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[2015] NSWCA 343
Court of Appeal (NSW)
2015-02-27
Macfarlan JA, Meagher JA, Bergin CJ
Original judgment source is linked above.
NSWLR 603 Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 Category: Principal judgment Parties: TMA Australia Pty Ltd (First Appellant) TMA Tech Pty Ltd (Second Appellant) Indect Electronics & Distribution GmbH (First Respondent) Indect Pty Ltd (Second Respondent) Representation: Counsel: M Einfeld QC with H N Newton (Appellants) M Dicker SC with J O'Connor (Respondents)
Solicitors: JDK Legal (Appellants) Mason Black Lawyers (Respondents) File Number(s): 2014/1391242014/139128 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2014] NSWSC 409 Date of Decision: 11 April 2014 Before: Ball J File Number(s): 2013/255364 2012/262302
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] Between June 2008 and July 2012, the appellants, TMA Australia Pty Ltd and TMA Tech Pty Ltd (collectively TMA), purchased car parking guidance systems from Indect E&D or Indect P/L (collectively Indect). Following a series of disputes between the parties, Indect advised TMA in May 2013 that TMA would no longer be a distributor of its products; that Indect would no longer directly supply equipment, parts or services to TMA; and that TMA would need to obtain those parts and services from an Indect distributor. TMA commenced two proceedings against Indect. In the Licence Proceedings, TMA claimed that the inclusion by Indect of an authenticity check feature in four of the systems purchased involved a breach of the supply contract and unconscionable conduct. That feature required that software be checked every three months to enable the software to continue operating. In the Supply Proceedings, TMA claimed that irrespective of whether it remained a distributor of Indect products, it was entitled to receive ongoing supply of parts and support from Indect for the systems resold and installed by it on commercial terms no less favourable than those previously offered or those offered to other distributors. That entitlement was said to arise by reason of a contractual implied term, an equitable estoppel and unconscionable conduct on the part of Indect in withdrawing its support of TMA. The primary judge found in favour of Indect and dismissed both proceedings. The issues before the Court were: in the Licence Proceedings, whether the inclusion of the authenticity check feature amounted to a breach of a term providing for a licence to use the software for an unlimited duration, or a breach of a warranty that the system would be reasonably fit for purpose; in the Supply Proceedings, whether the implication of a term requiring Indect to supply parts and services directly to TMA to ensure the continuing effective operation of the systems supplied was necessary for the reasonably effective operation of the supply contracts; whether Indect's ongoing obligation to support TMA was adopted as the conventional basis of the supply relationship between the parties with respect to each system purchased and resold such that Indect should be estopped from denying that obligation; and Whether Indect acted unconscionably in contravention of s 21 of the Australian Consumer Law by withdrawing the supply of parts and support to TMA in May 2013. The Court held, dismissing the appeals: In relation to (i) (Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing) The fact that the software did not operate continuously without technical assistance or regular updates did not shorten or breach the licence granted for its use: [50]. The subject matter of each purchase order was the then current version of the software, which here included the authenticity check: [52], [54]. There was no breach of contract and no unconscionable conduct: [1], [54], [57], [154]. In relation to (ii) (Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing) The individual contracts for supply did not address the agency or distribution arrangement, or secure the ongoing supply of parts and services to TMA: [96]. The proposed term would have qualified the parties' positions under the informal distributorship arrangement in existence between them: [102]. Notwithstanding the representations and assurances relied on by TMA as confirming the 'obviousness' of the term to be implied, the term was not necessary for the effective operation of the individual supply contracts: [1], [103], [154]. In relation to (iii) (Per Meagher JA, Bergin CJ in Eq agreeing) The question whether the conduct and statements of the parties viewed objectively shows sufficiently clearly the adoption of an assumption intended to affect an aspect of their existing or contemplated legal relationship may be addressed assuming that TMA has established error on the part of the primary judge in relation to the findings made as to what was said between the parties: [106], [112], [122], [155]. (Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing) Taking the evidence at its highest from TMA's position, it did not establish that the parties conducted their relationship on the basis that, with respect to each system sold, Indect was bound to provide parts and support on the terms asserted - either by reason of a conventional or promissory estoppel: [4], [124], [125], [136], [154]. In relation to (iv): (Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing) The primary judge erred in formulating unconscionability under s 21 too narrowly: [144]. TMA had an opportunity to negotiate a parts and labour supply agreement with Indect and, absent such an agreement, the systems installed by TMA could still be maintained via other Indect resellers: [149]. Indect did not engage in conduct that was against good conscience: [1], [148], [154].
Judgment
Overview The dispute which is the subject of these appeals arose from the breakdown of a relationship concerning the supply, sale and installation in Australia of car parking guidance (CPG) systems manufactured in Austria by the first respondent, Indect Electronics & Distribution GmbH (Indect E&D). Between June 2008 and July 2012 one or other of the appellants, TMA Australia Pty Ltd (TMA Australia) and TMA Tech Pty Ltd (TMA Tech), purchased CPG systems from Indect E&D, or its Australian subsidiary (Indect P/L), for sale to car park operators throughout Australia. Unless it is necessary to distinguish between the respective appellants and respondents, I will refer to them collectively as TMA and Indect.
The CPG system
The parties and principal players
The transactions between the parties
The breakdown of the relationship
The Licence Proceedings
The Supply Proceedings
TMA Tech's case at first instance
Reasoning of the primary judge
Determination of the Licence Proceedings appeal
Conclusion: Licence Proceedings appeal
Overview
TMA's claim
The primary judge's reasoning
The argument on appeal
The terms of the Indect supply contracts
Warranty period 3 years on sensors and signs; all other components 1 year
… Our general terms of business apply, property of INDECT until fully paid. INDECT provides 2nd level support during regular business times. First Level Support to the end customer by TMA.
The representations and assurances
Proposed term not necessary to give business efficacy
The representations (grounds 3, 4, 5 and 6)
TMA's claim
The relevant principles
Was there a common assumption adopted as to ongoing supply of parts and support to TMA under each supply contract?
Promissory estoppel (grounds 10 and 11)
Detriment (grounds 12 and 13)
Unconscionable conduct (grounds 14, 15 and 16)
Conclusion
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TMA Australia Pty Ltd
Indect Electronics & Distribution GmbH
[2008] ACTCA 6
(1977) 180 CLR 266
(1988) 14 NSWLR 438