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.