Evans Deakin Pty Ltd v Sebel Furniture Ltd - [2003] FCA 171

FEDERAL COURT OF AUSTRALIA
Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171
TRADE PRACTICES – whether supplier of seating tendering to a prospective head contractor to an engineering contract promised the elements of its tender as to price beyond nominated tender validity date
CONTRACT – whether supplier and head contractor bound in contract – discussion of contract formation in tendering
ESTOPPEL – whether supplier estopped from denying obligation to supply according to tender
EVIDENCE – expert evidence – importance of identifying the relevant opinion of the expert and the material upon which the opinion is based.
Trade Practices Act 1974 (Cth) ss 52, 82
Evidence Act1995 (Cth) ss 78, 79, 135
Taylor v Johnson (1983) 151 CLR 422 referred to
Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 referred to
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 referred to
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 referred to and discussed
Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158 applied
PD v Australian Red Cross (New South Wales Division) (1993) 30 NSWLR 376 applied
British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 referred to
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 referred to
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 referred to
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 referred to
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 referred to
First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd’s Rep 194 referred to
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 referred to
Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 referred to
Eccles v Bryant [1948] 1 Ch 93 referred to
The Queen v Ron Engineering & Construction (Eastern) Ltd [1981] 1 SCR 111 referred and discussed
Fred Welsh Ltd v BGM Construction Ltd (1996) 10 WWR 400 referred to and discussed
Naylor Group Incorporated v Ellis-Don Construction Ltd (1999) 43 OR (3d) 325 referred to and discussed
Naylor Group Inc v Ellis-Don Construction [2001] 2 SCR 943 referred to and discussed
Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 referred to
Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 (CA) referred to
City University of Hong Kong v Blue Cross (Asia Pacific) Insurance Ltd [2001] 1 HKC 463 referred to
Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 referred to
Burnham v Carroll Musgrove Theatres Ltd & Victoria Arcade Ltd (1928) 41 CLR 540 applied
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 applied
Coal Cliff Collieries Pty Ltd & Another v Sijehama Pty Ltd and Another (1991) 24 NSWLR 1 referred to
Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 referred to
Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 referred to
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 referred to
South Sydney District Rugby League Football Club v News Ltd (2001) 177 ALR 611 referred to
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 referred to
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 referred to
Mackay v Dick (1881) 6 App Cas 251 referred to
Butt v McDonald (1896) 7 QLJ 68 referred to
Byrne v Australian Airlines Ltd (1995) 185 CLR 410 applied
Hawkins v Clayton (1988) 164 CLR 539referred to
Placer Development Ltd v Commonwealth (1969) 121 CLR 353 referred to
Meehan v Jones (1982) 149 CLR 571 referred to
Biotechnology Australia Pty Ltd v Pace (1998) 15 NSWLR 130 referred to
SVI Systems Pty Limited v Best & Less Pty Limited [2001] FCA 279 referred to
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 referred to and discussed
Williams v Roffey Brothers and Nicholls Contractors Ltd [1991] 1 QB1 referred to and discussed
James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 applied
L Schuler A G v Wickman Machine Tool Sales Ltd [1974] AC 235 applied
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 applied
Ryan v Textile Clothing and Foolwear Union of Australia [1996] 2 VR 235 applied
FAI Traders Insurance Company Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 applied
Jennings Construction Ltd v F R Coyle Pty Ltd 17 October 1984 NSWCA   applied
Cox v Goldcrest Developments (NSW) Pty Ltd (2000) 50 NSWLR 76 referred to
C H Magill v National Australia Bank Limited [2001] NSWCA 221 referred to
Winstonu Pty Ltd v Pitson [2001] FCA 541 referred to
Valentines Properties Pty Ltd v Hunico Corp Ltd [2000] 3 NZLR 16 referred to
Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 174 referred to
United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 referred to
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 referred to
O’Keefe v Williams (1910) 11 CLR 171 referred to
Wheeler Grace & Pierucci Pty Ltd v Wright Pty Ltd (1989) ATPR 40-940 referred to and discussed
Bowler v Hilda Pty Ltd (1998) 80 FCR 191 referred to
Famel Pty Ltd v Burswood Management Ltd (1989) ATPR 40-962 referred to
Holman Construction Ltd v Dalton Timber Company Ltd [1972] NZLR 1081 referred to
Perre v Apand Pty Ltd (1999) 198 CLR 180 referred to
Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 referred to
Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 applied
Poseidon Ltd & Sellers v Adelaide Petroleum N L (1994) 179 CLR 332 applied
Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 applied
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 referred to and discussed
H G v The Queen (1999) 197 CLR 414 referred to and discussed
Velevski v The Queen (2002) 187 ALR 233 referred to
Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd [2000] FCA 1463 referred to
Quick v Stoland Pty Ltd (1998) 87 FCR 371 (Full Court) referred to and discussed
Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 referred to
Marks v GIO Australia Holdings (1998) 196 CLR 494 referred to
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 referred to
Henville v Walker (2001) 206 CLR 459 referred to
Johnson v Perez (1998) 166 CLR 351 referred to
Carter and Harland Contract Law in Australia (4^th Ed)    referred to
Cole “The Concept of Reasonableness in Construction Contract” (1994) 10 BCL 7   referred to
Dorter and Sharkey Building and Construction Contracts in Australia: law and practice (2^nd Ed)   referred to
Goff and Jones The Law of Restitution (4^th Ed)   referred to
Carter “Ineffective Transactions” in Finn (ed) Essays on Restitution   referred to
Mason and Carter Restitution Law in Australia referred to
Dietrich Restitution: A New Perspective   referred to
H K Lűcke “Illusory, Vague and Uncertain Contractual Terms”, Adelaide Law Review Vol 6(1) September 1977 at 1   referred to
M Chen-Wishart “Consideration, Practical Benefit and the Emperor’s New Clothes” in
Beatson et al Good Faith and Fault in Contract Law   referred to
Sir Anthony Mason “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66   referred to
Baron “‘Good Faith’ and Construction Contracts – From Small Acorns Large Oaks Grow” (2002) 22 Aust Bar Rev 54   referred to
Charles “Interpretation of Ambiguous Contracts by Reference to Subsequent Conduct” (1991) 4 JCL 16   referred to
Seddon Government Contracts; Federal, State and Local (2^nd Ed)   referred to
EVANS DEAKIN PTY LTD v SEBEL FURNITURE LTD
N 768 of 1999
ALLSOP J
12 MARCH 2003
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 768 of 1999

BETWEEN:

EVANS DEAKIN PTY LIMITED
APPLICANT

AND:

SEBEL FURNITURE LIMITED
RESPONDENT

JUDGE:

ALLSOP J

DATE OF ORDER:

12 MARCH 2003

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The application be dismissed.
2.The proceedings stand over to a date to be fixed for argument as to costs and in order that either party may raise any matter adverted to in these reasons, other than costs, in respect of which the parties have been given liberty to apply.

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

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 768 of 1999

BETWEEN:

EVANS DEAKIN PTY LIMITED
APPLICANT

AND:

SEBEL FURNITURE LIMITED
RESPONDENT

JUDGE:

ALLSOP J

DATE:

12 MARCH 2003

PLACE:

SYDNEY

REASONS FOR JUDGMENT
INDEX
Introduction
Outline of proceedings
Clyde’s essential submissions
An overview of the claims as pleaded

Facts
Introductory comment
Approach to the factual findings
Main witnesses
Factual narrative
Further factual discussion

Legal analysis
The contract claims
Contract A
Contract B
Contract C
Contract D
The estoppel claim
The Process Protocol agreement
The Process Protocl representation
The balance of Clyde’s case under s 52 of the TPA
Negligent misrepresentation
Postscript on liability
Damages
Reserved rulings on objections

INTRODUCTION
Outline of proceedings

The applicant, Evans Deakin Pty Limited, is a company that carries on the business of manufacturing. A division of the applicant, known at the relevant time as “Clyde Engineering” and now referred to as “EDI Rail” (to which division I will refer in these reasons as “Clyde”, synonymously with the corporate applicant), carried, and carries, on the business of the design, manufacture, assembly, repair and maintenance of railway locomotives and cars, including electric passenger trains. The respondent (“Sebel”) carried, and carries, on the business of the design and manufacture of seating.
In 1998 Clyde won the tender for the design, manufacture, supply and maintenance of a new generation of electric passenger trains for the New South Wales State Rail Authority (the “SRA”). The train was called the 4GT Project – short for the fourth generation of electric passenger trains in New South Wales. I will refer to it as such, or as “the Project”. Sebel tendered to Clyde as a prospective sub-supplier for the design and supply of passenger seating in these trains. From mid-1997 until March 1999, Sebel evinced enthusiasm about its prospective participation in the Project. In early October 1998, Clyde signed a contract with the SRA. Clyde used the Sebel design in its tender, in the sense that will become evident in due course. From mid-1997 Clyde and Sebel worked together in the development of the design of the seating. Whilst Clyde had called for, and received, three other seating tenders during 1997 and 1998, it did not take any steps towards developing those other designs. Soon after Sebel’s tender was received (in late October 1997), and evaluated (shortly thereafter), Clyde found the Sebel design both aesthetically appealing, and attractive in its costing, calculated at about $538 per seat space as an average (excluding certain associated costs). Thereafter, in early 1998, Clyde learnt that the SRA also found Sebel’s seating attractive.
The price at which Sebel tendered was based on Sebel’s direct costs only. Anticipated costs of tooling, and design or research and development, were to be capitalised and amortised over time in the balance sheet and profit and loss account of Sebel and not directly expensed to the Project. A concomitant of this approach was that Sebel intended to keep the intellectual property in the seat (copyright, design and patents), for future unrelated jobs. The Project was seen by senior management at Sebel as an opportunity for Sebel to move into the transport seating market – a market in which, hitherto, it had not participated.
In early 1999, after Clyde had bound itself to the SRA by contract in October 1998, Sebel, under the influence of a new General Manager, Mr Doman, reviewed this approach to capitalisation and amortisation of the costs of tooling, and design or research and development, in relation to the seats for the Project. In late March and early April 1999, Sebel told Clyde that it was no longer prepared to participate in the Project on the commercial basis hitherto indicated, and that Clyde had a choice – it could buy the intellectual property for $490,000 and then carry on with the development of the seating with another party in place of Sebel, or, pay $1,025 (not $538) per seat space for seating in the first stage of the Project (about forty percent of the anticipated total job) and $550 per seat space for the remaining two stages of the Project. Clyde rejected both these alternatives. It set about designing and manufacturing seating for the train itself. It brought these proceedings for damages brought about by Sebel’s conduct.
Clyde sues for breach of contract, for contravention of s 52 of the Trade Practices Act 1974 (Cth) (the TPA), for negligent misrepresentation and in estoppel.
Clyde’s essential submissions
Clyde’s case was succinctly put in its written opening as follows:
At the heart of this case is the following:
·Sebel continuously promised to Clyde over the period from October 1997 to April 1999 that Sebel would supply seating to Clyde for the 4GT Project at the prices set out in Sebel’s response to Clyde’s request for quotation. The fulfilment of such promises was entirely within the control of Sebel.
·Over that same period Clyde and Sebel, and their respective agents, worked closely together on the design of the seats in the expectation that if Clyde was selected by the SRA as the preferred tenderer for the 4GT Project (as it was in June 1998), Sebel would be responsible for the design and manufacture of the seating.
·Sebel knew that Clyde had relied heavily on Sebel’s response and counted on the price remaining firm in providing Clyde’s response to the SRA and subsequently entering into a binding agreement with the SRA.
·Sebel knew that if Clyde was selected by the SRA as the preferred tenderer, Sebel would be responsible for the seating. Sebel knew that there were no other seating manufacturers being considered by Clyde and that there had not been since the middle of 1997.
·In April 1999 Sebel reneged on its promises and refused to supply seating to Clyde at the prices set out in Sebel’s response.
·In the meantime, and to the knowledge of Sebel, in October 1998 Clyde entered into its formal contract with the SRA on the basis that Sebel would supply at the prices set out in its response (having locked itself finally into doing the work at the price in about June 1998).
·After Sebel’s withdrawal, Clyde undertook the task itself of designing and manufacturing the seating of the 4GT Project at considerable extra expense over and above the prices promised by Sebel in its response.
Clyde submitted that there were only three relevant matters that could seriously be in dispute in the proceedings and that could be affected by the evidence. The respondent would not agree with the limitation there expressed, but certainly the three matters identified by the applicant go to the heart of the dispute.
First, there was the question as to what, if anything, was promised by Sebel. The applicant posited various promises by Sebel. These promises informed the case in contract (in its various manifestations), the case under s 52 of the TPA and the case in estoppel. The promises were as follows:
(a)In the event that Clyde won the contract with the SRA and bound itself to the SRA, Sebel would supply the seating to Clyde in accordance with its tender.
(b)That promise itself embodied two promises as to price, being
(i)that the average price per seat space was $538 across the seating configuration in the tender, comprising prices of $490 per seat space for fixed seating and of $552 per seat space for roll-over seating; and
(ii)that should the seating configuration change, the price for each new seating “unit” would be calculated substantially in accordance with these prices by reference to the price per seat space for that particular type of “unit” – fixed or rollover.
These promises do not expressly arise from Sebel’s tender. Sebel did not say in its tender: if Clyde relies on the Sebel tender and wins the SRA contract, binding itself to the SRA, Sebel will provide seating in the configuration ultimately called for at the average price per seat space by reference to the per seat pricing for fixed and rollover seating used (as is evident in the tender) in the make-up of Sebel’s tender.
The form of the tender response of Sebel will be dealt with in due course. It suffices to say at this point that the case of the applicant that these conditional and flexible promises were made rests, in significant part, on distilling from events some fundamental and immutable facts:
(a)that Clyde relied entirely upon the Sebel design and price in committing itself to the SRA;
(b)that Sebel knew that;
(c)that Clyde did not engage in any co-operation with any other tenderer in the close manner it did with Sebel;
(d)that Sebel knew that;
(e)that Clyde and Sebel, through their relevant officers, knew that Sebel would necessarily obtain the seating contract if Clyde won the tender from the SRA;
(f)that Clyde and Sebel, through their relevant officers, knew that in the nature of things, over time, the configuration of seating units called for by the SRA would change; and
(g)that Clyde and Sebel, through their relevant officers, knew that once Sebel became aware that Clyde had bound itself to the SRA it, Sebel, was bound to supply to Clyde in accordance with the promises.
These facts, which the applicant uses to underpin the promises, amount to the view mutually shared by Clyde and Sebel, through their relevant officers, that Sebel would provide the seating in accordance with its tender if Clyde won the tender and committed itself to the SRA, such that the Court can infer a legally binding promise (whether in contract or otherwise) to that effect.
One of the difficulties with this approach, as will be seen from a detailed examination of the communications between the parties, is that even if the relevant officers (or at least some of them) shared a view that Sebel would be providing the seating if Clyde won the tender, that may not necessarily lead to the conclusion that the Court should infer that, by some point of time, a mutually enforceable legal relationship conformable with this expectation of future events arose, in circumstances where the parties dealt in communications with the formation of legal relations in a manner inconsistent with such an inference.
This brings me to the second matter put forward by Clyde that could seriously be in dispute: the states of mind of the relevant officers of Clyde and Sebel from October 1997 to April 1999 as to whether they regarded Clyde and Sebel as legally bound as reflected by the promises.
The third matter put forward by Clyde that could seriously be in dispute was the characterisation of, motivating factors behind, and justification (if any) for Sebel’s withdrawal of its willingness to supply seating in accordance with its tender response.
An overview of the claims as pleaded
An analysis of the legal issues, to be meaningful, requires a knowledge of the facts. For this reason, at this point it is unnecessary further to identify the legal issues beyond a brief introduction. First, the claim was put in contract in at least four alternative ways. The contracts were said to arise (a) at the time of tendering in October 1997, (b) at the time of entry into a document known as the Process Protocol in March 1998, (c) in October 1998 when it was said that Clyde accepted Sebel’s tender, and (d) in February 1999 after final legal and technical documentation had been sent by Clyde and responded to by Sebel.

Secondly, three express and implied representations were pleaded. These concerned price and the maintenance of the tendered price in accordance with the promises referred to above. It was said that in the circumstances which occurred there was a contravention of s 52 of the TPA in respect of these representations. Clyde emphasised that at least some of the representations were promissory, and not merely concerning future matters.
Thirdly, a claim in negligent misrepresentation by reference to the method of calculation of the price to be placed in the tender was pleaded.
Fourthly, various estoppels were pleaded, seeking to hold Sebel to the original tender price and to sheet home the consequences thereof, in accordance with the promises referred to above.
FACTS
Introductory comment
I turn now to the facts. Two matters, which are related, need be noted by way of introductory comment. First, the distinction, on the one hand, between what the parties believed or understood to have occurred and would in all likelihood occur, and, on the other hand, what the parties believed or understood to be their respective legal rights and obligations, should be borne in mind. The two are related, but distinct. Conflation of these two matters can have one move from the premise that the parties believed Sebel would be supplying the seats, to the conclusion that therefore Sebel was presently bound to supply the seats. The one does not necessarily flow from the other. Secondly, oversimplification of the facts should be guarded against. A degree of summation is possible without distortion and oversimplification, but great care needs to be exercised in summarising over eighteen months of a relationship. There were at times inconsistencies and tensions in the facts which, and the significance of which, can be lost sight of with a too shortly encapsulated view of events.
Approach to the factual findings
To a significant extent, the resolution of this dispute turns on the ascertainment of the events that occurred from mid-1997 to early 1999, and the assessment of the context in which they occurred. Because of the pleading of estoppel and s 52 of the TPA and the related question of reliance, it is also necessary to understand the states of mind and beliefs of the parties during the above-mentioned period. The conclusions as to the states of mind and beliefs are, at least theoretically, capable of being of relevance to the assessment of contractual status and intent. To say as much is not to violate the objective theory of contract: Taylor v Johnson (1983) 151 CLR 422, 428, 429; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, 335, 336, and see generally Carter and Harland Contract Law in Australia (4^th Ed) [110] to [113] and [206].What I have sought to do in relation to contractual formation is to find objectively what was said and done, how it was said and done, and the context in which it was said and done, in order to evaluate whether the parties can be taken, to the reasonable observer, by reference to their words and deeds, to have agreed to something, and whether they intended to be legally bound by what they had agreed. A finding as to what a participant or participants in a meeting or meetings thought the result of the meetings was may assist in understanding or drawing a conclusion about what did occur at the meeting or meetings. Care, of course, must be taken not to slide from a conclusion that a party thought that there was or was not a contract, to a conclusion that there was or was not a contract. I have sought to exercise that care: see generally Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 [298] to [300]; and Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540,548-51 (per Gleeson CJ, with whom Hope JA and Mahoney JA agreed). In the end, as shall be seen, little light in this case is shed on the question of what in fact happened by reference to beliefs or states of mind.
The parties (and the applicant in particular) pressed their cases by reference to a careful appreciation of the facts. The facts can only be fully understood by a chronological appreciation of their development. Summary form or concentration on one particular event or one particular point in time can lead to distortion. The consequence of this is that there is no alternative to the setting out chronologically of the facts as they unfolded from late 1996 to early 1999. In coming to my findings as to the facts I have been assisted significantly by the submissions of the parties. Each side provided me with detailed submissions and a detailed factual narrative. To an extent, I have taken advantage of that assistance from the parties and incorporated parts of those narratives into my conclusions, without attribution. I would like to express my appreciation to the parties and their representatives for the care with which those submissions and narratives were prepared (care which was conformable with that displayed in the balance of the presentation of the case by both sides) and to say that my resort to the text of either narrative has not been, in any way, a substitute for my careful consideration of the appropriate factual findings.
Main witnesses
At this point it is appropriate to identify the persons involved for both Clyde and Sebel and to say something by way of introduction about their evidence.
Mr John Hancox was the Group General Manager of Clyde. He did not give evidence.
Mr Reg Graham was an employee of Clyde at the time the 4GT Project arose. He started work on Clyde’s tender to the SRA in about February 1996, and was appointed Clyde’s “Executive Manager 4GT Project” in January 1997. Mr Graham was one of a number of Clyde officers and employees who together constituted Clyde’s Executive Management Committee through the relevant period, that is, between 1996 and mid-1999. The senior member of the Clyde Executive Management Committee was Mr Hancox. Also on the Committee were Mr Keith Edwards (Financial Director and Financial Group), Mr Tom Zube (Logistics Manager), Mr Kevin Thompson (Sales and Marketing Manager) and Mr Bob Cantwell (IT Manager).
Mr Graham in [8] of his affidavit of 19 October 2000 described his responsibilities as Executive Manager of the 4GT Project for Clyde as including the following:
(a)preparing the overall commercial strategy to enable Clyde to win the Tender;
(b)developing a framework of what Clyde believed the SRA was seeking from tenderers for the 4GT Project in order that Clyde could formulate a tender that was competitive;
(c)corresponding and meeting with the customer, the SRA;
(d)co-ordinating and preparing both material and labour estimates;
(e)selecting a partner and the sub-suppliers that Clyde was going to work with in preparing its Tender;
(f)finding the appropriate facilities for the manufacture to be carried out on the 4GT Project, including evaluation of sites and negotiations with local councils and authorities;
(g)co-ordinating and preparing the maintenance pricing and offer;
(h)co-ordinating the overall bid and arranging all board approvals.
Mr Graham struck me as an honest man. He attempted, at all times, to be of assistance. However, as I later say, I think that there was a degree of after the fact rationalisation in some of Mr Graham’s evidence.
Mr Graheme Sheldrick, a professional quantity surveyor of long and wide experience in tender evaluation and the management, administration and negotiation of major engineering and construction works, was the consultant “Logistics Manager” for Clyde’s tender to the SRA from September 1997 until October 1998, when he became the Commercial Manager for Clyde. Mr Sheldrick described his responsibilities up to October 1998 as “Logistics Manager” in [5] of his affidavit of 13 October 2000 as including the following:
(a)calling for tenders and selection of sub-supplier submissions, including incorporation of the sub-supplier information into Clyde’s Tender offer to the SRA;
(b)negotiations with sub-suppliers;
(c)negotiations with the SRA;
(d)preparation of Clyde’s Tender to the SRA;
(e)co-ordination of the Clyde 4GT Project team for the purposes of providing responses to the SRA when requested.
As can be seen from the above expressions by Messrs Graham and Sheldrick of their responsibilities, and as was otherwise clear from the evidence, Mr Graham was more closely involved at the practical technical level than Mr Sheldrick, whose responsibilities were directed to negotiation and documentation with parties such as Sebel.
Mr Sheldrick, like Mr Graham, struck me as honest and attempting to be of assistance. However, also like Mr Graham, as I later say, I think that there was a degree of after the fact rationalisation in some of his evidence which at times, in Mr Sheldrick’s case, was a little forced.
Sebel was a subsidiary of GWA International Limited (GWA). Mr Geoffrey McGrath was the managing director of GWA. His evidence in cross-examination was given cautiously and somewhat defensively. With some exceptions, that I have identified, I accept his evidence.
Up to about August 1997, Mr Ian Paxton was the General Manager of Sebel. That position was in effect the managing director of Sebel. In that position, Mr Paxton reported to Mr McGrath. Mr Paxton did not give evidence.
Mr Jones was at all material times the Major Projects Manager at Sebel. He was the person at Sebel who had senior day to day contact with Clyde. It is not oversimplifying matters to say that he had effective carriage of the Project at Sebel until about February 1999. He gave evidence for Clyde. I deal in some detail with his evidence in these reasons. Whilst I think that he attempted at all times to be truthful, his evidence, as I say later, had a certain after the fact construction to it. He deeply disagreed with the approach and conduct of Mr Doman. He thought it to be both unwise and unethical. Whilst in significant part I accept his evidence, especially where it conflicts with Mr Wright, I think, as I say later, a modicum of caution is to be exercised in dealing with the evidence of his state of mind.
In August 1997, Mr Wright took over from Mr Paxton as Acting General Manager of Sebel. He remained in this position until late October or early November 1998, when the newly recruited Mr Doman took over as General Manager of Sebel. Mr Wright was involved in the decision to tender on the terms offered. He was a man of wide experience in manufacturing, and in Sebel’s business. He was a man whose experience ranged from the factory floor to executive level. He struck me as an acute, intelligent and tough businessman, able to sum up a situation swiftly and accurately and deal with it forcefully and directly. He gave his evidence in this manner. He had a long and close history of employment with Mr McGrath. They were close business associates. Unfortunately, there were aspects of Mr Wright’s evidence which were less than satisfactory. I deal with the detail of these aspects in due course. However, by way of necessary introductory comment, I have to say that I found his evidence at times stubbornly aggressive, almost as if he perceived himself in combat with the cross-examiner. That may not, of itself, be otherwise than to his credit, in a vigorously conducted cross-examination, if it had not been in respect of topics in connection with which he was plainly refusing to make concessions that documentation and commonsense demanded be made. He was especially adamant that at no time did Mr Jones ever give him reason to think that Sebel was in a position of effectively being the only likely seating supplier. I deal with the detail of this in due course, but, unfortunately, it is necessary to say that I do not think that Mr Wright’s evidence is at all reliable in this regard. It is unnecessary for me to express a view as to whether this was deliberate, or the result of after the fact rationalisation. It suffices to say at this point that I have reservations about the reliability of important parts of Mr Wright’s evidence.
Mr Gabadou was, from commencing employment with Sebel in October 1997, its Operations Manager. He expressed the responsibilities involved in this position as follows:
In that role, I was in charge of the manufacturing operations of Sebel’s business, which meant that I was responsible for the research and development, production, quality assurance and despatch/purchasing departments of Sebel. I would report to the General Manager of Sebel, who was Sonny Wright at the time I joined.
Mr Gabadou’s involvement in the Project began in January 1998, after Sebel had submitted its tender. I deal with his evidence later. At this point it need only be said that he gave his evidence in cross-examination in a careful, open and direct manner. When called on, and when appropriate, he gave concessions. When apparently clear on a matter he, without any defensive aggression, made his position perfectly clear. The cross-examination of him took the form of a direct and modulated dialogue in which the cross-examiner promptly reached the bedrock of a reliable recollection, clearly expressed. I accept Mr Gabadou’s evidence as reliable.
Mr Doman was brought in as the new General Manager of Sebel and commenced in that position in early November 1998. It is fair to say that his business views on how underlying costs should be accounted for in projects of this kind caused an entire reversal of approach to the Project. To that extent, in large part, he was responsible for the affair which has led to this litigation. That is not said critically, but factually. This late, but in a sense central, position of Mr Doman in the mutual affairs of the parties led to a direct and vigorous (and entirely fair) cross-examination of him. Under this fire Mr Doman was at times evasive in his defence. I found some aspects of Mr Doman’s evidence less than persuasive, in particular his expressed view that he wanted Sebel to undertake the Project and his refusal to concede that he appreciated in February and March 1999 that he was reversing the costing methodology of tooling and design costs. I have dealt with his evidence, as necessary, later.
It is unnecessary further to identify and comment on witnesses and actors at this point. A dramatis personae was provided by the applicant which, in the absence of correction by the respondent, I have taken as accurate. I have marked this document as exhibit A2. The parties have liberty to apply to oppose the admission of that document into evidence.
Factual narrative
The SRA commenced the process of introducing the new generation of passenger train called the “Millenium train” in 1996.
The third generation of passenger train, known as the “Tangara”, had been introduced in the 1980s. Before that, the last of the second generation trains, known as the “Double Deck Suburbans”, commenced service in the late 1960s. In 1996 the retirement of this thirty-five year old rolling stock was imminent.
In 1996, Clyde decided that it would tender for the 4GT Project. Its tender was initially intended to be in conjunction with a French entity, GEC Alsthom, which specialised in the provision of electric traction machinery. GEC Alsthom later withdrew from the joint venture with Clyde, but indicated that it was prepared to supply the traction package to Clyde, if Clyde proceeded to tender on its own. Clyde informed the SRA of this development and the SRA responded by suggesting to Clyde that it submit a tender on its own. To that end, the SRA agreed to give Clyde an extension to 5 November 1997 to prepare its tender submission.
Clyde commenced work on the Project in 1996.
On about 30 October 1996 the New South Wales Minister for Transport issued a media release announcing that CityRail would soon invite tenders for the 4GT Project. The announcement stated that the specifications would require seats to be reversible (or rollover or walkover), more comfortable and vandal resistant.
The tender for the 4GT Project was conducted by the SRA in three stages. The first stage was a pre-registration process in which the SRA chose a limited number of companies to tender. This process concluded in June 1997. The second was the preparation and submission of tender submissions which occurred from about July 1997 to 5 November 1997. The third was the tender evaluation which took place from 5 November 1997 until Clyde Engineering was awarded the tender in June 1998, formal contracts being signed on 8 October 1998. The evidence did not explore the precise nature of the legal relationship between Clyde and the SRA from June to October 1998. A media release on 30 June 1998 by Evans Deakin Industries Limited (EDI), Clyde’s parent company, stated that the SRA’s chief executive had announced that EDI was the “preferred supplier” of the 4GT trains.
From about December 1996, it was clear to Clyde that the seating in the new trains was a very important consideration and that the SRA placed considerable importance on improving the seating in comparison to the Tangara train. In particular, the SRA made known its desire for reversible or walkover or rollover seats which had not been installed in the Tangara used in suburban areas, though such seats had been installed on trains travelling inter-city. Passenger comfort and vandal resistance were also said to be important. It was plain to Clyde that the seating was a very important part of its tender.
On or about 4 June 1997, the SRA released a preliminary set of tender documents. These documents were issued as part of the pre-registration process approximately two months before the formal bid process began. These documents, known as “pre-registration documents”, contained the SRA’s specific requirements in a number of areas, including in relation to seating. The preliminary documents called for interest in respect of the design, manufacture, supply and possible maintenance and financing of the 4GT train.
On about 17 June 1997, Clyde received a letter from the SRA informing it that its joint venture with GEC Alsthom was one of three organisations which would be invited to participate in the formal tender process. The other two organisations were ABB Daimler-Benz Transportation (Australia) Pty Ltd and A. Goninan Co Limited.
The letter from the SRA to Clyde-GEC Alsthom dated 17 June 1997 stated that considerable emphasis was to be given to the maintenance phase of the contract.
Meanwhile, in about late March 1997, Clyde had commenced working with an organisation called Transport Design International (“TDI”) to establish the design features of the train. Within this task, TDI began the design process to develop the general functionality and appearance of the proposed seating.
Also, during the pre-registration period, when Clyde was working on seat design with TDI, Clyde sent letters to various potential sub-suppliers, including potential seating suppliers, seeking their expression of interest in participating in the 4GT Project. It was during this period, in approximately June 1997, that Clyde representatives first had informal communications with representatives of Sebel, to discuss the possibility of Sebel being the seating designer and supplier for the 4GT. Mr Graham of Clyde was aware that approximately fifteen years previously, when he was working for another company, Sebel had indicated a willingness to break into transport seating. The initial contact between Clyde and Sebel was through contacts between representatives of their respective parent companies, EDI and GWA.
Mr Graham telephoned Mr Jones in approximately early June 1997 and a meeting was arranged at Clyde’s offices to discuss Sebel’s participation in the 4GT Project. The meeting, held shortly thereafter, was attended by Mr Jones and Mr Ken Payne (Sebel’s Research and Development Manager) on behalf of Sebel, and Mr Graham and Mr Rakesh Batra (Clyde’s then Logistics Manager for the 4GT Project – Mr Sheldrick’s immediate predecessor) on behalf of Clyde. At the meeting there was discussion about Sebel’s resources and ability to undertake the work on the 4GT Project, given that Sebel had not done any work on passenger seating before. It was agreed that Mr Graham and Mr Batra would attend Sebel’s premises for an inspection of its facilities.

Sebel commenced work immediately on designing a seat. On 17 June 1997, Sebel prepared a design brief in relation to the Project. The design brief was signed by Mr Jones. The “Price Estimate” in the brief was $250 - $450 “per bum space”.
On 20 June 1997, Mr Jones wrote to Mr Batra of Clyde. The letter enclosed a confidentiality undertaking duly executed and stated, amongst other things:
Following our meeting, we are pleased to confirm that Sebel Design is interested in working with Clyde Engineering in the development and subsequent manufacture of rail carriage seating.
……
We are confident that we have the resources and the ability to work with you on this project and look forward to a mutually rewarding association.
The letter also included statements as to Sebel’s history and good credentials.
On 24 June 1997, Clyde sent Sebel a request for quotation for the supply of passenger seats. This request was superseded by a further request for quotation issued by Clyde to Sebel during the tender process in September 1997. The request was an invitation in respect of the “design, manufacture and/or supply” (not maintenance) on a free in store basis of 450 seats minimum per train for twenty train sets (with four trains per set).
There then followed various internal meetings within Sebel in relation to the Project. On 11 July 1997 Mr Jones and Mr Payne, together with other Sebel employees, including Mr Sheldon King, a designer, met with Mr Greg Martens of TDI. At that meeting, Mr Martens presented TDI’s aesthetic concepts for the proposed train seat, together with a series of concept drawings that TDI had developed for the possible styling of the seats.
The proposed inspection of Sebel’s factory by Clyde’s representatives took place on 17 July 1997. Various employees of Sebel were in attendance. Sebel’s General Manager at that time, Mr Ian Paxton, attended for part of the time. He indicated that Sebel felt it could go forward with the 4GT Project and he said that he thought it was a great opportunity to achieve Sebel’s objective of expanding its business. As Mr Graham recalled it, Mr Paxton also said that Sebel was very interested in getting into the ferry market and was very interested and keen on the 4GT Project.
At the meeting of 17 July 1997 Mr Graham said the following:
We’re really looking for something unique in seating design, something new and innovative. We don’t want the same conventional designs that everyone else out there is doing in mass transit. We don’t want you to just re-engineer the Tangara seats. We want you to factor in a moving lumbar support.
This made clear the importance of the seat.
During the course of the meeting Mr Paxton said words to the following effect:
Sebel wants to expand its business. Transport seating is an ideal area as it is the only part of the seating market that we are not in. We have experience on very large design, construct and install projects like the convention centres, Opera House seating and have developed a new design for education seating. We are working hard to expand our business. We really feel that we can go forward with the 4GT Project and will provide whatever support and resources are necessary to be successful as it is a great opportunity to achieve our objective of expanding the business.
At one point during this tour Mr Jones said that the 4GT Project represented an opportunity for Sebel to break into new markets such as trains and ferries, and that Sebel was keen to work on a project and was committed to the Project.
At the conclusion of the factory tour, Mr Jones said to the Clyde representatives, words to the effect of:
As you can see, we’d have no problem manufacturing the seats, we have all the resources and expertise that you could possibly need.
There was some dispute in the evidence as to whether at this meeting Mr Graham, or someone on behalf of Clyde, stated that they were looking at a “ballpark” figure of something less than $400 per seat position. Mr Payne gave this evidence. Mr Graham did not recall it. Mr Jones recalled that in these early meetings (whether this meeting or a slightly later meeting) Mr Graham said to him that Sebel should be looking to a range of a maximum of $570 per seat space. Handwritten notes of the meeting of 17 July tendered, but otherwise unexplained, refer to “Target Price <$400/seat”. I do not think that the two recollections are necessarily mutually inconsistent. There appears to be support for Mr Payne’s recollection concerning this meeting in the note. Mr Jones gave evidence in [15] of his affidavit of 6 October 2000 that at one of the early meetings the following was said:
Jones:We’ve never been involved in any kind of public transport seating. We’ve got absolutely no idea what kind of figure we should be looking at tendering. Can you give us a ballpark indication of a range of figures that would be considered by Clyde?
Graham:You should be looking somewhere in the range up to a maximum of $570 per seat space.
That Mr Graham gave this figure to Mr Jones early in the piece is confirmed by the evidence of Mr Drabsch (Sebel’s Commercial Manager before Mr Lange) who said in [16] of his affidavit:
At paragraphs 15 and 16 of his affidavit, Mr Jones refers to a top of the range price of $570. I had no contact with anyone from Clyde and do not know if that price came from them. However, I do recall it being mentioned by Neville Jones. I think that this was in a discussion with him, me and Sonny Wright where Mr Jones said words to the effect:
“$570 is the price we have to target to win the job”.
Mr Graham’s recollection varied slightly. He gave evidence in [54] of his affidavit of 19 October 2000 that in about August 1997 the following exchange with Mr Jones took place:
Graham:For your information Clyde has established an average seat cost as a target for this contract. We are expecting to pay in the range of $450-500 per seat position. This has been established from European standards.
Jones:Thank you for that. I will give you an indication in the next few weeks of what we believe can be achieved as soon as our first cut pricing is completed.
Mr Graham also then gave this evidence in [55] and [56] of that affidavit:
Some time later at another design meeting Neville Jones came back to me and said words to the following effect:
“Sebel cannot meet the target price you have given us but we can produce a seat along the lines you have requested for an average price of $500-550. We can offer this price because we believe this design can be the basis for other markets in the transportation business. It has been Sebel’s policy on other large seating projects to view the potential market for a type of seat and to amortise the fixed costs of research and development, design, tooling and testing over the total market and not just the individual project, eg: not just the 4GT contract. In this case I can build a seat for you that can be modified to suit ferries. We will develop the dies for this seat and then recover our costs by exploiting the full market opportunities. This is what we did with the Olympic stadium project.”
I was very happy as a result of this conversation as Sebel seemed able to design the novel seat and nearly meet our target price. This would provide Clyde with a competitive advantage given that other major elements of the train costing would be similar as between all competing tenderers.
I accept this evidence. This conversation made clear to Clyde the relationship between Sebel’s ownership of intellectual property and the likely tender price.
Whilst there was some temporal and sequential inconsistency between Mr Graham and Mr Jones, I find that at least by August 1997 Mr Graham had indicated to Mr Jones that an upper figure of about $550 to $570 per seat space would be acceptable to Clyde.
On the day following the meeting at the Sebel factory on 17 July 1997, Clyde (Mr Batra) sent a facsimile to Sebel (Mr Payne) thanking it for the tour of the facility. It appears from that transmission that Clyde by that time had already provided Sebel with some documentation in relation to the Project. Additional documents, being further TDI sketches, were provided by Clyde to Sebel shortly afterwards.
By 17 July 1997, Sebel had produced design photographs of the seats. Sebel then started to consider what it might cost to build a seat for the 4GT Project. It began by costing the existing rollover seat from the inter-city Tangara series. Mr John Martin (a Sebel engineer) prepared a series of sketches of the components in that seat and then listed those components in a bill of materials. Those materials were then costed by Mr Matthew Leary, a junior engineer at Sebel, and Mr David Manz, Engineering Manager of Sebel. They did so by measuring the materials to be used, and the processes involved. The total cost for that seat (an existing Tangara 2 person walkover seat) was $811.33, or $405.66 per seat space.
Having done that work, Sebel then explored how it might be able to redesign the Tangara walkover mechanism so as to reduce cost. Mr Martin prepared sketches of a revised mechanism and a bill of materials, and those materials were costed by Mr Leary and Mr Manz. The total cost for that seat (an existing Tangara 2 person walkover seat as redesigned by Sebel) was $563.41, or $281.70 per seat space.
The costing estimates prepared by Mr Manz were based on a 2 seat walkover seat. A 3 seat walkover seat would cost marginally less per seat space, while a 1 seat walkover seat would be more costly per seat space. Fixed seating (ie. seats without a rollover or walkover mechanism) would be less costly per seat space.
In a letter dated 18 July 1997 Clyde indicated the types of seats then anticipated in each train. They were a 2 seater walkover, a 3 seater walkover, a 1 seat fixed, a 3 seat fixed, a 5 seat fixed and a tip up seat. These elements changed in due course.
During the period July to September 1997 there were various meetings between representatives of Sebel and Clyde, including employees of TDI. Those meetings were for the purpose of exploring seat designs and mechanisms, pricing options, resource allocations and development schedules. Representatives of Sebel and Clyde worked closely together on all aspects of seating and mechanism design, with Sebel submitting several design options to Clyde before mutually settling upon one preferred design to progress further. Clyde did not engage in any similar process with other seating manufacturers. The 4GT Project became a significant part of the day-to-day work for several Sebel staff, particularly for Mr King from Sebel’s Research and Development Department and for one of Sebel’s junior engineers, Mr Leary, both of whom spent substantial proportions of their time on the 4GT Project.
As was evident to Clyde, Sebel was enthusiastically developing a design and committing such resources to the Project as were required to develop a design carefully and expeditiously.
Mr Graham recalled telling Mr Jones during one of the meetings held in the period after July 1997 that there would be a refurbishment of existing trains in the near future and that would be a good potential market for Sebel to aim for, and that Mr Jones responded by saying that Sebel had spoken with train and ferry people and it looked like those markets were worth exploring. I accept this evidence. Mr Graham also recalled a telephone discussion in about July or August 1997 between Mr Ron Paul (then Chairman of Clyde’s parent company, EDI), Mr McGrath and him. Mr Graham’s evidence was that Mr McGrath said that he was aware of the 4GT Project, that it was a prime opportunity for Sebel to expand its business into transport, that Sebel was keen to extend its seating range to include rolling stock and ferries and that Sebel was keen and he would ensure that every effort was put into preparing a competitive tender. Mr McGrath’s evidence was that he said no more than that he would ask Sonny Wright, Sebel’s Acting General Manager, to look into the matter. I prefer Mr Graham’s evidence. It is more in keeping with how the “Sebel side” of these early exchanges was exhibiting real enthusiasm.
On or about 22 July 1997, the SRA released its tender specification documents for the 4GT Project. A revised, final set of these documents was issued on 29 August 1997.
From July 1997 onwards, and in particular August and September, Sebel undertook extensive research about the existing art in train seating. Sebel was aware that an entirely new design was required. I infer that Clyde had passed on to Sebel what the SRA had said about seating, and its importance, in the new train.
In about late August or early September 1997, Mr King came up with the idea of using gears, including a moveable lumbar support, rather than a linkage system, for the walkover mechanism for the seat. Shortly after doing so, Mr King left Sebel and started working for a company called Design & Industry Pty Ltd (“D&I”). As Sebel wished to retain his services, it engaged D&I to assist it in the design work subsequently undertaken in relation to the seat.
The new seat design prepared by Mr King in August and September 1997 was then costed by Mr Leary and Mr Manz. In a Sebel inter-office memo of 1 October 1997 from Mr Leary to Mr Jones, the estimated costing was set out as $382, on the basis of $80 tooling cost per seat, and on the basis that no maintenance costs had been allowed for. Thus, the direct cost of the seat was calculated at this time as $302.
In August or September 1997, prior to Clyde sending Sebel the superseding request for quotation on 10 September 1997, Mr Graham had a conversation with Mr Jones to the following effect:
Before working with Sebel, Clyde had already obtained Expressions of Interest from other seating suppliers. My view is that Clyde needs to obtain tenders from other suppliers but we will continue to work closely with you.
Mr Graham sought in his evidence to explain why these other requests for quotation were obtained. He said:
Clyde sent requests for quotations to a number of seating suppliers. One reason that I wanted to call for tenders for seats other than from Sebel is that if the market had known that Clyde was dealing with only one seating manufacturer it would have informed the market place of my strategy and focus. There is so much networking done by those involved in our relatively small industry that I was concerned that this information could potentially disadvantage Clyde. Furthermore, Clyde has the policy to gain three competitive quotes.
The applicant submitted that this evidence supported a finding that Clyde requested these other quotations only “as a matter of internal compliance”. This submission was related to the central factual element of the applicant’s case that Sebel at all times knew that it was the only seating supplier being considered by Clyde. It is sufficient, at this point, to note that the words of Mr Graham to Mr Jones do not contain any assurance of exclusivity or any explanation that the other tenders were being sought as a matter of form only or merely for “internal compliance”. Sebel was told that there would be other tenderers, but that Clyde would continue to work closely with Sebel. Nor did Mr Graham explain to Mr Jones the matters referred to at [78] above.
Clyde proceeded to send the request for quotation to various sub-suppliers for each of the components for the train. In relation to the seating component, it sent requests to three other suppliers: Austral Pacific, Trimtech and Transform.
The request for quotation addressed to Sebel took the form of a letter dated 10 September 1997 with various enclosures. In that request for quotation, Clyde stated that it had been short-listed to tender for the 4GT Project and that the scope of work for the head contractor under the Project would involve “the Design, Build, Maintenance and Financing of double deck electric suburban rail cars”. Whilst Clyde thus described the head contract for the 4GT Project, Sebel was only invited to submit a quotation for the “design (where applicable), manufacture and/or supply of” the seats.
Notwithstanding the absence of a request for a quotation on maintenance, that matter was discussed between Mr Graham and Mr Jones. Mr Graham said at [86] of his affidavit of 19 October 2000 that the following exchange took place between him and Mr Jones some time before Sebel submitted its tender in October 1997:
Mr Graham:Neville, we need an offer from your company for maintenance of the seats over the life of the contract, what service you can provide, the life of the components, and their cost of replacement. If Clyde is successful we would prefer that the maintenance be included. We can discuss the details of this at that time, based on the offer you submit.
Mr Jones:We would be pleased to include maintenance in the contract and we will forward a submission to you shortly as a basis.
I accept this evidence.
The question of the extent to which the parties had, by early 1999, agreed on issues of maintenance was a matter of dispute. It is therefore necessary to trace the development of this issue during the unfolding of events.
The request described the scope of work as follows:

Description
Drawing/Specification

Reference
Rev Total Qty

1.    Passenger seats (Each 4 car train set comprising of):

a) 3 person reversible 68 units

b) 2 person reversible 64 units

c)   1 person reversible 8 units

d) 1 person fixed 14 units

e)   3 person fixed 12 units

f)    5 person fixed (end saloon) 6 units

g) 5 person fixed (end saloon) with 2 fold up seats 6 units

2. Life Cycle Costing for the proposed seats.

P 163-06

To be advised
10/09/97
50 train sets (in 3 stages)

50 train sets
(in 3 stages)

The three stages referred to in the column headed “Total Qty” were explained in the body of the request for quotation. Stage 1 was for the supply of eighty cars, which would make up twenty train sets (one train set consisting of four cars). Both of Stages 2 and 3 would only proceed at the SRA’s option, Stage 2 being for the supply of fifteen train sets (sixty cars) and Stage 3 also being for fifteen train sets (sixty cars).
The request required tenderers to meet the technical requirements set out in Engineering Specification Tender Inquiry No P163-06 which was SRA Specification No 4GT-S96 0301, which required (in section 3.3) all passenger seating to meet the requirements of CityRail Specification FE 038-92.
The request also stated:
1.Prices are to be quoted for each individual type of seat detailed in the scope of work. The split up of different types is preliminary and subject to change during the design development of the car.
[emphasis added]
The request for quotation included a document headed “Attachment 1 Conditions of Tendering”. Condition C to that document, headed “Price Basis”, was in the following terms:
C. Price Basis
All prices to be submitted should be on a Rise and Fall basis in accordance with Clause 3 of Clyde Engineering’s Special Conditions of Contract 4GT Project. The base date for the Project is defined as 5 September 1997.
Prices are to be submitted in Schedule 1 to the Request for Quotation in the tables provided. If additional space is required, extra sheets may be photocopied and attached. The split up of the unit price is to be submitted in Schedule 1A for the purposes of indexation for Rise and Fall calculations.
Suppliers are also required to submit a Fixed Price option for Stage 1 only (20 train sets) in Schedule 1B. This price will be firm for the duration of Stage 1 and will not be subject to Rise and Fall or Exchange Rate variation.
The prices should be in Australian currency and should exclude sales tax.
Where imported goods are involved, Suppliers may submit prices in foreign currencies as an option.
Clause 3.1 of the Special Condition of Contract was in the following terms:
3.1All prices to be submitted will be subject to rise and fall from the base date defined as 5 September 1997.

Condition D to that document, headed “Validity Period” provided that “all offers must be valid for acceptance up to 30 September 1998”.
The request for quotation also included copies of “Clyde Engineering General Conditions of Contract” and “Special Terms and Conditions 4GT Project”. Sebel was requested to indicate whether any of the terms set out in that document were terms it was not prepared to accept.
Clause 2 of the General Conditions of Contract was in the following terms:
2.The Contract
2.1 The Purchase Order constitutes an offer to purchase and not an acceptance of any offer to sell the Equipment. The Purchase Order shall only be accepted in accordance with its terms and without modification, addition, deletion or alteration thereof unless agreed to in writing by Clyde and duly signed. In the absence of written acceptance or other written confirmation by the Supplier, the Supplier will be deemed to have accepted the Purchase Order upon delivery of the security deposit (if any in accordance with clause 7.1 or upon expiry of 21 days after the date of the Purchase Order whichever occurs first.
2.2 The Contract is the entire agreement between the parties in relation to the design (if required by the terms of the Contract), manufacture and delivery of the Equipment and shall be deemed to have superseded, excluded and cancelled (so that they shall not be part of or be used in the interpretation of the Contract) any qualifications, understanding, arrangements warranties, statements, agreements, reservations or restrictions contained in any:
(a)invitation or offers;
(b)precontractual negotiations, discussions or documents whatsoever; or
(c)collateral agreement or warranty;
which in any way relate to the subject matter, or part of the subject matter, of the Contract, or the intentions of any of the parties.
The words and phrase “Contract”, “Equipment” and “Purchase Order” were defined in cl 1.1 as follows:
“Contract”means the contract between Clyde and the Supplier for the supply of the Equipment formed by acceptance of the Purchase Order by the Supplier and includes these General Conditions of Contract, any Special Conditions of Contract and all attachments, documents and schedules thereto or hereto;
…
“Equipment” means the goods to be supplied by the Supplier described in the Purchase Order to which these Conditions of Contract are annexed or of which they form part;
…
“Purchase Order” means Clyde’s purchase order form to which these Conditions of Contract are annexed or of which they form part but excludes any terms and conditions printed on the back of the form;
Clause 12 of the Special Terms and Conditions provided that suppliers would be required to comply with the various terms and conditions of the head contract (being the contract for the supply of trains between Clyde and the SRA) on a back-to-back basis. One term identified was cl 9.3 of the proposed head contract, under which Clyde would be obliged to assign to the SRA all rights, title and interest in any intellectual property specifically created for work under the contract.
That clause was, relevantly, in the following terms:
9.3Rights granted to the Principal
The Contractor:
(a)assigns to the Principal all rights, title and interest in any Intellectual Property in the Contract Documentation and any other Intellectual Property produced under the provisions of the Contract or specifically created for the work under the Contract from the Date of the Deed of Agreement or its creation (whichever is later); and
(b)grants to the Principal a permanent, irrevocable, royalty-free, non-exclusive licence to use any other Intellectual Property incorporated into the work under the Contract or otherwise used in connection with the work under the Contract for any purpose whatsoever which:
(i)arises upon the creation of those things the subject of it;
(ii)may be sub-licensed;
(iii)will survive termination of the Contract on any basis; and
(iv)entitles the Principal, any sub-licensee or any assignee to alter or enhance anything licensed with any Intellectual Property in the alterations or enhancements vesting in the Principal; and
(c)must do all further things necessary to assign the rights, titles and interests referred to in the preceding paragraph (a) and to obtain the Principal’s right to the licence referred to in paragraph (b) and the Contractor is responsible for any payment, including any royalty fees, in connection with the granting or the obtaining of the licence.
Other clauses of the head contract made relevant by cl 12 of the Special Terms and Conditions concerned insurance. Clause 12.3 stated:
Suppliers and their subcontractors will be required to meet the provision [sic] of these clauses. The amount of Public and Products Liability Insurance cover required is $100 million and the amount of Professional Indemnity Insurance cover required is $30 million as stated in Attachment A of the Head Contract.
Consequently, Clause 33 Suppliers Insurance of Clyde Engineering General Conditions of Contract is not applicable.
Also, cl 12.5 of the Special Terms and Conditions in the request for quotation, dealing with the application of head contract provisions made the question of maintainability relevant to the contractual responsibility for design. Sebel was required to design for a planned service life of each train car of at least thirty-five years. It is unnecessary to set out the detailed provisions in cl 2.5 of the special conditions and cll 3.7 and 3.8 in volume 2 of appendix 5 which dealt with Sebel’s contractual responsibility concerning a reliability programme, modelling and predictions in respect of reliability of performance, analysis of failure modes and criticality analysis of the seat and its parts, a reliability demonstration, and a maintainability programme. These matters required Sebel to deal with issues related to reliability, life expectancy and maintenance, but this was in connection with the design and manufacture of a suitable seat. The applicant in particular relied on the following provisions of cll 3.8.1 and 3.8.2 in volume 2 of appendix 5, which provisions do not it seems to me take the matter any further than I have indicated.
3.8.1Maintainability is a characteristic of design. It is used to describe the ease with which failures can be repaired and time required to perform schedule maintenance and replacement procedures. Mean Time To Repair (MTTR) is a quantitative measure orf maintainability. … The contractor (ie Sebel) will implement a maintainability program as part of the contract. …
Maintainability characteristics will be an important consideration in the evaluation process, because of the impact of repair times on life cycle costs and on the potential availability which can be achieved in service.
…
3.8.2The contractor will be required to provide the estimated MTTR for repair of a selection of most common faults and for completion of inspection and replacements required as part of the scheduled maintenance program.
Also included in the request for quotation (whether initially on 10 September 1997 or later supplied) was a request for the supply of data in respect of “Life Cycle Costing”. The relevant document, headed “Specification for Life Cycle Costing Data to be Supplied”, noted that one of the SRA’s objectives was to minimise the life cycle costs over the expected life of the 4GT trains and that Sebel was required to provide information in a particular format so that the information could be standardised and equipment life cycle cost could be evaluated. The document stated that the SRA required Clyde to submit with its tender to the SRA a preliminary reliability predictions report, a preliminary maintainability predictions report and life cycle cost estimates, and that in order to allow Clyde to compile these reports, Sebel was requested to provide certain information in its scope of supply. The data requested included a spare parts list seeking manufacturing source and costs, costing for corrective maintenance, frequency, duration and costing for scheduled maintenance and life cycle costing for each major part. The document also stated:
You should assume, for the purpose of compiling this data only, that you are tendering for a subcontract to Clyde Engineering for the maintenance of your supply items at the designated maintenance facility at Eveleigh NSW for an initial period of 5 years. Should you be so contracted, you would be required to provide all necessary skills and labour, tools, spares, test equipment and other documentation to allow the work to be competed [sic] in the maintenance availability.
The same document also requested the following information relevant to maintenance:
·The extent of ongoing support over thirty five (35) year maintenance period specified for the equipment specified.
·The approach to guaranteeing the performance of the equipment to the standards specified over the maintenance periods of 15 years + 10 years + 5 years + 5 years (35 years).
·Any special tools and test equipment required to be held at servicing and maintenance depots for either maintenance or repair work to be listed and priced separately.
·List of “day one” recommended spares and current price of each item along with minimum stock levels to be held in inventory.
·Listing of float spares for Equipment overhaul and current price of each item.
The request for life cycle costing information was not a request for Sebel to tender for a maintenance contract. This was accepted by both Mr Graham and Mr Jones.
The Special Terms and Conditions contained in the tender request also required Sebel to develop or supply and maintain an appropriate range of operating and maintenance manuals for the seating.
Included in the material sent to Sebel as part of the request for quotation was a drawing prepared for Clyde by TDI identified as drawing TD-1784-SK49. The drawing had marked on it the following:
(a)       the estimated overall internal saloon width of 2910mm;
(b)       SRA requested aisle width of 470mm absolute minimum;
(c)       seat width of 450mm absolute minimum; and
(d)       seat pitch of 850mm.
Further, at page 3 of SRA Engineering Specification 4GT-S96 0301 being the engineering technical specification governing the seat design at this stage, it was stated:
Clause 3.4.1 – design is to be based on concept ergonomic layout drawing TD-1784-SK49.
In respect of the load requirements that the seats had to meet, specification 4GT-S96-0301 provided as follows:
(a)       At Appendix 1, clause 3.6.1.1.6 provided
Loads on car body attachments. The car body structure and attachments shall withstand a 4g longitudinal, 2g lateral and 2g vertical acceleration over and above gravitational acceleration acting on any bracket, fixing, partition, interior or external fittings or anchorage without exceeding the critical design stresses for any member.
The above components shall also be designed using a fatigue methodology which prevents fatigue failure over the life of the 4GT.
(b)       Clause 2.4 provided the following shock loads:
All equipment – not axle mounted:
Vertical 3g
Lateral – 3g
Longitudinal – 6g.
(c)       Clause 2.1.56 of Appendix 1 defined passenger as:
For design and testing purposes passengers shall include 5^th percentile Australian female to 95^th percentile Australian male. The average mass of a passenger to be 70kg...
Paragraph 4.1(i) of FE 038-92 – dealing with testing – required the seat back to be capable of being walked over fore and aft for at least 15,000 cycles.
The relevance of these various elements of the tender request and specifications will become apparent in due course.
On or about 24 September 1997, Sebel engaged D&I to prepare a three dimensional computer animated image of the walkover seat. At or by this time, the Sebel Project team made, or had made, a decision that Sebel would try to sell the new seating to other markets beyond the 4GT Project. Mr Jones believed that a successful seating product from the 4GT Project could be used in future bus seating projects, ferry projects and other train contracts. Mr Wright had similar views. Sebel’s senior management team therefore decided that Sebel would seek to retain all intellectual property in the seating design, so that Sebel could continue to use the design in future projects. A consequence of this decision and of what underlay it, was the costing decision that tooling costs, and design or research and development costs would not be expensed directly to the Project and thus would not be included as part of Sebel’s tender price. Such costs would be capitalised and amortised over time in the balance sheet and the profit and loss account of Sebel.
By about late September 1997, Sebel’s basic concept design was completed.
Mr Jones gave evidence that a meeting to determine the bid price and other matters took place in Mr Gabadou’s office, with Mr Gabadou present. I infer that this meeting was in late September or early October, but probably before 3 October. Mr Gabadou denied this, pointing out that he only joined Sebel in October 1997. I accept Mr Gabadou’s evidence in this respect. In any event, Mr Jones, Mr Payne (Sebel’s then Manager of the Research and Development Department) and Mr Manz, an Engineering Manager, were present at a meeting for this purpose. Some work had already been done on the make-up of the price prior to that meeting. At the meeting, a figure of approximately $560 per seat space (average) was calculated, being a figure that would, in the view of those present at the meeting, provide a satisfactory commercial return to Sebel after the costs of production (and taking into account the intended future use of the seating in other projects). Mr Jones said that in arriving at this figure they assumed that Sebel would absorb the tooling and research and development costs for the reasons just referred to. At this time, it was ordinary practice and policy within Sebel for costs such as research and development and tooling to be amortised over a period (five years in respect of a major project such as the 4GT Project) where Sebel intended to use, or could see opportunities that may arise to use, the product of the design and research and development over several future projects.
These costings, calculations and discussions were based on the concept of a single “price per seat space”. This was so even though some seats would be more expensive than others to manufacture (for example fixed seats would be less expensive to manufacture than walkover reversible seats), and even though the exact configuration and number of each type of seat was not yet settled.
The next day Mr Jones worked through the figures which had come out of that meeting with Mr Drabsch (Sebel’s Commercial Manager), and the figures were then taken by Mr Jones and Mr Drabsch to Mr Wright, Sebel’s Acting General Manager. The figures were then worked through on a whiteboard with Mr Wright. During the course of this meeting, Mr Jones gave evidence that the following discussion occurred:
Wright:I think we should reduce the seat price to $538 per space.
Jones:We’re not in a competitive situation here. We don’t have to bid down to win this.
Wright:Yes, but I don’t want this to blow the deal for Clyde. We will give them the lower price of $538 because we have to make sure Clyde gets its tender so that we get ours.
[emphasis added]
Mr Wright contested this conversation in two respects. First, he said that he did not think that he would have voluntarily reduced the price. However, in cross-examination he accepted that he could not deny that he would have reduced the bid price to try and get the deal. Secondly, he vehemently rejected the proposition that Mr Jones said that Sebel was not in a competitive situation on this tender. The following exchange took place between Mr Wright and the cross-examiner, in forceful terms (from Mr Wright):
Mr Foster Yes and don't you remember that Mr Jones told you at this meeting that Sebel was not in a competitive situation on this tender?
Mr WrightThere was not one single time when Neville Jones told me that, not one. In fact, for the whole duration of my time there, I had constant dispute with Neville about trying to get a commitment from Clyde to the effect that we were the preferred tenderer and in fact I believe then as I believe to this day that our job in this was to compete in Clyde with somebody else and not with the SRA as has been portrayed.
Mr Foster Weren't you ever told that from about late 1997 there was no other seating manufacturer in the game?
Mr WrightNo, never.
Mr Foster Never told that?
Mr WrightNever told that.
Mr FosterYou say you were not told at this meeting words to this effect that Sebel was not in a competitive situation on this tender or here?
Mr WrightAbsolutely not, in fact, everything in Neville's conduct and Clyde's conduct as related by Neville to me indicated quite the reverse.
Mr FosterWell, everything in their conduct, what have you got in mind when you give that answer?
Mr WrightI have in mind constant pressure on Neville Jones.
Mr Foster From who?
Mr WrightFrom myself.
Mr FosterConstant pressure, over what period of time?
Mr WrightOver the period till the October. Try to understand we were spending money trying to understand what was going on, why wouldn't Clyde, I believed then as I do now, that Clyde had alternative prices and alternative proposals. In fact, I couldn't conceive that Clyde would go in on a $150,000,000 job without and rely completely on us.
[emphasis added]
If Clyde was, to Sebel’s knowledge, relying solely on Sebel for the seating, that was said by Clyde to permeate how one looks at the conduct of the parties. Mr Wright was an acute and experienced man. His keen and vehement delivery of this evidence indicated that he appreciated the importance of it.
I accept Mr Jones’ evidence. It was directly corroborated by the other person at the meeting, Mr Drabsch, who was called by Sebel. Mr Drabsch not only generally recalled the conversation as deposed to by Mr Jones, but also, when gently taxed with the matter in cross-examination, said the following:
Mr Foster:Do you remember there got to a point where Mr Wright said that there should be a seat price of an average $538 per seat space at this meeting?
Mr Drabsch:     No, I don't recall that specific price.
Mr Foster:You wouldn't deny that either, would you?
Mr Drabsch:     No, I know there was some discussion that we should pitch it in at slightly lower than what we were calculating.
Mr Foster:A suggestion made by Mr Wright?
Mr Drabsch:     That's correct.
Mr Foster:Did not Mr Jones say when that suggestion was made that there wasn't any need to do that because Sebel was not in a competitive situation in relation to this tender?
Mr Drabsch:     Mr Jones did make that statement.
Mr Foster:And did Mr Wright come back and say, well I don't want to blow the deal for Clyde. We will give them the lower price, whatever it was, because we have to make sure Clyde gets its tender so that we get ours or words to that effect?
Mr Drabsch:     Mr Wright would have said words to that effect.
Mr Foster:In other words, help the head contractor because you are sliding in under him and you'll get the job?
Mr Drabsch:     Well, provide assistance to make sure that Sebel win the job.
From the manner in which Mr Wright gave his evidence and what I take to be his natural acuteness, I conclude that Mr Wright was well aware of the apparent importance of this evidence. I prefer the clear and unequivocal evidence of Mr Drabsch and Mr Jones.
It will be necessary, in due course, to assess the importance of this evidence in the light of the evidence as a whole. For now, it is sufficient to conclude that in about September 1997, in finalising the costing, Mr Jones expressed the view to Mr Drabsch and Mr Wright (but not Mr Gabadou) that there was no need to reduce the tender price from $560 as Sebel was not in a competitive situation. In answer Mr Wright expressed the view that he wanted to reduce the price to maximise the chance of Clyde winning the tender and so to make sure, as far as was possible, that Sebel won the job. This conversation took place against a background of Clyde and Sebel knowing of the importance of the seating in the new train.

It is unnecessary to traverse the law on whether in a tendering relationship such as this a duty of care can arise: see generally Seddon Government Contracts; Federal, State and Local (2^nd Ed) pp267-70; Holman Construction Ltd v Dalton Timber Company Ltd [1972] NZLR 1081, 1082-3; and Perre v Apand Pty Ltd (1999) 198 CLR 180.
Not least of the difficulties in the propounding of any such duty is the lack of reliance of Clyde on Sebel saying anything to it about the quality of its (Sebel’s) own work in preparing the tender. The tender was to be submitted. All parties understood that Clyde would then carefully, in its own interest, evaluate it. If the tender was commercially satisfactory and it was open (there being a tender validity date) it could be the subject of acceptance. In one sense, it would be a matter of indifference to Clyde whether Sebel had set its price with care. If it had not and the price was too high Sebel risked rejection; if it had not and the price was too low Sebel risked acceptance.
In any event, as I have indicated earlier, Sebel’s tender was put together rationally, carefully and in a businesslike manner. Even if some duty of the kind pleaded existed, there was plainly no breach.
Postscript on liability
It may, in the light of the genuine and hostile views of Mr Jones and Mr Hancox, be seen as unfair and contrary to common commercial decency to reach the conclusions I have. How, it might be asked rhetorically, can Sebel be allowed to “get away with” walking out on Clyde when it knew that Clyde had relied on it and when it knew that Clyde was then (in March/April 1998) placed in an invidious position?
It must not be forgotten, when facing this question, that Clyde was in control of its own tendering procedures. It set the rules. It controlled the correspondence. At no time did the parties lapse into a state of false security because of the close co-operation within the relationship or because of anything Sebel said or did. Clyde chose to regulate the relationship between the parties by the words of its choice. It was asked for a token of commitment; it refused to give it, in the generic form requested. In so doing, Mr Sheldrick did not say that such a request was unnecessary because a contract existed. He said the requested letter would not be given and a contract would be sent to Sebel in due course. This was a step indicating that Sebel was intended to provide the seating, as was plain already, but nevertheless, this was a step within the nominated steps described in the Process Protocol and letters of 28 March and 2 June 1998 indicative of an, as yet, unformed legal relationship.
What is plain from the conduct, relationship and communications of the parties is that they both intended to create a contract upon which their relationship was to be based. The difference between them is whether that occurred.
Mr Graham and Mr Sheldrick thought that what they had done was sufficient to create a contract. Objectively speaking, in my view it was not. My view was shared contemporaneously by Mr Gabadou, Mr Wright and, I think, by Mr Jones.
Sebel misled no-one. It was either bound in contract not to change its position, or not so bound. In my view it was not so bound.
No case was made relying on some innominate tort importing an obligation to act fairly or decently in business. No such tort or legal obligation is known to the law in this country: compare the lack of an independent tort of unfair competition. If Sebel acted in a way that lacked commercial decency, as was the view (and an understandable one) of some of the actors at the time, it may face commercial consequences by injury to its name, but it did not, in my view, breach any contract or otherwise commit a tortious or statutory wrong.
The application should be dismissed.
Damages
Notwithstanding my views as to the proper disposition of the proceedings, it is appropriate that I deal with damages, lest I be found to be wrong in my views on liability, should there be an appeal.
The approach which I have taken is to deal with the issues raised as follows. First, I will deal with the question of damages in contract. Here, the parties were not at odds in terms of questions of principle. The matter is to be examined by comparing what the passenger seating has, and will, cost, deducting what it would have cost had Sebel performed its contract. Secondly, I need to rule on certain matters of evidence, in particular parts of the evidence of an accountant called by the respondent. Thirdly, I will deal with differences in approach by way of principle in dealing with any damages under the TPA or negligence and certain factual matters therein involved.
Damages in Contract
Clyde brought together its evidence on damages through a report of a chartered accountant, Mr McClintock. He based his reports on evidence of Clyde employees who had personal knowledge of the conduct of the Project, in particular Messrs Habgood, Thompson and Graham.
Mr Habgood held a BSc and a diploma in industrial engineering. He had forty years in the transportation engineering industry. He was a manufacturing engineer at Clyde. He has been closely involved in the Project. Mr Habgood calculated the cost to Clyde of the following aspects of the design and manufacture of the seats for Stages 1, 2 and 3 of the 4GT Project:
(a)       seat components;
(b)       tooling; and
(c)       seat assembly labour.
Mr Habgood was not cross-examined. In this circumstance and considering the apparent careful and painstaking approach of Mr Habgood, for the reasons set out by Samuels JA in Ellis v Wallsend District Hospital (1989) 17 NSWLR 553, 586-7, I accept Mr Habgood’s evidence.
Mr Graham also gave evidence calculating the cost to Clyde of the following aspects of the design and manufacture of the seat for Stages 1, 2 and 3 of the 4 GT Project:
(a)Design – Clyde;
(b)Design – Consultants;
(c)Prototype – Development;
(d)Testing; and
(e)Project Management.
Mr Hapgood also updated these figures.
Mr Graham was cross-examined to a very limited extent on questions of quantum, to which I will refer.
Mr Thompson was a qualified accountant who worked at Clyde. He had been involved in the day-to-day costings for the Project and had a detailed knowledge of the primary records and procedures of Clyde. He gave evidence of the cost to Clyde of the design and manufacture of the seating for stages 1, 2 and 3. Mr Thompson was not cross-examined. I accept his evidence for the reasons given concerning Mr Habgood’s evidence.
Based on the calculations prepared by these and other Clyde witnesses, Mr McClintock calculated Clyde’s damages (as at 30 June 2002 for the purposes of interest) at $6,780,154. This is a figure representing the difference between actual and anticipated costs for Stages 1, 2 and 3 less what Clyde would have paid Sebel, plus interest and other adjustments, and using commercial rates of compound interest, rather than Court rates (and thereby reaching a lesser sum than by the employment of Court rates).
Sebel identified a number of areas where it disputed what underlay these figures. I will deal with each and allow the parties to compute the consequences should that become necessary. Initially, a large number of matters appeared to be in dispute. However, I take Sebel’s counsel’s detailed written submissions to set out the matters finally in issue, with which I now deal.
Actual costs incurred by Clyde
Mr McClintock’s calculations were based on an acceptance of Clyde’s evidence that its Stage 1 costs for the passenger seating unit were $10,635,660. This was said by Sebel to be an unreliable foundation for a number of reasons. First, it was based on affidavits specially prepared for these proceedings. I reject this in the absence of cross-examination of the deponents. Secondly, it was said that Mr McClintock expressed no opinion on the reliability or completeness of the information. I reject this in the absence of cross-examination of the deponents of the underlying affidavits. Thirdly, a discovered document was pointed to which was said to raise doubts about the reliability of Mr McClintock’s underlying information. No cross-examination of the deponents of the underlying affidavits took place on this document. I do not propose to deal with any procedural issues raised about its alleged late discovery. No adjournment was sought to deal with the relevant witnesses. It was said that no witness was called to explain the document, a spreadsheet, which might be seen as reflecting some claim on the SRA. In the absence of any challenge to any underlying witness based on this document, it would not be appropriate to speculate on the nature and importance (or lack thereof) of it. Fourthly, other discovered documents dealing with a claim on the SRA for enhancement were said to undermine the figure of actual costs. They were not put to the Clyde witnesses. I refuse to speculate on them.
For these reasons the costs of Stage 1 supplied by the Clyde witnesses and used by Mr McClintock in his calculations should be accepted.
Sebel Contract Price
Mr McClintock’s calculations were based on Sebel’s 1997 contract price being an average price per seat across all configurations. Sebel says that the tender figure of $5,153,280 should be taken, not $5,031,576 used by Sebel (a difference of $121,704). I accept Clyde’s submission in this respect.
However, I would take a figure of $121,704 as part of an arbitrary contingency figure for contracting disputes to which I will make reference later.
Allowance for uncertainty in-relation to stages 2 and 3
Mr Lovat, an officer of the SRA, gave confidential evidence, which was not the subject of cross-examination, about the future of the Project. In my view, taking all his evidence into account and in the light of the budget papers in Exhibit K, in accordance with the assessment of future events discussed in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638, Poseidon Ltd & Sellers v Adelaide PetroleumN L (1994) 179 CLR 332 and Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473, 503-507, I would assess Stage 2 as definitely proceeding and not discount it at all, and discount Stage 3 by 25%.
Other matters
There were a number of matters said by Sebel to demonstrate that the figures underlying Mr McClintock’s report were unreliable. No precise figures were said to attend these matters, but they were matters for the Court to take into account.
GRP panels
Clyde now proposes to build the end saloon fixed seats and tip-up seats using what are called GRP panels. Sebel had not proposed to use these.
Various adjustments were made to Mr McClintock’s calculations because of this, based on Mr Graham’s evidence that had Sebel proceeded Clyde would have sourced the panels elsewhere, leading to a reduction in Sebel’s price. This was the area in which Mr Graham was cross-examined on damages. Mr McClintock reduced the price by $780,700. This was said by Sebel to be overly conservative. It was said that Sebel would have had redesign costs. Mr Payne however was not able to quantify any such costs. For reasons which I gave earlier ([462] above) I am cautious about Mr Payne’s evidence. Nevertheless, I would include a sum of $25,000 for design and dispute contingencies in addition to the $121,704 referred to earlier for these matters.
width of seat
Sebel submitted that Clyde has undertaken work with a view to modifying the seats to achieve a width of 441mm. This, if correct would have been a change to the specification of December 1998, of 450mm, a width to which Sebel had worked during 1998.
The documents referred to by Mr Payne did not reveal any required seat width different from 450mm.
I reject this attempted qualification by Sebel.
load requirements
Sebel submitted that it had not been provided with load details of the interface of the passenger seating with the train cabin. Mr Payne described additional design work that Sebel might have had to undertake once relevant load details were available. It was said that these matters were not covered by the specifications.
Clyde, on the other hand referred to a number of parts of the 1997 specification, which were mentioned at [103] and [104] above. It is unnecessary to deal with these matters in any further detail. In the light of the content of the specifications and the cross-examination of Mr Payne, I am not prepared to make anything other than a nominal adjustment for design and dispute contingencies of another $25,000 in this regard.
I have taken earlier an arbitrary figure of $121,704 for such contingencies; the additional sums to which I have made reference are the only other changes that I would make to the contract damages outlined by Mr McClintock. I think that these sums, though arbitrary, are appropriate to take into account in respect of possibilities of argument and dispute between Clyde and Sebel had a contract between them gone ahead.
Contract D
Assuming there to have been breached a promise to negotiate in good faith a contract based on the 1997 tender, the following submission was put by Sebel:
In circumstances where Clyde was insistent upon pursuing the negotiation of a seat supply contract that imposed 35 year maintenance obligations on Sebel, and required Sebel to change its entrenched position in relation to intellectual property, it is submitted that the prospect of the parties reaching agreement could not be put at above [50%]. Although Graham says he would have accepted Sebel’s initial tender without any maintenance component, he was not the real decision maker. Any award should be discounted accordingly.
I reject these submissions. First, the evidence exhibits a willingness of Sebel to undertake maintenance. If, however, maintenance could not be negotiated, Mr Graham’s evidence was that Clyde could live without Sebel undertaking maintenance. I see no reason why I should not accept that as unlikely to be indicative of Clyde’s position. Secondly, whilst agreement had not been reached about intellectual property, the elements of it had been discussed and on the evidence I find that, given an exhibiting of good faith by Sebel in negotiation, that issue would have been resolved.
I see no basis for other than a nominal discount of, at most, 10%.
The question of expert evidence
Significant objections were taken by Clyde to parts of the first report and the whole of the second report of a chartered accountant called by Sebel to answer Mr McClintock’s report, Mr Ross.
Judicial focus has, in recent times, been given to the question of admissibility of expert evidence: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. 729-50 (per Heydon JA); H G v The Queen (1999) 197 CLR 414, 427 (per Gleeson CJ); Velevski v The Queen (2002) 187 ALR 233, 252-53 (per Gaudron J) and 267-69 (per Gummow and Callinan JJ); Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd [2000] FCA 1463 (Full Court); and Quick v Stoland Pty Ltd (1998) 87 FCR 371 (Full Court).
Central to the orderly and admissible presentation of any expert evidence is the clear identification of the opinions that the expert seeks to present. This is a separate question from whether, for the opinions of the expert to be admissible, the basis of the opinions on the assumed facts must be set out, about which there may be different views expressed in Makita and Quick v Stoland. I think, however, any such difference is unlikely, in most cases, to be of significance in the light, in particular, of s 135 of the Evidence Act and its likely application to disembodied and unsubstantiated expressions of opinion, a matter to which reference was made in Quick v Stoland. If I may say so, without intending to put to one side the comprehensive reasons of Heydon JA in Makita, or the careful reasons of the Judges in Quick v Stoland, in this case, I particularly bear in mind what Gleeson CJ said in H G v The Queen, supra at 727.
The opinions of Mr McCombie were never expressed in admissible form. An expert whose opinion is sought to be tendered should differentiate between the assumed facts upon which the opinion is based, and the opinion in question …
Argument in this Court proceeded upon the basis that it was possible to identify from Mr McCombie’s written report some facts which he either observed or accepted, and which could be distinguished from his expressions of expert opinion. Even so, the provisions of s 79 will often have the practical effect of emphasising the need for attention to requirements of form. By directing attention to whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience, the section requires that the opinion is presented in a form which makes it possible to answer that question.
[emphasis added]
It is necessary to understand, with precision, the content of the opinions being proffered. One of the reasons that this is so important is that the Court must be able to understand whether the expert is, or the extent to which the expert is, drawing upon any particular, and if so, what, training, study, expertise or experience, which he or she may have in respect of any particular opinion. A discursive discussion by an intelligent expert (from a particular field or discipline) who is well endowed with intelligence, insight and common sense, may help someone unravel a problem in another field of expertise or discipline; but, he or she will not be proffering opinions on that subject matter that will be either helpful or admissible as evidence in Court.
Mr Ross was a chartered accountant. That was his area of expertise.
As to Mr Ross’ first report, I deal only with the paragraphs objected to by Clyde.
I reject [18], [19], [21], [23], [24], [25], [26], [27], [29], [30], [42], [43], [44], [45] to [54], [55], [56], [57] to [67], [68], [69], [70], [71] to [76], [77], [80], [81], [82], [83], [84] to [132], [140] to [153], [154], [155], [157], [158], [159], [160], [161], [162], [163], [164], [169], [172] to [178], [181], [182], [192] to [194], [197], [214], [242], [243] to [258], [265], [266], [270], [271], [272], [273], [279] to [283] and [284] to [288]. All contain, in substance assertions, not apparently based on accounting expertise. If such accounting or other opinions based on his expertise can be discerned, they are not clearly based on any identified facts or assumptions. Such of these paragraphs as can logically be read as assumptions can otherwise stand as such.
I allow [195 (c)] as being arguably rooted in accounting expertise.
The report is largely a discursive body of views of someone who understands enough of litigation to put forward an argumentative case for how Sebel could defend these proceedings. There are precious few accounting opinions displayed, and such as there may be are buried. Mr Ross may perhaps be forgiven. He deals, to a degree responsively, with the report of Mr McClintock (that was, largely, not objected to). There may well have been great value in those preparing Sebel’s case obtaining the views of Mr Ross. Such views would no doubt have assisted them in analysing and preparing the case and in marshalling and formulating arguments. That is the legitimate, accepted and well known role of expert assistance for a party preparing and running a case. Expert evidence in which a relevant opinion is given to the Court drawing on a witness’ relevant expertise is quite another thing. There is no ethical reason why it cannot be given by the person providing assistance, as long as that person and the legal advisers understand and recognise the difference between the two tasks, and keep them separate. This was not a report containing accounting opinions, or any other opinions, based on relevant expertise.
Much the same can be said about Mr Ross’ second report. I do not propose to dissect it line by line. Much is assertion, submission and argument. The whole report is objected to. Such opinions as can legitimately be put forward, if any, are sufficiently buried as to require mining to be discovered, a task which I am not prepared to perform. I reject the whole report.

The combined efforts of Mr McClintock and Mr Ross have not been wasted. Through the dialectic of their debate, what was in dispute about the question of damages was distilled. I have dealt with the matters in controversy. However, I did not need to have all their reports, as they developed, put into evidence. I do not intend what I have said to be a personal or professional criticism of counsel or solicitors. A practice has grown up, certainly in Sydney, perhaps elsewhere, in commercial matters, for each party to arm itself with what might be described as litigation support expert evidence. In this case, no point was left undiscussed by Mr Ross – whether legal, logical, evidential or common sense.
Parties and their legal advisers should expect the Court to look with rigour upon expert evidence in order to ensure that only relevant opinions, based on relevant expertise and on coherent and ordered assumptions, are put on the court record. Whatever may be the strict requirements of s 79 of the Evidence Act, s 135, in at least other than straightforward cases, demands that the basis of expert opinion be apparent, and that the opinions, in respect of which the witness has expertise, be displayed and apparent. Cross-examination, in particular of a determined and dialectically combative kind, should not be necessary (as to an extent it was here) to shear away the layers of evidence, in order to assess whether such evidence does involve opinions, and if so, what they are and whether they are relevant, in the sense that I have discussed.
The rejection of Mr Ross’ evidence does not disadvantage the respondent in any way. I have dealt earlier with the contract damages. The disputes there, and elsewhere on quantum, which have no doubt been distilled with his assistance, lie in non-expert evidence and submissions.
Damages for s 52 and negligence
Sebel submitted that Clyde has misconceived the approach to the question of damages in relation to the tort and statutory claims.
The approach of Clyde in relation to these claims was the same as its contract claims. This was not the product of elementary error, overlooking the difference between compensating for loss of a bargain (by comparing the actual position to the position that would have obtained had the contract been performed), and compensating for damage caused by a wrong, statutory or tortious (by comparing the actual position to the position that would have obtained had the wrong not occurred). Rather, it was a considered application of principle to the facts.
Clyde recognised that under s 82 of the TPA and the law of tort the measure of putting an applicant in the position in which it would have been had the contravention not occurred has traditionally been used (see, for example, Brown v Jam Factory Pty Ltd (1981) 53 FLR 340). However, Clyde submitted that in a number of cases the High Court has stressed that the measure of damages under s 82 should not be confined by common law concepts: Marks v GIO Australia Holdings (1998) 196 CLR 494, 503, 510, 529, 537; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413, 459. The ultimate task of the Court is the fair compensation to the injured party: Henville v Walker (2001) 206 CLR 459 at [131] and Johnson v Perez (1998) 166 CLR 351, 355-56.
The facts here were said by Clyde to lead to the same result whether contract, tort or statutory claim is employed. The essence of what was put was set out in [168] to [170] of Clyde’s written submissions:
…Had Clyde Engineering been made aware that the representations made to it were open-ended as to price, Clyde would have sought from Sebel a firm price for seating from which Sebel did not leave open to itself the option to revoke or resile, or such a price from another seating manufacturer, and included that firm price in its tender to the SRA.
At paragraph 63 of the Affidavit of Reginald Keith Graham sworn on 19 October 2000, Mr Graham stated:
“If at this time [late 1997/early 1998] Sebel had changed its offer from around $540 per seat and instead quoted around $1,000 per seat prior to Clyde finalising its Tender submission to the SRA, I would then have:
(a)Sought to negotiate with Sebel to secure an offer from them that was closer to the $540 price per seat they had previously indicated; and
(b)If no deal could be done with Sebel I would then have opened negotiations with other seating manufacturers who had submitted an offer to attempt to improve their offers in terms of both design and price and also to use as leverage in further negotiations with Sebel; and
(c)If none of these negotiations were fruitful, I would reluctantly have accepted the lowest conforming bid, taking into account all relevant risks, from the tenders received. This may well have been the Sebel bid at around $1000 per seat. I would have increased the total price of Clyde’s Tender to the SRA to cover the higher than expected cost of the seats”
Even if that firm price had been higher than the price included in Sebel’s response (in fact even if it had doubled), Clyde Engineering contends that it still would have been selected as the successful tenderer by the SRA but at a price which did not leave it exposed as happened in fact in the present case.
Clyde posits that had the wrongs not occurred it would have been told of the lack of fixity in Sebel’s price, it would have fixed Sebel to its tendered price or if it had been told

(before 8 October 1998) that the price was as Mr Doman put it on 1 April 1999, it would have dealt with the matters described by Mr Graham at [686] above.
However, as Sebel pointed out, it was never Sebel’s intention in 1998 to change its price. The essence of the claims by Clyde is that the unqualified promises were made and in circumstances where there was no foundation for making them, at least in unqualified form. Thus, it seems to me to be irrelevant and misleading to posit that Sebel told Clyde in 1998, before Mr Doman was employed, that the price was, or would be, different. The real question is what would have happened if Sebel had (on this hypothesis) not been misleading or deceptive or negligent and had qualified its promises or representations and said matters which conveyed that Clyde could not rely on Sebel maintaining its tender after, at the latest, the end of the tender validity period.
In those circumstances, Clyde would, to act logically and reasonably, and conformably with how Mr Graham and Mr Sheldrick otherwise acted, have ensured that it accepted the tender of Sebel or made sure otherwise that it remained open. This would have led to Sebel being bound to its 1997 prices, in some fashion. On this hypothesis, Clyde’s use of the contractual measure of damages is appropriate.
However, putting the matter this way highlights a fundamental difficulty for Clyde on liability and quantum. Mr Sheldrick and Mr Graham did think they had accepted Sebel’s tender. If they had been told expressly that the Sebel tender would, or may not, be kept open, they may well have clarified and extended the tender validity period and made sure that they accepted the tender within time. However, these were the very things that they tried to do and that they thought they had done, by no later than 13 October 1998. Mr Graham’s evidence in his affidavit (see [291] above) that he was “absolutely certain” on 13 October 1998 that Clyde had accepted Sebel’s offer should be recalled in this context. It is difficult to see how they would have acted differently, on the basis of the relevant hypothesis.
On this analysis, which I think is correct, no loss occurred.
Reserved rulings on objections
The proceedings were conducted before me on the basis that certain material could be admitted, subject to objection and relevance. I acted on that basis. I said that I would rule on any such conditionally or provisionally admitted evidence in my reasons. I have already discussed some of these rulings.
Exhibits A and A1 contain lists of objections to affidavits with the results of various rulings already made, identification of what material was not pressed and identification of which parts of affidavits were admitted conditionally or provisionally. The exhibits are typed. I have indicated on them in handwriting, my further rulings on the conditionally or provisionally admitted material in the column headed “Allsop J Ruling”. If, in relation to any ruling the parties or either party requires further written reasons, such can be the subject of an application after these reasons are published. Each party has liberty to apply within a reasonable time, say twenty one days, in that respect.
Also, there was handed up at the end of the hearing a consolidated index to the tendered document bundle. The parties withdrew documents agreed to be irrelevant. They were crossed out. A small number of documents were marked as admitted subject to relevance and objection. I have ruled on those documents by marking in hand the various entries. The agreed index unmarked by me was Ex M; the agreed index so marked will become an exhibit and numbered Ex M1. If there is any objection to this course either party may put submissions to me; and each party has liberty to apply within a reasonable time, say twenty one days, in that respect.
Finally, I would like to express my gratitude to counsel and solicitors for the efficient conduct of the hearing. Through the efficiency of the presentation of the evidence and submissions, a case of some complexity, concerning a considerable period of time was reduced to a little under three weeks of evidence and addresses.

I certify that the preceding six hundred and ninety three (693) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.
Associate:
Dated:             12 March 2003

Counsel for the applicant:
L G Foster SC
I R Pike

Solicitor for the applicant: Gilbert and Tobin

Counsel for the respondent: I M Jackman SC
M R Elliott

Solicitor for the respondent: Clayton Utz

Dates of Hearing: 8-12, 29 and 30 April, 1-3 May and
24-27 June 2002

Last Submission received 19 August 2002

Date of Judgment: 12 March 2003

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 768 of 1999

BETWEEN:	EVANS DEAKIN PTY LIMITED APPLICANT
AND:	SEBEL FURNITURE LIMITED RESPONDENT
JUDGE:	ALLSOP J
DATE OF ORDER:	12 MARCH 2003
WHERE MADE:	SYDNEY

JUDGE:	ALLSOP J
DATE:	12 MARCH 2003
PLACE:	SYDNEY

Counsel for the applicant:	L G Foster SC I R Pike
Solicitor for the applicant:	Gilbert and Tobin
Counsel for the respondent:	I M Jackman SC M R Elliott
Solicitor for the respondent:	Clayton Utz
Dates of Hearing:	8-12, 29 and 30 April, 1-3 May and 24-27 June 2002
Last Submission received	19 August 2002
Date of Judgment:	12 March 2003