Ipex ITG Pty Ltd v Melbourne Water Corporation (No 5)

[2009] VSC 383

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

LONG CASES LIST

No. 5249 of 2003

IPEX ITG PTY LTD (In Liquidation) (Receivers and Managers Appointed) (ACN 007 433 623)	.................................................. Plaintiff
v
MELBOURNE WATER CORPORATION	.................................................. Defendant

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JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	16, 17, 18, 19, 23, 24, 25, 26 February, 2, 3, 4, 5, 16, 17, 18, 19, 23, 24 March and 31 August 2009
DATE OF JUDGMENT:	11 September 2009
CASE MAY BE CITED AS:	Ipex ITG Pty Ltd v Melbourne Water Corporation (No 5)
MEDIUM NEUTRAL CITATION:	[2009] VSC 383

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TRADE PRACTICES – misleading and deceptive conduct – information technology outsourcing agreement – representation as to number and type of help desk calls in preceding six months – whether information accurate – whether implied representation as to number and type of calls in future – whether misleading and deceptive – whether reliance – whether causation of loss – whether loss

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr I.G. Waller SC with Mr A.W. Sandbach and Mr H.H. Redd	AJH Lawyers
For the Defendant	Mr G.H. Garde QC with Mr M.G. Roberts	Allens Arthur Robinson

TABLE OF CONTENTS

Background
The Trial

Mr Schwalb not called
Mr Patishman not called
Ipex tender documents missing
The deletion of Ipex Schedule 1

The Preliminary Point

The entitlement of Takapana to sue in the name of Ipex
The Takapana Corporations Act application

Were the Representations Made?

First representation – the average number of calls
Second representation – the information in the HD Calls Table
Third representation – future numbers of help desk calls
Fourth representation – representative sample
The representation by silence

Were the Representations False or Misleading?

First representation – the average number of calls
Second representation – the information in the HD Calls Table
Third representation – future numbers of help desk calls
Fourth representation – representative sample
The representation by silence

Reliance
Causation of Loss

Conclusion

HIS HONOUR:

Background

1. In the early 1990s the plaintiff, Ipex ITG Pty Ltd (“Ipex”), carried on business essentially as an IT hardware company.  As the business grew, its subsidiary activities became more significant so that it became more involved in consulting, design and installation of computer technology.  By the mid 1990s it became interested in the emerging and potentially lucrative market of providing IT outsourcing services for commercial enterprises and government departments.  This new market was seen to be a risky one and it first sought involvement only as a sub-contractor to prime service providers.

1. By the late 1990s, Ipex decided that it, too, should venture its hand as a prime services provider of IT services and, in 1998 it submitted a tender as such for a group of five Commonwealth departments or agencies.  This was referred to as the G5 tender.

1. For the purposes of preparing its tender for the G5 project, David Elliott Cohen, the Ipex systems integration and services director, prepared what he called a model for costing the project.  To do this, he said, he prepared a service function map which listed all the functions and things which the service provider would be required to perform or provide in order to perform the services required in the contract documentation.  The cost of providing these functions and things would then be calculated.  Insofar as the function comprised the provision of services, the model required the calculation of the number of what was called “full-time equivalents” or FTEs which would be required over the life of the project for an employee to perform that function.  An FTE represents the number of hours of one person or a succession of persons over one year to perform a task - 1687 hours.  The cost to the service provider of providing one FTE of a worker of a particular skill or status could be calculated by reference to the wages paid to the worker plus the usual add-ons.  The product of the number of FTEs required and the cost of providing each FTE, therefore, represents the cost to the service provider of performing that task over the contract period.  This represents a very crude summary of what is a complex process;  it required an intimate knowledge of what the client required to be performed or supplied and of what would be required to satisfy those requirements, including on‑site and off‑site management and, further, including an allocation for amortising capital costs over the term of the project and a provision for satisfying these requirements in the future over that term, including a provision for risks of various kinds.

1. The Ipex bid for the G5 contract was unsuccessful, but Mr Cohen said that the model which he had developed at a cost of about $1.5 million was available for use in other projects for which Ipex was minded to tender. 

1. The next such project was a similar IT outsourcing project for seven Commonwealth government departments or instrumentalities, called the G8 project.  This was a very substantial project involving servicing over 9,000 workstations and for which Ipex tendered $130 million for five years.  The services to be provided for this project were similar to those required for the G5 project so that Mr Cohen’s model was used to build up the tender price.  The tender was successful and Ipex won the G8 contract. 

1. At the time that Mr Cohen was fully occupied with the G8 tender and setting up the project, Ipex tendered for two other projects – that for providing IT services for the New South Wales WorkCover Authority and that for the defendant, Melbourne Water Corporation (“Melbourne Water”).  Mr Cohen’s model was said to have been used for the Melbourne Water tender and, for reasons which will appear, the G8 tender build-up and the methodology involved was much relied upon by Ipex in this case. 

1. Seven IT service providers were invited to submit tenders or proposals for the Melbourne Water project;  the tenders were required to be lodged by 17 May 2000.  The invitation was accompanied by a request for proposal (“RFP”) prepared on behalf of Melbourne Water and delivered to tenderers on or about 10 April 2000.  This is a lengthy document setting out information as to the IT environment which the successful tenderer was required to service and, in considerable detail, the services which that tenderer was to provide.  It also required each tenderer to provide information as to its costings.

1. A feature of the RFP was that it was expressed in terms that the tenderers were to provide what were described as outcomes.  How these outcomes were to be achieved was, to a very large extent, a matter for the tenderer.  Another important feature was that the tenderers were required to submit a lump sum price for providing those outcomes.  While there was provision in the form of contract for an adjustment of the price in the event that the scope of work was varied,[1] the wording of the specification was such that a change of this nature would be unlikely.  The end result was that the successful tenderer, Ipex, was required to assume most, if not all, of the risks involved of providing IT services for Melbourne Water over the three year term of the project and it was therefore required to build into its tender price an allowance for this. 

   [1]Clause 15(c).

1. The Ipex tender price was $5,218,204 plus GST.  It was the lowest tender and, in due course, it won the Melbourne Water contract which was entered into on 27 July 2000 and which commenced on 1 August 2000 for a term ending 31 July 2003.

1. A significant part, but by no means all, of the services to be provided under the contract involved the provision of help desk services.  The function of Melbourne Water, as its name suggests, was and is the management of the water supply catchments, sewerage, waterways and drainage systems for the Melbourne region.  In 2000 it operated from some 24 locations in Victoria, mostly near Melbourne and its personnel are described in the RFP as numbering 561 staff, 690 PCs and 51 NT servers.[2]  When one of these employees encountered an IT problem they would contact by telephone or email the help desk which Ipex operated from Sydney.  The help desk operator, available 24 hours per day seven days per week, was expected to resolve a substantial proportion[3] of these enquiries and those which could not be resolved would be referred to a technician who would resolve them from the Ipex offices in St Kilda Road, Melbourne or by attending the site and doing what was required.

   [2]The request mentions a range of other sites having IT involvement, but details are not provided.

   [3]Mr Cohen and Mr Keedle said that the industry experience was that 70% to 80% of problems were resolved at this level.

1. This litigation arises from the fact that the information provided to tenderers in the RFP contained a table which set out the number and category of help desk calls recorded monthly by Melbourne Water help desk from October 1999 to March 2000, both inclusive.  I shall refer to this table as the “HD Calls Table”.  The figures for total calls in the HD Calls Table vary from month to month from a low of 364 in March 2000 to a high of 527 in November 1999, but the average is 433 per month.[4]  Soon after its entry upon the project, Ipex experienced help desk calls at a greater monthly rate, reaching a maximum of 1,448 calls in March 2002 and averaging over the three years of the project 675 per month.

   [4]A copy of the HD Calls Table is Annexure A to this judgment.

1. During the project term Ipex complained about this disparity and sought payment for the extra costs involved in servicing this number of help desk calls as a variation in scope pursuant to cl 15 of the contract.  This claim was, in November 2001, rejected by Melbourne Water on various grounds, but principally because the Melbourne Water contract was a lump sum contract and Ipex bore the risk.  I should note at this point that Ipex made other applications for variation of the contract sum pursuant to cl 15 and were, to some extent, successful, but these were not concerned with the subject-matter of this proceeding.

1. Ipex on 17 February 2003 commenced this proceeding in the Federal Court asserting a claim for payment under the contract and under the Trade Practices Act 1974 and the Fair Trading Act 1999. It was transferred to this Court in April 2003. The claim of Ipex has undergone a series of major changes over the ensuing years. Ultimately, in December 2007 it assumed, more or less, its present form as a claim for misleading and deceptive conduct. This claim, which is set out in its fifth amended statement of claim[5] has been substantially amended even during the course of the trial.[6]  

   [5]Fifth amended statement of claim filed 19 February 2009.

   [6]On Day 2 and again on Day 13.

1. The misleading and deceptive conduct in question comprises four representations, all concerned with the number of help desk calls included in the HD Calls Table which appears at page 105 of the information provided to tenderers in the RFP.  These representations are described in the statement of claim in these terms:

4. On or about 10 April 2000, [Melbourne Water] represented to Ipex:

(a)the average number of calls recorded by the [Melbourne Water] IT Help Desk (“Help Desk Calls”) had been 433 per calendar month during the period October 1999 to March 2000;  and

(aa)the information contained on page 105 of the Requirements Specification was an accurate summary of the:

(1)categories;

(2)number;  and

(3)type

of Help Desk Calls recorded each month during the period October 1999 to March 2000;  and

(b)the average number of Help Desk calls would be and would continue to be approximately 433 per calendar month during the period of the outsourced provision of the IT infrastructure services to [Melbourne Water] for which Ipex was requested to tender (“the Ipex Term”). 

(bb)The Help Desk Call data contained on page 105 of the Requirements Specification for the six month period from October 1999 to March 2000 was a representative sample sufficient to allow the tenderers to cost their proposals on a proper basis.[7]

The claim goes on to allege that, in reliance upon the content of the HD Calls Table, Ipex calculated its tender price and bound itself by contract to perform the services at that price.[8]  Ipex says that the representations of fact alleged in the first, second and fourth representations were false.[9] With respect to the representation as to future fact contained in the third representation, Ipex relies upon s 51A of the Trade Practices Act.[10]  Further, Ipex positively alleges that Melbourne Water knew or ought to have known that the average number of help desk calls during the term of the project would be significantly greater than 433 per month, and that the help desk data in the HD Calls Table was not a representative sample sufficient to enable Ipex, and the other tenderers, to cost their tenders on a proper basis.[11]

[7]Statement of claim, para 4.

[8]Statement of claim, para 7.

[9]Statement of claim, para 8, (a), (aa), (aaa).

[10]Statement of claim, para 6.

[11]Statement of claim, para 8 (b).

1. The evidence shows that from July 1997 Melbourne Water had received monthly reports from its then IT service provider, Unisys Australia Ltd, containing information as to the number of calls per month and that this number varied from month to month from a high of 980 in August 1997 to a low of 475 in December 1997.  Although the general trend of the total number of calls per month was downward, the average over the total period of 28 months from July 1997 to September 1999 (both inclusive) was certainly much higher than 433;  it was 723 per month.

1. And so, it is said that the monthly figures for the six months, October 1999 to March 2000, were not a representative sample in terms of the fourth representation and that the information in the Unisys report with respect to the earlier 28 months from September 1999 meant that Melbourne Water had no basis for making the third representation. 

1. The falsity of the first and second representations was sought to be demonstrated by a detailed analysis of the material underlying the figures in the HD Calls Table. 

1. A further, but associated, claim is that Melbourne Water refrained, otherwise than inadvertently, from disclosing information in its possession relating to the help desk calls which it had received in the monthly Unisys reports for the period prior to October 1999 and from providing information required by Ipex concerning the help desk calls.[12] 

   [12]Statement of claim, para 10.

1. This trial is concerned with all issues in the proceeding other than quantum. I am required, therefore, to consider whether Melbourne Water has contravened s 52 and s 51A and whether Ipex relied upon the conduct and whether it suffered loss as a consequence. The amount of this loss is for another day.

1. A further claim of Ipex is for an unpaid instalment of its fee for providing the IT services.  This has been resolved and I say nothing more about it. 

1. Melbourne Water in its defence[13] resists these claims on bases which I shall consider in due course.

   [13]Third amended defence, filed 23 February 2009. 

1. The issues, then, raised in this proceeding may be summarised as follows:

1.Were the representations in fact made. 

2.Did the representations, including the refraining from providing information, constitute contraventions of ss 52 and 51A.

3.Did Ipex rely upon the conduct as alleged in entering upon its contract with Melbourne Water.

4.Did Ipex suffer loss as a consequence.

1. The defence also raises a discrete point that, by reason of its changes in ownership and, more recently, by reason of its being in receivership and in liquidation, those instructing the lawyers who appeared at trial for Ipex were not in fact acting on the instructions of Ipex or of anyone authorised by Ipex to instruct them.  Accordingly, the bringing or the maintenance of this proceeding is an abuse of process;  it should be summarily dismissed as such.  It is to this essentially preliminary point that I first turn, after making some general observations about the trial.

The Trial

1. The trial of this proceeding presented a number of unusual features which were said to impact upon the issues.  It is convenient that I deal them at the outset. 

Mr Schwalb not called

1. Ipex was incorporated in 1990.  A director from its early days was one Joel Schwalb.  Mr Schwalb was mentioned in evidence as being the managing director of Ipex in 2000 and the person who directed Mr Cohen to put in hand the preparation of the Melbourne Water tender.  At this time, the directors of Ipex were Mr Schwalb and two other persons who I take to be family members of Mr Schwalb, for they have the same surname and address. 

1. Although I know nothing of Mr Schwalb’s technical expertise, it is clear that he had at least a commercial involvement in the Melbourne Water tender process. 

1. The shareholder of Ipex at that time was Takapana Investments Pty Ltd and perhaps Mr Schwalb as to one share.  Takapana was the trustee of the Schwalb Family Trust No 1, a discretionary trust for the benefit of certain members of the Schwalb family.  As will be seen, Mr Schwalb continued to drive and fund this litigation after Takapana ceased to be a shareholder in Ipex in late 2003 and after he and his co-directors, including Mr Cohen,[14] resigned their offices consequent upon the sale of the Ipex shares to Volante Group Ltd.  Mr Schwalb was not called as a witness at the trial and no reason was offered for this.

   [14]Mr Cohen became a director on 19 December 2003.

1. His non-appearance as witness was said to be of significance for three reasons.  First, he was the man intimately involved in Ipex’s commercial decisions with respect to the Melbourne Water tender.  He would be in a position to give evidence as to the significance of the information as to help desk calls contained in the HD Calls Table and as to the reliance of Ipex upon this information.  Second, he would be able to explain the non-production of important documents with respect to the Ipex tender and the performance by Ipex of the contract.  Third, he is the witness best able to provide the factual basis for the Ipex argument that Takapana was entitled to pursue this proceeding in the name of Ipex. 

1. I was invited to draw an O’Donnell v Reichard inference from the failure of Ipex to call this witness.[15]  I will do so, but bearing in mind that the evidence he might have given touches only upon those matters. 

   [15][1975] VR 916.

Mr Patishman not called

1. The second absent witness is Michael Patishman, the Ipex account manager.  Mr Patishman was the man who dealt with Melbourne Water in the presentation of the Ipex tender and in the post-tender negotiations and meetings.  Although he does not appear to be a technical man, he is the person who might have given evidence upon a number of matters of significance which are referred to in correspondence sent by him or received by him and in minutes of meetings at which he was shown to be present.

1. I was told that Mr Patishman is married to general counsel for Melbourne Water.  From this, I was invited to infer that he would not voluntarily assist the Ipex case.  Mention was made that his attendance may have to be compelled by subpoena and that he might have to be called as a witness by Ipex without a prior conference with counsel.  These matters, which might warrant a conclusion that Mr Patishman should not be treated as being in the camp of Ipex, provide a proper basis for my not drawing the O’Donnell v Reichard inference, and I will not do so.

Ipex tender documents missing

1. Much criticism was directed to the absence of Ipex documentation relating to the Melbourne Water tender.  The evidence showed that Michael Charles Keedle and other employees of Ipex (who were not called) put together a detailed cost analysis based on the form prepared by Mr Cohen for the G8 tender or perhaps a variant of this used in the NSW Workcover tender.  This analysis would have been prepared on a spreadsheet with supporting material showing how the various components of the price were calculated or estimated.  The assumptions made in the costing would have been recorded.  Mr Keedle’s tender was then put to the Ipex board and, ultimately, it, or some variant, was approved to form part of the Ipex tender.  Mr Keedle said that emails and other documents were left with Ipex when he ceased to be employed in 2000 or 2001.

1. According to Mr Cohen, this type of material was normally stored electronically by Ipex until it was necessary to delete unwanted material that was clogging up the system.  He said, too, that after the tender process was complete, even if the contract had been won, there was no need to preserve this material.  He said, however, that material prepared for the Melbourne Water tender might still be on the Ipex system today or it might have been archived on tape.  In this context, it should be noted that the issue as to the number of help desk calls being less than that disclosed in the HD Calls Table was alive as early as 2001 when Ipex sought extra payment pursuant to cl 15 of the contract.  This litigation commenced in early 2003 and was being actively pursued in this Court from that date.  The contract was still on foot for some months after the litigation was commenced. 

1. Victor Ng, the in-house legal counsel for Ipex from October 2003 to March 2004 and counsel for Volante to October 2006, said he enquired of Ipex employees what documents existed and he located them and kept them.  He made no enquiries regarding back-up tapes. 

1. In this proceeding the solicitors for Ipex from the outset have been AJH Lawyers.  Gene Volovich, a solicitor employed with that firm, said he had been involved in this proceeding since it was transferred to this Court in April 2003.  He, too, said that he made enquiries of Ipex employees as to the existence of relevant documents.  He was not aware of records retained on tape and was not familiar with attempts to access archival material.

1. It became increasingly apparent as the trial unfolded that the unexplained absence of these documents created great difficulties.  Mr Keedle, the only witness called by Ipex to speak of the actual preparation of the tender, had very little recollection of what he in fact had done.  The events were some nine years ago and he had been approached to recall them only in the last few months.  Without the assistance of contemporaneous documents, his evidence was, understandably, given in generalities or was essentially a reconstruction of what he would have done having regard to his normal practice.  Moreover, his evidence could not be tested or explored in cross-examination without the documents upon which he made his calculations.

1. There was no suggestion that documents had been deliberately destroyed and no evidence was led that those responsible were in breach of their discovery obligations. What was said was that, where the documents in the ordinary course ought to have been preserved by Ipex for the litigation, Ipex ought not to be given any forensic advantage as a consequence of its failure to keep them. 

The deletion of Ipex Schedule 1

1. The Ipex claim has undergone a number of changes over the years since 2003.  Nevertheless, it has always depended upon the disconformity between the help desk numbers disclosed in the HD Calls Table and those encountered by Ipex during the term of the contract.  What Ipex has always put forward as a central pillar of its claim is that it prepared its tender based on the figures in the HD Calls Table. 

1. Over the years Ipex has been repeatedly asked to explain precisely what role the figures in the HD Calls Table played in the preparation of the tender.  Its fourth amended statement of claim filed in December 2007 contained the following statement:

Further particulars of the breakdown of the total price of $5,218,204 (including details of where and how the number of Help Desk Calls were factored into the calculation) are contained in Schedule 1 hereto.  The actual calculation of the total price and the manner in which and the extent to which the number of Help Desk Calls of approximately 433 per calendar month affected calculation of the tender price is lengthy and complex, and will be set out in full in Ipex’s discovery in relation to calculation of the tender price.[16]

[16]Statement of claim para 7, particular (ii) (the passage in italics was deleted by amendment permitted on 19 February 2009, day 4 of the trial).

1. Schedule 1 presented an analysis of the total tender price of $5,218,204 which comprised a handover component and a component for the services provided in each of the three years of the contract.  Year 1, for which $1,632,778 was allowed, was detailed as an exemplar of this calculation.  It was said that, of this sum, two items were directly related to the average number of help desk calls in the HD Calls Table:

Project office supplementary	$74,160.00
Service delivery group – core team	$593,100.00

This larger item was said to have been arrived at by assessing the cost of a call at $167.08 for MAC calls[17] and $98.00 for others.  The number of these two types of calls were taken from the HD Calls Table and totalled 433.  This information was provided in December 2008 in response to a request for further and better particulars of this same matter. 

[17]MAC calls are explained in para [101] below.

1. It was observed by counsel for Melbourne Water that the second sentence in the particulars which I have quoted in italics above suggests that the drafters or those instructing them expected that the missing documents relating to the tender then existed.  As it turns out, this was not the case.

1. Significantly, for present purposes, Schedule 1 was withdrawn on Day 13 of the trial and a new Schedule 1 in much less specific terms was substituted.  The terms of this new schedule are such that it does not disclose precisely how the figures in the HD Calls Table were used to produce the FTEs in the tender detail or the consequent tender price.

1. This amendment occurred after the sole Ipex witness as to the preparation of the tender had given his evidence and after the Melbourne Water expert witness reports on this matter had been deployed in evidence and had been put to the Ipex witnesses.  I think it is quite fair to say that the effect of this was to demonstrate the falsity of the account of the tender process set out in the original Schedule 1.  Accordingly, it was properly withdrawn. 

1. Counsel for Melbourne Water took the matter further, arguing that this had tainted the Ipex case generally.  The drafters of the pleading in December 2007 and of the particulars a year later, were presumably acting on instructions which are now known to have no basis in reality.  Again, since Mr Schwalb was the person instructing the lawyers, comment was made of his reluctance to enter the witness box. 

1. To my mind the point is well made.  It means that I approach the case of Ipex with the caution which is appropriate to a case which has been so presented.  It does not affect the credit of any particular witness;  it does make me reluctant to act on generalities or to draw inferences from evidence where detail is not provided.

The Preliminary Point

1. The point taken here is that those instructing the lawyers acting for Ipex do not have the authority to give those instructions.  Accordingly, the proceeding is an abuse of process and should be dismissed as such.[18]

   [18]See Halsbury’s Laws of Australia para 120-3180.

The entitlement of Takapana to sue in the name of Ipex

1. The point was first taken in October 2008 when Melbourne Water sought summary judgment on the same basis.  I refused this relief on that occasion, treating it as an interlocutory application.[19]  I reserved to the parties the prospect that they might plead these contentions more fully, supplement the material then in evidence and present full argument at the trial.

   [19]Ipex ITG Pty Ltd v Melbourne Water Corporation (No 4) [2008] VSC 497.

1. At trial no further evidence was offered and the same contentions were pressed.  The only new fact is that on 24 November 2008 the creditors of Ipex at a second meeting held under Part 5.3A resolved, pursuant to s 439C(c) of the Corporations Act, that Ipex be wound up.  The administrators thereupon became liquidators.  The company remains under receivership. 

1. The position of the liquidators appears from a letter from their solicitors dated 13 February 2009.  In response to an enquiry from the solicitors for Melbourne Water, seeking confirmation that the liquidators had elected to continue this proceeding and whether they had instructed AJH lawyers to act on behalf of Ipex, their solicitor responded in these terms:

… I am instructed to confirm: 

·that the liquidators have not elected to continue the proceedings; and

·that the liquidators have not (either as liquidators or previously as administrators) authorised AJH Lawyers to act on behalf of the Plaintiff in this matter.

I understand that you are aware that AJH Lawyers assert that they are entitled to act as a result of arrangements which ante-date the administration.

1. The position of the receivers appears to be that stated previously in their letter of 9 October 2008 sent prior to the interlocutory hearing: 

As is their entitlement, our clients have not made any election in relation to the proceeding.  Nor have they instructed AJH Lawyers in relation to the proceeding.

1. Neither the liquidator nor the receivers have taken any step to interfere with the continuance of this proceeding in the name of Ipex.

1. It is accepted by Ipex that instructions for the proceeding have been given by Takapana or perhaps Mr Schwalb, or both, since its commencement in 2003.

1. Takapana has paid the costs of Ipex incurred in prosecuting the proceeding and, generally, any orders for costs which have been made against Ipex.  Takapana has paid or assumed responsibility for the provision of security for the costs of Melbourne Water which I have ordered.

1. The history and background to this question is summarised in a little more detail in my judgment of November 2008.[20]  Since the evidence was essentially unchanged and no one contended otherwise, I am content to adopt this summary as the factual basis for my consideration of this issue.

   [20][2008] VSC 497 at [4]-[14].

1. Each party asserted that I should treat myself as being bound by the conclusions which I expressed in its favour in the November judgment.  This I will not do.  I see my duty to be that I should look at the issues afresh and with a little more reflection as befits the consideration of issues debated after a full trial.  I say this, notwithstanding that the parties did not, for the most part, seize the opportunity to lead further evidence.[21]  Nor did they develop further their earlier submissions, except insofar as the subsequent liquidation of Ipex required. 

   [21]The evidence was, if anything, a little more exiguous, as parts of the affidavits read in October 2008 were objected to and struck out as hearsay. 

1. The position of Takapana may be considered in a number of periods.

1. From the time the proceeding was commenced in February 2003 to the end of that year, no difficulty arises.  Takapana was the majority or sole shareholder of Ipex and Mr Schwalb its managing director.  The directors were, of course, entitled to authorise the commencement and prosecution of litigation in its name.  If Takapana paid its costs this might be dealt with in its loan accounts or otherwise.

1. On 22 December 2003 Takapana entered into a share sale agreement to sell all of the shares in Ipex to Volante Group Ltd.  Thereupon, or shortly thereafter, the pre-existing board of directors was replaced by Volante appointees.  On that basis, Takapana and Mr Schwalb had no authority to cause Ipex to continue this litigation.

1. What is said, however, is that this matter was dealt with upon the sale of the shares.  In short, it is said that Takapana reserved the right to pursue existing litigation at its own cost and in the name of Ipex and to receive the proceeds, if any. 

1. This, it is said, is dealt with in cl 11.2 of the share sale agreement, the relevant parts of which are set out in my earlier judgment.[22]  The difficulty is that this provision refers to the parties in this way – the vendor is Takapana and the purchaser is Volante.  Inserting these names in the critical cl 11.2(a)(iii), the provision reads:

If Takapana so requests, Volante must permit Takapana, at Takapana’s expense, to take such reasonable action in the name of Volante to defend, continue, pursue or otherwise settle that Existing Litigation or to select legal advisers and seek and obtain legal advice from such advisers as Takapana may reasonably require provided that Takapana at all times takes into account Volante’s market reputation, relationships with existing customers and prospects as well as the views of the Volante’s board.

[22][2008] VSC 497 at [6].

1. The list of cases comprising the Existing Litigation is set out in Schedule 10 to the share sale agreement.  Ipex is described as a party to each of these proceedings;  Volante is not so described in any of them.  This is, of course, not to deny that Volante may have been a party, but did not appear in the short title to the proceeding.  It seems to me that the drafter of cl 11.2(a)(iii) confused the role of Volante, as purchaser and thereafter as shareholder in Ipex, with that of Ipex as the litigant in the Existing Litigation.  In 2008 I felt myself unable to construe this provision in a way which would require the substitution of the correct party.[23]  I have wondered, on reflection, whether the expression “to take such reasonable action in the name of Volante to defend, continue…” the proceeding might warrant Volante as sole shareholder in Ipex compelling the directors of Ipex, if this be necessary, to permit its name to be used in the proceeding.  But the point was not argued before me and I will not take it further.

   [23]No application for rectification was, obviously enough, made since none of the contracting parties was before the Court.

1. The third period, commenced in April 2006 when Volante became a wholly owned subsidiary of Commander Communications Ltd.  This of itself would not affect any arrangements on foot between Ipex and Takapana. 

1. Next, on 7 August 2008, Commander went into administration, taking with it its subsidiaries including Volante and Ipex.  Westpac also appointed a receiver and manager over the assets of these companies.  This was how things stood at the time of the October application. 

1. Finally, on 24 November 2008 Ipex was put into liquidation.  The entitlement of Takapana to continue instructing the lawyers in this proceeding and for them to do so in the name of Ipex, therefore, depends upon there being in existence a right to do so which pre-exists and which remains unaffected by the events of 2008.

1. The case presented on behalf of Ipex is that such a right arose and that it arose by an equitable estoppel binding on Ipex, alternatively by the share sale agreement of December 2003, alternatively by the doctrine of subrogation.  I have rejected the contention which depended upon the terms of the agreement. 

1. The estoppel, it is said, arises from the fact that Takapana, with the knowledge and acquiescence of Ipex conducted the litigation and paid for it, at least after December 2003, when it otherwise had no interest in it.  These facts are not in issue. 

1. The point taken is that such a right can arise only where I am satisfied that Takapana had assumed a state of facts, namely that if it paid the costs and directed the litigation Ipex would permit it to use the Ipex name and would hand over any proceeds of the litigation.  It was put that no evidence was led to warrant such a finding:  Mr Schwalb was not called.  I should therefore infer that his evidence would not assist those acting for Ipex.  Further, it must be shown that this assumption was induced by some act of Ipex, that Takapana paid the costs and provided instructions in reliance upon the assumption so induced, and that Ipex knew or intended that Takapana did so.  Accepting for a moment that the assumption existed, I would have little difficulty with these elements.  The assumption must have arisen in late 2003 when Mr Schwalb was the moving spirit behind both Ipex and Takapana.  The remaining constituents of the cause of action do not present a problem.  If Ipex retreats from the assumption, Takapana will have expended much money in vain.

1. There are, however, two considerations which make this case an unusual vehicle for equitable estoppel of this kind.  First, Ipex is not seeking to resile from any such understanding.  The liquidators and the receivers have adopted a neutral position.  The second, associated with this, is that the situation is sought to be impugned by a third party, Melbourne Water.  Put bluntly, if Melbourne Water owes Ipex a sum of money, why should it be permitted to avoid the consequence of this because of any difficulty which may exist between Ipex as its creditor and Takapana, the funder and driver of the litigation?  Melbourne Water will be required to pay what it owes.  How the proceeds will be dealt with when paid to Ipex, will be a matter for the receivers and the liquidators and the funder. 

1. I return, then, to the fundamental question which is an essentially factual one – was there any assumption of the kind contended for.  Given the paucity of the evidence and, notwithstanding the absence of Mr Schwalb’s evidence, I find, on the balance of probabilities, that there existed some such arrangement or assumption.  Without it, it is inconceivable that Takapana would have provided the enormous sums which it has invested in the proceeding.  It is not necessary that I make any finding as to its precise terms or as to its binding nature.  It is sufficient that I am satisfied, as I am, that the assumption included the right in Takapana to instruct lawyers and to conduct this litigation in the name of Ipex.  Ipex has acquiesced in this for many years and so too, in more recent times, have the administrators, the receivers and the liquidators.  So long as that situation remains, I will not interfere with the present litigation.

1. A further point raised on behalf of Melbourne Water depended upon the provisions of the Corporations Act.  The statute does not put a stop to all litigation brought by a company which goes into liquidation.  The liquidator may pursue the litigation in the name of the company[24] or a creditor, a contributory or ASIC, may do so when authorised by the Court.[25]

   [24]Section 477(2)(a)

   [25]Section 477(6).

1. The real question here is whether the liquidator’s power to pursue the litigation is one which is, subject to court order pursuant to s 477(6), exclusively vested in the liquidator.  What is the position of a plaintiff suing a wrongdoer in the name of a company in liquidation pursuant to powers of subrogation?[26]  I have concluded that, immediately prior to the liquidation, Takapana was permitted, with the concurrence of Ipex, to conduct this litigation in its name.  This is a state of affairs which has been brought to the attention of the liquidators and which they have not been minded to disturb.   In these circumstances, I would presume that they are satisfied that the assets of the company available for its creditors are not thereby put in jeopardy.  I conclude that they, like Ipex, acquiesce in the continuance of this proceeding as presently constituted and conducted.   Those presently acting for Ipex are, therefore, not acting without authority; there is no abuse of process.  The preliminary point fails.

   [26]See generally Halsbury’s Laws of Australia  para 120-3176 especially footnote 2 and the cases referred to.

The Takapana Corporations Act application

1. Following the completion of the hearing of this trial on 24 March 2009 and shortly before this judgment was to be delivered, the solicitors for Ipex advised my associate  on 3 April 2009 of their intention to apply for an order pursuant to s 477(6) to the effect that their conduct of this litigation on behalf of Takapana in the name of Ipex, at least since the commencement of the winding up of Ipex be validated.  This application, they said was made out of an abundance of caution.  I caused my associate to advise them that this was an application which they might bring in the ordinary way but before another judicial officer, and that I would hold this judgment until the result of that application is known. 

1. Accordingly, Takapana commenced proceeding No 5802 of 2009 against the liquidators, seeking leave to continue this, and another proceeding,[27] in the name of Ipex.  The leave was sought pursuant to ss 471B, 477(6), and 1322(4) of the Corporations Act and pursuant to the inherent jurisdiction of the Court. 

   [27]Ipex ITG Pty Ltd v State of Victoria proceeding No 7182 of 2002.

1. After a lengthy hearing Efthim AsJ published his reasons on 28 July 2009 and made a final order on 14 August 2009.  His Honour was careful to address only the problem which was not before me:  whether the fact that Ipex was in liquidation should have the consequence that Takapana could no longer sue in its name.  He was not concerned with the rights of Takapana to sue in the name of Ipex prior to liquidation.

1. A further matter of concern to his Honour was the risk that this litigation caused to the interests of secured and unsecured creditors of Ipex.  The arrangements which are doubtless in place with the Ipex lawyers means that the interests of these creditors are not likely to be prejudiced by any claim for costs from that quarter.  The risk arises in the event that a costs order might be made against Ipex in this proceeding.  His Honour therefore required and obtained an undertaking on behalf of Takapana that it would indemnify Melbourne Water for any costs awarded or to be ordered in their favour.  A security for these costs in the sum of $948,800 had already been ordered and provided.  His Honour directed that a further security of $1m be provided to ensure that the undertaking might be fully covered.  Conditional upon payment of this further security, his Honour therefore ordered:

To the extent that the Plaintiff had the right to conduct proceedings number 7182 of 2002 and number 5249 of 2003 (“the MWC and SOV proceedings”) in the name of Ipex ITG Pty Ltd (In Liquidation) (Receiver and Manager appointed) (“Ipex”) prior to 24 November 2008 (being the date on which it was resolved pursuant to section 439C of the Corporations Act that Ipex be wound up), the Court authorizes the Plaintiff, nunc pro tunc, to conduct the MWC and SOV proceedings in the name of Ipex on and after 24 November 2008.

The further security has been provided.

1. I have concluded[28] that immediately prior to liquidation on 24 November 2008 Takapana was entitled to conduct this litigation in the name of Ipex.  The effect of his Honour’s order is that this right is not affected by the liquidation of Ipex.  Accordingly, the preliminary point fails. 

   [28]See para [69] above.

Were the Representations Made?

1. There can be no doubt that the information contained in the RFP was communicated to all tenderers including Ipex on or about 10 April 2000.  This included the statement that the number of calls recorded in the help desk were those in the HD Calls Table and that their break-up by category was as set out in the HD Calls Table.  It is convenient, therefore, to deal with the first and second representations together.

First representation – the average number of calls

Second representation – the information in the HD Calls Table

1. Counsel for Melbourne Water sought to make much of the self-evident point that, nowhere in the HD Calls Table, or indeed elsewhere in the RFP, was there any mention of the average total number of calls received.  The first representation, in terms, then, was not made.  This is correct.  The fact remains that it is not a difficult calculation to average the six total figures and arrive at 433. 

1. These total figures were only part of the information contained in the HD Calls Table.  More significant, the evidence showed, was the breakdown of those figures.  And so, in the amendment made on Day 2, was added the second representation under which the information in the HD Calls Table as to monthly total numbers and categories and types was relied upon.

1. A fair reading, including a calculation by a person involved in preparing of the tender would have disclosed the represented fact as to the average number of help desk calls.    But this is not necessary:  the HD Calls Table contains the summary of the help desk calls recorded by category, by number and by type.  These are the matters contained in the second representation which I find to have been made.

1. It was also contended that I should conclude that I should not find that Melbourne Water made the first or second representation because it was simply passing on information provided to it by Unisys.[29]

   [29]See Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605 [38].

1. The evidence of Terrence John Ryan, the Melbourne Water Technology and Infrastructure Manager from 1997, showed that the information in the HD Calls Table was provided to Melbourne Water by Unisys at his request and that he received from Gregory Peter Budd of Unisys two Excel spreadsheets in electronic format a few days before the RFP was issued on 10 April 2000.  The first spreadsheet comprised two tables, the first being a list of calls by category showing the monthly help desk calls for the six months from October 1999 to March 2000 and also a table containing the calls by location for the same six month period.  The second sheet contained limited detail of calls actioned by Unisys for the same six months and a table of calls by category for the period October 1998 to October 1999 both inclusive.[30]  The second sheet was in the form which had appeared in the Unisys monthly reports delivered to Melbourne Water in the months up to and including October 1999.  The electronic copy in native form which was in evidence as Exhibit 28 showed that the two sheets had been created on 3 April 2000 by Costas Papanagiotou who was employed by Unisys as its desktop team leader in Melbourne.

   [30]The second sheet contains detail of network user registration which was not relevant for present purposes. 

1. Mr Ryan said that he checked these spreadsheets for reasonableness but he did not observe that, for the month of October 1999 which was the only month covered in the three tables, that there were differences in the figures.  In sheet 1, for example, the total number of calls is given as 468, in sheet 2 it is 473.  The preliminary information in sheet 2 shows that the total calls actioned by Unisys or directed to other service providers was for the month of October in fact 492.  Moreover the categories in the table for the 13 month period differ from those in the table for the six month period. 

1. Mr Ryan made the decision to insert in the RFP the two tables in sheet 1 only and these were inserted into pages 105 and 106 of the RFP.  The table on page 105 became the HD Calls Table.  He did not insert the other information in the Excel spreadsheets.  He explained that the HD information which he inserted in the RFP was that which he considered the most relevant and that he did not include information for the period of what was called the SOE project and the period in which the after-effects of the SOE project were being worked out.  I shall return in a little detail to the SOE project.[31]  For present purposes, it is sufficient that I note that Mr Ryan exercised judgment as to the reasonableness and as to the appropriateness of the information which he included in the RFP.

   [31]See paras [131]-[136] below.

1. Whilst it is true that the information was provided by Unisys and that Mr Ryan accepted it as accurate, it cannot be said that, from his point of view, he simply passed it on to the tenderers.  It is true that Ipex was aware that the current service provider for Melbourne Water at the time of tender was Unisys.  It also had some familiarity with Melbourne Water’s current IT management from information appearing elsewhere in the RFP, including the involvement of Unisys.  There is, however, no evidence that Ipex, or any of its employees involved in the preparation of the tender, knew what information in the tender information was provided to Melbourne Water by others and what was compiled by its own personnel. 

1. This is not a case where the information in the HD Calls Table was passed on by Melbourne Water for what it was worth.  Nor does the disclaimer contained in cl 19.1 of the Conditions of Tendering lead me to the conclusion that the content of the HD Calls Table was not a representation made by Melbourne Water.  I find that the second representation was made.

Third representation – future numbers of help desk calls

1. The third representation is as to a future matter.  What is pleaded is that it was a notorious industry practice that the number of help desk calls over a period of time remained constant providing there was no change to the IT environment.[32]  And so, it was said, the provision of historic figures of help desk numbers carried with it the representation that ”the average number of Help Desk Calls would be and would continue to be approximately 433 per calendar month during the period of the outsourced provision of IT infrastructure services to Melbourne Water for which Ipex was requested to tender”.[33]

   [32]Statement of claim, para 4, particularly  para 4(bb)(iii).

   [33]Statement of claim para 4(b).

1. I do not accept this to be the case.  First, no witness attested to the proposition that help desk calls would remain constant in an unchanged IT environment.  Dr Niemann in his first report addressed this very question saying no more than that there were few if any studies on the question.  He later said that, given the absence of future call volumes, tender costings were usually based on historical data.  But this is not the proposition for which Ipex contends.  All of the experts were agreed that when a tender of this kind is put together some regard is had to the historic data.  None of them said that the process was to assume constancy of numbers.

1. Furthermore, there is nothing in the tender specification to lead the reader to a conclusion that the Melbourne Water IT environment would remain constant over the three year term of the contract.  The RFP itself warns the tenderers that they must accommodate future changes.[34]  Furthermore, Ipex knew that it would be working in a dynamic environment.[35]

   [34]See for example, cll A2.19, A3.3 and A3.4.

   [35]See for example, Ipex Tender Proposal, pp 108ff.

1. I conclude therefore that the third representation was not made.

Fourth representation – representative sample

1. The fourth representation concerns the representative nature of the sample.  Again, nothing in terms is found in the RFP as to this matter.  What is put is that, since Melbourne Water expected that tenderers would calculate their tender price from the information contained in the HD Calls Table, it impliedly represented that the information was proper and sufficient for that purpose.  This argument is advanced against a background where the number of help desk calls recorded for the months prior to October 1999 was in fact very much greater than those in the six months from October 1999 contained in the HD Calls Table. 

1. Counsel for Melbourne Water resisted this contention on a number of bases, some of which I have already dealt with in considering the other representations.  A point which they made with special reference to this representation was the inherent ambiguity which lies within the expression “a representative sample sufficient to allow the tenderers to cost their proposals on a proper basis”.  This, they said, contains assumptions that there is some common basis upon which tenderers would approach their task of costing and that Melbourne Water was aware of this.  Neither of these assumptions, they said, has been established.  There was evidence as to the way in which Ipex approached the task of costing.  This was challenged.  There was also evidence from the expert witnesses called by Melbourne Water that different approaches may be and were used.  While it may be supposed that every tenderer would like to have as much information as possible, this is a case where there was no statement to tenderers to the effect that no further information as to help desk numbers was available.  It is one where there is no evidence that any tenderer sought further information as to the number  or types of help desk calls in the past. 

1. I am, nevertheless, satisfied that the information in the HD Calls Table was intended for the assistance of tenderers in their task of preparing their tenders.  It is clear that a substantial part of the contract services involved the handling of help desk calls during the period of the contract.  What is said, in the suggested representation was that the information was representative and that it was sufficient to allow them to cost their proposals on a proper basis.  I accept that the information was offered as an indication of the number of calls which were then being received.  It was a representation that the figures recorded for the months October 1999 to March 2000 was representative of the number of calls over that six month period.  I do not accept, however, that Melbourne Water made any representation that this was sufficient to allow tenderers to cost their proposals.  A feature of the tender process was that Melbourne Water asked tenderers to approach the achievement of the stipulated objectives in their own way and to introduce innovation and change where they thought this to be useful.  Changes of this kind, the witnesses said, would be very likely to affect the number and type of help desk calls in the short term and in the long term.   In the short term the numbers would increase, as was the experience during the SOE period; in the long term, changes were hoped to produce greater efficiencies and reduce the number of calls.  In these circumstances, the number of calls as shown in the HD Calls Table could not be taken to be a representation that these were the numbers to which they should apply a per call cost figure over the three year term of the contract in order to arrive at the their tender price.

1. The fourth representation has not been made out.  The information in the HD Calls Table was provided to tenderers without the further statement such as is contained in the fourth representation.

The representation by silence

1. What is put here is that Melbourne Water did not disclose to Ipex the information as to help desk calls which was contained in monthly reports provided to it by the previous IT services provider, Unisys, from July 1997.[36]  It is not disputed that this information was not disclosed and that this was not due to inadvertence.  The conduct alleged therefore has been proved.  I shall return to the question whether it was misleading and deceptive.

   [36]Statement of claim, para 10(a).

1. The second representation by silence is the failure of Melbourne Water to provide information as to help desk calls sought by Ipex at a pre-tender meeting held on 28 April 2000.  Seven requests are pleaded.[37]  Three of the requests were abandoned at trial, the remaining requests were the following:

1.LAN Topology (head office) Is this current environment adequate, are there any performance problems?

…

12.What works well and what doesn’t in the current IT environment?

15.What is the engineers daily workload like and what are most common problems being seen?

16.What are the main problems seen by the support team in regards to tools and infrastructure?

[37]Statement of claim, para 10(b), particulars.

1. It was accepted that these requests, other than the first, were not answered:  they were deferred to another meeting and not later responded to.  The note of the response to the first request made by Mr Ryan who represented Melbourne Water at the meeting was as follows:

Refer to diagram of the logical LAN at Bourke Street. IPEX requested a copy of the detail for all LAN environments. 

I am not persuaded that this request required as part of a reasonable response, any further information as to help desk calls.  I find that this representation by silence has not been proved. 

Were the Representations False or Misleading?

1. It is convenient to deal in turn with each of the four positive representations and then with the representation by silence alleged in paragraph 10 of the statement of claim. 

First representation – the average number of calls

Second representation – the information in the HD Calls Table

1. A good deal of attention was directed to the accuracy of the total monthly calls shown in the HD Calls Table and as to the accuracy of the figures for the various categories.  Both Ipex, seeking to impugn the figures, and Melbourne Water, whose interest it was to uphold them, were confronted with the fact that the source data no longer exists.  Furthermore, no witness was called from Unisys who described the preparing of the data.  The solitary possible exception to this was Mr Papanagiotou who compiled the information in the HD Calls Table but he really had no recollection of the process.  My task, therefore, must depend upon inferences to be drawn from other comparable data. 

1. The question here is whether Ipex has established that the information contained in the HD Calls Table is misleading or deceptive or likely to mislead or deceive.  This involves an assessment of its accuracy in terms of the requirements of Ipex as tenderer.  This is an important factor here where a good deal of information was directed by the expert witnesses to the detail of the figures contained in the table.  It is important, too, because it appears from the evidence that, for the purpose of costing the tender, tenderers were interested only in the total numbers of calls and how many of them fell into the category referred to as MAC because these are more expensive to deal with than other calls.[38]  Other inferences which may have to be gleaned from the information was not in this case seen as significant.

   [38]In the Ipex G8 tender, for example, the tender cost was $118 per MAC call and $26.44 per non-MAC call.

1. A MAC call is one which concerns the moving, adding or changing of an IT component.  In the HD Calls Table it was accepted that six of the categories fell within the description of MAC calls.  These are the following:  other software install;  service order network add/install; service order network delete; service order network rego;  service order network change; and service order other.  This means that the information in the HD Calls Table which was of interest to a tenderer may be summarised as follows:

Dates	MAC	Non-MAC	Total
October 1999	164	304	468
November 1999	79	448	527
December 1999	57	387	444
January 2000	104	261	365
February 2000	126	304	430
March 2000	129	235	364
659	1939	2598
Average	110	323	433

1. The contention of Ipex was that the monthly call totals in the HD Calls Table were understated and that I should conclude that the number of calls was in fact of the order of 650 per month.  Counsel on its behalf also submitted that the categories were not accurately stated but no detail of the true position was proffered. 

1. I start by examining the source of the figures in the HD Calls Table.  It will be recalled that they were supplied by Mr Papanagiotou to Mr Ryan via Mr Budd and that Mr Papanagiotou really had no recollection as to how he compiled them.

1. The evidence of this witness, however, sheds some light on the likely process.  The Unisys help desk operators compiled a log of each call with details as to its nature and outcome.  Part of their task was to attribute one of a number of fixed categories to each call, categories which were determined under the agreement between Melbourne Water and Unisys.  There was some suggestion that certain calls had been not correctly categorised, but I do not find that, generally, the call log data was inaccurate.  Data was extracted by Mr Papanagiotou from these logs and entered into a system called Crystal which was used to generate reports as needed.  There were in evidence only two such Crystal reports of help desk calls by category for the months November and December 1999 respectively.

1. David Michael Rehkopf, an outsourcing adviser called as an expert witness by Melbourne Water, in an elegant analysis, has demonstrated that the information in the HD Calls Table for the months November 1999 and December 1999 was probably taken from the Crystal reports for those months and inserted by Mr Papanagiotou into sheet 1 of the Excel spreadsheet prepared by him and delivered to Mr Ryan in April 2000.  This is demonstrated by an unusual spelling mistake which is found in both documents.  The same spelling mistake is found in the HD Calls Table which was included in the RFP, confirming Mr Ryan’s evidence that he simply pasted the table from the Excel spreadsheet onto page 105 of the RFP.

1. Although the total number of calls in the two Crystal reports matches those in the Excel spreadsheet and the HD Calls Table, the categories are not identical.  Again, Mr Rehkopf’s analysis reconciles these category differences and the figures in them, including a transposition error which made its way into the Crystal report for December 1999.[39]

   [39]These transpositions do not affect the number of MAC calls for this month.

1. I conclude from this that the information contained in the HD Calls Table issued to tenderers conforms with such of the Unisys data based on the help desk logs as is available to me. 

1. Next, the inaccuracy of the information in the HD Calls Table was sought to be demonstrated by an analysis by Stuart Harding Niemann, an IT forensic analyst engaged by Ipex, who compared this information with the Unisys information for the comparable periods. 

1. From January 1997, when it became the Melbourne Water IT services provider, Unisys was required to submit monthly reports.  In the latter months at least, these reports covered the period ending on the 25^th day of each month.  Its reports from July 1997 to July 2000 were in evidence.  As from November 1999 the format of these reports changed.  From that month little statistical information as to the number and breakdown of help desk calls was provided to Melbourne Water.  In respect of each month for the period up to and including October 1999, the reports included a table setting out the number of calls by category and a second table setting out their number by location.[40]  Dr Niemann pointed out that the total number of calls in each of these monthly tables did not coincide.  The explanation for this, it was agreed between Dr Niemann and Mr Rehkopf, is that the table of calls by location did not include third party calls.  These are calls which were related to IT problems with applications which were supported by service providers other than Unisys and they were, therefore, referred to those third parties.  In the detailed Unisys reports these third party calls were detailed an a separate table. 

   [40]In the RFP Melbourne Water included information as to the number of calls by category and by location for the six months from October 1999 to March 2000 only. 

1. With respect to one month only is there available the detailed statistical analysis in a Unisys old-style report as well as the information contained in the HD Calls Table.  This is October 1999.  The Unisys report and the table show the following:

Unisys report	HD Calls Table
1.	Calls by category	473	468
2.	Calls by location	447	447
3.	Third party calls	45
4.	Total 2 + 3	492

The conclusion I draw from this is that tenderers were told in the RFP that the total number of help desk calls for October 1999 was 468 and that, using the category break-down, it would be possible for an experienced tenderer to know that, of those, the number of MAC calls was 164.[41]  Had they access to the Unisys report for that month they might, without further enquiry, have wondered whether the correct total figure was 468, 473 or 492.  Furthermore, they would have wondered whether the number of MAC calls was indeed 164, or 68 as can be gleaned from the Unisys report as Dr Niemann accepted.

[41]See para [101] above.

1. The conclusion drawn by Mr Rehkopf is that the discrepancy in total calls is insignificant, since 492 is a little over 5% in excess of the figure of 468 appearing in the RFP.  Furthermore, the number of MAC calls is, on any view, overstated in comparison with the figures to be extracted from the Unisys report in October 1999.

1. It is not possible to undertake a similar exercise for the other five months of the RFP data period since detailed Unisys reports were not prepared and no further data is in evidence.  Nevertheless, the witnesses were in substantial agreement that the total figures for November and December 1999 and February 2000 were consistent in both the HD Calls Table and the Unisys report.  There was, however, a small disagreement between Mr Rehkopf and Dr Niemann as to the appropriate total figures for the months of January and March 2000.  They were agreed that the figures in the Unisys reports represented calls by location and that a further number had to be added for third party calls.  The point of difference was whether this further number should be 88, as Dr Niemann contended, or 54 as Mr Rehkopf said.  Dr Niemann’s figure was the average of third party calls in the period from January 1998 to February 2000;[42] Mr Rehkopf’s were the average of third party calls in the period from June 1999 to December 1999 plus February 2000.[43]  The reason offered by Dr Niemann was that this was the period when the same IT applications were supported;  Mr Rehkopf would exclude the months up to and including May 1999 which were collected before the SOE programme in a different IT operating environment.

   [42]Niemann report table 6. 

   [43]Rehkopf report para 8.2.10(c).

1. The position, with respect to total calls, is in summary as follows on the basis of the Unisys reports:

RFP	Niemann	Rehkopf
October 1999	468	492	492
November 1999	527	527	527
December 1999	444	444	444
January 2000	365	452	419
February 2000	430	430	430
March 2000	364	451	418
Average	433	466	455

These averages show an increase over the figures provided to tenderers in the HD Calls Table of 7% (Niemann) and 5% (Rehkopf) respectively.

1. At this stage I point only to discrepancies between the Unisys data and the RFP.  Mr Rehkopf made the point that the mere fact that two sets of figures differ says nothing as to which is correct.  He was of opinion that the figures in the RFP had not been shown to be wrong by comparison with the Unisys reports.  He said that the figures produced by Unisys to Mr Ryan in April 2000 might be seen as more accurate than those in the reports, since, those for November and December 1999 are known to be derived from the Crystal reports, and perhaps the others were as well.  Furthermore, there was some evidence that the figures in the monthly reports, which were prepared in a matter of days after the conclusion of the reporting period, might have been later adjusted for error.  He then said that he would be more comfortable with the detailed figures in the RFP compared with those in the reports for November 1999 and following, which reports evidently contained errors.

1. The next matter relied upon was that all but one of the five tenderers which responded to the RFP submitted prices ranging from $5m to $6m or thereabouts;  the sole exception was Unisys whose price was about $12m.  The Ipex price was about $5.2m.  The point taken here was that this was explained by the fact that, of all the tenderers, only Unisys knew the true position, namely, that the number of help desk calls was historically greater than 433 per month and that the resources required to deal with them were very much greater than Ipex and, perhaps, the other tenderers realised from the information in the RFP.

1. When this was put to Mr Ryan he disagreed.  He said that the unit costs of Unisys, including overheads, were very much greater than those of Ipex.  This provides at least one explanation for the tender price difference.

1. A point was also made in this context of the fact that the Unisys tender contemplated 23 FTEs per annum being applied to this contract compared with 12 FTEs provided for by Ipex.  In fact, the position with respect to the Unisys tender is not as clear as this.  In cl C3.1, it says as follows in answer to a question about personnel:

Unisys understands the importance to Melbourne Water of cost visibility and flexibility to meet changing business requirements. Our response to the Tender is based upon maintaining the current team and undertaking a brief implementation period to address the increased scope. The new team comprises a total of 23 personnel on a Full Time Equivalent basis, dedicated to supporting Melbourne Water for the ongoing engagement. This represents an increment of 7 people above the current staffing levels, to cater for the increased scope, yet at a comparable price to the current contract.

The Ipex tender allows for 12.0 FTEs for year 1 for its core team, noting that the figures for FTEs were provided by way of example only.  After the Ipex tender was submitted and, perhaps in response to a query as to whether the proposed resources would be sufficient to meet the outcomes specification, Mr Patishman on 31 May 2000 sent an email to Mr Ryan which included the following:

I would like to draw your attention to the fact that the FTE count has increased from initial offer of 12 to 16.5 with no price increase.[44]

This increase was not reflected in any change to the tender details which were incorporated in the contract.  Mr Patishman was not called to explain this.  Mr Ryan said that he received the email but that he did not notice that the FTEs in the contract documents remained unchanged.  He said that, since it was a service-based contract rather than a resource-based contract, he was not overly concerned.

[44]See para [164] below.

1. Assuming, as may well be the case, that Unisys planned to provide about 40% more resources that Ipex, this does not tell me anything about the belief of Unisys as to the volume of help desk calls which would be addressed.  It may be that their practice was to make a more generous allowance to cover risks; it may be that they were less efficient or intended to provide a higher quality of service; there may have been other, commercial, reasons.  In this regard, Mr Rehkopf observed that, in its tender costing prepared for the aborted 1999 tender, Unisys appears to have prepared its costings on the basis of one thousand calls per month.  This was in May 1999 when the total numbers had never been at that rate and when the number following the SOE program completion stood at 870, and when its pricing costing report was speaking of only 600 per month.

1. I would not be prepared to draw any inference as to the inaccuracy of the total help desk call numbers in the RFP from the content of the Unisys tender.

1. There is one further matter to consider before I reach any final conclusion.  This is the evidence of the total HD Calls Table statistics for the whole period in which they are available.  John Warwick Rundell, an accountant with specialist IT outsourcing experience engaged by Melbourne Water, prepared a very useful and detailed chart showing the help desk statistics in graph form.  It commences in January 1997 when the first Unisys reports were prepared and concludes when the Ipex contract came to an end in July 2003.  A number of observations may be made about this graph.  First, the period of six months which is covered in the HD Calls Table contains, for the most part, the lowest readings of the whole six-and-a-half year period.  Second, the graph shows no steady level;  it is characterised by about six peaks and five troughs.  This lack of regularity is also apparent in the total figures in the six months period covered by the HD Calls Table where the figures fluctuate considerably.

1. What was said in support of this argument against the accuracy of the total figures in the HD Calls Table is that, for a reason which is unaccountable, these figures were not at all representative of what was the experience before and after the selected six month period.  It was put that, putting to one side some uncharacteristic peaks in August 1997, in early 1999 and in June – July 2001 and in March, April and May 2002, there was a more or less steady history of about six hundred calls per month over the whole six-and-a-half year period.  It was said that the figures for the period September 1999 to June 2000 were so far out of this pattern that I should consider them and, in particular those for the period covered in the HD Calls Table, to be suspect. 

1. This may be so, but suspicion is not a sound basis for judgment.  Evidence was led that the data for the period immediately prior to June 1999 was adversely affected by the disruption caused by the SOE program and that the period before that was not at all comparable because, without SOE, the Melbourne Water IT environment was chaotic.  With respect to the period after March 2000, the graph shows a steady climb until it reaches 600 calls per month in August 2000.  This was attributed to the fact that Unisys, after May 2000, conducted its work knowing that it would not continue as service provider, a factor which might lead to a diminution of morale and efficiency.  And counsel for Melbourne Water characterised the performance of Ipex over its early months in an expression which I cannot forebear from repeating.  He said that, far from being the dream team, the new Ipex help desk staff might be described as a green team.  There were complaints about its performance and this lead to a loss of efficiency achieved by the implementation of the SOE program. 

1. This is not the place for me to reach any conclusions about these matters.  It is sufficient to note that I am not prepared to reject the evidence as to the accuracy of the information in the RFP to which I have referred in favour of an argument based upon the expectancy that trends before and after the event belie the accuracy of the figures in the RFP provided by Unisys.  It was not suggested to any witness that the figures were deliberately distorted and I am comfortable in reaching the conclusion on the available evidence that the total help desk call numbers contained in the HD Calls Table are not misleading or deceptive.  If it is thought that the figures for October 1999, January and March 2000 are understated, they are within the bounds of tolerance which a tenderer would be comfortable to act upon.  Mr Keedle mentioned in this regard a tolerance of 10% to 15%.  Much the same may be said for the figures of MAC calls;  the error there, if error there be, was to overstate them, a fact which would not be of concern to a tenderer in the position of Ipex.

1. I conclude from this that I am not satisfied that the information contained in the HD Calls Table is inaccurate; it is not properly characterised as misleading or deceptive or likely to mislead or deceive a tenderer receiving it.

Third representation – future numbers of help desk calls

1. Given my conclusion that this representation was not made, it is not easy to consider how things might stand if this conclusion should not be correct.   It is a representation as to a future matter.  Accordingly, the question is whether Melbourne Water had reasonable grounds for making it.  First, it must be that the representation carried within it the qualification that the environment in which the service were to be provided would not change relevantly during the contract period.  Accepting this qualification, and assuming that the representation as pleaded was made, I find that there were sufficient grounds for making this prediction.  I start from the conclusion that the number and type of help desk calls shown in the HD Calls Table accurately reflected the experience in the six months to March 2000.  The expectation of Melbourne Water and a reason for the letting of the tender was that the new IT service provider would examine critically the current IT environment and would recommend improvements.  This was one of its functions under the RFP.  Its expectation, too, was that the new provider would perform better than Unisys.  In these circumstances, the opinion of the experts was that the number of calls would settle down to a number no greater than that shown in the HD Calls Table and, probably, less.  I should add that Ipex provided encouragement for this expectation in the material which it provided in the course of the tender process.  Melbourne Water has discharged its burden of showing reasonable grounds, so that the third representation (if made) must not be taken to have been misleading or deceptive or likely to mislead or deceive.[45] 

   [45]Trade Practices Act 1974 s 51A(1).

Fourth representation – representative sample

1. I have concluded that this representation, too, was not made.  Assuming, however, that it was made, I would not conclude on the evidence that it was false or misleading.  Again, the matter must not be looked at in a vacuum.  The information was provided to tenderers experienced in the provision of IT services of the kind in question.  Despite the contentions of counsel for Ipex, it cannot be correct that the tender price was arrived at in the mechanical way which they suggest.  The submission was largely based on the approach adopted by Mr Cohen in the preparation of the G8 tender which, he said, he recommended to Mr Keedle for the preparation of the Melbourne Water tender.  There was, however, an important difference between the basis for these two tenders.  The G8 tenderers were provided with the general number of help desk calls upon which they should base their cost;  extra calls would warrant a price adjustment. The Melbourne Water tenderers were required to build the risk of extra calls into their price.  This meant that they were required to make their own assessment of the likely demands upon the help desk over the three year contract period.  Again, I emphasise that the philosophy underlying the Melbourne Water tender was that the successful tenderer was to achieve an outcome in terms of the extensive performance requirements set out in the RFP.  For present purposes, assuming that the numbers of calls shown in the HD Calls Table was to be taken as a representative sample of the experience of Melbourne Water upon which the tenderers were to rely, it could be relied upon only as indicative of the existing position.  How this might be used for the purpose of predicting the future was a matter for the tenderers.  In this sense it was sufficient for them to perform this task.

1. One further matter was relied upon by Ipex.  In Melbourne Water’s request for proposal prepared in May 1999, for the tender which was never completed, tenderers were provided with details of help desk calls by category for an 11 month period from June 1998 to April 1999.  The numbers of help desk calls shown in this table were of the order of 700 per month for the months June 1998 to January 1999 with a sudden increase in the following three months to over 900 per month, but it had a footnote  warning tenderers that “SOE was rolled out during February, March and April”.  It was said that this information, which was thought to be relevant for tenderers in May 1999, should have been provided to the tenderers, including Ipex, 12 months later.  In the present context, it was argued that, without this information, it could not be said that the information contained in the HD Calls Table was sufficient to allow the tenderers in 2000 to cost their proposals on a proper basis. 

1. The answer offered on behalf of Melbourne Water was a convincing one: the decline in help desk call numbers to September 1999 was not then known and that the figures after July 1999 and, in particular, those for the six months to March 2000 disclosed a very different picture.  The relevant information which was available to Melbourne Water in May 1999 differed from that which was available six months later.  Accepting that tenderers might want to know as much as possible so that they might make up their minds what was useful for costing purposes and what was not, the absence of this earlier information cannot be said to mean that the information in fact provided was insufficient.

1. I conclude that the fourth representation, if made, has not been shown to be insufficient  to allow the tenderers to cost their proposals on a proper basis.

The representation by silence

1. The final representation was that, by refusing to disclose to tenderers the prior help desk calls history, the representation contained in the HD Calls Table was misleading.  It contained only half of the story.  The information as to help desk calls in the RFP would have had a different significance for tenderers had it been supplemented by the prior help desk calls history.  As pleaded, the undisclosed information is alleged to be that contained generally in the Unisys reports[46] and that constituted by the failure of Melbourne Water to respond to three specific requests for information which were made by Ipex as part of the tender process.[47]  It will be recalled that the fourth representation depended upon the assumption that the six months data provided to tenderers was not representative of the whole help desk history.  In a sense, this raises the same issue as the representation by silence.  This is because Melbourne Water took the position that information as to help desk call numbers prior to October 1999 would not tell tenderers anything useful which might modify the information presented in the HD Calls Table.  Essentially, this was because its help desk experience in the period prior to the commencement of the SOE was not relevant because the SOE program had changed the IT environment.  Furthermore, the period of and immediately after the SOE program was characterised by disruptions caused by that program.

   [46]Statement of claim, para 10(a).

   [47]Statement of claim, para 10(b).

1. It is necessary that I say something now about the SOE program.  By the end of 1998 the Melbourne Water computer network, originally outsourced in 1995, was proving inadequate.  It lacked capacity to use current technology and, in many respects, was outdated.  Furthermore, it had developed in a way which meant that there were inefficiencies in its operation and in its maintenance program.  Mr Cox described this IT environment as being “utterly uncontrolled”.  Melbourne Water therefore commissioned BHP IT to examine the system and to make recommendations.  This was done and a number of recommendations were made which Melbourne Water decided to implement.  These became known as the SOE program because a principal feature of them was the establishment of a standard operating environment (SOE).

1. It is not necessary that I descend to the detail of the SOE program which is set out in the SOE project charter prepared by Anthony Paul Cox who was then Melbourne Water’s IT projects manager.  Mr Cox said that the project was large by Melbourne Water’s standards, having a cost of about $2m.  It impacted upon nearly all employees and every piece of hardware or software.  It involved upgrading the system to one based on Windows NT Workstation 4.0, Windows 95 and MS Office 97.  In all, some 170 software applications had to be integrated into the SOE.

1. It is common ground that the disruption involved in the rolling out of the SOE program would have dramatically increased the volume of help desk traffic, as the staff came to grips with the new environment.  This created an immediate problem which bears upon this case inasmuch as these extra help desk calls were the responsibility of Wang Global which had the SOE contract.  A fresh category of calls was developed to identify those which were the consequence of the SOE.  In the Unisys monthly reports for January, February, March and April 1999 the numbers of this category were reported.  I accept that the number of calls allocated to the SOE category does not, however, necessarily represent the totality of all calls generated by the SOE events of those four months.

1. The SOE program was completed by 27 April 1999 when staff training and deployment was concluded.  According to the SOE program closure report of April 1999 there still remained to be completed by May 1999 what was described as “server rationalisation”, as well as a number of miscellaneous outstanding issues.  There was some controversy as to when the impact of the SOE program, in terms of increased help desk calls, would have disappeared.  Estimates varied from days after the end of April 1999 to months after that date.  What is remarkable is that Mr Rundell’s graph shows that the total number of calls per month plummeted in a fairly straight and very steep line from 870 in May 1999 to 488 in September of that year.

1. Mr Ryan said that his expectation was that the number of help desk calls would reduce by 30% as a result of the SOE program.  This was one of the benefits for which Melbourne Water was expending a considerable sum of money.  Assuming, as appears to be the case, that the total number of calls was running at about 700 per month prior to the SOE program, this would take them to about 490 calls per month.  His expectation was, I was told, consistent with industry experience[48] and it accorded with the opinion of Mr Rundell.  Other witnesses expressed the view that the number of help desk calls might be expected to return to their pre-SOE level after the period of its roll-out. Again, it was Mr Rehkopf who subjected this reduction to a more rigorous analysis.  He pointed out that the reduction of about 200 calls per month compared with the number of calls in the SOE period occurred in only two categories – email system calls and out of scope software calls.  This, he said was consistent with the expected benefits of the SOE.  He explained, too, how the SOE would have had this effect.

   [48]See Microsoft Technet December 1998, p 3/12.

1. Two conclusions may be drawn from this, for present purposes.  First, it explains the spectacular decrease in the total number of help desk call numbers following May 1999 and, second, it provides a good reason for not burdening tenderers with this information which, after all, concerned a vanished environment.  These conclusions may be contrasted with those drawn from the data by counsel for Ipex.  They said, first, that the reported decrease did not occur or was not as severe, because the figures in the HD Calls Table were understated.  This, of course, begs the question.  Second, they said that if and insofar as these figures were not understated by up to 200 calls per month, then the post-SOE decline in numbers is simply inexplicable.

1. In this context reliance was again placed upon the failure of Melbourne Water to provide tenderers with the information as to the number of help desk calls made in the 11 month period from June 1998 to April 1999.  I have considered this matter[49] and, for the reasons there set out, I do not consider that this period is relevant for the purposes of the 2000 tenderers.

   [49]See para [130] above.

1. I return then to the question presently under consideration:  whether the failure of Melbourne Water to provide the help desk call data for the period prior to October 1999 had the consequence that the information supplied to tenderers was misleading or deceptive.  For reasons which I have ventured to set out in a little detail, I accept the evidence of Mr Ryan and Mr Rehkopf that this was not the case;  it was not relevant to the period covered by the HD Calls Table.

1. The second aspect of this allegation arises from the three specific requests for information which I have found were not responded to.[50]  This claim also requires me to determine whether the information provided to tenderers regarding help desk calls would have had a different impact upon the representee if a proper response had been provided to the requests. 

   [50]See paras [96]-[97] above.

1. The requests were made at a pre-tender meeting on 28 April 2000 at which Ipex was represented by Mr Patishman, who was not called, Mr Keedle who was not asked about these matters, and one Bradly Morin who was not otherwise mentioned or called as a witness at the trial.  The Melbourne Water representative, Mr Ryan, gave evidence of the meeting.  He agreed that the information sought in requests 12, 15 and 16 was not provided.  This was, he said, because he took the view that it would be unhelpful for the tender process if tenderers were provided with the Unisys experience.  This would lead them to follow the Unisys’ approach to providing IT services and the intent of Melbourne Water was to encourage tenderers to propose innovative solutions.

1. Request 12 sought information as to “[w]hat works well and what doesn’t in the current IT environment”.  Request 15 asked about the current workload of engineers and the common problems being seen.  Request 16 sought information as to current “problems seen by the support team in regards to tools and infrastructure”. 

1. I remind myself that the pleaded allegation was a failure to provide requested information concerning, or relevant to, help desk calls.  Mr Ryan resisted the suggestion put on behalf of Ipex, that these requests showed that Ipex wanted more information as to the nature of the help desk call experience.  It was not demonstrated that a reasonable and relevant response to these questions would have elicited information which would cause Ipex to take a different view of the information as to help desk calls which was in fact provided to tenderers. 

1. I conclude that the conduct of Melbourne Water in not responding to those requests was not misleading or deceptive or likely to mislead or deceive. 

Reliance

1. The Melbourne Water tender was put together by a team of Ipex personnel which included Mr Patishman, the sales person who co-ordinated communications with Melbourne Water regarding the tender, and Mr Keedle, the technical pre-sales person whose job it was to look at the technical aspects of the tender and to determine the costs to Ipex of delivering the required services and to place this before management for decision.  No witness from management spoke of this process.  Mr Cohen said that he was not involved in the preparation of the tender and professed no knowledge of how it was in fact put together and costed.  No other person concerned with the preparation of the tender costing by Ipex was called to give evidence.  Importantly, no evidence was led from the person or persons who actually made the decision on behalf of Ipex to act or not to act upon the work of Mr Keedle.

1. The evidence showed that Mr Schwalb was interested in tendering for the new project.  He contacted Mr Cohen who told him that he did not have available resources to pursue the opportunity.  Mr Cohen said that he was contacted by Mr Keedle who was located in the Sydney office seeking assistance.  In response, he provided Mr Keedle with a template which he had used in the New South Wales WorkCover tender which was, in turn, based on the work done on the G8 project.  Such evidence of the preparation of the Melbourne Water tender as there was, was that of Mr Keedle and it is to this evidence that I now turn.

1. Although Mr Keedle had then been employed by Ipex for five to seven years, he did not have experience in costing large projects such as the Melbourne Water tender.  He had, however, had some involvement in the New South Wales WorkCover tender.

1. Mr Keedle’s evidence suffered from the fact that the events which he was describing were some nine years old.  He had left Ipex soon after the Melbourne Water tender was submitted and had moved on to other things.  In January of this year, a month or so prior to the trial, he agreed to give evidence.  He was given a copy of certain documentation in order to refresh his memory.  As late as 22 January 2009, however, he said that he had no recollection of the detail with respect to the events with which this trial is concerned.  His evidence was given by video link from Singapore on 23 and 24 February 2009. 

1. It was apparent as he gave his evidence that the process of doing so had the effect of refreshing his memory, so that his recollection was more specific at the end of his evidence than at the beginning.  I formed the impression that he was an honest witness, although, in some respects, his evidence smacked of reconstruction rather than recollection.  He often spoke of his practice – of what he would have done, rather than of what he in fact did. 

1. For present purposes, the significance of his evidence lay in the use he made of the information in the HD Calls Table in putting the price together.  I am, of course, mindful of the fact that he carried out a costing exercise using a spreadsheet based on the G8 tender spreadsheet, and that this spreadsheet was not produced.  The price included in the tender was, however, that decided upon not by him, but by management in the light of his work.  I am not prepared to assume without evidence that the figures in the tender were Mr Keedle’s own spreadsheet figures.  He was unable to say that his figures had not been amended or adjusted.  He was not involved in the post-tender discussions with Melbourne Water which were conducted by Mr Patishman. 

1. Against this very unsatisfactory evidentiary background, I must address the question whether Ipex relied upon the accuracy of the information in the HD Calls Table.  In order to satisfy this component of the cause of action, it is sufficient that Ipex show that the inaccurate statement played some part in the formulation of its tender price.  It need not be the sole factor.[51]  I was reminded to approach the mere assertions of reliance with a degree of caution and I heed this warning.

   [51]Gould v Vaggelas (1985) 157 CLR 215 at 236, per Wilson J.

1. On the facts of this case, the question of reliance is not a difficult one to answer.  Melbourne Water compiled and included in its RFP a mass of material to enable tenderers to prepare their tenders.  It was clear that Melbourne Water was careful to ensure that all tenderers approached the task on the same basis.  In short, it intended that all tenderers rely upon the information provided to them.  It cannot escape responsibility for this by hedging this information with disclaimers.  The question of reliance is a question of fact, and a fact of this sort cannot be contractually deemed out of existence.  Whether a particular piece of information was in fact relied upon is a question which must be supported by evidence of reliance or by evidence from which reliance can be inferred.

1. The starting point must be the evidence of Mr Keedle.  He said that he used the information as to help desk calls to identify which of them were the more time consuming MAC calls and, generally, to calculate the FTE values for the different functions which Ipex would be required to perform.  This was described in the evidence as the “bottom up” approach to the pricing exercise.  This is to be contrasted with the “top down” approach which starts with the number of work station users and applies to this an industry standard of numbers of calls per work station per month.  Mr Keedle maintained that he calculated the number of FTEs and arrived at a consequent price from the number and type of calls described in the HD Calls Table.  He said that the top down approach was used by him to verify the accuracy of the figures arrived at using the bottom up approach. 

1. A heroic effort was directed to demonstrating that factors other than the information in the HD Calls Table had a role to play in the costing process and that other methods were used in the industry.  But Mr Keedle did not depart from his evidence that the information in the HD Calls Table was important for his purpose.

1. He said, too, that the information was important as an indicator of the stability of the IT environment which, itself, was a factor in the pricing. 

1. I have indicated my assessment of Mr Keedle as an honest witness doing the best he could in the circumstances given that he was being asked about routine events of many years before.  Accepting the criticism offered on behalf of Melbourne Water, based on the absence of other witnesses, I am nevertheless satisfied, in the light of the evidence explaining the tender process, that it is inherently probable that the help desk information provided was in fact relied upon by the tenderer and I so find. 

1. An argument was presented in Melbourne Water’s final submissions of 19 March 2009[52] that the suggested reliance was unreasonable, that Ipex was so negligent in approaching the help desk information that this information was not a real inducement.[53]  I reject this submission for a number of reasons including the facts that it was not pleaded and that there was no evidence of negligence. 

   [52]Para 3.7(a).

   [53]See Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 138.

1. I am satisfied that Ipex did in fact rely in preparing its tender upon the accuracy of the information in the HD Calls Table as to the number and type of calls. 

1. The question of reliance upon the third representation, that the number of calls would continue at the rate of 433 per month, is a little more difficult, assuming I am wrong in finding that it was not in fact made. 

1. I find no reliance here.  There was no witness who asserted that Ipex relied upon this representation.  This is not inconsistent with my conclusion as to reliance about the first and especially the second representation.  The information as to help desk calls was used by Mr Keedle, but not on the basis of suggested industry practice that the numbers do not change. 

1. I find also no reliance upon the fourth representation if it were made.  I accept Mr Keedle’s evidence as to how he went about pricing the tender information.  He did not agree that he used the information in the manner described in this representation.

1. As to the representation by silence, the requirement of reliance plays a rather different role.  It is that, by definition, the representor has said nothing;  if the omitted information had been provided this would have changed the impact of the disclosed information on the mind of the representee.  Again, this is a question of fact, but the fact is essentially a suppositious one.  Ipex must fail on this point for essentially the same reason that I have concluded that the silence did not have a misleading or deceptive effect.[54]

   [54]See para [130]-[143] above.

Causation of Loss

1. In many cases it will be but a small step from the proof that a plaintiff entered into an unprofitable contract in reliance upon a misleading representation, to the conclusion that this representation caused the loss.  As with so many aspects of this case, it is here not so simple.  I assume, contrary to my conclusions, that Melbourne Water made misleading representations and that Ipex relied upon them in preparing its tender.

1. There are, however, a number of steps to be considered.  The suggested loss did not flow from the submission of the tender in May 2000;  the event which led to this loss was the entering into of the contract on 27 July 2000.  In that two month period there were post-tender discussions between Melbourne Water and Ipex.  No witness was called by Ipex as to these discussions.  Mr Ryan gave evidence of the discussions held by him on behalf of Melbourne Water. 

1. My attention was drawn to a number of matters which were said to warrant the inference that the chain of causation was not shown to be intact.  There was no evidence that Mr Keedle’s costing was carried into the tender.  Mr Keedle recalled that his tender figures were reworked at some stage but he could not recall the detail.  This evidence was given in the context of the very puzzling email of 31 May 2000 from Mr Patishman to Mr Ryan in which Mr Patishman wrote:

I would like to draw your attention to the fact that the FTE count has increased from initial offer of 12 to 16.5 with no price increase.  The increase has been mostly funded by the transfer of some supplementary personnel to core team and split of the 1st and 2nd level support groups.[55]

[55]See para [117] above.

1. It is necessary to put this email in context.  In response to the Ipex tender of 17 May 2000, Mr Ryan, on behalf of Melbourne Water, on 22 May wrote to Ipex setting out a number of questions for which a response was required at a meeting to be held the following day.  The second of these questions is in these terms:

From MWC’s most recent experiences, there is a view that the resourcing proposed by IPEX is inadequate to deliver the services (range and reach) without impact on MWC.  Is IPEX prepared to commit to the price and fix the resourcing shortages as referenced in the above question, if they are detected?  Apart from the easily measured (break and fix requests), how does IPEX propose measuring (deliverables and quality) the more intangible, more difficult to define service elements.

At the meeting Ipex was represented by Mr Schwalb and Mr Patishman.  Evidence as to what was discussed was given by James Edward Peach, a consultant engaged by Melbourne Water for the tender. Mr Peach’s notes record the response to question 2 as being that the Ipex response to the tender was service based.  It was prepared to provide “increased resources (EFTs) at their cost if they have under-resourced to deliver contracted [service level agreement]s”.   On 24 May Mr Patishman provided a written response to this question in these terms:

Ipex is prepared to commit to the price and fix resource shortages, if they are detected.  Ipex proposes to measure the more intangible (deliverables and quality) by turning them into tangible.  As part of the hand over and take over, Ipex will design a procedure manual that will encompass all the possible requests that are likely to occur.  This document is a living document and will be updated mutually.

The fourth question is addressed to the sufficiency in the tender documents of the definition of services required to support Melbourne Water’s environment.  To this Ipex is recorded in Mr Peach’s notes of the meeting as responding “RFT very clear in defining MW requirements therefore IPEX prepared to accept MW rulings.”  Mr Patishman later responded in writing as follows :

Ipex has made two assumptions that are relevant to Due Diligence in this proposal.

1.      All the information provided by MWC is accurate.

2.MWC IT environment is not different to other companies of similar size and level of responsibility to the public.

Based on above Ipex believes that we have completed the sufficient due diligence.

1. On the following day Mr Ryan emailed Mr Patishman advising that Ipex had been short listed and arranging for it to make a presentation on 31 May. 

1. On 29 May Mr Ryan sent to Mr Patishman a further eight questions.  Mr Patishman’s response is erroneously dated 24 May 2000:  it was in fact submitted by email sent about 1 am on the morning of 31 May.  It is in this email that the statement regarding 16.5 FTEs quoted above, was made.  The attached answers to Mr Ryan’s questions including the questions of 23 May were later incorporated in the contract;  the email dated 31 May was itself not so incorporated. 

1. In his answers of 31 May Mr Patishman said this, in response to a question as to the call handling capacity of the Ipex help desk:

Ipex will make the Help Desk Facility available to Melbourne Water that has technical (1^st level support) call handling capacity of 84 Calls per day.  The Help Desk will revert to call logging function in peak periods which greatly increases call handling capacity to as much as 240 calls per day.

Translated into calls per month, this response speaks of a capacity of some 1,680 help desk calls per month[56] and a rate, during peak periods, of 4,800 calls per month.

[56]I assume 20 working days per month.

1. What was said on behalf of Melbourne Water was that, at this late stage after Mr Keedle had completed his costing exercise, some modification to the costing was introduced, perhaps to cater for the concerns of Mr Ryan expressed in the second question of 23 May, or perhaps for some commercial reason.  In any event, it was said, this showed that Ipex was prepared to cater for a help desk call volume very much greater than 433 per month. 

1. It is important to note that, notwithstanding a 37.5% increase in help desk resources represented by the application of 16.5 FTEs, the contract price was unchanged.  Furthermore, there was no change to the tender price break up in the contract to show where these extra resources were to be found.  It is possible that the FTE increase went nowhere.  Mr Ryan said that the increase did not concern him for the contract was based on services, not resources.  Neither Mr Patishman nor any Ipex manager who must have considered this enlargement of resources was called.  Mr Keedle was asked about the statement about 84 calls per day capacity.  He said that it related to the capability of the Ipex help desk rather than to any expectation that this capacity would ever be called upon. 

1. My findings as to this are that Melbourne Water expressed to Mr Patishman a concern about the ability of his proposed help desk staff to cater for the Melbourne Water requirements.  There is no evidence as to the terms of this expressed concern.  In particular, there is no evidence as to what were the Melbourne Water requirements which were then mentioned.  It may be that Mr Ryan was speaking of the Ipex help desk capacity to deal with 433 calls per month; it may have been as to some other number.

1. This said, it is a matter which was raised at an early stage of the trial and a matter which might easily have been dealt with by Mr Schwalb or some other Ipex manager to whom Mr Patishman reported. 

1. I conclude that, notwithstanding this, a sufficient causal link has been demonstrated between the representations and the entering into of the contract in July 2000.  On the evidence, it cannot be denied that the given number of help desk calls played a significant part in the decision of Ipex to enter into a contract with Melbourne Water at the tender price.

1. The next step in the causation is that between the representation and the losses which were suffered by Ipex in this contract inasmuch as it was required to commit more resources than budgeted.  I am not required to quantify these losses but I must identify them.

1. The claimed heads of loss are set out in paragraph 13 of the statement of claim:

(i)Had Ipex been given the correct information about the number and type of help desk calls it would have submitted a higher tender price and entered into a contract with a higher contract price.  Its loss, therefore, represents the difference between the actual contract price and this higher price. 

(ii)Further, Ipex incurred greater cost in performing the contract.  This is represented by difference between 17.37 FTEs, being the number of FTEs which were in fact required, and 12.06 FTEs, being the number allowed for in the contract.  It is also represented by an increased hourly rate for FTEs.  These figures are then applied to the actual work hours in the contract period to produce the amount of this head of claim. 

(iii)Further, Ipex incurred costs investigating the misleading and deceptive conduct by Melbourne Water and negotiating the same.

1. I express no view as to the prospect of Ipex establishing these losses.  I am concerned only with the question whether they are sufficiently related to the misleading and deceptive conduct.

1. A number of difficulties immediately present themselves.  First, given the way Melbourne Water evaluated the tenders, it is by no means certain that a higher Ipex tender would have been accepted.  The other tenders, other than that of Unisys, were close to that of Ipex.  If, as seems inevitable, an increased Ipex tender would not have been accepted, this first head of loss cannot be attributed to the conduct of Melbourne Water in question. 

1. The second head of loss appears to contain a good deal of overlap with the first.  It appears to start with the assumption that the contract price would have been $7,965,390 rather than the actual contract price of $5,218,204.  This assumption must overcome the difficulty that I have mentioned with respect to the first head of loss.

1. It contains a further assumption which, in this case, is very problematic.  It is that the contract price of $5,218,204, based as it is upon 12.06 FTEs, would have sufficed for the performance of the contract work.  In this regard Mr Patishman’s email of 31 May 2000 is significant.  It seems from this that the basis for this calculation should perhaps be 16.5 FTEs rather than 12.06 FTEs. 

1. It is not for me at this trial to express a view upon the prospect that the quantum of these losses be proved.  I am concerned whether the claimed losses of the kind pleaded are sufficiently related to the misleading and deceptive conduct as to satisfy the test of causation.  This is the point at which global claims such as this must be addressed.[57] 

   [57]See John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd (1996) 8 VR 681 at 700 [41].

1. The point at which this trial stops is at the quantification of proved loss.  There was no satisfactory evidence to establish any of this loss.  It is nothing more than mere assertion and assertion of a very high improbability.  Nor was there any real attempt to provide a factual basis for the required causal link.  The plaintiff’s case was that the misleading conduct occurred and that Ipex suffered loss under its contract.  I am not prepared to ignore the possibilities, which are for Ipex to disprove, namely that the contract price was not a proper one, assuming the alleged misleading and deceptive conduct was not present, and that the extra cost in fact incurred by Ipex in performing the contract work was due to its own performance deficiencies or to some reason other than the alleged misleading and deceptive conduct. 

1. The third head of loss, if indeed it is not more properly characterised as part of the costs of the litigation, is for the cost of investigations and negotiations.  There was some evidence that investigations and negotiations occurred.  I would accept that these would have cost Ipex something in staff time.  I would accept that this cost is causally related to the conduct being investigated. 

1. I conclude therefore that this final ingredient of the Ipex claim has been satisfied, but only in respect of the third head of damage.

Conclusion

1. It follows from all of this that the claims of Ipex fail.  It would seem, therefore, that there should be judgment for the defendant.  I will hear counsel further as to the terms of the judgment and as to costs.

ANNEXURE A

Calls by Category

The following is a summary of the calls recorded by the Help Desk, by call category for the 6 months to March 2000.

Category	Oct – 99	Nov – 99	Dec – 99	Jan – 00	Feb – 00	Mar – 00
HARDWARE
Laptop PC Printer Other Hardware   SUB TOTAL	4 26 30 2 62	9 38 18 17 82	8 39 24 21 92	1 35 20 7 63	5 52 23 9 89	2 31 22 4 59
SOE SOFTWARE
Vet Windows 95 Windows NT Internet Explorer Outlook 98 MS Word MS Excel MS Powerpoint MS Project Other Software Install Other Software Support   SUB TOTAL	7 4 53 4 35 12 2 0 0 3 13 133	14 6 58 22 36 10 1 1 5 10 42 205	7 2 17 33 44 1 5 1 25 11 45 191	4 3 18 4 20 2 2 1 4 8 29 95	3 2 21 7 27 4 2 2 2 8 28 106	5 2 23 12 9 10 1 3 5 12 14 96
LAN/WAN
Problem Network Problem Network Server   SUB TOTAL	28 10 38	106 2 108	79 4 83	9 11 20	2 12 14	3 13 16
SYSTEM ADMINISTRATION
Service Order Network Add/Install Service Order Network Delete Service Order Network Rego Service Order Network change   SUB TOTAL	3 84 23 16 126	22 3 4 6 35	1 5 3 16 25	21 14 3 8 46	41 12 4 7 64	27 7 4 8 46
SUNDRY
Service Order Other Problem Other Others   SUB TOTAL	35 50 24 109	34 50 13 97	21 12 20 53	50 6 85 141	54 9 94 157	71 4 72 147
TOTAL	468	527	444	365	430	364