Baan Australia Pty Ltd v George Weston Foods Ltd
[2000] NSWSC 742
•28 July 2000
CITATION: Baan Australia Pty Ltd v George Weston Foods Ltd [2000] NSWSC 742 CURRENT JURISDICTION: Equity Division
Commercial ListFILE NUMBER(S): SC 50217/97 HEARING DATE(S): 21 July 2000 JUDGMENT DATE: 28 July 2000 PARTIES :
Baan Australia Pty Limited (Plaintiff/Cross Defendant)
George Weston Foods Limited (Defendant/Cross Claimant)JUDGMENT OF: Bergin J
COUNSEL : AJL Bannon SC/AJ Payne (Plaintiff Cross Defendant)
S Finch SC/D Studdy (Defendant/Cross Claimant)SOLICITORS: Clayton Utz (Plaintiff/Cross Defendant)
Gilbert & Tobin (Defendant/Cross Claimant)CATCHWORDS: Application for indemnity costs in circumstances of an abandonment of part of the case during the hearing. CASES CITED: Ragata Developments Pty Ltd v Westpac Banking Corporation & Anor (Davies J, FCA, 5 February 1993, unreported)
Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225
Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 CLR 425
NRMA Insurance Ltd v FR Coyle Pty Ltd & Ors (Cole J, NSWSC, 13 May 1994, unreported)DECISION: Application refused.
THE SUPREME COURT
OF NEW SOUTH WALES
COMMERICIAL DIVISIONBERGIN J
28 JULY 2000
50217/97 - BAAN AUSTRALIA PTY LIMITED v GEORGE WESTON FOODS LIMITED
JUDGMENT
1 In this matter I delivered judgment on 8 June, 2000 in respect of a separate determination of questions pursuant to Part 31 rule 2 of the Supreme Court Rules. On 9 June, 2000 orders were made including an order that the cross claimant, George Weston Foods Limited (GWF) pay each of the cross defendant’s, Baan Australia Pty Limited and Baan Company NV (Baan) costs of the separate hearing.
2 The question as to whether the costs ought to be paid on an indemnity basis was reserved.
3 On 21 July, 2000, pursuant to a Notice of Motion, Baan sought an order that GWF pay on an indemnity basis Baan’s costs “of and occasioned by the representations case, being paragraphs 9-14 inclusive, 19, 20 - 23 inclusive and 60 - 185 inclusive of the contentions contained in the Amended Cross Claim” (Order 3).
4 As recorded in my judgment of 8 June, 2000, Rolfe J made an order on 20 November 1998 that the separate questions be determined as preliminary legal questions. The separate questions were in two Lists - List “A” and List “B”. List “A” contained 24 separate questions and List “B” contained 22 separate questions.
5 In List “A” questions 1, 2 and 9 - 24 inclusive related to the representations case. In List “B” questions 1, 2 and 17 - 22 inclusive related to the representations case. Question 24 in List “A” was as follows:
24. If any of the representations referred to in this list of questions was made, in relation to each such representation, did GWF rely on the representation?
6 During the hearing of the separate questions Mr Guest, a former employee by GWF, gave evidence. He had sworn two affidavits, one of 8 July, 1999 and the other of 12 January, 2000. He was cross examined and gave evidence that:
· he had authority to negotiate and enter into the contract on behalf of GWF;
· in negotiating the contract, with the assistance of GWF’s lawyers, he attempted to include protections for GWF which he regarded as important;
· he was satisfied both by his own assessment and with the assistance of the advice of GWF’s lawyers, that GWF was protected in respect of all matters which he regarded as of critical importance;
· the contract was entered into in reliance on his assessment, with the assistance of advice of GWF’s lawyers, that the contract adequately dealt with and covered all matters which he regarded as important for the purposes of GWF in deciding to proceed with Baan;
· any representations and promises that he thought were important had been dealt with in Schedule D to the SLSA; and
· there was no matter outside of a contract which he was relying upon when he entered into the contract on behalf of GWF.
(Tr. 86)7 This evidence was given on the third day of the hearing. On the morning of the fourth day of the hearing GWF agreed that the answer to Question 24 should be “no”. GWF also agreed to the revocation of the questions in relation to the representations case and an order dismissing the proceedings insofar as they related to a case based on representations.
8 Baan seeks indemnity costs on the basis that the evidence in Mr Guest’s affidavits, before he was cross examined, did not assert a reliance case. It is submitted that the contemporaneous documents were inconsistent with a reliance case and that the evidence after Mr Guest’s cross examination confirmed the absence of a tenable reliance case.
9 It is further submitted by Baan that there is no material before the Court to indicate that there was ever a tenable basis for alleging a case based on reliance on non-contractual representations. Indeed it is submitted that such evidence as is before the Court suggests otherwise.
10 One of the matters focused upon by Baan in this application is that GWF has not availed itself of the opportunity to explain how it came to make the allegation of reliance in the circumstances described above. Baan submitted that GWF persisted in propounding what should on proper consideration have been understood to be a hopeless case. It is submitted that it continued to make groundless allegations which should never have been made: Ragata Developments Pty Ltd v Westpac Banking Corporation & Anor (Davies J, FCA, 5 February 1993, unreported); Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225.
11 Mr Bannon SC referred the Court to the following portion of Justice Rolfe J’s judgment in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 435 in which His Honour quoted a passage from Cole J’s unreported judgment in NRMA Insurance Ltd v FR Coyle Pty Ltd & Ors (Cole J, NSWSC, 13 May 1994, unreported) as follows:12 In dealing with the matter before him Rolfe J went on to say:
It is, if I may say so with respect, appropriate to quote a passage from his Honour’s reasons (at 2), which it would be well for all commercial litigants and their legal advisers to bear in mind:
…in modern society, while a person or corporation engaged in business may, as an incident of business, run the risk of being subjected to litigation, society requires that careful consideration be given by those intending to litigate before the claim is brought. This is particularly necessary with the current high legal costs. A person in business is entitled to assume that he will not be subjected to untenable litigation causing disruption to his business and cost. If litigation is brought against him, and it is held to be untenable, he should not in consequence suffer in a monetary sense. Great care must be taken by prospective plaintiffs and their legal advisers before proceedings are commenced.
I entirely agree, with respect, with what fell from His Honour. However it must be borne in mind that that was in the context of his deciding whether a party, which had struck out the originating process against it as failing to disclose a cause of action, was entitled to indemnity costs.
It seems to me that conceptually MCE’s case was one which was open and, on the basis of the untested evidence of the “reliance” witnesses, which receive corroboration from independent witnesses, it was one which, if the “reliance” witnesses had adhered in cross examination to their evidence in chief and ultimately been believed, may have provided relief to MCE by way of damages arising from a breach of s 52. There can be little doubt that the case thus formulated had difficulties. But most cases do and it is not every case, which has difficulties, which ultimately fails. While I am not to be taken as acquitting litigants and their advisers of investigating as thoroughly as possible a case brought, I am not to be taken as suggesting that cases in which there are problems should not be brought and, as I have just said, many such cases succeed either wholly or substantially or, at least, lead to a reasonable settlement for the benefit of those bringing them. It would be quite wrong, in my respectful opinion, to say that a case should never be brought unless the parties and their legal advisers were satisfied that it must succeed…On the other hand I do not agree that an award of indemnity costs is to be reserved for a case where it is apparent that there was no chance of success. The more difficult question is what should happen in the case which “collapses” during the hearing. Obviously it is necessary to review it as it becomes weaker and any bargaining position of the party propounding it becomes similarly weaker. But, in many instances by that stage the prospect of a reasonable settlement had evaporated. Of course what is “reasonable” at that time must be considered in the light of the circumstances as they exist.
My present view is that in the absence of any wrongful or vexatious conduct on the part of MCE of the type which will typically attract indemnity costs by reason of the nature of the proceedings brought or the way in which they are conducted, and I am not satisfied that there was any such conduct in this case, indemnity costs should not, without more, be awarded. Any such general statement must be tempered by the requirement to consider, in the exercise of the judicial discretion, the facts and circumstances of each case.
13 In this case Mr Bannon SC submitted that it is not merely a matter in which the case “collapsed” during the hearing. He submitted the case was untenable before the hearing commenced.
14 Mr Bannon SC submitted that Mr Guest’s affidavit evidence did not make out a case on reliance. Accordingly the cross examination of him was not inconsistent with his evidence in the affidavits. He submitted that the questions he asked of Mr Guest should have been asked by GWF’s lawyers prior to the commencement of the proceedings or alternatively certainly prior to requiring Baan to meet the representations case on the separate hearing.
15 It is submitted that the failure by GWF to call any evidence to explain why such a course was not taken, or alternatively was taken with an outcome consistent with an entitlement to maintain the representations case, results in an inference adverse to GWF being drawn.
16 GWF submitted that this is not a case in which it is appropriate to award indemnity costs. It submitted that Mr Guest’s affidavit evidence provided a proper basis to plead the representations case. It is therefore necessary to review some of the evidence in Mr Guest’s affidavits. In doing so it is not appropriate to discriminate between those portions of the affidavits that were read at final hearing of the separate questions and those that were not. The analysis at this stage is to decide whether there was evidence upon which GWF could properly plead its representations case.
17 I have been provided with a Schedule containing extracts of Mr Guest’s affidavit evidence upon which GWF relies in this application. Without going through each of them, a good example is the evidence relating to what has been described in the proceedings as the “rollout representation” which was as follows:18 Some of the evidence available to GWF, although not read in the separate hearing, is contained in paragraphs 153 and 154 of Mr Guest’s affidavit of 8 July 1999 which was as follows:
Baan represented to GWF in trade or commerce, that the Baan Software when used in conjunction with equipment selected by reference to the Baan IV Sizing Guide was capable of or likely to be capable of being installed and operated by GWF within the time frame contemplated by the RFP, and in any event before 1 January 2000.
19 Further evidence which was read in the separate hearing included the following:
153 Baan’s representations as to the speed and ease with which Baan’s Baan IV Software could be implemented in GWF was very important to GWF.
154 GWF did not have much room within which to move because it was not Y2K compliant. Accordingly, Baan’s representation that due to its unique implementation procedure, it would be able to implement its ERP System company-wide within 18 months, was critical to GWF’s decision to enter into a contract with Baan.
155 I recall having many conversations with MacQuoid about the importance of the 18 month implementation period..
I said: Don, this 18 month implementation deadline is critical for GWF.
I said: …that time frame is critical to GWF if we can’t meet it then the project will not be perceived as a success within GWF.
20 The point raised by Baan is that although conversations were deposed to in the affidavit and although statements were made that assurances were given and GWF regarded certain matters as important, there was no basis for the representations case and in particular the reliance placed upon the representations.
21 I am of the view that the evidence in paragraph 154 was evidence from which GWF and its legal representatives could have understood that Mr Guest did in fact rely upon a representation made, outside the contract, that the system could be implemented company-wide within 18 months.
22 I do not know whether GWF’s legal representatives ever asked Mr Guest the questions Mr Bannon SC asked in cross examination. The submission that I should draw an inference adverse to GWF on this topic because it did not avail itself of the opportunity to give evidence about it has rather complex consequences. The possible alternatives that present include:
· that he was not asked;· that he was asked and gave different answers to those given in cross examination;
· that he was asked and gave answers similar to those given in cross examination.
23 If I assume he was not asked the questions I am not in a position to find that such failure triggers an award of indemnity costs. He may have provided information that, to the legal representatives, appeared to obviate the need to ask those specific questions, for example, the information contained in paragraph 154. If I am to assume that he was asked the questions and gave different answers then of course no basis for an indemnity costs order would exist.
24 The last alternative assumption is really the only one in this case that would ground a proper basis upon which to award indemnity costs. This calls for a finding that GWF knew that Mr Guest did not rely on any of the representations made by Baan and still persisted in propounding its representation case. There is no basis for such a finding and I could not draw such an inference in this case.
25 Mr Bannon SC did not submit that such a particular inference was available although on analysis of his general submission it is an alternative that arises. He was content to rely on the more benign alternative that the questions were not asked. That reliance fails to establish a proper basis for an award of indemnity costs.
26 There is no doubt when cross examined the step that GWF took in abandoning its representations case was an understandable step to take in the proceedings.
27 I am not persuaded by the course the hearing took that Mr Guest’s evidence was a mere confirmation of what was already available to GWF. I am of the view that this is a good example of a case that “collapsed” during the course of the hearing.
28 Mr Finch SC for GWF referred me to the following portion of Davies J’s judgment in Ragata Developments Pty Ltd v Westpac Banking Corporation & Anor (FCA, 5 February 1993, unreported) at p 4 of 4:
I cannot draw from the sliming down of the case as it proceeded, any inference that there were allegations which ought never to have been made, or that the case was unduly prolonged by groundless contentions. It seems to me that the very opposite occurred. It is the task of lawyers to define for their clients the matters which ought to be put to a court and matters which ought not to be put. It is duty and function of lawyers to advise their clients on these aspects. Such advice must be given as the case progresses, as more becomes known of the facts and as the lawyers come to understand the ensuing ramifications. It is not a task that can be undertaken once and for all before the proceedings are instituted, before discovery of documents have been had, or before the affidavits of the opposing parties have been received and studied…I cannot infer that Ragata was entirely unjustified in bringing the present case, or that the issues, as originally raised, were issues which Ragata was never justified in litigating.
29 Mr Guest’s concession was made during a skilful and disarming cross examination by Mr Bannon SC. Once made GWF acted extremely promptly in “slimming down” the issues for the Court to decide. I am not satisfied that there are any special circumstances in this case, as referred to in the relevant authorities, upon which a departure from the usual order could be justified.
30 I refuse to make Order 3 in the Notice of Motion.
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