TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH; TMA Tech Pty Limited v Indect Pty Ltd & Ors

) Indect Electronics & Distribution GmbH (Defendant 2013/255364) Indect Pty Ltd (ACN 140 157 357) (Defendant 2012/262302) Representation: Counsel: M Einfeld QC with N Newton (Plaintiffs) M Dicker SC with J O'Connor (Defendants) Solicitors: JDK Legal (Plaintiffs) Mason Black Solicitors (Defendants) File Number(s): 2013/255364 and 2012/262302 Publication restriction: Nil

Background 1Indect Electronics & Distribution GmbH (Indect E&D), which is one of the defendants in these proceedings, manufactures in Austria and sells throughout the world car parking guidance systems (CPG systems). The systems, which are used in public car parks, consist principally of sensors and lights in individual parking bays which detect the presence of vehicles and indicate whether or not a bay is occupied, signs which indicate the number of available bays and their location and computer software which controls the signs and provides centralised information and reports concerning the operation and use of the car park and the CPG system. Indect E&D is owned equally by Mr Ingo Herwich and Mr Richard Schreiner. 2Indect Pty Ltd, which is also a defendant, is an Australian subsidiary of Indect E&D. It was incorporated in October 2009. Approximately 99 per cent of the shares in it are owned by Indect E&D and the remaining shares are owned by Mr Dale Fowler. During the relevant time, Mr Fowler was Indect Pty Ltd's only employee. He has now relocated to the United States. He had done some work for Indect E&D before Indect Pty Ltd's incorporation. Indect Pty Ltd, through Mr Fowler, provided marketing and other assistance to distributors of Indect E&D CPG systems in Australia. Where it is not necessary in this judgment to distinguish between Indect E&D and Indect Pty Ltd, it will be convenient to refer to them as Indect. 3TMA Australia Limited (TMA Australia), one of the plaintiffs in these proceedings, is a wholly owned subsidiary of TMA Group of Companies Limited. Up until June 2011, its business included the business of supplying, installing and maintaining in Australia parking control systems including CPG systems, ticketing systems, parking meters and security systems. That business was largely taken over by TMA Tech Pty Limited (TMA Tech), another subsidiary of the TMA Group, in June 2011. TMA Tech is the other plaintiff in these proceedings. The Chief Executive Officer of TMA Group and its subsidiaries is Mr Anthony Karam. Where it is not necessary in this judgment to distinguish between TMA Australia and TMA Tech, it will be convenient to refer to them as TMA. 4In early 2008, Indect was looking to expand into Australia. It was introduced to Westfield, one of TMA's customers, by Mr Fowler and Westfield in turn suggested that Mr Herwich contact Mr Karam, which is what Mr Herwich did. 5Mr Herwich and Mr Karam first met in April 2008 at the Intertraffic Trade Fair in Amsterdam. Following that meeting and the introduction through Westfield, they had a number of conversations concerning the distribution of Indect's products in Australia. As a result of those discussions, Indect effectively appointed TMA as its distributor in Australia, although no formal distribution agreement was ever entered into. In all, between 2008 and 2012, TMA installed 15 Indect CPG systems in car parks around Australia. Set out below is a table listing each car park, the date the system was ordered by TMA and the price paid by TMA for the system (in euros): Date Location Price 6.6.08 Westfield Doncaster (Vic) €444,975 30.10.08 Westfield Hornsby (NSW) €381,745 30.1.09 Westfield Parramatta (NSW) €380,433 7.5.09 Top Ryde Shopping Centre (NSW) €361,889 1.4.10 Royal Children's Hospital (Vic) €62,115 6.7.10 South Wharf Shopping Centre (Vic) €6321 30.8.10 Centro Box Hill (Vic) €81,587 31.8.10 Fisher Street Car Park, Fairfield (NSW) €6485 26.5.11 The Concourse, Willoughby (NSW) €79,121 10.6.11 Westfield Belconnen (ACT) €407,892 8.7.11 IKEA Springvale (Vic) €28,091 1.9.11 Rhodes Shopping Centre (NSW) €275,594 1.2.12 Warringah Mall Shopping Centre (NSW) €56,389 19.4.12 Highpoint Shopping Centre (Vic) €617,205 9.7.12 Perth Arena (WA) €98,500

6The agreements in respect of The Concourse, Willoughby, Westfield Belconnen, IKEA Springvale, the Rhodes Shopping Centre and Warringah Mall Shopping Centre were entered into by Indect Pty Ltd . The balance of the agreements were entered into by Indect E&D. The agreements entered into before 8 July 2011 were entered into with TMA Australia. The balance were entered into with TMA Tech. 7It will be necessary to say more about the circumstances in which the contracts were entered into. For present purposes, it is sufficient to observe that generally TMA, with the assistance of Mr Fowler (and later Indect E&D), prepared a specification for a particular site and Indect would provide a quote based on that specification. TMA would then tender or submit a proposal to the operator of that site based on the quote. On occasions, Mr Fowler attended presentations given by TMA to prospective customers and he was given copies of tender documents, although not copies of the final contracts. If TMA was successful, it would sign a contract with the operator and then issue a purchase order to Indect for the necessary components. Each system was bespoke in the sense that it had to be designed specifically for the car park in question largely using standard equipment and software that had been designed and manufactured by Indect. No formal contract was signed between Indect and TMA relating to the equipment and software to be supplied by Indect. However, Indect E&D's invoices contained a number of terms relating to the supply of the system and in many cases purported to incorporate by reference its standard terms and conditions. The evidence, however, is unclear about the particular form those standard terms and conditions took in the case of each contract. Significantly, the invoices set out some terms concerning the warranty period provided by Indect. Generally, it was stated to be 3 years. However, in some cases the warranty period was reduced to 1 year in respect of some components, such as computers and peripherals. 8Over time, a number of disputes developed between Indect and TMA. One dispute concerned the payment of a number of invoices issued by Indect to TMA. Some of those invoices related to the CPG system installed at the Westfield Parramatta site, although they were later paid. Others related to the CPG system installed at Westfield Belconnen. TMA claimed that that system was defective and for that reason withheld payment of some invoices. From April 2011, Indect required TMA to pay for CPG systems on a cost on delivery basis. Over time, the dispute concerning the payment of those invoices escalated to the point where, on 4 November 2011, Mr Fowler wrote to Mr Mostyn Howell, TMA Tech's sales director, threatening to disable the system at Westfield Belconnen, to withdraw sales and technical support, to stop further deliveries to the installation at Rhodes and to stop TMA's account. In response, concerned about the threat made by Mr Fowler, TMA changed all the remote log on passwords for the Indect systems in Australia so that Indect could not log on to the systems. 9Another dispute concerned a formal distribution agreement. It was TMA's position that it should be appointed Indect's exclusive distributor in Australia. Draft agreements were exchanged between the parties. However, no agreement was signed. Indect's position was that it was prepared to agree to a distribution agreement, but not on terms that were acceptable to TMA. In September 2011, Indect agreed to permit a number of competitors of TMA to distribute its systems in Australia and, on 30 November 2011, it was announced that one of those, SABAR Technologies Pty Ltd, had been successful in winning the tender for the Sydney Airport car park using an Indect system. 10A third issue concerned modifications that Indect made to its software in August 2011 to introduce an additional security feature. It is not entirely clear how that security feature operates; and, indeed, its operation was very much an issue during the course of the hearing. However, the effect of the security feature is that the software at a particular site stops working unless an authenticity check code, which checks the authenticity of the software running on the system, is provided to the system. If the system is connected directly to Indect's server in Austria over the internet that check occurs automatically. In other cases, every 3 months it is necessary to load the relevant file manually. That can be done by a technician in Austria who is given remote access to the system. Alternatively, the relevant file can be emailed to Australia to be incorporated by someone locally. The authenticity check software is tied to Indect's accounting system so that Indect's server will not automatically issue the necessary codes required by the authenticity check software if the accounting system shows outstanding amounts owed by the purchaser of the relevant system. In that case, if the system in question is connected to Indect's server via the internet, the server sends a notification in relation to the authenticity check to Mr Herwich or Mr Schreiner who must click a button before the authenticity check code is sent to the relevant system. TMA did not appreciate it at the time, but the version of the software that was installed at the Rhodes site in January 2012 stopped working because the authenticity check file had not been loaded onto the Rhodes system before the expiration of 3 months after the software was first configured by Indect for that site. Indect loaded the file remotely shortly after it was made aware of the problem. 11A fourth issue was that TMA became increasingly concerned about ongoing support from Indect prompted in part by concerns raised by Westfield following Indect's announcement that it had appointed other distributors. 12The various matters came to a head in late 2011 and early 2012. On 14 December 2011, Mr Karam sent Mr Herwich a detailed email setting out a summary of the various issues between the parties and TMA's views on them. The email stated that TMA would like to continue the agency relationship with Indect but that it was not prepared to do so if it had to continue to deal with Indect Pty Ltd. Mr Herwich replied in detail the following day setting out Indect's position in relation to each of the issues raised by Mr Karam. On the question whether to terminate the relationship, Mr Herwich said: The main reason why we are hesitating to simply "say goodbye" is that we do not want to damage TMA's reputation by losing a worldwide supplier (especially with the situation at Sydney airport where we still have no contract from Designa...) and that we will still have to give to TMA (or in case that you decide to stop also support for the installations that TMA made - we have to support someone else) support for existing installations. Mr Herwich went on to say: This is why we came to the idea to sell the distribution rights so that we have a very clear separation of responsibilities and at least a small but stable income from Australia. We see this as the only option at the moment. You and me, we discussed that already. I just wanted to summarize. 13Mr Karam replied on 15 December 2011 by saying that he thought Indect wanted to terminate its presence in Australia because it was unprofitable, that he was not going to beg Indect to stay and that he proposed a "sensible separation" on terms that included: 1. TMA will move to fix all the issues at Belconnen and offset that against any money owed by TMA to Indect - This will resolve this matter and should avoid LD's 2. Once this is complete TMA will remit all outstanding money to Indect 3. TMA will continue to complete those jobs that have already been commenced with Indect. Indect will need to support this. These sites include Doncaster and RCH Melbourne 4. TMA will no longer order any new systems from Indect 5. Indect will continue to honour it's [sic] warrantee [sic] commitments for the installations completed by TMA 6. Indect will continue to supply parts and assistance of which TMA will pay for the sites already installed by TMA as TMA has maintenance agreements that need to be honoured. 7. Indect will withdraw from the market for a period of 10 years 8. TMA will allow Indect to complete the sale of the system to Sydney Airport with out the need to compensate TMA Indect did not accept those terms and the relationship continued. However, TMA maintained its position that it was no longer prepared to deal with Mr Fowler and insisted that it should be entitled to place any new orders with Indect E&D directly. 14On 20 and 21 February 2012, Mr Karam and Mr Herwich met in Dubai in an attempt to resolve the issues between them. There is a dispute concerning what happened during the course of those meetings. However, the meetings did not result in a resolution of the disputes. 15On 9 March 2012, Indect Pty Ltd commenced proceedings in the Magistrate's Court in Heidelberg to recover outstanding invoices in respect of the Belconnen project. Those proceedings remain unresolved. 16There were further meetings in Sydney on 26 and 27 April 2012 between Mr Herwich and Mr Karam and TMA's solicitor during which 3 options were discussed. One was for an exclusive distributorship. The second was for a non-exclusive distributorship. The third was for no distributorship. Again, no resolution was reached. 17Despite the ongoing disputes, TMA Tech placed 3 additional orders for Indect's CPG systems - one for Warringah Mall in February 2012, one for Highpoint Shopping Centre in Victoria in April 2012 and one for the Perth Arena in July 2012, although in the case of Warringah Mall the agreement with the customer was signed on 13 October 2011. Each of those systems incorporated software which included the authenticity check feature. TMA also entered into the following maintenance agreements with a number of its customers: Date of Agreement Commencement Duration Warringah Mall 13.10.11 1.9.11 10 years Westfield Doncaster 19.4.12 1.4.12 5 years Westfield Hornsby 19.4.12 1.4.12 5 years Westfield Parramatta 19.4.12 1.4.12 5 years Westfield Belconnen 19.4.12 14.10.14 5 years Centro Box Hill 23.8.12 1.7.12 5 years

18Some time in mid-2012, TMA began to promote a CPG system designed and manufactured by TCS International, a competitor of Indect. 19TMA experienced further difficulties with the authenticity check software and, after further correspondence between the parties, on 22 August 2012 it commenced the first of the proceedings with which this judgment is concerned (the Licence Proceedings). In those proceedings, TMA Tech seeks orders against Indect E&D requiring Indect E&D to provide a software licence of indefinite duration for the CPG systems at Rhodes Shopping Centre, Warringah Mall, Highpoint Shopping Centre and Perth Arena. On 15 October 2012, Indect E&D gave undertakings to the court until further order to provide TMA Tech with the necessary computer files to prevent the software from ceasing to operate. 20TMA did not order any new CPG systems from Indect after July 2012. It installed the last Indect system (at the Highpoint shopping centre) in March 2013. On 2 May 2013, Indect advised TMA that "because of the legal activities of TMA re. the software license, Indect board is refusing any further orders as that will probably make this situation worse". On 13 May 2013, Indect advised TMA that TMA no longer had credit with Indect and that in future TMA would need to place orders for any Indect equipment with one of Indect's local distributors "such as Wilson or Designa". Indect refused to supply TMA with any further equipment from that time. On 19 June 2013, Mr Fowler sent a circular letter to users of Indect's CPG systems in Australia stating that "Wilson Technology Solutions are the NEW fully authorised reseller of Indect systems". 21In response to these developments, on 22 August 2013, TMA commenced the second proceedings with which this judgment is concerned against both Indect E&D and Indect Pty Ltd (the Supply Proceedings). In those proceedings, TMA sought urgent interlocutory orders the effect of which was to require Indect E&D to supply TMA Tech with components and parts necessary to permit the continued operation of the CPG systems installed in the 15 locations identified above and to supply diagnostic and repair services in respect of defective or malfunctioning software necessary to permit those systems to continue to operate, in each case at prices and on terms specified in Indect E&D's then current price list applicable to Indect E&D's distributors or agents in Australia. Orders in those terms were granted by Robb J on 20 September 2013. At the hearing of this matter, TMA sought a continuation of those orders for the expected life time of the systems, which is estimated to be approximately 15 years.

The Licence Proceedings 22The issues in relation to the Licence Proceedings fall within a relatively narrow compass. 23TMA's position is that it was an implied term of each of the agreements by which it acquired CPG systems from Indect that it would have a licence to use the software that formed part of those systems for an unlimited period of time. In addition, or in the alternative, it says that it was a term of each of the agreements implied by s 19 of the Sales of Goods Act 1923 (NSW) that the system would be reasonably fit for the purpose of operating as a CPG system for the economic life of the hardware. It says that the effect of the authenticity check feature is that Indect only granted a licence for 3 monthly periods, not for an unlimited period of time. Alternatively, it submits that the system was not reasonably fit for the purpose for which it was acquired because, on the expiration of each 3 monthly period, the system will not operate unless a new file containing the relevant code is loaded on to the system. In those circumstances, it says that Indect should be ordered to supply software that complies with its contractual obligations. 24Indect, on the other hand, accepts that, at the time it sold the 4 systems that included software that contains the authenticity check feature, it granted a licence to use its software for the life of the system. It also accepts that it is under an obligation to provide the necessary computer file every 3 months to enable each system to continue to function. In accordance with undertakings it gave to the court on 15 October 2012, it has been doing so since that time, although there was a minor problem at the Perth Arena site on 21 January 2014 because Indect's main server in Austria did not send out the required file before the expiration of the 3 month period. Mr Schreiner provided TMA with the necessary file as soon as the problem was drawn to Indect's attention. Indect's position is that it is not in breach of the agreements under which it sold the relevant systems to TMA. Even if it is, its agreement to provide the necessary files every 3 months is an adequate solution to the problem and consequently it says that the court should decline to grant TMA any relief. 25Before seeking to address these competing contentions directly, it is necessary to make 3 preliminary observations. 26First, the parties did not seek to identify with any precision the nature of the software licence granted to TMA and the operators in whose car parks the relevant CPG systems were installed. In the case of the physical equipment, it seems clear that that equipment was sold to TMA Tech and TMA Tech on-sold that equipment to the relevant operator. It is less clear, however, whether Indect granted a licence to TMA to use the software together with a right to sublicense or a right to assign that right to the operator or whether, in the circumstances, it should be implied that Indect granted the operator itself a licence to use the software for the life of the system. The terms on which TMA sold Indect systems to Westfield assume that TMA was in a position to grant a perpetual licence to the software to Westfield. The parties themselves proceeded on the basis that TMA Tech obtained and retained a right to use the software at least for the life of the CPG systems. Whether that assumption was correct or not, it seems clear that the individual operators themselves obtained some form of licence in respect of the software and that fact, and the fact that they are not parties to the proceedings, must be taken into account in considering what order, if any, should be made. 27Second, at the time the systems were sold to TMA, there was no attempt to identify with any precision the software that was to be supplied as part of those systems. It is to be expected that Indect would seek to modify the software it used over time to correct errors, to improve the functionality of its system in order to remain competitive and to improve the security features of the software to reduce the risk of malicious interference with the software and to protect its own intellectual property. That is a normal and expected incidence of any computer software. TMA placed weight on the fact that Indect did not tell it that it had modified its software to include the authenticity check. Moreover, when the problem first arose Indect gave opaque explanations of what had happened and it took TMA some time to understand how the software had been modified. There can be little doubt that Indect handled the introduction of the modification badly. However, in my opinion, when TMA placed an order for an Indect system, in the absence of any specific agreement to the contrary, it must be understood as having placed an order for the then current version of Indect's software. That is what Indect delivered. 28Third, it is not disputed that the authenticity check feature of the software was introduced as a standard feature of the software that Indect distributed globally. Mr Herwich gave evidence that the feature was introduced to make it more difficult to copy the software following the discovery that unauthorised copies of Indect's software had been made in Africa. TMA sought to challenge that evidence and contended that the primary reason for the introduction of the modification was as a debt collection mechanism. However, in my opinion, Mr Herwich's explanation is plausible and is consistent with the specification originally prepared by Mr Herwich and Mr Schreiner at the time they arranged for the relevant code to be written. The first paragraph of that specification states (the passage quoted is taken from a translation): This describes how the system specific licensing and software authentication must be implemented in the next release due to several system manipulations and attempted manipulations to use the INDECT iCOM software illegally. Adequate measures are to be taken to limit destabilisation opportunities or overall control of the system through malware (unintentionally) and third-party software (intentionally) or third-party control. In addition, the creation of illegal copies of the Indect application and their installation on external computers must be prevented. 29In any event, the important point is that the feature is now part of Indect's standard software. It was not a feature that was specifically designed for systems that were sold to TMA. 30On the way in which the case was run, TMA was entitled to receive a licence of the software that was supplied to it for the life of the relevant system. TMA sought to characterise that as an unlimited licence. However, it was not suggested that the licence could be used for any purpose other than the purpose of operating the system that had been supplied by Indect. If it was a perpetual licence, it was a perpetual licence to use the software in conjunction with a physical system which itself had a limited life. 31There is nothing to suggest that TMA was entitled to be supplied with software that did or did not have specific characteristics, other than the characteristic of being Indect's then current version of its application software that was capable of operating its CPG system. The fact that that software had a particular feature that meant that it had to be connected directly to Indect's server in Austria, or required updating every 3 months with an authenticity check file, did not mean that in fact the licence Indect granted to its software was for some shorter period of time. It simply meant that one of the characteristics of the software that was the subject of a lifetime licence was that it required a direct connection with Indect's server or the periodic inclusion of the authenticity check file in order to function normally. TMA's case involves the proposition that Indect agreed to license to it software that, at the time the licence was granted, did not exist or at least was not Indect's then current version of its software. In my opinion, that proposition cannot be accepted. 32Having regard to the terms on which the system was sold, and accepting that it was a term of the agreement that TMA would retain a lifetime or indefinite licence to use (and presumably sublicense) the software, a term can readily be implied into the agreements by which Indect sold the systems to TMA Tech that Indect would permit a direct connection to its server or would provide TMA or the operator with the updated authenticity check file every 3 months. Unless that term is implied, neither TMA nor the car park operator would get the system for which they contracted (TMA with Indect, and the car park operator with TMA). However, Indect accepts that it is bound by such a term. And if such a term is implied, it is difficult to see why the systems are not fit for the purpose for which they were acquired. 33Even if the conclusions I have reached are wrong, I would not be prepared to grant the relief sought by TMA. I say that for several reasons. 34First, I am not satisfied that there are any particular difficulties with the arrangements that are currently in place for Indect to provide authenticity check files every 3 months. Indect accepts that it should continue to do so whatever the outcome of these proceedings. I have already indicated that it is under a contractual obligation to do so. There is no reason now to suppose that Indect will not comply with that contractual obligation. It is true that there have been a few occasions on which for one reason or another the relevant file has not been provided. Only one of those occurred recently - in January this year. The problem was fixed quickly. There is no reason to think that it will be a regular occurrence; and it is in the nature of computer software that errors occur from time to time. 35Second, the orders sought by TMA would require Indect to modify its software for the specific sites in question. That proposition was contested by TMA. It pointed to emails sent by Mr Schreiner that suggested he could create an "unlimited" licence if no payment was overdue but otherwise could only create a licence for "max 2 months". It also pointed to the fact that in a number of cases the software failed to function after periods of less than 3 months. It submitted that the court should infer from this evidence that Indect was capable of fixing any date it chose for the expiry of the software. I do not accept that submission. If TMA is to be believed, Mr Herwich and Mr Schreiner were engaged in an elaborate attempt to mislead the court about how the authenticity check operated. I do not accept that they were. They both were anxious to protect Indect's commercial position and that may have affected some of the evidence that they gave. However, both of them struck me as honest witnesses. There were teething problems with the new authenticity check system when it was first introduced. Mr Schreiner gave evidence that some of those were caused by errors in the programming of Indect's main server, which explained why the authenticity check did not initially always function at 3 monthly intervals. I accept that evidence. 36Mr Schreiner did refer to the possibility of creating an "unlimited" licence and to creating a licence for a maximum of "2" months. However, it needs to be borne in mind that English is not Mr Schreiner's native language and that he felt it was necessary to give some of his evidence through an interpreter. As I have said, the authenticity check occurs automatically if the relevant system is connected to Indect's server and the person to whom the system was supplied has no overdue accounts. Mr Schreiner gave evidence that he was using the word "unlimited" to describe that state of affairs. He said that the reference to "2" months was a typographical error. I accept that evidence. 37Mr Herwich gave evidence that the software modifications would take at least half a calendar year and cost 80,000 euros. Mr Herwich's description of what was involved was embellished somewhat. Nonetheless, I accept that it would take a considerable amount of time and cost a substantial sum of money, both of which are likely to be difficult to estimate in advance. It is also significant that it is to be expected that there would be risks of errors in the revised software that may need to be corrected. It would not be reasonable to put Indect to that cost and risk when there is a simple and effective solution, which is the one that is followed at other sites around the world - namely, direct connection to Indect's server or the provision periodically of an authenticity check file. 38Third, the systems that TMA seeks to modify are essentially systems that belong to third party operators. In my opinion, it would not be appropriate to make orders requiring Indect to modify those systems in circumstances where the operators were not parties to the proceedings. Nor would it be appropriate to require Indect to devote the time and expense needed to create modified software with the intention of giving those operators an opportunity to replace their existing software with the modified software if they chose. The time and expense would be wasted if they chose not to exercise that option. 39For those reasons, the Licence Proceedings should be dismissed with costs.

The Supply Proceedings 40TMA advances 3 broad reasons for why Indect should be required to continue to supply parts and services to it on the terms and at the rates it charges its distributors in Australia. First, it says that an obligation of that type is an implied term of each of the 15 contracts under which Indect supplied CPG systems to TMA. Second, it says that the obligation arises as a result of an equitable or conventional estoppel. Third, it says that Indect would engage in unconscionable conduct in contravention of s 21 of the Australian Consumer Law (ACL) if it did not provide TMA with parts and services on the terms for which TMA contends.

The representations 41It is convenient to begin by describing the representations which TMA says Indect made concerning its willingness to provide support. Those representations obviously form the basis of its claim based on equitable estoppel. They are also said, in a way that is not easy to understand, to be relevant to TMA's implied term, conventional estoppel and unconscionability cases. 42The representations fall into two categories. First, TMA relies on a number of representations said to have been made by Mr Herwich to Mr Karam. Most of those were oral. Mr Karam says that, given the passage of time, he cannot specifically recall when the representations were made; and they are generally expressed in broad and vague terms. However, Mr Karam gives some specific examples and he also says that Mr Herwich never suggested to him that Indect could not provide spare parts. Second, TMA relies on a number of representations made to potential clients concerning the availability of spare parts and support from Indect. Those representations were either made by Indect or by TMA with Indect's knowledge. 43The first example of a representation said to have been made to Mr Karam is a representation that he says was made to him by Mr Herwich during their first telephone conversation. During that conversation, Mr Karam says that Mr Herwich told him that "Indect E&D would support TMA Australia and all the Indect [CPG systems] that TMA Australia sold for their system life". 44The second example is said to have occurred not long afterwards during a discussion of the proposal to install a CPG system at Westfield Doncaster. During that discussion, Mr Herwich is alleged to have said, in response to a concern expressed by Mr Karam that the Westfield contract was extremely onerous and that he needed to know that Indect E&D would provide support for the life of the system, "the Indect system has a 15-year life and Indect will fully support TMA and the products for that time". Mr Howell also gives evidence that he asked Mr Fowler if Indect would support TMA if it tendered for the Doncaster project. Mr Fowler is alleged to have said that he would check with Mr Herwich. Mr Fowler rang back within 24 hours and is alleged to have said: I talked to Ingo [Mr Herwich]. Indect will help TMA to prepare the tender and if TMA are successful we would also provide training to TMA staff, and support in installation, commissioning and maintenance of the product going forward. 45Mr Karam also wrote to Mr Herwich on 4 June 2008 in relation to the Doncaster project. In that email, Mr Karam pointed out that the contract had "massive liquidation damages if the installation is not completely operational by 29th of September". He asked Mr Herwich in those circumstances to "do everything you can to reduce all lead times and keep our team 100% informed at all times". Mr Herwich agreed to do so. The email concluded: Ingo I would like to express again that we have a lot of money at risk and I need to get you to do everything you can to speed up delivery of all components for this job. Mr Herwich replied: Please be assured that you have INDECT's full support. There was no reference in Mr Karam's email or Mr Herwich's response to maintenance or support once the system had been installed. 46A third example of a representation made to Mr Karam is in a conversation he says that he had with Mr Herwich at about the time of the Top Ryde car park tender. Mr Karam says in his affidavit evidence that the conversation occurred in 2009, although the original tender for that site was dated 26 June 2008. Mr Karam says that he told Mr Herwich that TMA was tendering for that contract and he says that Mr Herwich said that TMA could tender on the basis of its new generation sensor. Mr Karam says that he said to Mr Herwich that he needed to know that the sensor "will be available to us for 10-15 years". Mr Herwich replied that it would be. Mr Karam also says that he asked Mr Herwich whether he would still be able to buy the old sensors. Again, he says that Mr Herwich replied that he would. 47A fourth example arises out of Mr Karam's meeting with Mr Herwich in Dubai in February 2012, at which time Mr Herwich is alleged to have made both oral and written representations concerning support. The events surrounding that meeting are relevant. 48As I have said, the meeting occurred following the deterioration in the relationship between TMA and Indect. As a result of that deteriorating relationship, one thing Indect did was to appoint additional dealers in Australia. On 2 February 2012, Mr Fowler sent an email to Ms O'Malley at Westfield announcing that fact. That email said that the most notable new dealer was Wilson Technology Solutions for whom Indect had began "full support". Mr Fowler said that the appointments would benefit Westfield because, among other things, they would give it "Multiple spare parts channels". Mr Clee from Westfield rang Mr Karam about that email and the following day sent Mr Karam an email in which he said that the issue could be discussed at the next meeting between representatives of Westfield and TMA. The email also said: In due course we will require full clarity on how TMA will in future source: 1 Replacement Parts. 2 Technical Services (e.g. Report Development, etc). Mr Karam spoke to Mr Herwich shortly after his conversation with Mr Clee. The meeting in Dubai was arranged following that conversation. 49During the course of the meetings in Dubai, Mr Karam told Mr Herwich that he had to see Westfield the following week to discuss the question of a maintenance agreement and he asked Mr Herwich whether he could give written confirmation that Indect would continue to support TMA. According to Mr Karam, Mr Herwich agreed to do so. There is a dispute about precisely what happened. However, an email was drafted to be sent to Westfield. Mr Herwich sent the text of that email to Mr Schreiner. In his email to Mr Schreiner, Mr Herwich said: Anthony [Mr Karam] has requested a letter from us following Dale's [Mr Fowler's] communication to Westfield last week about changes in Australia and the upcoming direct distribution of INDECT by Wilson and Sabar and their intention to speak to Westfield regarding Sales, Service and Support. As discussed, I do not want to write anything to him until we have a complete and finalised agreement ...[translated from German] After setting out the text of the proposed email to Mr Karam, the email continues: What do you think? I am not really convinced, but Anthony believes that Westfield is so worried and will not purchase any further INDECT System (from anyone...) ... 50Mr Schreiner gave his approval to the email on 21 February 2012 and, on the same day, Mr Herwich sent Mr Karam an email in the following terms: further to Westfields [sic] recent correspondence with you, we want to confirm INDECTs continued support of TMA for the sale, distribution and maintenance of the INDECT product in the Australian and New Zealand market. 51Immediately after the meetings in Dubai (on 21 February 2012), Mr Karam sent Mr Herwich and Mr Schreiner an email purporting to record the terms of an agreement reached at the meetings. That email recorded the following terms, among others: 1 TMA will acquire the exclusive rights to sell all Indect Electronics Austria (Indect) products for the Australian and New Zealand market for EURO 100,000 ... 5 All spare part purchases and upgrades must be done through TMA The email concluded by asking for a reply confirming "agreement in principal [sic] with the above so that I can advise TMA's lawyers to draft the agreement under European Law". 52Mr Karam forwarded a copy of Mr Herwich's email dated 21 February 2012 to Mr Clee on 23 February 2012, who replied the following morning. In his reply, Mr Clee said: This email does not clarify the issue of exclusivity, nor the broader current or future playing field for the installation, maintenance and technical support of Indect technology in Australia. It simply confirms that TMA are on that field of play. 53It appears that Mr Karam then met with Mr Clee on the same day and told him that TMA was the sole distributor for Indect in Australia, although Mr Karam denies doing so. It also appears that Mr Clee contacted Indect directly to obtain confirmation that TMA was Indect's sole distributor, since Mr Herwich sent an email to Mr Karam on 26 February 2012 in which he said: we have been advised by Westfield on Friday [24 February 2012] that you have met them last week and told them that I shall have confirmed to you personally that TMA are sole distributor for Indect in Australia. Richard and I, we really absolutely do not understand why you said that to Westfield! I am very annoyed about this. The email goes on to assert that there was no agreement, that negotiations were ongoing and that they had agreed not to speak to Westfield or any other client about their discussions. 54Mr Karam responded to that email the following day. He denied breaking his word. He said that he merely told Westfield that Indect and TMA were having confidential discussions, that he could not provide any additional information until those discussions were finalised and that Indect would be in a position to provide written confirmation of the exact status of the relationship once the discussions were finalised. 55Mr Herwich provided a lengthy response to Mr Karam's email of 21 February 2012 on 29 February 2012. In that response, he said that he had had a long discussion with Mr Schreiner and that they wanted "to move forward to work on an agreement with TMA according to [Mr Karam's email]" and considering a number of other matters, which Mr Herwich then goes on to describe. Those matters included the following: F) Kindly provide a concept how TMA wants to achieve best possible market share (we have to be aware that there is no minimum revenue limit that TMA has to achieve), also considering that [Indent E&D] will introduce a multibay detection in 2012 that is capable to offer optional picture analysis for ANPR, Find my Car etc. To be honest we are not fully convinced yet how TMA will compensate the loss of Dales sales support in the Australian market. We also think that WTS and others will not be willing to purchase INDECT PGS from TMA, being a competitor in the system market. You have seen this differently while talking in Dubai about this and we would like to learn in detail what activities you want to start to get other system suppliers open minded to accept TMA as a competence center for PGS G) We would prefer to change the wording "exclusive agreement" to "preferred partnership territory agreement" (or similar) to avoid any useless conflicts with our OEM client that act worldwide. 56A fifth example of representations said to have been made to Mr Karam occurred in April 2012, shortly after TMA had been notified (on 5 April 2012) that it had been successful in obtaining the contract for the Highpoint Shopping centre. Mr Karam says he was concerned at that time about the relationship between TMA and Indect. He says he told Mr Herwich that the liquidated damages under the contract was $30,000 per day and that he was not prepared to enter the contract if TMA did not have Indect's ongoing support. Mr Herwich is alleged to have replied "TMA has Indect's ongoing support for the sale, installation and maintenance of our systems in Australia". Mr Herwich, on the other hand, says he agreed to give support in accordance with the contractual warranties. 57The last example of representations made to Mr Karam are representations said to have been made during the discussions between Mr Herwich and Mr Karam and Mr Hamilton, TMA's solicitor, on 26 April 2012. Mr Karam gives evidence that during that meeting he said to Mr Herwich: If we don't agree on an ongoing distributorship and we go separate ways, you need to continue providing us parts and support for Highpoint and all our other Indect installations. As we have discussed before we need you to keep supporting us for the life of those systems. Mr Herwich is alleged to have replied "That's right". 58As I have said, TMA also claims that Indect made or participated in a number of representations to customers or potential customers concerning the provision of maintenance and support or in the preparation of material containing such a representation. 59The first was in relation to the Westfield Doncaster project. Mr Fowler assisted Mr Howell to prepare a quote for that project. Mr Howell and Mr Fowler were at the time close friends. Mr Fowler said that he was assisting Mr Howell in that capacity. However, he was also acting as a consultant to Indect E&D at the time. 60On 5 May 2008, Mr Fowler sent Mr Howell an email which attached an example presentation. Under the heading "Warranty" that presentation stated that the system would be supplied with a 3 year warranty on signs, sensors and software and a 1 year warranty on the management PC and peripherals. It continued: We can also supply you with a preventative maintenance contract for the system. This will provide for a trained staff member to visit the site quarterly and ensure the system is running at its optimal level. Mr Howell used that presentation as a template for the presentation to Westfield; and he included an offer in similar terms to the offer quoted above in a letter he sent to Westfield. He proposed a price of $6,400 excluding GST for the first year for that service. He also made similar offers in relation to a number of other bids. In addition, in the proposal to Westfield, TMA stated: TMA GROUP OF COMPANIES will hold adequate levels of spare parts for WESTFIELD and guarantees parts will be delivered within 24 hours. As things turned out, that statement was not correct. TMA never held an inventory of spare parts. 61The second representation concerned the tender for the Canberra airport car park. On 10 August 2008, Mr Fowler sent Mr Howell an email in relation to the tender for that project. He pointed out in the email that the tender called for "9 Year maintenance agreement from the end of the warranty - All parts an [sic] labour - 7 days a week including holidays. All breakdowns and servicing. They also want an alternative quote for preventative maintenance - 1 hour response time." Mr Fowler accepted in cross-examination that he saw "no difficulty" with Indect providing a 9 year guarantee for parts to TMA if it was required by the tenderer, even though he appreciated that TMA could not provide such an assurance unless it was itself able to supply parts and software obtained from Indect. TMA was not successful in winning that tender. 62The third representation or series of representations were allegedly made by Mr Fowler at presentations to potential customers. Mr Howell gave evidence that Mr Fowler participated in a number of presentations to potential customers including Bovis Lend Lease Pty Ltd in relation to the Top Ryde shopping centre project, TAC Pacific Pty Ltd in relation to the Royal Children's Hospital project and Willoughby City Council in relation to the Concourse project. According to Mr Howell, at each of those presentations, he (Mr Howell) described TMA as "Indect's Australian based partner" and said "With the support of Indect, TMA will maintain the system for the life of the equipment". Mr Fowler is alleged to have said: The local service and maintenance of the car parking guidance systems will be provided by TMA. TMA's staff are trained by Indect at its factory in Austria. TMA provides very reliable customer service and support. Indect will provide TMA with spare parts and the necessary backup to support the software for the life of the system. Mr Howell says that similar statements were made at other presentations attended by Mr Fowler, although TMA was not successful in winning any of those tenders. Mr Fowler says that he cannot remember saying the words attributed to him, but that it is possible that he did. However, he accepts that potential customers were told in TMA's presence that Indect E&D would supply parts and services during the lifetime of the systems other than during the warranty period. 63The fourth representation or series of representations were made in connection with the tender for the car park at the Brisbane airport. Mr Howell prepared the tender response in respect of that tender with the assistance of Mr Fowler. Clause 2.27 of Appendix B of that response, which Mr Fowler saw, said: Indect and TMA guarantee to provide support and spare part availability for a period of ten (10) years from delivery of the equipment. And clause 2.28 stated: Indect, and TMA guarantee software upgrades to support the system will be free of charge for ten (10) years. 64On 9 February 2010, Mr Fowler sent an email to Mr Howell and Mr Herwich (who was also going to attend the presentation in respect of the Brisbane airport car park) attaching a rough document that was intended to be a guide for the presentation. That guide included the following bullet point: Indect the manufacturer, software developer etc - we can guarantee supply etc for 10 years or more. Mr Howell says that he repeated that statement at the presentation. Mr Herwich did not deny that that statement was made and he accepted in cross-examination that the Queensland Airport Corporation was told that TMA would be available to fulfil its servicing and maintenance needs well into the future. The tender was not successful. 65The fifth representation was made in connection with the tender in respect of the car park at the Canberra Centre. In connection with that tender Indect E&D provided a formal guarantee (signed by Mr Schreiner) in the following form: Indect Electronics & Distribution GmbH Rennweg 83 A-2345 Brunn am Gebirge hereby guarantees The TMA Group to provide support and spare part availability for the project The Canberra Centre for a period of 10 years from delivery. The guarantee was provided at the request of Queensland Investment Corporation (QIC), the owner of the site. Mr Fowler also sent an email to Mr Howell setting out the text of an email he was willing to send QIC if Mr Howell thought it would help. That email relevantly said: Canberra Centre and QIC would also benefit from the extensive backing from our local partner TMA. TMA has been a supplier to the Parking Industry for over 10 years. We specifically chose them due to their extensive experience, dedication to a long term customer service plan and also their technical expertise in parking. TMA also have the financial backing to ensure the project is not just delivered but supported into the future. TMA are people who understand parking and service and are in the industry for the long term. 66Lastly, TMA relies on a number of representations made in tender documents or in emails concerning tender documents. For example, in relation to the Concourse project, on 18 February 2011, Mr Fowler sent Mr Howell an email that included proposed responses to questions asked in the tender document. One question was "Define time period for which spare parts will be available for the equipment". Mr Fowler provided the answer "10 Years minimum". The tender document sent by TMA to the Willoughby City Council stated that "Indect will guarantee spare part availability for 10 years", although no requirement to that effect was included in the final contract. The tender document for the Rhodes project provided that "proposals must incorporate a separate preventative maintenance program for a period of up to 10 years" and required that "sufficient spare parts will be kept on hand in Australia". Mr Fowler accepted in cross-examination that these were usual requirements and he saw no difficulty in providing the required assurances. In fact, Indect did not provide a written guarantee confirming the availability of service support and software and parts for 10 years in respect of the Rhodes project, although the customer had requested such a guarantee.

Implied term 67TMA contends that it is an implied term of each of the 15 agreements pursuant to which it acquired CPG systems from Indect that: (a)Indect E&D or Indect Pty Ltd (as the case may be) would provide TMA with spare parts and components in respect of the hardware and software of the system for the economic life of the system; (b)Indect E&D or Indect Pty Ltd (as the case may be) would provide TMA with technical advisory services and support for the maintenance and repairs in respect of the hardware and software of the system for the economic life of the system. 68In its pleading, TMA alleges that the term is to be implied as a matter of fact, as a matter of law, as a result of the course of dealings between the parties or by reason of a custom or usage in the market for the supply of hardware and software for CPG systems. It is hard to know from TMA's final submissions which of these claims are pursued. Only the implication of as a matter of fact is specifically identified in TMA's written submissions, although those submissions suggest that the representations and the parties' conduct are relevant to the implication on that basis. 69The test for the implication of a term as a matter of fact was stated in these terms by Lord Simon, Viscount Dilhorne and Lord Keith in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283: [F]or a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. As their Lordships pointed out, the basis of the implication is the presumed intention of the parties. 70The 5 requirements identified by their Lordships are to be applied stringently and cumulatively when a written document embodies the entirety of the agreement between parties: see, eg, Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 354 per Mason J; Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 441-2. However, when the agreement in question is informal: a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. See Hawkins v Clayton (1988) 164 CLR 539 at 573 per Deane J; adopted by the High Court in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422, 442. 71Terms implied as a matter of law are generally terms that are implied in all contracts of a particular class: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 448 per McHugh and Gummow JJ. Often, but perhaps not always, a term will be implied in contracts of a particular class because contracts of that class have particular features which mean that the benefits of the contract could be rendered nugatory, worthless or perhaps seriously undermined if the term is not implied: Byrne at 450. 72A term may be implied in a contract by a past course of dealing between the parties: see Hawkins v Clayton (1988) 164 CLR 539 at 573 per Deane J. But for a term of that type to be implied, it must be possible to identify the term and the parties' agreement to it by reference to their past conduct. 73A term may also be implied by custom. But in that case: There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract ... See Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 236. 74The claim that the terms contended for can be implied as a matter of law, or on the basis of a course of dealing or on the basis of a custom can be put to one side. 75TMA does not point to any case which has held that the alleged terms should be implied as a matter of law into contracts for the supply of CPG systems or some broader category of contract, such as contracts for the supply of systems that will require maintenance. The contracted for promise was a promise to deliver a system that had certain characteristics. It is difficult to see how it could be said that that promise would be rendered nugatory unless the terms contended for were implied. 76There was no course of dealing which could establish that it was an incidence of each supply contract that Indect would also supply parts and maintenance services for the life of the systems. When the first contract was entered into, there was no course of dealing between the parties at all. None of the systems in question has reached the end of its life. Consequently, it is impossible to say that there is a course of dealing between TMA and Indect by which Indect provided parts and services for the life of the system. Any arrangement by which Indect supplied parts or services to TMA can be explained by the fact that, during the relevant period, TMA was a distributor of Indect's products rather than as an incidence of the individual contracts. 77TMA led no evidence of a custom to the effect pleaded. 78That leaves the allegation that the term can be implied as a matter of fact. 79Indect submitted that the contracts for the supply of CPG systems to TMA contained Indect's standard terms and conditions so that the contracts should be treated as ones where all their terms are embodied in writing with the result that the test for the implication of terms stated in BP Refinery should be applied strictly. That is true of all the contracts except the contract for Westfield Parramatta, where Indect's invoice does not purport to incorporate its standard terms and conditions. The position is not entirely clear in the other cases, since Indect is unable to identify the precise form of its standard terms and conditions at the time each contract was entered into. The likelihood is that the standard terms did not change substantially over the relevant period. The standard terms that were in evidence were clearly concerned with the terms on which the equipment was sold. They do not say anything about maintenance. In those circumstances, except in the case of the Westfield Parramatta contract, it is difficult to see why the test in BP Refinery should not be applied strictly. However, it is not necessary to resolve the issue. Even if the more flexible approach adopted in Byrne is applied, I do not think that the terms contended for by TMA should be implied. 80TMA submitted that the terms contended for were necessary because, in order to achieve their operational life, the CPG systems needed support from Indect. They were proprietary systems which could not be serviced except with assistance from Indect and depended for their operation on spare parts that could only be sourced from Indect. In addition, TMA contends that, to Indect's knowledge, TMA maintained the systems beyond their warranty periods and it was to TMA the operators resorted for their maintenance and technical requirements. TMA relies on the representations allegedly made by Indect or in Indect's presence as establishing that it would have gone without saying that the requirement of ongoing support would have been agreed. 81The submissions made by TMA wrap up a number of features of the relationship between TMA and Indect and TMA and its customers and, in doing so, fail to identify with sufficient precision the nature of the contracts into which it is alleged the terms are to be implied. The relevant contracts are contracts for the sale of systems that are to be on-sold to customers. It is the customers, not TMA, who may need to acquire spare parts and other support services. It is to be expected that those customers would make separate arrangements for the maintenance of their systems. Those arrangements may be ad hoc in the sense that the customer may choose to acquire the relevant services from anyone who is able to supply them at the time they are required at the then prevailing price. Alternatively, the customer may seek to enter into a formal agreement dealing with the question of maintenance. Such an agreement would need to deal with a number of issues, including response times and price. Having regard to the nature of the Indect CPG systems, it is to be expected that whatever arrangements exist would exist with a distributor of Indect's systems; and often the customer would choose the distributor from whom it bought the equipment. But it does not follow from that that the customer will necessarily seek to acquire those services from the distributor from whom it bought the equipment or, if it does, that it will continue to do so for the life of the system. From the customer's point of view, it must be contemplated that the distributor could change or additional distributors could be appointed. 82It is to be expected that, for as long as TMA remained a distributor of Indect's products, it would be in a position to obtain parts and technical assistance from Indect. In the normal course of events, the terms on which it does so will be governed by a distribution agreement. That agreement may be formal or, as in this case, informal. But in each case, the ability of TMA to obtain parts and technical support is an incidence of that agreement. 83Against that background, there is no basis for implying into a particular order a term that Indect will supply parts and technical assistance to TMA in connection with the equipment the subject of that order for the life of that equipment on the basis that TMA remains a distributor of Indect's products. The term is not necessary for the reasonably effective operation of the contract. Absent the term, TMA was still able to buy the relevant equipment and sell it to its customer. It obtained the benefits of that sale. Absent some specific arrangement between the parties, TMA sold the equipment on terms that did not require it to provide parts and technical assistance for the life of the equipment. It is very difficult to see how in those circumstances it is necessary for the reasonable operation of the sale agreement between Indect and TMA that Indect be required to supply those services to TMA for the life of the equipment. 84The implied terms contended for by TMA do not identify the terms on which the parts and services are to be supplied. Implicit in TMA's submissions, and in the interlocutory orders that have been made, is the assumption that those terms should be the same as the terms made available to distributors of Indect's products in Australia. As things have turned out, it is possible to identify those terms because other distributors have been appointed. However, at the time the earlier orders were placed, there were no other distributors and it is not apparent how the terms can be identified in those cases. The content of those terms cannot be identified by reference to subsequent events. At the time each order was placed it must be possible to identify the terms on which Indect was required to supply the parts and services that are said to be the subject of the implied term for the life of the relevant system. TMA offered no explanation for how that could be done. 85The effect of the implied terms for which TMA contends is that it is to be treated as a distributor of Indect's products for the purpose of obtaining parts and support for the systems it sold for the life of those systems (whether or not the customer seeks to acquire those services from TMA or not). Indeed, it seems that the underlying commercial concern of TMA is not so much that it will not be able to acquire parts and support from Indect but that it will have to do so from a current distributor at a higher price, which will impede its ability to compete for maintenance contracts for customers who bought their equipment from it and will cause it to earn reduced profits or make a loss on maintenance contracts that it has entered into. But the terms on which Indect may be willing to supply distributors of its products will be affected by the benefits it obtains from the distribution agreement. A distributor has an incentive to promote Indect's products and it is to be expected in those circumstances that Indect would provide parts and support at a lower price because of that benefit. Why it would be reasonable to expect Indect to provide parts and support to an entity from whom it did not obtain similar benefits and who could, for example, end up promoting a competitive product (as has happened with TMA) is not clear. 86As I have said, it is to be expected that a customer will need maintenance services in connection with the system it buys; and it has a choice whether to seek to enter into a formal contract to acquire those services and, if so, from whom. If the customer enters into a maintenance agreement with TMA that runs for a period of time, and TMA has no formal distributorship agreement with Indect, TMA takes the risk that its distributorship agreement will not remain on foot. That risk can be addressed by TMA by making it a term of the maintenance agreement that it is entitled to terminate the agreement if its distributorship is terminated or by seeking to enter into some specific arrangement with Indect in relation to that agreement. However, the existence of the risk - which is a risk that can be controlled by TMA - is not a reason for implying into each of the 15 contracts the terms contended for by TMA. It is not reasonably necessary for the operation of those contracts that terms be implied to avoid a risk that TMA can control.

Equitable estoppel 87In order to make out a claim of equitable estoppel, the plaintiff must, to use the words of Brennan J in Waltons Stores v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428-9, prove that: (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. Although Brennan J's statement has not been approved by the High Court as a whole, it has been the formulation most commonly cited and applied by lower courts in Australia: see, eg, Nathan Elali v Carl Frederik Reinhold Mahrs & Anor (No. 2) [2013] NSWSC 1976 at [9] per Slattery J; Settlement Group Pty Ltd v Purcell Partners (a firm) [2013] VSCA 370 at [124] per Dixon AJA; The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1; (2008) 225 FLR 1 at [3539] per Owen J; Waddell v Waddell [2012] NSWCA 214; (2012) 292 ALR 788 at [40] per Campbell JA; Pazta Company Pty Ltd v Idelake Pty Ltd [2008] NSWSC 941 at [24] per Brereton J; Byron Shire Council v Vaughan [2002] NSWCA 158 at [58] per Giles JA; Royal and Sun Alliance Insurance Ltd v Buttigieg [2001] VSC 475 at [37] per Balmford J; Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd [1998] FCA 205; (1998) 153 ALR 198 at [233]-[234] per Lockhart, Lindgren and Tamberlin JJ; Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 at 611-12 per Priestley JA. 88TMA does not seek to identify with any precision either in its pleading or in its submissions the assumptions it says it made, how those assumptions were induced by Indect or the detriment that TMA is alleged to have suffered as a consequence of acting on those assumptions. What is alleged is that from the very first agreement TMA assumed that Indect would supply it with spare parts and components and ongoing factory support for the life of each of the systems at prices and on terms that would apply to Indect's distributors in Australia and that that assumption was induced by the various representations to which I have referred. Obviously, the later representations could not have induced the assumption in relation to agreements entered into before the date the representations were made. The detriment TMA says it suffered was potential losses arising from its inability to perform any of the agreements by which it supplied the relevant systems to its customers, loss of reputation and the potential cost of replacing Indect CPG systems with alternative systems. Implicit in this claim is the assumption that TMA's customers were entitled, under the agreements they had with TMA, to be supplied with parts and support for the life of their systems. However, TMA never sought to make good that assumption. It did lead evidence that TMA Tech had entered into a number of maintenance agreements with some of its customers. However, it was not pleaded that its obligations under those agreements formed part of the detriment on which it relied, although the case appears to have been fought on that basis. That is, it appears to have been assumed that part of TMA's case is that it entered into the maintenance agreements as a result of representations of continued support by Indect. 89Put in that way, the equitable estoppel case raises two broad questions. The first is whether the representations on which TMA relies were made and carried with them the implication that Indect would provide TMA with parts and support for the life of the systems. The second is whether TMA acted to its detriment in reliance on the representations. 90In considering whether the representations were made, the context is important. As I have said, it seems clear that Indect appointed TMA as its distributor in Australia and New Zealand. For a time, TMA was Indect's only distributor in Australia. However, neither its appointment nor its exclusivity was formalised in a written agreement, although TMA sought to enter into an agreement of that type. Eventually, TMA's distributorship agreement was terminated by Indect. It is not alleged by TMA that Indect was in breach of an express or implied term of the distributorship agreement by terminating the agreement when it did. Much of what Indect said about the relationship between it and TMA was an incidence of the distributorship agreement. TMA understood that no formal agreement had been entered into; and it must have understood that either party was free to terminate the distributorship agreement, at least on reasonable notice. Consequently, it could not have expected that any right or obligation that was an incidence of that agreement would continue past its termination in the absence of an express agreement or representation by Indect to that effect. 91I am not satisfied that Mr Herwich made the representation relied on by TMA during his first conversation with Mr Karam, at least not if it is interpreted as a representation that Indect would support TMA for the life of the systems. 92I did not find Mr Karam to be a reliable witness. In particular, he was inclined to say that more was agreed or said than was the position. An example is his email dated 21 February 2012, which purported to record the terms of an agreement that he had reached with Mr Herwich in Dubai, although it is clear that no agreement had been reached at that time. Mr Karam said that, during his first conversation with Mr Herwich, he told Mr Herwich that, if TMA was going to sell Indect's product to Westfield, it would need an exclusivity agreement. However, that seems unlikely. No such agreement was reached; and when Indect started supplying other distributors TMA did not allege that it was doing so in breach of an agreement. Nonetheless, TMA installed Indect systems at a number of Westfield sites. When it was put to Mr Karam that the representation that Indect would fully support TMA and the products for their 15-year life was not reduced to a formal contract, Mr Karam claimed that it was and pointed to a draft distribution agreement which he accepts was never executed. Mr Karam was cross-examined about his email exchange with Mr Herwich on 14 and 15 December 2011. It was pointed out that neither of Mr Karam's emails alleged that Indect had made a promise that it would supply parts and labour to TMA in relation to the systems it had installed for the lifetime of the systems. Mr Karam gave evidence that that was incorrect and then referred to the statement in his email dated 15 December 2011 that Indect will continue to supply parts and assistance. But that statement was clearly a proposed term of separation, not a statement purporting to record what Mr Herwich had said on a previous occasion. Mr Karam said in cross-examination that he had mentioned Mr Herwich's promise to Mr Clee. Had he done so, it is to be expected that he would have referred to it in his affidavit evidence, but he did not. 93I also accept Indect's submission that it is objectively unlikely that Mr Herwich would have said that Indect would support TMA for the life of the systems. At that stage, Mr Herwich knew very little about TMA. It is implausible in those circumstances that he would have said that Indect would support TMA for 15 or more years irrespective of what happened in the future. 94Moreover, the evidence given by Mr Karam does not support a representation that Indect would support TMA for the life of the systems. Mr Karam's evidence is that Mr Herwich said that Indect would support TMA and would support its systems for their lifetime. But that does not mean that Indect would support TMA for the lifetime of the systems. It is to be expected that Mr Karam would ask about Indect's willingness to support its systems since that would be important to customers and consequently important to TMA's ability to sell those systems. But is does not follow that Mr Herwich was making a representation to Mr Karam that Indect would support TMA, even if, for example, TMA turned out to be an unsatisfactory distributor. It is consistent with Mr Karam's evidence that Mr Herwich said that Indect would support TMA so long as it remained a distributor and would support its systems (one way or another) for the lifetime of the systems. That statement is consistent with what has actually happened and is consistent with what Mr Herwich said in his email dated 15 December 2011. Mr Herwich recognised that TMA might cease to support Indect's products. In that event, he recognised that it would be necessary to appoint another distributor to carry out that function. 95Nor am I satisfied that Mr Herwich made the second representation on which TMA relies. That representation is said to have been made in response to a concern expressed by Mr Karam about how onerous the Westfield Doncaster contract was. But Mr Karam was concerned about the contract not because it placed onerous maintenance obligations on TMA. Warranties aside, it placed no obligations on TMA in that regard. What Mr Karam was concerned about was the liquidated damages clause. He wanted assurances from Mr Herwich that Indect would support TMA in the installation of the system and in delivering the components promptly. The words Mr Karam attributes to Mr Herwich and on which TMA now relies were non-responsive to that concern. For that reason, in my opinion, it was unlikely that they were said. Mr Karam repeated his concern in writing; but again he made no mention of the need to provide ongoing support for the life of the system. If that really was one of his concerns, it is to be expected that he would have raised it in his email. However, he did not. Mr Howell's evidence does not change the position. Even if his evidence is accepted, Mr Fowler did not say that Indect would support TMA for the lifetime of the system. At most, Mr Fowler said that Indect would support the product going forward. 96The third representation allegedly made by Mr Herwich concerns the availability of the new and old sensors. In my opinion, Mr Karam's evidence on that issue is implausible. Mr Karam may well have asked whether the new sensors would be available for the life of the system and whether the old ones would still be available for that period as well. They were natural questions to ask. But it is difficult to believe that the real point of the question was whether they would be available to TMA rather than whether they would be available generally. At the time, TMA had only recently started distributing Indect's products. The relationship between the parties was good at that time and the likelihood is that both parties expected the arrangement to continue for an indefinite period of time. It strikes me as implausible that the focus of Mr Karam's questions would have been whether Indect intended to continue to supply TMA rather than whether Indect intended to continue to manufacture both types of sensor. It is unlikely that Mr Karam could have remembered several years later a conversation that sought to draw that subtle distinction, when that distinction is unlikely to have been foremost in his mind at the time. As I have said, I did not find Mr Karam to be a reliable witness. I do not accept his uncorroborated evidence of this conversation. 97As to the representation made on 21 February 2012, it is clear that Mr Herwich represented that Indect would continue to support TMA "for the sale, distribution and maintenance of the INDECT product in the Australian and New Zealand market". In effect, that representation was a representation that Indect intended, at the time the representation was made, that TMA would continue as a distributor of Indect's products. Mr Herwich understood that the representation was being made, in part at least, to alleviate any concerns that Westfield had about TMA's ability to support the products and in a context where Mr Karam was meeting with Westfield the following week to discuss maintenance contracts. The email itself gives no indication for how long Indect would continue to provide support to TMA. Mr Karam says that, during the course of the meetings in Dubai, he told Mr Herwich that TMA was negotiating with Westfield for 5-year maintenance contracts. I do not accept that evidence. If Mr Karam had mentioned formal maintenance agreements for a period of 5 years, then it is likely that he would have asked Mr Herwich to refer to that period in his email; and it is likely that Mr Herwich would have made some reference to it in his email to Mr Schreiner. The likelihood is that what Mr Karam said about maintenance was less specific. 98Mr Karam must have appreciated that the terms of a distributorship agreement had still not been agreed and that there was a substantial risk that agreement would not be reached having regard to the state of the relationship between the parties at that time. He must have also appreciated that there was a real risk that the distributorship would come to an end because the parties were unable to repair their relationship. Consequently, he could not have understood from that email that Mr Herwich was saying that the support referred to in it would continue indefinitely or for the life of any system TMA had ordered or might order in the future. 99In my opinion, the conversation Mr Karam had with Mr Herwich following the success of the Highpoint Shopping Centre bid adds nothing. Mr Karam's concern at the time was liquidated damages, not future maintenance. There had been a further deterioration in the relationship between TMA and Indect at that time. Indect had commenced proceedings against TMA and it was obvious by that time that there was a real question whether TMA would remain a distributor of Indect's products. It strikes me as implausible that Mr Herwich, in response to Mr Karam's concern about liquidated damages, would have volunteered the assurance that Indect would provide TMA with support for the ongoing maintenance of systems in Australia. Even if words to that effect were said, I do not accept that Mr Karam could have understood them to mean that Indect would provide that support for the life of the systems. That was one of the issues that was the subject of negotiations at the time. 100I do not accept that Mr Herwich made the representation on which TMA relies at the meeting on 26 April 2012. That meeting was clearly a meeting to attempt to resolve what was by then a number of serious disputes between the parties. Indect, with some justification, is critical of the circumstances in which the meeting occurred. Mr Karam took Mr Herwich to TMA's solicitors' offices without any warning to conduct the negotiations. They occurred without Indect's solicitor being present, even though by then there were court proceedings between Indect and TMA and one of the matters that the meeting was designed to resolve were those court proceedings. TMA's solicitors did not inform Indect's solicitors of the meeting; and Mr Herwich was not encouraged to obtain his own legal advice. 101That aside, no resolution was reached at the meeting. Mr Herwich made it clear that he would need to speak to Mr Schreiner before he agreed to anything. Mr Karam's evidence that Mr Herwich agreed that if the distributorship was not going to continue then Indect was still prepared to support TMA for the life of those systems seems to me to be another example of Mr Karam attributing to Mr Herwich words that he did not say. 102In relation to the representations on which TMA relies that arise out of statements to potential customers or from the assistance that Indect provided to TMA in connection with the tenders that it lodged, Indect's case is that all it was prepared to agree to was to give the warranties set out in its invoices - which was generally a warranty for a maximum of 3 years. Mr Herwich gave evidence that, except in exceptional circumstances (such as the unsuccessful tender for the Canberra Centre), Indect would not have been prepared to undertake more onerous obligations, partly at least because it had no control over the future costs of providing additional support. I do not accept that evidence. It is plain that, on a number of occasions, Indect told potential customers or permitted TMA to tell potential customers that TMA or Indect would support its system for the lifetime of the system. Mr Herwich's evidence that he would not have been prepared to make statements of that type because he did not know the costs involved strikes me as unconvincing. It was open to Indect to charge for the support that it provided and to adjust its charges to reflect any increase in the costs of providing the support. As I have said, in Mr Herwich's email dated 15 December 2011 to Mr Karam, Mr Herwich specifically contemplated the possibility that Indect would need to appoint another distributor if TMA was no longer willing to provide support to customers itself. 103However, the question remains whether Indect, by making statements about its willingness to support its products to potential customers or by permitting TMA to make statements to potential customers, was making statements to TMA from which TMA was entitled to assume that Indect would continue to supply goods and services to TMA in connection with all the sites that TMA had installed for the lifetime of the relevant systems as if it were a distributor of Indect's products even after its distribution agreement was terminated. In my opinion, it was not. 104The statements on which TMA relies were each made in the context of specific proposals. In some cases, such as the guarantee offered in respect of the Canberra Centre, the relevant statement (in that case, a formal guarantee provided by Indect to TMA at the customer's request) was the subject of detailed consideration. In many cases, the statements were made in response to specific queries from the proposed customer. The responses varied from customer to customer. It seems clear that Indect's position was that it was happy to commit to a representation that it would provide parts and services to the customer for a period of 10 or more years. But it does not follow from that fact that it was making a representation to TMA concerning its willingness to continue to supply those goods and services through TMA. The terms of each representation and its context need to be considered separately. 105The representation that was made to Westfield in connection with the Doncaster project, and other projects, was a representation concerning TMA's willingness to negotiate for a preventative maintenance agreement. It was not a representation that TMA would supply preventative maintenance, much less that it would do so using the services of Indect. It must have been contemplated that if such an agreement was actually negotiated, and if TMA was intending to rely on services from Indect to discharge its obligations under that contract, then it would negotiate a similar agreement with Indect. Consequently, the fact that Indect acquiesced in the making of the representation could not form the basis of any assumption on the part of TMA that Indect was willing to provide those services to TMA in all circumstances. 106The representations concerning the Canberra Airport, the Brisbane Airport and the Canberra Centre are not significant, since none of those tenders was successful. 107The critical question in relation to the representations made to Bovis Lend Lease, TAC Pacific and the Willoughby City Council is whether Mr Howell said that "With the support of Indect, TMA will maintain the system for the life of the equipment" and whether Mr Fowler said "Indect will provide TMA with spare parts and the necessary backup to support the software for the life of the system", as Mr Howell alleges, or whether what was said was that Indect would provide parts and services during the lifetime of the systems. In my opinion, it is more likely than not that Mr Howell and Mr Fowler did say words to the effect of those alleged. Mr Howell attended the meetings as a representative of TMA. It was TMA, not Indect, who was contracting with the customer. The likelihood in those circumstances is that Mr Howell made a statement concerning TMA's ability or willingness to maintain the systems and that Mr Fowler confirmed that statement. Mr Howell came across generally as an honest witness and his evidence on this aspect is plausible. Mr Fowler, who also struck me as an honest and forthright witness, was unable to deny that he said that Indect would provide TMA with spare parts and the necessary backup for the life of the systems. 108The remaining representations on which TMA relies are all in writing. Each of the representations was made in response to questions asked in tender documents. None of them suggested that spare parts would be available through TMA. The tender document in respect of the Willoughby car park made it clear that it was Indect that guaranteed that spare parts would be available for 10 years, not TMA. Although the proposal in respect of the Rhodes car park required a separate maintenance program for a period of up to 10 years, it is not suggested that TMA provided such a program. 109The second question is whether TMA acted to its detriment in reliance on the representations. 110On the findings I have made, the only occasions when Indect represented that it would support TMA for the life of the systems was in the presentations to customers at which Mr Fowler was present. I do not think that TMA was entitled from those statements to assume more generally that Indect was willing to provide TMA with parts and support for the life of any system it sold. The statements made and acquiesced in by Mr Fowler were made and acquiesced in to assist TMA in winning particular bids. 111I do not accept that TMA relied on those statements to its detriment. TMA submitted that, had it known that Indect would not provide it with parts and support for the life of the systems, it would not have bid for the relevant contracts. I find that implausible. It stood to benefit from the success of its bids whether or not it was in a position to maintain the installations or not. It was not suggested, for example, that TMA expected to make a loss on the installations that it would only recoup if it provided maintenance services to the site for the duration of the life of the system. Although representations were made to the relevant customers concerning TMA's and Indect's willingness to provide support, the contracts that TMA ultimately entered into do not require it to provide that support; and there is no evidence that the customers were induced to enter into those contracts on the basis of the representations that were made. Even if they were, the evidence is that those customers will be able to obtain support for their Indect systems from other Indect distributors. Consequently, it is difficult to see that they have suffered any loss as a result of the representations which will cause TMA detriment. 112For similar reasons, if contrary to the findings I have made, Indect made a number of the other representations on which TMA, I am not satisfied that TMA acted to its detriment in reliance on those representations. 113As I have said, TMA relies on the long term maintenance contracts it entered into with some customers and it appears to assert that it has suffered a detriment as a consequence of those. However, those contracts were entered into on 13 October 2011, 19 April 2012 and 1 July 2012. TMA does not point to any specific representations made by Indect in relation to the supply contracts for the systems to which those maintenance contracts relate. By 13 October 2011, it is clear that there were serious problems with TMA's relationship with Indect. There was already a serious dispute concerning the payment of Indect's invoice in relation to the Westfield Belconnen project. On 24 September 2011, Mr Fowler had written to Mr Howell saying that there was no point signing a draft distributorship agreement that had been prepared "when the two companies cannot agree to co-operate". The email continued: The current relationship is completely dysfunctional and no signed agreement will make that better. Co-operation is based on trust and mutual understanding, not agreements. The agreement is only a set of rules to play by. When Ingo and Anthony work through all issues then there may be a basis for an agreement. Whatever might have been said in the past, TMA could not, in the light of that email, have believed when it signed the maintenance agreement in respect of Warringah Mall on 13 October 2011 that the relationship was such that it could expect continued support from Indect for the next 10 years. The position is even clearer when it signed maintenance agreements with Westfield on 19 April 2012. By then, Indect had appointed other distributors in Australia. Mr Karam and Mr Herwich had met in Dubai and Mr Herwich had provided Mr Karam with his email dated 22 February 2012. However, for the reasons I have already explained, Mr Karam could not have understood from that email that Indect would support TMA for the length of those maintenance agreements. The same point can be made in relation to the maintenance agreement for the Centro Box Hill car park, although by then it had become even plainer that an agreement was not going to be reached, following the failure of the talks between Mr Karam and Mr Herwich in April.

Conventional estoppel 114In Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32], Brereton J explained the requirements of conventional estoppel in these terms: In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff. See also Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at [200]; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [573]; Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202 at [235]. 115It is clear from what I have already said that the parties did not adopt an assumption that their relationship would be conducted on the basis that Indect would provide parts and support to TMA for the life of the systems bought by TMA irrespective of whether TMA remained a distributor of Indect's products or not. Any assumption made by the parties was an assumption concerning the support that Indect would provide TMA while it remained a distributor. When the question whether the distribution agreement should continue arose, there was clearly an issue between the parties concerning what would happen if it were terminated. That issue was never resolved.

Unconscionable conduct 116TMA seeks a declaration that Indect has acted unconscionably in contravention of s 21 of the ACL by refusing to supply TMA with spare parts and components and technical advisory services in respect of hardware and software for the CPG systems supplied to TMA. 117Section 21(1) of the ACL provides: A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. It is not suggested that the exclusion in respect of a "listed public company" applies in this case. 118Section 21(4) provides: It is the intention of the Parliament that: (a) this section is not limited by the unwritten law relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. 119Section 22 of the ACL sets out a non-exclusive list of matters the court may have regard to for the purpose of determining whether a supplier or acquirer of goods or services has engaged in unconscionable conduct. It is not necessary to list all the factors set out in that section. The ones specifically relied on by TMA are:

• The relative strengths of the bargaining positions of the supplier and the customer (s 22(1)(a));
• Whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier (s 22(1)(b));
• Whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer (s 22(1)(d));
• The amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier (s 22(1)(e));

Orders 126The orders of the court are: (1)Proceedings 2013/255364 and 2012/262302 be dismissed. (2)The interlocutory orders made by Robb J on 20 September 2013 in proceedings 2013/255364 be dissolved. (3)The second defendant in proceedings 2012/262302 be released from the undertaking it gave to the court in those proceedings on 15 October 2012. (4)The plaintiffs in proceedings 2013/255364 pay the defendants' costs of those proceedings; (5)The plaintiffs in proceedings 2012/262302 pay the defendants' costs of those proceedings.

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: 17 April 2014