BHP Information Technology Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd
[1998] VSC 113
•20 October 1998
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION Do not Send for Reporting Not Restricted
No. 6792 of 1996
| BHP INFORMATION TECHNOLOGY PTY LTD (ACN 006 476 213) AND THE BROKEN HILL PROPRIETARY COMPANY LIMITED (ACN 004 028 077) | Plaintiffs/Respondents |
| v | |
| DIGITAL EQUIPMENT CORPORATION (AUSTRALIA) PTY LTD (ACN 000 446 800) AND DIGITAL EQUIPMENT CORPORATION | Defendants/Applicants |
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JUDGE: | Ashley J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28, 29 September 1998 | |
DATE OF JUDGMENT: | 20 October 1998 | |
MEDIA NEUTRAL CITATION: | [1998] VSC 113 | |
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Pleading - application to strike out statement of claim under R.23.02.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs/Respondents | MR R. MACAW, Q.C. with MR C.M. MAXWELL | Arthur Robinson & Hedderwicks |
| For the Defendants/Applicants | MR D. COLLINS | Herbert Geer & Rundle as agents for Gilbert & Tobin |
HIS HONOUR:
The Application
Before me is an application by the defendants to strike out the plaintiffs' further amended statement of claim (the statement of claim) filed on 25 March 1998. The application, made by summons filed on 23 June 1998, is founded on R23.02 of Chapter 1 of the Rules. It is the second such application made in this proceeding. The first was the subject of orders made by Master Wheeler on 10 March 1998. It was pursuant to those orders that the statement of claim was brought into its present form.
The Master preserved, by his orders, the right of the defendants to pursue objections to the whole of any further amended statement of claim. His concern was, it seems, that if the defendants sought to object to such a statement of claim, then insofar as such objections sought to agitate issues which were before him but which he did not squarely dispose of, an argument that such objections were an impermissible attempt to appeal his orders out of time should not succeed. Such a contention was put for the plaintiffs before me. But it was not much argued.
It appears to me to accord with the intent of the Master's orders that I should consider the merits of the present application. I indicated that provisional view to counsel at an early stage of the hearing. In those circumstances, I heard full argument. My provisional view remains unchanged.
The strike out order is sought on the footing that the statement of claim in its present form may prejudice, embarrass or delay the fair trial of the proceeding: R23.02(c). Mr Collins of counsel pursued the defendants' attack upon the statement of claim with his customary skill; and in considerable detail. The gravamen of the complaint was that the statement of claim does not disclose to the defendants the case that they are called upon to meet.
It was common ground that in considering the defendants' complaint the following passage from the judgment of Saville, LJ in British Airways Pension Trustees Ltd v. Sir Robert McAlpine & Sons Ltd (1995) 11 Const. LJ 365 is apposite:
"The basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it. To my mind it seems that in recent years there has been a tendency to forget this basic purpose and to seek particularisation even when it is not really required. This is not only costly in itself, but is calculated to lead to delay and to interlocutory battles in which the parties and the court pore over endless pages of pleadings to see whether or not some particular point has or has not been raised or answered, when in truth each party knows perfectly well what case is made by the other and is able properly to prepare to deal with it. Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing. Each case must of course be looked at in the light of its own subject matter and circumstances."
The statement of claim - an overview
The statement of claim is no less than 125 pages in length. It includes a glossary and note, 131 numbered paragraphs, and five appendices. I consider it by no means unfair to remark that it pleads the plaintiffs' case in every way that the ingenuity of counsel could conceive. Whether it is really necessary to so plead what is essentially a simple story may perhaps be doubted. But it is doubtless the modern way to plead every variation on a theme that is imaginable. In any event, the story which the statement of claim unfolds is broadly this: The Broken Hill Proprietary Company Limited (BHP), the second plaintiff, operates a steel rolling mill at Whyalla, in South Australia. It wished to implement a precise control computer system for the mill. In about August 1993 it engaged the first plaintiff, BHP Information Technology Pty Ltd (BHPIT) to assist it in "identifying, purchasing and implementing" the system. The project was given an acronym - RMOCS.
Digital Equipment Corporation (Australia) Pty Ltd (DEC) is a "supplier of computer systems, hardware, software and services". In August 1993 BHPIT invited it to register its interest "in providing a costed technical solution for RMOCS". The invitation specified the "functionality" required for the system by BHP. Additional requirements were detailed orally that month.
On 24 August 1993 DEC submitted a proposed solution. It included hardware and software. According to paragraph 11 of the statement of claim it was "based on two VAX 4000 model 100 computers ... and other specified computer hardware and software, development and modification of software, and services".
In the period 25 August to 18 November 1993 BHPIT sought and DEC supplied additional information. In November a revised solution was proposed. It included an option to upgrade to two Alpha DEC 4000 model 610 computers.
By agreement made on 3 December 1993 BHP agreed to purchase hardware and software referred to in DEC's revised solution. These products were supplied to BHP in December 1993, January 1994, October and November 1994.
Supply of products apart, DEC was engaged by BHP in January 1994 to advise it in relation to the use of those products for the purpose of meeting the requirements of the system. DEC attended the mill and provided reports in February, March and April 1994. In about June 1994 it was engaged by BHP to undertake a further consultancy. In the course of that consultancy a workshop was conducted at which the plaintiffs specified further requirements for the system, and at which DEC said that the products purchased pursuant to the December 1993 agreement were easily capable of meeting those further requirements.
From September 1994 BHPIT developed the system for BHP, using the products supplied by DEC. The statement of claim describes the development this way:
"The development comprised developing software, configuring and implementing software supplied by DEC Australia, and integrating software with hardware (including hardware supplied by DEC Australia) and integrating that hardware and software with other computer systems at BHP Co’s Whyalla Rolling Mill."
Next, according to the statement of claim, in December 1994 or January 1995 BHP purchased from DEC the right to use certain computer software in the system; on about 1 March 1995 it exercised an option which it had to upgrade to Alpha computers and software; and on about 31 March it agreed to purchase additional equipment from DEC.
In April and May 1995, according to paragraph 34 of the statement of claim, DEC undertook a further consultancy - to install and configure on the Alpha computers software purchased in March of that year; and to place those computers, properly configured with that software, in a state ready for use.
In the event, according to the plaintiffs, there was delay in introduction of the system; and when it was introduced it did not perform as it was required to do. This delay, by reason of unsatisfactory performance, is attributed by the plaintiffs to the products supplied by DEC.
The causes of action
What I have described in the preceding overview of the statement of claim makes no mention of Digital Equipment Corporation (DECUSA) the American parent company of DEC. Nor does it describe the causes of action which are pleaded. In order to understand the submissions made for the defendants it is necessary to set out the ways in which the plaintiffs put their case. So it is to that matter which I now turn.
Breach of ss.52 and 51A Trade Practices Act 1974 (Cth)
The plaintiffs plead that:
· In August 1993 DEC made various representations by providing the proposal and the documentation which accompanied it (para 12).
· DEC made other representations - on four occasions in September 1993 (paras 13A, 14, 14A and 14B); in November 1993 (paras 15, 15A, 15B and 15C); in July 1994 (para 25); and in January 1995 (para. 32).
· The July representation was confirmed in August 1994 (para. 26).
· The various representations were not corrected (paras. 40 and 41).
· The representations and confirmation were false (paras 35, 36, 36A, 37, 38, 39 and 42).
· DEC's conduct in making the representations, confirming the July representation and not correcting the representations which had been made, was conduct in breach of s.52 of the Trade Practices Act 1974 (Cth); see also s.51A (paras. 43 and 44).
· BHP relied upon specified representations in undertaking certain action (paras 45, 46 and 47). By conduct of DEC it has suffered and is likely to suffer loss and damage (para 49).
· BHPIT relied upon specified representations in undertaking certain action (paras 45A, 46A, 47A). By conduct of DEC it has suffered and is likely to suffer loss and damage (para. 48).
Negligent misstatement
It is alleged that DEC fell under a duty of care to each of the plaintiffs to ensure that its proposed solution, and the representations made in the proposal, were accurate and appropriate (paras 50, 50D and 51); that in submitting the proposed solution and making the representations therein it was negligent; and that the plaintiffs respectively relied upon the proposed solution and representations in undertaking particular action.
Mirror allegations are made in respect of:
· the September 1993 representations (paras 54, 54A, 55, 56, 56A and 57, 59 and 60);
· the failure to correct (paras 58, 58A, 59 and 60);
· the November 1993 representations (paras 61, 62, 63, 63A and 64);
· the July 1994 representations and August 1994 confirmation (paras 65, 65A, 66, 67, 67A, 68 and 69);
· the January 1995 representations (paras 70, 70A, 71, 72, 72A, 73).
By paragraphs 74 and 74A it is alleged that the plaintiffs respectively suffered loss and damage by reason of the breaches of the duties of care which were owed.
Breaches of contract and breaches of duty
The statement of claim pleads, as I have said, that the plaintiffs (or one or other of them) entered into various contracts with DEC. They related to provision of products in some instances; and provision of services (by "consultancies") in two instances.
It might have been thought sufficient to plead that DEC breached those contracts and that such breaches caused the plaintiff loss and damage. Such a claim is raised. Breaches are alleged by paras 75 and 76 (the "Functional Specification Consultancy"); 80 and 81 (the "Installation Consultancy"); 85, 86, 87 (the "product supply agreements" generally); and 87A and 87B (the "VAX agreement"). Allegations of loss and damage are made by paras 79, 84, 88 and 88A.
But the plaintiffs additionally allege that DEC fell under a duty of care which obliged it, inter alia, to render the consultancy services with due care and skill (paras 76A, 76B and 77; and paras 81A, 81B and 82); that it breached those duties (paras 78 and 83); and that thereby the plaintiffs suffered and will suffer loss and damage (paras 79 and 79A; and para 84). Similar allegations are made in connection with the purchase of DEC products (paras 89, 90, 90A, 91, 92, 93 and 94).
DECUSA
I turn to the claim raised by the plaintiffs against DECUSA. First, the American company is pleaded to have breached s.52 (see also ss.51A and 75B(1)) of the Trade Practices Act. That is alleged to be so on the footing that impugned representations originated with the American company; and alternatively on the basis that DECUSA knew that the products were likely to play up, but took no steps to disclose that situation to the plaintiffs (paras 89-112B).
Second, it is pleaded that DECUSA breached a common law duty of care which it owed to the plaintiffs (paras 113-116).
Loss and damage allegedly sustained by the plaintiffs by reason of the breaches of statute and common law duty to which I have just referred are pleaded at paras 118-119.
Third, a separate claim is raised, again reliant upon provision of the Trade Practices Act, in connection with provision by DEC of the proposed solution and the November 1993 quotations. Each of the plaintiffs are alleged to have suffered loss and damage by reason of contravention of the statute by DECUSA (paras 120-131).
The defendants' submissions
A major thrust of the defendants' submissions was this: according to the statement of claim BHP wished to identify, purchase and implement a process control computer system. DEC was invited to register its interest in providing a "costed technical solution" for the system. DEC's proposed solution was an amalgam of products and services. BHP did not take up the proposed solution. Instead, it purchased products from DEC and others. Implementation was for the most part undertaken by BHPIT - DEC having a limited role via specific consultancies. The plaintiffs allege that the system does not work properly. They seek to attribute this to the products purchased from DEC. For the most part they do not identify defects in particular items of equipment. Rather, they point to reported operating defects in the system and seek to attribute those defects to unstated defects in unspecified items of equipment. Part of the defence will be that defective operation of the system is attributable to mistakes made by BHPIT in its development. In the circumstances described the plaintiffs must identify the particular defects (in particular items of equipment supplied by DEC) and identify the loss and damage allegedly resulting from each such defect. Because it does not do so the statement of claim is defective.
Counsel for the defendants grouped the alleged defects in the statement of claim into six categories. Thus:
(1)allegations incorporating the defined term "specified functionality";
(2)allegations incorporating the expression "the functionality described for that product in the proposal and the documentation accompanying the proposal";
(3)allegations of defects in products and falsity of representations made in respect of products by reference to the content of Appendix D of the statement of claim;
(4)allegations incorporating paragraphs of the statement of claim containing defects (1), (2) or (3);
(5)allegations of loss and damage made globally, without identifying the loss and damage attributable to separate claims, or the causal connection between the claims and the loss and damage allegedly resulting from them.
(6)vagueness and unintelligibility of the claims pursued against DECUSA.
The defendants' submissions considered
I shall deal with the alleged deficiencies in the statement of claim in the order to which I have just referred. In doing so I will refer to additional matters urged on behalf of the defendants, and the plaintiffs' responses.
Category 1: The term "specified functionality" appears frequently in the statement of claim. It is given a defined meaning by para 8C. Thus:
"8C. The term "specified functionality" where used hereafter means
the functionality identified in the particulars to paragraph 7
together with the functionality identified in paragraphs 8, 8A
and 8B."
The particulars subjoined to para 7 read as follows:
" Particulars
BHP Co required a dedicated process control computer system (level 3) -
(a) to provide computer support for the activities of process control, process monitoring, scheduling, product identification and tracking, data archiving and data communications, identified under the heading "Scope" in paragraph 1.2 of the ROI;
(b) to meet the objectives identified in paragraph 1.3 of the ROI;
(c) to meet the general system design criteria as set out in the following sub‑paragraphs of 3.1 of the ROI: (a) (Ease of Use), (b) (Integration), (d) (Response Time), (g) (Audit Trail/Recovery), (i) (Back up and Recovery), (j) (Redundancy), (k) (Security), (l) (Communications) and (m) (Standards), and in Appendix 1 of the ROI;
(d) to meet the detailed functional description as set out in paragraphs 4.1 (Process Monitoring), 4.2 (Process Control) and 4.3 (Data Archiving and Communications) of the ROI; and
(e) to meet the system sizing requirements set out in Appendix C to the ROI."
References to "the ROI" are references to the invitation given to DEC to register its interest in providing a solution to the system objective sought by BHP.
Paras 8A and 8B read as follows:
"8A.Prior to 25 August 1993, BHPIT informed DEC Australia that a further requirement for RMOCS (in addition to those specified in or implied by the ROI) was that high speed communication of analogue inputs should be at the rate of 10 Kilohertz per channel.
Particulars
The communication was oral and was constituted by a telephone conversation between Cowper and O’Connor, the substance of which was as alleged.
8B.Prior to 18 August 1993, BHPIT informed DEC Australia that a requirement for RMOCS was that the Mill should be capable of continuing to operate, without any reduction in production, in the event of a failure of any processor comprised in RMOCS.
Particulars
The communication was oral and was constituted by a conversation between Cowper and O’Connor or Hampton, the substance of which was as alleged.
Mr Collins submitted that the pleading defines "specified functionality" to be "the functionality described in the ROI, which the court and the defendants are required to ascertain for themselves, as the plaintiffs fail to allege with brevity and clarity in a summary form what that is."
I do not consider the pleading is defective for the reason thus outlined. First, that there can be no complaint about definition of specified functionality of the proposed system by reference to the language used in the ROI itself. The fact that necessary functionality was there specified at length does not appear to me to render the impugned term incapable of meaning. Particularly that is so when the document dealt with a technical problem in technical language and was addressed to a recipient which by its response repeatedly proclaimed its expertise in the field, and its understanding of what had been specified. Indeed, in its response it used the term "specified functionality". That the situation was as I have described it emerges from consideration of the ROI and the proposed solution, to each of which I was referred in argument (undoubtedly I was authorised to consider these documents in connection with the present application). It seems to me, contrary to the thrust of the defendants' submissions, that to paraphrase and condense those parts of the ROI upon which the plaintiffs rely might well have produced a real mischief.
Second, Mr Collins took as an exemplar of the problems said to be created by references to "specified functionality" paragraphs 12(a) and 35(a) of the statement of claim. Paragraph 12(a) alleges a representation that the DEC solution would provide the specified functionality, with more than 50% spare capacity. Paragraph 35(a) alleges that the DEC solution was incapable of achieving that outcome. Four particulars are advanced. Two relate to alleged want of capacity of computers proposed for use by DEC, and a third to the likely consequence thereof - random malfunctions in mill operations. The fourth particular refers to operating problems actually experienced.
As I understand it, the defendants contended that if the only allegation of falsity was that which emerged from paragraph 35(a)(i) and (ii) then the representations relied upon should have been confined to representations about the capacity of the computers. This was a recurrent criticism of the statement of claim, that is, that the representations were wider than the allegation of falsity made necessary. The defendants' further contention was that inability of the DEC solution to provide specified functionality, and to do so with more than 50% spare capacity, could not be established by the occurrence of operating defects in the system as it was actually implemented by BHPIT. Moreover, reliance upon operating defects to prove the inability of the DEC solution to provide specified functionality did not permit the defendants to know which of the items of equipment provided by it were alleged to be defective, or in what way they were defective.
I consider that paragraphs 12(a) and 35(a) are not objectionable. Paragraph 12(a) pleads the representation made. It does so by reference to language adopted by the parties. The representation relied upon is not to be confused with the material particularised by the plaintiffs. Whether that material makes good the representation is a matter for trial.
Next, the complaint made by paragraph 35(a) appears to be this: It was inherent in DEC's proposed solution that recommended products could be integrated so as to achieve the necessary outcome. But, however those products were configured, the necessary outcome was unachievable. In part that was so because the recommended computers were inadequate. In part it was disclosed by the fact that the products, when incorporated into a system whose requirements were understood by DEC, did not achieve specified functionality - despite (as appears from Appendix D) defects in operation of the system being reported to and being considered by DEC.
In my opinion it is permissible to attempt to prove the inability of products to achieve a given outcome in a specified environment by proof that they did not achieve that outcome in such an environment in fact. In evidence, other explanations may emerge. For example, the specified and actual environments may be shown to differ. Whether there is some other explanation is a matter for trial. It is not to be resolved against the plaintiff on the pleadings.
Moreover, where the substance of a complaint is, to take an analogy, that it was falsely represented that an engine would start, I cannot see why the representee must plead that the engine would not start because the carburettor was dirty, or the battery was flat, or the electrical system failed. It seems enough to say: It was represented that the engine would start. It did not start. Some evidence that it would not start is that it did not start.
Specified functionality was to be an overall consequence of provision of equipment and its integration in a system. No doubt functionality had certain elements. They are spelt out in the ROI. It is true to say that, in the statement of claim, specified functionality is given a defined meaning embracing the entirety of the required consequences. But it seems to me to be wrong to say that particular paragraphs which use the term do not address quite specific aspects of functionality; or, in other cases, match broad representations with the breadth of specified functionality. So, it may be said, paragraph 12(a) is principally concerned with the capacity of the system, whereas paragraph 12(b) is directed to the ability of certain equipment to operate in a particular way so as to provide specified functionality. On the other hand, paragraph 12(f) addresses a different issue again - the asserted ability of alternative equipment to achieve, when set up in the system, the overall required result.
Mr Collins contended that an attempt to prove want of functionality by reliance upon operating defects did not permit DEC to know what defects were allegedly present in particular products. That contention, I think, misunderstands an important aspect of the plaintiff's case. Suppose a person said to a parts supplier, I wish to buy parts which, when assembled, will provide me with an engine which will power my car. Suppose the supplier represented that certain parts, when assembled, would do that job. Suppose the person bought the parts in reliance on that representation and then built an engine which would not start. The representation which he would contend was false was the representation that, when assembled, the parts supplied would do the required job. It would not be necessary for him to show that some particular part was defective. That, in my opinion, is relevantly the case here. It does not prevent the plaintiffs from proving, if they can, that particular parts were defective.
In connection with the point now under discussion, it may be said that the logical end point of the defendants’ submissions was that a plaintiff would be precluded from bringing a proceeding against a supplier in a case such as the present - where all that could be shown was that a system making use of parts supplied by a person cognisant of its requirements, it being built as the supplier supposed it would be, did not operate. Perhaps particularly in a case where the equipment supplied was of a sophisticated nature, its qualities being likely to be well understood by the supplier, I do not consider that a plaintiff would be so precluded. Moreover, it should be expected, I think, that the description of observed operating defects would be likely to point the expert supplier, if anyone, to the particular equipment source(s) of those defects, insofar as that was necessary.
Third, I have considered each of the references to "specified functionality" in the statement of claim. I will not mention all of them. I note, in passing, that the reference in paragraph 24A could not by any stretch of the imagination be thought objectionable; that the objection to paragraph 37(c) is an objection to incorporation of the term by cross‑reference to paragraph 35 - which in my opinion is not objectionable; and that many of the paragraphs are variations upon a theme which I have already concluded is not objectionable. So, for example, paragraph 38 repeatedly harks back to paragraph 35. Again, paragraph 75(b) simply pleads an implied term of an agreement, and paragraph 76(b) its breach; whilst paragraph 76B(b) pleads a matter allegedly relevant to the imposition of a duty of care upon DEC, and paragraph 77(b) the ambit of the duty of care. The various occasions on which the term is used in paragraph 87A involve a recitation of contractual terms or warranties upon which the plaintiffs rely. They cover old ground. Likewise the breaches alleged by paragraph 87B.
Category 2: The expression "the functionality described for that product in the proposal and in the documentation accompanying the proposal" is not defined in the statement of claim. The expression is used in some 35 sub-paragraphs of the document. There is no doubt what the term "the proposal" means; nor what is comprised in "the documentation accompanying the proposal": see paragraph 9(b) and (c) of the statement of claim.
The defendants' principal complaint, as I understand it, is that the expression leaves it to the defendants to wade through the proposal and documentation in order to derive (hopefully) what the plaintiffs are really alleging was the representation made.
In my opinion that complaint is without foundation. The exemplar taken by Mr Collins in his written submissions, paragraph 12(b)(ii), illustrates the point. I make these observations: First, the expression, whenever used, refers DEC to its own documents, documents addressing an area in which it claims special expertise. Second, paragraph 12(b)(ii) - as is the case with other products in respect of which the expression is used - identifies a particular product the subject of representations in the defendants' documents. Third, in paragraph 12(b)(ii) - as is the case on many other occasions where the expression is used - the functionality claimed by the documents is identified by way of particulars. Mr Collins submitted that the claimed functionality was long-winded. That is a complaint he might have made to his own client. Fourth, Mr Collins submitted that the particulars to paragraph 12(b) also assert that the representations are implicit in the inclusion of "the statements in the proposal and other documentation". That submission addressed particulars of the allegation made by paragraph 12(b)(iii). It asserts that DEC represented that the particular software package would, as part of DEC's proposed solution, be suitable for the system. The particulars, I think, amount to this: that the inclusion of the product in the proposal and accompanying documentation, and the statements made about the qualities of the product, give implicit support to the representation set out in paragraph 12(b)(iii). There seems to me to be nothing complex or unintelligible in that simple proposition.
Mr Collins attacked the use of the expression now under discussion in other respects. He submitted that references to "the other hardware and software products described in the proposal ..." were vague. They did not identify the products or the particular functionality claimed for them by his client; nor the alleged defects by reason of which those products lacked that functionality. He instanced paragraphs 12(e)(ii) and 15(f) (his written submissions referred, in error, to paragraph 15(e)).
It is, I think, incorrect to say that the other products and the functionality claimed for them are not disclosed by the statement of claim. See the particulars subjoined to paragraph 12(e). Paragraph 15(f) sends the reader back to that particularisation.
I have already dealt with the submission that the statement of claim fails to disclose particular defects in particular products. In connection with that issue I add this: The plaintiffs, in pursuing their case, have alleged, in effect, that all the products the subject of representations and supply were - when integrated into the system - defective. They did not achieve in that setting the outcome which it had been represented they could achieve. I doubt, for reasons outlined, that the plaintiffs need prove particular defects in particular products in order to make out their case. But if that is wrong, the task that they have set themselves is clear. The fact that it may be a large task does not mean that it is not apparent. When referring to the expression now under consideration Mr Collins highlighted a representation often alleged - that a product
"... would, as part of the DEC solution, be suitable for RMOCS";
and an allegation often made that such a product
"... as part of the DEC solution ... was not suitable for RMOCS".
(see, for example, paragraphs 12(b)(iii) and 35(b)(iii)).
He submitted that the allegation of "suitability" was vague; and that, the DEC solution - that is, both products and services -not having been acquired, it could not be said that the products were unsuitable, even if (which was not the case) their want of suitability had been particularised.
In my opinion, the allegation that the products were represented to be suitable for a system whose objectives were specified in the ROI, and were said by DEC to be understood by it, involves no unsuitable vagueness. The "DEC solution" did propose provision of both products and services. But the plaintiffs should not be precluded from alleging that, using the recommended products in a manner compatible with the DEC solution, the products were shown to be unsuitable for the system.
The paragraphs which make use of the expression "the functionality described for that product in the proposal and in the documentation accompanying the proposal” extend beyond instances of pre‑contractual representations. Paragraph 87A pleads that the representations became terms of an agreement made between BHP and DEC; or were matters warranted by DEC. Paragraph 87B pleads breach of such terms or warranties. Paragraph 91 pleads that DEC owed a duty of care to the plaintiffs to ensure, inter alia, that products supplied met represented functionality. Paragraph 93 alleges breach of duty in that respect; and paragraph 94, loss and damage. The defendants have not satisfied me that, thus put, the allegations are objectionable.
Category 3: I understand the defendants' main complaints to be that description of problems encountered in operating the system do not enable them to know which products DEC supplied are alleged to have been defective; what particular defects are said to have been present in any particular item of equipment; and what loss and damage was occasioned to the plaintiffs by each defective product.
I have already discussed in some detail most of the issues raised by this category of complaint. I will deal separately (see category 5) with the last of the issues which I have identified.
I add this in respect of those issues with which I have dealt: it may be that proof of operating problems will not prove that a particular product was defective, still less the nature of the defect. But, in what seems to be a highly technical area, I am unable to say that proof of a particular operating problem is not capable of making out proof of a particular defect in a particular product.
Mr Collins submitted that it was objectionable to plead that the quality of functionality of particular products was "of such a degraded nature that, in substance, none of that functionality was provided". See, for example, the particulars subjoined to paragraph 35(b), (d), (e) and (g). The substance of the allegation seems to me to be clear. Perhaps it is one in respect of which further particulars could be sought. It is not one which ought to be struck out.
Category 4:
There being no sustainable complaint in respect of categories (1), (2) or (3), Mr Collins' submission in respect of category (4) fails also.
Category 5:
The defendant's submissions were mainly argued by reference to paragraphs 88 and 88A. Counsel contended that the particular flaw in those paragraphs was also present in other paragraphs by which the plaintiffs allege loss and damage. He referred to paragraphs 48 and 49, and to paragraphs 118 and 119.
There is no doubt about the products the subject of allegations made by paragraphs 85 to 87 of the statement of claim. They are the products referred to in the identified agreements. The fact that the products may have been numerous does not mean that they have not been properly identified.
There is no doubt that the plaintiffs allege that all those products were not of merchantable quality, nor reasonably fit for the purpose of implementing the system. It is true that the statement of claim does not allege individual defects in particular products. But the plaintiffs' case, so far as is now relevant, is that the defect in the products was that they did not operate as required.
Again, the plaintiffs seek to prove relevant defects in all the products by inference from the defects which were experienced. Whether that inference is available will be a matter for trial. So to plead the matter does not demonstrate fault in the statement of claim.
Breaches of paragraphs 87 and 87B are alleged, by paragraphs 88 and 88A, to have given rise to the loss and damage there set out. Mr Collins submitted that global claims were made by paragraphs 88 and 88A, and were impermissible. They sought to roll up the consequences of defects in products supplied under different contracts.
He referred me to Wharf Properties Limited and Anor v. Eric Cumine Associates & Ors (No. 2) (1991) 52 B.L.R. 1 (PC) and John Holland Construction and Engineering Pty Ltd v. Kvaerner R.J. Brown Pty Ltd and Anor (Byrne J, Supreme Court of Victoria, judgment 11 October 1996, unreported).
In Wharf Properties a statement of claim was struck out where the plaintiffs sought to allege that the defendants' failure to properly manage a project had delayed a project. There were six identified periods of delay. The statement of claim did not seek to relate particular breaches of contract on the part of the defendants to the particular delays, although at one stage the plaintiffs had consented to provide particulars addressing that issue. Lord Oliver observed (at 21) that:
"The failure even to attempt to specify any discernible nexus between the wrong alleged and the consequent delay provides ... no agenda for the trial."
In John Holland, Byrne J considered whether a statement of claim which made a global claim for damages in reliance upon breaches of two agreements ought to be struck out under R23.02. His Honour said this (at pp. 18-19):
"The question whether in a given case a pleading based on a global claim, or even a total cost claim or some variant of this, is likely to or may prejudice, embarrass or delay the fair trial of a proceeding, must depend upon an examination of the pleading itself and the claim which it makes: British Airways Pension Trustees Ltd v. Sir Robert McAlpine & Sons Ltd (1994) 72 B.L.R. 26 at 34, per Saville, L.J. The fundamental concern of the Court is that the dispute between the parties should be determined expeditiously and economically and, above all, fairly ... a total cost claim puts a burden on the defendant. This burden may involve the defendant in extensive discovery of documents relating to the performance of the project; it may mean that at trial the defendant must cross-examine the plaintiff's witnesses to expose the flaws in a claim which assumes that the defendant is, itself, responsible for every item of the plaintiff's cost overrun; it may mean that the defendant must lead evidence to explain what, in fact, was the impact of each of the acts complained of on the project, as was done in McAlpine Humberoak Ltd v. McDermott International Inc. (No. 1) (1991) 58 B.L.R. 1 at 28, per Lloyd, L.J. Litigation inevitably imposes burdens on the parties; the Court must exercise its powers to ensure that, as far as possible, these burdens are not unreasonable and are not unnecessarily imposed.
In my opinion, the Court should approach a total cost claim with a great deal of caution, even distrust. I would not, however, elevate this suspicion to the level of concluding that such a claim should be treated as prima facie bad: British Airways Pension Trustees Ltd v. Sir Robert McAlpine & Sons Ltd (1994) 72 B.L.R. 26 at 34, per Saville, L.J., Beldam, Neill, L.JJ. concurring."
His Honour referred to, and counsel for the plaintiff cited, British Airways Pension Trustees Ltd v. Sir Robert McAlpine & Sons Pty Ltd & Ors, op cit. There the plaintiff alleged that a variety of defects caused by building works resulted in a property development being sold at a discounted price. The plaintiff did not seek to ascribe to particular defects the amount of their contributions to the discounted sale price. The Court of Appeal allowed an appeal against orders striking out the statement of claim and dismissing the action.
I consider that Mr Collins' submission in respect of paragraph 88 should be rejected. As that paragraph is presently pleaded, the gist of the plaintiffs' case, so far as is now relevant, is that defects in products which were supplied cumulatively precluded the system achieving the required outcome. That preclusion brought about delay in implementing the system, and thus the loss and damage claimed by the plaintiffs. The plaintiffs' case is not one, by contrast with Wharf Properties, where there were a series of delays not all of which logically could be attributed to the same breaches. It bears a passing resemblance, but only that, to John Holland. There the two contracts which were breached logically had distinct consequences. Here, so far as is presently relevant, the pleaded representations, contracts and warranties related to products which were all used in the system whose deficiencies brought about delay.
In the course of argument Mr Macaw of Queens Counsel, who with Mr Maxwell appeared for the plaintiffs, said that his clients' case was not only that breaches of the supply agreements cumulatively caused the loss and damage asserted by paragraph 88, but that breach of each supply agreement was a sufficient cause of that loss and damage. If that is to be the plaintiffs' case, paragraph 88 will require amendment. I do not agree with Mr Macaw's submission that the alternative approaches are already opened up by that paragraph.
Even if the damages claim raised by paragraph 88 is properly described as a global claim, which I doubt, I am not constrained to strike it down. I do not doubt that the defendants can know the case they must meet. DEC has professed particular expertise in the relevant area of technology. The statement of claim sets an agenda for trial. This application is concerned with matters of pleading, not with matters of evidence.
I should refer, briefly, to paragraph 88A. It alleges, in the alternative to paragraph 88, that BHPIT suffered discrete damage in consequence of a discrete breach of agreement. There appears to be no basis for a complaint of the type now under discussion.
I noted earlier Mr Collins' reference to paragraphs 48 and 49, and to paragraphs 118 and 119. In my opinion there was nothing to the criticism of paragraphs 48 and 49. Their gist is that particular false representations, cumulatively, caused identified loss and damage. The paragraphs, by reference to Appendix A, do not ascribe all loss and damage to all the representations in an undifferentiated way.
Neither, in my opinion, is criticism of paragraphs 118 and 199 made out. Particular contraventions are alleged to have been, singly or in combination, sufficiently causative of defined loss.
Category 6:
Mr Collins submitted that paragraph 97 does not identify with clarity the material allegedly provided by DECUSA to DEC. In my opinion, there is nothing to that criticism. Subparagraphs (a) and (b) identify what is defined, respectively, as DECUSA "product information" and "product brochures".
At the heart of his submissions concerning the plaintiffs' claim against DECUSA, said Mr Collins, was the proposition that the particular statements which the plaintiffs contended were made in the DECUSA information, and which were said to be untrue, were not sufficiently identified. He submitted that the information was not said to have been provided by the American company with the plaintiffs' particular system in mind. He criticised the allegation that such information represented that various products were "suitable for process control applications of the kind involved in RMOCS" (see, for example, paragraph 99(a)); and he criticised the allegations of falsity which made use of that language (see, for example, paragraph 105(a)). One could not tell, he submitted, what the plaintiffs meant to allege by that form of words.
In my opinion these submissions must be rejected. According to the statement of claim the nature of the system required by the plaintiffs was set out in the ROI and in other communications between DEC and the plaintiffs. The plaintiffs' requirements were, DEC claimed, well understood by it. Let it be assumed that the American company did not know, when it allegedly provided the information, what those requirements were. It does not follow that the information did not represent that requirements of the kind specified by the plaintiffs could be met by the products to which the information related.
Nor does it follow that DECUSA could not now understand, by reference to the ROI and other communications, what those requirements were. It does not appear to me to be necessary for the plaintiffs to plead, in lieu of suitability for "process control applications of the kind involved in RMOCS", suitability for applications expressed in the language of the ROI and later communications.
A somewhat different criticism was this: that the statement of claim sets out the particulars of alleged representations at length; and then asserts that the representations were untrue. The defendants should not be faced with not knowing what individual statements set out in the particulars were said to be untrue. The plaintiffs should isolate individual statements that were said to be untrue.
I do not accept that this criticism was valid. The statement of claim alleges that a representation of suitability was made. That representation, simple in itself, is said to be gleaned from a number of statements allegedly made by DECUSA. Whether the representation is made out will depend on analysis of the evidence at trial. That representation, not the statements from which the representation is said to be gleaned, is claimed to be untrue.
Paragraph 107 was attacked. It asserts that DECUSA knew that when certain products were operated in a process control application of the kind involved in RMOCS defects of the same kind as were experienced in fact were likely to be experienced. The reference to "defects" in the paragraph is a reference not to defects in the products, but to operating problems when the products were incorporated into a system.
One criticism made of the paragraph was that it does not identify defects in the products. If the paragraph set out to allege such defects it might well be a criticism of substance. But that is not what the paragraph sets out to do.
Another criticism was this: that by referring to "process control applications of the kind involved in RMOCS" the allegation of knowledge was incapable of being understood by DECUSA. For reasons previously stated I reject that criticism.
Again, counsel submitted that the allegations made by paragraph 107 were so wide that they could be used to conduct a fishing expedition on discovery from the American company. No doubt the court should do nothing to authorise a fishing expedition. But I am not persuaded that it is impermissible to plead, partly by reference to an admission allegedly made, partly by reference to knowledge of alleged want of evaluation of products, and partly by reference to problems experienced in operating the products in RMOCS, that DECUSA had knowledge of the matters alleged by paragraph 107.
What I have just said does not extend to justify the last sentence of the particulars subjoined to subparagraph (a). In my opinion that sentence should be struck out. That has a carryover effect upon the particulars subjoined to subparagraphs (b) and (c).
Paragraphs 115(c) and 116(b) were the subject of criticism. The former paragraph alleges duties of care said to be owed by DECUSA to the plaintiffs. The latter alleges breach of those duties.
No doubt paragraph 115(c) assumes that the products did have "latent defects and inherent limitations", at least in the context of the required application. Paragraph 107(c) points to that conclusion. Clear also it is that the plaintiffs' allegation in paragraph 107(c) is based, at least largely, upon inference. Critically, however, paragraph 115(c) does no more than allege a duty of care. It does so in language which is unremarkable.
Paragraph 116(b), alleging breach, relevantly asserts that DECUSA failed to warn "of the latent defects or inherent limitations". The particulars subjoined to paragraph 116 hark back to the allegedly false representations made in the proposal, and in September and November 1993. As I understand it, the plaintiffs say that the failure to warn emerges from the (false) representations of efficacy which were made.
It may be accepted that the representations of efficacy gave no warning of "latent defects and inherent limitations". The difficulty for DECUSA is to understand what defects and limitations are alleged to have existed. The answer seems to be - see paragraph 107 - no more than that the plaintiffs contend - largely by resort to inference - that the products must have had some, though undescribed, latent defects and inherent limitations, at least in the context of the required application. Once the limits of the plaintiffs' case are understood, I do not think that DECUSA is unable to meet the allegation made.
Conclusion
The last sentence of the particulars subjoined to sub-paragraph (a) of paragraph 107 of the statement of claim should be struck out. The plaintiffs should have leave to make consequential amendments to the particulars subjoined to sub-paragraphs (b) and (c) of paragraph 107. The plaintiffs should have leave to amend paragraph 88 of the statement of claim as they may be advised. A second further amended statement of claim should be filed and served within 14 days of this day. Otherwise the defendants' summons filed on 23 June 1998 should be dismissed. I will hear the parties as to costs.
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