5 February 2014, the WSLHD tender was awarded (in its terms, to Questek). On the same day, Hills Health Solutions was informed that the tender had been awarded.
On 5 February 2014, Mr McCarthy sent an email to Mr Lynch, Mr Curtin and Mr McLaughlin: As discussed please see attached the Letter of Offer in relation to the Tender Submission the JV participated in. I have also attached the Executive Summary from the RFP Response. This is a great result as it demonstrates the JVs [sic] ability and potential to compete with the biggest names in the industry. The timing in light of Hills discussions a positive as well … We have some serious work ahead of us. This is a super contract to have in hand.
Mr Curtin's reference to the "JV" can only be to his understanding of the arrangements between Stellar Vision and Questek since it is abundantly clear that at that stage there was no joint venture agreement (formal or otherwise) with Hills Health Solutions. However, the joint venture arrangements had been finalised with Questek.
On 6 February 2014, Mr Linderman sent an email to Mr White, attaching a "workout doc" used during the tender process for the WSLHD tender. Hills Health Solutions notes that the attached spreadsheet made no reference to a profit share with Stellar Vision.
On 23 February 2014, Mr Lynch sent an email to Mr McLaughlin, stating that "[s]poke to Darren [Brighton] just now. He wanted to know how we felt about Western Sydney deal. I said we are just waiting on the sidelines to see what he does but we are relaxed either way, we can see the benefits of both options and are happy to fit in with his decision". (This seemingly refers to the two options being whether Questek proceeded with the Hills' buy-out or did not.)

[30]

Meetings in respect of the WSLHD project

On 26 February 2014, there was a meeting attended by representatives from NSW Health (Mr Noone and Mr Burnett), Mr McCarthy and Mr Linderman. Mr McCarthy's evidence is that, during this meeting, the following exchange took place with Mr Noone (from WSLHD): Mr McCarthy: As you know, our tender bid was a joint submission and we will need to change the tender entity from Questek to the joint venture entity when it is formed. How do we go about arranging to change their name on the contract for the tender? Mr Noone: This isn't usually a problem - we have done it in the past. Once you are ready, you will need to discuss this with HealthShare NSW as they look after the contract side of things.
Following this meeting, Mr McCarthy sent an email on 27 February 2014 to Mr Linderman stating that: The feedback we received yesterday from our initial WSLHD meeting was that we should raise any contractual points, such as an entity change to the incorporated joint venture (no real change to what we are and have been doing just formalizing). They did not appear to have any real issue around an entity change. The second main point on contract start date they also felt was reasonable. Again the earlier we flag the better as they suggested. Bryan [McCarthy] and I will have an intense read of the deed/contract draft previously supplied and mark up any sections for our discussions. We should get together to compare markups and communicate these back to Health Services. The sense I got was we should be looking to get this back to Margaret before they issue contract from there [sic] end.
Mr Linderman's response to Mr McCarthy the same day was that: Yes it was a great meeting. I think this will begin the Rollin effect for a great future together. At this stage I cannot ask to change the contract details without having any details to change it to. We are all keen to change it and move ahead with the JV but until hills [sic] are in or out we will need to sit tight. I will have a chat with Darren [Brighton] and Daniel [Rhodes] tomorrow morning and see what our options are to action the JV based around even just the current projects at hand and tendered ones. Darren believes that hills [sic] will be more than happy to do the deal between Stellar / Questek-Hills as first planed [sic]. Again this will be cleared up over the next 2 weeks. At this stage we should focus on the hardware and software delivery options to them and as Matthew mentioned they would be happy to transfer details on the contract at a latter [sic] date if required. We understand your concerns / frustrations to lockup the deal with WSLHD but after yesterday's meeting I feel we have about 4 to 5 weeks of contract talk with WSLHD and in this time we can amend the documents to the JV details once finalized.

[31]

Meeting 13 March 2014

On 13 March 2014, there was a meeting attended by Mr Linderman (still at Questek), Ms Jurd and Mr White (of Hills) and Mr Curtin (of Stellar Vision). Mr Curtin's evidence is that during that meeting, there was a conversation to the following effect: Mr White: What makes you think you have an interest in the Western Sydney tender? Mr Curtin: Stellar Vision submitted the tender jointly with Questek under an agreement that the contract would be entered into by the joint venture. This was in compliance with the Outline of Agreement reached with Questek under which Stellar and Questek agreed to work together in a project-by-project joint venture arrangement. Stellar Vision in fact wrote the tender response based on Stellar Vision's software, and the tender has Stellar Vision's name all over it. Questek's [sic] simply acted as a facilitator given its existing relationship with the client. Ms Jurd: Instead of a joint venture, we will put in a structure where Stellar Vision gets the same financial outcome. We are about to finalise the deal with Questek and are completing the final legal documents. As part of this we need you to sign this letter which I will give you in draft form to review and come back to us.
Stellar Vision says that, while Hills or Ms Jurd may have wished to put in place a structure other than a joint venture in which Stellar Vision obtained the same financial outcome, this was not a possible outcome (in the absence of agreement from Stellar Vision), in light of the relationship between the parties in respect of the WSLHD tender. That, however, appears to be predicated on Stellar Vision's trust claims succeeding, since the Outline of Agreement did not contain a concluded agreement as to how Stellar Vision and Questek would work together on future projects. In any event it is noted that such statements pre-date the signing of the Undertaking (see below). More significantly, my view is to note that Stellar Vision is not suing on any representation by Hills that it would "put in a structuring" where Stellar Vision got the same financial outcome as a joint venture.
Hills Health Solutions says that the above conversation did no more than put Hills Health Solutions on notice of what it already knew, namely, that the WSLHD tender was understood by Stellar Vision to be a "joint tender" and, consistent with the documents that had been provided to Hills Health Solutions at that date, that Stellar Vision and Questek were working towards some form of agreement (which may or may not ultimately have been a "joint venture" of some sort). I agree. The draft letter provided at the meeting on 13 March 2014 (with amendments) was ultimately executed on 24 March 2014 (the Undertaking).

[32]

Draft 13 March 2014 letter

The 13 March 2014 letter provided to Stellar Vision at the meeting on that date took the form of a draft undertaking and in effect sought confirmation that Stellar Vision would continue to supply the software for the QCH contract on the same terms as contained in the Outline of Agreement, and any open purchase orders, tenders and/or requests for proposal jointly submitted by Questek and Stellar Vision. The letter, which underwent a number of iterations, in its first version sought the following consent and undertaking from Stellar Vision: 1) Consent to assignment Stellar consents to the [assignment/novation] of the QCH Outline of Agreement dated 23 May 2013 between Stellar and Questek Australia to Hills with effect from completion of the Questek acquisition. 2) Undertaking in regards to future contracts Stellar acknowledges that Questek Australia have jointly submitted Tenders and Pitches. Stellar undertakes to Hills that if there is a successful Tender and/or Pitch, Stellar will supply to Hills the software for the Questek entertainment products which are the subject of that Tender and/or Pitch on the terms set out in the Tenders and Pitches or any additional terms which are necessary to reflect any final awarded contract arising from Tenders and Pitches.
In submissions, Hills Health Solutions points out (see T 347.9-10) that the consent sought to the assignment of the "QCH Outline of Agreement" was for the benefit of Hills Health Solutions in that it was seeking to ensure that when it acquired the Questek business it did so with the software provider (Stellar Vision) to continue on the same terms to provide the PES software.
Mr Curtin's evidence is that he was concerned that the draft undertaking characterised Stellar Vision as the "software and content" supplier to Hills Health Solutions, rather than as a joint venture partner with Questek, and that the letter did not identify all the joint projects (Annexure A to the draft letter being blank). As such, Stellar Vision says that the draft undertaking letter is appropriately characterised as Ms Jurd's attempt to create a different arrangement that did not involve any joint venture between Hills and Stellar Vision in respect of existing tenders (including the WSLHD tender) or more generally. It is said (consistent with Hills Health Solutions' submissions) that it was directed to protecting Hills Health Solutions' position to ensure the involvement of Stellar Vision in relation to, inter alia, the WSLHD project post-acquisition.

[33]

Revisions to Draft Undertaking

Following the meeting on 13 March 2014, Mr Linderman sent an email to Ms Jurd, identifying all the projects that were joint Questek and Stellar Vision projects, and the status of those projects as follows: The following are the projects as discussed: - Queensland children's hospital - Project under progress - Western Area Health - Won - Nepean Area Health - Tender in progress - Caboolture Public Hospital - Won - Northern Beaches - Tender in progress - Perth children's = Under discussion / awaiting Bart to arrange demo - Able Tasman - Aged care potential demo site to release aged care platform - Dubbo Base Hospital- Under discussion / awaiting meeting after NC installation … VCCC Melbourne
On or about 13 or 14 March 2014, Mr Curtin and Ms Jurd had a discussion during which Mr Curtin indicated that the draft 13 March undertaking did not adequately address the WSLHD tender (amongst other things). Mr Curtin's evidence is that he and Ms Jurd had a conversation to the following effect: Mr Curtin: There are still some things missing from the letter. The bids and tenders need to be added in, for example the Western Sydney tender and the Northern Beaches tender. Ms Jurd: I will send you a revised letter shortly.
On 14 March 2014, Ms Jurd sent a revised version of the draft undertaking to Mr Curtin. The covering email stated: Attached is a revised Undertaking document which has been updated following our meeting yesterday to better reflect [sic] Western Sydney. Based on the information that Daniel [Linderman] has provided to us we are proposing that the following contracts would be included in the attachment. - Queensland children's hospital - Project under progress - Western Area Health - won - Nepean Area Health - Tender in progress - Caboolture Public Hospital - Won - Northern Beaches - Tender in progress Would you be able to provide some feedback to us on Monday please so we can progress with the Questek transaction. …
The revised draft undertaking contained the following additions in respect of the WSLHD tender (that were not included in the original draft): … In connection with the acquisition, Hills seeks confirmation from you that Stellar will continue to supply the software for the Questek patient entertainment system under: … (b) the tender for the Western Sydney Local Health District ("WSLHD") on the terms set out in the WSLHD Request for Proposal or on any additional terms which are necessary to reflect and final awarded contract; … … With respect to WSLHD, Hills acknowledges that Stellar will seek to be named as a party in any final awarded contract relating to WSLHD. If WSLHD does not agree to Stellar being named as a party or if Stellar is not named as a party to the final awarded contract relating to WSLHD, Stellar undertakes to Hills that Stellar will continue to supply Hills the software for the Questek patient entertainment system that is the subject of such final awarded contract. … 2) Undertaking in regards to WSLHD Stellar acknowledges that Questek Australia has been selected as a preferred supplier of the WSLHD tender for patient entertainment systems. Stellar undertakes to Hills that if this tender is awarded to Hills, Stellar will supply to Hills the software for the Questek entertainment products which are the subject of that tender on the terms of the Request for Proposal or any additional terms which are necessary to reflect any final awarded contract. …

[34]

24 March 2014 Undertaking

On 24 March 2014 (shortly prior to entry into the Business Purchase Agreement on 3 April 2014 - as to which timing Stellar Vision attaches some significance), Stellar Vision and Hills Health Solutions signed the written undertaking (Undertaking), which provided, relevantly: We acknowledge that Stellar and Questek Australia entered into negotiations which were summarised in the document entitled "Outline of Agreement" and dated 23 May 2013. Negotiations between the parties were undertaken as envisaged under the heading "Financial Cooperation" which negotiations were suspended at the request of Questek Australia in late 2013. We are aware that the time span envisaged in the document "Outline of Agreement" has in part expired and in part will expire in May of this year. It is our understanding that discussions with Stellar [sic] that Stellar is prepared to honour the spirit and intent of the document "Outline of Agreement" in respect to: (a) The Queensland Children's Hospital; and (b) Its intent outlined in Annexure A hereby for all the tenders that have been issued. We acknowledge that such tenders [which I interpose to note must be a reference to the tenders referred to in (b) above] have been submitted as joint tenders between Questek Australia and Stellar. [I also note here that this was inserted in the document at Stellar Vision's request - and Stellar Vision emphasises the acknowledgement of "joint tenders"] Stellar undertakes: (a) In relation to Queensland Children's Hospital to provide the service identified in the Outline Agreement. (b) Hills and Stellar acknowledge and agree that in relation to future contracts detailed in Annexure A the intent of the previous discussions between Questek Australia and Stellar will be honoured, specifically: 1. both parties, Hills and Stellar, will each contribute 50% of all contract implementation costs including labour, materials & ongoing operations costs for each project; 2. Stellar will licence [sic] the end user to utilise the software for the Term of the contract; This will not apply to any vendor owned systems e.g. WSLHD / NBMLHD tenders 3. both parties acknowledge that a core part of the value that the parties are contributing to this arrangement is, for Hills, access to the Questek customer base and for Stellar, access to the Stellar software and related support services; 4. both parties will split the gross profit 50/50 from all projects & any ongoing services (hospital & Sales commissions will be paid from gross revenues unless stated otherwise within tender documentation) (gross profit being gross income less hospital & Sales Commission); and 5. Both parties will have open access to all project & financial information as required. Hills undertakes to, within 4 weeks of settlement of the Questek Transaction, commence negotiations in good faith with Stellar to draft an agreement that suits both parties for a long term relationship.

[35]

Business Purchase Agreement - 3 April 2014

On 3 April 2014, Hills Health Solutions, Brighton Technology Group, Questek and others entered into a Business Purchase Agreement (the purchase being completed on that date).
The "Assets" transferred under the Business Purchase Agreement included the "Contracts" and "all other property and assets of the Sellers connected with the Business". The term "Contracts" was defined as: (a) the contracts and commitments entered into by a Seller in the ordinary course of conducting the Business; and (b) any rights under a tender which, upon acceptance, have or will give rise to a purchase order, contract or other commitment of, or related to the Business. (Stellar Vision says that those rights in relation to WSLHD were subject to its rights in relation to the joint tender.)
The Business Purchase Agreement also included as a condition precedent that "Key Contracts" be novated to Hills Health Solutions (cl 3.1(b)). The Outline of Agreement between Stellar Vision and Questek was identified as a "Key Contract". On the date of the Business Purchase Agreement, however, Hills Health Solutions waived this condition precedent.
Stellar Vision places emphasis on the fact that the due diligence material identified in the Business Purchase Agreement (Schedule 10) contained material relating to Stellar Vision and the WSLHD project. In particular, the due diligence material referred to in the Business Purchase Agreement included a document entitled "Current Relations with Stellar & Questek Infotainment", which included the following: Western Area Health - Won - Final details of start dates are being confirmed with health share. Stellar and Questek will be on the contract if a JV agreement is not finalized at this stage. [emphasis as per Stellar Vision's submissions]

[36]

ASX Announcement

At the time Hills announced its acquisition of Questek, the ASX announcement media release in respect of the acquisition attributed the following statement to Ms Jurd: This is another great strategic fit for our health solutions business … It is the market leader in wireless nurse call solutions, has respected, long-term customer relationships, and a new solution in entertainment through a partnership with Stellar Entertainment.
Stellar Vision says that it had not asked to be included in the ASX release and that it amounts to an acknowledgement of the partnership between Questek and Stellar Vision (see at T 304.13-14).
Ms Jurd forwarded the ASX announcement to Mr Curtin by email on 4 April 2014, stating: I am very pleased to advise that the Hills acquisition of Questek has completed. Thanks again for your assistance in making that happen.
Stellar Vision says that Mr Curtin's assistance in making the acquisition happen was through the Undertaking.

[37]

Position regarding Lincor

In October 2013, representatives of Hills had been in contact with Lincor in respect of the WSLHD Contract (in the context of HTR's ultimately unsuccessful bid for the WSLHD project). Stellar Vision's complaint is that, almost immediately after Hills Health Solutions acquired Questek's business, Hills Health Solutions started to consider the possibility of replacing Stellar Vision with Lincor.
Stellar Vision maintains that, at the same time as it was undertaking work on the WSLHD tender, Hills Health Solutions determined to exclude Stellar Vision from the WSLHD tender and to replace Stellar Vision with Lincor; and that this was not communicated to Stellar Vision. Stellar Vision says that this was due to Hills Health Solutions' relationship with Lincor and to Hills Health Solutions' dissatisfaction with Stellar Vision's conduct at QCH, and in particular to certain supposed ethical issues in Stellar Vision "going behind Hills Health Solutions' back" (to which I refer shortly). (In the absence of any evidence from Ms Jurd or Mr Linderman, Stellar Vision says that those inferences may be readily drawn.)
It certainly seems that Stellar Vision had some concern at the time as to the position of Lincor since, on 4 April 2014, Mr McCarthy wrote to Mr Curtin stating "[a]s we have discussed it feels like they [Hills Health Solutions] will now want to see our product installed and working at QCH as a first step as [their] view is [that] it is unproven and untested. Hills are still in talks with Lincor in relation to software and at this stage are looking to keep that option and line open".
On 7 April 2014, Mr Curtin emailed Ms Jurd, stating "We look forward to further discussions with you to reach agreement on how we work together in the future".
On 28 April 2014, Mr Linderman (by then at Hills Health Solutions) sent an email to Ms Jurd which stated: I have been reviewing the Lincor documents and can see it will be great to work with them but as Ted [Pretty] has already seen we really will need to be able to ether [sic] influence their design path or preferably own the path... I have reviewed the pricing for SCUH and there is diffidently [sic] some money to work of it. Unfortunately it looks like the system is designed using VMware that will have an oncost in licence fees for ever [sic] (to be confirmed). What I was after is some documentation on the back office and any documentation relating to design platforms and billing reporting & usage reports. Also If they have a product development path / along with standout features? E.g. Web RTC technologies for web based video conferencing. It would also be nice to know: If they are open to setting up an aged care platform (Something we need to invest into - maybe with them) Content Security? (Foxtel & VOD Content).

[38]

QCH project unpaid invoices

Meanwhile, on 7 and 22 April 2014, Mr Curtin emailed Ms Jurd regarding Stellar Vision's unpaid invoices in respect of the QCH project. (The outstanding invoices were paid on 17 July 2014.)

[39]

Continued work on the WSLHD tender

Following Hills Health Solutions' acquisition of Questek's business, Stellar Vision continued to work on the WSLHD tender. Stellar Vision says that this work occurred in the context of Stellar Vision seeking to discuss with Hills Health Solutions a more formal agreement as contemplated by the Agreed Undertaking.
In particular, Stellar Vision points to the fact that, throughout the period from April 2014 until at least November 2014, Dr Rahman and others from Stellar Vision worked to develop the software architecture, system design and services architecture for the WSLHD project; during the second half of 2014, Mr McCarthy and Mr Linderman worked together to source hardware in respect of the project, including Android terminals; and Dr Rahman's development team at Stellar Vision spent an estimated 80% of its time on customisation of Stellar Vision's core software for use on the WSLHD project. Dr Rahman has deposed (see at [30]) that he continued working on the customisation portal until the end of December 2014 and Stellar Vision says that he continued to work on the WSLHD project until late February 2015.
On 30 April 2014, Mr McCarthy emailed a "to do" list to Mr Linderman, one of which was "Update on WSLHD contract process. Request Dan to include and copy StellarVision in on all correspondence with WSLHD going forward".
On 1 May 2014, Mr Linderman responded to the above by annotating Mr McCarthy's 30 April 2014 email. The annotation for the WSLHD item was "Currently awaiting a call back from Mathew re Westmead renovation issues that may interfere with contract terms. (still yet to receive Risk based terminal from Advantech.)"
That same day, Mr McCarthy responded by further annotating the email: "Okay. As StellarVision are part of and carry risk on the contract we would like to be involved in any and all discussions and correspondence in relation to it. Bryan [Curtin] will handle the contract side from our end".

[40]

May 2014

On 13 May 2014, a meeting took place between Stellar Vision and Hills Health Solutions. Mr Curtin's evidence is that the purpose of the meeting was to fulfil the requirement in the Undertaking to commence negotiations on a formal agreement documenting the long term relationship between the parties within six weeks of the completion of Hills Health Solutions' acquisition of Questek. His evidence is that, at the meeting, Ms Jurd stated that "there is no rush to formalise the agreement between Hills and Stellar Vision while we are still waiting for the WS Contract to be signed. The obligations that each company is responsible for in the WS Contract will need to be incorporated into the agreement between Hills and Stellar Vision anyway. So once that is signed we can then do our agreement quickly". (This is inconsistent, at least on one view, with it being understood that there was already an agreement in place between the two companies.)

[41]

Meeting with WSLHD representatives - 16 May 2014

On 16 May 2014, Mr McCarthy and Mr Linderman attended a meeting with Mr Noone and Mr Burnett. During this meeting, the delayed start for Westmead hospital was discussed, and Mr Burnett proposed the concept of "total number of bed days" as a means of addressing this delay. This proposal was recorded in a discussion paper prepared for WSLHD on 26 May 2014 (and was subsequently incorporated into the final WSLHD Contract).

[42]

Hills Health Solutions' withdrawal from the QCH project

In early June 2014, representatives of Hills Health Solutions attended QCH and observed Stellar Vision's PES in operation at QCH, following which Ms Jurd emailed Mr McCarthy on 5 June 2014 to "to thank you and your team for the support you have been giving us on the QCH site" noting that "[i]t is a challenging project for all of us so the extra effort your team has been putting in is appreciated".
However, not long after this (during July 2014), Hills Health Solutions withdrew from the QCH project. (Stellar Vision says that this formed part of the factual background to Hills Health Solutions' pretext for excluding Stellar Vision from the WSLHD tender (see below) but it may be noted that it was some months after Mr Linderman had already recorded concerns as to the serviceability of Stellar Vision's product.)
Relevantly, the head contractor at the QCH project was Lendlease, which had subcontracted part of the work to Allied Technologies Pty Ltd (Allied), an electrical contractor which had in turn subcontracted part of the work to Questek.
On 12 June 2014, Allied issued a "show cause" notice to Hills Health Solutions (on the basis that Questek's subcontract with Allied had been novated to Hills Health Solutions). As I understand it, Allied asserted that Hills Health Solutions was fully liable for any failure of performance of the sub-contract. After receipt of the "show cause" notice, Hills Health Solutions ceased work in respect of the QCH project. (Pausing here, the position of Hills Health Solutions was that the contract had not been novated - see below.)
Stellar Vision says that, at that time, there were substantial problems on site (as identified in part in the show cause notice), including installation of nurse call systems in locations where cabling was not present, and a failure rate of approximately 30% for over door lights (which it says were issues related to Questek's nurse call system, rather than Stellar Vision's PES).

[43]

Lincor exclusive distribution agreement

On 5 June 2014 (Stellar Vision says this was shortly after the plan to seek to remove Stellar Vision from the WSLHD Contract and replace it with Lincor was identified - seemingly referring to the 27 May 2014 document above), Hills Health Solutions entered into an exclusive distribution agreement with Lincor Inc and Lincor Solutions Ltd. The agreement provided that: Hills Health Solutions would pay Lincor a "Right-To-Use Licence Fee" of US$1,500,000; Hills Health Solutions would pay a "Platform Licence Fee" of A$0.50 per bed per day; and the payment of the "Platform Licence Fee" would be offset against the "Right-To-Use Licence Fee" until an amount equal to US$1,500,000 had been offset.
Stellar Vision says that this agreement provided a commercial incentive for Hills Health Solutions to replace Stellar Vision on the WSLHD project, because engaging Lincor on the WSLHD project would allow Hills Health Solutions to start to recoup the "Right-To-Use Licence Fee" at no additional cost to Hills Health Solutions up to a value of US$1.5 million.

[44]

Request for name change on contract

On 3 July 2014, Stellar Vision sent an email to HealthShare NSW, requesting that the WSLHD Contract include both Questek and Stellar Vision as parties to the deed.
Stellar Vision says that this was consistent with previous discussions between the parties, and the position disclosed to Hills Health Solutions at the time of the Questek acquisition, where the document titled "Current Relations with Stellar & Questek Infotainment" regarding the status of the WSLHD project included the statement that: Stellar and Questek will be on the contract if a JV agreement is not finalized [sic] at this stage.
On 15 July 2014, Stellar Vision received an email in response to that request: Thank you for your email enquiry. In response, as the tender bid for Patient Entertainment & Information systems was solely in the name of Questek, we are unable to change this without advice from this company. I have approached Daniel Linderman from Questek and received advice that the Deed will remain in their name alone.
Mr McCarthy's evidence is that following receipt of the email of 15 July 2014 responding to the name change enquiry, he and Mr Linderman had a conversation during which Mr Linderman reassured Mr McCarthy and said words to the effect that it was "normal for Hills to front end the contract and the joint venture to operate behind it as we have discussed" and that "we will cover this off when the agreement is done". Relevantly, Mr McCarthy's evidence is that he had a conversation with Mr Linderman during which they said words to the following effect: Mr McCarthy: Dan why did you instruct HealthShare to not include our name along with Questek? You know this was part of our agreement from the start. You did not raise any concerns in conversations with Noone and Burnett. Mr Linderman: Once the email arrive from HealthShare I had to have the request cleared internally and was instructed not to add Stellar Vision's name but to change it to Hills. There was nothing I could do. Mr McCarthy: That is bullshit. On the phone you say you're in agreement if the request comes and then fuck me over. Mr Linderman: This is normal for Hills to front the contract and the joint venture to operate behnd it as we have discussed. I think Hills want it in their name to get board approval and so they can book the revenue numbers. You know how these big companies work, as long as they can book the revenue and show the headlines no one sees what they pay out the back-end. We will cover this off when the agreement is done. Mr McCarthy: And when are we going to get that done? Mr Linderman: As Peta said there is no rush as we have not signed the contract with the government yet. This is the first draft stage and Hills will no doubt pass this around their internal legal. It could take a few months.

[45]

Hills Health Solutions ceases work on QCH project

On 21 July 2014, Stellar Vision was informed (apparently by HTR) that Hills Health Solutions had stopped work on the QCH project. Mr Curtin sent an email to Ms Jurd which stated: We received advice this morning from Michael Hezlett, Senior Project Manager at Merlon Technologies that "we have removed all labour from site at QCH." Could we please meet with the agenda to include: 1. The implications of this advice in regard to the completion of the QCH Project; 2. Stellar's residual obligations to Hills Health Solutions in respect of the undertaking given by Stellar to Hills in relation to Queensland Children's Hospital; 3. Hill's [sic] undertaking regarding an agreement for a long term relationship. We look forward to a meeting at your earliest convenience.
On 21 July 2014, Ms Jurd sent in an email to Mr Curtin, which stated: Hills does not currently have a contract with Allied so we could not continue to do any more work without a commercial agreement in place. We expect that Lend Lease will step in to resolve this if Allied don't come to their senses. I am happy to meet next week and we will keep you posted on any developments.
Stellar Vision says that Hills Health Solutions did not take steps formally to novate the contract with Allied (it is suggested that this was on the basis that it wished to avoid potential exposure to liquidated damages though nothing turns on this), but that, notwithstanding that Hills Health Solutions had not novated the contract at QCH (and notwithstanding that Ms Jurd was asserting that Hills Health Solutions did not have a contract with Allied in respect of QCH), it may be inferred from the above email that Hills Health Solutions wished to continue to work on the QCH project, (and had withdrawn from the site in order to place commercial pressure on Allied). I understand that, in due course, compensation was agreed between Allied and Hills Health Solutions which involved a percentage rate in Allied's favour up to a specific sum (of $1.3 million) see Exhibit 4 Post Fact Audit - HTR, Merlon, and Questek - ARCC Report dated June 2015 (an internal post acquisition report of Hills which refers to the decision not to novate the contract from Questek and to walk off the QCH project to protect Hills' exposure).

[46]

Draft WSLHD Contract

On 25 July 2014, Mr Linderman forwarded a copy of the draft WSLHD Contract to Mr McCarthy. In that draft contract, Questek had been replaced by Hills Health Solutions as the "Contractor". Stellar Vision points out that the technical specifications contained in the draft WSLHD Contract were the same as those prepared by Stellar Vision and submitted with the response to the WSLHD RFP.
The draft WSLHD Contract had specified a Planning Commencement Date for Auburn Hospital of 1 August 2014. The Planning Commencement Date was the date on which the planning for the deployment of the PESs at the hospital was due to commence. The deployment of PESs at a WSLHD Hospital was to commence on the Installation Commencement Date, being five weeks after the Planning Commencement Date. By five weeks after this date, on the Service Commencement Date, the PESs devices were due to commence operation.

[47]

29 July 2014 meeting

There was a meeting about the QCH project between representatives of Stellar Vision and Hills Health Solutions (referred to in the 21 July 2014 email above) on 29 July 2014, which was attended by Mr Curtin and Mr McCarthy for Stellar Vision, and Ms Jurd, Mr Starkey and Mr Linderman for Hills Health Solutions. During that meeting, the QCH and WSLHD projects were discussed.
As to the WSLHD project, there was reference to a financial model for the project. The evidence of Mr Curtin and Mr McCarthy is that Ms Jurd described the model as one in which "Hills will take care of the capital costs and Stellar Vision will provide the software".
As to the QCH project, their evidence is that Ms Jurd said words to the effect that "Stellar Vision has no obligations to Hills" in respect of the QCH project (i.e., Stellar Vision had no obligation to continue to perform the QCH project - apparently on the basis that the Questek contract in relation to this project had not been novated to Hills Health Solutions - see below) and that "Hills would view it unfavourably" if Stellar Vision continued to work on the QCH project.
Shortly after the meeting, Mr Curtin prepared a memorandum of the meeting, which recorded the following: The purpose of the meeting was discuss the status of the contract negotiations with WSLHD and the financial model for the project. However, Hills had recently withdrawn their project team from the QCH project. Stellar Vision had delivered the PES software for the Project and been paid in full. I had reviewed the Outline of Agreement dated 23 May 2013 between Stellar Vision Operations Pty Limited & Questek Australia Pty. [sic] Limited, and wished to establish the residual obligations of Stellar Vision in respect of the QCH contract. Peta Jurd of Hills stated that Stellar Vision had no obligations to Hills in respect of the QCH contract as the novation of the QCH Agreement was never completed owing to unacceptable requirements by the Prime Contractors in respect of the Deed of Novation. Hills had purchased the assets of Questek but never took the contractual obligations of Questek. Stellar Vision, therefore, had no obligation to Hills. Given this unexpected reply I raised the question that if Stellar Vision had no contract with Hills with regard to work invoiced to and paid by Hills, with which party was Stellar Vision contracted. Hills replied that it could only be with Questek. However, in the Sale Agreement to Hills, Questek agreed to a covenant not to participate in the Health Care sector for a period of five years. The implication of this was that Questek was incapable of fulfilling the contract, and that any obligations Stellar Vision may have had to Questek had therefore ceased.

[48]

Financial model for WSLHD project

On 6 August 2014, Mr McCarthy and Mr Curtin were provided with a copy of the financial model discussed at the 29 July 2014 meeting by Mr Starkey. Mr Starkey's covering email stated: … We need to still finalise the expected installation cost for each site and agree the budget operating P/L. The P/L is at this stage based on rough numbers and we need to critically assess the expected cost for each line. Also, I have not calculated the profit sharing % at this stage, rather just trying to ascertain the NPV of the contract. …
On 16 September 2014, Mr Curtin sent an email to Mr Starkey which attached a revised version of the financial model that Hills Health Solutions had provided to Stellar Vision (the September Model). The revised model contained an additional item for Stellar Vision's Software Licensing fees. Mr Curtin's evidence is that those fees were included as a means of demonstrating the value which Stellar Vision was providing to the joint venture for the purpose of future discussions with Hills. (They are, however, arguably inconsistent with the five numbered points in the Undertaking (see (b)(2)) which provide that Hills Health Solutions and Stellar Vision "acknowledge and agree in relation to future contracts [that] … the intent of the previous discussions between Questek Australia and Stellar will be honoured, specifically" that "Stellar will licence [sic] the end user to utilise the software for the Term of the contract; This will not apply to any vendor owned systems" and the points which follow). Mr Curtin agreed with Mr Starkey's "suggestion of a line by line audit of the costs estimates", referring to Mr Starkey's 6 August 2014 email.
Stellar Vision says that it is clear that Mr Curtin understood Mr Starkey's reference to "we" in the email sent on 6 August 2014 as being a reference to "Stellar Vision and Hills Health Solutions", which Stellar Vision says explains Mr Curtin's reference to undertaking a "line by line audit". While Mr Starkey could not recall whether the "we" was a reference to "Stellar Vision and Hills Health Solutions" or the collective Hills Health Solutions management team, Stellar Vision says that, on either view, the model was not a "final" model, and was certainly not an "agreed" model as between Hills Health Solutions and Stellar Vision. (This issue is of relevance insofar as the experts have taken the September Model as the starting point for the discounted cash flow methodology when calculating the value of the WSLHD Contract - which I discuss in due course.)

[49]

Review of draft WSLHD Contract

Meanwhile, Stellar Vision's representatives were involved in the review of the draft WSLHD Contract.
On or around 5 August 2014, Mr Linderman and Mr McCarthy had a discussion about the Fair Use rights in the WSLHD Contract, which Mr McCarthy documented in an email to Mr Linderman on 6 August 2014, including a statement to the effect that "[a]n approach around "Fair Use" would be inline [sic] with discussions we have had and our Tender submissions".
On 14 August 2014, Mr Linderman sent an email to Ms Annerly Squires (the in-house lawyer at Hills), attaching Stellar Vision's review of Schedule 2: Please find attached the details that Brendan and I had minor concerns with. Other than the attached Stellar happy to deliver as tendered. Please review the changes in alien [sic; presumably line] with the front end of the contract and points that we reviewed already. Once that is done we will arrange for Brian [sic] (Stellar) review [sic] your points to ensure he is happy as they will be required to deliver the head contract under the sub contract.
It is noted that the attached document directly copied from Mr McCarthy's email from 6 August 2014 regarding Fair Use.
On 28 August 2014, Mr Linderman provided Mr McCarthy and Mr Curtin with a copy of Hills Health Solutions' comments on the draft WSLHD Contract, with a request that Mr McCarthy and Mr Curtin "review today".
On 2 September 2014, Mr Curtin responded thereto that: We have reviewed the draft [WSLHD] Agreement in conjunction with the comments prepared by Hills. Generally, Stellar Vision's interests align with Hills in respect of the contract terms. We note that Hills has requested removal of Clause 14.1.1 on the basis that Hills did not prepare the tender. Stellar Vision, however, did sign off on the Proposal. We believe this will be a significant issue for [WSLHD]. In effect Hills is arguing that it acquired the assets of [WSLHD], including the contract award by WSLHD], but is not prepared to stand behind the Proposal submitted by Questek and Stellar Vision, which was the basis of the award of the contract, in effect creating the asset acquired. In the expectation that the remaining contract issues with WSLHD will be resolved, we look forward to finalising an agreement between Hills and Stellar Vision in respect of the PES System for the WSLHD contract.

[50]

QCH project

On 4 September 2014, Stellar Vision sent letters to Hills Health Solutions and Questek in respect of the QCH project. The letter to Questek stated that: At a meeting with Hills Health Solutions Australia Pty Ltd on Tuesday 29th July we were advised that Stellar has no obligation to that company in respect of the Queensland Children's Hospital Contract as the novation of that contract pursuant to a Business Purchase Agreement dated on or about March 2014 between Hills Health Solutions Australia Pty Ltd (ACN 21 100 173 715), Brighton Technologies Pty Limited (ABN 23 123 014 040), Questek Australia Pty. [sic] Limited (ABN 22 001 898 504), was never completed. This letter is to formally terminate any agreement that may exist between Stellar Vision Operations Pty Limited and Questek Australia Pty. [sic] Limited in respect of the Queensland Childrens [sic] Hospital Contract.
The letter to Hills Health Solutions attached a copy of the letter to Questek, and stated: Following Hills Health Solutions Australia Pty Limited (Hills Health Solutions) departure from the Queensland Children's Hospital Project and the meeting between our two companies on Tuesday, 29 July 2014, this letter is to formally acknowledge Hills Health Solutions statement that Stellar Vision no longer has any obligation to Hills Health Solutions in respect of or in relation to the Queensland Children [sic] Hospital Contract. For good order sake [sic], attached is a copy of a letter of even date forwarded to Questek Australia Pty Limited. Stellar Vision confirms that that there is no outstanding claim by either Stellar Vision against Hills Health Solutions nor Hills Health Solutions against Stellar Vision relating to that project. You may be aware that as Chairman of Stellar Entertainment, I made a donation of entertainment content and associated services to the Children's Hospital Foundation in support of Stellar Vision's sale of an end user licence to the Queensland Children's Hospital. I fully intend to meet this obligation and provide any services required by the hospital in support of the end user licence from Stellar Vision.
Stellar Vision says that the above correspondence occurred in light of Hills Health Solutions withdrawing from the QCH project and Ms Jurd's express statements to Stellar Vision that it no longer had any obligations to Hills Health Solutions in respect of the QCH project. Stellar Vision says that this correspondence has no bearing on the arrangements between Hills Health Solutions and Stellar Vision in respect of the WSLHD project (although, as already noted Stellar Vision seems to rely on the QCH correspondence as the cause of dissatisfaction that it contends led to Hills Health Solutions seeking to exclude it from the WSLHD Contract). Ultimately, Stellar Vision was retained to provide the software for the PESs for the QCH by Allied Technologies and Stellar Vision completed the QCH project in November 2014 (installing some 460 PES units and 150 televisions).

[51]

WSLHD Contract

On 8 September 2014, Mr McCarthy, Mr Starkey and Mr Linderman attended a meeting at Cumberland Hospital with Ms Lyn Packer, the Director of Information Technology Services at WSLHD. That meeting was organised at the request of Ms Packer. Mr McCarthy's evidence is that, during that meeting, Ms Packer expressed some concern that the WSLHD Contract had not been finalised; and that he and Mr Linderman confirmed that Stellar Vision and Hills Health Solutions were ready and committed to the project respectively.
Mr Curtin's evidence is that, at or around the end of September 2014, he left a voicemail message for Ms Jurd, asking her to give him a call in respect of the agreement between Stellar Vision and Hills Health Solutions. Mr Curtin sent an email recording the content of his message on 30 September 2014: I was unable to speak to Peta but finally left a message to the effect that we are aware that: 1. the contract negotiations are nearing finalization [sic] 2. [WSLHD] wish to proceed without delay with implementation 3. We have been told Hills will prepare a draft of an agreement between Hills and Stellar Vision 4. We do not wish to be the cause of any delay so are ready proceed [sic] give this our immediate attention I also left a message that I would be overseas and that she should contact me by email.
Mr Curtin's evidence is that in the first week of October 2014, he left a voicemail message for Ms Jurd, stating "we still haven't made any progress on the agreement. Can you give me a call?".
On 7 October 2014, Ms Jurd sent an email to Mr Curtin, stating that: Sorry I missed your call last week. It's been a mad rush to the end of quarter and I've just got your message. Hills [sic] Legal team are now in the final stages of negotiation with the LHD and all going well we will be ready to move forward shortly. To ensure we can get the final contract approved with the Hills [sic] CEO, CFO and Legal our team will require a review of the software package you are proposing. Once we have internal approval granted we will then be able to complete our offering to Stellar that David Starkey and yourself have been working on. …
Before responding to that email, Mr Curtin and Mr McCarthy exchanged internal emails in which Mr Curtin stated that "[o]ur software proposal has already been accepted by the client" and that Ms Jurd "seems to be overlooking that this is a Joint Venture". Mr McCarthy stated that Ms Jurd "is also overlooking the document both parties signed acknowledging our interest in WSLHD and other already submitted Tender re Nepan [sic] Blue Mounts and Norther [sic] Beaches". Stellar Vision says that those internal emails are only consistent with Mr Curtin and Mr McCarthy's understanding being that there was an agreement in place with Hills Health Solutions in respect of the WSLHD tender (i.e., that "this is a joint venture"), and that Ms Jurd's email was inconsistent with their understanding of the position. (The relevance of understanding within Stellar Vision as to the position can seemingly only go to the estoppel claims.)

[52]

Demonstrations of the PES software

As adverted to above, Stellar Vision says that, from around September 2014, Hills Health Solutions established a pretext to exclude Stellar Vision from the WSLHD project, which culminated in a demonstration on 22 December 2014 which Hills Health Solutions contended had failed. (Stellar Vision says that, in fact, Hills Health Solutions had already determined to exclude Stellar Vision from the WSLHD project and replace it with Lincor.)
Stellar Vision maintains that the circumstances of the demonstrations did not demonstrate that Stellar Vision was unable to meet the requirements of the WSLHD tender.

[53]

27 November 2014 demonstration

The 27 November 2014 demonstration took place at Hills Health Solutions' office in Pitt Street. During this meeting, Dr Rahman demonstrated the current version of Stellar Vision's PES software. Stellar Vision says that the demonstration was limited as there was no access to a network and preconfigured servers. Mr Linderman made a request for a "cash collection feature" to be incorporated into the software and Dr Rahman stated that this could be incorporated if Hills Health Solutions provided him with the specifications.
Following that meeting, on 1 December 2014, Mr Linderman sent an email to Dr Rahman containing the specifications for the "cash collection" facility.

[54]

2 December 2014 communication

Stellar Vision says that, for reasons that appear to be related to seeking to establish a basis to exclude Stellar Vision from the WSLHD Contract, on 2 December 2014, Ms Jurd forwarded to Mr Linderman a copy of Stellar Vision's letter dated 5 September 2014 to Hills Health Solutions in respect of the QCH project.
On 3 December 2014, Mr Linderman sent an email to Ms Jurd in response to that letter: No it is not asking a question it is stating there [sic] position and thoughts. At the time this letter was offered to us we where [sic] still looking to go back to QCH and complete the PES for Free. (With Stellar) Looking back on this now this is the clear reason we where [sic] not allowed back as Stellar was not supporting Hills (As they signed to do in [M]arch 2014 for QCH, Northern Beaches & NBMLHD ) but yet they chose to get to the customer on the first day and under cut the situation and offer to complete the project for free. Along with that they where [sic] also asking questions of me to help them. I personally would like legal prepare [sic] a letter to Stellar stating this and outline that they breached the original agreement of supporting Hills Health causing further relationship breakdown between Allied and [Hills Health Solutions] and not allowing negotiations to be completed between [Hills Health Solutions] and Allied. Note we also don't know what other influences Stellar had whilst in the ear of Daniel Willis. This also would have helped Allied in there [sic] thoughts of moving away from Hills Nurse Call and going with Rauland Aust. If you recall Brendan [McCarthy] did enter the site on the week we left and had a meet up with Daniel Willis. I hope [Hills Health Solutions] is not planing [sic] to pay Allied a single cent in light of this as to me it looks like they may have been in cahoots the whole time and played Hills all the way. In light of this i [sic] feel it is in our right to cancel any further relations with stellar [sic]. I would also thing [sic] that it would not be out of the question to also request the loss of income and damages (service contract on the PES was $300K PA @ 5 + 5 contract) I would also like to state at this time that we should not be attending any further demos with Stellar as their business ethics is [sic] clearly gone south. The above may sound aggressive but they will play hard when it comes down to it and i [sic] feel we need to as well.

[55]

Arrangements regarding the December 2014 demonstration

Mr Curtin's evidence is that, during the first week of December 2014, he and Ms Jurd had a telephone conversation during which Ms Jurd expressed concern that a PES terminal was not available for a demonstration of Stellar Vision's software. Mr Curtin gave evidence to the effect that he told Ms Jurd that it was not Stellar Vision's responsibility to procure the terminal, as this was originally Questek's responsibility.
Between 7 December 2014 and 19 December 2014, representatives of Stellar Vision and representatives of Hills exchanged emails to arrange a "demonstration" of the functionality of Stellar Vision's software. On 7 December 2014, Mr Linderman sent an email to Mr Curtin which stated: Can you please confirm the demo time tomorrow and that you have the terminal your service are required to operate on as confirmed with Peta last week.
On 9 December 2014, Mr Curtin responded to that email, saying that: Although we had pencilled in the 8th, we had been awaiting confirmation of the terminal delivery before confirming. There has been further delay in delivery of the terminal … As this is primarily an exercise in confirming software functionality against the deliverables in the Tender Response, we can proceed without the new terminal. Can we confirm a date of early next week, Monday 15th or Tuesday 16th?

[56]

Hills Health Solutions - internal request for execution of WSLHD Contract

On around 10 December 2014, Mr Linderman prepared a draft document entitled "Document Request for Execution" in respect of the WSLHD project, seemingly an internet requirement for approval in advance of formal execution of the agreement; which stated: As at the Commencement Date, [Hills Health Solutions] will deliver services which are currently providing in the existing HTR business. Over time, the business will roll-out other specifications to the system (outlined in the Agreement) in consultation with the Principal. As with the majority of HTR contracts, the business will provide and install the equipment (comprising the PES system) at its expense and will derive revenue from patients directly. A commission is paid to the Principal in consideration for [Hills Health Solutions] being granted the exclusive right to provide the services. … Business Review Questek entered the WSLHD project in August 2013 with Stellar Vision providing the software. It was the intention that a JV be incorporated to run this project - Questek managing the install and Stellar managing the software.-Due to the acquisition of Questek Australia Pty Ltd this was no longer viable and the intention was to maintain a JV outcome between Hills and Stellar as a profit share model. Hills (formerly Questek Australia Pty Ltd) being the contracting party is required to deliver a proven solution. Despite requests for demonstrations it is clear that Stellar do not have a complete demonstration with the proposed solution and as such we do not feel comfortable installing this solution. As such it is proposed to deliver this project using the Lincor solution. Lincor has the ability to deliver the "core services" as outlined within the contract and have supplied all documentation to their system along with supporting documentation that they will be able to deliver the required services with minimal development if required. We are confident that this change can be managed with the customer as their focus has been on functionality which Lincor can deliver.
The draft document recorded as a "key assumption" a "Lincor cost of $0.5 per bed per day". Stellar Vision says that the preparation of this draft board paper on 10 December 2014 is only consistent with Hills Health Solutions having already determined to exclude Stellar Vision from the WSLHD Contract, and to replace it with Lincor. It is certainly consistent with that being a possibility under consideration.

[57]

December demonstration

On 16 December 2014, Mr Curtin sent a further email to Mr Linderman which stated: If we wish to meet before Christmas to check of [sic] the software functionality against the deliverables in the Tender Response, we should meet this week as Stellar is in partial close down from Friday. Please advise whether Hills is available to meet this week and we can schedule a time.
Mr Linderman responded to this on the same day that: Hills was hoping to see the system operational on hardware as we will be required to order this equipment prior to Xmas. Is there any hope that the terminal will arrive this week?
Mr Curtin then sent an email on 17 December 2014: The latest is that Brendan [McCarthy] has been told that the sample hardware will be arriving from China next week. However, previous delivery commitments have not been met so we can only wait and see. I understand from Brendan you were also following up various hardware options with your suppliers. Did you make any progress with the suppliers you were in contact with?
Mr Curtin's evidence is that he agreed to proceed with the demonstration prior to Stellar Vision being able to obtain a terminal.

[58]

Email from Mr Linderman to Mr Starkey

Meanwhile, on 16 December 2014, Mr Linderman had sent an email to Mr Starkey containing "some notes", as follows: Stellar Entertainment is a Sydney based content provider that Questek commissioned to supply the Queensland children's hospital Patient entertainment software solution. Due to Programmed and Hills not being able to negotiate a contract to complete the project Hills was unable to stay on the site. In light of this Hills had paid Stellar for the complete works for the QCH project and Stellar was to support Hills in getting back onto the QCH project as committed to prior to the acquisition of Questek in April 2014. Unknowingly [sic] to Hills the Stellar Group was also in discussion with Programmed to complete the QCH project without informing any Hills representatives. In late November 2014 Stellar accidentally let slip that they had been completing the system at QCH. Questek entered the WSLHD project in August 2013, Due [sic] to the ongoing relationship with stellar [sic] at this time it was fitting that Questek and Stellar would work together again on this project. Many discussions had taken place on how we would enter into the project from a JV to Questek managing the install and Stellar managing the software. The decision was made that Questek would be taking all the risk on and should manage the contract to ensure they could manage it accordingly. As Questek was the contract manager it was their responsibility to deliver a proven solution. It has now been outlined by Stellar that they do not have their solution ready that was being proposed in 2013. Stellar are still yet to install this solution into a facility in the world and still yet to deliver any project or complete demonstration with the proposed solution. It is in my opinion that in light of the above details Hills should be using the Lincor solution that has a proven product in over 30,000 beds in operation in over 20 countries. Along with a proven product they also manage all development and support in house offering a complete managed product from beginning to end. I believe Stellar will push back on Hills decision to go with Lincor but Hills is in the strongest position and managed all dealing with Stellar in an honest and ethical manner at all times. Stellar have been unable to deliver a demonstration on the proposed equipment along with a complete operational demonstration prior to Hills committing to sign the 15 year contract. Lincor have supplied all documentation to there [sic] system along with supporting documentation that they will be able to deliver the required services with minimal development if required. …

[59]

Hills Health Solutions - request for execution

On 18 December 2014, the final "Document Request for Execution" form (which had been prepared in draft on 10 December 2014) was prepared. That document was in substantially the same form as the draft, and stated: As at the Commencement Date, Hills Health Solutions will deliver agreed "core services" and over time, the business will roll-out other specifications to the system (outlined in the Agreement) in consultation with the Principal. … Business Review Questek entered the WSLHD project in August 2013 with Stellar Vision providing the software. It was the intention that a JV be incorporated to run this project - Questek managing the install and Stellar managing the software. Due to the acquisition of Questek, this was no longer viable and the intention was to maintain a JV outcome between Hills and Stellar as a profit share model. Hills Health Solutions being the contracting party is required to deliver a proven solution. Despite requests for demonstrations it is clear that Stellar do not have a complete demonstration with the proposed solution and as such we do not feel comfortable installing this solution. As such it is proposed to deliver this project using the Lincor solution. Lincor has the ability to deliver the "core services" as outlined within the contract and have supplied all documentation to their system along with supporting documentation that they will be able to deliver the required services with minimal development if required. We are confident that this change can be managed with the customer as their focus has been on functionality which Lincor can deliver. …
Stellar Vision says that reference to "core services" must be understood as a reference to the "Core Services" identified at Item 19 of Schedule 1 of the WSLHD Contract, being the services to be provided initially in respect of the WSLHD project.

[60]

December 2014 demonstration

On 19 December 2014, after leaving a voicemail message, Mr Curtin sent an email to Ms Jurd which stated: I called at 4:30 and left a message to advise that we can demonstrate the software on Monday provided we are supplied with a compatible terminal, today if possible. Can you make arrangements to supply the proposed terminal for testing purposes today or over the weekend, or failing that first thing on Monday? For your information the cash receipt functionality discussed for the first time at our meeting on 27 November and which was not part of the Tender Response Deliverables has been completed in accordance with the requirements advised by Daniel.
An email from Ms Jurd to Mr Curtin at around the same time stated: Thanks for your message. Daniel [Linderman] is currently arranging to get the terminal to Adul [Rahman]. Give the customer's timeframe, our expectation on Monday is to be able to see all functionality required in the specification [sic] and the functionality we require to manage the system; eg cash reconciliation. There can be no further delays.
Stellar Vision says that the email's reference to "all functionality required in the specification[s]" was inconsistent with Schedule 2 of the WSLHD Contract, which required only the "Core Services" initially.
The terminal for the demonstration was collected on 19 December 2014. Hills Health Solutions says that there is no evidence that Stellar Vision provided Hills Health Solutions with the specifications required for the terminal prior to Hills Health Solutions providing the terminal on 19 December 2014. (This is of some relevance to part of the explanation given by Stellar Vision in response to complaints made about the demonstration.)

[61]

Draft letter over which privileged is claimed

On 19 December 2014, a draft letter to Stellar Vision was prepared (over which Hills Health Solutions has claimed privilege), bearing the document identification number "158398.1"; which is the same document identification number as on the letter subsequently sent by Ms Jurd following the December 2014 demonstration. Stellar Vision invites the inference that, on 19 December 2014, Hills Health Solutions was preparing a version of the letter ultimately sent to Stellar Vision on 31 December 2014, which Stellar Vision maintains is only consistent with Hills Health Solutions having made a decision to exclude Stellar Vision from the WSLHD project prior to the 22 December 2014 demonstration. (Pausing here, I do not draw that inference. It seems to me equally consistent with the chronology of events that Hills Health Solutions, or whoever at Hills Health Solutions or its lawyers prepared the letter, had in mind the possibility that the demonstration would prove unsatisfactory and was contemplating the possibility that in that event one course that might be taken would be to cease to work with Stellar Vision in relation to the project. It does not seem to me that the fact that a draft letter of some kind had been prepared at that stage means that there had necessarily been a decision made at this point to do so.)

[62]

Stellar Vision preparation for the demonstration

Stellar Vision says that there were a number of problems with the terminal that had been provided by Hills Health Solutions for the demonstration. First, that the terminal was not one that had previously been proposed to Dr Rahman as a possible terminal for the Stellar Vision PES (in particular, the terminal provided only had storage space of 8GB, whereas the samples that Dr Rahman had previously tested all had storage space of at least 32GB). Second, that the terminal did not have an operating system loaded onto it; it had been configured to boot off a server and operate as part of a network environment (that is, a "thin client" system, rather than a "thick client" system). Third, that the terminal was password protected and Hills Health Solutions did not provide the password to Stellar Vision until nearly 7:00pm on the evening of Saturday, 20 December 2014. (It is noted, this perhaps being a Freudian slip, that the password was "L1nc0r".) Fourth, that when "booted up", the terminal showed the "Lincor" logo. Fifth, that the terminal did not have drivers loaded that would have enabled Dr Rahman to configure the terminal to the network. It is said that the information about the terminal provided by Mr Linderman did not provide any details regarding the drivers. Stellar Vision says that as the Stellar Vision PES was built on the Android operating platform, the Stellar Vision PES could not operate on the terminal provided in the absence of all the peripherals and device drivers being provided by the manufacturer.
Dr Rahman's evidence is that he worked over the weekend of 20-21 December 2014 to prepare for the demonstration. His evidence is that, in light of the issues identified above, it was not possible to do a complete demonstration of the Stellar Vision PES on the terminal provided at short notice.
On 21 December 2014, Dr Rahman sent an email to Mr McCarthy which identified a number of these issues: I got all the USB ports, network and sound working. Only thing missing is Graphics card driver. It is now using a generic driver and hence there is no hardware acceleration. It is also running in a non standard resolution (1600X1200 @ 256 DPI). As there is no hardware acceleration (therefore, no OpenGL) video playing is jittery. 2nd problem is disk space. Android 4.4 itself requires 10GB space. So I couldn't install all the features of Android. I couldn't install all our software too. I only installed an older version of our software which is the home screen only.

[63]

Execution of WSLHD Contract - 23 December 2014

Meanwhile, on or around 23 December 2014, Hills Health Solutions executed the WSLHD Contract. How Hills Health Solutions came to be named as a party to the contract seems to have been that, in the course of proposed amendments to the draft contract, WSLHD was provided with the Business Purchase Agreement (which referred to the purchase of the assets of Questek and the assignment of rights in relation to tenders) (see the email from Mr Linderman to Mr McCarthy and Mr Curtin on 28 August 2014 as to receipt of the first draft of the contract which attaches a "Table of Comments & Amendments" which suggests the inclusion of a recital as to this acquisition of assets from Questek).

[64]

29 December 2014 letter from Hills Health Solutions

On 31 December 2014, Ms Jurd sent via email to Mr Curtin and Mr McLaughlin, copying in Ms Squires, Mr Linderman and Mr Starkey, a letter dated 29 December 2014, which stated that: … While no agreement had been reached as to which party is to be responsible from a cost perspective for the provision of the equipment, Stellar has recently been involved in the development of a prototype to support the requirements of its proposed software. As previously discussed, the intended functionality of the proposed terminal (which Hills has only seen drawings of) does not meet the requirements of the customer and is cost prohibitive for this project. There have been significant delays in the manufacture and delivery of a protype and once received, it will require components to be installed and tested. We understand that there have been issues with components overheating in early testing stages. It is also not clear whether the prototype will be delivered with appropriate certifications having been completed. …
In the 29 December 2014 letter, Ms Jurd referred to the fact that "Stellar was aware that the customer was desirous of having the new PES system and services rolled-out from August 2014. Despite having the benefit of the delays in finalising the contract, Stellar has made no major developments since its demonstration to Hills in March 2014".
Hills Health Solutions stated in the letter that it was clear that Stellar Vision did not have a product that was ready for the WSLHD project and, in the circumstances, Hills Health Solutions had no alternative but to look to another supplier.
Following receipt of the 29 December 2014 letter, Stellar Vision and Hills Health Solutions exchanged some correspondence during late December 2014 and early January 2015. However, Stellar Vision says that it did not have any ongoing involvement in the WSLHD project from that time.

[65]

Resignation of Mr Linderman

Mr Linderman resigned from Hills Health Solutions as of 13 February 2015. This is of relevance in relation to the issue of delay in completion of the WSLHD project and also as to the terms of the fact that he was not called to give evidence in the proceedings notwithstanding that he had signed a document obliging him to provide assistance to Hills following his resignation - see below.

[66]

Letter dated 10 March 2015

In a letter dated 10 March 2015, Hills Health Solutions' solicitor said that at the December demonstration it was not demonstrated that a range of functionalities were operating automatically, and that Dr Rahman had manually to make changes or instructions in the system to seek to cause required functions to be performed. These were the matters identified as being relied on as demonstrating the inability of Stellar Vision to meet the requirements of the WSLHD (the Functional Deficiencies). (See the discussion of these matters in due course below.)

[67]

Lincor

Ultimately, Hills Health Solutions utilised the services of Lincor, an alternative supplier of PES software, in fulfilling the WSLHD Contract.

[68]

Lay evidence

Stellar Vision adduced evidence from each of Mr McCarthy, Mr Curtin and Dr Rahman.
Hills Health Solutions, although having served affidavit evidence of Ms Jurd, ultimately did not call Ms Jurd. It adduced evidence from Mr Starkey, Mr Rajasingam, and Mr Osborne (formerly the Head of the Health Business at Hills Health Solutions, and current Chief Executive Officer of a business competitor of Hills).

[69]

Jones v Dunkel inferences

Stellar Vision invokes the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) in relation to the failure of Hills Health Solutions to call evidence from any of Ms Jurd, Mr White or Mr Linderman (those persons being identified as the Hills Health Solutions' officers and key decision-makers involved in the matters the subject of the present proceeding).
Stellar Vision contends that the evidence of those persons would clearly have had a bearing on the matters the subject of the dispute; and says that the failure to call these witnesses is unexplained (noting that affidavits of Ms Jurd were served but not read and that Hills Health Solutions places reliance on her file notes and correspondence).
As to Ms Jurd, Stellar Vision says that it can be inferred that her evidence would not have assisted Hills Health Solutions on the issue as to the alleged pretext for excluding Stellar Vision from the WSLHD Contract (i.e., the failure of the demonstration).
As to Mr White, it is said that he was present at critical meetings and led the due diligence process.
Particular emphasis is placed on the position of Mr Linderman (who it is said is a relevant witness and could not be said to be in the plaintiff's camp) because of the fact that Mr Linderman was a party to a Deed of Settlement, Release and Restraint entered into with Hills on 12 March 2015, under which Mr Linderman was obliged (see cl 7(a)) to "co-operate with, and provide all reasonable assistance required by" Hills or member of the Group in, inter alia, any legal proceedings "relating to the period in which he was an employee of the Group". Under the Deed, Hills was obliged to meet the reasonable costs of Mr Linderman providing such co-operation or assistance.
The assistance contemplated (as per cl 7(b)) included Mr Linderman's agreement "within 30 days of the Deed, [to] make himself available at the Company's registered office on such occasions as is reasonably required by [Hills] for the purpose of providing a witness statement and sworn affidavit" with respect to matters with which Mr Linderman had been involved during the course of his employment with Hills Health Solutions. The Deed also provided (see cl 7(c)) that, unless compelled by law and subject at all times to Mr Linderman complying with his obligations under this Deed, Mr Linderman would not "provide any assistance whatsoever to any Dispute Party in relation to a claim, legal proceedings, demand or otherwise which that Dispute Party intends to bring against [Hills] or its Related Bodies Corporate and/or its representatives". Stellar Vision says that it would fall within the term "Dispute Party" , being a party that had been in dispute with Hills or its related bodies corporate (which includes Hills Health Solutions) at any time within two years before the "End Date" (being 13 February 2015). In that regard, it is said that, although the proceeding was not commenced until 2016, by early 2015 there was an expectation that claims would be made in relation to the WSLHD project (referring to Ms Jurd's email to in-house counsel Ms Squires dated 27 December 2014 which noted that the "next letter" should be drafted by, and come from, external solicitors; the communication in early January between Stellar Vision and Hills Health Solutions in emails dated 4, 6 and 8 January 2015; and the involvement of EMB Legal for Hills in the letter of 10 March 2015).

[70]

Determination

As is well known, the so-called rule in Jones v Dunkel may apply to permit an adverse inference to be drawn where there is an unexplained failure by a party to adduce evidence (for example, by calling witnesses or tendering documents or other evidence) in order to contradict a matter which arises upon the issues in the proceedings. As to whether such an inference should be drawn, the missing witness must be someone who would be expected to be called by one party rather than the other; the evidence that would be expected to have been called would elucidate a particular matter; and the absence of the witness must be unexplained (see Payne v Parker (1976) 1 NSWLR 191 at 200-2 per Glass JA; and more recently Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778 at [737]; [741]). The inference that may be drawn in appropriate circumstances is that the uncalled evidence would not have assisted the party. The inference does not permit the filling of gaps; nor does it allow an inference that the missing evidence would positively damage that party's case. Furthermore, the "rule" only becomes relevant if there are competing available inferences.
As to Mr White, the knowledge of Hills Health Solutions of what was in the data room for the purposes of due diligence does not seem to be disputed and so recourse does not need to be had to the rule in Jones v Dunkel on this issue.
As to Ms Jurd (whether or not she is still at the company - there being no evidence I can recall as to this), again there is no need to resort to this "rule". Ms Jurd's file notes record her contemporaneous observations of matters (such as the demonstrations) and her interpretation of them would not assist.
As for Mr Linderman, I do not accept that his absence from the witness box enables a positive damaging inference properly to be drawn. It simply enables me more comfortably to draw otherwise available inferences from the contemporaneous documents and evidence (if there be competing available inferences). In my view there is sufficient material in the contemporaneous documents to establish Mr Linderman's dissatisfaction with Stellar Vision and his contemplation of pursuing the project without Stellar Vision to make it unnecessary again to rely on a Jones v Dunkel inference.

[71]

Expert evidence

Expert accounting evidence was adduced on the issue as to the quantification of loss.
Mr John-Henry Eversgerd of FTI Consulting, who was called by Stellar Vision, provided a number of expert witness reports (the first being dated 5 September 2017, followed by a second report dated 14 August 2019 and an addendum report dated 13 November 2019, a third report dated 27 April 2020 and a fourth report dated 8 April 2021).
Mr Eversgerd was instructed to quantify the loss of economic benefit as at 23 December 2014 of a 50% interest in the WSLHD Contract and other lost opportunities resulting from the alleged breach by Hills Health Solutions of fiduciary and contractual obligations. In his second and successive reports he provided updated calculations reflecting revised instructions and assumptions (including as to operating expenditure (OPEX)), taking into account financial documents with which he was provided and commenting on the reports of the defendant's expert.
Mr Campbell Jackson of Ernst & Young, who was called by Hills Health Solutions, provided an expert witness report dated 18 May 2018, opining on the value of a 50% share of the WSLHD Contract as at September 2014 and on the methodology and conclusions of Mr Eversgerd. Mr Jackson provided a second report dated 5 March 2020 in response to the second and addendum Eversgerd reports.
The experts met in conclave and prepared a joint report dated 23 April 2021 (during the course of the hearing). They gave evidence concurrently during the hearing.
In summary, based on differing scenarios, Mr Eversgerd assessed the loss of economic benefit of a 50% interest in the WSLHD Contract as at various dates as being in the range from roughly $12.48 million to $5.75 million or $11.71 million to $5.197 million; and Mr Jackson assessed the loss (depending on whether Stellar Vision would have the benefit of existing hardware or not) again on different scenarios in ranges from $1.26 million to $3.992 million (the "benefit" scenarios) to $1.22 million to $3.952 million (the "no benefit" scenarios).
There was broad agreement between the experts as to various matters, including that the discounted cash flow methodology (DCF) is appropriate to calculate loss; and both experts relied on the September Model (see above) with adjustments. The experts were also agreed that the September Model represented the best contemporaneous information as to what net profits were expected to be generated from the WSLHD Contract. While the experts noted that their methodologies "did not align" ("based on instructions") the experts generally agreed that each other's calculations were "mathematically correct" (see the joint report at [18]).

[72]

Evidentiary objections

Rulings on evidentiary objections were largely dealt with at the hearing (and, indeed, Hills Health Solutions did not press its objections as to relevance in relation to evidence concerning the QCH project). However, Hills Health Solutions did press its objection to evidence going to the assertion by Stellar Vision (and reflected in the assumptions given to its expert) that, had Stellar Vision been involved in performing the WSLHD Contract, the financial outcome of the WSLHD Contract or its performance would have been different. Objection was taken on the basis that the evidence was not relevant to the plaintiff's pleaded case; and that there is no evidence (nor any factual or legal basis to infer) that Stellar Vision would have been involved in performing the WSLHD Contract other than by way of providing software. I deferred ruling on that objection and provisionally admitted the evidence to which objection was taken. I therefore now address that objection.
Stellar Vision served an affidavit sworn by Mr Curtin on 25 September 2019 (Mr Curtin's second affidavit) in which Mr Curtin asserts that, had Stellar Vision been involved in the performance of the WSLHD Contract, the contract would have been more profitable. This is put on several bases, including that: particular costs would not have been incurred; higher revenue would have been received; and delays would not have occurred had Stellar Vision been involved in providing the PES. In this regard, Mr Curtin has set out details of Stellar Vision's performance as the PES supplier in respect of other projects. It is said that this evidence has informed Mr Eversgerd's valuation of the WSLHD Contract (and in turn that is referenced in the particulars of loss).
Hills Health Solutions complains that the counterfactuals upon which Mr Eversgerd has based his valuation are unpleaded (and have no factual foundation) and accordingly should be rejected. It is said that there is nothing in Stellar Vision's pleaded claim of breach and damage that suggests that the counterfactuals raised in Mr Curtin's second affidavit found an inherent part of Stellar Vision's claim. Hills Health Solutions says that the fact that the WSLHD Contract was less profitable because of Hills Health Solutions' delay in performing the contract or the way in which private patients were invoiced is not the "necessary and immediate consequence" of the alleged breaches (see below as to Barnes v Forty Two International Pty Ltd (2014) 316 ALR 408; [2014] FCAFC 152 (Barnes v Forty Two) at [121]). Thus, it is said that the counterfactual case should be rejected and the objections to the relevant parts of the evidence upheld.

[73]

Pleading issue

As to the pleading issue, Hills Health Solutions says that the entirety of Stellar Vision's allegation of loss and damage, arising from the alleged breaches of trust and/or fiduciary duty and contract, is to be found at [42] and [44] of the further amended statement of claim, which paragraphs have been supplemented by further particulars provided on 9 December 2020 (to which Hills Health Solutions similarly takes objection).
It is submitted that the pleading does not disclose any material fact as to how Hills Health Solutions performed the WSLHD Contract nor how Stellar Vision would have performed the WSLHD Contract differently. It is thus said that how the WSLHD Contract was run, managed or performed is not a fact in issue; that no counterfactuals are pleaded that would properly put in issue the profitability of the WSLHD Contract by suggesting that the WSLHD Contract could have generated more profits had it been differently managed; and that Stellar Vision has not pleaded causation (i.e., how it is said that the WSLHD Contract would have been performed differently had Stellar Vision been involved in its management). Hills Health Solutions says that this is particularly relevant given that the terms of the Undertaking limit Stellar Vision's involvement in the supply of PES to the provision of software, whereas Mr Curtin's second affidavit makes broad ranging claims about Stellar Vision's hypothetical performance of the contract that are unrelated to the provision of software. Accordingly, Hills Health Solutions says that it is not apparent how the performance of the WSLHD Contract would have been any different had the alleged breach of contract not occurred.
Hills Health Solutions notes the requirement that a party's pleadings state with sufficient clarity the case that must be met; and the recognition that particulars, even those that are clear and unambiguous, cannot supply a deficiency in pleadings; nor can evidence perform the function of pleadings (citing Hastie Group Ltd (in liq) v Bourne [2017] NSWSC 709 at [241] (Hastie), the issue there being a failure to plead the material facts making clear the causal nexus between the allegations of breach and the losses that had been claimed).
It is further noted that, where a party pleads a cause of action of which causation is an essential element, it is necessary to plead the material facts which are said to give rise to the causal connection (citing Hastie; and referring to Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457 at [15]; as well as Berry v CCL Secure Pty Ltd (2020) 381 ALR 427; [2020] HCA 27, where Gageler and Edelman JJ reiterated (at [72]) the principles set out in Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 at 286 (Banque Commercial) and explained that a plaintiff is expected to plead all material facts on which the plaintiff relies to constitute the statutory cause of action, including any counterfactual on which that plaintiff relies to establish the requisite causal link between identified loss or damage and the alleged wrongdoing.

[74]

Factual foundation?

As to whether there is a factual foundation for the postulated counterfactual, Hills Health Solutions notes that damages are to put the party in the position it would have been in but for the breach; and says that that position would be that governed by the terms of the Undertaking. It is said that each counterfactual assumes that Stellar Vision would have had a role in the management of the WSLHD Contract but that the basis for this assumption cannot be found in the terms of the Undertaking (which refers to Stellar Vision's role as the provider of software), nor in any communication between Stellar Vision and Questek or Stellar Vision and Hills Health Solutions. It is noted that Mr Curtin conceded in cross-examination that there was nothing in the terms of the Undertaking that would give Stellar Vision a management role in respect of the WSLHD Contract. Stellar Vision says that a contrary assumption cannot be adopted.
It is said that, to the contrary, the documentary evidence establishes that Stellar Vision's role was always envisaged to be as software provider, whereas Questek or Hills Health Solutions would be responsible for the installation of the PES devices and management of the contract generally. This is said to be established by the following documents: the 6 July 2013 email from Mr McLaughlin to Mr Brighton, describing what he saw as Stellar Vision's contribution to any joint project (which included "project management from a software and integration perspective"); the 8 August 2013 email from Mr Linderman to Mr McLaughlin, describing the options for collaboration between Stellar Vision and Questek; and the 11 November 2013 presentation to HealthShare NSW in respect of the WSLHD tender (the slides referring to Questek being responsible for "installation, project management and service", whereas Stellar Vision was responsible for "content, software, services"). It is noted that there is no suggestion that Stellar Vision would be involved in discussions with the WSLHD about installation of the PES devices (including the timetabling of installation) or invoicing the hospitals for PES use.
Hills Health Solutions submits that there is no basis for concluding that Stellar Vision would have been able to influence management decisions in a way that would have resulted in the counterfactuals alleged in Mr Curtin's second affidavit and therefore that Stellar Vision has failed to establish the element of causation as between the alleged breach (being termination of the contract) and the damage alleged.

[75]

Determination

I am troubled by the fact that the case was not pleaded on the basis of the counterfactual posed by the assumptions given to Mr Eversgerd and I cannot accept that Hills Health Solutions has acquiesced in the conduct of such an (unpleaded) case (cf the position in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at [415]-[525] (Ingot)). In Ingot, McDougall J implicitly recognised that in some circumstances the parties might, by the way in which they conduct the case, acquiesce in the widening of the pleaded case (noting that there had been no express widening in that case nor could it there be inferred). On appeal, as to the circumstances where a party would be allowed at trial to depart from its pleaded case, Ipp JA accepted that there may be a departure from the pleadings where adherence to them would be unjust or unfair, quoting the following passage from Banque Commerciale per Mason CJ and Gaudron J at CLR 286-7: The function of pleadings is to state with sufficient clarity the case that must be met … In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. … Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference. …
Ipp JA further noted the passage quoted by Dawson J in Banque Commerciale (at 293) from Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490; [1916] HCA 81 at 517 per Isaacs and Rich JJ: But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.

[76]

Stellar Vision's submissions

As noted above, Stellar Vision's claim is put in various ways: in trust; for breach of fiduciary obligations (arising either as a result of the alleged trust or generally by reference to the circumstances of the case); for breach of contractual obligations (the Undertaking); or by the invocation of various principles of estoppel.

[77]

Key factual propositions for which Stellar Vision contends

At the outset of its submissions Stellar Vision contends for a number of what it identifies as key factual propositions, which I will deal with in sequence.
The first proposition is that Stellar Vision and Questek submitted a joint response to the WSLHD tender (albeit one which solely named Questek as the respondent). Stellar Vision relies on the fact that the tender was submitted in circumstances in which Questek had undertaken to act in the interests of both parties, pointing to the matters referred to in the chronology of events above (including the circumstance that Stellar Vision was persuaded not to submit its own direct tender) and to the contents of the response that was submitted to the WSLHD tender. Stellar Vision contends that the tender was therefore a "joint tender".
Stellar Vision says that the proposition in Mr McLaughlin's 21 October 2013 email (see above) to the effect that Stellar Vision was intending to respond to the RFP directly, while continuing discussions, is properly characterised as commercial pressure rather than any intention to abandon the relationship with Questek. Stellar Vision points to Mr McCarthy's evidence in cross-examination in this respect (see T 106.13-22): Q. Right and you understood that the email that you were sent from Mr Rhodes was a plea to Stellar to "reconsider its position regarding a sole bid and to commit to a joint tender with Questek at least in relation to WS tender", do you sed [sic] that? A. Yes. Q. But you say that was the position in any event? A. It was and I, I think the idea of putting a joint - of telling Questek we were in a position and could put a, a tender in on our own was, was an exercise to try to expediate formalising the full joint venture agreement.
Stellar Vision says that, following Mr McLaughlin's 24 October 2013 email (see above), Stellar Vision and Questek worked together to finalise a joint response to the RFP, on the basis discussed by Mr McCarthy and Mr Linderman (i.e., that is, that the tender would be submitted in the name of Questek, but on behalf of both Stellar Vision and Questek); and to references in the emails between Mr McCarthy and Mr Linderman to the response as being the "Questek/Stellar" response.
Stellar Vision says that Mr McCarthy's evidence in cross-examination to the effect that there was no "formalised" agreement between Questek and Stellar Vision at that time is properly to be understood as a being a reference to there being no formal joint venture agreement (in the form of the creation of an incorporated joint venture vehicle or a formalised "equity swap"). Stellar Vision argues that this is not the same as there being an absence of an agreement or common understanding in respect of the basis on which the WSLHD tender was submitted. It is noted that, when asked about the position of the WSLHD tender in particular, Mr McCarthy's evidence was (at T 101.29-45): Q. Then there was a discussion, was there not, about who would be the tenderer on any tender applications? A. Well, it was on a project by project basis, but on this tender application, yes, there was a discussion. Q. And are we discussing the Western Sydney one at the moment, initial discussion? A. Yes, yes, we are. Q. And the discussion was, well, it can only have one tendering party? A. That was a requirement on the tender documentation, that you couldn't put two entities in. Q. That is how the tender was put in, Questek was the tenderer, correct? A. No, it was agreed between the two parties that Questek's name would appear on the tender, that Questek was doing that on behalf of Stellar Vision and Questek.

[78]

Allegation of no hardware

Stellar Vision emphasises that the discussions between Stellar Vision and Questek (and then Hills Health Solutions) had been on the basis that sourcing hardware was the responsibility of Questek and, subsequently, of Hills Health Solutions (and says that Ms Jurd expressly recognised that this was not her "stronger argument", because the hardware was Hills Health Solutions' responsibility).

[79]

Allegation that functionalities not demonstrated

Stellar Vision says that it was not possible to demonstrate all functionalities automatically, because: it was a demonstration environment and not a "live" environment; and the terminal had insufficient storage and no drivers.

[80]

Allegation of inability to demonstrate incoming calls

Stellar Vision says that Dr Rahman demonstrated outbound phone calls and incoming phone calls from within the phone network to which the device was connected. It is said that Dr Rahman was cross-examined (at least in part) based on an erroneous assumption that no incoming call was demonstrated, whereas it was only an incoming call from an external number that was not demonstrated. Stellar Vision says that, as explained by Dr Rahman, it was not possible to demonstrate incoming calls for an external number without the purchase and registration of a new telephone number.

[81]

Allegations regarding billing system capabilities

Stellar Vision says that the contention that there was no deduction for a movie that was ordered does not demonstrate any deficiency in the Stellar Vision software, because the demonstration was conducted in a test environment. It is said that Dr Rahman's evidence on this point was not challenged, which was to the effect that the test was conducted on a system known as the "Sandbox" system, which has full functionality but where payments do not actually get charged (which it is said makes it ideal for testing). Stellar Vision points out that, to the extent telephone billing was not demonstrated, Dr Rahman's evidence was that Stellar Vision had a billing system, but it was not possible to demonstrate billing capability for phones (because it was not clear whether the billing system would be integrated into the hospital's existing phone system, or a new phone server).

[82]

Allegation relating to inability to demonstrate closed captioning

Stellar Vision says that Dr Rahman was given no notice of the requirement to demonstrate closed captioning. It is said that, had he been notified of this, this could have been demonstrated by installing a third-party application. In any event, it is noted that according to Dr Rahman the alleged problem appears to have been that the closed captioning could not be operated from the handset (although it could otherwise be operated).
Stellar Vision says that this is not a deficiency in Stellar Vision's software. Further and in any event, it is said that this was not one of the "core services" to be provided by the Commencement Date under the WSLHD Contract.

[83]

Allegation relating to inability to demonstrate document reader

Stellar Vision says that Dr Rahman was given no notice of the requirement to demonstrate a document reader. It is said that, had he been notified of this, this could have been demonstrated by installing a third-party application. Stellar Vision says that Dr Rahman could show one magazine, but had not downloaded further titles. Further, Stellar Vision says that this was not one of the "core services" to be provided by the Commencement Date under the WSLHD Contract.

[84]

Allegations regarding inability to demonstrate content management systems, Citrix or web interface, "service & system management" procedures and "catch-up" TV

Stellar Vision says that none of these matters was one of the "core services" to be provided by the Commencement Date under the WSLHD Contract.

[85]

Allegation regarding inability to demonstrate multiple TV channels

Stellar Vision says that it was not possible to demonstrate multiple TV channels simultaneously, because in order to do so it would be necessary to have more than one head-end server. It is said that this was explained by Dr Rahman at the time of the demonstration; and that in order to demonstrate all channels simultaneously would have required five servers.

[86]

Allegation regarding inability to demonstrate functionality for automatic update

Stellar Vision says that this was not required as part of the WSLHD requirements and, in any event, that it is undesirable for practical reasons because it would require an update of all the software and modules every time the operating system was upgraded.

[87]

Allegation regarding no system quality assurance

Stellar Vision says that the system had been tested prior to the 22 December 2014 demonstration; but that it was not possible to do so in an operational environment.

[88]

Allegation regarding inability to demonstrate USB security lockdown

Stellar Vision says that this was not demonstrated because there were two possibilities for the USB system that were yet to be decided (and neither was difficult to achieve). It is noted that Dr Rahman did not consider that there was any need to demonstrate lockdown functionality; however, if provided with notice of this requirement, it could have been arranged (and had been achieved on the QCH project).

[89]

Allegation regarding inability to demonstrate a survey satisfaction form

Stellar Vision says that the form had not been provided by the client; but that the functionality (although not the content) was demonstrated by Dr Rahman.

[90]

Allegation regarding inability to demonstrate "productized software solution"

Stellar Vision complains that this does not appear to be specific alleged defect, but is rather just a general descriptive term without any specific technical meaning.
As to the above matters, I consider in due course Dr Rahman's evidence. However, the difficulty I have in concluding that the December 2014 demonstration was or was not a failure (at least in Hills Health Solutions' eyes) is that to a large extent that this seems to have been a matter of perception and of mis-matched expectations (one might say that the parties' expectations were as ships passing in the night). Certainly, there was a degree of confusion in the oral evidence as to what precisely had or had not gone wrong in the course of the demonstration. Its only relevance for present purposes goes to the question of repudiation (which I consider in due course).
For present purposes, I simply note that the evidence establishes that there was dissatisfaction on the part of the Hills Health Solutions' representatives at the demonstration but I am not persuaded that it demonstrated that Stellar Vision was or would have been (within a time acceptable to WSLHD) unable to perform the requirements of the WSLHD tender.
Finally, the twelfth proposition contended for by Stellar Vision is that, following the demonstration on 22 December 2014, Hills Health Solutions appropriated to itself the WSLHD project to the exclusion of Stellar Vision.
Stellar Vision says that in the correspondence exchanged during late December 2014 and early January 2015 Stellar Vision indicated a willingness to perform, and to fulfill its obligations under the Undertaking so as to implement the WSLHD Contract within the timeframe contemplated by the parties.
There is no doubt that, from 31 January 2015, Hills Health Solutions had determined not to proceed with Stellar Vision. In that sense, it has taken the whole of the benefit of the WSLHD Contract. Whether it has wrongfully done so is the issue here to be determined (and will be addressed in due course).

[91]

Hills Health Solutions' submissions

Before turning to the specific claims made, it is useful here to expand on Hills Health Solutions' overall position in relation to the dispute. In summary, from the contemporaneous documentary records, Hills Health Solutions says that it is apparent that there was no agreement at all, let alone a "joint venture", as between Questek and Stellar Vision in respect of the WSLHD tender. It says that, to the contrary, negotiations were continuing and that no final bargain had been reached, nor had the structure of a joint venture even been settled on, by the time of the acquisition by it of the assets of Questek.
Hills Health Solutions says that it is equally apparent that, consistent with the stage at which the negotiations were at, Hills Health Solutions was not advised that there was any concluded agreement between Questek and Stellar Vision. Further, it is said that Stellar Vision itself recognised that Hills Health Solutions was now the party with which it needed to negotiate, given that no agreement had been reached with Questek.
Hills Health Solutions contends that the Outline of Agreement, while it contemplated the possibility of further agreements, had no contractual force (other than in respect of the QCH project); noting that Stellar Vision had decided not to tender in its own capacity in order to "show good faith and our desire to work with Questek" (not, I interpose to add, because of some contractual arrangement then in place that would have precluded it from so doing).
As to the tender, Hills Health Solutions emphasises that it was submitted solely in Questek's name (it being a requirement of HealthShare NSW that tenders be submitted solely in the name of one party), albeit that it accepts that Stellar Vision was involved in preparing the technical specifications for the tender (and that the tender made reference to Stellar Vision and included its logo); and that it may be described in some sense as a "joint tender".
Hills Health Solutions says that, between the date of the Outline of Agreement and the sale of Questek's assets to Hills Health Solutions on 3 April 2014, while there was extensive negotiation between Questek and Stellar Vision with a view to reaching an agreement as to the nature of their relationship in the event that the tender was successful, the contemporaneous documentary record demonstrates that (despite the best intentions of both parties) no agreement was ever reached.

[92]

Stellar Vision's submissions

Stellar Vision puts its trust claim in two alternative ways.
First, it says that, by reason of the circumstances of the relationship between Questek and Stellar Vision, Questek held its interest in the WSLHD project (and ultimately the WSLHD Contract) on trust for itself and Stellar Vision and that, when Hills Health Solutions acquired Questek's assets, it acquired those assets subject to the trust in favour of Stellar Vision. Stellar Vision emphasises that this is not a claim based on the first (knowing receipt) limb of Barnes v Addy (1874) LR 9 Ch App 244; and Stellar Vision expressly disavows any allegation of breach of fiduciary duty by Questek (thus it is also not pursuing any claim based on the second (knowing assistance) limb (see T 289.17-24). Rather, the first way in which the trust claim is brought is one based on Hills Health Solutions taking its interest in the tender subject to Stellar Vision's rights. It is said in oral submissions (T 289.29-30) that the tender was submitted by Questek as "agent" or joint tenderer on behalf of both parties.
Second, and in the alternative, Stellar Vision says that, by reason of the circumstances of the relationship between Stellar Vision and Hills Health Solutions (and in particular the acknowledgment in the Undertaking) Hills Health Solutions held its interest in the WSLHD project on trust for itself and Stellar Vision. Stellar Vision says the Undertaking makes plain that Hills Health Solutions "took with notice" that the tender was a joint tender and that, in the event that no joint venture agreement was negotiated between Questek and Stellar Vision, then both names would be "put on the contract".
As to the first way the trust claim is put, Stellar Vision relies on the principles which apply when determining the existence of a trust in the absence of an express declaration of trust (see Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16 per Mason CJ and Dawson J at 618-619 (Bahr v Nicolay); Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62; [2015] HCA 6 at [3]; [10] per French CJ (Korda)), to which I refer in due course. Stellar Vision notes that the relevant intention is to be a manifested (and not private nor subjective) intention ascertained by "all the relevant circumstances" (citing Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 at [54] per Gummow and Hayne JJ; and referring to Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 at [147]); that it is not necessary that the parties use the language of trust, or that the creator of the trust should know that the particular relationship intended is a trust (referring to Reitano v Reitano [2012] NSWSC 1127 at [26] per Pembroke J); and that the relevant intention can be established by words or conduct (referring to In the matter of Tresdar Pty Ltd [2019] NSWSC 179 at [148] per Rees J (Tresdar); Heydon and Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) at [5-02]).

[93]

Stellar Vision's submissions

The breach of fiduciary duty claim turns principally on the proposition that Hills Health Solutions held the benefit of the WSLHD Contract on trust for Stellar Vision and itself; and hence owed fiduciary duties to Stellar Vision in its capacity as trustee. However, Stellar Vision maintains that even if the trust claim is unsuccessful, Hills Health Solutions owed fiduciary obligations to Stellar Vision (referring to authorities as to the incidence and nature of fiduciary relationships such as Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 at 195 per Deane J (Chan v Zacharia); Pavan v Ratnam (1996) 23 ACSR 214 per Beazley JA (as Her Excellency then was) with whom Meagher JA agreed, at 224-225; John Alexander's Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19 at [87], per French CJ, Gummow, Hayne, Heydon and Kiefel JJ (John Alexander's Clubs); Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 at 96-97 per Mason J (as his Honour then was) (Hospital Products); United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1; [1985] HCA 49, per Mason, Brennan and Deane JJ at 10-12 (United Dominions Corporation); and News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410; [1996] FCA 870, per Lockhart, von Doussa and Sackville JJ at 538 (News Limited v Australian Rugby)).
Reference is also made to Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569; [2006] FCAFC 44 at [8] per Finn J; [75] per Sundberg and Emmett JJ (Gibson Motorsport); Finn J there identifying two features characteristically present where one party's conduct prior to the expected finalisation of a business arrangement has been found to constitute a breach of fiduciary duty. Those being: first, that "the particular relationship being bargained for, and in relation to which anticipatory action may have been taken, was itself (or would have been) one having fiduciary characteristics"; and, second, that "the factors in the projected relationship which would have authored those fiduciary characteristics were themselves prefigured in, and hence coloured, the relationship as it evolved". It was there noted that, to the extent that the relationship is fiduciary, the duty of loyalty imposed on the negotiating parties will have obliged them to act in their mutual interests to the exclusion of their several interests. Stellar Vision also refers to the discussion in Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd (1988) 2 Qd R 1 (where a partnership agreement was negotiated but not concluded) per Williams J at 9-11; to which reference was made in Disctronics Ltd v Edmonds [2002] VSC 454 at [152]-[153] per Warren J (as her Honour then was) (Disctronics). Finally, in this context, Stellar Vision refers to the decision in Hungry Jack's v Burger King at [369]; [372].

[94]

Hills Health Solutions' submissions

Although, in its outline of submissions Hills Health Solutions characterised Stellar Vision's claim against it, based on the alleged trust between Questek and Stellar Vision, as a knowing recipient of trust property claim within the first limb of Barnes v Addy (perhaps because Stellar Vision has contended that Questek held its interest or rights in the WSLHD project on trust in part for Stellar Vision and that Hills Health Solutions acquired its interest in the project from Questek with notice of and subject to Stellar Vision's interest or rights), as noted above, Stellar Vision was at pains to disavow such a claim and hence it is not necessary here to deal with Hills Health Solutions' submissions in relation to that issue.
As did Stellar Vision, Hills Health Solutions refers to the principles applicable in relation to the creation of an express trust, noting that where parties to a contract have refrained from contractual use of the terminology of trust, an intention to create a trust will be imputed to them only if, and to the extent that, a trust is the legal mechanism which is appropriate to give legal effect to the relationship between the parties or between a party and a third party, as established or acknowledged by the express or implied terms of the contract (referring to Korda at [109] (Gageler J), his Honour citing Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; [1988] HCA 44 at 147-149 and Bahr v Nicolay at 618-619).
Hills Health Solutions submits that the ongoing discussions with Questek about the WSLHD tender, which resulted in a submission by Questek which incorporated specifications prepared by Stellar Vision and a tender which bore both Stellar Vision and Questek's logo, does not support any kind of "joint venture", fiduciary or trust relationship for the following reasons.
First, it contends that there is no basis to conclude that Stellar Vision had some sort of "beneficial interest" in Questek's rights vis-à-vis the WSLHD tender. To the contrary, it is said that there was no concluded agreement as between Stellar Vision and Questek (at the time of the WSLHD tender or at the time that Hills Health Solutions acquired Questek's assets) and that discussions about the form of the arrangement between them continued after the submission of the WSLHD tender. It is said that, in contrast to the Outline of Agreement that governed the parties' arrangements with respect to the QCH project, there was no final agreement reached in respect of the WSLHD tender. Hills Health Solutions maintains that, without some form of express or implied agreement between Stellar Vision and Questek, the trust and joint venture claims must fail.

[95]

Determination

Reference has been made by both parties to the applicable principles relating to the existence of a trust in the absence of an express declaration of trust and it is not necessary here to repeat them in detail (see above) (reference being made in Bahr v Nicolay per Mason CJ and Dawson J at 618-619; Korda at [3] per French CJ; and to the observations in Jacobs' Law of Trusts in Australia at [5-02] to which reference was made in Tresdar by Rees J that: A court cannot hold that an express trust exists unless it is satisfied that there was an intention to create such a trust. The question will be whether there is language or conduct which shows a sufficiently clear intention to create such a trust. No formal or technical words are required; any apt expression of intention will do. The conclusion that the intention existed may be drawn as an inference from the available evidence. In order to infer intention, the court may look to the nature of the transaction and the whole of the circumstances attending the relationship between the parties and known to them, including commercial necessity. …
As noted by Elliott J in Nguyen v Phan (No 2) [2015] VSC 634 at [237] (there noting a distinction between commercial transactions and family dealings): In order to find an express trust was created, it is not necessary for the plaintiffs to prove the parties specifically and formally turned their minds to the fact that a trust was being created; no special or technical language needs to be used; it is sufficient if the intention to create a trust may be ascertained from what the parties actually agreed or said. The intention is imputed when manifest in what is expressly agreed or declared. That intention must be clear from the language used, as objectively understood in the relevant circumstances of the case, including the relationship of the parties. More than once, Gummow J has observed that the precision that might be expected in arms-length commercial transactions is not to be expected in private family dealings. [Footnotes omitted]
In Korda at [53], French CJ made clear that there is a distinction between the ascertainment of an express trust with the imposition of a constructive trust and that the two should not be conflated.
I am unable to discern from the negotiations between Questek and Stellar Vision prior to the submission of the WSLHD tender an objective intention on the part of Questek to hold the benefit of any contract that might be awarded in its favour on trust as to a 50% interest for Stellar Vision (even leaving aside the interesting question as to whether that would be a trust of future property since the tender had not been awarded at that stage - an issue on which Stellar Vision relied by way of analogy on the position in relation to mining tenements). Rather, there was clearly a representation that the tender would be on a "joint" basis, with both parties to share in some (as yet precisely to be defined) way in the participation and profits of the contract (if awarded); and a promise or representation that if a joint venture agreement could not be reached, then Questek would arrange for Stellar Vision's name to be on the contract. To my mind, that is inconsistent with a manifested objective intention on the part of Questek to hold the contract on trust for Stellar Vision.

[96]

Stellar Vision's submissions

In the alternative to the claim for breach of fiduciary duty, Stellar Vision makes a claim for breach of contract, based on the Undertaking, noting the principles for construction of such documents and that the legal rights and obligations arising under the Undertaking are to be determined by what the words and conduct of the parties would reasonably be understood to convey (and referring to Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ).
Stellar Vision says that the Undertaking contained promises from both Stellar Vision and Hills Health Solutions. In the case of Stellar Vision, it is said that it promised, amongst other things, to provide services in respect of the QCH Project, to contribute 50% of contract implementation costs in respect of the projects identified in Annexure A of the Undertaking, which included the WSLHD project; and to split the gross profit from those projects. In the case of Hills Health Solutions, it is said that it promised to contribute 50% of contract implementation costs in respect of those projects, and to split the gross profit from those projects.
Stellar Vision contends that the language of the Undertaking is only consistent with an objective intention on the part of Stellar Vision and Hills Health Solutions to be bound by the mutual promises contained in the Agreed Undertaking, including the use of the word "undertakes" and the phrase "acknowledge and agree". Stellar Vision says that, from Hills Health Solutions' perspective, the Undertaking would not have achieved its commercial objective (at least as identified by Ms Jurd) of ensuring that Stellar Vision would continue to supply Hills Health Solutions in respect of the QCH project if it did not impose any contractually binding obligations on the parties. (It is noted that Hills Health Solutions accepts that the Undertaking was binding at least in part.)
Stellar Vision says that the Undertaking contains an express obligation on the parties to honour the intent of the previous discussions between Questek and Stellar Vision including, specifically, that the gross profit from the WSLHD project would be split between Stellar Vision and Hills Health Solutions. Although the Undertaking also contained an obligation on Hills Health Solutions to "commence negotiations in good faith with Stellar Vision to draft an agreement that suits both parties for a long term relationship", Stellar Vision says that obligation does not detract from the binding nature of the obligations otherwise contained in the Agreed Undertaking.

[97]

Hills Health Solutions' submissions

As to the breach of contract claim, Hills Health Solutions says that the Undertaking cannot be construed as a binding contract (other, I interpose, than in relation to the QCH contract) for at least the following reasons.
First, as Stellar Vision accepts, the Undertaking must be read and understood as a whole. Hills Health Solutions says that, by the Undertaking, Hills Health Solutions did no more than seek Stellar Vision's confirmation that it would continue to provide services in the event that Hills Health Solutions acquired Questek's business. It is submitted that the words used do not evince an intention by Hills Health Solutions to be bound by any promise.
Hills Health Solutions says that the letter is not an offer from Hills Health Solutions capable of acceptance (but, rather, a request from Hills Health Solutions for Stellar Vision's consent and undertaking to continue to provide the said services on the same basis they had been provided to date). It is said that it is confirmatory of the position established by the Outline of Agreement but goes no further.
Hills Health Solutions argues that the notion of "honouring" the "intent of previous discussions" is far from consistent with a contractual promise. It is said that the reference to the "previous discussions" can only be to the Outline of Agreement, which in terms was expressly stated not to create any legal obligations in relation to future contracts. Therefore, Hills Health Solutions says that, at best, by the Undertaking there was a promise to honour the provisions of the Outline of Agreement (which itself is merely an agreement to agree in relevant part). It is said that the Outline of Agreement was relevantly non-contractual and so must be the Undertaking.
Second, that to the extent that Stellar Vision focusses on the (two) paragraphs numbered (b) on the second page of the Undertaking (see as extracted earlier), the final paragraph of the letter can only relate back to the paragraphs numbered (b). It is said that every other part of the letter is clearly referable to the Outline of Agreement; and that the final paragraph does not speak in terms of documenting an agreement recorded in the letter (rather it speaks of an agreement that "suits both parties").
The last paragraph of the letter (which states that "Hills undertakes to, within 4 weeks of settlement of the Questek Transaction, commence negotiation in good faith with Stellar Vision to draft an agreement that suits both parties for a long term relationship") is said to be an arrangement that falls squarely within the third category described in Masters v Cameron, namely one in which the parties did not intend to make a binding agreement at all unless and until they executed a formal contract. It is said to be clear from this last line of the letter that entering into a binding relationship was conditional upon the parties agreeing to an "acceptable form" for their long-term relationship.

[98]

Repudiation

If, however, it is found that the Undertaking did constitute a binding agreement, then Hills Health Solutions contends that, by failing to demonstrate PES software capable of performing the requirements of the WSLHD tender in November and December 2014, Stellar Vision repudiated that contract.
It is noted that repudiation of a contract occurs when a party is objectively not ready, willing and able to perform the requirements of a contract (see Shevill v Builders Licensing Board (1982) 149 CLR 620; [1982] HCA 47 at 626 per Gibbs CJ (Shevill)); and that whether conduct is repudiatory is not decided by reference to the party's subjective intention, but by reference to how it would appear to a reasonable person in the position of the other contracting party (referring to Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23 at 657-8 per Deane and Dawson JJ; Duffy Bros Fruit Market (Campbelltown) Pty Ltd v Gumland Property Holdings Pty Ltd [2007] NSWCA 7 at [195] per Giles JA).
It is noted that the specifications included by Questek in the WSLHD tender were prepared with the assistance of Stellar Vision; and that those specifications were incorporated into the draft WSLHD Contract, which was provided to Stellar Vision on 25 July 2014 (see chronology above).
Although the 1 August 2014 Planning Commencement Date in the draft contract was not the date ultimately incorporated into the final WSLHD Contract, Hills Health Solutions says that it was objectively clear that it was necessary for Stellar Vision to have functioning software by this point in time. The Planning Commencement Date for Auburn Hospital contained in the executed WSLHD Contract was 1 January 2015, with Blacktown and Mt Druitt Hospitals following shortly after on 1 February and 1 March 2015 respectively. Accordingly, it is said that Hills Health Solutions was required to commence deployment of the PES at Auburn Hospital by early February 2015 and at Blacktown Hospital by early March 2015.
Hills Health Solutions says that, by October 2014, Hills Health Solutions was receiving pressure from NSW Health to commence supplying the PES (as acknowledged by Mr Curtin in the 30 September 2014 email in which he referred to the fact that the WSLHD "wish to proceed without delay with implementation"; and that, by this time, the only demonstration of Stellar Vision software that had occurred was on 30 January 2014 when Hills Health Solutions was first introduced to Stellar Vision (which demonstration did not include live functionality). It is said that Stellar Vision subsequently acknowledged in May 2014 the need to demonstrate to Hills Health Solutions its capabilities as a "presentable package".

[99]

Determination

As to the contractual claim, the difficulty I have with the Undertaking (leaving aside the infelicity of some of its drafting - to which I have referred above) is that the second paragraph (b) is expressed to be an acknowledgment and agreement (by, relevantly, Hills Health Solutions) to honour the "intent" of the previous discussions between Questek and Stellar Vision. Those discussions involved a variety of arrangements - none finally agreed; and left much of the working out of any joint venture still to be agreed. The word "specifically" focusses attention on the content of the five numbered points (and I accept that this objectively intended to set out "specifically" what the parties understood the "intent' of the discussions to be) but it does not seem to me to be objectively intended to amount to a binding and enforceable obligation to enter into a joint venture on those terms (and I consider them on their own to be largely unworkable).
The difficulty facing Stellar Vision is that which it faced in the previous discussions - that while a joint venture was contemplated (in which they would share 50/50 in the gross profits of the project), how they would do so remained to be agreed. I accept there may be a distinction between the last paragraph and the preceding bullet points but ultimately I consider that Stellar Vision's recognition that, absent a joint venture agreement, it was left with a "50/50 joint venture" with Questek is the nub of the problem. Unfortunately, that proposed joint venture arrangement was never finalised with Questek and certainly not with Hills Health Solutions.
I have much sympathy for the position of Stellar Vision, which has obviously worked in good faith in the expectation that an agreement would be concluded within the spirit or intent of the previous discussions, but I consider that this is a risk faced by all parties engaged in commercial negotiations which ultimately may not come to fruition.
The contractual claim therefore fails. That makes it strictly unnecessary to consider the repudiation defence. Had it arisen for consideration I would have held that the demonstration (unsatisfactory as it may have been in Hills Health Solutions' eyes) was not such a failure as to meet the very high test for repudiation. See, for example, Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [44] per Gleeson CJ, Gummow, Heydon and Crennan JJ: … The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. … Secondly, it may refer to any breach of contract which justifies termination by the other party. … There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.

[100]

Claim based on proprietary estoppel

Reference is made to the summary in Carter v Brine [2015] SASC 204 per Blue J as to the elements of estoppel by encouragement (at [326]), which I do not here repeat (though I consider them to be a useful guide see ADM v FDGK [2018] NSWSC 442 at [912] albeit not to be applied in a mechanical fashion).
The relevant representation here identified (based on the terms of the Undertaking), which is said by Stellar Vision to be clear and unequivocal, is to the effect that Stellar Vision would continue to have a 50% interest in the WSLHD Contract. Stellar Vision says that the representation induced it to adopt the assumption that it would have a 50% interest in the WSLHD Contract.
Stellar Vision also points to the conduct of Hills Health Solutions following the date of the Undertaking, including: the reference to the "partnership" with Stellar Vision contained in the ASX announcement in relation to the Questek acquisition; Hills Health Solutions' provision of a financial model of the WSLHD to Stellar Vision (following its request for review and feedback"), and the parties' discussion of that model including reference to the "profit sharing %" (which it is said is consistent only with Stellar Vision having an economic interest in the profits from the WSLHD Contract). It is noted that Hills Health Solutions requested that Stellar Vision review the draft WSLHD Contract, (said to be consistent with Stellar Vision having an interest in that contract) and that, when Stellar Vision's name was not included on the draft contract, Stellar Vision was reassured that this did not affect the arrangements as between Stellar Vision and Hills Health Solutions (which was relied upon by Mr McCarthy).
Stellar Vision's assumption is said to be further reinforced by the matters of detrimental reliance to which it points. It is noted that, following the date of the Undertaking, Stellar Vision: undertook work in respect of the WSLHD project in the form of developing the software architecture, system design and services architecture for the WSLHD project; and otherwise expended time and resources in respect of the WSLHD by attending meetings, reviewing documents, including the WSLHD Contract, and working collaboratively with representatives of Hills Health Solutions to source hardware for the WSLHD project.
Mr McCarthy's evidence is that this work was being undertaken because of a belief that there was an agreement in place in respect of WSLHD, not based on any hope or expectation that such an agreement would come into existence. It is noted that Mr Curtin agreed with the proposition that he caused Stellar Vision to continue with the work because he "thought that it was a good thing to do" but it is said that this evidence is consistent with that work being done by reason of a belief that there was an agreement or arrangement in place. It is noted that Dr Rahman was not cross-examined on this issue. Thus, it is said that Stellar Vision relied to its detriment on the relevant assumption.

[101]

Claim based on promissory estoppel

As to the claim based on promissory estoppel reference is made to the summary of the relevant principles set out in Antov v Bokan [2018] NSWSC 1474 at [484]-[486], which again I do not propose here to set out. Insofar as it has been said that a promissory estoppel must be negative in substance, and cannot be relied upon to acquire some positive interest or right (see, for example, in Zugic v Vesuvius Australia Pty Ltd [2020] NSWSC 106 at [269]), Stellar Vision points to the acknowledgement by Bathurst CJ in Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12 at [138] that there is significant dicta contrary to this limitation.
Stellar Vision says that, in the present case, the relevant consequence of the promissory estoppel in this case is not to permit Stellar Vision to acquire some positive right; but rather that the promissory estoppel operates negatively in preventing Hills Health Solutions from denying that its legal relationship with Stellar Vision is governed by the terms of the Undertaking. Stellar Vision relies upon the same factors identified in respect of the claim based on proprietary estoppel for its claim based on promissory estoppel.

[102]

Claim based on conventional estoppel

As to the claim based on conventional estoppel, reference is made to the outline of the elements of conventional estoppel by Brereton J, as his Honour then was, in Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32], approved by the Court of Appeal in TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 at [115] per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing and Rydledar Pty Ltd t/as Volume Plus v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [200] per Tobias JA, Mason P and Campbell JA agreeing.
Stellar Vision says that the Undertaking sets out the assumptions made by the parties as to their legal relationship; and that, following the Undertaking, until the end of December 2014, at least in respect of their public communications and those made with each other, Stellar Vision and Hills Health Solutions conducted their relationship on the basis of that assumption. The conduct relied upon is similar to that relied upon above in respect of the equitable estoppels.
For the same reasons as submitted in respect of the equitable estoppels, it is said that departure from this assumption would occasion detriment to Stellar Vision.

[103]

Estoppel Claims - Hills Health Solutions' submissions

Hills Health Solutions says that Stellar Vision's pleaded case in respect of these claims relies upon the terms of the Undertaking (see pleading at [44A] and [44H]); and that this claim can therefore rise no higher than the breach of contract claim. It is said that, without a contract there can be no unequivocal representation. (I do not accept that as a matter of principle that is the case.)
Hills Health Solutions says that the suggestion that Stellar Vision was ever operating on the assumption of some binding promise is fanciful in light of its own contemporaneous documents, and in particular the 9 October 2014 email from Mr Curtin which it is said clearly demonstrates that Stellar Vision considered there to be no binding agreement as at that date.
Moreover, Hills Health Solutions says that Stellar Vision's estoppel claims cannot succeed as Stellar Vision has failed to establish that it acted to its detriment in reliance upon any represented or assumed state of affairs. It is said that there is no evidence that Stellar Vision changed its position by reference to any representation or other conduct of Hills Health Solutions, or that it acted to its detriment upon an assumption as to the basis of its relationship with Hills Health Solutions. To the contrary, it is said that the documentary evidence (see chronology above) demonstrates that Stellar Vision continued to attempt to negotiate a binding agreement with Hills Health Solutions until at least the November 2014 demonstration. It is said that this is the opposite to the alleged assumption. It is said that there is no evidence that Stellar Vision altered its state of affairs on the basis of the Undertaking, rather than simply continuing to pursue a business opportunity as it would have done in any event.

[104]

Determination

As to the estoppel claims, I accept there was a representation that Hills Health Solutions would honour the intent of the previous discussions but in circumstances where Stellar Vision was well and truly on notice of the fact that it had not yet reached agreement as to the terms under which it would participate in the WSLHD project (beyond the five numbered points in the Undertaking said specifically to comprise the "intent" of those previous decisions), I am not satisfied that it could reasonably have assumed an entitlement to participate in the WSLHD project on any particular terms.
I find that Stellar Vision's actions were taken in reliance on the anticipation that terms would be able to be agreed but not in reliance on a representation that it would have any particular interest in a joint venture on particular terms).
Hence the estoppel claims are not made good.

[105]

Relief sought by Stellar Vision

In light of the failure of each of Stellar Vision's claims, the below consideration of the question of relief arises only in the event that my conclusions with respect to the trust claim, the breach of fiduciary duty claim, the breach of contract claim, and the various estoppel claims are erroneous.
As to the breach of trust claim, Stellar Vision claims an entitlement to equitable remedies including equitable compensation or an account of profits. A similar claim for equitable relief is made as to the breach of fiduciary duty claim (either because the benefit of the WSLHD Contract is held on trust for Stellar Vision, or because the relationship between Hills Health Solutions and Stellar Vision is fiduciary in character). Reference is made to the statement in Warman v Dwyer at 559 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) that "the cardinal principle of equity [is] that the remedy must be fashioned to fit the nature of the case and the particular facts". It is noted that, in appropriate circumstances, that may result in the imposition of a constructive trust, an account of profits or the payment of equitable compensation.
As to the breach of contract claim, Stellar Vision claims damages (to be assessed in accordance with the principle that damages should put Stellar Vision in the same situation as it would have been in had Hills Health Solutions performed the contract) (reference in this context being made to Clark v Macourt (2013) 253 CLR 1; [2013] HCA 56 at [106]). Stellar Vision says that the relevant obligation not performed was splitting the gross profit of the WSLHD Contract in accordance with the Undertaking.
It is noted that while the general rule is that damages are assessed at the date of breach, the rule is not universal (see Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64 at 355-356 per Mason CJ (Johnson v Perez)), and that, even if the loss is assessed at the date of the breach, it will be permissible to take into account events that have occurred since the date of breach in assessing that loss (HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [39] (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ)). In that context, I note that in Kizbeau Pty Ltd v WG & B Pty Ltd (1995)184 CLR 281; [1995] HCA 4 the High Court earlier said at 291: In an action for damages for deceit for inducing a person to enter a contract of purchase, which is an action that is closely analogous to an action for damages for breach of s 52 the courts have consistently held that the proper measure of damages is the difference between the real value of the thing acquired as at the date of acquisition and the price paid for it. Nevertheless, although the value is assessed as at the date of the acquisition, subsequent events may be looked at in so far as they illuminate the value of the thing as at that date. A distinction is drawn, however, between subsequent events that arise from the nature or use of the thing itself and subsequent events that affect the value of the thing but arise from sources supervening upon or extraneous to the fraudulent inducement. Events falling into the former category are admissible to prove the value of the thing, those falling into the latter category are inadmissible for that purpose. [Citations omitted; emphasis added]

[106]

Quantum

Stellar Vision says that, irrespective of the way in which the claim is characterised, the benefit to Hills Health Solutions or the loss to Stellar Vision is largely the same. Stellar Vision argues that (whether Hills Health Solutions is required to: account for the benefit of trust property which it has misappropriated; provide an account of profits; pay equitable compensation; or pay damages for breach of contract) in each case attention is directed towards valuing a 50% interest in the WSLHD Contract. In other words, it is said that in substance what Stellar Vision lost (a 50% interest in the WSLHD Contract) and what Hills Health Solutions gained (the whole of the benefit of the WSLHD Contract short of Stellar Vision's 50% interest) are the same.
As referred to earlier, both parties have served expert evidence seeking to quantify the value of a 50% interest in the WSLHD Contract; and both experts adopt a discount cashflow valuation; the differences in calculations primarily being the result of different variables that the experts have used in their respective discounted cashflow models, and different approaches to inflation and discounting cashflows.
As I read the Table at [14] of the experts' joint report dated 23 April 2021, Stellar Vision's expert (Mr Eversgerd) valued the 50% interest in the WSLHD Contract (see the Table at [14] of the joint report dated 23 April 2021) at the upper end in a range between $5,750,052 and $12,482,619 (on the "no delay scenarios") and $5,197,501 to $11,714,276 (on the "delay scenarios") (with a range in lesser sums for those scenarios depending on the discount rate and assumption as to length of contract); whereas Hills Health Solutions' expert (Mr Jackson), values the loss in the range between $1,262,639 to $3,992,256 (on the "benefit scenarios") (although on some assumptions it is negative) and in the range between $1,223,114 to $3,952,730 (on the "no benefit scenarios") (with one assumption producing a negative figure) (again with differences depending on different variables).
Stellar Vision says that Mr Eversgerd has valued additional revenue of between $1,506,699 to $1,749,676 (depending on the discount rate) which would have been paid to Stellar Vision had it participated in the WSLHD Contract. (Presumably that is included in the total loss figures in Table 4.)
Stella Vision says that Mr Eversgerd's valuation proceeds by reference to the actual performance of the WSLHD Contract, adjusted to take into account the improved performance that the WSLHD Contract would have had, had Stellar Vision participated in the performance of the contract (in order appropriately to compensate Stellar Vision for what it has lost). This of course depends on the counterfactual assumptions being adopted.

[107]

September Model

Hills Health Solutions points to the September Model, which valued the WSLHD Contract as at that date, based upon a discounted cash flow model which both parties believed was reasonable, at $1,322,166. It is said that, if Stellar Vision is entitled to 50% of that, then Stellar Vision's claim is worth approximately $750,000 (although it is noted that, at Stellar Vision's insistence, this model provided for Stellar Vision to receive licence fees, which Hills Health Solutions says is entirely inconsistent with the contract on which it now sues). Hills Health Solutions says that, properly understood, Stellar Vision's case is for loss of the value of the contract that it says it had (i.e., loss of bargain damages) and, that contract having been lost in December 2014, it is at that date that the value of the contract should be analysed. It is said that this follows the general principle that damages should be assessed at the time of breach (referring to Johnson v Perez at 355-356 per Mason CJ).
Hills Health Solutions accepts that the September Model is based upon assumptions, but says that this was all that was known to the market and therefore the proper basis for valuation as at that date. Alternatively, if the loss is valued on the basis of the valuations provided by the experts based on the actual performance of the WSLHD Contract (as well as any counterfactual established on the evidence), Hills Health Solutions says that this is properly characterised as a loss of a chance which will need to be discounted.
Stellar Vision says that Hills Health Solutions' contention that the quantum of Stellar Vision's loss should be assessed by reference to the "September Model" is flawed as a matter of fact and legal principle.
As a factual matter, it is said that the September Model does not reflect an "agreed position". It is said that Mr Curtin agreed with Mr Starkey's "suggestion of a line by line audit of the costs estimates" (referring to Mr Starkey's 6 August 2014 email) but that the evidence does not disclose any "line-by-line" review. It is noted that, while Mr Starkey could not recall whether he had proposed a line-by-line audit with Stellar Vision, he accepted that the model was based on estimates and would change as those assumptions became more certain. Stellar Vision maintains that in the absence of evidence of a line-by-line audit (and agreement thereon), the only inference to be drawn is that the September 2014 model was an early model prepared by Hills Health Solutions which was never more than an estimate based on assumptions and guesswork.

[108]

Areas of disagreement between the experts

Turning to the itemised areas of disagreement between the experts, I propose to address them sequentially. I note that Stellar Vision has grouped them differently, identifying the "inputs" for the model as falling into two broad categories: first, factual inputs which require determination as to the current revenue and expenses under the contract as it has been performed by Hills Health Solutions (referring to the disputed "scenarios" and items 10-17 and the issue of hospital commissions); and, second, counterfactual inputs which require determination as to what the position would have been had Stellar Vision been jointly involved in the contract with Hills Health Solutions (relating to items 1, 4, 6, 7- 9 and 11-15). (Hills Health Solutions maintains an objection to the counterfactual inputs on the basis that the material facts in relation thereto were not pleaded.) For present purposes I consider it convenient to refer to the parties' submissions on each itemised area of disagreement.

[109]

Item 1 - Contract performance

The first area of disagreement (item 1) is the issue of contract performance. Mr Eversgerd has been instructed that the performance of the WSLHD Contract would have been different had Stellar Vision been involved in the management of that Contract (see Mr Eversgerd's second report at [2.4.6]). Mr Jackson's opinion is that there is no evidence that contract revenue would have been substantially higher and the costs substantially lower if Stellar Vision was jointly managing the contract (see Mr Jackson's second report at [144]).
Thus, item 1 (which Stellar Vision describes as a counterfactual input) is based on assumptions as to how the contract would have been performed had Stellar Vision jointly operated the contract with Hills Health Solutions. Stellar Vision addresses these assumptions in more detail in relation to Items 4, 6, 7, 8, 9 and 11, emphasising that each assumption is separate and distinct.
Insofar as Mr Jackson's position (as noted in the joint report) as to lack of evidence is concerned, Stellar Vision says that this is not a matter for expert evidence but is a matter for the Court.
Stellar Vision maintains that, as a general matter, had Stellar Vision not been excluded from the WSLHD Contract by Hills Health Solutions, and had it been permitted to participate jointly in the project, then Stellar Vision (and its officers) would have been directly involved in the process. It says that, as a matter of commercial common sense, a party contributing 50% of the costs and with an entitlement to 50% of the profits would have an interest in the management of the project. Further, it points to Mr Curtin's evidence of the way in which Stellar Vision, even if only characterised as a software supplier for the purpose of the WSLHD project, would be involved in a project in such a capacity. It is said that, to the extent that Stellar Vision was able to manage the project more effectively, there is no reason why Hills Health Solutions (acting rationally) would not accept that assistance.
As noted above, this is the counterfactual assumption with which Hills Health Solutions takes issue (both on the basis that it is unpleaded and, as I understand it, on the basis that the counterfactual postulated by Stellar Vision is premised on the Undertaking, which did not ascribe a management role to Stellar Vision).

[110]

Item 2 - Loss Date

Mr Eversgerd was instructed to calculate loss as at 23 December 2014 (see Mr Eversgerd's first report at [30]). Mr Jackson adopted an "Ex-Post discounting approach and calculated the value of a 50% share of the WSLHD Contract using actual cash flows prior to 31 January 2021 and the present value of future cash flows after that date discounted to 31 January 2021 (though he had also prepared a calculation on the "Ex Ante" discounting approach).
Stellar Vision accepts the "Ex Post" discounting approach adopted by Mr Jackson is the correct method. This issue therefore does not arise.

[111]

Item 3 - Overall Methodology

Mr Eversgerd calculated loss as the sum of: 50% of the WSLHD Contract (excluding revenue from service and maintenance and licence fees) and 100% of Stellar Vision's revenue from service and maintenance and licence fees (and was instructed to provide calculations assuming there was a delay under alternative scenarios where Stellar Vision either did or did not receive compensation payments (see Mr Eversgerd's second report at [2.3.2])). Mr Jackson calculated the value of a 50% share in the WSLHD Contract assuming equal cost and revenue sharing (and was instructed to apply different assumptions for licence fees and CAPEX; as well as to calculate loss on two different scenarios - as to whether Stellar Vision would or would not gain the benefit of existing hardware under a previous contract at Mt Druitt Hospital (see Mr Jackson's second report at [17])).
As to this item, Stellar Vision says that nothing turns on this as it is answered by every other issue.
Hills Health Solutions notes that the experts (Mr Eversgerd and Mr Jackson) are agreed upon the methodology for calculating loss (a discounted cash flow methodology) and have agreed that it is appropriate to use a 12-month average to forecast future performance of the WSLHD Contract (see the joint report at 18).

[112]

Item 4 - Contract Delay

Mr Eversgerd was instructed to assume that, had Stellar Vision performed the contract with Hills Health Solutions jointly there would have been no delay during the Installation Period as defined in the WSLHD Contract (and provided an alternative scenario in which there would have been a delay to the roll out of the PESs (Annexure A to Mr Eversgerd's second report)). Mr Jackson adopted the approach whereby the estimated number of beds available was aligned with the actual available beds achieved under the WSLHD Contract (see Mr Jackson's second report at 98(iii)).
Stellar Vision says that the "no delay" scenario modelled by Mr Eversgerd should be adopted pointing to Mr Curtin's evidence in respect of the manner in which Stellar Vision would have managed the WSLHD project so as to avoid delays.
Stellar Vision points out that the WSLHD Contract recorded the following Planning Commencement Dates for each hospital - for Auburn: 1 January 2015; Blacktown: 1 February 2015; Mt Druitt: 1 March 2015; and Westmead: 1 September 2017. Stellar Vision says this means that, under the WSLHD Contract's definition of "Installation Commencement Date" and "Service Commencement Date", those dates for each hospital are: for Auburn: 5 February 2015 and 12 March 2015; Blacktown: 8 March 2015 and 12 April 2015; Mt Druitt: 5 April 2015 and 10 May 2015; and Westmead: 6 October 2017 and 10 November 2017. However, it is noted that the Monthly Uptake Report, which Hills Health Solutions relies on as evidence for revenue, shows that Blacktown and Auburn only became live in September 2016; Westmead only became live in November 2017; and Mt Druitt only became live in April 2018.
Stellar Vision says that it is evident that these significant delays in Hills Health Solutions' performance (in the case of Blacktown, Auburn and Mt Druitt, of between 17 months and up to nearly three years) of the WSLHD Contract have a deleterious consequence on revenue generation.
Insofar as Hills Health Solutions, through the evidence of Mr Osborne, suggests that any delay was caused by a failure of the WSLHD to give Hills Health Solutions access to the relevant hospitals, Stellar Vision says that no documentary evidence is provided to support the contention that the WSLHD did not allow Hills Health Solutions to access to any part of Blacktown, Auburn and Mt Druitt Hospitals for between 17 months to three years. It is said that such a contention is inconsistent with the contemporaneous documents which state that hospitals were "desperate" for installation to occur.

[113]

Slowing down of project to preserve working capital in FY16

Stellar Vision says that the contemporaneous documents show that Hills Health Solutions made a deliberate decision in respect of the WSLHD project to "slow down delivery to preserve working capital" in the 2016 financial year.
Reference is made in this regard to: a May 2016 "Business Review" of Health, that records in the "Head of Health Summary" that "WSLHD -The delivery of the project continues and our focus remains to slow down delivery to preserve working capital in FY16"; a June 2016 "Business Review" of Health, that similarly records "WSLHD - The delivery of the project continues and our focus was to slow down delivery to preserve working capital in FY16 … [w]e expect to ramp these up in early FY17"; and an email dated 16 December 2016 from Mr Osborne (then of Hills Health Solutions) to the Chief Executive Officer of Lincor responding to questions from the Lincor Chief Executive Officer as to whether Western Sydney "is live and a paying customer" to the effect that "in short yes. We have all of Auburn finished and billing. The new CSB building at Blacktown is finished and billing. The old main building at Blacktown and the last ward at Mt Druitt are close to being completed. We were put on a spend freeze earlier in the year and could [not] order the stock. That is what they are not complete at this time". The "not" was as clarified by Mr Osborne in cross-examination.
Stellar Vision also points to an email dated 13 October 2016 from Lincor's Chief Executive Officer to Hills Health Solutions, which stated: We need to figure out what the plan is for payment to Lincor Inc. for hardware with the W Sydney (I believe) order. There are some deadlines coming this Friday that need to be met to assure [sic] order and delivery timelines. Obviously everyone is aware of cash and working capital so if that is connected to the decisions about payment for the items, lets discuss so we are all on the same page as to the what, why and impact of not paying or delaying payment - as well as other options such as Hills paying the vendor directly.
Stellar Vision says that Hills Health Solutions' eventual solution to the cash shortage was to obtain a financing facility with Macquarie Bank, but that this was not implemented until the delays had already been incurred. Reference is made in that regard to an email dated 14 October 2016 from Hills Health Solutions' Chief Financial officer to Lincor (in response to an email asking about payment terms) stating: Yes [the Purchase Orders are] for Western Sydney and so we definitely need to keep things moving so that Hills Health Solutions can meet its delivery deadlines on this project. The facility with Macquarie Bank is now up and running but I don't think it would be ready to draw against for the purposes of this first batch of Western Sydney kit just yet. In the meantime we will pay 65% of the invoice 2622 via EFT today so that things are not held up for the delivery schedule and then we will work on getting Macquarie finance on this asap after which Hills Health Solutions will then transfer ownership in the kit to Macquarie and get its funds back from this prepayment.

[114]

Starting from scratch and "reassembling" the project

As to the second of the asserted reasons for the delay, Stellar Vision says that it is evident that Hills Health Solutions was in effect starting from scratch as a result of both replacing the software solution at the last minute with the Lincor PES and changing critical personnel at the last moment, referring in this regard to the following documents.
First, an email dated 25 February 2015 from Mr Osborne to Lincor that stated: Sheila - Sorry for the confusion. … It would seem in the absence of Daniel [Linderman] we are still finding our way with where he was with regards to the Western Sydney project. Maybe it would be better if you were to send me what he has ordered. With that, we will work it out in reverse. Sorry to look so unprofessional but the handover information is limited.
Second, an email dated 10 February 2015 from Mr Jon Maloney of Hills Health Solutions to Mr Starkey and Mr Tom Sykes, stating that: … After discussions with you this evening. I went and re-visited the documents Daniel L sent through to me (attached). The most immediate concern is that Daniel has sold a Stellar system not a Lincor system. Daniel's previous descriptions of the Stellar system include features such as multi user teleconferencing, Concierge, local shop purchase, environmental control and soft Nurse Call buttons. I'm [sic] don't believe that Lincor currently has these features. There may be further R&D before the Lincor system matches the job specifications." [Emphasis as per submissions]
Third, an email dated 16 February 2015 from Mr Osborne to Mr Gordon Timmins of NSW Health, which stated: I am new to Hills as you will see by my email address and have been brought in to ensure the project does not fail. Daniel Linderman has resigned from Hills as of Friday. That said, I apologise for coming in so late; however, I will work diligently to make the project a success for all parties. As I am coming late, I will have some questions that I am sure may have been asked earlier. My apologies again but I would like to build up the documentation to best deliver the end product.
Fourth, an email dated 19 March 2015 from Mr Osborne to Mr Peter de Robillard of NSW Health, stating: … We are working hard to reassemble the project in lieu [sic] of Daniel Linderman leaving. In the background, we have been very busy getting the finer points down on paper along with the stock and equipment …

[115]

Item 5 - Scenarios

Mr Eversgerd was instructed to prepare his model under various alternative scenarios: a 15 year term with and without delay; a 10 year term assuming no extension with and without delay (see Annexure A of Mr Eversgerd's second report).
Mr Jackson was instructed to apply three different assumptions for licence fees and two different assumptions for CAPEX, resulting in 6 alternative outcomes. Mr Jackson summarised the alternative scenarios (see Mr Jackson's second report at [17]) as being the Benefit and No Benefit Scenarios.
Under the Benefit scenarios, Stellar Vision would gain the benefit of existing hardware at Mr Druitt hospital and only incur the incremental hardware costs required. It is noted that for any additional beds installed after 30 April 2019, the cost per bed would be the same as the historical cost. On the No Benefit scenarios, Stellar Vision would not gain the benefit of the existing hardware at Mr Druitt and, accordingly, for Mt Druitt would incur the weighted average cost of hardware per bed for Auburn, Blacktown and Westmead, which Mr Jackson calculated to be $2,479 per bed applicable to Mt Druitt absent any existing CAPEX. On each scenario the various assumptions were: no software licence fees; licence fees of $0.33 per bed per day and perpetual licence fee of $300 both payable to Stellar Vision; and licence fees incurred as reflected in the schedule of Lincor licence costs.
In summary, therefore, this issue as to the appropriate "scenarios" involved valuation by the experts of several different scenarios including: whether or not the WSLHD Contract will last 10 years or 15 years; whether or not Stellar Vision and Hills Health Solutions would get the benefit of the existing hardware at Mt Druitt Hospital; whether or not there was a delay; and whether or not a licence fee was payable and if so, to whom.
As to the term of the WSLHD Contract, Stellar Vision says that the value of the WSLHD Contract should be assessed on the basis that it would continue for 15 years. It points to the evidence of Mr Curtin and Mr Starkey that the contract is likely to be extended by the hospitals for the additional five years because, under cl 14.5.2 of the WSLHD Contract, liability for a compensation payment would be incurred if a requisite number of "bed days" is not met (and the requisite number of bed days will not be met if the contract is not extended).

[116]

Item 6 - Number of Beds

Mr Eversgerd was instructed to assume a particular number of beds for the respective hospitals (see Item 6, Schedule 1 of the WSLHD Contract, WSLHD Data, and the Monthly Uptake Report) and was instructed in relation to the "activated" bed rate to use the Planning Commencement, Installation Commencement and Service Commencement Dates in the WSLHD Contract, assuming no delay during the Installation Period. Mr Eversgerd adopted those numbers for the 2015 financial year to 2021 financial year period. Mr Eversgerd was instructed to adopt the updated bed numbers pursuant to a Deed of Variation of the WSLHD Contract dated 7 October 2020 and adopted those numbers for the forecast period from the 2022 financial year. (See Mr Eversgerd's third report Annexure A and noting updated instructions were provided during the conclave process.)
Mr Jackson adopted the actual historical number of beds live as contained in the Monthly Uptake Reports up to January 2021. As to the forecasted number of beds, Mr Jackson was also instructed to adopt the updated bed numbers pursuant to the Deed of Variation (updated instructions during conclave).
Stellar Vision notes that item 6 concerns both the historical number of PES enabled beds and the forecast of PES enabled beds. In respect of the historical number of PES enabled beds, Stellar Vision says that this issue will be determined by the delay issue (i.e., that, if Stellar Vision's submissions on delay are accepted then the number of beds historically achieved would have been achieved without delay; and if Stellar Vision's submissions on that issue are not accepted, then the historic number of beds should be the actual historic number of live beds as contained in the Monthly Uptake Reports up to January 2021).
Otherwise, it is said that the experts are agreed and that the evidence discloses that the number of beds going forward should be the number of beds in the variation to the WSLHD Contract dated 7 October 2020.
As to Item 6, Hills Health Solutions submits as follows. Mr Eversgerd has been instructed to assume that a certain number of beds were equipped with PES devices, those being the numbers set out in the WSLHD Contract. In contrast, Mr Jackson relies upon the actual historical number of beds live as contained in the Monthly Uptake Reports (MURs). Both experts also rely upon a Deed of Variation to the WSLHD Contract dated 7 October 2020 in respect of future bed numbers (see the joint report at 10, item 6).

[117]

Item 7 - Private Patient Utilisation

Mr Eversgerd was instructed to assume that the utilisation rate for private patients was 100% (see Mr Eversgerd's third report at Annexure A). Mr Jackson adopted the actual historical utilisation rate for private patients as contained in the Monthly Uptake Reports up to January 2021 (which was the most recent month for which both actual revenue and cost information was available) (see Mr Jackson's second report at 98). In the joint report it is noted that, in calculating forecast private patient utilisation, Mr Jackson did not explicitly use the utilisation rates in calculating forecast revenues but that the utilisation rates were implicitly included in his calculations.
The joint report notes that the difference of applying average revenue per unit at historical utilisation versus 100% utilisation (that Mr Eversgerd was instructed to use) is shown in the $10.4 million difference in the graphical representation of the key differences in free cash flows between the two experts' models. Mr Jackson noted that he had been provided with no evidence to suggest that the 100% utilisation by private patients was achievable.
This item is related to item 8 (see below).
Stellar Vision points out that, under the WSLHD Contract, the contractor is entitled to charge revenue for each private patient. Reference is made to the evidence of Mr Osborne which Stellar Vision says makes clear that "Hills were very keen holistically [to] bill the hospital for every, every patient registered as a private patient".
This raises what may be referred to as the HL7 issue. Stellar Vision says that, in order to charge for every private patient, it is necessary to know the number of private patients, as well as when they are admitted and discharged.
Stellar Vision says that it has (on other projects) automated this information gathering process by utilising "Health Level 7" or "HL7" information standard for the transfer of clinical and administrative data. Stellar Vision says that, by connecting with a given hospital's HL7 protocols, Stellar Vision is provided with information about the admission of every patient (public and private) and to which bed the patient is admitted; and that this allows Stellar Vision automatically to provide PES terminal access for each private patient and to invoice the hospital for each private patient, for the PES device provided. It is noted that the only challenge to Mr Curtin's evidence on this point was the suggestion put to him that WSLHD could have taken issue with this proposed approach and not consented thereto, or that there may have been an alternative agreement between Hills Health Solutions and WSLHD.

[118]

Item 8 - Private Patient Revenue

Mr Eversgerd was instructed to assume a particular revenue ($13.90 GST inclusive) per day per private patient (referring to Table B, Schedule 3 of the WSLHD Contract) (see Mr Eversgerd's third report at Annexure A); whereas Mr Jackson had adopted the historical revenue data in the MURs for the 12 months prior to 28 February 2021 to calculate average revenue per unit used by a private patient for each hospital (GST inclusive) which produced varied rates from $13.40 per unit in Blacktown up to $14.19 in Auburn (see Mr Jackson's second report at 98; 98). Mr Jackson's forecast revenue for private patients was based on the historical prices per unit for each hospital. He calculated the combined average revenue per unit per day (private and public combined) for the four hospitals. Mr Jackson also noted that although the averages were shown as GST inclusive, the revenue amounts used in his model to determine the "alleged loss estimate" were GST exclusive.
In respect of item 8, Stellar Vision emphasises that the revenue figure permitted to be charged for each private patient is $13.90. It is said that this is the amount that, as revealed by Hills Health Solutions' internal financial documents, Hills Health Solutions has in fact been charging for each private patient.

[119]

Item 9 - Clinical Revenue

Mr Eversgerd was instructed to assume clinical revenue at $1.25 per unit and assumes a clinical utilisation rate of 100% in respect of all patients (both public and private) limited for each hospital on any one day by the number of "activated" beds for that hospital on that day. Reference is made by Mr Eversgerd to Mr Starkey's affidavit at 46 in this regard, where Mr Starkey deposed to his recollection that WSLHD had responded positively (albeit without commitment) to a proposal for $1.25 per terminal per day for clinical revenue) which proposal was going to senior management of WSLHD (third report Annexure A).
Mr Jackson did not include clinical revenue on the basis that historically it had been zero for all hospitals (which he had confirmed with instructing solicitors). Mr Jackson noted that in the September Model the clinical revenue utilisation rate was assumed to be zero percent and the September Model included no such revenue (see Mr Jackson's first report at 87(i) and second report at 98(i)). Mr Jackson's position is that a proposal without commitment (as referred to in Mr Starkey's affidavit) is an insufficient basis to include any clinical revenue in his analysis (particularly given that it was not forecast in the September Model and historical information for the contract shows zero clinical revenue for all hospitals (see Mr Jackson's second report at 98(v)). The joint report notes (at [15]) that the impact of including (versus excluding) clinical revenue is shown in the $9.6 million difference depicted in the graphical representation of the sources of key differences in free cash flows between the respective experts' models.
Stellar Vision notes that, under the WSLHD Contract, the Statement of Requirements included clinical applications. It is noted that Hills Health Solutions and WSLHD considered a figure of $1.25 per bed per day for Hills Health Solutions to charge WSLHD for access to those clinical functions. Stellar Vision says that WSLHD repeatedly asked Hills Health Solutions for information about this functionality, and by March 2019, Les Forest of WSLHD was recorded as asking Hills Health Solutions, in respect of a Blacktown Clinical Trial of this clinical access, "to start this project back up".

[120]

Item 10 - Facility Rental and TV Refunds Revenue

Mr Eversgerd was unclear as to how to treat this potential revenue source, noting that his instructions were updated to reflect 50% of the Facility Rental revenue as at February 2020. Mr Eversgerd calculated the NPV of facility rental revenue to be $818,548 and $749,522, discounted at 10% and 13% respectively, using Mr Jackson's discounting methodology (third report at 2.3.9).
Mr Jackson relied on the revenue amounts from the MURs and costs from the Income Statements up to 31 January 2021, as summarised in Appendix C to his second report, for the actual performance of the WSLHD Contract at all four hospital locations (taking into consideration later in his report the licence fee expenditure - referring to [103H] of the report) but did not attempt to reconcile the various financial statements (second report at [58]).
Stellar Vision says that the documentary evidence reveals that Hills Health Solutions had agreed with WSLHD that WSLHD would pay for "fixed rental" (referring to an email sent on 7 January 2019 from Hills Health Solutions to WSLHD to the effect that "where the hospital pays a fixed fee to Hills, and the PES is provided free of charge to the patients"); and noting that in that email it was said that "[t]he current fixed fee for PES at WSLHD sites is $3.90 per day per bed plus GST". Stellar Vision says the evidence is replete with references to WSLHD's willingness to pay for fixed fee rental, apparently on a ward-by-ward basis. It is noted that, by 9 October 2019, Mr Rajasingam recorded that WSLHD had "agreed to continue fixed rental arrangement for the 48 beds in renal and cancer wards at $3.90 per day per bed (plus GST)". Stellar Vision says that invoices produced on discovery by Hills Health Solutions for the period October 2019 to February 2020 show that this was labelled "Facility Rental", and that those invoices alone show that the service was provided for "Renal Dialysis", the "Infusion Suite" and Ward 1A, and a fixed price per day per terminal.
In any case, Stellar Vision says that the Income Statements of Hills Health Solutions (on which Hills Health Solutions and Mr Jackson rely as an accurate record of Hills Health Solutions' costs of the WSLHD Contract - referring to items 13 and 15 below) record a separate line item for revenue called "Facility Rental". Stellar Vision says that this, consistent with the invoices, shows that (irrespective of the formal status of any variation of the WSLHD Contract by Hills Health Solutions and WSLHD) WSLHD did in fact pay Hills Health Solutions the agreed "fixed rental" or "facility rental" income. It is said that there is no suggestion that this is a revenue stream outside the WSLHD Contract and, as such, any assessment of the WSLHD Contract's value should take into account the facility rental revenue stream.

[121]

Item 11 - Licence Fee

This item (so far as it relates to the Lincor licence fee) does not arise in light of concessions made by Hills Health Solutions (though it does arise in relation to a Stellar Vision licence fee).
Mr Eversgerd was instructed to assume licence fee costs of $600 payable to Stellar Vision (a perpetual licence) and that Stellar Vision incurred no marginal costs in relation to that revenue stream (see Mr Eversgerd's third report at Annexure A).
Mr Jackson was instructed to assume three scenarios in relation to licence fees under the WSLHD Contract: that no expenses were incurred under this category of software licence fees; that licence fees were incurred and payable to Stellar Vision ($0.33 per day per bed for each hospital and a perpetual licence fee of $600 per terminal payable at the time the PES is initially activated; or that licence fees were incurred as reflected in a Lincor schedule (this last no longer arising) (see Mr Jackson's second report at [17]).
Stellar Vision notes that Mr Curtin's evidence (in his second affidavit, at [290]-[293]) is that, if Stellar Vision had jointly operated the WSLHD Contract with Hills Health Solutions, Stellar Vision would have charged fees comprising: $0.33 per bed per day for 'software support' services; and a $600 per terminal licence fee. Stellar Vision points out that this scenario was expressly modelled in the September Model (on which Hills Health Solutions puts primary focus) and that it was only removed from the September Model by Mr Starkey due to the removal of Stellar Vision from the project (when it was changed to a licence fee payable to Lincor).
Stellar Vision seeks a finding that Stellar Vision would have generated this software support and licence fee revenue stream had it not been removed from the WSLHD project (even if the September Model were to be used as being wholly determinative of Stellar Vision's loss).
As to the issues relating to the licence fees (Items 11, 12 and 15 and Mr Jackson's alternative scenarios), Hills Health Solutions says as follows.
Mr Eversgerd was instructed to assume that, if Stellar Vision had been involved in the performance of the WSLHD Contract, Stellar Vision would have received licence fees of $600 per terminal and derived income from maintenance and service costs of $0.336 (GST inclusive) per bed per day for each hospital, of which $0.33 is payable to Stellar Vision (see the joint report at 15, item 11; and at 16-17, item 15). These instructions are premised upon assertions in Mr Curtin's second affidavit that these fees would have been payable to Stellar Vision had it been involved in the WSLHD Contract (at [289]-[294] and [203]-[303]).

[122]

Item 12 - Exchange Rate adopted in the schedule of Lincor licence costs

Again, this item does not arise in light of concessions made by Hills Health Solutions.

[123]

Item 13 - Content, broadband and VoIP cost

This item does not arise as Stellar Vision accepts that the approach taken by Mr Jackson (in using the costs as actually incurred by Hills Health Solutions and recorded in the Income Statements) is the correct approach.

[124]

Item 14 - Sales Commission

Mr Eversgerd was instructed that the inclusion of the sales commission payable to Mr Linderman in the September Model was inconsistent with the terms of the Undertaking to share costs and profits equally and excluded this cost from his analysis (see Mr Eversgerd's second report at [3.4.21]).
Mr Jackson's opinion is that it is not reasonable to eliminate the cash flow associated with this cost as it represents a cash flow of the contract. Mr Jackson was provided with the sales commission amortisation schedule which detailed the upfront payment of a lump sum sale commission of $220,713 from Hills Health Solutions and he adopted this at 92(vi) of his first report as an upfront payment (see Mr Jackson's second report at [71] and [103]).
Stellar Vision says that no sales commission should be included as a factual input as it is not supported by the evidence. Stellar Vision points out that the Deed of Settlement, Release and Restraint between Hills (not Hills Health Solutions) and Mr Linderman does not provide for a sales commission in relation to the WSLHD Contract or at all. It is noted that, pursuant to cl 2.1 of that Deed, Hills agreed to pay to Mr Linderman the "Settlement Sum" (defined as (figure redacted)). Recital H records that the Settlement Sum was paid to "settle all outstanding matters between [Mr Linderman and Hills]". Pursuant to cl 4.1 Mr Linderman released Hills and other defined parties against any "Claim" he had and may at any time have against those parties. Stellar Vision says that no reference is made in the Deed to the WSLHD contract.
Further, it is noted that the document relied upon by Hills Health Solutions is consistent with this (as it records the payment to Mr Linderman as being (figure redacted) and is described as "To record prepaid severance payment for DL").
As to Item 14, Hills Health Solutions argues that Mr Linderman's commission represents a cash flow associated with the cost of the WSLHD Contract. Hills Health Solutions says that Mr Curtin's evidence (see his second affidavit at [304]-[305]) is mere conjecture and that there is nothing in the terms of the Undertaking that would enable Stellar Vision to exclude this cost.
Pausing here, the difficulty I see with this submission is that the payment in question is not described in the Deed as payment of sales commission to Mr Linderman. It appears to be recorded as a severance payment. If so, I would not conclude that it was an expense relating to the WSLHD project.

[125]

Item 15 - Software Maintenance and Service Costs

Mr Eversgerd was instructed to assume maintenance and service costs of $0.336 (GST inclusive) per bed per day for each hospital, of which $0.33 per bed per day is payable to Stellar Vision (the $0.33 per bed per day figure is addressed at item 11 above) and to assume that Stellar Vision incurred no marginal costs in relation to this revenue stream (see Annexure A of Mr Eversgerd's third report). Mr Jackson adopted the actual historical costs as reported in the Income Statements from commencement of the contract to 31 January 2021 (see Mr Jackson's second report at 103).
Stellar Vision accepts that the approach taken by Mr Jackson, in using the costs as actually incurred by Hills Health Solutions and recorded in the Income Statements, is the correct approach to value any Software Maintenance and Service Costs additional to the $0.33 per bed per day (that figure being dealt with at item 11 above) and hence it says that this issue does not arise.

[126]

Item 16 - Operating Expenditure (OPEX)

Mr Eversgerd was instructed to determine an appropriate OPEX rate based on his analysis of the most recent financial information and based his opinion of the most reliable OPEX rate on that which was reported by Hills Health Solutions for the period 1 July 2017 to 30 June 2018, the resulting weighted average OPEX rate being $0.281 (see Mr Eversgerd's third report at [3.3.22]-[3.3.26]) (although in the joint report and Stellar Vision's submissions this figure was reported as $0.295).
Mr Jackson was instructed to adopt the assumptions in the September Model to determine OPEX costs, on advice from Hills Health Solutions that the OPEX data in the Income Statements was not representative of total OPEX (see Mr Jackson's second report at [17]).
Stellar Vision thus notes that Mr Eversgerd calculated the operating expenditure of the WSLHD Contract by reference to operating expenditure actually incurred by Hills Health Solutions as recorded in Hills Health Solutions' Income Statements (using a six month sample of the most recent Income Statements that record Hills Health Solutions' actual operating expenditure to calculate an appropriate "OPEX" rate of $0.295 per bed per day (according to the joint report) or $0.281 per bed per day (according to Mr Eversgerd's third report) to be applied across the life of the WSLHD Contract). Stellar Vision says that this calculation should be used.
Stellar Vision says that there is no basis to rely on the assumptions as to OPEX contained in the September Model as they are estimates. Further, it is said that, even if a previous forecast assumption is to be used in substitution for the actual financial costs incurred by Hills Health Solutions, the cross-examination of Mr Starkey makes it clear that his assumptions that underlie his July 2015 Model are more accurate than the assumptions in his August 2014 Model, and were updated in circumstances where he had "more certainty on assumptions" and because his understanding as to the WSLHD Contract had improved over that period of time. It is noted that Mr Starkey accepted that he believed in July 2015 that he was in a better position to estimate those operating expenditure assumptions, whereas he accepted that the expected costs for each line in the September Model were "relatively rough".
Stellar Vision says that the reason why Hills Health Solutions seeks to rely on the OPEX assumptions in the September Model is that it has not proved the OPEX of the WSLHD Contract; rather, the evidence it relies on is the belief of Mr Rajasingam that it is not possible to provide an estimate of the portion of operating expenditure incurred at the Hills Health Solutions business level that relates specifically to the WSLHD Contract or specific WSLHD Contract. Stellar Vision says this belief is irrelevant and incorrect.

[127]

Item 17 - Cost of Hardware

Mr Eversgerd was instructed to adopt a series of assumptions in relation to capital expenditure (CAPEX) (see third report [3.3.27]-[3.3.28]) and adopted the USD/AUD rate provided by the Reserve Bank at the date of service commencement for each hospital to derive a CAPEX cost per terminal in AUD for each hospital.
Mr Jackson adopted the actual historical CAPEX costs under the WSLHD Contract from commencement to 31 January 2021. For his forecasts, Mr Jackson adopted the assumptions in the September Model as to the cost of terminal replacement during the WSLHD Contract ($1,200 per terminal) and that there was a terminal replacement rate of approximately 10 per year for Auburn and Mr Druitt Hospitals, 20 per year for Blacktown and 30 per year for Westmead (see Mr Jackson's second report at [17], [58]-[59]; joint report at 17-18, item 17).
Insofar as this item relates to the capital expenditure incurred by Hills Health Solutions to date, Stellar Vision says this item does not arise, as Stellar Vision accepts that the input used by Mr Jackson, in relying on Hills Health Solutions' records of the capital expenditure actually incurred in the capital expenditure schedule, is the correct input to adopt.
However, in respect of the capital expenditure regarding the replacement of PES terminals in the future, it is noted that Mr Jackson has again adopted the assumptions in the September Model. Apart from the criticisms accepted by Mr Starkey of his cost estimates in the September Model, Stellar Vision says that Mr Starkey's own affidavit accepts that his choice of figures for how many terminals required replacement was "more in the nature of guesswork than evidence-based estimate", noting that he could not recall how he estimated the figures.
Further, Stellar Vision says that Mr Jackson's calculation of Software Maintenance and Service Costs (at Item 15, is based on the Income Statements) already incorporates a line item for a cost called "Service Parts". Stellar Vision says it would be double counting of expenses to include both Mr Starkey's forecast replacement expenditure (as per the September Model) as part of the Item 17 Costs of Hardware and Mr Jackson's inclusion of the Service Parts expense in Item 15 (Software Maintenance and Service Costs).
As to the counterfactuals as to costs of sales, it would appear that the only aspect of this Item 17 (the cost of hardware) that remains in issue is whether there is a double counting in relation to the component of spare parts (a matter that I am not able to assess on the material to which I was taken) or as to the basis on which the forecast cost for future replacement of terminals should be assessed. Hills Health Solutions' submissions in relation to the issue of cost of hardware were largely directed to the rejection of the counterfactuals put forward in Mr Curtin's second affidavit.

[128]

Hospital Commission

In addition, Stellar Vision notes that the experts have adopted a "flat rate" of hospital commission rather than a "progressive rate". Stellar Vision says that there is no explanation by the experts for this and points out that under cl 6.1.4 of the WSLHD Contract, the Contractor is to pay the Principal (i.e., WSLHD) a Commission calculated on a monthly basis, by reference to Table 2.0 in Schedule 3. That table sets a progressive rate, where a higher rate of utilisation results in a higher percentage of revenue to be paid by the Contractor. Stellar Vision says that this has the effect that in a month of low utilisation by patients, there is a lower percentage, whereas if the same hospital in the following month has a higher utilisation rate, then the Contractor is to pay a higher percentage of the Commission payment.
The experts instead have adopted a "flat rate", i.e., a single commission rate across the entire WSLHD Contract, rather than a rate that varies on a month to month basis. Stellar Vision notes that Hills Health Solutions' internal documents recording its summary calculation of the commissions payable evidences a commission rate that varies from quarter to quarter, consistent with a progressive rate, rather than being a flat percentage rate.
It is noted that the experts accept that adopting progressive rates, as the WSLHD Contract contemplates (which Stellar Vision notes is the basis on which Hills Health Solutions has paid commission under the contract) ,would have the effect of lowering the expenses of the contract. It is submitted that the actual calculation of hospital commission costs under the WSLHD Contract should be done by way of a progressive rate.

[129]

Loss of Chance

Hills Health Solutions says that if the loss is valued on the basis of the valuations provided by the expert witnesses based upon the actual performance of the WSLHD Contract, as well as any counterfactual that is established on the evidence, then this is properly characterised as a loss of chance which will need to be discounted.
Stellar Vision accepts that it may be appropriate to apply a discount to take into account the chance of the counterfactuals described at items 1, 4 and 6, 9, and 11 and 15 not occurring (it is said that the remaining items, being factual Inputs, are not counterfactual assumptions that would potentially require any such discounting). Stellar Vision says that such a discount should not necessarily be applied in a uniform manner but, rather, assumption-by-assumption to reflect the determination of the relevant likelihood of each counterfactual assumption eventuating. It says that any discount to any given assumption should only apply to the amount that comprises the numerical difference between, on the one hand, how Stellar Vision's loss would be valued if the counterfactual assumptions were adopted and, on the other hand, how Stellar Vision's loss would be valued if the counterfactual assumption were not adopted.
Hills Health Solutions submits that, properly understood, the way Stellar Vision is putting its case is indeed for a loss of a chance, yet Stellar Vision assumes that the chance was 100% assured. It is submitted that a further discount of say 50% should be applied to take into account the chance of the counterfactuals not eventuating.

[130]

Discount rate

Stellar Vision points out that the appropriate discount rate to be adopted in the discounting cash flow model is not identified as an area of disagreement in the joint report. It is said that it is not necessary to have recourse to expert opinion as to the appropriate discount rate, where the evidence is that Mr Starkey, who prepared the September Model considered that 9% was an appropriate discount rate at the time and that it reflected Hills Health Solutions' assessment of the weight of average costs of capital as at both August 2014 and July 2015. It is said that it is therefore unnecessary to consider expert opinion to determine an alternative discount rate, especially where the experts have not had the benefit of Mr Starkey's evidence as to the reasoning behind the choice of a 9% discount rate.
Hills Health Solutions notes that the experts are agreed that a discount rate between 10-13% is reasonable in assessing loss (see the joint report at 18). Thus, it is said that the higher valuation of loss provided by Mr Eversgerd (in the vicinity of $11-12 million) should be disregarded as it represents a "risk free" scenario with a 2.9% discount rate.
Alternatively, if Mr Starkey's discount rate of 9% is not accepted, then Hills Health Solutions submits that 10% should be adopted as the appropriate discount rate, which reflects the choice of discount rate in the range agreed by the experts, which is the closest in number of Mr Starkey's original choice of discount rate.
Taking a pragmatic approach, Hills Health Solutions submits that 11.5% (see T 436.14) is a reasonable discount rate to adopt (subject to the further discount to reflect the assessment of loss of chance).

[131]

Pre-Judgment Interest

Stellar Vision notes that the experts agree that neither expert has included court interest in their models. Stellar Vision contends that its loss should include pre-judgment interest under s 100 of the Civil Procedure Act 2005 (NSW) from when they were excluded from the WSLHD Contract, being December 2014.

[132]

Summary of Proposed Instructions to Expert

In summary, Stellar Vision submits that the following findings should be made for the purpose of informing directions necessary to finalise quantification of Stellar Vision's claim: that Stellar Vision's claim is to be quantified by reference to a discounted cash flow model with the features as agreed between the experts as set out at 18-(d), (f)-(j), (l), (n)-(q) of the joint report, and with the following additional features: a discount rate of 10%; applying a progressive rate for hospital commission percentages in accordance with cl 6.1.4 of the WSLHD Contract; and calculation of pre-judgment court interest on Stellar Vision's loss from December 2014; and that the inputs into the discount cash flow model should reflect the resolution set out in its submissions (which I do not here set out but have addressed in summary form below, in my determination as to quantum) to the areas of disagreement identified by the experts in the joint report.

[133]

Determination

Liability not having been established I will be brief as to the relief that would have been ordered had Stellar Vision succeeded in any of its claims. Other than the dispute as to whether the lost opportunity (i.e., the chance to participate in a joint venture in relation to the WSLHD Contract) should be assessed at the date of the relevant breach or with hindsight having regard to the actual performance of the contract, the principles do not appear to be in dispute. Rather, the dispute is as to the "inputs" into the financial models prepared by the respective experts when assessing the value of a 50% share in the WSLHD Contract.
Proceeding on the basis that Stellar Vision says in effect that the loss on any of the claims would be assessed as being the value of a 50% share in the economic benefit of the WSLHD Contract, and that all I was ultimately invited to do was to rule on the disputed "inputs", I set out below the findings I would have made had the issue arisen for determination. However, I reiterate my conclusion that the exercise cannot be based on the counterfactual postulated by Stellar Vision that, had it participated in the management of the WSLHD Contract, the financial performance of the contract would have been enhanced: first, because I consider that the material facts on such a counterfactual should have been pleaded (and I do not accept that Hills Health Solutions has acquiesced in an expansion of the pleaded case in this regard) and, second, because (even apart from the fact that the Undertaking does not make clear that Stellar Vision would have been operating in a managerial role in the contract) it seems to me no more than speculation that Stellar Vision could have produced a better result.
Stellar Vision accepts the "Ex Post" discounting approach (used by Mr Jackson (see item 1)) and there is no dispute as to overall methodologies. Thus, had quantification been required I would have held that Stellar Vision's claim was to be quantified by reference to a discounted cash flow model with the features as agreed between the experts as set out at 18-(d), (f)-(j), (l), (n)-(q) of the joint report and, as to the remaining disputed "inputs" into the financial models (noting that it appears to be accepted that the following items are no longer in dispute: item 2, item 3 (in that it is answered by other items) items 11 and 12 (so far as they concern the scenario in relation to the schedule of Lincor licence fees), item 13, and items 15 and 17 (other than a claimed double counting of "service parts" and forecast future terminal replacement do not appear to arise)), I would have determined as follows.

[134]

Conclusion

In summary, while there was clearly an informal joint endeavour between Questek and Stellar Vision (which might well be termed a "joint venture") there was no binding joint venture agreement between the two entities and I am not persuaded that their relationship gave rise to a trust or any beneficial interest on the part of Stellar Vision in whatever rights or interest Questek had (or expected to have) in the WSLHD project. I accept that as between itself and Stellar Vision, Questek could not have taken the exclusive benefit for itself of the joint WSLHD project (and it would likely have been unconscionable for it relevantly to do so) but no claim is here made against it (and any breach of fiduciary duty by it has been expressly disavowed).
I have found that there was no trust relationship (no objectively manifested intention to create a trust and no agreement to hold any rights obtained as a result of the tender on trust). The parties were still negotiating at all relevant times. There was an understanding that Stellar Vision would be involved and would share the benefit of any contract obtained as a result of the joint venture (in some fashion) but this was not a concluded agreement. It may well have been case that Questek would not have had all the benefit of the contract but this would said only in a claim against Questek.
At the time of the due diligence (and acquisition of Questek's business) Hills Health Solutions was on notice that Questek and Stellar Vision were in negotiations for a proposed joint venture agreement (which had not been concluded) and had jointly prepared Questek's tender response on the understanding that Stellar Vision would participate in that project and share the benefits of the project in some fashion (and perhaps as co-tenderer named on the contract) but the terms of this as between Questek and Stellar Vision were not finalised. As Stellar Vision emphasises, Hills Health Solutions knew from the due diligence that there was an understanding (or agreement) between Questek and Stellar Vision that, if they could not agree a joint venture agreement then Stellar Vision's name would be put on the contract. Stellar Vision says that what Hills Health Solutions knew was that Questek accepted it did not have an entitlement to be on the contract in its own name (see T 342.11-18). The difficulty I have with this is the proposition that this in some way put Hills Health Solutions on notice that Stellar Vision had a "50% beneficial 'undivided' interest" in the WSLHD Contract. It seems to me that Hills Health Solutions' understanding at the time is more accurately reflected by the statement made in the course of negotiations to the effect that it would ensure that Stellar Vision had the same financial outcome as the "joint venture" intent of the previous discussions. That is a very different concept from an undivided beneficial interest in the contract itself.

[135]

Orders

For the above reasons, I make the following order: 1. Dismiss the plaintiff's claim with costs.

[136]

Amendments 02 March 2022 - Amounts at [685] and [686] redacted DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 March 2022

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