Infinity Design Pty Ltd Trading as Ingenuity Product Design v Challenge Property Investments Pty Ltd

[2021] NSWDC 602

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Infinity Design Pty Ltd Trading As Ingenuity Product Design v Challenge Property Investments Pty Ltd [2021] NSWDC 602

Hearing dates:

24 August 2021
25 August 2021
27 August 2021

Date of orders:

08 November 2021

Decision date:

08 November 2021

Jurisdiction:

Civil

Before:

Coleman SC DCJ

Decision:

1 Judgment for the Plaintiff in the sum of $96,045.60, together with interest on that amount.
2 The Amended Cross‑Claim is dismissed.
3 The defendant/cross‑claimant is to pay the plaintiff/cross‑defendant’s costs of the proceedings.
4 The parties are to confer to prepare Short Minutes of Order to calculate the amount of interest payable in accordance with Order 1 above, and provide those Short Minutes to my Associate within 7 days.
5 If the parties are unable to agree the terms of the Short Minutes, there is liberty to apply on 3 days’ notice.

Catchwords:

Contract – Breach of Contract – Alternative quantum meruit Claim – Whether the Defendant Breached the Contract – Cross‑Claim – Breach of Contract – Whether the Plaintiff Breached the Contract – Whether the Plaintiff Engaged in Misleading and Deceptive Conduct – Whether the Plaintiff Repudiated the Contract – Whether the Contract was Suspended or Terminated – Effect of Exclusion Clauses on Recovery of Damages – Assessment of Damages – General Principles

Legislation Cited:

Competition and Consumer Law Act 2010 (Cth) Sch 2 ('Australian Consumer Law') s 18

Corporations Act 2001 (Cth) s 1305

Evidence Act 1995 (NSW) ss 69, 79

Cases Cited:

Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500

DCT Projects Pty Ltd v Champion Homes Sales Pty Ltd [2016] NSWCA 117

Fink v Fink (1946) 74 CLR 127

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1

H & E Van der Sterren v Cibernetics (Holdings) Pty Ltd (1970) 44 ALJR 157

Italform Pty Ltd v Sangain Pty Ltd [2009] NSWCA 427

Jones v Dunkel (1959) 101 CLR 298

Krakowski v Eurolynx Properties Ltd (1995) CLR 563

Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1980) 144 CLR 300

Roads and Traffic Authority of New South Wales v Barrie Toepfer Earthmoving & Land Management Pty Ltd(No 3) [2012] NSWSC 937

Shevill v Builders Licensing Board (1982) 149 CLR 620

Smith v Noss [2006] NSWCA 37

Texts Cited:

Cheshire and Fifoot, Law of Contract 10th Australian edition

Category:

Principal judgment

Parties:

Infinity Design Pty Ltd t/as Ingenuity Product Design (Plaintiff)
Challenge Property Investments Pty Ltd (Defendant)

Representation:

Counsel:
Mr D Elliott (Plaintiff)
Mr J Raftery (Defendant)

Solicitors:
Coleman Greig Lawyers (Plaintiff)
Somerset Ryckmans (Defendant)

File Number(s):

2019/118565

Publication restriction:

N/A

Judgment

BACKGROUND

1. These proceedings concern a dispute between the parties arising from a contract to design and develop a wearable RFID reader for workforce industries such as cleaning staff and security guards that enabled employees to log the tasks performed by them by scanning a wristband linked to a smartphone application.

2. By Amended Statement of Claim filed 22 October 2019, the plaintiff (Infinity) seeks damages against the defendant (Challenge) in the sum of $96,045.60 plus interest and costs. Infinity alleges that Challenge is in breach of the contract between them by its failure to pay an invoice for services rendered and for damages arising from Challenge’s breach of the contract.

3. Challenge has filed an Amended Cross‑Claim by which it alleges that Infinity was in breach of the agreement, and acted in repudiation of that agreement, thereby causing it loss and damage. It further alleges that Infinity engaged in misleading and deceptive conduct by representing on 3 occasions that apart from an agreed variation, no further additional work would be required to complete Stage 2 of the project. It says the representations were misleading and deceptive as Infinity knew that an increase of the budget (and the work) to complete Stage 2 was required. Challenge alleges that the Statement of Claim should be dismissed and there should be judgment for it in the sum of $43,309.93, together with interest and costs.

4. For the reasons which follow, I find that Challenge was in breach of the contract by failing to pay the invoices rendered and for loss and damage flowing from its breach of contract. The amount of damages is the amount that Infinity would have charged by way of fees if the breach had not occurred. With respect to the Amended Defence and Amended Cross‑Claim, I do not accept that Challenge has established any pleaded breach of contract. I do not accept that Infinity repudiated the contract. I do not accept that Challenge has established the pleaded case of misleading and deceptive conduct.

5. The end result is that Challenge will be ordered to pay Infinity the sum of $96,045.60 together with interest and costs.

THE EVIDENCE

6. The hearing of the matter proceeded by way of Audio Visual Link. The evidence in chief of the witnesses for each of the parties was given by affidavit.

7. Infinity relied on affidavits of:

1. Paul Moutzouris sworn 14 May 2020, 16 October 2020, 30 June 2021 and 19 August 2021. Mr Moutzouris is the Chief Executive Officer and sole director of Infinity.

2. Affidavits of John‑Paul McKeown sworn 14 May 2020 and 22 October 2020. Mr McKeown was a senior electronics designer at Infinity whose role on the project included electronic design work.

3. Affidavits of Benjamin Ford sworn 18 May 2020 and 22 October 2020. Mr Ford was the research and development manager at Infinity whose role in the project included engaging with the client and overseeing and managing the development and delivery of the projects.

8. Challenge relied on an affidavit of Marc Triulcio sworn 31 August 2020. Mr Triulcio is a manager at Challenge who was responsible for the management of the project on its behalf.

9. Each of the witnesses was cross‑examined. I formed the view that each was doing their best to recall events, by reference to documents if necessary, and answer questions asked of them honestly and to the best of their ability. I did not form an adverse impression of the credit of any of the witnesses. I did form a view that parts of Mr Triulcio’s evidence were not reliable.

10. The parties prepared a Joint Court Book (Exhibit 1) and opening and closing written outlines of submissions. I have had regard to all of the evidence in making my findings below. Those findings are based upon that evidence including the cross‑examination of the witnesses. I am grateful for the parties’ assistance in providing the written submissions which I have drawn on to set out the relevant chronological facts below.

FACTUAL FINDINGS

11. In April 2018, Challenge came up with an idea for a software concept for workforce industries such as cleaning staff and security guards, that enabled employees to log the tasks performed by them by scanning a wristband lined to a smartphone application (at [5] of Triulcio 31.8.2020).

12. On 10 April 2018, Mr Triulcio met with Mr Moutzouris at Infinity's offices to discuss Challenge’s needs and requirements for the project (at [8] Triulcio 31.8.2020).

13. On 17 April 2018, Mr Triulcio met with Mr Moutzouris and Mr Ford at Infinity's offices to further discuss Challenge’s needs and requirements for the project (at [10] of Moutzouris 14.5.20; at [6] of Ford 18.5.20). Mr Moutzouris then sent a proposal to Mr Triulcio for the proposed product entitled “Wearable RFID Reader Development Proposal” (Exhibit 1 at pp 857‑902). Between 18 April 2018 and 23 April 2018, Mr Ford, with the assistance of Mr Moutzouris, finalised the proposal (at [8] of Ford 18.5.20).

14. On 24 April 2018, Mr Moutzouris emailed Mr Triulcio a revised proposal which contained some amendments sought by Mr Triulcio (the Proposal) (Exhibit 1 at pp 64‑85). The document presented the proposed development activities, deliverables, resources, estimated costs and timeframes associated with the development of a wearable RFID (Radio‑frequency identification) reader electronics, embedded software, iOS App, and enclosures (Proposal; 1.0 Introduction).

15. The Proposal relevantly included:

1. the proposed work involved the following stages:

1. S1 Preliminary Design (Stage 1). Stage 1 was aimed at defining and documenting engineering requirements, confirming product feasibility, and answering key technical questions and commercial questions. Stage 1 comprised:

1. Project Planning And Management;

2. Engineering Specification;

3. Preliminary Hardware Design;

4. Preliminary Software Design; and

5. Preliminary Enclosure Renders.

2. S2 Design and Implementation (Stage 2). Stage 2 was aimed at undertaking the detailed design of the product and constructing fully functional prototypes. Stage 2 comprised:

1. Project Management;

2. Circuit Design, Schematic Entry and Review;

3. PCB (“Printed Circuit Board”) Design and Review;

4. Embedded Software Development;

5. Enclosure Design;

6. Prototype Documentation;

7. Component Procurement and Kitting; and

8. Prototype Construction.

3. S3 Test and Verification (Stage 3). Stage 3 was aimed at comprehensively testing, verifying and validating the product against requirements and undertaking formal compliance testing. Stage 3 comprised:

1. Project Management;

2. Hardware Verification;

3. Embedded Software Verification;

4. Enclosure Verification;

5. Compliance Engineering; and

6. Prototype Field Trial Support.

2. The estimated cost and labour for each stage was as follows:

1. Stage 1 – 22 labour days – $27,520 (excl GST);

2. Stage 2 – 93 labour days – $126,140 (excl GST);

3. Stage 3 – 17 labour days – $23,960 (excl GST);

TOTAL – 132 labour days – $177,620 (excl GST)

16. The Terms of Service relevantly provided in clause 10.1 that:

All figures presented in this proposal are estimates based on a preliminary understanding of product requirements as outlined in this proposal. Estimates may require revision at the conclusion of the specification and preliminary design tasks when product requirements have been fully defined.

Estimates are intended as a guide only. Ingenuity will undertake the development on an hourly rate basis (i.e. time and materials) and will track expenditure against estimates. This is not a fixed price quote. New requirements and scope changes can be accommodated upon THE CLIENT’s request. All such work is outside the scope of this proposal…

17. The Terms of Service also stated that Infinity would charge on an hourly rate basis of $160.00 excl GST in respect of the resources applied to the project (Exhibit 1 at p 85 – under cl 6 of the Proposal).

18. The Terms of Service stated that Infinity would issue invoices for the services provided. All invoices issued would be due and payable 14 days from the date of issue (cl 10.2).

19. Prior to the commencement of the project, the client was to pay a bond. Payment of the bond would amount to acceptance of the Proposal and of the Terms of Service (cl 10.11).

20. Importantly, either party could suspend the Agreement by providing the other party with one month’s written notice (cl 10.12):

…At suspension, THE CLIENT will be billed for any work performed by Ingenuity which has not yet been billed as at the date of the suspension (as supported by Timesheets) and approved third party costs supported by Invoice copies.

With the exception of any unpaid invoices, neither party will be held liable for any costs, loss or damages resulting from suspension of the project.

21. Further, either party could terminate the Agreement by providing the other party with one month’s written notice (cl 10.13):

…At termination, THE CLIENT will be billed for any work performed by Ingenuity which has not yet been billed as at the date of termination (as supported by Timesheets) and approved third party costs supported by invoice copies.

With the exception of any unpaid invoices, neither party will be held liable for any costs, loss or damages resulting from termination of the project.

22. In addition, I note the following clauses of the Terms of Service:

1. Infinity was not liable in contract, tort or otherwise to compensate the client for any increased cost caused by its failure to complete or delay in completing or to delivering the product (cl 10.10(c)); and

2. Challenge was able to accept the Proposal by providing instructions and paying the applicable bond. Payment of the bond by Challenge was, under the contract, deemed to be acceptance of the content, terms and conditions presented in the proposal (cl 10.11).

23. Challenge accepted the terms of the Proposal by paying the initial deposit of $11,000 on 4 May 2018 and an agreement was formed between the parties on the terms contained in the Proposal (the Agreement). There is no dispute about this.

Stage 1 – S1 Preliminary Design

24. On 17 May 2018, Mr Ford sent an email to Mr Triulcio requesting a meeting to understand Challenge’s needs and requirements for the project (Exhibit 1, p 586) (at [15] of Ford 18.5.20). On 30 May 2018, Mr Triulcio attended a meeting at Infinity's offices with Mr McKeown and Mr Ford (Exhibit 1, p 95).

25. On 6 June 2018, Mr Triulcio attended a meeting at Infinity's offices with Mr Ford and Mr McKeown (at [13] of McKeown 14.05.20) (at [16] of Ford 18.5.20) (Exhibit 1, p 97). During that meeting, Mr Ford and Mr McKeown presented to Mr Triulcio:

1. Challenge Monitor Product Specification User Needs; and

2. Challenge Monitor User Needs Analysis Session Presentation.

Mr Triulcio confirmed that he was happy with Infinity's analysis and proposed product specification and asked for some minor amendments to the product specification. Mr McKeown confirmed that they would make the relevant changes and email an updated product specification for Mr Triulcio’s review.

26. The following day, Mr McKeown sent an email to Mr Triulcio at 5:46pm (Exhibit 1, p 208), attaching the following documents:

1. D0004106 Challenge Monitour [sic] Product Specification (1_00) User Needs.pdf (Exhibit 1, pp 209‑213) (the Product Specification); and

2. D0004124 Challenge Monitor User Needs Analysis Session Presentation (1_01).pdf (Exhibit 1, pp 214‑220).

Mr McKeown asked Mr Triulcio to review the documents to ensure conformance with needs and anything missed. Mr McKeown confirmed that these documents will be the basis for the rest of the development.

27. Between 7 June 2018 and 26 June 2018, Infinity undertook Stage 1 of the project, which included completing the product specification, designed the software architecture, reviewed and approved the final software requirements specification and prepared the preliminary electronics design (at [17] of McKeown 14.05.20) (at [18] of Ford 18.5.20).

28. On 26 June 2018, Mr Ford sent an email to Mr Triulcio (Exhibit 1, p 343) attaching the following documents (the Stage 1 Documents):

1. D0004150 Challenge Monitor Software Architecture (1_00).pdf (Exhibit 1, pp 345‑364);

2. D0004170 Challenge Monitor Software Requirements Specification (1_00).pdf (Exhibit 1, pp 365‑402) (the Software Requirements Specification);

3. D0004123 Challenge Monitor Preliminary Electronics Design (1_01).xlsx (Exhibit 1, pp 426‑464); and

4. D0004106 Challenge Monitor Product Specification (1_00).pdf (Exhibit 1, pp 403‑425).

29. Mr Ford requested a meeting with Mr Triulcio to “go through these with you and anyone on your team” and “it will also allow us to explain any assumptions and decisions we’ve made along the way” (Exhibit 1, p 343). Mr Ford also stated in his email “…we’re ready to launch in to the design of the product. We’re keen to get in to it, so as soon as we get your approval we’ll be straight in to Stage‑2 Detailed Design, design the product and producing some tangible prototypes” (Exhibit 1, p 343).

30. On 10 July 2018, Mr Ford sent an email to Mr Triulcio (Exhibit 1, pp 751‑753) seeking comments from him in respect of the Stage 1 Documents provided on 26 June 2018. Mr Ford stated “Just so you know, we have paused waiting for your feedback before we get in to the detailed design”.

31. On 18 or 27 July 2018, Mr Triulcio attended a meeting at Infinity's offices with Mr Ford and Mr McKeown (at [21] of McKeown 14.05.20) (at [23] of Ford 18.5.20) (Exhibit 1, p 101). During that meeting:

1. Infinity delivered the 3D Concept Renders (also, a Stage 1 Document), being a physical mock‑up of the device; and

2. Mr Triulcio instructed Infinity to proceed with Stage 2. He said that updates on Stage 2 could be discussed at the regular meetings (at [28] of Triulcio 31.08.2020).

32. Mr Triulcio was happy to proceed with Stage 2, based on the Stage 1 documents (T114.4‑6). As discussed further below, the Stage 1 documents did contain items and functions over and above those in the Proposal and the estimate which, if they were included, would require additional work to that descried in the Proposal.

Stage 2 – S2 Design and Implementation

33. Stage 2 commenced following the 27 July 2018 meeting (although some preparatory works had been undertaken prior). Infinity’s timesheets for the period 1 July 2018 to 31 July 2018 (Exhibit 1, p 101) record that 62 hours were devoted to “2.2 Schematic Design” and 11 hours to “2.5 Enclosure Design”.

34. On 3 August 2018, Mr Triulcio attended a meeting at Infinity's offices with McKeown (at [22] of McKeown 14.05.20) (at [35] of Triulcio 31.08.2020). (Exhibit 1, p 115). Mr Ford was not at that meeting. During that meeting:

1. Mr Triulcio requested that an over the air “OTA Function” be included in the RFID Reader; and

2. McKeown indicated he would check the Product Specification to determine whether the “OTA Function” was already included.

35. The “OTA Function” would permit firmware updates on the RFID reader remotely once it was in use. Otherwise, updates would have to occur via a wired USB connection (at [22]‑[23] of McKeown 14.05.20).

36. There is a dispute about the date of the meeting at which the OTA Function was first discussed. Mr Triulcio says that the OTA Function was discussed at the meeting on 27 July 2018. In cross‑examination, he stated that he used his own memory to fix this date (T116.28‑30) but does not have any independent and objective corroboration (e.g. a file note) (T116.19‑23). McKeown’s evidence as to the date of the conversation was that it occurred on 3 August.

37. I prefer Mr McKeown’s recollection as it is corroborated by objective evidence, being the 4:37pm email referred to below where he reported the conversation to Mr Ford and the 3 August 2018 timesheet entry (Exhibit 1, p 115). McKeown also confirmed in cross‑examination that the entry on the timesheet “check specs for firmware OTA update and tag copy protection” was a separate entry to “Meeting with Marc” (T87.25).

38. Following the 3 August meeting, McKeown sent an email to Mr Ford at 4:37pm stating (Exhibit 1, p 468; at [24] of Ford 18.5.20):

“One issue that came up during the chat with Marc this morning was regarding future updates to the firmware. Marc asked if this was possible and I said that it would be possible but I’d need to check if it’s in the spec already.

…

If we’re updating the budget, do we also want to include the additional costs of radio certification as highlighted by the EMC pre‑compliance and maybe the stage 4 production prep?”

39. On 8 August 2018, Mr Triulcio attended a further meeting at Infinity's offices with Mr Ford and Mr McKeown (at [24] of McKeown 14.05.20) (at [25] of Ford 18.5.20) (at [36] of Triulcio) (Exhibit 1, p 116). During that meeting:

1. Mr Ford indicated that the “OTA Function” was not included in the Product Specification and would require an additional 10 days of labour and budget; and

2. Mr Triulcio approved an additional 10 days of labour and budget for inclusion of the OTA Function. This was an approved variation to the estimate in the proposal (Variation).

3. Mr Triulcio (at [36] of Triulcio 31.08.2020) says that he had a conversation with Mr McKeown at this meeting where he asked Mr McKeown to confirm that there is no further variation of the scope of work and timeline. He says Mr McKeown said “We will get everything done by the agreed timeframe”. Mr McKeown denies he said this. I will return to this below.

40. On 15 August 2018, Mr Triulcio attended a further meeting at Infinity's offices with Mr Ford and McKeown (at [26] of McKeown 14.05.20) (at [27] of Ford 18.5.20) (at [38] of Triulcio)(Exhibit 1, p 115). During that meeting:

1. Infinity presented the final 3D Concept Renders and provided an update as to the progress of the project;

2. Mr Triulcio says he had a conversation with Mr McKeown where he asked: “Are there any budget increases that I need to be concerned about?”. He says McKeown replied: “No, we’re on track at this stage.” Mr McKeown says the conversation was that Mr Triulcio asked: “I’m happy with the progress on the project so far. Are there any other known budget increase requests that you need to make?” McKeown replied: “No”. I will return to the difference in versions below.

41. On 16 August 2018, Mr McKeown sent an email to Phil Symonds (Symonds) (Software Manager at IDG) with instructions to update the Software Requirements Specification to include the OTA Function (at [27] of McKeown 14.05.20).

42. During August 2018, Infinity worked on Stage 2. The timesheets for the period 1 August 2018 to 31 August 2018 (Exhibit 1, pp 115‑117) record that 72.75 hours were deployed in respect of “2.2 Schematic Design”, 60.1 hours were devoted to “2.4 Embedded Software Development” and 39.75 hours to “2.5 Enclosure Design”.

43. On 5 September 2018, Mr Triulcio attended a meeting at Infinity's offices with Mr Ford and Mr McKeown (at [28] of McKeown 14.05.20) (at [28] of Ford 18.5.20) (at [44] of Triulcio 31.08.2020) (Exhibit 1, p 105). It is common ground between the parties that this meeting occurred on this date. During that meeting:

1. Mr McKeown provided Mr Triulcio with an update on the various aspects of the project;

2. Mr Ford presented Mr Triulcio with an estimate of the additional labour and cost of items presented in a spreadsheet (Exhibit 1, p 781). A copy of this spreadsheet (the 5 September Spreadsheet) is annexed to these reasons. The plaintiff says these are additional features that Mr Triulcio had requested, or it had suggested, during the Stage 1 process, and the OTA Function;

3. Mr Ford stated that the items in category 1 (highlighted green) were desirable features that Infinity's firmware team had identified and suggested as they had begun in‑depth work on the RFID reader. The features were optional to include and could be included after the project was complete;

4. Mr Ford stated that the items in category 2 (highlighted red) were features which were either agreed in the initial proposal or subsequent scope/budget extension, but which Infinity estimated would require additional labour to implement. The update was based on a better understanding of the design complexities now that the firmware team had begun its in‑depth work; and

5. Mr Ford stated that the items in category 3 (highlighted yellow) were features that Mr Triulcio had requested throughout the course of the project that were not in the original estimate provided before the project started. Infinity had hoped to absorb these into the approved budget but had to increase the estimate given a better understanding of the design complexities now that the firmware team had begun its in‑depth work.

44. Mr Ford stated that if Mr Triulcio wished to proceed with all of the features listed there was around 25 days additional labour, however, many of the features did not need to be implemented and could be done at the end of the project. Alternatively, Infinity could deliver all these additional features in line with the original timeframe if they allocated additional resources to the project.

45. Mr Triulcio expressed significant concern and displeasure about the timing of the request for additional budget and left the meeting.

46. It was accepted by the plaintiff’s witnesses in cross‑examination, that some of the matters on the 5 September Spreadsheet presented to Mr Triulcio were not included in the Proposal but had been included in the Stage 1 Documents. It was accepted that to include these features in the RFID reader would require additional time but that no increased budget or timeframe had been communicated to Mr Triulcio until the 5 September meeting. Challenge says this should have been communicated to it. Infinity says it could not communicate any increase in time or budget as it was not known until the spreadsheet for the 5 September meeting was prepared. There is a fundamental dispute about the impact of this issue with respect to the amended defence sought to be raised by Infinity and its cross claim. I will return to this below.

47. On 6 September 2018, Mr Triulcio contacted Mr McKeown and said:

“What happened yesterday? How am I supposed to get approval for this when I previously agreed to 10 days? You know I need approval from my father and uncle. Can you send me the updated timeline you showed me yesterday? Do I own the IP and can I get access to the software guys’ timeline? It seems like it’s the software guys asking for more time. I’ve never met them. I don’t know them”

Mr McKeown responded:

“No worries, I’ll get onto it and send it on to you.”

48. On 7 September 2018 at 5:17pm (Exhibit 1, pp 550, 1094), Mr McKeown sent an email to Mr Triulcio which attached, inter alia:

1. A link to an updated project timeline for the RFID Reader;

2. The updated software budget estimate presented by Mr Ford on 5 September 2018 (Exhibit 1, p 1107); and

3. A statutory declaration signed by Mr Moutzouris stating that Challenge owned the intellectual property.

49. Mr Triulcio responded at 9:55pm (Exhibit 1, p 1109) stating that “I’ll get back to you over the weekend on the adjustment of the project timeline and features".

“Suspension”/“Termination”

50. On 10 September 2018, Mr Moutzouris says he was called by Mr Triulcio, who informed him that Challenge was suspending all work on the project effective immediately (at [22] of Moutzouris 14.5.20). Mr Triulcio said that he said that the project was to be put “on hold” (at [50] of Triulcio 31.8.2020). Mr Moutzouris said that Mr Triulcio did not explain the reasons as to why he was suspending the contract. Mr Triulcio, however, said that he told Mr Moutzouris it was because of the delays “from your end”.

51. There is a dispute about the effect of the action taken by Mr Triulcio on 10 September 2018. Infinity says it was a suspension within the meaning of cl 10.12 of the Agreement. Challenge asserts it was a termination of the Agreement within the meaning of cl 10.13. I will return to this below.

Invoices

52. On 21 September 2018, Infinity issued Invoice 1275 to Challenge in the sum of $40,365.60 (incl GST) for the period 1 August to 29 August 2018 (Invoice 1275) (Exhibit 1, pp 1112‑1116).

53. On 21 September 2018 at 4:33pm, Mr Triulcio sent an email to Mr Moutzouris stating (Exhibit 1, p 119):

“Hi Paul, got this new invoice.. is there any more invoices after this one?

If there are more can you send them through so I can pay in one lump sum..”

Mr Moutzouris responded (Exhibit 1, p 121):

“I will check with accounts on Monday and get back to.

We stopped on the day you told us to, so depending on when that was there may be a few more days to bill for September”

54. On 28 September 2018 at 9:54am, Mr Triulcio followed up on his 22 September 2018 email (Exhibit 1, p 1117). At 10:23am, Ms Cui (Accounts at Infinity) sent an email to Mr Triulcio attaching Invoice 1280 for the sum of $17,517.46 for the period 1 September to 28 September 2018 (Exhibit 1, pp 1119‑1126).

55. On 12 October 2018, Ms Cui sent a Credit Note to Mr Triulcio refunding the deposit paid of $11,000 (Exhibit 1, pp 1127‑1128). Mr Moutzouris then sent an email Mr Triulcio at 1:38pm attaching a statement issued on 12 October 2018 (Exhibit 1, pp 1129‑1131). Challenge made a payment of $14,792.47 on 23 November 2018.

56. On 19 October 2018, Infinity reversed Invoice 1280 and issued Invoice 1292 dated 19 October 2018 for $17,394.08 (incl GST) (Invoice 1292). Invoice 1280 was paid. Accordingly, payment for Invoice 1292 is not pressed.

57. On 14 December 2019 at 2:51pm, Mr Triulcio sent an email to Mr Moutzouris which stated, inter alia:

“I have never told you why we decided to cancel you as a contractor, I wanted to steer away from blame, as all trust was lost in you and Ben ford to deliver the project on time and on budget as previously quoted”.

Demand

58. On 15 February 2019, Infinity's solicitors issued a letter of demand to Challenge (Exhibit 1, pp 158‑165) seeking payment of Invoice 1275 and Invoice 1292. As I have noted above, payment of invoice 1292 is now not pressed. To date, Challenge has failed and refused to pay any amount to Infinity.

THE PLAINTIFF’S CLAIM

59. Infinity's claim against Challenge is brought in contract, or in the alternative, quantum meruit: (at [13] of the Amended Statement of Claim).

60. Infinity submits that by cl 10.1 of the Agreement, Challenge agreed to pay Infinity the rate of $160.00 per hour (excl GST). It submits that the timesheets, which are admissible as business records of Infinity pursuant to s 69 of the Evidence Act1995 (NSW) and s 1305 of the Corporations Act 2001 (Cth), establish the tasks undertaken by it and the time to complete those tasks. It submits that it has a contractual entitlement to be paid the amounts claimed in Invoice 1275.

61. In the alternative, if it is necessary to decide the claim in the quantum meruit basis, Mr Moutzouris deposes that the charge out rate of $160.00 per hour (excl GST) is at the lower end of commercial rates (at [3]–[7] of Moutzouris 30.06.21). Mr Moutzouris is relevantly qualified to give expert evidence as to the rate of reasonable remuneration to be applied on a quantum meruit basis: see s 79 Evidence Act 1995 (NSW); Roads and Traffic Authority of New South Wales v Barrie Toepfer Earthmoving & Land Management Pty Ltd(No 3) [2012] NSWSC 937. The timesheets establish the tasks undertaken by Infinity and the time to complete those tasks.

62. For the reasons below, I have found that Infinity is entitled to succeed in contract so it is not necessary to determine the quantum meruit claim.

Damages

63. Infinity submits that it had a right to continue working on the project until such time as the project was suspended in accordance with the contractual terms. It notes that by cl 10.12 of the Agreement, Challenge was required to give it one month’s notice if it wished to suspend the project. Infinity submits that, in breach of the Agreement, Challenge purported to suspend the project on 10 September 2018 without giving the required one month’s notice.

64. As to damages for the one month period of notice, Infinity submits that the general rule at common law is that where a plaintiff sustains a loss by reason of a breach of contract, a plaintiff is entitled to be placed in the same position with respect to damages, so far as money can do it, as if the contract had been performed. Subject to matters of proof, it is entitled to recover damages for the loss of the bargain (i.e. expectation damages and damage suffered), including expenditure incurred in reliance on the contract (i.e. reliance damages): Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at [12] cf Cheshire and Fifoot, Law of Contract 10th Australian edition, pp 1126‑11.

65. Infinity further submits that where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages: Fink v Fink (1946) 74 CLR 127 at p 143 per Dixon and McTiernan JJ. In Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64, the High Court stated at [31]:

The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v. Fink (1946) 74 CLR 127, at p 143; McRae v. Commonwealth Disposals Commission (1951) 84 CLR 377, at pp 411-412; Chaplin v. Hicks (1911) 2 KB 786, at p 792. Indeed, in Jones v. Schiffmann (1971) 124 CLR 303, Menzies J. went so far as to say that the "assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation": at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359.

66. In support of its claim for these damages, Infinity submits that the evidence establishes that it would have spent an additional 348 hours in respect of the remaining Stage 2 items which were to be undertaken post‑suspension and within the one month period, and that this was within the estimate provided in respect of Stage 2 (at [8]‑[22] of Moutzouris 30.06.21). This work amounts to be $55,680.00 (excl GST), broken down as follows: Mr McKeown (7 hours), Mr Gong (133 hours), Mr Murphy (72 hours) and Mr Symonds (136 hours).

67. Infinity pointed to the evidence of Mr Moutzouris, who confirmed in cross‑examination that projects of this type are long term projects and the people are locked into them. He said that, when such a project gets suspended, Infinity doesn’t necessarily have work for the employees who were working on it to do immediately. His evidence was that the 30 day notice period was to protect Infinity and to give it time to wrap the project up and to reassign its resources without cost implications (T50). He also confirmed that most of the staff members referred to in paragraph 10 of his affidavit of 30 June 2020 were fairly dedicated to this project alone (T51.27‑31).

68. Infinity submits that Mr Moutzouris was barely challenged in cross‑examination on the accuracy of the estimates he made. In respect of the estimate given in respect of Mr Gong, it was put to Mr Moutzouris that Mr Gong was on annual leave between 1 October 2018 to 11 October 2018 and that he couldn’t have undertaken work on the project (T53.10‑33). However, Mr Moutzouris recalled that Mr Gong took annual leave to fill in the gap of work that he did not have (T58.5‑7). No challenge was made in respect of the estimates provided in respect of Mr Murphy, Mr Symonds and Mr McKeown.

THE DEFENDANT’S POSITION

Breach of the Agreement

69. Challenge submitted that the Agreement had three stages (Exhibit 1, tab 5, p 69):

1. Stage 1 – Preliminary design – aimed at defining and documenting engineering requirements, confirming product feasibility and answering key technical and commercial questions;

2. Stage 2 – Design and Implementation – aimed at undertaking the detailed design of the product and constructing fully functional prototypes; and

3. Stage 3 – Test and Verification – aimed at comprehensively testing, verifying and validating the product against requirements and undertaking formal compliance testing.

70. Challenge accepts that an estimate was provided in the Agreement. It referred to cl 10.1 of the Agreement, which provides that:

“[e]stimates may require revision at the conclusion of the specification and preliminary design tasks when product requirements are fully defined.”

71. Challenge submits that the clear intention of that clause was to give it the opportunity to make a fully informed decision as to whether or not to proceed with Stage 2. That is, it submits that if Infinity knew at the time of completion of Stage 1 that the estimate required for the completion of the Stage 2 works required revision, it was contractually bound by this clause to tell Challenge before those works were undertaken.

72. Challenge submits that the evidence discloses that there can be no doubt that there was additional work referred to in the Stage 1 documentation which was not in the Proposal. Accordingly, it submits, Infinity was contractually bound to inform it of an increase in the budget as set out in the original estimate.

73. Challenge noted that Mr Ford gave the following evidence by reference to the matters set out in the spreadsheet provided at the 5 September meeting (Exhibit 1, p 781):

1. The category ‘Events Records’ work was included in the Stage 1 documentation. Thus , there needed to be an increase in the budget (T64.11‑14);

2. The category ‘Configuration’ work was included in the Stage 1 documentation. Thus, there needed to be an increase in the budget (T65.10‑14);

3. The category ‘pedometer’ work was included in the Stage 1 documentation. Thus, there needed to be an increase in the budget (T65.21‑24);

4. The ‘New Details’ features, aside from the OTA, related to matters which were approved by Mr Triulcio during Stage 1 of the project (T73.48‑T74.06) but Infinity did not contemplate the detail of the work that may be required to achieve those features (T74.08‑12);

5. The ‘New Features’ were matters that had been identified in Stage 1 (T74.35‑42) but Infinity had not considered what was required to complete the work in detail and had not formally re‑estimated the work with the software team (T74.44‑48);

6. The matters identified in the Project Summary document indicated the additional time required to implement the additional scope of works that had been identified in Stage 1. Mr Ford accepted that there was an underestimate from the proposal to implement some of the technical features (T75.17‑23);

7. There was an underestimate in the Proposal (T75.25‑28) and there was no allowance in the estimate contained in the Proposal for the features which were considered in Stage 1 and that were in the Stage 1 documents but were not in the proposal (T75.30‑38).

74. Challenge referred to the evidence of Mr Moutzouris (at T46.07‑14):

Q.   Would you agree with me, that is, [if] the engineers were consulted prior to the stage 1 documents being provided, that they could have provided either you or the client with a more accurate estimate of the budget?

A.   Yes, but that may not be the most efficient time to do it.

Q.   But it would give the client an update on what they may be required to spend if they wanted to proceed to stage 2, wouldn't it?

A.   Yes.

75. Challenge submitted that, in breach of the Agreement, Infinity failed to advise it of the increase in budget at the time the Stage 1 documents were delivered and approval was sought for Stage 2.

76. Challenge says that Infinity’s submission that Challenge ought to have requested an update to the budget at the conclusion of Stage 1 ought to be disregarded. Mr Triulcio’s gave the following evidence (T110.01‑03):

Q.   And it wouldn't have been a surprise to you that, because of the change in scope, there may have been a revision to the estimate, correct?

A.   Well, no, because I was never told of these budget increases.

77. Mr Triulcio also gave the following evidence in cross‑examination (T111.37‑40):

Q.   Having completed the stage 1 process, you didn't ask my clients for a quote for an estimate to undertake stage 2, did you?

A.   No, because they explained to me that revisions of the budget may be required after they fully defined the project.

78. Challenge submits that if the estimated budget contained in the Proposal required revision, Infinity was contractually obliged to provide the revised budget at the conclusion of Stage 1. It failed to do so. Had it done so, Challenge submits it would not have proceeded with Stage 2.

79. Challenge says, by reason of this breach of the Agreement, it suffered damage. The invoices related to Stage 2 of the project which were paid by it totalled $32,309.93. It also paid $11,000 by way of a bond which also must be returned. Challenge submits that the loss suffered by it caused by Infinity’s breach of the Agreement is $43,309.93.

Misleading and Deceptive Conduct

80. Challenge also raises by way of defence and cross‑claim an allegation of misleading and deceptive conduct, which it says was engaged in by Infinity. It alleges that at several meetings in August 2018, Infinity by its employees represented to it that, apart from the variation with respect to what is referred to as the OTA work, no further additional work would be required to complete the Stage 2 works as identified in the Proposal. It will be necessary to refer to the pleading of this claim below.

80. Challenge referred to the evidence of Mr McKeown in his affidavit regarding a conversation he had with Mr Triulcio on 15 August 2018 (Exhibit 1, p 173):

Triulcio:   I’m happy with the progress on the project so far. Are there any other known budget increase requests that you need to make?

McKeown:   No.

82. Mr McKeown confirmed in cross‑examination that he ‘only ever advocated an assurance that the whole variations to date is everything that we know about.’ (T90.29‑30) and that there were no known variations at the time the question was asked (T91.48‑49; T92.11‑13).

83. Challenge contends that representations were also made by Infinity employees that there were no known budget increases or variations at meetings with Mr Triulcio on 3 August 2018 and 8 August 2018.

84. Challenge notes that the evidence referenced above with respect to Infinity’s alleged breach of contract (see [69]–[79] above) establishes that at the time Stage 1 was completed, Infinity knew or ought to have known that there was a requirement for a budget increase. It follows, so it says, that the representations made by Infinity (through Mr McKeown) were misleading or deceptive as there were required budget increases at the time they were made.

85. Challenge submits that, for it to be successful in its defence, the Court does not need to find that Mr McKeown knew or ought to have known at the time the representation was made that there was a required budget increase. In that respect, the following was held in Krakowski v Eurolynx Properties Ltd (1995) CLR 563 at 583:

A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them.

86. Challenge contends that it does not matter when Infinity or one of its employees became aware that the budget was underestimated. The evidence establishes that, had the appropriate employee reviewed the Stage 1 documentation, the employee would have recognised the underestimation. If actual knowledge is required (which is denied by Challenge), the Court ought to draw a Jones v Dunkel inference as a result of Infinity’s failure to call any software engineer.

87. Challenge submits that whether a party had relied on certain conduct is a subjective question: Italform Pty Ltd v Sangain Pty Ltd [2009] NSWCA 427 at [40]. It submits that reliance/causation will be established if there would have been inaction or some other action had it been known that the representation was false. Specific evidence is not essential to establish reliance/causation: Smith v Noss [2006] NSWCA 37 at [26] and [27].

88. Challenge contends that once Mr Triulcio was made aware that there would be an increase in the budget, he ended the Agreement. The powerful inference is that, had he been advised earlier, he similarly would have ended the Agreement.

Repudiation of Contract

89. Challenge additionally contends that by the Agreement, Infinity represented (my emphasis) that Stage 2 of the project would be completed in an estimated 93 days (Exhibit 1, p 75). It is not said that this amounted to a contractual term.

90. If there was to be a revision to that estimate, Challenge says it was to be provided at the conclusion of Stage 1 or following the request by Challenge for new features.

91. Challenge notes that Infinity complied with its obligations when it advised Challenge that the budget/work estimate would be increased by 10 days to enable the incorporation of the OTA feature. However, Challenge contends that by failing to provide a revised estimate at the conclusion of Stage 1, Infinity implied that the estimate of 93 days did not require revision. Although it was an estimate, the budget provided by Infinity was relied upon by Challenge.

92. On 5 September 2018, Infinity advised that it required an additional 32 days to complete the works which Challenge contends were primarily contained in the Stage 1 documents. Challenge submits that that request evidenced an intention by Infinity to fulfil the Agreement in a manner substantially inconsistent with what had previously been agreed. Relevantly, the initial estimate was for 93 days to complete Stage 2. Infinity requested a further 10 days on 8 August 2018 and a further 32 days on 5 September 2018. That is an increase of around 45%.

93. Challenge submits that it accepted the repudiation on 10 September 2018 when Mr Triulcio ended the Agreement.

DETERMINATION

Challenge’s Pleaded Defence and Cross‑Claim

94. Before I deal with the issues raised above in detail and set out Infinity’s response to Challenge’s allegations of misleading and deceptive conduct and repudiation, it is first necessary to determine whether Challenge is able to argue, on the pleadings as they stand, that Infinity was in breach of the Agreement as Challenge alleges by not informing it of an increase in budget, from that contained in the Proposal, to complete the Stage 2 works.

95. Challenge submitted that the clear intention of cl 10.1 of the Agreement was to give it the opportunity to make a fully informed decision as to whether or not to proceed to Stage 2. It submitted therefore, properly construed, that clause imposed an obligation on Infinity to notify Challenge that a budget revision was required at the end of the Stage 1 works if it knew that was the case. It says this was not done and, accordingly, Infinity is in breach of the cl 10.1 of the Agreement.

96. From the commencement of the hearing, Mr Elliott of Counsel for Infinity took objection to Challenge running a case that Infinity had breached the Agreement by failing to provide an updated budget estimate when Stage 1 was delivered. Mr Elliott maintained that the relevant parts of the Cross‑Claim and Amended Defence did not plead any allegations that Infinity had breached the Agreement by failing to provide an updated budget estimate when Stage 1 was delivered. He submitted that Challenge did not plead that by not updating the estimate at the conclusion of Stage 1, Infinity implicitly represented that the estimate contained in the proposal for Stage 2 remained the same.

97. At the conclusion of the evidence and at the commencement of his closing submissions, Mr Raftery of Counsel for Challenge made an application to further amend the Amended Defence and Cross‑Claim to expressly plead that by the terms of the Agreement Infinity was obliged to provide Challenge with a revised budget estimate at the end of Stage 1 of the project. After hearing argument, I refused the application to amend and gave separate reasons for doing so. Those reasons included that Mr Elliott had always taken objection to the point being run and said he was forensically prejudiced as he would have called additional evidence to meet the point.

98. Mr Raftery maintained as an alternative position, however, that the Amended Defence and Cross‑Claim as currently pleaded enabled him to run the same point. Mr Raftery identified the relevant part of the Cross‑Claim as being paragraph [5]. That paragraph cross‑referenced paragraphs [12]‑[25] of the Amended Defence. It is accepted that this should in fact have been a reference to paragraphs [14]‑[33] and [37] of the Amended Defence as the numbering in the Cross‑Claim had not been updated to reflect the amendments to the defence at the time of the hearing. I granted leave for Challenge to file an Amended Cross‑Claim updating the numbering. That amended document, the terms of which were consented to by Infinity, was served on 15 October 2021.

99. Paragraph [5] of the Amended Cross‑Claim is as follows:

1. By virtue of the matters pleaded at paragraphs 12 to 25 14 to 33 and 37 of the Defence to the Amended Statement of Claim, the Cross-Defendant breached its duties to the Cross-Claimant pursuant to the Agreement.

   Particulars

   a.   The Second Stage: Design and Implementation was to be completed within 93 working days;

   b.   Any new requirements or scope changes by the Cross-Defendant were to be accommodated upon the Cross-Claimant’s request;

   c.   The Cross-Defendant had a duty to provide the serves in a timely and professional manner including providing the Cross-Defendant with any material information or updates regarding any changes (such as scope) to the Work;

   d.   By virtue of the Cross-Defendant’s Representation during the Additional Meetings, the Cross-Claimant was advised that, except for the Variation, no further additional work was required by the Cross-Defendant to complete the Stage 2 work; and

   e.   The Cross-Defendant had knowledge that it could not complete the Stage 2 Work within the timeframe as agreed between the Cross-Claimant and Cross-Defendant.

   100. It is not necessary to set out in full paragraphs [14]‑[33] of the Amended Defence. In my opinion, paragraph [5] of the Amended Cross‑Claim and the cross‑referenced paragraphs of the Amended Defence do not plead that there was a contractual obligation on the plaintiff that it must notify the defendant of any known budget increases at the completion of the Stage 1 works. The particulars to paragraph [5] of the Amended Cross‑Claim make clear that the concern being raised by Challenge was the timing of completion of the Stage 2 work, not the increase in any cost that may be required to complete those works, including any additional works not included in the Proposal, but included in the Stage 1 documents.

   101. Mr Raftery also relied upon particulars provided on 25 September 2019 by his instructing solicitors (Exhibit 4) in response to a request from Infinity’s solicitors on 12 August 2019 (Exhibit 3) for further and better particulars of the Defence and Cross‑Claim. He specifically referred to request and answer 7(c) of the particulars relating to paragraph [25] of the Defence and paragraphs [4] and [5] of the Cross‑Claim. Request 7(c) asked:

“(c)   please explain the basis of the allegation that “the Cross‑Defendant had knowledge that it could not complete the Stage 2 Work within the timeframe as agreed”.

102. The response given was:

“(c)   Following the First Meeting and completion of Stage 1, the Plaintiff would have had knowledge of the timeframe to complete the Stage 2 Work. We otherwise refer to the matters detailed at paragraphs 4 and 5 above.

(Paragraphs [4] and [5] of the response set out conversations that Challenge allege took place at meetings on 3 and 8 August 2018, which are set out at [35] and [36] of Mr Triulcio’s affidavit and in effect where Infinity employees were said to confirm that there would be no further variations of the scope of work and the prototype deadline of November would be met).

103. In my opinion, those particulars do not assist. Once again, the reference is the timing and November “deadline” for the completion of the project.

104. I have formed the view that even a broad reading of the paragraphs relied upon in the Amended Defence and the Amended Cross‑Claim, and the particulars, do not plead these matters in the way that Mr Raftery contends. The paragraphs relied upon in the Amended Defence do refer to cl 10.1, but only in the context of the alleged breach of “contractual duty” (whatever that may be) pleaded in paragraph [5] of the Cross‑Claim. Mr Raftery identified paragraph [5](e) in the Cross‑Claim as the hook which caught the allegation of contractual breach he wished to advance. However, that particular (and the other particulars of paragraph [5] refer only to the timeframe (not the budget) in which completion of Stage 2 of the project was said to have been agreed between the parties.

105. Whilst I accept that the Agreement provides that payment is based on the fee of $160 per hour, if there was an increase in the time taken to complete the project there would likely (but not certainly) be an increase in budget. I do not consider that these paragraphs raise the construction of the contract, or the breach, that the defendant sought to run at the hearing.

106. I do not accept the plain reading of the identified paragraphs and the particulars can be massaged to have the meaning put forward by Mr Raftery. There is no pleading in the identified paragraphs of any express or implied term as sought to be relied on. Whilst Mr Raftery said all that he could in support of his argument, it was clear that the proposed Further Amended Defence, which I disallowed, was required in order for Challenge to mount this defence and cross‑claim.

107. Accordingly, the defendant cannot contest the claim relying on the unpleaded defence, or mount any cross-claim, that the plaintiff was contractually obliged to inform it of any budget increase, if known, at the completion of Stage 1.

108. In any event, even if I am wrong about this conclusion and such an argument is available, I have concluded below when dealing with the misleading and deceptive conduct claim, that there was no known increase in budget at the conclusion of the Stage 1 works. Accordingly, if the argument was available, I would have found that Infinity was not in breach.

The Plaintiff’s Entitlement to Unpaid Invoice Amount and Damages

109. As described above, the plaintiff’s claim is in the sum of $96,045.60. That amount is made up of the unpaid invoice 1275 in the sum of $40,365.60 (incl GST) and damages for the amount the plaintiff says it would have charged in the one month’s notice period that was required on suspension (or termination) or the contract.

110. Having rejected the submission that the defendant can rely on the unpleaded breach of contract allegation, it is necessary now to deal with the other matters raised by the defendant in defence of the plaintiff’s claim and then deal with the Cross‑Claim for misleading and deceptive conduct.

Did Infinity Repudiate the Contract?

111. In further answer to the plaintiff’s claim that it is entitled to the unpaid invoices and the damages it seeks, the defendant says, as noted in [89]‑[93] above, that the plaintiff repudiated the agreement.

112. In its closing submissions at [32], Challenge submits that if the Court accepts the repudiation agreement, then it is liable to pay Infinity the sum of $25,696, being the amount of Invoice 1275 in the sum of $36,696 less the bond of $11,000.

113. I do not accept that Infinity repudiated the agreement in the manner pleaded by Challenge. The Proposal contained estimates of the time that each of the steps then known for the various stages of the project would take. There was also an estimate of the costs to complete those stages based on the hourly rate of $160. There was never any contractual promise that the Project would be completed in accordance with the budget and/or timeframe in the Proposal. The Agreement made it clear these were just estimates.

114. The addition of various features to the RFID reader during its design and development in Stage 1 would, if agreed and implemented, necessarily have the result that additional time may (or would) be required to complete those features over and above the matters identified in the Proposal. There would consequently most likely be an increase in the budget.

115. Leaving aside whether or not the plaintiff engaged in misleading and deceptive conduct, which I will deal with below, I do not accept that the plaintiff acted in a manner substantially inconsistent with the Agreement by presenting Mr Triulcio with a revised estimate of an additional 32 days to complete all of the work identified in the spreadsheet (Exhibit 1, p 781) at the meeting on 5 September 2018. As the plaintiff submits, repudiation is a serious matter and is not lightly to be found. A finding of repudiation requires a clear indication of the absence by the plaintiff of a readiness and willingness to perform the contract: Shevill v Builders Licensing Board (1982) 149 CLR 620. The applicable principles with respect to repudiation have been set out in [54] of the plaintiff’s closing submissions by reference to DCT Projects Pty Ltd v Champion Homes Sales Pty Ltd [2016] NSWCA 117 at [39]‑[42]. I will not repeat them here as I do not understand the defendant to challenge them as applicable to this matter.

116. I do not accept that the matters relied upon by Challenge demonstrate that Infinity was unwilling or unable to perform its contractual obligations as set out in the Agreement. I do not accept that Infinity evinced an intention to no longer be bound by that Agreement. When it provided Mr Triulcio with the spreadsheet identifying the new estimate of time to complete all of the items on that spreadsheet, it was revising the estimate previously given in the Proposal.

117. It was expressly stated in cl 10.1of the Agreement that the estimates in the Proposal may require revision at the conclusion of the specification and preliminary design tasks. In this sense, it can be seen that Infinity was acting in accordance with the contract by providing Challenge with the new estimate of time that it then thought would be required to complete the identified features in the spreadsheet if those features were to be incorporated at that time.

118. It should also be observed that the additional categories in the spreadsheet were presented as options to Challenge. It was made clear to Mr Triulcio at the 5 September meeting and in email correspondence after that meeting (Exhibit 1, p 553‑554) that those features could be added at a later date. As such, there was no suggestion that Infinity would only perform its obligations under the contract if all of the items in the spreadsheet were immediately included.

119. I reject Challenge’s allegation that Infinity repudiated the Agreement.

Was the Agreement Suspended or Terminated by Challenge on 10 September?

120. I find that, as at 10 September 2018 (the date that Mr Triulcio said he wished to put the contract “on hold”), Infinity was not in breach of the Agreement. Challenge had no right at common law, as at that date, to terminate the contract for breach.

121. There does not appear to be any dispute therefore, in those circumstances, that Challenge is indebted to Infinity in the sum of the unpaid Invoice 1275, namely $40,365.60 (incl GST). The question is whether Infinity is entitled to any additional amounts by way of damages and whether any such damages are to be set‑off by an amount if Challenge establishes the misleading and deceptive conduct claim.

122. There was a debate between the parties as to whether or not the actions of Challenge on 10 September 2018 were to suspend the Agreement or terminate it. For reasons which will follow, I do not think it matters to the end result whether Challenge exercised its contractual right to suspend the project under cl 10.12 or terminate the project under cl 10.13 of the Agreement.

123. For completeness, I will set out the evidence as to the events of 10 September 2018 and assess whether Challenge suspended or terminated the Agreement.

124. Mr Triulcio informed Infinity on 10 September 2018 that, according to his version of events (at [50] of his affidavit), that he wanted to “put the project on hold”.

125. Mr Moutzouris’ version of that conversation was that Mr Triulcio said that he would like to stop work on the project and that they “intend to pick the project back up again in February 2019” (at [22] of Moutzouris 14.5.20). At [94] of his affidavit, Mr Triulcio responding to that paragraph says that “I recall that I told Mr Moutzouris that I needed to re‑assess the project. I did not say to Mr Moutzouris at any time that the project was going to restart” (Exhibit 1, p 846). This is denied by Mr Moutzouris (at [11] of Moutzouris 16.10.20).

126. Mr Ford deposes that he was told by Mr Moutzouris on or about 7 September 2018 that Mr Triulcio had telephoned him and had suspended the project effectively immediately. He said Mr Moutzouris told him that Mr Triulcio said he was happy with the work but just needs time to re‑evaluate the development plan (at [30] of Ford 18.5.20). I take the reference to “on or about 7 September” to be an error; it must refer to 10 September as that was the day that Mr Triulcio informed Mr Moutzouris of his wish to put the works on hold.

120. Mr McKeown deposes that, on or about 10 September 2019 (sic 2018), he met with Mr Moutzouris and Mr Ford and was told that Mr Triulcio had called Mr Moutzouris to suspend the project. He was told that the plan was to recommence early 2019. He and Mr Ford were asked by Mr Moutzouris to finalise all of the tasks they were working on so the project would be ready to be picked up again later (at [32] of McKeown 14.5.20).

121. None of the witnesses were cross‑examined on their versions of the events of 10 September.

122. On balance, I accept the plaintiff’s version. That is, I accept Mr Moutzouris’ version of the conversation with Mr Triulcio. That is consistent with what he related to Mr Ford and Mr McKeown at the subsequent meeting. I also note that Mr Triulcio himself says that he told Mr Moutzouris that he was putting the project “on hold” and not terminating it.

123. On 12 September 2018, Mr McEwen emailed Mr Triulcio (Exhibit 1, p 1111) and said:

“Hey Marc,

Paul told me earlier the news that the project is being shelved so I’ll cancel the weekly meetings in our diaries to clear up a bit of space.

Sorry again about the communications around budget etc. I’m sure it caused a few problems on your end. I still think it could be a great product and you’ll be the right person to make a success of it so hopefully we get to help you pick it up again in the future.

Anyway, take care till next time.”

131. I regard this email as corroborative of the plaintiff’s version that the project was suspended rather than terminated. The reference to the project being “shelved” and to picking it up again in the future support that conclusion.

132. In the circumstances, I conclude that Mr Triulcio suspended the Agreement on 10 September 2018.

The Effect of Any Exclusion in Clauses 10.12. and 10.13

133. Infinity alleges that by suspending the Agreement without providing one month’s notice, Challenge was in breach of the Agreement. It contends that, as a result of the breach, it suffered loss in the sum of $59,667.20, being the amount that it would have charged Challenge if one month’s notice had been provided.

134. Challenge alleges that Infinity cannot recover any more than the unpaid invoices by reason of the operation of clause 10.12 (in the event of suspension) or clause 10.13 (in the event of termination). Again, I do not think it matters whether Challenge exercised its contractual right to suspend or terminate the Agreement as the construction of clauses 10.12 and 10.13 would, at least in this case, lead to the same result.

135. As has been set out above, clause 10.12 of the Agreement provides for a contractual right to suspend the operation of the Agreement. Clause 10.13 provides for a contractual right to terminate the Agreement. Each of suspension pursuant to clause 10.12 or termination pursuant to clause 10.13 was available to either party on the giving of one month’s written notice. Each clause provides (with the differences between the clauses for suspension/termination in square brackets):

“A project may be suspended [terminated] by either party with one month’s written notice. At suspension [termination], THE CLIENT will be billed for any work performed by Ingenuity which has not yet been billed as at the date of suspension [termination] (as supported by Timesheets) and approved third party costs supported by invoice copies.

With the exception of any unpaid invoices, neither party will be held liable for any costs, loss or damages resulting from suspension [termination] of the project.…”

136. It can thus be seen that, on the provision of the notice to suspend/terminate the contract, the suspension/termination would take effect one month from the date of that notice. That date (being the date one month after the notice) must be, in my opinion, the “date of suspension/termination” within the meaning of those clauses. As such, as at that date, Challenge can be billed for any work performed by Infinity which had not yet been billed as at the date of suspension/termination.

137. Challenge argues that a proper construction of the words that neither party will be “held liable for any costs, loss or damages resulting from suspension/termination” of the project means that all that Infinity is entitled to (whether the Agreement was suspended or terminated) is payment of unpaid invoices. It deals with this issue at [48]‑[60] of its opening outline of submissions. In essence, it says that the clauses limit Infinity’s entitlement following suspension/termination whether it be on one month’s notice or otherwise. It says there are five reasons for this construction:

1. First, the reference to one month written notice provides an express provision as to notice, as opposed to having an implied term regarding the reasonable notice period;

2. Second, the party is not entitled to damages if the other party exercises its contractual entitlement to terminate. It follows that, for the limitation clause to have any work to do, it must relate to a circumstance with an Agreement was terminated in the way other than in accordance with the agreement (that is when terminated without one month written notice).

3. Third, if Infinity had intended that it would be entitled to recover damages, it would be expected that there would be a reference to damages in cl 10.2 of the Agreement. That clause provides:

“THE CLIENT agrees to pay all cost incurred by Ingenuity in pursuing overdue payments, including, but not limited to, associated time, accounting, legal and debt recovery costs”.

4. Fourth, the limitation clause is consistent with an agreement for services which a party may like no longer require. In this case, Challenge did not wish to proceed with the project. It submits it would therefore be nonsensical in those circumstances to require it to instruct Infinity to undertake an additional one month’s work on the project it had no intention to complete. Another scenario may be if Challenge did not wish to proceed with Stage 2. In those circumstances, the limitation clause would ensure that the client was not required to pay damages to Infinity by reason of the termination without one month’s notice; and

5. Fifth, to the extent the limitation clauses are ambiguous, the contra proferentem rule ought to apply and the Court ought adopt a construction favourable to Challenge.

138. In response, Infinity submits that whether a clause excluding liability applies to particular breaches of contract is a matter of construction: Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1980) 144 CLR 300, 305. The interpretation of an exclusion clause “is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity.”: Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510.

139. Infinity says that, in the present case, the exclusion clause contained in cl 10.12 (or I interpolate cl 10.13) operates to exclude liability if the contract was suspended in accordance with that clause (i.e. one month’s notice was given, which in the present case was not given): H & E Van der Sterren v Cibernetics (Holdings) Pty Ltd (1970) 44 ALJR 157, 158 (Barwick CJ & Kitto J agreeing). Accordingly, it does not operate to exclude liability in respect of damages suffered by not giving proper notice period. This construction is supported by the fact that a clause excluding liability for damages for suspension is contained in cl 10.10 “Exclusion of Liability”, which deals with exclusion of liability in respect of the project generally.

140. I accept the plaintiff’s submissions. In my opinion, a plain reading of this clause having regard to the contract as a whole means that liability for any amount, save for unpaid invoices, is excluded when a party suspends (or terminates) the contract in accordance with their contractual right. These clauses provide a mechanism agreed by the parties for the temporary suspension, or permanent termination, of their respective contractual obligations. In circumstances where the parties have agreed to exercise those mechanisms, these clauses set out the parties’ agreement that neither party is liable for any costs, loss or damages resulting from the exercise of those rights, save and except that the client (here Challenge) must pay any unpaid invoices as at the date of suspension or termination.

141. This conclusion is supported, in my opinion, by reference to cl 10.10, which provides a general exclusion of liability to Infinity to the client resulting from, inter alia, Infinity’s failure to complete or delay in completing or to delivering the product to the client. That is, that clause would apply if Infinity was in breach of any such (or other) contractual obligations.

142. Accordingly, subject to any misleading and deceptive conduct by Infinity and any relief which would flow from such conduct, Challenge is obliged to pay Infinity the amount of the unpaid Invoice 1275 together with an amount for any unbilled work as at the date of suspension, being one month after 10 September 2018.

Damages for the Suspension Notice Period

143. As I have said above, Infinity claims that Challenge was in breach of the Agreement by failing to give one month’s notice of suspension. As such, it says, and I agree, that it is entitled to be compensated by being placed in the same position that it would have been had Challenge given the contractually required one month’s notice.

144. At [45] of its closing submissions, Infinity refers to the principle that where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, namely, an award of damages: Fink v Fink (1946) 74 CLR 127 at [143]. It also refers to the well‑known passage from Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at [31]:

The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v. Fink (1946) 74 CLR 127, at p 143; McRae v. Commonwealth Disposals Commission (1951) 84 CLR 377, at pp 411-412; Chaplin v. Hicks (1911) 2 KB 786, at p 792. Indeed, in Jones v. Schiffmann (1971) 124 CLR 303, Menzies J. went so far as to say that the "assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation": at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359.

145. Infinity led evidence that it would have spent an additional 348 hours in respect of the remaining Stage 2 items to be completed within the one month period. This evidence was contained in Mr Moutzouris’ third affidavit (Moutzouris 30.6.21). Mr Moutzouris was cross‑examined on these amounts and, as the plaintiff submits, was not significantly challenged on the accuracy of that evidence.

146. The basis of the claim for that work was that projects such as the one Infinity undertook for Challenge were relatively long term and that employees of Infinity were locked into them to undertake the planned work. On suspension of the contract, there would not necessarily have been other work that those employees could immediately shift to. Mr Moutzouris said that the notice period was to protect Infinity and give it time to wrap the project up and basically reassign resources without significant cost implications to it. He confirmed that the staff members the subject of his estimate of work during the notice period were “fairly dedicated” to the project (see T51.27‑31).

147. In its closing submissions at [33]‑[35], Challenge disputes that Infinity is entitled to the amounts claimed by Mr Moutzouris. It submits that the total amount that should be paid to Infinity for the one month’s notice period is $8,100.80. Infinity reaches this figure by way of a calculation set out in the table at [34] and explained in [35] of its closing submissions. Save for the use of a percentage figure of which the employees would not have been engaged in billable hours (see [21] of Moutzouris 30.6.21), none of those matters in support of these calculations were put to Mr Moutzouris in cross‑examination. In my opinion, they ought to have been so that Mr Moutzouris could explain Infinity’s position on them. It seems to me that counsel for Challenge is seeking to interpret the evidence given by Mr Moutzouris in a manner which ought to have been put to Mr Moutzouris so that he could have explained why he had made the calculations he had.

148. I do not think that Challenge’s submissions on this point should be accepted. It may well be that if the employees of Infinity had continued to work on the project in the one month’s notice period, that the percentage of time they spent on billable hours on the project would have been different to that used by Challenge to make its estimation.

149. As I understood it, the evidence led by Infinity in Mr Moutzouris’ affidavit of 30 June 2021, in particular the table at [21], was said to be supportive of Infinity’s position that as a result of the suspension without notice, each of the listed employees in the table had an increase in the non‑billable hours for their work overall. As I understand the table at [10] of Mr Moutzouris’ affidavit of 30 June 2021, the hours estimated as approved work remaining for the project if the notice period had been given were all billable hours. Accordingly, I accept Infinity’s calculation as an appropriate estimate of the losses it has suffered as a result of Challenge not providing the appropriate notice.

150. Infinity has therefore established that it is entitled to damages in the sum of $96,045.60 to put it in the position it would have been if the contract had been performed by Challenge and it was given the one month’s notice of suspension (or termination).

The Misleading and Deceptive Conduct Cross‑Claim

151. Once again, it is important to start with the pleaded case in considering whether Challenge has made out its claim that Infinity engaged in misleading and deceptive conduct and, if it did, what flows from that conduct.

152. Paragraph [6] of the Amended Cross‑Claim pleads:

1. By virtue of the matters pleaded at paragraphs 24 and 25 of the Defence to the Amended Statement of Claim, the Cross‑Defendant has engaged in misleading and deceptive conduct in violation of section 18 of the Australian Consumer Law.

   153. Paragraphs [24] and [25] of the Amended Defence plead:

2. On or about 27 July 2018, the Plaintiff informed the Defendant that:

   a.   An additional feature called “over the air firmware update” (OTA Firmware Update) was required for the development, which had not been previously advised; and

   b.   The inclusion of the OTA Firmware Update would add 10 days to the agreed timeframe for stage 2 but that no further extensions would be required.

   Particulars

   Meeting between Ben Ford (Ben), the Project Manager of the Plaintiff, John-Paul McEwen, the Designer of the Plaintiff (John-Paul), and Marc Triulcio, the Development Manager of the Defendant (Marc) (First Meeting).

3. At the conclusion of the First Meeting, the Defendant and Plaintiff agreed to vary the Agreement to allow for an additional 10 days of work for the second stage Designed and Implementation work (Variation).

   Particulars

   Oral conversation between Marc and Ben

   154. The reliance on these two paragraphs of the Amended Defence alone as constituting the misleading and deceptive conduct may be confusing. One also needs to have regard to other paragraphs of the Amended Defence to properly understand the case as it was put. Those paragraphs are paragraphs [26], [27], [31]‑[33].

   155. Those additional paragraphs of the Amended Defence refer to “Additional Meetings” on 3 August, 8 August and 15 August 2018 between Infinity and Challenge, where it is alleged that Mr Ford and Mr McKeown made representations on behalf of Infinity to Mr Triulcio, on behalf of Challenge, that “except for the Variation, no further additional work was required by the Plaintiff in order to complete the Stage 2 work” (Representation). Paragraph [32] of the Amended Defence alleges that the Representation was false. Paragraph [33] of the Amended Defence alleges that, by virtue of the Representation, Infinity engaged in misleading and deceptive conduct in breach of s 18 of the ACL.

   156. As such, the essence of the misleading and deceptive conduct claim mounted by Challenge is that, apart from the Variation, Challenge alleges it was told that no further additional work would be required in order to complete the Stage 2 work. It says that the Representation was false in that, at the meeting on 5 September, it became obvious that there was significant other additional work included in the Stage 1 documents which would be required to be done to complete the Stage 2 work.

   157. As I set out above, there is a dispute about what was said at the various meetings and when these things were said. An analysis of the evidence leads me to the conclusion that no representation of the effect alleged was made by anyone on behalf of Infinity on 3 August 2018 or 8 August 2018. The evidence of what took place at those meetings was that Mr Triulcio was updated as to the progress of the project and on 8 August he agreed to the Variation.

   158. As I found in [34] above, I do not think that a discussion with respect to the Variation occurred on 27 July 2018. Rather, the OTA functionality was discussed at a meeting on 3 August 2018 between Mr McKeown and Mr Triulcio. Mr Ford did not attend that meeting.

   159. I have set out above the text of the email sent after the 3 August meeting by Mr McKeown to Mr Ford about the effect of the inclusion of the OTA to the firmware (Exhibit 1, p 468). For ease, I will set it out again. Mr McKeown said:

“One issue that came up during the chat with Marc this morning was regarding future updates to the firmware. Marc asked if this was possible and I said it would be possible but I’d need to check if it’s in the spec already.

Well, turns out it’s not and if we want to be included then the guys are telling me that we’ll also need to increase our software budget estimate by five weeks. This would be a scope increase. What do you reckon Marc’s reaction would be?

If yes then the immediate tasks to do would be:

Update Product Specification

Update Software Architecture

Update Project Budget/Schedule

If we’re updating the budget, do we also want to include the additional costs of radio certification as highlighted by the EMC pre-compliance and maybe the stage 4 production prep?”

160. Mr Triulcio refers to this email in his affidavit at [70]‑[72]. He seeks to assert that this email supports Challenge’s contention that Infinity knew at least by this time that there was additional work which was required which would both increase the time necessary to complete the project and its costs. He said, had he known of this information on or about 3 August 2018, he would have terminated the contract at that time.

161. Each of Mr Ford and Mr McKeown in their reply affidavits state that Mr Triulcio misunderstands the 3 August email. They say that the email refers to the Variation, namely, the discussion first raised at the 3 August meeting with Mr McKeown about the OTA inclusion. They both say that the estimate of five weeks was a preliminary estimate and, after consultation between them and the software engineers who had given the original five week estimate, the Variation was agreed for an additional 10 days at the 8 August 2018 meeting (see McKeown 22.10.20 at [15]‑[17], Ford 22.10.20 at [5], [10]).

160. I accept the evidence of Mr McKeown and Mr Ford in this regard. The email of 3 August 2018 confirms that the issue of the OTA was raised with Mr McKeown on 3 August who then communicated that matter to Mr Ford by that email. I accept that the matters in that email refer to the OTA Variation which, as the evidence shows, was approved by Mr Triulcio with a 10 day increase in time to complete that work at the meeting on 8 August 2018.

161. In relation to whether or not the Representation was made by either or both of Mr McKeown and/or Mr Ford at the 3 August and 8 August meetings, each of them denied that at those meetings they said that, apart from the Variation, no further work would be required to complete the Stage 1 part of the project. For the reasons I have given above, I do not accept that anything amounting to the Representation could have occurred at the 3 August meeting as this was the first time the OTA function had been raised and there was no time limit given by Mr McKeown as he did not then know what additional time would be required. That did not occur until the 8 August meeting.

162. Mr McKeown was cross‑examined on the 3 August email, in particular its concerns about how Mr Triulcio would react to an increase in the budget estimate. He said, and I accept, that he was always concerned about going back to clients to ask them for more time and money to complete projects and this is what he was referring to in that email.

163. I accept the evidence of Mr McKeown and Mr Ford about what occurred on the 8 August meeting. Mr McKeown deals with this at [24] of his first affidavit. He says that he informed Mr Triulcio that the OTA functionality was not included in the specification but could be added and the specification reissued. Mr Ford said that the functionality was not included in the labour estimates for Stage 2 and if it was required there would be an additional 10 days required. Mr Triulcio approved that time extension (which became the Variation).

164. Mr Ford deals with this meeting at [25] of his affidavit. His version of the conversation is similar to that given by Mr McEwen.

165. Mr Triulcio deals with these meetings, including the 27 July meeting, at paragraphs [29]‑[38] of his affidavit. I have already rejected his evidence that the discussion about the OTA update occurred on 27 July but, rather, took place on 3 August. Additionally, [30] of his affidavit must be wrong when it refers to the 10 day estimate for the OTA Variation being discussed at the 27 July meeting as this timeframe was not presented to him until the 8 August meeting when he approved it. Having regard to these errors, which indicate some confusion in his recollection, and the cross‑examination of him with respect to the 27 July meeting (see T114‑T117), I have concluded that I cannot accept his evidence about these events as reliable.

166. In relation to the 8 August meeting at [36], Mr Triulcio said that a conversation took place as follows:

Triulcio:        “I just wanted to confirm that there is no further variation of the scope of work and the timeline”

McKeown:    We will get everything done by agreed timeframe.

169. Mr McKeown at [24] of his first affidavit does not give evidence of any such conversation. At [12] of his reply affidavit, he denies that the conversation as set out by Mr Triulcio took place at the 8 August meeting or at any other time. He said he never guaranteed to Mr Triulcio that there would be no further variations to the RFID project budget or timeline.

170. Mr Ford at [25] also does not give evidence of any conversation to the effect of that deposed to by Mr Triulcio. At [8] of his reply affidavit, he denies that he had such a conversation with Mr Triulcio on the 8 August meeting or at any other time. He says that neither he nor Mr McKeown, in his presence, ever told Mr Triulcio that there would be no further variations to the scope of work and timeline for the project. He says he would not have said that because Infinity’s ordinary practice is to accommodate variations requested by the client which may result in changes to the scope of work and timeline for completion.

171. I accept the evidence of Mr Ford and Mr McKeown on this matter. In reaching this conclusion, I take into account the finding I have just made about the reliability of Mr Triulcio’s evidence as to these events.

172. I accept that, at the 8 August meeting, there was a discussion about the OTA Variation and the fact that there would be an additional 10 days required for this variation. This variation was approved by Mr Triulcio. I do not accept that any conversation took place to the effect of the Representation as pleaded by Challenge at this meeting.

173. Coming now to the 15 August meeting, it appears common ground that there was a discussion at this meeting between Mr McKeown and Mr Triulcio about any further budget increases which may be required. At [26] of his first affidavit, Mr McKeown says the conversation was:

Triulcio:   I’m happy with the progress on the project so far. Are there any other known budget increase requests that you need to make?

McKeown:    No.

174. Mr Triulcio’s version of the conversation is found at [38] of his affidavit. It is:

Triulcio:   How is the project tracking?

McKeown:    The Project is tracking as agreed.

Triulcio:   Are there any budget increases that I need to be concerned about?

McKeown:   No, we’re on track at this stage.

175. Thus, it can be seen that, in effect, the substance of Mr McKeown’s and Mr Triulcio’s versions of the conversation is similar. Mr Triulcio was asking whether or not there were known budget increases required at that time and he was told by Mr McKeown that there were not (apart from the Variation which had already been agreed). Mr Triulcio said he was told the project was on track “at this stage”. The question, therefore, arises whether or not a conversation to this effect amounts to the Representation as pleaded in [27] of the Amended Defence.

176. I am not satisfied that what was said at the 15 August meeting amounted to the pleaded Representation. The conversation does not deal with whether, apart from the Variation, no other work would be required to complete the Stage 2 works. The Agreement noted that all of the matters in the Proposal were estimates. There was never a condition that the work would be completed (or could be completed) within the time/cost estimates given or revised. Mr Triulcio being told that the project was tracking as planned “at this stage” was being implicitly told that there was a possibility, at a later stage, that the tracking could change. I accept Mr Ford and Mr McKeown’s denials that they ever said that no further work or increases in budget would be required. They always said when asked that at the time, none were known.

177. As I have said above, because the Agreement provides that Infinity will charge it’s fees based on an hourly rate, an increase in time to complete any work would most likely (but not certainly) increase the budget. I say not certainly because it is possible for scheduled and budgeted work to be delayed which would increase the timeframe for completion but not the cost. However, the conversation at the 15 August meeting was in the context of the regular meetings where Mr Triulcio was updated as to the progress of the project. He had, the week before in the 8 August meeting, approved the Variation. He was enquiring if there were any other known budget increases. He was told there were not at that stage.

178. I do not accept the Representation was made.

179. If I am wrong about that, then the question is whether, as pleaded by Challenge, the Representation was false as alleged at [32] of the Amended Defence. This comes down to whether, at the time the Representation was made, Infinity knew that, in addition to the Variation, additional work would be required to complete the Stage 2 works.

180. Counsel for Challenge submitted that the evidence is plain that, as at 15 August 2018, Infinity knew or ought to have known that there was going to be a requirement for a budget increase, and an increase in time required to finish the Project from that estimated. That is because, he says, the evidence establishes that there were items in the Stage 1 documents, but not included in the Proposal, and included in the table presented to Mr Triulcio on 5 September 2018 in support of a suggestion that 32 days extra time was required to complete all of those items.

181. I accept that the evidence establishes that there were certain items in the 5 September spreadsheet that had been included in the Stage 1 documents as approved by Mr Triulcio in late July 2018 which were not in the Proposal. There was much cross‑examination of Infinity’s witnesses about this and whether as a result, it must have been known that further budget increases would be required.

182. Mr Moutzouris (at T44.48‑T48.11) was asked a series of questions about this issue. He said that, at the time the Stage 1 documents were provided to Challenge, the author of those documents would not have had an in‑depth idea of how long it would take to complete the software components of the project (T44.50). It may not be until after the Stage 1 documents were provided that it would be known that the estimates provided would be wrong (T45.10). He noted that sometimes additions to the scope may be minor and not require budget increases. In respect of software matters, it would not be until after the software engineers had been consulted that a better understanding of what time/cost would be required would be known. Here, no software engineer was consulted about these matters until after the Stage 1 documents had been provided to Challenge. He accepted that if a software engineer had been consulted before the Stage 1 documents were provided to Challenge, they could have provided a more accurate estimate of the budget. However, he said that providing consulting the engineers at that time was not the most efficient time to do so, as the best time to engage the software engineers would be after the schematics are finalised and the hardware design is more “solidified” and this would be into Stage 2 of the project work (T46.5‑T47.32). Here, he said, as soon as the software engineers were consulted and engaged in the detailed work, they became aware that some additional requirements that were not in the Proposal were in the Stage 1 documents. They then advised that additional budget would be required to cover those items. When the software engineers gave that advice, the client was informed on 5 September (T48.5‑10).

183. Mr Ford was also cross‑examined on this issue (T65.6‑T70.32). In essence, his evidence was consistent with that of Mr Moutzouris. He said that whilst some items that were not in the Proposal had been included in the Stage 1 documents, it was not appropriate to consult the engineers about possible budget increases as a result before the Stage 1 documents were provided to the client, because that would have been doing Stage 2 work (T65.45). If this work was to be done earlier, it would have increased the scope of Stage 1, rather than in Stage 2 when the detailed work to understand the complexities on the implementation of the Stage 1 concept is done (T66.10). Importantly he said (at T67.02‑15):

Q.   These matters that Mr Raftery has taken to you were not in the proposal but they were in the stage 1 documents, so you knew that they were needed for the purposes of completing stage 2, but the client wasn't told of any increase in costs because it would have been difficult to get an engineer to cost them; is that what you're saying?

A.   So it's unknown at that time ‑ well, we did not know that there were any changes of effort required until the software engineers start the implementation and actually give us feedback and say that there is more work than has previously been estimated, and, so at that point, they informed me and Mr McKeown, and we sat with them, understood what those changes would be, and then reported them back to the client.

Q.   In the form of this document, for example, at the meeting on 5 September?

A.   Yep.

And (at T67.30):

His Honour:   It’s not clear to me though, Mr Ford, why that wasn’t done, sitting down with the software engineers, prior to the client being asked to approve stage 2 works.

Ford:   The software team is intimately involved in stage 1, and, to the best of everyone’s knowledge, there was no, sort of, material change to any of the estimates, and it wasn’t until they are engaged in stage 2, and understood the complexities of some of the implementation details, that these changes of scope, sort of, became known…

I guess, if you want to go back to the theoretical, like yes, this work could have been done as part of stage 1, but it would have taken engineering time and effort, and fundamentally changed the budget and scope of stage I. Like, we intend to-I mean, stage 1 is still a preliminary design. Its research and development, it’s never specific, it is never completely holistically known. There’s always risks and changes due to things that we can just never-never forecast. So we try and maintain efficiency…

His Honour:   I understand it, and I might be completely wrong, I’m just trying to follow. Mr Raftery’s point is that the matters that is taking you to with respect to events records, security, pedometer, et cetera, weren’t included in the proposal, but they were in the stage I documents. So you knew that they were going to be necessary to complete for the purposes of stage II. Is that right?

Ford:   Yes

His Honour:   They won’t in the proposal, therefore they weren’t included in the budget?

Ford:      That’s right.

His Honour:   So you must have known that there was additional work over and above the budget in the proposal for the completion of the stage II works. Am I right about that?

Ford:   We knew that the work scope in stage 1 was different from the proposal, but we didn’t know that there’d be any meaningful change to the budget, until we got in and started to actually do that work and the scope, and understand the complexities of implementation. And so, yeah, as soon as we knew that, we provided that information.

(see also, T69.35‑T70.15).

184. Mr Ford accepted that the 5 September spreadsheet did show that there had been an underestimate in the Proposal to implement some of the technical features required (T75.2). At T79.5‑20, this exchange took place:

Raftery:   In those circumstances, you’d agree with me that the estimate was drastically under what was actually required following the production of the stage 1 documentation?

Ford:   So, the estimate was definitely a lot less than what was re-estimated after stage I. But yeah, the [5 September spreadsheet], you know, we-in that meeting on five September we clearly identified that the differences between stage 1 in proposal, and if Mr Triulcio wanted to go ahead with all of those features that weren’t in stage 1, that this would be required. But we also didn’t mandate that was required, we clearly outline those were options and we could fall back and not implement those, or implement them at a later stage.

Raftery:   But they were in the stage I documents, as you said?

Ford:      They were in stage I, yet.

Raftery:   And Mr Triulcio had approved the stage I documents in late July 2018?

Ford:      Yep.

185. On 7 September 2018, Mr McKeown emailed Mr Triulcio (Exhibit 1, p 550). In that email, he attached certain matters including the 5 September spreadsheet. He concluded as follows:

“Also just confirming my advice on the phone, that it’s possible to leave the OTA software development to after the stage 2 prototypes are done. This can be developed and tested separately, in conjunction with your app developers, at some point before the first 1000 units are produced.

The other software items listed in [the five September spreadsheet], if you wanted to do them, could be done later. If you wanted to do any or all of them now, they could be in parallel to the development without affecting the delivery date. This is because we would put on a separate program.…”

186. From all of this evidence, I draw the following conclusions:

1. There were certain functions for the RFID reader included in the final Stage 1 documents that were not in the Proposal;

2. The Stage 1 documents were approved by Mr Triulcio in about late July 2018;

3. Whilst there were functions in the 5 September Spreadsheet that were not in the Proposal but were in the Stage 1 documents, Mr Triulcio was told they could be integrated into the RFID reader at a later stage and the project could be completed in accordance with the estimates in the Proposal;

4. There had been an underestimate in the Proposal of some of the work required. However, that of itself does not amount to misleading and deceptive conduct; it was just an underestimate not able to be corrected until further work was done which led to an appreciation of the complexities of the implementation of some of the design functions;

5. It was not efficient for Infinity to engage the software engineers to undertake the more detailed work to assess what was required to implement the Stage 1 document functions until Stage 2, as that would have increased the scope and timing of Stage 1 itself;

6. Whilst the additional functions in the Stage 1 documents that were not in the Proposal would, if implemented, possibly increase the scope of the project and it’s time for completion and cost, it was not until the software engineers undertook the work they did at the commencement of Stage 2 that Infinity knew, or could know, that there was to be additional time and budget required to complete those additional functions and the scope of that additional time/cost;

7. Once Infinity knew of the additional time and budget increases they estimated would be required, they presented these new estimates to Mr Triulcio on 5 September; and

8. Neither of Mr Ford of Mr McKeown ever represented to Mr Triulcio that apart from the Variation, there would not be any further work required to complete the Stage 2 works.

187. Accordingly, I find that even if the Representation was made, it was not false, misleading or deceptive.

188. If I am wrong about that conclusion, then I accept that by reason of the misleading and deceptive conduct, Challenge suffered loss. I accept that it would have terminated or suspended the Agreement on 15 August 2018. It would have been required to give one month’s notice (cl 10.12 or 10.13), thus suspending or terminating the Agreement on 14 September.

189. Counsel for Challenge accepts that in such circumstances, Challenge would be required to pay Infinity the sum of $25,696 (see [26] of the defendant’s closing submissions).

Conclusion

190. For the above reasons, the orders of the Court are:

1. Judgment for the Plaintiff in the sum of $96,045.60, together with interest on that amount.

2. The Amended Cross‑Claim is dismissed.

3. The defendant/cross‑claimant is to pay the plaintiff/cross‑defendant’s costs of the proceedings.

4. The parties are to confer to prepare Short Minutes of Order to calculate the amount of interest payable in accordance with Order 1 above, and provide those Short Minutes to my Associate within 7 days.

5. If the parties are unable to agree the terms of the Short Minutes, there is liberty to apply on 3 days’ notice.

Annexure A - Exhibit 1 - Page 781 (239379, pdf)

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Amendments

08 November 2021 - Amendment to Cover Sheet only.

Decision last updated: 08 November 2021