Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd (No 7) - [2020] NSWSC 554

Supreme Court

New South Wales

Medium Neutral Citation: Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 7) [2020] NSWSC 554
Hearing dates: 27; 28; 29; 30; 31 August 2018; 4 September 2018; 22; 23 November 2018; 7; 8 March 2019
Date of orders: 15 May 2020
Decision date: 15 May 2020
Jurisdiction: Common Law
Before: Campbell J
Decision:
See paragraph 315

Catchwords: CONSUMER LAW – Competition and Consumer Act 2010 (Cth) – Australian Securities and Investment Commission Act 2001 – misleading and deceptive conduct – persons involved in the contravention – contract for IT equipment, software and services – financing of contract by commercial lease - oral representations made about efficiency of IT system to be supplied – contract repudiated – hypothetical question of misrepresentation – misrepresentation a question of fact – measure of loss
Legislation Cited: Australian Securities and Investment Commission Act 2001 (Cth), ss 12DA, 12GF
Competition and Consumer Act 2010 (Cth), s 131A; Sch 2 – Australian Consumer Law ss 2, 18, 236, 243(a)
Fair Trading Act 1987 (NSW), ss 42, 68
Trade Practices Act 1974 (Cth), ss 52, 75B
Cases Cited: ACCC v Dukemaster Pty Ltd [2009] FCA 682
ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26
Australian Securities and Investments Commission v Wealth & Risk Management Pty Ltd (No 2) [2018] FCA 59
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60
Campbell Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378
Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 4) [2018] NSWSC 1379
Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 5) [2018] NSWSC 1373
Canon Finance Australia Limited v Reliance Medical
Practice Pty Ltd & Ors (No 6) [2018] NSWSC 1809
Cassidy v Saatchi & Saatchi Australia Pty Ltd (2004) 134 FCR 585; [2004] FCAFC 34;
Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41; [1931] HCA 53
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17
Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Pappas v Soulac Pty Ltd (1983) 50 ALR 231
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44
Quikfund (Australia) Pty Ltd v Airmack Consolidators Pty Ltd (2014) 222 FCR 13; [2014] FCAFC 70
Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; (1982) ATPR 40-303
Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69
Vairy v Wyong Shire Council (2005) 223 CLR 422; [2005] HCA 62
Watson v Foxman (1995) 49 NSWLR 315
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65
Category: Principal judgment
Parties: Reliance Medical Practice Pty Ltd trading as ATF Reliance Medical Practice Trust (First Cross-Claimant)
Rodney John Beckwith (Second Cross-Claimant)
Voice Print & Data Australia Pty Ltd (First Cross-Defendant)
Christian Altenburg (Second Cross-Defendant)
Grant Edwards (Third Cross-Defendant)
BHD Leasing Pty Ltd (Sixth Cross-Defendant)
Representation:
Counsel:
G A Moore (Cross-Claimants)
A J H Morris QC with I Erskine (First and Third Cross-Defendants)
A F Fernon (Second Cross-Defendant)
L W Chan (Sixth Cross-Defendant)
Solicitors:
Gorval Lynch (Cross-Claimants)
Anthony Delaney Lawyers (First and Third Cross-Defendants)
O’Neill McDonald Lawyers (Second Cross-Defendant)
Holman Webb (Sixth Cross-Defendant)

File Number(s): 2016/362193
Publication restriction: Nil

Judgment

HIS HONOUR: These proceedings were originally commenced by statement of claim filed by Canon Finance Australia Pty Ltd (“Canon”), seeking damages for breach of contract from, inter alia, the first and second cross-claimants (respectively, Reliance Medical Practice Pty Ltd ATF Reliance Medical Practice Trust (“RMP”) and its director, a legally qualified medical practitioner, Dr Rodney John Beckwith).
RMP and Dr Beckwith issued the cross-claims the subject of this judgment. RMP and Dr Beckwith settled Canon’s claim out of court. The settlement was effected by entry of a consent judgment in favour of Canon against RMP and Dr Beckwith in the sum of $1,116,880.92.
What remains is the cross-claim brought by RMP and Dr Beckwith (collectively referred to in this judgment as “the cross-claimants”) against four active cross-defendants. Cross-claims against two former officers of RMP were resolved before the commencement of the hearing. Although the cross-claimants seek a variety of remedies, in substance they are claiming an indemnity against their liability to Canon.
The first cross-defendant is Voice Print & Data Australia Pty Ltd (“VPD”) and the third cross-defendant is Mr Grant Edwards, its National Connected Services Manager. VPD is a Queensland-based company that carries on business as a provider of information technology goods and services.
VPD’s current New South Wales State Manager Mr Christian Altenburg is joined as the second cross-defendant. Although Mr Altenburg now works for VPD, when the events the subject of these proceedings occurred, he was a contactor of Fuji Xerox Australia Pty Ltd (“Fuji”) working as an Accounts and Business Development Manager.
The final (and sixth) cross-defendant is BHD Leasing Pty Ltd (“BHD”) trading as BHO Finance, a company in the business of the provision of finance by third party lenders, in other words a broker. In relevant documentation it described itself as “a member of the BHD Capital Group” (Rental Payment Agreement, 25 November 2015; CB 774 at 791).
For completeness I record that the former officers of RMP referred to at [3] above were the fourth and fifth cross-defendants respectively.

Introduction

These proceedings arise out of a dispute about a contract for the supply of information technology goods and services by VPD to RMP, involving hardware, software, and ongoing technical support. VPD and Messrs Altenburg and Edwards were each involved in the formation of the contract. BHD facilitated the finance funding the transaction. The transaction was structured as a commercial lease between BHD as (undisclosed) agent (Rental Payment Agreement, 25 November 2015, CB 779; 783 (cl 2.8)) for the financier (Canon; Strategic Alliance Agreement, CB 601) and RMP, with a single capital payment to be made to VPD in advance covering the total cost of all of the goods and services to be provided by VPD, including the ongoing service agreement for its term. BHD’s lease to RMP was assigned to Canon which provided the finance, and to which company RMP was liable for the ongoing instalments.
After the various contractual documents had been executed on behalf of RMP, including a guarantee by Dr Beckwith, and VPD had been paid (on 15 December 2015; CB 831), RMP repudiated the contracts (by emails between 14 January 2016 and 25 February 2016: CB 850-876), clearly evincing an intention to no longer be bound by them. Notwithstanding VPD’s clearly stated intention to maintain the contract (to say nothing of the intervention of Canon’s rights) RMP refused to pay for, and declined to go through with the project. By then, hardware, consisting of equipment for a Mitel telephony system, had been delivered, VPD was persisting with attempts to make arrangements for its installation and the software agreed to be supplied had been installed on VPD’s remote server for the dedicated use of RMP. Canon and the cross-defendants refused to accept the cross-claimants repudiation.

Relief sought

The RMP parties seek declarations that each of VPD and Mr Altenburg engaged in conduct in contravention of s 18 of Sch 2 (the Australian Consumer Law), Competition and Consumer Act 2010 (Cth) (“the ACL”). They also claim that Mr Edwards was a “person involved” in such misleading or deceptive conduct. As against BHD, RMP relies on s 12DA Australian Securities and Investment Commission Act 2001 (Cth) (“ASIC Act”). They seek damages under s 236 of the ACL and orders setting aside various agreements under s 243(a) of the ACL. They say that by reason of the alleged misleading or deceptive conduct, RMP entered into the agreements which it was forced to repudiate, resulting in it incurring liability to Canon.
For the reasons that follow, I have concluded that the RMP parties Second Further Amended Statement of Cross-Claim filed in court on 8 March 2019 must be dismissed with costs.

Narrative of primary facts

A need for an IT upgrade

RMP operates a number of general medical practices located in various places on the Central Coast of New South Wales.
In 2015, RMP sought to upgrade its scanning and IT equipment as its then current system was proving slow and inefficient as the practice expanded. Dr Beckwith was then also dissatisfied with the practice’s IT services provider.
A function of RMP’s existing IT system was to allow RMP’s patient medical files to be stored electronically in its practice management software, known as “Best Practice”. RMP began experiencing problems in the efficiency of its data processing requirements particularly relating to the speed of processing complex material. These inefficiencies accompanied RMP’s expansion and involved its document management system. The increasingly slower speeds were inefficient because they necessitated staff manually scanning-in individual documents and recording document details (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 133 at [15]-[17]). This resulted in longer than necessary doctor-patient consultations.
Dr Beckwith had a conversation with Mr John Henderson, the manager at RMP responsible for on-line technologies, as well as Mr Phil Dimond (RMP’s Finance and Administration Manager) in early June 2015 in relation to a possible system upgrade. According to Mr Henderson Dr Beckwith wanted a new system that was (159T):

“… cloud-based … high speed, with fibre optics links. It must be able to process large data files, particularly medical images quickly. It must also allow for video conferencing.
…
The new system needs to allow a chiropractor taking an image of a patient in the West Gosford practice, to quickly share that image and other patient data files with any other location and have a video conference as well.”

I interpolate that Dr Beckwith disputes Mr Henderson’s recollection (108.5-35T) because he took issue with Mr Henderson’s use of the word “must”. He said (108.34-35T):

“I am not saying that we didn’t have an interest in those kind of outcomes, but to say “must” and to say, “must have the cloud”, was not true.”

This seems to me to be no more than a difference in emphasis. Dr Beckwith was not inflexible about compliance with these specifications.

Mr Dimond suggested that he would contact a person he knew who “works at Fuji Xerox” and who might be able to help. Dr Beckwith told Mr Dimond to get in touch with his contact and to ask for their suggestions (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 134 at [18]).
Mr Dimond’s contact worked at Fuji Colour and could not assist but put him in touch with a colleague at Fuji Xerox, Mr Altenburg. On 10 June 2015, Mr Dimond emailed Mr Altenburg in the following terms (CB 517):

“I was given your name by a good friend, Pierre Visser, at Fuji Film.
Reliance Medical Practice is a rapidly expanding Medical Practice on the Central Coast, part of Reliance GP Super Clinic, seeing over 8,000 patients per month.
Also, in early 2016, we will be expanding to a second site at Wyong.
We presently have a need for a vastly improved scanning technology to quickly and efficiently enter patient correspondence into the patient files in our Practice Software, Best Practice.
I am hoping you or your team can assist us, or point us in the right direction.”

There were in substance two discrete IT projects being undertaken by RMP at the same time. The first related to the resolution of the issues RMP was experiencing with slow scanning speeds and problems in retrieving scanned files. The other was larger. It concerned the expansion of RMP’s existing IT and communications infrastructure to better accommodate its business expansion plans. This involved in part the optimisation of the efficiency of RMP’s patient files database. It appears that it was hoped that the latter project would solve the first issue (157.20-.27T).

Discussions and meetings about the IT upgrade

There is some disagreement in the evidence about how many meetings took place between VPD and RMP, and who attended them. I explain my resolution of this issue below.

19 June Meeting

Mr Dimond arranged for a meeting to take place on 19 June 2015. In attendance from RMP’s side was James Beckwith (Dr Beckwith’s son, who was involved in the administration of RMP) and Mr Dimond himself. On VPD’s side were Mr Luke Briggs, a director of VPD, and Mr Altenburg who was introducing VPD to RMP (“the 19 June Meeting”).
Mr Briggs gave a presentation in the form of a sales pitch, with some occasional input from Mr Altenburg. There was conflicting evidence as to what was said and by whom at this meeting and during the presentation. Generally, the presentation focused on VPD’s core offering, which was a cloud-based IT service called LiveOffice Wide Area Network (“LiveOffice WAN”).
I interpolate a brief explanation of the nature of the services offered to RMP. RMP’s existing IT system was wholly run and operated from a server owned by RMP and located at its West Gosford site. Its entire IT network and medical practice software (“Best Practice”) were managed from that single location. Other RMP practice sites would login remotely to access the software.
What VPD was offering was, in effect, a complete overhaul and replacement of RMP’s existing IT system. The range and breadth of the equipment, software and services offered had been set out in Mr Briggs’s Affidavit of 21 August 2018 (CB 332-337 at [58]) which in the end was not read at the hearing (365.15T). Accordingly I put it to one side. Other evidence establishes that, broadly speaking, the LiveOffice WAN is a dedicated computer and storage service hosted in three separate data centres around Australia. The system was to be accessible by up to 86 of RMP’s users simultaneously. This cloud-based system was to be located in a remote server in one data centre and backed-up in the other two data centres, so that if one data centre went offline, another would immediately take over. The idea was, essentially, that RMP would be able to install its Best Practice software (and indeed any other software) on VPD’s server, and access it remotely with near-certain reliability.
A particular dispute arose during hearing about whether the particular system ultimately proposed for RMP included “[a] dedicated SQL server” and “Windows SQL licences”. It was common ground that SQL software was necessary for running RMP’s “Best Practice” management system. I will deal with this issue separately below. I will say now that the issue emerged almost by accident out of the re-examination of Mr Chris Benson, an expert called by RMP (264.15-265.15T). Mr Benson’s role is explained later in these reasons.
Following the 19 June meeting, on the same day, VPD sent Mr Dimond a quote numbered LB5120 which included a proposed subscriber agreement. There was dispute about the legal status of the subscriber agreements submitted at various stages of the negotiations. RMP submitted they were quotes only and VPD submitted the final versions once signed on behalf of RMP on 15 October 2015 were its contract with RMP. I flag now that my finding is that the subscriber agreements in their final form arrived at after negotiation, once signed on behalf of RMP formed the contract between RMP and VPD for the supply to RMP of the IT hardware, software and other services by VPD.

15 July Meeting

A second meeting took place on 15 July 2015. VPD was represented by Mr Edwards, the National Connected Services Manager for VPD, and Mr Altenberg attended ostensibly to maintain what he regarded as his client contact with RMP. I interpolate, it transpired that unbeknownst to RMP he had been promised a commission if VPD secured the contract (Affidavit, Christian Altenberg, 2 March 2018, CB 418 at [80]; 327.41-328.20T). RMP were represented by Mr Henderson, Mr Dimond and James Beckwith (“the 15 July Meeting”). Mr Edwards gave another presentation of the system VPD had to offer.
At this meeting Mr Henderson specified RMP’s requirements in accordance with instructions given by Dr Beckwith, by saying:

“[The system], must be cloud based. It must be high speed, with fibre optic links. It must be able to process large data files quickly. It must also allow for video conferencing” (Affidavit, John Henderson, 6 March 2018, CB 169 at [45]).

One example of required data processing given was the capacity to rapidly share medical imaging between different practice locations.

Mr Henderson reported back to Dr Beckwith on the meeting. He said that he explained to Dr Beckwith that Fuji Xerox were unable to assist, but that “another IT service provider, VPD” had been brought in and they would be providing a quote (Affidavit, John Henderson, 6 March 2018, CB 170 at [46]).
The quote in the form of further proposed subscriber agreements was received by Mr Dimond on 31 July 2015. This quote was discussed at a regular weekly meeting involving Dr Beckwith and Mr Henderson in early August 2015 when it was decided to obtain quotes for similar services from other providers. Dr Beckwith was not interested in dealing with either Optus or Telstra, but, despite his reluctance, agreed a quote should be obtained from RMP’s then current and continuing service provider, CCTS of which Mr Benson was a principal (Affidavit, John Henderson, 6 March 2018, CB 170 at [47]).
This task fell mainly to Mr Dimond who then began making enquiries of other providers, including Mr Benson of CCTS, about the cost of a cloud-based hosting service similar to that proposed by VPD. Mr Benson provided a basic costing of such a service. He did not regard such a system as necessary for RMP’s needs and did not put a lot of effort into developing a proposal. I should add there is a question about when alternative quotes, other than from CCTS, were sought but I am of the view that Mr Henderson is generally accurate and I accept that this was done following RMP’s August meeting. It is unlikely it was undertaken before the receipt of the updated 31 July quote from VPD. In the case of CCTS, Mr Henderson’s recall for the chronology is probably out. It seems clear that Mr Dimond took it upon himself to sound out Mr Benson about a system to that described by Mr Briggs in the early part of July 2015, and made a written request for a proposal on 15 July 2015, I infer probably after the meeting, to which Mr Benson responded on 24 July 2015 (CB 528-529).

30 September Meeting

A third meeting between RMP and VPD took place on 30 September 2015 involving Dr Beckwith, James Beckwith, Mr Henderson, Mr Dimond, Mr Altenburg, and Mr Edwards (“the 30 September Meeting”). Although it is clear that Mr Henderson understood the system was to be provided by VPD and not “Fuji Xerox” his reminder to Dr Beckwith about the meeting referred to the latter not the former. I interpolate there can be no question about Mr Dimond’s understanding, he knew from the outset that the proposal was VPD’s (see Exhibit XD2.2; Affidavit, Phillip James Dimond, 18 July 2018, CB 231 at [12]-[15]) and as the main point of contact at RMP carried on the negotiations with VPD on its behalf (see email from Mr Edwards to Mr Dimond, 8 October 2015, CB 620). However it does seem that the matter was referred to in-house at RMP as the Fuji proposal or in similar terms.

The purpose of the 30 September meeting was to further discuss VPD’s proposal for the benefit of Dr Beckwith who had not been present at prior meetings. That meeting was the first meeting about the proposal Dr Beckwith attended. This was the first time he had met Messrs Altenburg and Edwards. The latter again gave a presentation that was not dissimilar to the presentations previously given by himself and Mr Briggs separately. He and Mr Altenburg fielded questions from Mr Dimond, Mr Henderson and Dr Beckwith.
On or about 1 October 2015, Dr Beckwith instructed Messrs Dimond and Henderson to negotiate terms with VPD, at the same time continuing to make enquiries of other potential suppliers as to alternative IT solutions. Dr Beckwith was not happy with either the monthly payment or the five year term. He wanted a better price and a three year term.
Following further negotiation, Mr Edwards emailed Mr Dimond on 13 October 2015 (CB 622). The subject was “QUOTE FINALISATION”. The body of the email opened “see attached final Recommendations as we have discussed”. The email went on to describe what VPD regarded as the advantages of their system, which included a new Mitel telephony system, upgrading RMP’s existing system, as well as the LiveOffice WAN system and providing calculations on costs savings VPD said RMP was likely to make compared to the “current bill from the phone provider”. Among the attachments were a further two proposed “Subscriber Agreements”. Contract ID GE5641 related to the Mitel telephony; and contract ID GE5691 to the LiveOffice WAN. Mr Dimond wrote back at 11:51 am referring to an apparent omission in GE5691 (Email from Mr Dimond to Mr Edwards, 13 October 2015, CB 655). Mr Edwards responded immediately correcting that omission (CB 654).
As matters turned out, VPD’s proposal was neither the cheapest nor the dearest. Mr Dimond performed an analysis of the competing solutions and submitted it to Dr Beckwith on 14 October 2015 (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 208 at [37]; “Network Comparison” document, CB1024). The document summarised the offerings of five providers, not including CCTS. The comparison was presented in tabular form and described VPD’s offering as “Fuji Xerox”. Underneath the comparison table Mr Dimond commented:

“Fuji Xerox’s offering is somewhere in the range of $61 cheaper per month to $1,589 more expensive than Cloudlogix’s offering. Any software that runs on a server, such as Best Practice, can be loaded onto FujiXerox’s network and be available at all locations. Thus we would not have to make an immediate change to MediRecords. Microsoft Office is included in their offer.
…
Recommendation
Given the greater flexibility (no need to use MediRecords immediately and could possibly wait to compare with an Australian version of eClinicalWorks) and similar pricing to Cloudlogix, Fuji Xerox’s offer is recommended.
…”

Agreements are struck

On 15 October 2015, Dr Beckwith authorised acceptance of what was in fact VPD’s, not Fuji Xerox’s, offer and RMP entered into the two Subscriber Agreements with VPD for the supply of equipment and services (“the Subscriber Agreements”) which were signed on its behalf by Mr Dimond whose signature was witnessed by Mr Henderson (CB 658-661).
When Mr Edwards had dispatched the Subscriber Agreements, so styled, dated 13 October 2015, he described them as quotations. That said, they were signed and accepted by the authorised officer of the cross-claimants, Mr Phil Dimond, on 15 October 2015. On their face these documents appear to be binding agreements, and I so find. Above Mr Dimond’s signature, under the heading "Subscriber acknowledgement, important declaration" were the following words:

"By signing this Agreement, you agree to be bound by this Agreement, including this Schedule and the Terms of Service attached to this Schedule ... this is a “Contract” for Services. ”(Original delineation.)

I repeat: the first Subscriber Agreement, GE5641, related to the Mitel telephony system; and the second Subscriber Agreement, GE5691, related to the LiveOffice WAN system. Dr Beckwith accepted that Mr Dimond and Mr Henderson had his express authority to sign the Subscriber Agreements (59.24-35T).
Each Subscriber Agreement identified the parties as VPD and RMP, described the services to be provided under it, fixed the “minimum term” as 36 months from the commencement date, identified in summary form the basis upon which the price was calculated, and fixed the payment due for each billing period and the amount of GST. Only the commencement date was left blank but previous discussions were to the effect that installation should occur before the IT industry shut-down, or the “embargo”, period over Christmas and January holidays.
On Thursday 29 October 2015, Zoe Pitchers emailed Mr Dimond introducing herself as VPD’s project co-ordinator for RMP’s project and suggesting a conference call to discuss the elements of the project. Mr Dimond replied the following day confirming 3 November 2015 as a suitable time for the conference call at which he, Mr Henderson and James Beckwith would be available. I infer the call took place (see Email from Ms Pitchers to Mr Dimond, 6 November 2015, CB 721). Following this, probably on 9 November 2015, Ms Pitcher forwarded a “Project Scope Document” which she had prepared on 3 November 2015 (CB 710-719). The document referenced the Subscriber Agreement GE5691 for the LiveOffice WAN. It referred specifically to both the LiveOffice WAN requirements and “the Telephony component” (VPD Project Scope Document, CB 714). In relation to the “Live Office” the document stated:

“This environment will be designed to support the company’s unique applications, such as Best Practice for imaging and Front Desk application.” (CB 714) (My emphasis.)

The scope of works was accepted by RMP by Mr Dimond signing the document on 27 November 2015 (VPD Project Scope Document, CB 718), two days after the Rental Payment Agreement had been signed by Dr Beckwith.

Finance arrangements

It seems always to have been contemplated at least by Mr Henderson and Mr Dimond, if not Dr Beckwith, on behalf of RMP and by VPD that RMP would require finance for the acquisition of the new IT services and related telephony upgrade. As I explain below, Dr Beckwith, on a subjective level appears not to have appreciated that the project was to be financed by a loan structured as a commercial lease. This appears genuine. But the contrary would have been apparent to anyone reading the document and paying attention to the details of the negotiations. I accept that Mr Henderson informed him that the lease would be backed by a finance company (Affidavit John Henderson dated 6 March 2018 at [65]; 167.24-.45T; 173.10-.29T). I also accept Mr Dimond’s evidence that he liaised with Dr Beckwith to obtain necessary financial information for the credit application (Exhibit XD2.2 at [20]-[23]). And it seems that BHD had entered into a non-exclusive agency with Canon on 8 October 2015, to arrange finance programs for suitable customers and equipment vendors (Strategic Alliance Agreement, CB 601-617).
On 11 November 2015, VPD and BHD had entered into a “Business Terms Agreement” (“BTA”) which had the effect of engaging BHD to facilitate finance for eligible subscriber agreements (CB 727-737). It is unnecessary to summarise the contents of the BTA. However, the recitals (“Background”) to the agreement describe in general terms the relationship between BHD and VPD (CB 728):

A.   “[BHD] is a specialist asset finance and payment solutions provider focusing on the information, communications and technology … business sector.
B.   VPD is in the business of providing ICT products and services to their customers … in the form of a service contract ….
C.   [BHD] has developed a range of payment solutions which comprise using the Service Contract to finance the capital and upfront costs …
D.   VPD at its own discretion will ask [BHD] to provide a Payment Solution in relation to the sale, provision and/or use of equipment, software and/or services by it and/or an associate or related body corporate under a Service Contract with a Customer …”

It is also pertinent background that under this agreement VPD was required to work with a customer to provide necessary financial documentation required by BHD for credit assessment. BHD in the course of conducting “verification, background and credit checks” was entitled to contact the customer, but was required to do this under the “banner” of VPD (BHD Finance Business Terms Agreement, CB 729).

It is clear that the arrangements between VPD and BHD reflected in their BTA of 11 November 2015 probably had been in place for some time before then. For on 16 October 2015, the day after Mr Dimond signed the Subscriber Agreements, Mr Briggs referred this matter, by email to an officer of BHD, Mr Mark Tuuta stating, “see below new deal for approval” and providing details of the Subscriber Agreements in general terms referring both to “Mitel” and “LiveOffice”, and concluding, “please make contact direct on behalf of VPD Finance for this” (CB 662). Mr Briggs emailed again shortly thereafter advising that the term was “36 months” (CB 663).
On 21 October 2015, Mr Mike Sheeran, a director of BHD (Deed of Assignment, CB 915), I infer under the “banner” of VPD, spoke to Mr Dimond detailing the required financial information to “get the process underway”. He confirmed this in an email of 22 October 2015 employing a VPD “footer” (CB 668).
Mr Dimond provided the required financial information as an attachment to an email of 23 October 2015 (CB 670-685). I accept his evidence that he collated the information with the knowledge and approval of both Mr Henderson and Dr Beckwith (Exhibit XD2.2; Affidavit, Phillip James Dimond, 18 July 2018, CB 232 at [20]-[21]) notwithstanding Dr Beckwith’s evidence to the contrary (78.23-79.5T). The email was addressed to “[email protected]”.
A detailed application for finance was then prepared on 28 October 2015 by Luke Price, another director of BHD, on stationary “branded” with BHD’s trading name, “BHO Finance” (CB 697-702). It is not apparent on its face, but I infer that this detailed application was submitted to Canon (BHO Finance Application for Reliance Medical Practice Gosford, CB 697-702). The application referred to both the Mitel telephony, described as networking equipment, and the LiveOffice WAN. Total funding requested was $700,000 plus GST.
I infer that the application was approved because on 25 November 2015, RMP entered into the Rental Payment Agreement with BHD (CB 774). In accordance with cl 2.5 of the BTA the Rental Payment Agreement was “co-branded” for BHD and VPD. In fact the documentation was “branded” with “VOICE PRINT DATA” across the top of every page. From its operative terms it is clear that BHD and RMP were the only named parties to the commercial lease over the equipment services and software which it created. Under the heading “Supplier/service” on p 2, the Rental Payment Agreement nominated VPD (CB 775). Mr Briggs was nominated as the contact at VPD. That is, VPD were the supplier of the goods and services BHD leased to RMP. RMP’s obligations to BHD were guaranteed by Dr Beckwith. Later, probably in December 2015, another guarantee was provided by the corporate entities associated with RMP (Guarantee of Definite Payment, undated, CB 1027).
From the general terms and conditions of the Rental Payment Agreement it is clear (and not now in issue between the parties) that the purpose of the arrangement it created between BHD and RMP is one for the provision of finance by BHD to fund the supply by VPD, and the acquisition by RMP, of the Equipment Services and Software described in its Sch (CB 774-5). I interpolate that it is obvious from all of the surrounding circumstances, and the evidence to which I have referred establishes, not only as to BHD and RMP, but also as to VPD, the intent was to cover the subject matter of both Subscriber Agreements. But, I find, through error or omission only the content of GE5641 relating to the Mitel telephony is listed in the schedule to the Rental Payment Agreement, as I discussed in Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378.
Dr Beckwith gave evidence that on the recommendation of Mr Dimond and Mr Henderson he signed the Rental Payment Agreement (56.15T), but he thought it was a “supply agreement” (58.20T), which I suppose it was given that the finance arrangements took the form of a commercial lease. He also signed the personal guarantee which he understood was guaranteeing a “commitment” of “$24,000 a month” (58.45-59.5T). However it became apparent that when Dr Beckwith referred to a supply agreement, he was indicating, subjectively, that when he signed he failed to appreciate that RMP was borrowing a large sum of money to fund the purchase of the equipment services and software to be supplied by VPD. He clearly did not read the agreement before he signed it (87.20-.40T).
On 3 December 2015, Dr Beckwith signed a Direct Debit Request, granting BHD authority to debit RMP’s bank account for the instalments due under the Rental Payment Agreement (CB 777). On the same day, Dr Beckwith also signed a “Privacy and Spam Notice Consent” for BHD, permitting the latter to share information provided by RMP.
Clause 2.8 of BHD’s general terms and conditions entitled BHD to enter into the Rental Payment Agreement as either principal or agent and to transfer its interest without RMP’s consent to a third party (CB 783). The Privacy and Spam Notice and Consent defined BHD to include “any disclosed or undisclosed principal on whose behalf [BHD] may act as agent” (CB 779).
By invoice number 215409 dated 10 December 2015 VPD invoiced BHD for the capitalised value of the charges due under both Subscriber Agreements for the whole 36 month term amounting to $766,260.60 (CB 831). This amount was paid by Canon to VPD on 15 December 2015 (CB 832).
Jumping ahead for the moment, on 20 March 2016, Canon wrote to Dr Beckwith and RMP informing the latter that it was the credit provider under the Rental Payment Agreement. Probably for abundant caution, on 4 August 2016, BHD assigned the Rental Payment Agreement, Dr Beckwith’s guarantee, the Direct Debit Request, and the Privacy and Spam Notice and Consent to Canon, doubtless to facilitate the commencement of these proceedings (CB 914-915).

Attempted performance by VPD and RMP’s repudiation

I summarised some of the salient features of the evidence dealing with RMP’s repudiation of the contract in my earlier decision of Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 4) [2018] NSWSC 1379.
As it happened, both Messrs Dimond and Henderson left RMP soon after the finance was finalised. Mr Dimond “finished up” with RMP on or about 4 December 2015 (CB 803). Mr Henderson left at about the same time (Affidavit, John Henderson, 18 July 2018, CB 225 at [3]). Dr Beckwith said he terminated Mr Henderson’s employment on notice on 6 December 2015 and there is no reason to question his evidence in this regard (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 151 at [101]). Their responsibilities seem to have been largely taken over by Mr Leif Arnebark and Ms Lisa Lord (Email from Mr Dimond to Ms Pitchers, 27 November 2015, CB 803; Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 152 at [105]).
Dr Beckwith deposed that RMP’s IT problems had largely been resolved with the IT system provided by CCTS and RMP decided to “cancel” the contract (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 152 at [105]-[112]). For reasons I am about to explain I do not accept this explanation.

Preparatory works

By arrangement between Mr Dimond and Ms Pitchers, a VPD network engineer had carried out a site survey at RMP’s premises on 27 November 2015 (Email from Mr Dimond to Ms Pitchers, 25 November 2015, CB 770; Site Survey Notes, CB 797-802). And necessary equipment, mainly relating to the Mitel telephony network, was delivered on 2 December 2015 (Email from Mr Dimond to Ms Pitchers, 2 December 2015, CB 821).
Email correspondence passing between officers of RMP and VPD in early December make no mention of RMP’s IT problems having been resolved (CB 815-818). Indeed they are concerned with preparatory steps for the installation of VPD’s networking equipment.
By at least mid‑December 2015, after the finance had been arranged and advanced, Mr Edwards and Ms Pitchers contacted officers of the cross‑claimants on several occasions in order to implement not only the installation of the Mitel telephony system, but also the LiveOffice WAN system. Indeed, I will quote from an email of Mr Edwards of 16 December 2015 where he said this (CB 833):

"As we move through the different silos of the project (WAN, Network, Telephony, Desktop Environment) we will add the project lead and team member (ie Mitel Engineer; Transitional Services Manager for DaaS, etc) to the chain and remove once the project for that particular product is finalised and handed over to [RMP]."

From then on there are several emails from either Ms Pitchers or Mr Edwards arranging for persons to attend RMP’s premises to implement the contracts, or at least attempting to make those arrangements. The documents which appear at CB 835-836 are of some significance, because they are drafts of authorities to enable VPD to, as it were, take over the conduct and control of RMP’s existing systems as the new provider of IT services for RMP. I interpolate that there is no limitation of the authority sought to installers of telephony services only.

These efforts were in fact thwarted by Dr Beckwith. During cross-examination about the omission of the LiveOffice WAN from the Rental Payment Agreement the following evidence emerged (45.15-.40T):

"Q. So, beyond what you’ve been told by the IT guy if we can call them that, you have no personal knowledge as to whether the equipment supplied in December 2015 was limited to the telephone system or extended to the WAN system?
A. I'd like to say yes with a comment, that the WAN system, the WAN links could never have been installed because we never allowed access to the rest of our system to do so."

I emphasise "we never allowed access to the rest of our system”. The evidence continued (see 45.22-.41T):

"Q. Yes, we understand that. You prevented any installation of the WAN system?
A. I did.
Q. Yes, now that was your decision?
A. Mine.
Q. No‑one from VPD suggested that they weren't willing to go ahead and install the WAN system?
A. That's correct.
Q. Indeed they offered to go ahead and install the WAN system?
A. That's correct.
Q. But you refused?
A. I did.
Q. But you still maintain a belief that the rental agreement you signed was limited to the telephone agreement?
A. I do maintain that belief."

Leaving aside that last question and answer, about which topic I make comment below under the heading, “An alternative claim”, these statements from Dr Beckwith are very amply supported by the contemporaneous documents contained in the court book. They clearly establish that RMP repelled VPD’s attempts to perform its contract with RMP from an early stage in its implementation.

Signs of trouble with the performance of the contract between VPD and RMP emanated from RMP unilaterally. The early marker in that regard might well be an email on 5 January 2016 from Mr James Beckwith, who was the assistant administrative manager at the relevant time, which, amongst other things, asks for a copy of the “service agreement”, information about what is included, the dates the agreements were signed "and what the cooling off period was" (CB 837). Mr Edwards wrote back while on holiday overseas providing the information required, but pointing out that there was no cooling off period (CB 838).

Repudiation of the contract

On 6 January 2016 there was an internal management meeting of RMP’s officers at which, inter alia, the financial position of the organisation was discussed. A minute was recorded of concerns in relation to the contract with VPD and a resolution passed to attempt to vary the payments in relation to it (CB 841-843).
On 13 January 2016, Mr Benson provided access details “to everything”. Although the codes were provided by him the requested written authorisation for VPD to utilise them did not materialise (Email from Mr Benson to Mr Cooper (of VPD), 13 January 2016, CB 845). On the same day Ms Lord emailed Ms Pitcher to inquire when the first payment was due (CB 847).
The next day, 14 January 2016, at 8:43 am Ms Lord emailed Ms Pitchers and Mr Edwards in these terms (CB 850):

"I have been provided instruction from the Director of Reliance Medical to inform you that we wish to halt any further installation of the IT and telecommunications and to cease any future payments, including this months expected payment." (My emphasis.)

I understand “the Director” to be a reference to Dr Beckwith. On the same day at 1:37 pm, Dr Beckwith himself emailed Mr Edwards stating that the RMP "is reconsidering this contract" and explaining why that was so (CB 852):

“The problem for [RMP] is that our business has had a significant set back over the past 2 months, which was finally fully disclosed to me in the past few days. It is with deep regret that I find that [RMP] is simply unable to afford this project. Our cash flow forecast leads me to believe that the project cannot be afforded for at least 6 months.
… I realise that [VPD] has rights under the contract with [RMP]. I think that enforcing those rights would be unproductive as [RMP] would then have no possibility of ever being a future … customer. The best position I can hope for is to defer the project for 12 months, and re-evaluate our needs at that time.
Reasonable costs of deferring the project can probably be met. [RMP] is, however, taking multiple measures to recover financial stability in the face of our cash flow difficulties.
As regards telephone conversations, I prefer emails so that we have a paper trail. If you can think of any other ways that we can work around this, I would be very pleased to consider them.
… This has not been an easy decision for me to take. One outcome is that [VPD] could sue [RMP] for the contract value, with serious repercussions for the business and for me personally. That would be devastating. In addition, one of my core values is integrity – and it pains me not to be able to do what I have said I will do. My response in the face of that is to clean up the mess as well as I can. Taking this decision now, before substantial costs have been incurred is a lot better than failing in 6 months with all the infrastructure in place.
I apologise to you and to [VPD] for the problem I have created.”

On 19 January 2016, Ms Lord informed a VPD technician that access had been removed, “[w]hilst the legalities of the contract dispute are sorted” (CB 854). She also informed him that a decision had been made “to revert back to CCTS until further discussions are held” (CB 854). Ms Lord was apparently unaware that earlier that day, at 4:45 am, Dr Beckwith had emailed Mr Edwards in these terms (at CB 855):

“Just proceed with your legal action. [RMP] has no capacity to meet the contract and we will go broke trying anyway.”

Notwithstanding this VPD continued to be willing to perform the contract and on 27 January 2016, Ms Pitchers attempted to arrange for the installation of equipment “for RMP’s new service”. Ms Lord responded that Dr Beckwith and Mr Edwards were “still in contract discussions”. No further work was to be arranged and access would be denied to VPD (CB 857).
Notwithstanding RMP’s repudiation of the contract, it is apparent that VPD attempted to negotiate with RMP to salvage the relationship. Following up on matters raised by Dr Beckwith in his email of 14 January 2016 relating to the consideration that RMP’s Wyong site was not yet operational and that the new system was not then operational at West Gosford “due to the embargo” (CB 852), Mr Edwards sought relevant information about the actual number of users of the system, which RMP provided on 28 January 2016. There apparently had been a conversation between Dr Beckwith and Mr Edwards on 27 January 2016 because Dr Beckwith emailed the latter on 1 February 2016, stating at (CB 860):

“Your response on Friday was surprisingly brief and lacked the information you said you would give me. However, that aside, I don’t believe our needs can be mutually met you have only indicated a small proportion of the price coming off.
There is no point having another meeting just to talk. At the end of any meeting, I will be asking you to detail the exact position in writing. In that case I can seek advice from more qualified people than myself. I am obviously wary of further over-commitment and other mistakes due to my lack of knowledge in this area.
If it turns out that we don’t have common ground then that is just that – you need to take the necessary action against me.
My apologies once more.”

On Friday 5 February 2016 Mr Arnebark emailed Mr Edwards and sought a meeting between them to enable him (CB 862):

“to lay out the reality of our current situation. [RMP’s] current financial position is tenuous and liquidity is extremely low. Decisions have been made regarding expansion plans that were based on faulty cash flow modelling and sense of optimism that failed to eventuate. We have recently laid off staff.”

He also said:

“I understand your position that [RMP] was not oversold on the service package as you undoubtedly responded to the information provided. However the reality remains that the level of IT infrastructure set forth in the agreement is far in excess of [RMP’s] realistic needs and also creates significant service redundancy’s (sic). These are matters we can investigate further.”

A meeting apparently took place but there was no resolution. On 16 February 2016, the sum of $24,451.97 due to Canon Finance was automatically deducted from RMP’s accounts pursuant to the debit authority previously provided. This led Dr Beckwith to email Mr Grant (of Canon) and Mr Altenberg in the following terms on 20 February 2016 (CB 866):

“You Arseholes,
I have just found out that $24,000 plus has been removed from my accounts illegally. I presume this is on supposed account of a contract I have with Fuji Xerox, VPD or BHO – whoever that is.
This contract has been completely repudiated by [RMP], and the matter is obviously going to be a court case lasting some years. Therefore [RMP’s] money, required to pay its contracted doctors has been stolen. I demand the immediate return of this money.
I will be taking the strongest actions available to me to recover this money. I emphasise that the money you have taken belongs to the third parties.”

I interpolate, this of course was the monthly payment due under the Rental Payment Agreement which Dr Beckwith had authorised by signing the Direct Debit Request.

On 21 February 2016, Dr Beckwith emailed Luke Price of BHD demanding the return of the $24,000 and threatening legal action. He accused VPD and BHD of having “an unacceptable way of working which was never fully disclosed to [RMP] (CB 868). He stated that his attitude had “shifted from apologetic to shocked to outrage” (CB 868). He also said at CB 868:

“Who on earth would agree that you should capitalise a rental agreement, not advise the borrower of any essential facts of the finance arrangement including implied interest rate and principal, and as a customer wear all risks associated with failure if VPD to provide the service? (Sic). Not me, that’s for sure.”

It is important to stress that the matters there complained of do not form the basis of any claim propounded by RMP in these proceedings.

Notwithstanding Dr Beckwith’s attitude, Mr Edwards emailed on 25 February 2016 offering “a re-structure of [RMP’s] rental schedule and deferred payments for a portion of the overall Monthly payment for 9 months”, on behalf of BHD and VPD (CB 874). Mr Edwards offered to meet “to discuss the new payment schedule” (CB 874). Dr Beckwith responded by stating that he had submitted a complaint to ASIC “about the conduct of all three companies involved” (CB 876). He made it clear that he had “no present intention of doing business with people who I have serious cause to complain about” (CB 876). He demanded the return of his money and indicated that he would “return … all VPD hardware in [his] possession” (CB 876). On 7 March 2016 the senior accounts service officer with Canon wrote to Dr Beckwith in a respectful tone referring to the contract and proposing that Dr Beckwith make “a manual payment” to bring the account up to date (CB 883). But also suggesting that he attempt to meet with BHD “to amicably resolve and explain any possible cashflow/solvency issues that you may be experiencing and speak with VPD on any ‘system’ issues you may have” (CB 883-884).
Dr Beckwith responded by email on 13 March 2016 (CB 886):

“My advice at this time is that the contract was never valid, nor was the guarantee.
In the event that you persist in this and my advice is proven to be incorrect, I’d like to point out that the guarantee entities have no assets to claim against – I’m not sure how they were selected. Thankfully all concerned were inept.
That’s my position.”

Dr Beckwith went on to accuse all concerned of unethical behaviour.

On 20 March 2016, Dr Beckwith wrote to Canon Finance a “without prejudice” letter demanding the return of the instalment deducted on 15 February 2016 (CB 888).
In his affidavit of 19 October 2017 at [111] Dr Beckwith said the following (Exhibit B):

“My decision to cancel the agreement was as a result of multiple reasons that included:
a.   Me becoming aware that Fuji Xerox would not be providing any IT services or equipment and that VPD had no relationship to Fuji;
b.   It was not disclosed to me that the financial obligations under the contract would be owed to BHD Leasing;
c.   I considered that the services and equipment that were being provided to Reliance by CCTS were completely satisfactory and that in fact Reliance did not need an entirely new IT cloud system;
d.   I didn’t consider it to be a necessity to change the entire IT system.”

Conclusions on Dr Beckwith’s evidence with respect to the repudiation of the contract

I do not accept this explanation. It is apparent to me on the evidence I have recited that Dr Beckwith’s decision on behalf of RMP to repudiate the contract with VPD was for the reasons explained in his emails of January and February 2016. That is to say, that following his review of RMP’s financial position with his new leadership team after the contracts had been entered into, Dr Beckwith decided that RMP could not comfortably afford the ongoing financial commitment he had taken on. His apparent high-handedness may well be explained by his initial failure to appreciate that RMP had entered into a loan agreement to fund the acquisition of the IT services and equipment and his related mistake that the $24,000 per month commitment was an ongoing fee for the provision of services rather than, effectively, a loan repayment. He seems to have proceeded on the belief, at least initially, that the contract could be “cancelled” with only limited legal and financial implications.

The evidence of Mr Chris Benson

It is convenient to deal with Mr Benson’s evidence-in-chief at this juncture. Four affidavits of Mr Benson were read in the proceedings: 18 October 2017, 28 June 2018, 14 August 2018 and 30 August 2018 (filed in Court). Mr Benson said that RMP became a client of CCTS in about 2013. After successfully quoting for the work, CCTS supplied all hardware, server equipment, networking equipment, telephone handsets, computer desktops and everything else that was necessary for RMP’s IT and telecommunications requirements for its West Gosford practice. CCTS continued to be RMP’s IT provider up to and after the period I am concerned with in this case. RMP’s IT system is completely run and operated from a server located at its West Gosford site. It continues to operate from this location servicing the other sites.
Mr Benson confirmed that “in or around July 2015” he, at Mr Dimond’s request, provided a quote for a cloud based system notwithstanding his own view that such an approach was unnecessary for RMP’s needs (Affidavit, Chris Benson. 18 October 2017, CB 249-250 at [26]-[32];). Because of his view he did not put a lot of effort into the quote which he provided on 24 July 2015 (see Affidavit, Chris Benson, 18 October, CB 528-529 at [27]). He contacted Mr Dimond about the quote after his return from holidays in October 2015 and was informed that RMP “decided to go with another provider, sorry” (Affidavit, Chris Benson, 18 October, CB 250 at [30]).
CCTS continued to provide IT services to RMP during the period of late 2015 to early 2016 when VPD were supposed to be taking over the work.
In his first affidavit Mr Benson says that he was contacted by RMP about the scanning issue (Affidavit, Chris Benson, 18 October, CB 248 at [19]). He does not say when in this affidavit. He said that upon review of the system he diagnosed that the error was being caused by the Best Practice software itself and that a solution would be to require an upgrade to the SQL software installed on RMP’s server when Best Practice was originally installed. RMP was running on a free version of Microsoft SQL. He also states that CCTS provided its own paid licence to RMP to show that the problem was not related to any equipment, but rather the shortcomings of the free product. The scanning issue, after consultation with the providers of Best Practice, was resolved by reducing the resolution on the scanners. Again he does not say in this affidavit when that occurred, but I would have inferred from his discussion about upgrading the SQL licence in this context that it was done after January 2016 following the repudiation of VPD’s contract.
I have formed this view because Mr Benson states that he was contacted by Ms Lord “in or around January 2016” (Affidavit, Chris Benson, 18 October, CB 253 at [49]). Ms Lord explained that RMP had decided not to proceed with the new VPD contract and wished CCTS to continue to provide IT services to RMP. This occurred after Mr Benson had made the administration passwords available for the use of VPD. Ms Lord explained, “We have been going elsewhere because the Practice software kept having issues, could you have a look at this”. He said (Affidavit, Chris Benson, 18 October, CB 253 at [52]):

“In or around the beginning of 2016 CCTS advised Reliance that a full version of SQL was needed to resolve Best Practise issues. This was advised to CCTS from Best Practise themselves after looking at the errors. In or around the beginning of 2017 CCTS provided its own SQL licence for Reliance to use. CCTS is currently in discussions with Reliance regarding the purchase of its own SQL licence.”

I interpolate that Mr Benson said the cost of upgrading the SQL licence was a one-off payment of $13,000 (Affidavit, Chris Benson, 18 October, CB 253 at [56]).

In his further affidavit of 30 August 2018, Mr Benson reiterated that the scanning problem was resolved by adjusting the resolution on the scanners. However he stated that this occurred in July/August 2015 (Affidavit, 30 August 2018, CB 249A, p 2 at [6]). This affidavit was filed in court on the fourth day of the hearing. This statement was not challenged, but as I have said, it seems more likely that this adjustment would have been made when Mr Benson was brought back into the fold by Ms Lord, doubtless on Dr Beckwith’s instructions in January 2016. Despite the absence of a direct challenge I would regard my preferred inference as supported by the context of Mr Benson’s first affidavit and the apparent logic of events. Moreover, Dr Beckwith recalls that the scanning issue was still in play at the 30 September meeting (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 207 at [29]). No other person employed by RMP gives evidence of the scanner’s having been adjusted in August 2015. Mr Benson must be mistaken in his belief.
In cross-examination Mr Benson agreed that there was a downside to reducing the resolution of the images in that “you are getting less clear and less definitive images” (256.25T). He also agreed that had “a full SQL platform” been installed at the outset, the inefficiencies experienced by RMP during 2015 with their IT system generally “would never have occurred” (256.6T). He also said he had reservations about RMP requiring “such a large upgrade” as proposed by VPD (260.16T).
Whenever the scanning adjustment had been made, it was quite clear that the necessary upgrade to the full SQL platform had not occurred at the time Dr Beckwith decided to repudiate RMP’s contract with VPD. Indeed it still had not occurred when Mr Benson affirmed his first affidavit.

The pleaded case of misleading or deceptive conduct

The claim against VPD and Mr Altenburg, the first and second cross-defendants

The parties are agreed that Mr Altenburg was a Fuji employee, or perhaps contractor, throughout 2015. From about March/April 2016, Mr Altenburg became an employee of VPD. The parties are also agreed that VPD is not associated with Fuji, and BHD is not a related company of Fuji (Statement of Agreed Facts, CB 1239).
The RMP pleads that throughout the period 19 June 2015 to 25 November 2015 (the day the Rental Payment Agreement was entered into), Mr Altenburg, on his own behalf and on behalf of VPD, held himself out as the Accounts and Business Development Manager of Fuji Xerox, and as a person who was acting on behalf of and in the interests of Fuji Xerox (Second Further Amended Statement of Cross-Claim, at [17]). RMP says this holding out arises from Mr Altenburg’s conduct in:

Providing to them a business card that described him as an employee of Fuji in the role of Business Account Manager;

Communicating with them through an email registered on a domain belonging to Fuji; and

Appending to emails sent to them a footer containing Fuji’s logo and a description of his role as Business Account Manager at Fuji.

The core of RMP’s claim however is pleaded at [18]-[21] of the cross claim. It is not necessary to set those paragraphs out in full here; a summary will suffice. The allegation made in those paragraphs is that throughout the period July to 25 November 2015, Messrs Altenburg and Edwards, on their own behalf and on behalf of VPD, represented to RMP, Dr Beckwith, and Messrs Henderson and Dimond, that:

The equipment, software, and services to be provided by VPD would address RMP’s current IT system’s inefficiencies; and

VPD’s products and services would address RMP’s concerns about the shortfall in its IT and printing systems; and

The VPD product would be quicker and more efficient than the current system (which relied on a physical server in RMP’s office). [1]
1. The ambit of the claim was originally much wider. However, over the course of the hearing, Mr Moore confined the scope of the cross-claimants’ claim to only these grounds (7.43-.50T, 18.17-.22T).

The RMP avers that as a matter of fact, the representations summarised in the immediately preceding paragraph were not correct and that Messrs Altenburg and Edwards failed to advise RMP and its key personnel of that (as distinct from representing that a state of affairs exists or a product fulfils some function where in fact it does not) (Second Further Amended Statement of Cross-Claim, CB 35 at [19]-[20]). RMP pleads that the representations, conduct, and failure to advise described contravene s 18 of the ACL (Second Further Amended Statement of Cross-Claim, CB 36 at [22]).

What might be immediately appreciated from the pleading is that the allegation central to the cross-claimants’ case is based on a hypothetical. They do not and indeed cannot plead that the VPD product, service and software “did not” cure RMP’s inefficiencies, nor can the cross-claimants plead that the same “was not” more efficient than the existing system, subject to the “emergent” issue outlined below. This is because, as has already been mentioned, the contract was repudiated, or “cancelled” as the cross-claimants would have it, before the system and associated hardware was installed at the various medical practice sites. As is obvious, to make good their case, it is necessary that the cross-claimants’ show that the package of IT goods and services that VPD agreed to supply was deficient in some way rendering it incapable of remedying RMP’s IT problem – even if it had been installed.
The scope – both temporally and in terms of the medium of representation – of the cross-claim was narrowed further as a result of the further and better particulars supplied to VPD’s solicitor by the cross-claimants’ solicitors (CB 1201). These particulars clarified that the representations referred to at [89] above were oral, and made during the 19 June and 30 September Meetings, (both of 2015), and not otherwise.
What Mr Morris QC, who appeared with Mr Erskine for VPD and Mr Edwards, termed the “emergent” part of the cross-claimants’ case was RMP’s argument that the VPD package was necessarily incapable of ameliorating RMP’s IT issues and that it was necessarily inferior to their existing system because it allegedly omitted the full licence for Microsoft SQL software, which was required to run RMP’s “Best Practice” management system: see Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 5) [2018] NSWSC 1373. This issue which really arose at the heel of the hunt gave rise to a significant body of evidence which I will deal with later in these reasons.
I hasten to add that RMP does not plead that any of the representations were in respect to a future matter and that the person making the representation did not have reasonable grounds for making it. Thus no issue arises as to s 4 of the ACL, nor can the cross-claimants avail themselves of the reversed onus of proof of reasonable grounds under s 4(2).

Actions taken in reliance on pleaded misleading or deceptive conduct

The RMP pleads that by reason of or in reliance on the misleading or deceptive conduct and other matters alleged to have been engaged in by VPD, Mr Altenburg and Mr Edwards RMP entered into, and Dr Beckwith acted as guarantor under, the Subscriber Agreements and the Rental Payment Agreement (Second Further Amended Statement of Cross-Claim, CB 36 at [24]-[26]).

The claim against BHD, the sixth cross-defendant

RMP also pleads (Second Further Amended Statement of Cross-Claim at [27]) that BHD leased and provided equipment services to RMP for a period of 36 months, and “if BHD terminated the contract” RMP would be required to pay all monthly payments for the entire period. By [28] it averred that by entry into the Rental Payment Agreement “BHD/Canon” paid the lump sum to VPD. It was alleged that Mr Altenburg and Mr Edwards represented, inter alia, on behalf of BHD that it was VPD’s “financial arm providing lease finance to prospective customers” (at [29]). And by [30] that the Rental Payment Agreement contained on each page “a prominent header” referring to VPD.
By these means it was alleged that BHD made the following representations (Second Further Amended Statement of Cross-Claim at [31]):

BHD was the financial arm of VPD; and

VPD, by itself, its servants and agents “was entitled to speak, act and conduct itself on behalf of BHD with respective lessees.”

It is also alleged that by this conduct BHD induced RMP to enter into the Rental Payment Agreement by reason of which RMP suffered loss and damage.

As against BHD, RMP seeks a declaration that it engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 12DA(1) ASIC Act; an order that the Rental Payment Agreement and associated arrangements be declared void ab initio; and in the alternative damages under s 236 of the ACL. It may be taken that damages are actually sought under s 12GF ASIC Act.

The accessorial claim against Mr Edwards, the third cross-defendant

At [23] of their pleading, which deals with Mr Edwards’ accessorial liability RMP pleads that “Mr Edwards … was a person involved in the contraventions of s. 18 [of the ACL] by [VPD, Mr Altenburg and BHD]”. So far as BHD is concerned the reference to the ACL is erroneous, given s 131A Competition and Consumer Act 2010 (Cth). The reference should be to s 12DA ASIC Act. Accessorial liability as a person involved arises directly from the language of s 12GF ASIC Act which creates the statutory cause of action in damages.

An alternative claim

For completeness I add that an issue arose between the parties as to whether the cross-claimants might make out their case of misleading or deceptive conduct by reference to the fact that the Rental Payment Agreement omitted any mention of the LiveOffice WAN system. This issue was the subject of my ruling in Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378, where I held that the cross-claimants were precluded by their pleadings from running the case on this basis. From time to time I refer to this alternative case because it tended to feature some of the evidence led and submissions advanced notwithstanding my ruling. I refused the cross-claimants leave to amend to advance the alternative case in Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 4) [2018] NSWSC 1379. No case was sought to be advanced which was founded on Dr Beckwith’s unilateral mistake about the Rental Payment Agreement involving a substantial loan. I am not suggesting such a case would have been in any way tenable, especially given my acceptance of the evidence of Mr Henderson and Mr Dimond on that matter.

When did the meetings take place and who attended?

There was, as mentioned, differences in the evidence of various witnesses about precisely who attended which meeting. I have already indicated my findings as to this issue above. In this section I set out in more detail the reasons for those findings.
In their joint statement of agreed facts, the parties agreed that (CB 1240 at [12]-[19]):

The 19 June Meeting was attended by James Beckwith and Messrs Altenburg, Briggs, Dimond and “possibly Mr Henderson”.

The 30 September Meeting was attended by Dr Beckwith, James Beckwith, Messrs Altenburg, Edwards, Dimond, and Henderson. This was the first occasion on which Dr Beckwith met Messrs Altenburg and Edwards.

Mr Henderson’s evidence as to the meetings he attended was imprecise. He deposed that the first meeting he ever attended took place “[i]n approximately mid-2015” (Affidavit, John Henderson, 6 March 2018, CB 169 at [43]). He was able to recall that Messrs Altenburg, Dimond and Edwards were present, and that Dr Beckwith was not. If this is so, this is obviously the 15 July Meeting because Mr Edwards was not present at the 19 June Meeting and Dr Beckwith only ever attended the 30 September Meeting. Mr Henderson also denied ever meeting Mr Briggs (155.32-.33T).
However, Mr Briggs gave evidence that Mr Henderson was present at the 19 June Meeting, and that he could not recall whether James Beckwith was there (Affidavit, Luke Samuel Briggs, 8 March 2017, CB 273). This latter issue is of no moment as the parties were agreed that James Beckwith was present. As to the former, Mr Briggs’ evidence is inconsistent with the evidence of Mr Altenburg (who relevantly made no mention of Mr Henderson’s presence at the 19 June Meeting) (Affidavit, Christian Altenburg, 2 March 2018, CB 412 at [42]) and possibly James Beckwith (who could not recall whether or not Mr Henderson was present) (Affidavit, James Beckwith, 6 May 2018, CB 218 at [18]). It is also inconsistent with Mr Henderson’s own evidence that he has never met Mr Briggs.
On balance the preferable conclusion is that Mr Henderson attended the 15 July and 30 September Meeting, but not the 19 June Meeting.
This detail of primary fact is of some small importance given the particulars that the representations were made at the 19 June and 30 September meetings.

Review of the evidence concerning the representations relied on by RMP

Dr Beckwith’s evidence

Dr Beckwith initially erroneously recalled that he was present at the 19 June Meeting (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 135 at [24]-[25]). This error was addressed in his second affidavit dated 6 May 2018 prepared after much of the evidence of the responding parties had been served (Exhibit B; CB 203 at [3]-[6]). Indeed much of the detail in the first affidavit was withdrawn or recast. Dr Beckwith’s reliability was, unsurprisingly called into question because of this and on demeanour grounds. Dr Beckwith now accepts that he was only ever present at the 30 September Meeting. It is clear that the need for Dr Beckwith to substantially recast his evidence after reviewing other evidence as it became available affects my assessment of the reliability of his recall. It also demonstrates that his final account is characterised by a relatively high degree of reconstruction which likewise tarnishes its acceptability, always accepting human recall may commonly involve some degree of reconstruction. I did not regard Dr Beckwith as in any way dishonest, nor did I understand such a submission to have been advanced by any responding party. Although Mr Fernon submitted aspects of his evidence were “unbelievable”.
The impression I formed from seeing and hearing his evidence, confirmed by my review of the transcript, was that when these events took place Dr Beckwith was a successful, busy medical practitioner of an entrepreneurial bent. He was the head of a growing multi-disciplinary practice on the brink of expanding into additional sites. His professional and executive responsibilities left him little time for the minutiae of business administration which he left in the hands of the managers he had employed for that purpose. He oversaw the work of these managers at an executive level but he was at least once or twice removed from the day to day implementation of his directions and their practical ramifications. Mr Henderson and Mr Dimond were the managers to whom the resolution of the IT issues had been delegated. They, of course, frequently reported back to Dr Beckwith for final instructions, which he gave. But they enjoyed a fair degree of autonomy in the day to day pursuit of the tasks assigned to them, acting, when they did, with Dr Beckwith’s full authority.
This business structure explains why at times Dr Beckwith was short on, or mistaken about, some of the important details of the negotiations and the legal structure of the deal when it was struck. A prominent example is his failure to fully read the Rental Payment Agreement and his resulting failure to appreciate it effectively embodied a commercial loan requiring monthly repayment instalments rather than a service agreement, as he apparently thought, involving payment of a fee for services from month to month. Anyone with a degree of business acumen, which Dr Beckwith must have in large measure, would have appreciated its true legal effect. Additionally anyone who had involved himself or herself in direct oversight of the various phases of the implementation of the decision which Dr Beckwith made to acquire VPD’s IT solution would have been in no doubt about its proposed business and legal structure.
Another example of Dr Beckwith’s “hands off” approach was his failure to appreciate that notwithstanding that RMP’s enterprise was poised on the threshold of significant expansion, or perhaps because of that, it could not afford the $24,000 per month commitment he had freely entered into without risking its liquidity until that salutary truth was drawn to his attention by Ms Lord after her appointment as RMP’s Finance and Administration Manager. And perhaps a third example is provided by the persistence of Dr Beckwith’s belief that Fuji Xerox, rather than VPD, were to be the new IT providers.
Turning then to his evidence. Earlier in the morning of the 30 September meeting, Dr Beckwith received an email from Mr Henderson. The email itself had no content, however its subject line read (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 142 at [57]; CB 581):

“Subject: Meeting with Fuji Xerox is at 10:30 this morning.”

Dr Beckwith deposed that prior to attending the meeting, he was told by Mr Dimond that a Mr Christian Altenburg “from Fuji” and a Mr Grant Edwards “from VPD” would be there (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018; CB 205 at [20]). When he asked Mr Dimond who VPD were, he was told that they were “a Fuji Company” (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 205 at [20]).
Dr Beckwith said that he was handed a business card by Mr Altenburg at the start of the meeting which described him as an “Accounts and Business Development Manager” at FujiXerox, and that Mr Altenburg introduced himself in the same way (Exhibit B; Affidavit, Dr Rodney John Beckwith, 19 October 2017, CB 135-136 at [28]).
Mr Altenburg’s business card was not in evidence before me, and Mr Altenburg does not recall having ever provided it (Affidavit, Christian Altenburg, 27 August 2018 at [7]). Dr Beckwith deposed that Mr Altenburg spoke first and introduced Mr Edwards as being there “to explain what is a cloud based system for [RMP] going forward” (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 206 at [24]). Dr Beckwith recalled Mr Altenburg drawing a series of diagrams on a whiteboard, with the word “Fuji” at the top representing the cloud (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 206 at [27]). He deposed that when Mr Altenburg spoke, he would use words like “Fuji Xerox” and “we will provide”, as distinct from “VPD will provide” (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 206 at [24]-[27]).
Dr Beckwith then deposed to the following exchange of words during the meeting between himself and Messrs Altenburg and Edwards. Given the paucity of direct evidence as to what was said during this meeting from other witnesses, I will set the exchange out in full (Exhibit C; Affidavit, Dr Rodney John Beckwith, 6 May 2018, CB 206-207):

“[Dr Beckwith]:   Does this mean that all the information on the servers would be live to all our sites?
Mr Edwards:   Absolutely, and because you will not be required to maintain physical servers on site. The cloud system will be more efficient and quicker in linking up all the medical practices as the information will is [sic] stored in the cloud and will be accessible from anywhere with an internet connection. You are not restricted by your server limits. We are offering you a one stop solution that will not only address the scanning issues [RMP] is experiencing but will resolve all the problems and issues you have been encountering with using a physical server on site.
Mr Dimond:   What happens if the business grows and we establish more sites?
Mr Edwards:   The cloud system will not rely on a physical server which means that you will be able to scale or wind back the number of users in real time based on the demands and needs of your business, this system is designed to respond to immediate demands without the need to invest in hardware infrastructure.
[Dr Beckwith]:   [H]ow does the cloud operate?
Mr Edwards:   [W]e employ 3 different server locations to which you connect through the cloud which means that if one ever goes down, the other two will continue to run and you will never experience any downtime. Additionally, we will handle all your IT needs and will provide you with live support should any issues arise. So instead of you having to deal with 3 different providers for support, you will only need to deal with us for all matters relating to your IT system moving forward, your internet, phones and data will all be managed by us so there’s only 1 person to call if you have any issues with anything.
Mr Edwards:   What we are offering is a complete IT cloud solution system that will be installed and maintained on Fuji on its servers. This means that the system will be entirely redundant thereby you will never have any downtime as the servers would automatically switch over in the event that one server goes offline for whatever reason.
Mr Altenburg: [T]his system will be a platform for various other features that [you] would want in your business.
Mr Edwards:   [Y]es, for instance we can integrate into the IT system an interactive video platform that you will be able to stream to different practices and use as an educational platform for your patients. There’s endless possibilities with the cloud system.” (My emphasis.)

In essence, Dr Beckwith’s version of events has Messrs Altenburg and Edwards jointly giving a presentation at the 30 September Meeting predominantly focussed on the capabilities of VPD’s service. That said, Dr Beckwith recalls Mr Edwards representing that VPD (or Fuji’s) system will be more efficient and quicker in linking up RMP’s medical practices, and that it would not only address the scanning issues RMP is experiencing but would resolve all the problems and issues that they have been encountering caused by using a physical server on-site.
In cross-examination, Dr Beckwith was asked whether he was told by anyone from VPD that it was an authorised supplier of Fuji equipment. He answered that he could not recall whether anything to this effect had been said (48.28-.30T). It was put to Dr Beckwith that the only reason he had come to hold the belief that VPD was related to Fuji was because this is what he had been told by one of his own employees (48.38-.40T). He disagreed, and said that the other reason he held this view was because of the manner in which Mr Altenburg introduced RMP to VPD (48.44T).
Dr Beckwith agreed that he was able to access Mr Dimond’s RMP email account at the time of swearing his affidavits. From them he was able to locate and exhibit an email sent by Mr Altenburg at 4:05 pm on 30 September 2015. That email relevantly said (CB 144 at [70]; CB 583):

“Hi Phil, John & James,
It was good to see you all today, meet Dr Beckwith and have a very productive meeting.
To summarise the meeting & action steps required by the relevant parties please see below:
…
The quotes provided will be for West Gosford, Kariong, Wyong and will include full hosted Live Office, full hosted telephony along with all necessary hardware required.
…
All other Microsoft & server licencing is included as discussed.”
(My emphasis.)

I have referred above to the evidence Dr Beckwith gave that he regarded the Rental Payment Agreement as a “supply agreement”. In further cross-examination about the Rental Payment Agreement he gave the following evidence (79.8-80.15T):

MORRIS
“Q. Like any businessman, and I don't mean to insult you by describing you as a businessman but as well as a member of a very honourable profession you also run a business, as any businessman knows if you agree to pay $24,000 a month or any other significant sum of money and it turns out you can't pay it, you are going to be in financial trouble.
A. I understood that.
Q. You understood that.
A. Yes
Q. No doubt you would primarily blame Mr Henderson and Mr Diamond for not alerting you to your company's financial position before Ms Lord brought it to your attention in early January.
A. That's a good point.
Q. No doubt if you had been informed of your company's financial position you wouldn't have agreed to upgrade your information technology and data retrieval system at a cost of $24,000 a month for 36 months?

Dr Beckwith’s repudiation of the Subscriber Agreements and the Rental Payment Agreement and his associated refusal to allow VPD to perform its side of the bargain erects a significant barrier in the way of proof of RMP’s case. This is not a case where the purported performance of the supplier’s side of the contract establishes the inadequacy of the goods and services provided by demonstrating performance which falls short of the representations made. There is simply no evidence that VPD’s equipment, software and services would not have performed in accordance with the representations made had RMP not repudiated the contract.
I should also say that had I permitted RMP to rely upon the alternative case based upon the omission of the LiveOffice WAN equipment software and services from the Rental Payment Agreement, no different outcome would have followed. As Ms Chan of counsel who appeared for BHD pointed out, in a different context, the Rental Payment Agreement would have been clearly amenable to rectification. I accept that VPD was not a party to the Rental Payment Agreement, however, both the Subscriber Agreements and the proposal advanced on behalf of RMP by BHD for finance by Canon detailed and documented the LiveOffice WAN requisites. But of fundamental importance, the evidence overwhelmingly establishes not only that VPD fully intended to perform the Subscriber Agreement in relation to the LiveOffice WAN but in fact, so far as it could, in its data centre, having been denied access access to RMP’s premises and system, it took all available steps to set up the LiveOffice WAN.
As I have said no case has been advanced based upon Dr Beckwith’s unilateral mistake about the Rental Payment Agreement involving a commercial loan and I will say nothing more about that in this context.
RMP has not proved the matters averred in [19] of the Second Further Amended Statement of Cross-Claim. This is an essential factual component of its case going to the contravening conduct of the cross-defendants which it has failed to establish.
I also regard it as important to point out that it is no part of RMP’s pleaded case against VPD that Mr Edwards or anyone else on behalf of VPD represented that VPD’s proposed solution was necessary or essential, in the sense of being the only solution available, to address the inefficiencies in RMP’s existing IT system. This is important because RMP points to the circumstance that since it “cancelled” (repudiated) the Subscriber Agreements and Rental Payment Agreement it has continued to operate using this existing system albeit with some modification as described by Mr Benson. The system as modified is also much cheaper than the solution proposed by VPD. The actual costs incurred are not in evidence. Obviously there may be more than one way to skin a particular cat. As Mr Morris argued a Holden Commodore and a Mercedes Benz may each serve efficiently to convey the driver from point A to point B. That is not the point. That RMP is content with what may be a much cheaper option, in circumstances where at the relevant time it was experiencing significant cash flow problems, does not prove, or even tend to prove indirectly, its case against VPD.
In reality, I repeat, Mr Benson’s evidence proves that RMP’s existing system was in need of improvement, or modification, if the inefficiencies and shortfalls RMP perceived were to be addressed and its operating requirements met.

The failure to advise averment

At [20] of the Second Further Amended Statement of Cross-Claim RMP avers that Mr Altenburg and Mr Edwards on behalf of themselves and VPD failed to advise RMP, Mr Dimond and Mr Henderson that the equipment and services to be provided would not address the inefficiencies, concerns and shortfalls in RMP’s existing system and would not be quicker and more efficient than it. Given my decision in relation to [19] these averments must fail. It’s not clear to me how this obligation is said to arise in the context of s 18 of the ACL absent proof that the representations I have found Mr Edwards made were known to be misleading or deceptive to each of Mr Altenburg and Mr Edwards. As I have found that they were not misleading or deceptive, or likely to mislead or deceive, the averments in [20] must be rejected for very substantially the same reasons given in relation to the averments in [19]. Clearly if the factual premise underpinning [20], ie that the performance of the equipment, software and services promised did not live up to what was represented, have not been made good that can be no occasion to advise RMP that that this was so. If it is necessary to say so, given my findings so far no question arises about the state of knowledge of Mr Altenberg and Mr Edwards.
It is also pointless to make contingent findings on this topic lest my decision on the [19] issue is incorrect. If the performance of what was to be supplied would not have matched what was represented this ground would not matter much to the outcome of the case as against VPD. Of course it may have some effect on the personal liability of Mr Altenberg and Mr Edwards but only if knowledge of the falsity or material inaccuracy of the representations were proved.

Causation

The statutory cause of action upon which RMP relies is that created by s 236 of the ACL which, as I have set out above at [222], has the effect that if a person suffers loss or damage because of the conduct of another person which contravenes, inter alia, s 18 of the ACL, the first person may recover the amount of that loss or damage by action against the second person or any other person involved in the contravention.
Like the cause of action for the tort of, say, negligence, damages is of the gist of the statutory cause of action created by s 236 ACL. And it is clearly an element of the statutory cause of action that the plaintiff prove the contravention relied upon caused the loss or damage alleged to have been suffered: ACCC v TPG Internet Pty Ltd at [39]; Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd at 241-242; Pappas v Soulac Pty Ltd (1983) 50 ALR 231 at 238; Butcher v Lachlan Elder Realty Pty Ltd at [37].
In a great number of cases relying upon a contravention of s 18 as an element of the statutory cause of action it will be necessary for the plaintiff to show he, she or it suffered loss or damage by relying on the defendant’s conduct said to constitute the breach of s 18: ACCC v TPG Internet Pty Ltd at [39]; Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd at 241-242; Pappas v Soulac Pty Ltd at 238; Butcher v Lachlan Elder Realty Pty Ltd at [37]. That is to say, very frequently reliance will be a factor which governs questions of causation. Frequently, as here, the plaintiff’s case may consist of entering into what is said to be an unfavourable contract in reliance upon an inaccurate or false representation which constitutes the asserted contravention of s 18.
Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69 involved a claim for loss suffered by misleading or deceptive conduct under s 42 Fair Trading Act 1987 (NSW). The statutory cause of action created by s 68 of the State Act is to the same legal effect as s 326 of the ACL. Gleeson CJ pointed out that question of causation “commonly involve normative considerations” (at [28]). His Honour also said:

In the context of considering an issue of causation under the [ACL], the statutory purpose is the primary source of the relevant legal norms.

His Honour stressed that the normative considerations that have a role to play in judgments to be made about causation do not “invite judges to engage in value judgments at large” (at [29]). His Honour said:

The relevant norms must be derived from legal principle. In this case, the primary task of the Court is to apply the legislative norms to be found in the [ACL] …

It is convenient to say here that his Honour also said (at [32]):

Misrepresentation will rarely be the sole cause of loss. If, in reliance on information, a person acts, or fails to act, in a certain manner, the loss or damage may flow directly from the act or omission, and only indirectly from the making of the representation.
(My emphasis.)

Gummow and Hayne JJ agreed with the Chief Justice. Their Honours stressed, by reference to Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26 that “notions of ‘cause’ as involved in [a] statutory regime are to be understood by reference to the statutory subject, scope and purpose. In particular, the question presented by [s 326 ACL] was whether the conduct of each respondent that constituted a contravention was a cause of the loss or damage sustained”. (Original emphasis).
In my judgment, integral to the statutory subject, scope and purpose of ss 18 and 326 ACL is the promotion of honesty and fair dealing in trade and commerce. This is a normative standard which informs the question of causation for the purpose of the attribution of legal responsibility in cases like the present.
I have emphasised these matters because in dealing with the question of causation, Mr Morris for VPD and Mr Edwards and Mr Fernon for Mr Altenberg, emphasised the evidence of Dr Beckwith I have set out at [119] and [122] above to argue that RMP did not rely upon the representations made by Mr Edwards during his presentations when entering into the Subscriber Agreements and the Rental Payment Agreement. Mr Fernon also pointed out that, in the end, Dr Beckwith said he “cancelled” the agreements once he was disabused of the Fuji Xerox representation (a case I have also rejected) and because he hadn’t appreciated it involved loan finance.
Mr Morris also relied upon the evidence of Mr Henderson at [131] above, that in recommending VPD’s solution to Dr Beckwith he had satisfied himself as to its suitability.
Emphasis was also placed upon the consideration that other options involving similar equipment, software and services were examined, evaluated and rejected before RMP settled upon the VPD solution. From this combination of factors it was argued that there was no reliance upon any representation made by or on behalf of VPD, even if the matters averred in [18], [19] and [20] of the Second Further Amended Statement of Cross-Claim had been made good.
I appreciate that this question of causation is entirely contingent given the findings I have made that neither VPD, Mr Altenburg nor Mr Edwards contravened s 18 of the ACL. But had my findings been otherwise, the evidence relied upon by VPD, Mr Altenburg and Mr Edwards would not mean that RMP could not establish reliance and other circumstances going to causation, having regard to the purpose of the legislation, to which I have made reference at [284] above. Reliance upon an inaccurate or false representation need not be the sole cause of RMP’s loss. It is sufficient if it is one of a number of causes in the sense of being one of a number of conditions necessary to bring about the loss.
Moreover, at a practical level the argument overlooks the effect that Mr Edwards presentations must have had on Mr Dimond and Mr Henderson to incline them toward VPD over its competitors. This in turn would doubtless have influenced their thinking when recommending VPD to Dr Beckwith in preference to a number of other similar options in a similar price bracket.
However as I have found there is no contravention of s 18, these questions do not require final determination. However had it been necessary to say so I would have been satisfied that the conduct of Mr Edwards in making the representations, of which I am persuaded, was a cause of VPD entering into the Subscriber Agreements and the Rental Payment Agreement.
I should also say, in any event, as I have found at [78] above, that the actual cause of any loss suffered by RMP was its repudiation of the various contracts constituted by the two Subscriber Agreements and the Rental Payment Agreement. Dr Beckwith’s decision to take this step was the product of RMP’s cash flow issues at that time and his failure to appreciate that RMP had entered into a loan agreement to fund the Subscriber Agreements. This latter cause was borne of his inattention to the detail of the proposed arrangements for the acquisition of the IT equipment, software and services to be supplied by VPD and his related belief that the contracts could be cancelled with limited legal and financial implications. These matters were the cause of any loss suffered by RMP, rather than any contravention of s 18 of the ACL by VPD, Mr Altenberg or Mr Edwards.

The question of loss

VPD, Mr Altenburg and Mr Edwards also argue that RMP has failed to prove any loss or damage caused by the alleged contravention of s 18 of the ACL. In particular, it is argued the entry into the settlement with Canon “does not constitute proof of loss or damage caused by the alleged contravention” (Mr Fernon’s written submissions [41]; Mr Morris’ written submissions [57]).
I accept that in at least most cases the compensatory principle relevant to the measure of a plaintiff’s loss is the “tort principle” which has “the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to Reliance loss)”: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3 at 12 and 14.
The argument mounted on behalf of RMP is that by reason of the representations made by Mr Edwards, they were induced to enter into the Rental Payment Agreement and as a result of entering into that transaction RMP is worse off by the full amount it had to pay to settle Canon’s claim against it. RMP says this is the amount of the prejudice or disadvantage it has suffered in consequence of altering its position under the inducement of the representations in contravention of s 18 of the ACL made by VPD, Mr Altenburg and Mr Edwards. Effectively RMP is seeking to be indemnified for the amount of its liability to Canon.
I am not satisfied that this is the amount of its loss. It is clear that before the first presentation by Mr Briggs in June 2015, RMP was dissatisfied with its IT and scanning services and was seriously looking for an upgrade. I accept it was also disenchanted with CCTS as an IT provider. If one assumes contravention of s 18 for present purposes, had that contravention not occurred it is likely that RMP would have selected one of the other options available to it from another supplier providing similar equipment, software and services at a similar price. At the time the decision was made there was no contemplation of either accepting CCTS’s 24 July 2015 quotation or continuing with CCTS and the existing system. The probabilities are that it still would have required a commercial loan to finance the acquisition of those IT goods and services.
Its position would have in the end been much the same given that those managing RMP, including Dr Beckwith, were then taking an optimistic view of its ongoing profitability and were unaware of the cash flow issues which caused the change of heart in January 2016 after the change in middle management at RMP
I accept that questions of causation are generally to be considered retrospectively because they require the Court to determine what happened and why: Vairy v Wyong Shire Council (2005) 223 CLR 422; [2005] HCA 62 at [124] (Hayne J). Adopting that approach there is every reason to suppose that the same commercial decision would have been made as at late 2015 involving a different supplier but with the same regrettable, from RMP’s point of view, financial outcome. I should also add that RMP continues to utilise IT equipment, software and services. There have been modifications and perhaps upgrades. No attempt has been made on the evidence before me to demonstrate any loss in terms of the difference in cost between the equipment and services to be provided by VPD under the Subscriber Agreements and the cost of the services actually incurred by RMP over the same period.
On the assumption that s 18 of the ACL was contravened as alleged by RMP, I am not satisfied it has proved any actual loss.

The claim against BHD

I confess to having difficulty understanding the case presented against BHD by RMP. The gravamen of the allegations against BHD are as I have summarised at [96] to [98] above. The representations said to contravene s 12DA(1) ASIC Act are those averred at paragraph [30] of the Second Further Amended Statement of Cross Claim and set out at [97] above. For convenience I will repeat them:

BHD was the financial arm of VPD; and

VPD by itself, its servants and agents “was entitled to speak, act and conduct itself on behalf of BHD with prospective lessees” (my emphasis).

No claim of misleading or deceptive conduct involving representations separate from or independent of VPD, Mr Altenberg or Mr Edwards was articulated against BHD. However, Ms Chan expressed her understanding of RMP’s claim as a case that BHD “was knowingly concerned” in the misleading or deceptive conduct of VPD. And that may be so, although it’s not expressly averred that BHD is “a person involved” in contraventions of the ACL by VPD. I am more inclined to think that RMP’s case as pleaded is more consistent with an assertion of vicarious liability on the basis of agency of the type discussed in Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41; [1931] HCA 53. If this is correct, then the claim must fail for the reasons already given rejecting the cases against the other cross-defendants. For there is no liability, or wrongful conduct, of others to be attributed to BHD.

I am prepared to proceed on the basis that RMP is alleging that BHD induced it to enter into the Rental Payment Agreement by “authorising” VPD to make the representations complained of in [18] of the Second Further Amended Statement of Cross-Claim. I accept that even the language of authority falls well short of Ms Chan’s phrase “knowingly concerned” drawn from the definition of “involved” in s 2 of the ACL. I accept also the force of Ms Chan’s argument that there is simply no evidence that anyone on behalf of BHD had any awareness of anything that was said by Mr Edwards on behalf of VPD, or Mr Altenburg for that matter, when he was pitching VPD’s solution to RMP. Nor is there even any evidence that BHD authorised VPD or Mr Edwards to speak “on its behalf”.
I also interpolate that if there was a representation that BHD was a financial arm of VPD, as its put in [30](a) of the Second Further Amended Statement of Cross-Claim, it hardly matters. VPD and BHD had entered into the Business Terms Agreement on 11 November 2015, prior to Dr Beckwith signing the Rental Payment Agreement. To that extent there was some “connection”, my word, between them. In any event Ms Chan relies upon the evidence of Dr Beckwith that he did not have anything to do with BHD or Canon (48.32-.33T). She submits that there is no suggestion that BHD ever represented to RMP that BHD was the financial arm of VPD.
I am not sure that that follows. As I have pointed out in my narrative of primary fact, under the terms of their agreement BHD was entitled to approach VPD’s customers to obtain the necessary financial information to process an application for finance. That happened here and the initial contact with Mr Dimond was by Mike Shearin, a Director of BHD under the “banner” of VPD (see [46] above). Moreover, it follows from this that Mr Dimond, who had been authorised to sign the Subscriber Agreements and to negotiate with VPD on behalf of RMP had contact with BHD and was aware that BHD was arranging finance. He provided the financial information which had been requested by BHD under the banner of VPD. When produced for signature, the Rental Payment Agreement was “co-branded” for BHD and VPD; “VOICE PRINT DATA” appeared across the top of every page (see [49] above).

However, I do accept Ms Chan’s submission that an important circumstance for any person considering the Rental Payment Agreement before signature is that only RMP and BHD were parties to it; VPD was not.
As I have said (at [53] above), Clause 2.8 of BHD’s terms and conditions authorised BHD to enter into that agreement as principal or agent and to assign its interest to another without RMP’s consent. There is no suggestion anywhere in the evidence that it had entered into an agency agreement, whether as principal or agent, with VPD (as opposed to Canon). And their “Business Terms Agreement” does not establish a legal relationship of agency.
Clause 32 is an acknowledgment that RMP had not relied upon BHD’s skill or judgment and that RMP had obtained its own accounting, legal and taxation advice and did not rely on any representation by BHD in regard to those matters. Importantly there was an acknowledgment that BHD had not made any representation of quality or fitness in relation to the equipment, software or services to be provided.
Moreover, Mr Henderson gave evidence that he advised Dr Beckwith to obtain legal advice in relation to the Rental Payment Agreement, but Dr Beckwith declined: (58.17-.18T; 168.10-.37T). As I have said, Dr Beckwith acknowledged that he had not read every word of the Rental Payment Agreement (87.19-.39T).
It seems to me that BHD did make what Ms Chan styles the financial arm representation, contrary to Ms Chan’s submission. However, nothing turns on this. There was no representation other than that they were separate companies who had a loose business association in relation to BHD sourcing finance for customers of VPD who sought to avail themselves of BHD’s services. The evidence does disclose a basis for that representation. However, to my mind such a representation was not inaccurate or false or an example of unfair dealing. It’s quite clear that as I have already said at [43] above, it was within the contemplation of VPD and the officers of RMP involved in finalising the procurement contract (Mr Henderson and Mr Dimond) that RMP would require finance for that purpose. There is no doubt that Mr Henderson and Mr Dimond knew that what was being secured was a commercial loan structured as a commercial lease. There was no requirement that they deal with BHD. Rather they chose to, doubtless for reasons of commercial convenience.
I am not satisfied that the financial arm representation, as Ms Chan puts it was a representation made in contravention of s 12DA ASIC Act. Although I accept that a representation of a connection between VPD and BHD was made on the facts I have set out, I am not satisfied that it was misleading or deceptive or was likely to mislead or deceive. Notwithstanding Dr Beckwith’s unilateral, and subjective, mistake about the nature of the Rental Payment Agreement, as I have set out above, I accept that Mr Henderson told Dr Beckwith the contracts with VPD would involve a finance agreement with a company connected with VPD and that Mr Dimond liaised with him to obtain at least some of the financial records necessary for the application for finance from Dr Beckwith’s accountants (Exhibit XD2.2 at [21]).
However, it does not follow from this that BHD was knowingly concerned in the representations made by Mr Edwards on behalf of VPD, assuming for the moment, solely for the purpose of this argument that they contravened s 18 ACL or, for that matter, s 12DA ASIC Act. In making her submission, Ms Chan referred me to Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65, a case concerning s 75B of the Trade Practices Act 1974 (Cth), as then in force, defining the meaning of the expression “person involved” in the same way as the provisions of s 2 of the ACL. Ms Chan emphasises that the plurality explained “that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention” (at 670). Assuming the representations for the purpose of this part of the argument that Mr Edwards made about the attributes of the VPD solution contravened s 18 of the ACL there is no evidence showing, or from which it may be inferred, that BHD had any knowledge whatsoever of what Mr Edwards said, or was proposing to say, at the 15 July and 30 September meetings. BHD cannot be liable as a person involved in VPD’s contravention under s 326 of the ACL. There is no suggestion that any misleading or deceptive representation was made by BHD directly to RMP so as to give rise to the question about a contravention of s 12DA ASIC Act involving liability under s 12GF ASIC Act.
The way the second representation, in [30](b) of the Second Further Amended Statement of Cross-Claim, is expressed, as I have said at [299] above, is more reminiscent of vicarious liability for the conduct of VPD than accessorial liability as a person involved. If this is the correct characterisation of the averment, I repeat, then the claim against BHD must fail as I have found that the representations made by Mr Edwards did not contravene s 18 of the ACL.
Moreover, the conduct of BHD relied upon, indeed its involvement, postdates the impugned conduct of VPD. Mr Briggs did not contact BHD to involve it until 16 October 2015, after the Subscriber Agreements had been signed (see [45] above). There is no evidence from which it can be inferred that BHD had represented to RMP when VPD’s representations were made at the 30 September meeting that VPD “was entitled to speak, act and conduct itself on behalf of BHD, with prospective lessees of BHD” such as RMP (my emphasis). As I have said, there is no evidence that BHD had actually engaged VPD as its agent. In Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 at [22] five of six sitting justices of the High Court of Australia said :

Colonial Mutual Life establishes that if an independent contractor is engaged to solicit the bringing about of legal relations between the principal who engages the contractor and third parties, the principal will be held liable for slanders uttered to persuade the third party to make an agreement with the principal. It is a conclusion that depends directly upon the identification of the independent contractor as the principal's agent (properly so called) and the recognition that the conduct of which complaint is made was conduct undertaken in the course of, and for the purpose of, executing that agency.

None of these conditions have been satisfied on the evidence before me.

For these reasons the claim against BHD must be rejected.

The accessorial liability of Mr Edwards

There is no need to expound on this topic. As I am not satisfied that any contravention of s 18 of the ACL, or for that matter s 12DA ASIC Act on the part of BHD, has been established no question arises about whether Mr Edwards is a “person involved”. There is certainly no evidence that at any time he intended to mislead or deceive RMP by any of his conduct relating to the supply of VPD to RMP of the IT equipment, software or services the subject of the Subscriber Agreements which supply was intended to be financed pursuant to the Rental Payment Agreement.

Conclusions

The cross-claim must be dismissed. Had the claims been made good, no question could arise about avoiding the Rental Payment Agreement or the Subscriber Agreements. As to the former, the settlement with Canon would preclude that. As to the latter, the term of them has now expired. The only remedy available in my judgment would have been damages, but as I have said RMP has not proved any loss.

Orders

My orders are:

The first cross-claim is dismissed;

Judgment in favour of each of the first, second, third and sixth cross-defendants as against the cross-claimants;

The cross-claimants are to pay the costs of each of the first, second, third and sixth cross-defendants;

Any party wishing to apply for a special order for costs is to do so by Notice of Motion supported by affidavit and written submissions not exceeding 3 pages in length filed in the Registry within 14 days;

Any opposing party is to file any affidavit and written submissions not exceeding 3 pages upon which he, or it wishes to rely within a further period of 14 days;

The question of whether a special costs order should be made is to be determined on the papers in chambers without the need for the appearance of any party.

Endnote

Decision last updated: 15 May 2020

Medium Neutral Citation:	Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 7) [2020] NSWSC 554
Hearing dates:	27; 28; 29; 30; 31 August 2018; 4 September 2018; 22; 23 November 2018; 7; 8 March 2019
Date of orders:	15 May 2020
Decision date:	15 May 2020
Jurisdiction:	Common Law
Before:	Campbell J
Decision:	See paragraph 315
Catchwords:	CONSUMER LAW – Competition and Consumer Act 2010 (Cth) – Australian Securities and Investment Commission Act 2001 – misleading and deceptive conduct – persons involved in the contravention – contract for IT equipment, software and services – financing of contract by commercial lease - oral representations made about efficiency of IT system to be supplied – contract repudiated – hypothetical question of misrepresentation – misrepresentation a question of fact – measure of loss
Legislation Cited:	Australian Securities and Investment Commission Act 2001 (Cth), ss 12DA, 12GF Competition and Consumer Act 2010 (Cth), s 131A; Sch 2 – Australian Consumer Law ss 2, 18, 236, 243(a) Fair Trading Act 1987 (NSW), ss 42, 68 Trade Practices Act 1974 (Cth), ss 52, 75B
Cases Cited:	ACCC v Dukemaster Pty Ltd [2009] FCA 682 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26 Australian Securities and Investments Commission v Wealth & Risk Management Pty Ltd (No 2) [2018] FCA 59 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 Campbell Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378 Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 4) [2018] NSWSC 1379 Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 5) [2018] NSWSC 1373 Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 6) [2018] NSWSC 1809 Cassidy v Saatchi & Saatchi Australia Pty Ltd (2004) 134 FCR 585; [2004] FCAFC 34; Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41; [1931] HCA 53 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17 Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Pappas v Soulac Pty Ltd (1983) 50 ALR 231 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 Quikfund (Australia) Pty Ltd v Airmack Consolidators Pty Ltd (2014) 222 FCR 13; [2014] FCAFC 70 Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; (1982) ATPR 40-303 Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69 Vairy v Wyong Shire Council (2005) 223 CLR 422; [2005] HCA 62 Watson v Foxman (1995) 49 NSWLR 315 Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65
Category:	Principal judgment
Parties:	Reliance Medical Practice Pty Ltd trading as ATF Reliance Medical Practice Trust (First Cross-Claimant) Rodney John Beckwith (Second Cross-Claimant) Voice Print & Data Australia Pty Ltd (First Cross-Defendant) Christian Altenburg (Second Cross-Defendant) Grant Edwards (Third Cross-Defendant) BHD Leasing Pty Ltd (Sixth Cross-Defendant)
Representation:	Counsel: G A Moore (Cross-Claimants) A J H Morris QC with I Erskine (First and Third Cross-Defendants) A F Fernon (Second Cross-Defendant) L W Chan (Sixth Cross-Defendant) Solicitors: Gorval Lynch (Cross-Claimants) Anthony Delaney Lawyers (First and Third Cross-Defendants) O’Neill McDonald Lawyers (Second Cross-Defendant) Holman Webb (Sixth Cross-Defendant)
File Number(s):	2016/362193
Publication restriction:	Nil