Associated Newsagents Co-Operative Ltd (Receivers & Managers Appointed) v Honeywell Pty Ltd

[1988] FCA 616

F

' .	-	JUDGMENT No.	...kj.. h!)	....,	8.8-
I

NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	1
1

NEW SOUTH WALES DISTRICT REGISTRY	1	NO. G.431 Of 1987
1
GENERAL DIVISION	1

BETWEEN:

Applicant

AND : HONEYWELL PTY LIMITED

First Respondent

BERSAND ONLINE SERVICES PTY

LIMITED

Second Respondent
BERNARD J DAWSON
Third Respondent
EXATRON PTY LIMITED

Fourth Respondent

!

CORAM:	WILCOX J
PLACE :	SYDNEY

DATE : 23 JUNE 1988

MINUTES OF ORDER

i	I
!	*

-- THE COURT ORDERS THAT:

1.        The application to vacate the date fixed for the commencement of the hearing of this proceeding, namely 1 August 1988, be refused.

2. The first respondent pay to the applicant its costs

of the application.

_.	.
! ,

Note:	Settlement and entry of orders is dealt with in Order
36 of the Federal Court  Rules.

I i

..

I .

. .

I

!

NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA ) )

NEW SOUTH WALES DISTRICT REGISTRY ) NO. G.432 Of 1987

L

) I .

DIVISION GENERAL 1

BETWEEN: ASSOCIATED NEWSAGENTS ;. *

CO-OPERATIVE LIMITED (RECEIVERS & MANAGERS APPOINTED)

Applicant

AND: HONEYWELL	PTY LIMITED	I ’
!

First Respondent	‘I
BERSAND ONLINE SERVICES PTY	. ..
LIMITED	j l
I .
Second Respondent BERNARD J DAWSON Third Respondent EXATRON PTY LIMITED Fourth Respondent

CORAM:	WILCOX J
PLACE :	SYDNEY  , .

I .

DATE : 23 JUNE 1988 .-

EXTEMPORE REASONS FOR JUDGMENT

I '

I 2. -

An application has been made by the first respondent,

Honeywell Holdings Pty Limlted, to vacate the proposed hearing
date in this matter. The hearing is currently fixed to
commence on 1 August 1988.

I do not propose to deal with the facts at any great	.. .
-. .

length, but it is perhaps useful to record a few dates. The

claim brought by the applicant, Associated Newsagents

. _,

Co-operative Limited, against Honeywell and three other	I _
!:'
respondents arises out of the supply to the applicant of a
I -.
computer based videotex system. This was a system,	as I

understand it, which was intended to be accessible by the
newsagent members of the applicant for the purpose of keeping

their accounts, for ordering supplies and, perhaps, for other

, .,

purposes. It appears that the system was installed in about

understand it, had some role in regard to software; although
the other respondents also had responsibilities in that

April 1985. Honeywell supplied the hardware and, as I

regard. The system apparently became operational in August

1985, but it was ultimately abandoned by the applicant in July

1986 because of the applicant's view that it	was irredeemably
unsatisfactory. The maximum utilization of the system was in
about March 1986, when something like	100 members were using
the system.

During the period of operation there was a Honeywell

officer designated as project manager. He was employed full time for portion of the period. Honeywell also kept a diary of problems notified to the company in relation to the system

I

I 3 .

and in regard to the action taken to meet those problems.

This diary has been discovered and apparently sets out numerous items. It also is said, and accepted on behalf of Honeywell, that, during this period, the company flew out

experts from France from time to time to investigate the
complaints. In about December 1985 a newstex steering

committee was established; the word "newstex" referring to

the code name of the system. This committee consisted of a

Honeywell representative, Mr Dawson, who is the third
respondent, and a principal of the second respondent and an

Ancol representative. This committee met regularly and

, i

minutes were kept. Apparently the committee dealt with	I.
problems which were being experienced.

As I have said, Ancol abandoned the system in July

1986.   In September 1987 this proceeding was commenced. The

matter first came before me in about November 1987 when there

was an application made for an order that Ancol provide

security for costs. At that time there was a deal of evidence

led as to the background to the matter and the problems which

had been experienced. It was obvious that significant	l ..
complaints were being made by Ancol as to the performance of
the videotex system and	it seemed to me, at the time, that
there was a likelihood that one or more of the respondents	. .
would be found to be liable upon one or more of the causes of action alleged against them. I say that because my impression was that the real contest related to the question which of the respondents was to blame for the performance problems, the
existence of which were not seriously	in issue. Nothing that

!

has since transpired has caused me to revise that opinion; although it is fair to say that, on the present application, the respondents, other than Honeywell, have not been

represented.

It was also obvious, in November 1981 , that

significant complaints were being made against Honeywell

itself. This was appreciated by Honeywell; because experts

were retained by Honeywell at that time. It appears from the

evidence that has been given in this application that at least
three independent experts have been consulted by Honeywell in
regard to the case. Apparently these experts thought that it
might be helpful in dealing with the allegations to develop

and operate a network load simulator. Without going into the

detail of the matter, this involves developing a simulated

system composed of some of the key components of the videotex

system and operating that system in order to determine whether	I .
I .
7' ,
the problems alleged do exist and, if	so, their cause.

It is clear to me that the development and operation

of a network load simulator would be of assistance in

answering some of the questions which arise in the proceeding.

But it is equally clear -- and indeed conceded by Mr

i

MacGregor, who has given evidence on behalf of Honeywell --

that the utility of the simulator will depend upon it being

either conceded or found that the specification and the

program used in developing the simulator do fairly reflect the

system which was installed in 1985. As to that matter, one

can only say that it ought to be possible for the

I

j '

5.

I

_.

specification, and subsequently the program, to be submitted

for examination by one or more experts retained by Ancol.

But, in respect of at least some items,	Mr Macgregor has
conceded that competent people might differ	as to the
appropriateness of what is proposed.	I can only say that the

evidence does not satisfy me that it would be possible to

avoid the undesirable situation at a trial of having a

I.

separate question arise as to whether the simulation is in

I .

fact a fair representation of the original system. Were such

an issue to arise, it could have the effect of distracting

attention from the principal question -- the adequacy of the

original system to comply with the requirements accepted on

behalf of the respondents -- and, of course, this diversion

could considerably extend the length of the trial and its
cost. If I were of the view that a simulation could be
undertaken which would very likely answer all the problems of
the trial, there would be considerable temptation in
postponing the trial for sufficient time to allow the
simulation to occur. However, it is clear that this is not

so. I think that it may turn out that the simulation provides little ultimate assistance; and even perhaps a disadvantage

in the ultimate resolution of the issues between the parties.

Mr Jacobson, on behalf of Honeywell, has put to me

that there is a principle that a party is entitled to an

adjournment if a failure to grant the adjournment would

prejudice it in its presentation of its case. He has also put

that the applicant, in order to resist the adjournment, must

show that the evidence desired to be obtained has no

I

I	'.
I '
i
I	6 . -

L

I '	I	conceivable relevance to the proceedings. I think, with
I	respect to him, that both these propositions are put too

1      :

, .

highly. I do not think that the applicant must demonstrate

that the evidence has no conceivable relevance. Obviously the

I .

relevance of the material is	a most significant matter. But	:
I .
I '

it may often be the case that evidence which has conceivable,

or indeed even obvious, relevance can only be obtained	at a
cost which visits undue prejudice upon another party.	In the
end, the Court has to weigh the advantage	of obtaining the

evidence -- in the interests of justice and, ultimately, of
the parties -- against any disadvantage in postponing the

trial in order to obtain that evidence.

In regard to prejudice, I think that the history to

which I have referred is significant. This is not a case of

the supply of equipment to a purchaser, who takes it, uses it

and abandons it without the supplier having the opportunity to

re-inspect the equipment. In such a case, one could well ! .

understand the supplier feeling that it had been prejudiced by	l
i
I .
not having access to the equipment in order that skilled	r - -
people could inspect it and ultimately give evidence on its
t ; '

behalf. This	is a case, by contrast, of the supply of	. -
. I

equipment in relation to which contemporaneous complaints were

! r

made and as to which there was detailed investigation by
Honeywell over a period of some months. To the extent that

any complaint is made at the trial, which was not voiced

during that period of almost 12 months, the applicant may

suffer some disadvantage; the comment being made that, if no
complaint was made during that period, perhaps the present

l.

-

complaint is unjustified. But this is not an unusual

situation. What is unusual 1s the extent of the involvement

by the supplier in the investigation of contemporaneous	I
complaints in regard to the equipment.	No suggestion has been
made that the people who investigated the problems	on behalf
of Honeywell are unavailable to give evidence	at the trial.
One would have thought-that their evidence would	be extremely

material and that, if they are able to set out factual matters
consistent with Honeywell's freedom from liability, this will , . ..

be most significant evidence for Honeywell's defence. No

doubt some, at least, of those people themselves have expert

qualifications, so that they will be qualified to go further

than to report facts and they will be able to express opinions

regarding matters within their area of expertise.	To the
extent that Honeywell wishes	to buttress any such opinions by

having experts give opinions upon the basis of assumed facts

-- hopefully, from Honeywell's point of view, consistent with

the evidence as to the facts	-- then this is a course which	is
open to it.

In short, I have great difficulty in seeing that the

word "prejudice" can properly be used in relation to the
denial to Honeywell of an opportunity	, not of locating
existing evidence, but of creating new evidence.	I.'
I also have to take into account the consequences of delaying the matter from the applicant's point of view.	When

!.

the application for security for costs was dealt with last	I
November, the applicant's parlous financial position was

I 8.

T

l * r

exposed for all to see. The applicant blames its financial

condition upon the problem of the videotex system and

therefore, of course, upon the respondents. I make no comment

as to whether or not that accusation is justified. That is a
matter to be investigated at the trial. But it was clear at
that time that the delay in the resolution of the claim was

proving extremely costly. The applicant is in receivership.

At that time the receiver's expenses were running at the rate

of $17,500 per week; this large amount being occasioned by

the fact that the receiver was also acting as a manager and

was carrying on the applicant's business. Interest was running, I was told, at the time at $22,800 per week. In

other words, the total cost was about $40,000 per week.

Counsel for the applicant has, on numerous occasions since
that time, emphasised to the Court the extreme urgency of the

matter from his client's point of view.

In November, I gave directions designed to ensure a

relatively early trial. I will not set out all the details of
the directions. It is sufficient to note that, without any

objection from the respondents, I directed that the affidavits

. I'

to be relied upon by the respondents be filed not later than 4 - 1 '

March 1988. At that time, I foreshadowed a trial in mid 1988. I '

As I have said, experts were retained by Honeywell in November

1987, but there was no mention of any possible simulation

:

until 9 March 1988; this being the day when the original	!
hearing date -- 4 July 1988 -- was fixed. When this matter of simulation was mentioned on 9 March, it was mentioned only as

a possibility, because the feasibility of running a simulation i

was still under investigation. I intimated that, if there	was
to be any application to postpone the hearing date from	4

July, an application ought to be made promptly. Subsequently,

I

as a result of a discussion in chambers, I vacated the

commencement date of	4 July and postponed the trial until	1
August 1988.	This was done at the request of counsel	fo r

Honeywell, and in order to give	more time for that company’s
expert evidence to be filed.

Notwithstanding my comment on 9 March, it was not

until early may that a decision was made by Honeywell to seek
a further adjournment of the trial and, if that application

was successful, to embark upon the simulation. No program for

the simulation was available until the end of May; the

feasibility study prepared by the Preston Group Pty Limited

I	being dated 30 May 1988.	That document sets out a timetable.
!	The timetable shows the final step	-- namely the confirmation

of system performance under critical load conditions -- as

i

being targeted for 28 November 1988. However, Mr MacGregor

has indicated, in the course of his evidence, that this target

date is unrealistic. He has said that it will take at least

until the end of January 1989 to reach this stage and that

that date will slip further if there is any delay in

commencement of the work	; as indeed there already has been.
Mr MacGregor said that it could be April	1989 before a report

was available. Assuming that this hope was met, it would

still be necessary for affidavits to be filed, so as to make

the report available to the Court and the other parties, and

there would have to be an opportunity for the other parties to

i

10.

-.. I .!

I '	:
; r

I	meet	this new evidence.	Even	if	all	went	as	well	as	could	be
I

hoped, it seems to me obvious that a trial could not start before the beginning of August 1989. In other words, there would have been a full year's delay. But even this may be a fairly optimistic view of the position. The fact is that, in

a period of only a few weeks, the likely report date has already slipped back about four months. Bearing in mind the

number of matters which Mr MacGregor has indicated have	yet to
be resolved and one's everyday experience that estimates of	. .
completion dates -- whether in relation to the hearing	of

cases in courts, the construction of buildings, or anything

else -- generally prove over-optimistic, I have no real

confidence that, if the simulation went ahead, it would be

possible to start a trial even by August 1989.

The consequences of such a delay, from the

applicant's point of view, are significant. The receiver has

L .

recently sold the applicant's business. A document setting

out an estimate of assets and liabilities as at 14 June 1988,

the accuracy of which is accepted by Honeywell at least for

the present purposes, shows that, after receipt of the

proceeds of sale, there will be a deficiency owing to the

c .

secured creditor, the National Australia Bank Limited, of	a	i
I . ,

little over $6 million. In addltion, there are unsecured

creditors whose claims come to a little more than $9 million.
These debts will continue unless and until they are able to be
reduced, or paid out, from the proceeds of this action. The

interest cost which is accruing on the amount still owing to

the bank is of the order of $1.2 million per year; that is to

i 11. -

say about $100,000 per month. I say nothing about any

interest liability to unsecured creditors because I have no

information on that matter. Perhaps there	is no interest
running; but perhaps there is interest,	at least in respect

. i

of some of those creditors.

I have no information as to the financial standing of

any of the respondents. Honeywell, the first respondent, 1s apparently a subsidiary of a well-known multi-national company. It may be that Honeywell has the resources to meet

any judgment given against it; but this is mere speculation.

It seems unlikely that the other respondents have such

resources. I say that because of their limited participation in the proceeding, apparently for financial reasons. It may

be, as Mr Jacobson says, that those respondents would not, in
any event, be in a position to meet even a verdict taking no
account of interest and that, in that sense, the applicant

would be no worse off in 12 months' time. But I simply do not

know whether this is the position or not. What I do know is

that the consequence of an adjournment of the trial is to add

over a million dollars to the applicant's claim, without their

being any information before the Court as to whether any or

all of the respondents would have the ability to pay that

extra amount.

In short, the position is that there is considerable

prejudice to the applicant in further delaying the trial of

the matter. I am not satisfied that the respondents will be placed in an unfair position as a result of a refusal of the

1              .

i  

I 12.

L

adjournment and I am not satisfied that the proposed

experiment will signiflcantly assist the Court in the resolution of the issues, or that it even will shorten the eventual hearing. This being so, I think that the discretion

of the Court must be exerclsed in favour of refusing the

application for a vacation of the hearing date and of	I .
maintaining the present arrangement that the trial will start
on 1 August next.
I certify this and the eleven	(11)
preceding pages to be a true copy	of
the Reasons for Judgment of his Honour Justice Wilcox.

&

&

-

/

:

e

t

a

i

c

o

s

s

A

Date:  5 July

Counsel for the Applicant:	Mr D E Grieve QC with Mr P M Wood
Solicitors for the Applicant:	J C Behm & Associates
Counsel for the First Respondent:	Mr P M Jacobson

Solicitors for the First Respondent: Allen Allen & Hemsley

i

Counsel for the Second and I '

Third Respondents:	No appearance	_,
1 . '

Solicitors for the Second and
Third Respondents:	Gregory J Halpin
Counsel for the Fourth Respondent:	NO appearance
Solicitors for the Fourth Respondent:	Wilmot & Klimt
Date(s) of hearing:	23 June 1988

i '