Jowett Motor Group Pty Ltd v Pentana Solutions Pty Ltd (No 2) - [2023] VCC 1916

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-20-01601

JOWETT MOTOR GROUP PTY LTD (ACN 069 648 433)	Plaintiff/ Defendant by Counterclaim
V
PENTANA SOLUTIONS PTY LTD (ACN 053 303 757)	Defendant/ Plaintiff by Counterclaim

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	13-16, 19-21 and 29 September, 29 November and 14 December 2022
DATE OF JUDGMENT:	3 November 2023
CASE MAY BE CITED AS:	Jowett Motor Group Pty Ltd v Pentana Solutions Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2023] VCC 1916

REASONS FOR JUDGMENT
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Subject:CONTRACT, CONSUMER LAW
Catchwords: CONTRACT – Plaintiff licensed software system from the defendant for use in its car dealerships – whether plaintiff entitled to terminate software licence agreement due to alleged breaches by the defendant – whether agreement varied whereby the defendant agreed to reimburse licence fees paid up to termination – whether plaintiff entitled to recover licence fees paid, plus damages for lost sales of vehicles, parts and servicing charges and other costs thrown away.

CONSUMER LAW – whether defendant engaged in misleading and deceptive conduct when making written representations about the performance of the software prior to the plaintiff entering into the licence agreement – nature of representations made – whether actionable or mere puffery – whether plaintiff relied upon representations and suffered loss and damage.
COUNTERCLAIM – defendant’s counterclaim for balance of unpaid fees owing under the software licence agreement plus a termination fee representing licence fees payable over five-year term of the licence agreement – whether termination fee is an unenforceable penalty.

Legislation Cited: Civil Procedure Act 2010 (Vic); Competition and Consumer Act 2010 (Cth)
Cases Cited:Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Arab Bank Australia Ltd v Sayed Developments Pty Ltd (2016) 93 NSWLR 231; Bellas v Powers [2023] NSWSC 1198; Boucaut Bay Co Ltd v Commonwealth [1927] HCA 59; Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; Foster v Hall [2012] NSWCA 122; Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135; Hill v Forteng Pty Ltd [2019] FCAFC 105; Hospital Products Ltd v United Surgical Corporation (1984) 156 CLR 41; Hungerfords v Walker (1989) 171 CLR 125; IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335; Jones v Dunkel [1959] HCA 8; 101 CLR 298; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Mr Whippy Pty Ltd v Oceanwalk Pty Ltd [2008] NSWCA 8; Roscorla v Thomas (1842) 3 QB 234; SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56; Scammell (G) & Nephew Ltd v Ouston [1941] AC 251; Slipper v Berry Buddle Wilkins Lawyers [2015] NSWSC 810; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1986) 118 CLR 429; Watts v Rake (1960) 108 CLR 158; Zachariadis v Allforks Australia Pty Ltd (2009) 26 VR 47

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S Rubenstein with Ms V Holt	Maddocks
For the Defendant	Mr P Wallis KC with Mr N Kotzman	KCL Law

Table of Contents

Introduction and summary

Background

Procedural history and pleadings

Witnesses

Tony Jowett
Wayne Marshall
Sue Jochheim
Arthur Goodall (who provided an expert report and addendum with his wife Peggy Goodall)
Stefan Grammenos
Josef Bortignon
Joshua Xerri
Virginia Greville
Julie-Anne Luby-James
Shane McDuffie
Trusha Solanki
Paul Litherland

Jones v Dunkel inferences

Key Issues

A. JMG’s breach of contract and damages claim
B. JMG’s termination and variation claims
C. JMG’s misleading and deceptive conduct claim
D. Pentana’s counterclaim for the Outstanding Sum, Termination Fee and Damages

Relevant contractual clauses

Master Licence Agreement
Service Level Agreement:

A. Breach of contract and damages claim

Issues (1)(a) to (e):

Did Pentana breach any of the terms and conditions of the MLA and SLA as alleged by JMG?
Issue 1(a) – Pentana would deliver the Licensed System in accordance with the SLA (clause 3.1);

JMG’s submissions
Pentana’s submissions
Analysis

Issue 1(b) – Pentana must perform such services as it considers reasonable to ensure the Licensed System remains in substantial conformity with the SLA (Clause 12.1)
Issue 1(c) – Pentana must provide the Services in response to a report by the Customer of a suspected defect or error in the Licensed System which defect or error allegedly causes the Licensed System to deviate from the Licensed System’s normal operating conditions (Clause 12.2)

JMG’s submissions
Pentana’s submissions
Analysis

Issues 1(d)-(e) – For the duration of the Warranty Period, Pentana warrants that the Licensed System would operate in conformity with the Documentation in all material respects (Clause 17.2) and Pentana will investigate perceived defects notified to it and will rectify such defects without additional charge to the customer (Clause 17.4)

JMG’s submissions
Pentana’s submissions
Analysis

Issue (2): When did Pentana breach the terms?
Issue (3): Did any breach by Pentana cause JMG to suffer loss and damage?

JMG’s submissions
Pentana’s submissions
Analysis

B. Termination and Variation Claims

Issues (4) to (6): Breach pursuant to notice of termination; remedy of breach(es); and validity of termination.
Issues (7) to (16) – Variation of the MLA – effect of the Grammenos email

(b) and (c) Was the offer subject to conditions – whether conditions satisfied

C. Misleading and deceptive conduct claim

Issues (17) – (21) Did Pentana make an actionable representation; was JMG induced and did it rely on the representation; was the representation if made one of fact or as to future matters; did Pentana have reasonable grounds for making the representation.

JMG’s submissions
Pentana’s submissions
Analysis

Issue (22) – Given the implementation of the Pentana DMS did not achieve the stated objectives, was the representation misleading or deceptive, or likely to mislead or deceive?
Issues (23) – (24) Has JMG suffered loss and damage; is JMG entitled to recover said loss and damage.

JMG’s submissions
Pentana’s submissions

D. Counterclaim

Issues 25 to 29 - Outstanding sum

Issues 30 to 33 -Termination fee
Analysis

Issue 34

Conclusion

Annexure A

Confidential reasons relating to assessment of Pentana’s counterclaim for damages representing termination fee.

HER HONOUR:

Introduction and summary
1Jowett Motor Group Pty Ltd (“JMG”), the plaintiff/defendant by counterclaim, operates motor vehicle dealerships in Victoria and South Australia, including dealerships for BMW and Honda.
2Pentana Solutions Pty Ltd (“Pentana”) the defendant/plaintiff by counterclaim, provides integrated software products for motor vehicle dealerships, including a Dealer Management System (“DMS”) licensed under the names of “ERAnet” and “eraPower” (“the Pentana DMS”). A DMS is a complex enterprise resource planning system, comprising a suite of computer programs, configuration settings and databases, designed for and primarily used by motor vehicle dealerships.
3On 15 March 2019, JMG and Pentana entered into a Master Licence Agreement (“MLA”) and an agreement entitled “Dealer Management System, Cloud Solution” described as the Service Level Agreement (“SLA”) in the MLA (collectively “the Agreement”). Pursuant to the terms and conditions of the Agreement, Pentana granted JMG a licence to use Pentana’s DMS in JMG’s dealerships.
4The installation of Pentana’s DMS at JMG’s dealerships took place on 11 November 2019. A number of errors, bugs and defects arose with the installation and integration of the software. The parties worked together closely in the ensuing weeks seeking to resolve the various issues that had arisen, together with new issues as they emerged. Despite these efforts, by late January 2020 there were still ongoing unresolved issues with the Pentana DMS which JMG regarded as being unacceptable and the cause of significant disruption to its business. On 28 January 2020, JMG’s senior management made the decision to terminate the Agreement.
5On 29 January 2020, JMG served a Notice of Termination (“the Notice”) on Pentana under clause 22.3 of the MLA providing a period of 30 days for Pentana to remedy various defects, errors and incidents which JMG identified in four PowerPoint presentations attached to the Notice, otherwise the Agreement would terminate on 28 February 2020.
6By late February 2020, JMG had lost faith in the software’s ability to function and operate properly. JMG informed Pentana it was not satisfied that Pentana had rectified the defects identified in the Notice and therefore, it had decided to proceed with the termination of the Agreement. JMG’s lawyers wrote to Pentana on 3 March 2020 confirming their client had terminated the Agreement.
7By this proceeding, JMG claims Pentana breached various terms of the MLA by, inter alia, failing to deliver the Pentana DMS in accordance with the SLA and failing to rectify defects, errors and incidents which JMG had notified. JMG seeks to recover licence fees it paid to Pentana prior to termination in the sum of $120,400.40. JMG also seeks damages for breach of contract for the disruption caused to its business representing losses of profit on sales of new and used vehicles, servicing and parts, and a consultant’s costs thrown away. The total amount claimed in damages is $933,198.
8In the alternative, JMG brings a claim under s18 of the Australian Consumer Law (“ACL”) for misleading and deceptive conduct arising out of written representations made by Pentana prior to JMG’s entry into the Agreement. JMG seek damages or compensation and various orders under the ACL.
9Pentana denies it was ever in breach of its contractual obligations and therefore, JMG’s termination of the Agreement was unjustified and unlawful. As a result, JMG repudiated the Agreement. By this proceeding, Pentana has accepted JMG’s repudiation of the Agreement and elected to terminate and sue for damages. Pentana also denies it engaged in any misleading and deceptive conduct.
10By counterclaim, Pentana seeks payment of an amount owing for services rendered to JMG in the sum of $41,583.91.[1] In addition, Pentana claims a termination fee representing an amount equal to the fees payable for the balance of the contract term of five years under the Agreement in the sum of $1,614,250. These amounts are claimed either as debts under the Agreement or damages.
[1]Pentana conceded this figure was the correct amount sought and not the sum of $93,454.97 as pleaded. Calculations of the outstanding sum are set out in Annexure A to Pentana’s closing submissions
11JMG denies it is indebted to Pentana or that Pentana is entitled to any damages. It contends the termination fee claimed under the terms of the Agreement is a penalty and therefore unenforceable.
12For the reasons that follow, I find that:
(a)   JMG’s contract claim failed as JMG did not prove that Pentana breached clauses 3.1, 12 and 17 of the MLA;
(b)   JMG’s alternative contractual claim that it was entitled to terminate and recover licence fees paid pursuant to an alleged variation of the Agreement was not established;
(c)   JMG’s misleading and deceptive conduct claim failed;
(d)   JMG’s purported termination of the Agreement was unlawful with the result that it repudiated the Agreement. By this proceeding, Pentana has accepted JMG’s repudiation, elected to terminate and sue for damages;
(e)   Pentana is entitled to judgment on its counterclaim in the sums of $38,229.48 and $1,614,250.

Background
13JMG was founded in 1996 by Mr Tony Jowett. Mr Jowett is the sole Managing Director of JMG and has extensive experience working in the car industry. Mr Wayne Marshall was the Chief Financial Officer of JMG up until February 2022.
14As at March 2019, JMG owned and operated five car dealerships. Those dealerships were the BMW dealership in Glen Waverley, three Honda dealerships at Yarra, Doncaster and Glenelg in South Australia, and a Nissan dealership in Melbourne’s CBD.
15JMG subsequently acquired further dealerships, namely, Berwick BMW, South Yarra BMW and Glenelg BMW. Berwick BMW was awarded to JMG on 1 June 2019. JMG no longer operates the Yarra Honda and City Nissan dealerships. JMG currently employs approximately 350 staff members across its dealerships.
16Pentana is an Australian based supplier of software and related services tailoring to the needs of motor vehicle dealerships. Its core business is the licensing of a compilation of software known as a dealer management system. The Pentana DMS is the market leader in Australia. It is used by approximately 4,000 dealerships, including over 20 BMW franchise dealerships. The Pentana DMS is used to assist in the management and operation of the various functions of a dealership, such as sales, servicing, vehicle and parts inventory management, customer relationship management and business administration. It is organised into different modules that correspond to a dealership’s departments. Each module is designed to integrate internally with one another. The Pentana DMS also integrates with third party software systems used by motor vehicle manufacturers (referred to as original equipment manufacturer “OEM”) with which a dealership regularly interacts, described as external integration. The purpose of these internal and external integrations is to assist the ordinary functions of a dealership by reducing duplication or work and manual interventions. A DMS does not fully automate these operations and sometimes manual intervention is required. The Pentana DMS is also designed to be customised to the business circumstances of each customer.
17In mid-2018, Mr Shane McDuffie, Business Development Manager at Pentana, approached JMG about eraPower. At the time, JMG was using a DMS product supplied by Pentana’s competitor, Titan Dealer Management Solutions Pty Ltd (“Titan”). JMG had previously moved from Pentana to Titan in 2014. On 4 June 2018, Mr McDuffie emailed JMG regarding BMW Australia’s endorsement of eraPower. Pentana’s DMS was endorsed by BMW Australia on 1 May 2018.
18Pentana continued to court JMG over the course of the next few months, including arranging meetings and delivering a series of presentations about eraPower from June 2018, until the date of signing of the Agreement in March 2019. This included a meeting on 9 August 2018, where Mr McDuffie attended JMG’s Yarra Honda offices and presented a ‘demo’ of eraPower, including a demonstration of the new ‘DealSmart’ module and the new ‘DealerSocket’ module. DealSmart is an application within the showroom and accounting modules that facilitates the processing of deals. DealerSocket is Pentana’s third party customer relationship manager (“CRM”) module used to facilitate customer relations between a dealership and its customers.
19On 1 November 2018, Mr McDuffie delivered a “deep dive” presentation to Mr Jowett and Mr Marshall at Waverley BMW. Mr McDuffie referred to the full integration of 66 BMW interfaces within eraPower and provided details of the new “DealSmart” module, which would be available to JMG from go-live and at no additional cost.
20After the meeting, Mr McDuffie sent a copy of the presentation to Mr Jowett and Mr Marshall. One of the documents sent was entitled “Dealer Management System: Cloud Solution” dated 1 November 2018. This document was the first version of the SLA provided to JMG by Pentana. Page 3 of the proposed SLA set out an “Executive Summary” in the form of a letter from Mr McDuffie to Mr Jowett which stated, amongst other things:
“By implementing the proposed solution you will achieve the following:
•Improved efficiency
•Increase profitability
•Streamline operations
•Reduce cost
•Increase sales

Our mandate is to help you use the product according to best practice so you can extract maximum value form [sic] the solution.”

21Mr McDuffie delivered further demonstrations of eraPower (including DealerSocket and Dealer Processing Console/DealSmart products) on 11 January, 22 February and 7 March 2019.
22On 15 March 2019, Mr Jowett, Mr Marshall and Mr McDuffie met at Yarra Honda. Mr McDuffie made a final presentation regarding the Pentana DMS. They discussed the SLA proposal document, which was mostly the same as the version provided in November 2018, and Pentana’s standard terms and conditions contained in its MLA. Mr McDuffie had emailed copies of these documents to JMG prior to the meeting. After Mr McDuffie made three handwritten amendments to the SLA which had been discussed, Mr Jowett signed the MLA and SLA on behalf of JMG. Mr McDuffie signed on behalf of Pentana.
23While the date of delivery or live date of the DMS was unknown at the time of signing, Mr McDuffie subsequently confirmed the date via an email to JMG on 17 April 2019, setting 11 November 2019 as the date of “go-live” at JMG’s dealership sites. “Go-live” is the date upon which the Pentana DMS would be operational and in use at a dealership.
24On 12 June 2019, Mr Jowett and Mr Marshall attended the “kick off” meeting at Pentana’s head office with Pentana’s representatives. This project meeting was the first formal meeting between Pentana’s delivery team and the broader group of JMG representatives who would use the DMS on a day-to-day basis. The meeting involved some 30 to 40 people. Pentana’s presentation that day included topics such as the sequence of implementation steps, the indicative time frame for the project, the resources that Pentana required from JMG, and the function of user acceptance testing and sign offs.
25The parties subsequently agreed the Pentana DMS would be used in four JMG dealerships (being three Honda dealerships and Waverley BMW). It was also agreed Pentana would adjust the project scope to accommodate a newly acquired JMG dealership at Berwick BMW.
26On 20 June 2019, Mr McDuffie emailed Mr Marshall setting out adjustments to the MLA and SLA entered into on 15 March 2019 and proposed terms for Berwick BMW. Pentana agreed to reduce monthly maintenance fees under the original SLA from $28,500 to $24,000 with a further reduction to $21,500 for the first six months following 11 November 2019. JMG had earlier paid an upfront installation fee of $75,000. On 27 June 2019, Mr Marshall signed the Berwick SLA on behalf of JMG. As events turned out because of this dispute, the installation of the Pentana DMS at Berwick, which was planned for May 2020 did not occur.
27On 21 August 2019, Ms Susan Jochheim was engaged as a consultant by JMG to assist at Waverley BMW in the lead up to go-live and during the first week of go-live. Ms Jochheim had extensive experience working with DMS software, including working with BMW Australia and BMW dealerships. Her consultancy was later extended to 3 March 2020. During her consultancy, Ms Jochheim maintained detailed and comprehensive records of the issues with the Pentana DMS as they emerged, including the date the issue emerged, the nature of the issue, what steps (if any) had been taken in respect of the issue and the status of the issue at any given time. Ms Jochheim recorded the issues in various spreadsheets, which she updated and circulated to Pentana and JMG staff during the course of her consultancy. These records were relied upon, not only by JMG, but also by Pentana for the duration of her consultancy. Pentana do not dispute the accuracy of the content of Ms Jochheim’s spreadsheets.

28User acceptance testing (“UTA”) commenced on 17 October 2019, initially scheduled for approximately one week. On 22 October 2019, Ms Jochheim sent an email to staff at JMG and Pentana, attaching a spreadsheet called ‘era testing.xslx’ (“Outstanding Issues Spreadsheet”), summarising the status of the issues that Waverley BMW had identified at that date. Relevantly, 21 issues had been raised with Pentana, 20 issues remained outstanding, and 7 issues were being investigated internally by JMG. In addition, Ms Jochheim sent a number of emails to Pentana staff regarding various issues being encountered with the DMS, including a further updated Excel spreadsheet containing a list of issues as at 1 November 2019. As at that date, there were 89 issues which had been raised with Pentana and only 43 of those issues had been marked as being complete.
29Given that go-live was approximately 10 days away, Ms Jochheim continued to test and re-test the Pentana DMS, particularly issues with integration between BMW key systems and the Pentana DMS. During this time, Ms Jochheim communicated with Pentana regarding the outstanding issues she was identifying. On 10 November 2019 (the evening before go-live), Ms Jochheim conducted a test during a Webex meeting with JMG staff of the integration between the Pentana DMS and IPSA Next. Ms Jochheim uncovered an issue at this time, in that the integration between the Pentana DMS and IPSA Next was not working and consequently, pricing information pertaining to vehicles was not available. Ms Jochheim emailed Pentana and JMG staff regarding this issue. IPSA Next is a BMW application to support the BMW service process. An OEM interface is required between IPSA Next and the Pentana DMS.
30On 11 November 2019, the Pentana DMS went live (“go-live”). Go-live is the first opportunity to process real transactions through the Pentana DMS and link it to the third-party systems used by car manufacturers. A number of issues were encountered on day one of go-live, with the spreadsheet for that day revealing 28 issues, 25 of which were ‘critical’. Ms Jochheim’s covering email dated 11 November 2019 to JMG, Pentana and BMW staff attaching the spreadsheet stated:
“I think overall we have had a pretty good day. Lots of challenges, and things to follow up. And all made more difficult with Pentana internal network issues making communication and remote access for them very difficult.
But, we’ve made it through the day, and from what I can see, you have been able to complete everything, albeit with some manual workarounds.
Attached is a list of the items that were raised today, together with the status.”
31In her oral evidence, Ms Jochheim sought to resile from the tone of her email. She said it had not been a good day and was a very difficult day for both JMG and Pentana and she had been trying to keep everyone positive. Mr Marshall’s recollection of the first day of go-live was that the staff were able to process all the usual kinds of transactions.
32During the first week of go-live, Ms Jochheim updated and circulated the outstanding issues spreadsheet capturing new issues and the status of old issues at the end of each day. On 12 November 2019, there were 52 issues, 36 of which were critical and seven of which were marked as complete. On 13 November 2019, Ms Jochheim sent a further revised outstanding issues spreadsheet, capturing issues emerging on day three of go-live and identifying the status of issues previously identified.
33Around 14 November 2019, an update to the software caused two critical business issues. The Pentana DMS was not calculating the prices of vehicles correctly or generating repair orders accurately, described as the vehicle pricing and sublet issues, respectively.
34At a meeting on 14 November 2019 between Pentana staff and JMG Waverley BMW staff, it was agreed JMG would continue to use the Titan DMS as an interim measure at Waverley BMW in order to continue selling vehicles, while Pentana attempted to resolve the two critical issues.
35On 15 November 2019, an internal meeting was held between Pentana representatives regarding the issues with the Pentana DMS and operability of the platform described as the “Jowetts crisis meeting.” Mr Bortignon said in cross-examination that he regarded the issues identified as being very serious which was why he called a crisis meeting. The main concern was the vehicle pricing issue. Later that day, a fix was made to make it possible to create valid deals.
36On 18 November 2019, Ms Jochheim attended a meeting with Pentana representatives to discuss ongoing issues. After this meeting, Ms Jochheim sent an email to Pentana identifying the risks associated with using two systems at the same time (that is, the Titan DMS and Pentana DMS).
37Pentana continued to improve the situation with the vehicle pricing issue. By 25 November 2019, JMG had confirmed internally that Pentana had addressed all known issues with vehicle pricing. The sublet servicing issue had been resolved earlier.
38Issues with the Pentana DMS continued throughout November 2019. Mr Marshall raised the issues with Richard Kerr (Executive at Pentana) who agreed to waive the first month’s maintenance fee. Pentana also extended its go-live support from two weeks to three weeks. The issues that arose were primarily in respect of the BMW Waverley dealership as opposed to the remaining Honda dealerships. According to Mr Marshall, most of the problems at that time concerned IPSA Next.
39In December 2019, Pentana provided JMG with access to the Pentana Service Now Portal, through which JMG could log issues directly. This portal was used from 3 December 2019 onwards, although it did not contain the previous issues identified in the outstanding issues spreadsheet circulated by Ms Jochheim in November 2019.
40On 6 December 2019, Ms Jochheim circulated another updated outstanding issues spreadsheet to Pentana staff requesting feedback regarding the status of the issues identified in the spreadsheet. On the same day, Mr Marshall met with Pentana staff to discuss the outstanding issues.
41From 10 December 2019, Ms Jochheim received a daily email, generated through the Pentana portal, identifying issues and their status formally logged through the portal. Ms Jochheim used these reports to review and update her own records regarding the status of issues.
42Throughout December 2019, issues with the DMS persisted. Where issues were identified by JMG and brought to Pentana’s attention, Pentana in some cases would provide a ‘patch’ or manual workaround, while the issues were being resolved. In January 2020, Pentana was continuing to load ‘patches’ designed to fix the ongoing issues with the DMS. According to Ms Jochheim’s oral evidence, vehicle pricing was still a critical issue in mid-December 2019. She said this issue had been closed on 25 November 2019 but then restarted again immediately.
43On 10 January 2020, weekly meetings between JMG and Pentana staff recommenced following the Christmas shutdown period.
44On 22 January 2020, Mr Marshall and other JMG representatives met with Mr Bortignon and other Pentana representatives to discuss the ongoing issues with the Pentana DMS. As a result of this meeting and the concerns raised by JMG, Pentana assembled a task force to work on the project and deal with the various issues. Mr Bortignon set up a meeting with Pentana staff to be held on 29 January 2020 regarding the issues identified by JMG. Mr Bortignon agreed in cross-examination that it was an unusual circumstance to set up a high-level task force.
45On 28 January 2020, Mr Marshall organised an internal JMG meeting, which Ms Jochheim was invited to attend. Ahead of the meeting, Ms Jochheim prepared documentation regarding the issues presenting in the DMS and the status of those issues (“January Issues Summary Documents”). This material revealed that there were 39 outstanding issues covering the period from 11 November 2019 to 19 January 2020. Those present at the meeting, including Mr Brett Jakes, a principal dealer at Waverley JMG, were very vocal about their frustrations with the Pentana DMS being not fit for purpose and its cost to the business. Mr Marshall gave evidence that it was decided at this meeting to terminate the contract with Pentana. Mr Marshall listed the reasons for doing so in paragraph 106(d) of his first witness statement, namely:
(i)Pentana had been aware of the issues for months, some outstanding incidents having been raised prior to go-live on 11 November 2019;
(ii)Pentana had demonstrated that issues could not be resolved within 1-2 weeks, which had been JMG’s expectation;
(iii)There were too many significant issues outstanding that did not seem to be capable of resolution within a short timeframe;
(iv)Some of the functionality (in particular the DealSmart module) that had been advertised to JMG was not actually yet ready for use;
(v)The showroom (sales) module of the Pentana DMS, which is key to JMG’s business, was so unreliable and “flaky’ that staff had lost confidence in it;
(vi)On the basis of what JMG had seen of the new Pentana DMS, JMG considered the Titan DMS to be superior, even if Pentana eventually managed to resolve the outstanding issues;
(vii)Every day JMG delayed was costing the business money;
(viii)The Titan system was still available to JMG and Titan had indicated that they could set up to transfer back onto their system within 2 days.

46After consultation with Mr Jowett following the internal meeting, JMG decided to issue Pentana with a notice of breach under clause 22.3 of the MLA providing a period of 30 days to remedy the defects and errors with the DMS, otherwise the Agreement would terminate. Ms Jochheim updated the January Issues Summary Documents and sent them to Mr Marshall and other JMG representatives later that day.
47On 29 January 2020, Mr Marshall emailed the Notice to Mr Kerr of Pentana, attaching four PowerPoint presentations setting out the issues with the Pentana DMS. The Notice required Pentana to remedy the defects and errors identified by 28 February 2020. The Notice was drafted by JMG’s lawyers, Maddocks, from whom JMG had sought legal advice.
48On 30 January 2020, Mr Bortignon sent an email to Mr Marshall, attaching a spreadsheet entitled “Jowetts Resolutions Delivery Plan” (the 30 January Pentana Plan) which listed 71 outstanding issues and a list of ‘requests for development’ to be reviewed after the 71 outstanding issues had been resolved. Mr Bortignon said it was Pentana’s intent to deliver resolutions to all 71 items in the attached list. This excluded any requests for new functionality (requests for development) which were in a separate tab and would be reviewed after Pentana had delivered on the items in the Resolution Delivery Plan. The email set out a timetable for the completion of issues in February 2020 with the latest date for the resolution of the 71 outstanding issues being 24 February 2020. Issues with DealSmart were to be completed by 20 February 2020; BMW pricing, IPSA and warranty issues by 8 February 2020; DealerSocket (consulting) by 14 February 2020 and other miscellaneous issues would be completed by 24 February 2020. Mr Marshall circulated this email to JMG’s staff.
49Mr Marshall received an email from Stefan Grammenos, the CFO of Pentana on 30 January 2020 (“the Grammenos email”). The email relevantly stated as follows:
“i/We acknowledge receipt of your letter and our business is working towards a resolution. We do not believe that we are in breach of any clause within the Master Agreement, albeit in the spirit of good business relations, in the event we are unable to demonstrate to you as our customer, that we have improved the situation at hand, we will grant you 2 options in 30 days’ time:
1.Either to continue to work with us to rectify and address and unresolved items, within a satisfactory timeframe agreed to by both parties; OR
2.Provide you with a full refund for any invoices paid to Pentana Solutions, as a gesture of Goodwill, should you wish to terminate.

Our preferred option, is Option 1, as our ultimate objective is to keep you as a long-term customer and provide your business with the best DMS in the country…….”
50On 31 January 2020, Mr Marshall and Mr Jowett attended a meeting with Mr Kerr, Mr Kloss and Mr Bortignon of Pentana. Mr Marshall noted that the issues to be resolved by Pentana were those set out in JMG’s documentation and not those provided by Pentana in the 30 January Pentana Plan.
51Mr Marshall gave evidence in his reply witness statement that he made clear his expectation at this meeting that if Pentana did not fix the issues within 30 days to JMG’s satisfaction, JMG would go with Option 2 of the Grammenos email and terminate. He also said in cross-examination that JMG accepted the offer contained in the Grammenos email at this meeting. Pentana dispute the accuracy of this evidence for reasons which appear later in this judgment. There is a similar factual dispute as to whether JMG accepted Option 2 at a later meeting held on 27 February 2020. It is not in dispute that no written acceptance of Option 2 was given by JMG prior to the letter from its lawyers to Pentana dated 3 March 2020.
52Ms Jochheim prepared a reconciliation of the 30 January Pentana Plan with the January Issues Summary documents. She sent Mr Marshall two documents entitled ‘Feedback to Pentana v.3.pptx’ (“Feedback PowerPoint”) and ‘Implementation Status.xlsx (“Implementation Excel”) on 3 February 2020. Mr Marshall forwarded the documents onto Pentana.
53Progress meetings between JMG and Pentana representatives occurred bi-weekly from 3 February 2020 onwards to discuss what steps had been taken and the status of the issues identified. During these meetings, Pentana presented PowerPoint presentations summarising the issues resolved, what they were working on, proposed solutions and expected timelines for delivery for JMG staff to test. These presentations were prepared by reference to the 30 January Pentana Plan and not by reference to Ms Jochheim’s Feedback PowerPoint of Implementation Excel.
54On 14 February 2020, Mr Pinto emailed Mr Jowett, copying in Mr Kloss and Mr Marshall, with a progress update identifying 54 per cent of the outstanding tasks as completed and signed off by both parties and 24 per cent as ‘awaiting testing.’ Mr Pinto offered a freeze on monthly maintenance fees for 12 months; free installation of the DMS at BMW Berwick with no fees to be charged for the first 12 months in respect of that dealership; and paying all of Ms Jochheim’s consulting fees from go-live till May 31 2020.
55On 16 February 2020, Mr Kloss sent an email to Mr Jowett which said, inter alia:
“There has been much progress on the key items of BMW and showroom, that are either in testing or already on your site awaiting your teams testing. My level of confidence half way through is good and huge progress is being made, with confidence the agreed items, plus more will be delivered.
The bulk of any software process delvers the greatest progress closer to the end than the start and hence the reason I look forward to the coming weeks.
I fully accept your 14 weeks have been too disruptive and I am not shying away from this and we will get it right. You have achieved so much since go live, but unfortunately we have let be overshadowed by the issues.”
“I will deliver the software and whilst confidence will take some time, you will be able to stabilise with a long term partner that will add enormous value to your business.”
56On 18 February 2020, Mr Marshall attended a meeting with Pentana staff who stated that 69 per cent of the Pentana identified tasks had been completed. By late February 2020, it was evident to Mr Marshall that there were still issues with the Pentana DMS which were unlikely to be resolved by the end of the Notice Period.
57On 25 February 2020, Ms Jochheim and Mr Marshall prepared a suite of documents relevantly revealing that 31 outstanding issues remained. Of these, 24 items were ‘required’ items and seven were ‘requests for development.’ Further, of the 31 outstanding items, 14 were critical business items and 17 were noncritical business items. Of the 31 outstanding items, a solution for four items had been accepted; a solution for two items had been delivered but needed to be tested; 11 items had been partially delivered; and 14 items had not been delivered. Of the 14 critical business items, a solution for one issue had been accepted; a solution for one item had been delivered but needed to be tested; seven items had been partially delivered; and five items had not been delivered.
58On 26 February 2020, the suite of documents prepared by Ms Jochheim and Mr Marshall was presented to senior JMG staff, including Mr Jowett. Mr Marshall presented a summary of the outstanding issues and referred to the documents as the Final Internal Status Reports. During this meeting, JMG decided that the Pentana DMS could not meet expectations and JMG would not continue with the Pentana DMS.
59On 27 February 2020, Mr Marshall met with Mr Bortignon and Mr Rick Pinto (“27 February meeting”) at JMG’s Waverley BMW offices. Mr Marshall told the Pentana representatives that JMG would be terminating the Agreement and returning to Titan. He said that the rectification work done was insufficient and that there were significant issues remaining with DealerSocket, and BMW integration, including IPSA. The most important thing was JMG’s inability to rely on the showroom system.
60Mr Bortignon did not recall exactly what occurred at this meeting but did recall it being discussed that Pentana needed more time. He was disappointed as Pentana had worked extremely hard with JMG to resolve the issues and was committed to the partnership. Mr Marshall’s evidence is that he said at this meeting that JMG would accept the second offer in the Grammenos email. His first witness statement stated that he told Pentana “we were thinking of exercising Option 2.” Mr Bortignon could not recall Mr Marshall saying he would accept the second offer.
61The matters discussed were recorded in notes of the meeting taken by Mr Pinto (noting that the date of the meeting was incorrectly identified as 26 and not 27 February 2020). His file note records that issues with DealerSocket were two to three weeks away from resolution; there were still unresolved issues with DealSmart; there was still work to do with BMW IPSA integration but getting there, needs three to four weeks; and there was still instability with the showroom system that were unresolved. On the topic of the second offer Mr Pinto noted the following:
“Decision is for contract to lapse - based on options on Stefan’s email.”
62On 27 February 2020, Mr Grammenos emailed Mr Jowett and Mr Marshall in response to the Notice and asked them to reconsider. Mr Grammenos noted amongst other things, that his understanding was that Pentana had significantly improved the situation at hand and the solution in the identified areas of concern and that the system was operating satisfactorily, albeit some further minor improvements were required. He said the solution was definitely operational and in line with expectation and representation. Mr Grammenos expressed surprise and disappointment at JMG’s decision to leave. He foreshadowed Pentana pursuing the matter legally if JMG did not honour its contractual obligations and asked JMG to confirm its intentions in writing. In cross-examination, Mr Grammenos said he recalled being told that Mr Marshall wanted to go with Option 2. He also said that by then, Pentana had delivered 86 to 88% of the items. He knew when he sent his email that not all items had been formalised. Mr Marshall disputes the accuracy of this percentage in his second witness statement.

63From the weekend of 29 February to 1 March 2020, JMG transitioned back to the Titan DMS. Pentana dispute this, claiming that JMG began the transition period back to Titan in mid-February 2020, halfway through the Notice Period. Notwithstanding the factual issue as to the date of transition, the Titan DMS was used in the dealerships from 2 March 2020.
64On 3 March 2020, Ms Jochheim received a daily incident report from Pentana’s Service Now portal. This report from Pentana stated there were 41 open (unresolved or outstanding) incidents. Some of those were categorised by Pentana as ‘in progress,’ ‘awaiting customer,’ ‘monitoring,’ ‘new,’ ‘awaiting problem/change’ or ‘awaiting 3^rd party.’
65JMG’s solicitors wrote to Pentana on 3 March 2020 confirming that JMG was terminating the Agreement and asking Pentana to repay JMG the sum of the invoices as promised by Mr Grammenos in the Grammenos email.

Procedural history and pleadings
66On 14 April 2020, JMG commenced this proceeding by writ. The statement of claim alleged breach of the Agreement by Pentana as a result of which JMG served the Notice. JMG further pleaded a variation of the Agreement by reason of the Grammenos email dated 30 January 2020, which JMG had accepted. As a result of these matters, JMG claimed the sum of $120,450, being the licence fees it had paid to Pentana.
67On 26 May 2020, Pentana filed a defence and counterclaim. It denied any breach on its part or that the Agreement was varied as alleged. Pentana counterclaimed for payment of outstanding invoices for invoices issued to JMG from 28 October 2019 to 31 March 2020 totalling $93,454.97. Pentana also claimed a termination fee in the sum of $1,614,250, being licence fees payable for the balance of the remaining contract term of five years under the Agreement.
68Pentana made a further claim for damages as a result of JMG unlawfully providing Titan with access to the Pentana DMS and sensitive data. In closing, Pentana confirmed it was no longer pressing this claim. For that reason, this claim did not feature in the agreed joint list of key issues.
69On 27 November 2020, JMG filed an amended statement of claim (“ASOC”) which introduced a third claim for misleading and deceptive conduct under s18 of the ACL. JMG also amended its claim for breach of terms and warranty contained in the Agreement. The original debt claim for the licence fees remained unchanged. The claim for damages under contract and the ACL was calculated in the same amount of $711,773.43.
70JMG filed an amended reply and defence to counterclaim dated 16 June 2022.
71On the second day of trial, Pentana was granted leave to file an amended defence and counterclaim dated 14 September 2022 in response to the ASOC. Pentana amended its pleading to include, amongst other things, reliance upon an exclusion clause in the Agreement, being clause 21.1 of the MLA, to deny any liability for JMG’s claim for damages.
72On 7 December 2022, I made an order granting JMG leave to file a proposed amended statement of claim. This followed an application made by JMG during its final oral addresses to amend its pleading. The principal amendment was that the quantum of damages, which had earlier been foreshadowed earlier in the evidence filed, was increased to the sum of $933,198. The debt claim was adjusted slightly, and the revised figure claimed was $120,000.40. Some other minor amendments were made, including the form of relief sought.
73JMG also sought to include some further statements in the SLA as additional representations as part of its misleading and deceptive conduct claim. This aspect of the proposed amendment was opposed by Pentana. I refused leave to JMG to include sub-paragraphs 15(f)-(i) of the proposed Amended Statement of Claim, which sought to plead these further representations for the first time. My reasons for doing so were contained in a ruling dated 7 December 2022.[2]
[2]Jowett Motor Group Pty Ltd v Pentana Solutions Pty Ltd [2022] VCC 2118
74Pursuant to orders made on 7 December 2022, JMG filed its further amended statement of claim on 22 December 2022.
75The trial of this matter was conducted over 10 days. Fourteen witnesses were called. The witnesses gave their evidence-in-chief by way of witness statements. Amended witness statements, which incorporated corrections or minor amendments made by the witnesses when giving oral evidence, were filed by both parties on 7 October 2022.
76The materials filed were voluminous and included three Court Books. Part 1 of the Court Book contained 4,970 pages, Part 2 some 20,666 pages and Part 3 was 137 pages. Transcript totalled 1,042 pages. The parties filed both opening and closing submissions, together with written submissions in reply, as well as providing various spreadsheets and memory aids during the course of final addresses. The closing and reply submissions filed by the parties, excluding attachments, alone comprised 289 pages.
77Pentana filed evidence which was marked “Confidential” which related to Pentana’s entitlement to claim a termination fee This evidence was led by Pentana to rebut JMG’s claim that the termination fee was an unenforceable penalty. Pentana sought to establish that the amount claimed was a reasonable pre-estimate of Pentana’s losses, having regard to Pentana’s various costings.
78On 29 September 2022, I made orders including that the redacted parts of the version of the further confidential witness statement of Stefan Grammenos dated 5 August 2022 (including its accompanying tender bundle) be marked “Confidential” and placed on the Court file. It was not to be accessed without further order of the Court. Similarly, the parties’ submissions dealing with this aspect of the counterclaim were redacted and marked confidential.
79Attached to this judgment and marked “Annexure A” are reasons relating to this issue, which are marked “Confidential” and will be provided only to the parties. Otherwise, Annexure A will remain confidential and will not be published.

Witnesses
80JMG called four witnesses, namely:
Tony Jowett
81As already noted, Mr Jowett is the Managing Director of JMG. He was, in my view, an impressive witness who had a good recall of events and made concessions when appropriate to do so. He refuted any suggestion put to him in cross-examination that the reason he terminated the Agreement was because he was influenced or persuaded to do so by personnel at Waverley BMW, who wanted to get rid of Pentana and return to Titan. He had not been made aware of any so called “Plan B” to revert to Titan. Mr Jowett gave convincing evidence that the decision to terminate was not within the control or power of the staff at the JMG Waverley dealership. Whilst he relied upon the advice of Mr Marshall, the decision to terminate was made by him alone. I accept his evidence on this point.
Wayne Marshall
82Mr Marshall was JMG’s CFO at the relevant time. He played a large role in the dealings with Pentana, including the meetings that were held up to and following termination. He signed the Notice on behalf of JMG. He gave evidence that he was unaware that Mr Jakes, the principal dealer at the Waverley BMW dealership, was frustrated with the Pentana DMS until he returned from leave at the start of 2020. He did not know about any “Plan B” to get rid of Pentana and revert to Titan from Mr Jakes’ standpoint.
83Mr Marshall also provided evidence about the loss and damage which JMG claims in this proceeding.
Sue Jochheim
84As already stated, Ms Jochheim was employed as a consultant by JMG. She had extensive experience in dealing with DMS software and this included a period when she worked for BMW Australia. She had over 25 years’ experience in the industry. She presented as a very thorough and meticulous witness with a strong recollection of events. There was no challenge made by Pentana to the accuracy of the various spreadsheets that Ms Jochheim prepared. I found Ms Jochheim to be a credible and impressive witness.
Arthur Goodall (who provided an expert report and addendum with his wife Peggy Goodall)
85Arthur and Peggy Goodall, of Automotive Management Solutions provided an expert report dated 14 June 2021, together with an addendum dated 14 September 2022. Mr Goodall gave oral evidence at trial. The independence and experience of the Goodalls was not challenged by Pentana.
86Pentana accepted that Mr Goodall was a witness with relevant experience. It said the opinions he expressed at a general level as to the sales cycle and relevant considerations of the Pentana DMS customer were clear and persuasive. However, the usefulness of his evidence as to specific matters in relation to the Pentana DMS as implemented at JMG was lessened by the fact that he did not experience it for himself and so was confined to carrying out a desktop “review.” His opinions on the specifics were also the product of the limited materials with which he was briefed. Pentana noted that Mr Goodall properly conceded that the opinions he expressed could have been different had he been briefed with further relevant material.
87Pentana called the following eight witnesses:
Stefan Grammenos
88Mr Grammenos is the Chief Financial Officer and Company Secretary of Pentana. His role was limited to a certain extent in that he only came in towards the end and sent the Grammenos email, which was the subject of considerable focus at trial. He also gave evidence regarding the damages claim made by Pentana, being the outstanding sum for unpaid invoices, together with the amount claimed for the termination fee.
89In the course of his evidence, it became clear that the original claim for services sought by Pentana in the sum of $93,000 was inaccurate. This figure was subsequently reduced by nearly half, as Pentana conceded that there had been amounts which had been incorrectly credited and some other mistakes made regarding the calculation of the figure claimed.
90JMG claims Mr Grammenos was not a credible witness and that the Court should be cautious of the weight given to the evidence adduced by him. His evidence was misleading when he failed to include credited invoices in the gross figure claimed in his witness statement. JMG also submitted Mr Grammenos was evasive when asked whether travel and accommodation costs were excluded from the estimate of costs Pentana was expected to incur. JMG contends Mr Grammenos’ calculations were inaccurate, overstated and should be rejected.
91Pentana said JMG’s characterisations of its witnesses was unhelpful to the Court, particularly, with respect to the critical assessment of Mr Grammenos. Pentana described Mr Grammenos as an enthusiastic witness who provided clear and cogent evidence regarding his involvement in the project, making appropriate concessions during cross-examination.
92Despite the wholesale attack on Mr Grammenos’ credit, I was not persuaded he was evasive or not credible when giving his evidence. Although there were inaccuracies in the figure claimed for the services amount of the counterclaim, which emerged during his evidence, this is more likely the result of an oversight, as opposed to any alleged dishonesty. I consider the attacks made on his credit were uncalled for and I reject JMG’s characterisation of his evidence.
Josef Bortignon
93Mr Bortignon is an executive of Pentana, responsible for the delivery and implementation of Pentana’s products. He had considerable involvement with the project and attended a number of meetings.
94JMG says that Mr Bortignon, like Mr Grammenos, was evasive and untruthful with respect to his evidence during cross-examination. But JMG concedes somewhat paradoxically, that Mr Bortignon displayed honesty and could appreciate fault in recognising the Pentana DMS was not always functioning or operating as designed, as well as the consequences borne by JMG as a result. JMG says Mr Bortignon’s evidence and concessions, being against the interests of Pentana, should be accepted.
95Pentana notes Mr Bortignon readily made concessions as to the defects and errors in the Pentana DMS, providing cogent explanations of his evidence in chief when challenged as dishonest during cross-examination.
96I was not persuaded that Mr Bortignon was evasive or untruthful, quite the contrary. I consider that he was doing his best to assist the Court and was a credible witness.
Joshua Xerri
97Mr Xerri was the product manager OEM at Pentana. He gave evidence from a technical standpoint in relation to the BMW integration aspects of the implementation project. JMG also argued he was not a credible witness. Again, on the basis of the matters raised in JMG’s closing submissions, I was not persuaded that I should make any adverse findings relating to Mr Xerri’s credit.
Virginia Greville
98Ms Greville was a customer engagement team leader at Pentana. Due to what JMG said were inconsistencies and omissions in her evidence, JMG submitted she too was not a credible witness. I disagree.
Julie-Anne Luby-James
99Ms Luby-James was the former delivery manager at Pentana and gave evidence of the implementation project on the ground and working with Ms Jochheim.
Shane McDuffie
100Mr McDuffie is the business development manager at Pentana. He was involved in the early process of selling and demonstrating the Pentana DMS to JMG. He agreed with and accepted as true, the various statements made in the executive summary and other introductory parts of the SLA, which he wrote along with the Pentana pre-sales team. JMG accepted his evidence was uncontroversial and that he was a witness of truth.
Trusha Solanki
101Ms Solanki is a project manager at Pentana. She was responsible for installing the DocuSmart product as part of the implementation of the Pentana DMS. JMG described her evidence as being largely uncontroversial.
Paul Litherland
102Mr Litherland is a project manager at Pentana. His evidence related to the implementation project at JMG to the preliminary data migration and conversion workstream in around September or October 2019. In summary, he was tasked with assisting with a conversion of the customer data extracted from Titan into an appropriate format so as to make it possible to migrate or import the data into the Pentana DMS. JMG accepted his evidence was uncontroversial and that he was a witness of truth.
103For its part, Pentana did not make any attacks about the credit of the JMG witnesses. For reasons I have already identified, I was not satisfied there should be any adverse credit findings made in respect of Pentana’s witnesses, contrary to the trenchant submissions put by JMG. In summary, I considered all the witnesses to be honest and credible and doing their best to assist the Court.
104There are really no credit issues that need to be resolved in this case. There was a factual controversy about whether there had been an oral acceptance of the offer contained in the Grammenos email by JMG, either at a meeting on 31 January 2020 or 27 February 2020. Apart from this, there seemed to be little dispute about the events that took place. There was no argument that any of the emails, for example, or correspondence relied upon were not sent or received or that various meetings did not take place. Similarly, in terms of the documents that were prepared, Pentana acknowledged that the various spreadsheets prepared by Ms Jochheim, which identified the various issues at any point in time were accurate.

Jones v Dunkel inferences
105Pentana submitted Jones v Dunkel[3] inferences should be drawn by reason of a failure to call senior management from Waverley BMW who, on its case, had animated JMG to cancel the agreement with Pentana. The main witness identified was Mr Brett Jakes, the then dealer principal at JMG Waverley, who is still employed by JMG. Pentana alleges he took an early dislike of the Pentana DMS and made this known to others. It is said that from November 2019 he began work on the bigger picture to petition Mr Jowett to abandon Pentana and revert to Titan. It is claimed that he launched a sustained campaign and prevailed over Mr Jowett and Mr Marshall, causing JMG to issue the Notice. Pentana submitted there was no reason for the Court to conclude that Mr Jakes was unavailable to give evidence and that an inference should be drawn his evidence would not have assisted JMG. Similar allegations were made in respect of two other employees at Waverley BMW, namely, Mr Nick Curcio, who was an after sales manager at the relevant time. The other witness identified was Mr Aaron Cosstick, who remains employed at Waverley BMW. He was the general sales manager at the time. He had noted in an email that the dispute between JMG and Pentana would be “an interesting legal battle” which has turned out to be prophetic.
[3][1959] HCA 8; 101 CLR 298
106The rule in Jones v Dunkel only applies where the party accused of not calling the relevant witness was required to explain or contradict something. I am not persuaded it can be inferred that the reason JMG did not call Mr Jakes, Mr Curcio or Mr Cosstick was because it feared to do so, or that JMG was required to explain or contradict something. Mr Marshall gave very detailed evidence as to the problems that had developed with the Pentana DMS and a detailed history of the dealings between the two parties leading up to and following termination. Although it was clear from the documents in evidence that Mr Jakes, in particular, was very vocal in his criticism of the Pentana DMS, Mr Jowett was clear in his evidence that the decision made to terminate was his and his alone. In my view, the mere fact that the three witnesses identified may have formed an adverse view of the Pentana DMS and were keen to revert to Titan does not ultimately bear on the issues that have to be determined by the Court.
107Although this matter was raised as part of the factual narrative, Pentana did not go so far as to say that JMG terminated for some ulterior purpose or, in effect, that the Notice itself was a sham because JMG wanted to go back to Titan and was trying to find some reason not to proceed any further with Pentana. By the time of closing, this topic was not pursued with any great vigour by Pentana. As JMG correctly points out, the contractual issue is and remains, whether at the time the notice of termination was served, Pentana was in breach of the Agreement.
108Further, JMG notes that Pentana did not articulate why any of these witnesses needed to be called to give evidence. The assertion that an adverse inference ought to be drawn in respect of these potential witnesses without any reference to any particular issue requiring resolution by the court misconceives the nature of the rule in Jones v Dunkel. JMG said it would have been incumbent upon Pentana to explain how the evidence these witnesses could have given would elucidate a relevant issue in the proceeding. Overall, I am not persuaded that I should make a Jones v Dunkel inference because these three individuals were not called by JMG to give evidence.
109During opening submissions, counsel for JMG referred to various individuals employed at Pentana who had not provided a witness statement. In closing submissions, JMG noted that Mr Neville Blakley did not give evidence in the proceeding. However, this is as far as it went and there was no argument developed in the plaintiff’s closing submissions that any Jones v Dunkel inference should be drawn by reason of the failure to call the Pentana employees whom JMG had previously mentioned.

Key Issues
110The parties provided the following agreed list of key issues for determination:

A. JMG’s breach of contract and damages claim
(1) Did Pentana breach any of the terms and conditions of the MLA and SLA as alleged by JMG, namely:
(a) That Pentana would deliver the Licensed System in accordance with the SLA (clause 3.1 and definition of ‘Services in clause 1.1.) (ASOC [5](a))?
(b) That Pentana must perform such services as it considers reasonable to ensure the Licensed System remains in substantial conformity with the SLA (clause 12.1) (ASOC [5](aa))?
(c) That Pentana must provide the Services in response to a report by the Customer of a suspected defect or error in the Licensed System which defect, or error allegedly causes the Licensed System to deviate from the Licensed System’s normal operating conditions (clause 12.2) (ASOC [5](ab))?
(d) That for the duration of the Warranty Period, Pentana warrants that the Licensed System would operate in conformity with the Documentation (as defined in clause 1) in all material respects (clause 17.2) (ASOC [5](b))?
(e) That Pentana will investigate perceived defects (that are such so as to cause the Licensed System not to comply with, or are such that the Licensed System cannot be used in conformity with the Documentation in all material respects) notified to it and will upon verification of the existence of the defect, rectify such defect without additional charge to the Customer (clause 17.4) (ASOC [5](bb))?
(2) If the answer to question 1 is “yes” in respect of any alleged term, when did Pentana breach the term?
(3) If the answer to question 1 is “yes”, in respect of any alleged term, did any breach by Pentana cause JMG to suffer loss and damage as alleged by JMG (ASOC [8A])?
B. JMG’s termination and variation claims
(4) Was Pentana in breach of the MLA or SLA as at 29 January 2020, being the date that JMG issued its notice of termination (Notice of Termination) pursuant to cl 22.3(a) of the MLA (ASOC [9])?
(5) [JMG’s version] If the answer to question 4 is “yes”, had Pentana remedied any such breach or breaches by 28 February 2020.
[Pentana’s version] If the answer to question 4 is “yes”, had Pentana remedied any such breach or breaches by 28 February 2020 or to the extent it had not, was it excused from doing so by reason of JMG decided by 26 February 2020 to cease using the Pentana DMS and revert to the Titan DMS?
(6) If the answer to question 5 is “no”, did JMG validly terminate the MLA and SLA:
(a) on 28 February 2020 upon the expiration of the 30-day period contained in the Notice of Termination; or
(b) on 3 March 2020, by notice contained in the letter from its solicitors dated 3 March 2020 (ARDC [9](f))?
(7) Did the Grammenos email constitute an offer to vary the MLA in the terms alleged in ASOC [11]?
(8) If the answer to question 7 is “yes”, was the offer to vary subject to any of the conditions alleged in Defence [12](b)?
(9) If the answer to question 8 is “yes”, had the conditions been satisfied by 26 February 2020 when JMG decided to stop using the Pentana DMS and revert to the Titan DMS (Defence [12](c))?
(10) [JMGs version] N/A
[Pentana’s version] If the answer to question 8 is “yes”, did Pentana withdraw the offer on 27 February 2020 by the email from Mr Grammenos to Mr Marshall and Mr Jowett?
(11) [JMG’s version] If the answer to question 8 is “no” or the answer to question 9 is “yes”, did JMG accept the offer to vary the MLA (by the letter from its solicitors dated 3 March 2020 (ASOC [12]) or otherwise by communication by Mr Marshall to Mr Kloss, Mr Kerr and Mr Bortignon on 31 January 2020 or to Mr Pinto and Mr Bortignon on 27 February 2020 (ARDC [9](c)(i))?
[Pentana’s version] If the answer to question 8 is “no” or the answer to question 9 is “yes”, and the answer to question 10 is “no”, did JMG accept the offer to vary the MLA (by the letter from its solicitors dated 3 March 2020 (ASOC [12]) or otherwise by communication by Mr Marshall to Mr Pinto and Mr Bortignon on 27 February 2020 (ARDC [9](c)(i))?
(12) If the answer to question 11 is “yes”, did JMG provide any consideration to Pentana in respect of the alleged variation (Defence [12](d)(i))?
(13) If the answer to question 12 is “yes”, did the alleged variation satisfy the requirements of clauses 29.1 and 30.1 of the MLA that any variation to the MLA be in writing and signed by the parties (Defence [12](d)(ii))?
(14) If the answer to question 13 is “no”:
(a) is Pentana estopped from relying on a failure to satisfy the requirements of clauses 29.1 and 30.1 of the MLA that any variation to the MLA be in writing and signed by the parties (ARDC [9](b)); or
(b) has Pentana waived reliance on the requirements of clauses 29.1 and 30.1 of the MLA that any variation to the MLA be in writing and signed by the parties (ARDC [9](d))?
(15) Was JMG entitled to terminate the MLA and SLA pursuant to the Grammenos email and obtain a refund of $121,000.40 (inclusive of GST) (ASOC [12])?
(16) Did Pentana waive any entitlement to sums owed on outstanding invoices by reason of the Grammenos email (ARDC [14](c))?
C. JMG’s misleading and deceptive conduct claim
(17) Did Pentana’s statements in the SLA constitute an actionable representation to JMG (as opposed to mere puffery) sometime in early March 2019 that by implementing the DMS, JMG would:
(a) achieve improved efficiency;
(b) increase profitability;
(c) streamline operations;
(d) reduce cost; and
(e) increase sales;
(Representation) (ASOC [15])?
(18) [JMG’s version] N/A
[Pentana’s version] If the answer to question 17 is “yes”, by what date did Pentana represent to JMG that the DMS would achieve the results listed in sub-paragraphs (a) to (e) in question 17 above?
(19) Was JMG induced and did it rely on the Representation to:
(a) change from its then existing DMS provider, Titan, to Pentana’s DMS;
(b) enter the MLA and SLA;
(c) dedicate staff, time, resources and money to assist with the development, integration and installation of the DMS into its business from about March 2019 to the end of February 2020: and
(d) from about March 2019, reduce or wind down the use of the DMS provided by Titan (ASOC [16])?
(20) Was the Representation or any part thereof a representation of fact or as to future matters?
(21) To the extent that the Representation was as to future matters, did Pentana have reasonable grounds for making the Representation because at the time of making the Representation it believed that if JMG implemented Pentana’s DMS it would eventually achieve the results listed in sub-paragraphs (a) to (e) in question 17 above (Defence [22])?
(22) Given that the implementation of the DMS had not achieved the results listed in sub-paragraphs (a) to (e) in question 17 above by 28 February 2020, was the Representation misleading or deceptive, or likely to mislead or deceive (ASOC [23])?
(23) Has JMG suffered loss and damage by reason of Pentana’s contravention (as alleged by JMG) of s 18 of the Australian Consumer Law (ASOC [24])?
(24) Is JMG entitled to recover any loss and damage from Pentana pursuant to s 236(1) of the Australian Consumer Law (ASOC [8A])?
D. Pentana’s counterclaim for the Outstanding Sum, Termination Fee and Damages
(25) Is the Outstanding Sum (or any part of it) for work under the MLA and SLA for which Pentana is entitled to be paid, or is the Outstanding Sum (or any part of it) for work that Pentana is required to perform without charge pursuant to clause 17.4 of the MLA (ARDC [13](b) and (c))?
(26) If the Outstanding Sum is for work under the MLA and SLA for which Pentana is entitled to be paid, did Pentana waive any entitlement to sums owed on outstanding invoices by reason of the Grammenos email (ARDC [14](c))?
(27) If the answer to 26 is “no”, did JMG breach the Agreement by refusing to pay the invoices for the Services totalling the amount of the Outstanding Sum, inclusive of GST (Defence [30])?
(28) Is JMG indebted to Pentana in the amount of the Outstanding Sum plus interest pursuant to clause 16.6 of the MLA (Defence [31])?
(29) Did JMG unlawfully terminate or repudiate the Agreement (Defence [32] and [35])?
(30) Subject to questions 31 to 33 below, by operation of clause 22.5 of the MLA, clause 4 of the SLA, and/or clause 4 of the Berwick BMW SLA, is JMG indebted to Pentana in the amount of the Termination Fee, inclusive of GST (Defence [33]-[34])?
(31) Are each of clause 22.5 of the MLA, clause 4 of the SLA, and clause 4 of the Berwick BMW SLA penalty provisions and therefore unenforceable (ARDC [18](d))?
(32) Is the sum of $1,614,250 a genuine, pre-estimation of the loss and damage suffered by Pentana as a consequence of the termination of the MLA and SLA and the Berwick SLA on 3 March 2020?
(33) Is the sum of $1,614,250 a penalty?
(34) What (if any), is Pentana’s loss and damage arising as a consequence of the alleged unlawful termination by JMG of the MLA, SLA and the Berwick BMW SLA (Defence [37])?

Relevant contractual clauses
111The contractual clauses which the parties rely upon in the MLA and SLA are set out below:
Master Licence Agreement
1. Definitions
1.1 In this Agreement, unless the contrary intention appears:
Defect means a failure of the Base Product used by the Customer to conform to the specifications published at any given time by Pentana Solutions that is reproducible by both the Customer and Pentana Solutions or, if applicable, a failure of a Modification to conform to specifications prepared by Pentana Solutions and approved by the Customer
Services means the services provided by Pentane Solutions to the Customer pursuant to the SLA including but not limited to Maintenance Services and Professional Services delivered by Pentana under and specified in the Agreements;

…
3 Access, Assistance and Performance
3.1 Pentana Solutions will use its best endeavours to deliver the Licensed System to the Customer, and where relevant install the Licensed System and perform the Services, in accordance with the timeframe specified in the SLA.
…

12 Nature of Services
12.1 Pentana Solutions must perform such services as it considers reasonable to ensure the Licensed System remains in substantial conformity with the SLA. Such support will, at the sole option of Pentana Solutions, take the form of:
(a) telephone advice;
(b) remote connection to customer site;
(c) on-site attendance followed by such advice, programming or re-configuration as Pentana Solutions considers necessary; and
(d) such services as Pentana Solutions considers are more effectively provided off-site.

12.2 Pentana Solutions must provide the Services in response to a report by the Customer of a suspected defect or error in the Licensed System, which defect or error allegedly causes the Licensed System to deviate from the Licensed System's normal operating conditions.
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16 Fees, Invoices and Payments
16.1 The Customer must pay the Licence Fees, SaaS Subscription Fees, Enterprise Licence Fees, Service Fees and any other Pentana Solutions invoices at the rate and in the manner specified in the SLA or Order Form. If no invoice period has been specifically agreed, invoices shall be paid within thirty (30) days from the date of invoice.
16.6 Notwithstanding the aforesaid, and without prejudice to the payment due, the Customer shall be entitled to withhold payment in the event that Pentana Solutions delivers a Product or Service which the Customer can prove deviates substantially and materially from what may be expected from a product or service with similar functionalities and technicality as the Product or Service in question, as evident to Pentana Solutions provided that the Customer immediately upon detection of the deviation gives Pentana Solutions notice of such deviation in writing specifying Pentana Solution's deviation. The payment withheld shall be proportionate to the deviation. The Customer must pay Pentana Solutions interest on any amount due and not paid by the Customer within the timeframe required by this Agreement at the prevailing base market interest rate plus 5%.

17 Warranty
17.2 For the duration of the Warranty Period, Pentana Solutions warrants that the Licensed System will operate in conformity with the Documentation in all material respects, but the Customer acknowledges that the Licensed System is of such complexity that it may have inherent defects
17.3 If at any time during the Warranty Period the Customer believes there is a defect in the Licensed System such that the Licensed System does not comply with or cannot be used in conformity with the Documentation in all material respects, the Customer must notify Pentana Solutions of such perceived defect
17.4 Pentana Solutions will investigate the perceived defect notified pursuant to subclause 17.3 and will, upon the verification of the existence of the defect, rectify such defect without additional charge to the Customer.
17.5 If due investigation by Pentana Solutions of a defect reported pursuant to subclause 17,3 reveals that no such defect in fact exists, Pentana Solutions may make an Extra Charge in respect of such investigation.
17.6 Pentana Solutions will not be liable under this clause to the extent that a defect is caused by the Customer or a third party, including the failure of the Customer or a third party to maintain the operating environment or any part thereof, designated in the Documentation, the failure of a Customer or a third party to maintain the hardware or network, or to otherwise use the Licensed System in accordance with recommendations made by Pentana Solutions from time to time, whether in the Documentation or otherwise
17.7 When any hardware or network product is no longer supported or serviced by its supplier and has effectively reached its end of life, the cost of replacement is the responsibility of the Customer. The Customer and Pentana Solutions may jointly agree to either
(a) the purchase of a replacement from Pentana Solutions by the Customer; or
(b) continued support by Pentana Solutions at an agreed Extra Charge.

17.8 Pentana Solutions' warranty applies only to the functioning of the Licensed System and is entirely independent of, and Pentana Solutions is not responsible for, any warranty provided by a third party supplier of hardware or networks that allow the Customer to use the Licensed System.
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21. Liability of Pentana Solutions
21.1 Except in relation to liability for personal injury (including sickness and death), Pentana Solutions is under no liability to the Customer in respect of any indirect, special, incidental loss or damage (including consequential loss or damage) which may be suffered or incurred or which may arise directly or indirectly in respect of the Licensed System, Base Product, Service or Result furnished under or related to the Agreement, including without limitation, damages for loss of profits, goodwill, work stoppage, computer failure or malfunction, loss or alteration of data or any and all other commercial damages or losses, supplied pursuant to this Agreement or in respect of a failure or omission on the part of Pentana Solutions to comply with its obligations under this Agreement even if Pentana Solutions is advised of the possibility thereof

22 Termination
22.3 Without limiting the generality of any other clause in this Agreement, a customer can terminate this Agreement immediately by notice in writing if:
(a) Pentana Solutions is in breach of any terms of this Agreement and has not remedied the breach within thirty (30) days following written notice to do so;
(b) Pentana Solutions becomes, threatens or resolves to become or is in jeopardy of becoming subject to any form of insolvency administration;
(c) Pentana ceases or threatens to cease conducting its business in the normal manner.

22.4 A Customer can terminate this Agreement by giving Pentana Solutions 30 days notice in writing after a period of six (6) months from the date of commencement of this Agreement has passed.
22.5 If a customer terminates this Agreement pursuant to clause 22.4, the customer is responsible for the payment of all fees forming part of this Agreement for the full term of this Agreement including all third party costs, and other fixed term contracts, incurred by Pentana Solutions as part of this Agreement.
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27Precedence
27.1 The documents comprising this Agreement are to be read in the following order of precedence:
(a) the clauses of this Agreement;
(b) any SLA

27.2 Where any conflict occurs between the provisions contained in two or more of the documents forming this Agreement, the document lower in the order of precedence shall where possible be read down to resolve such conflict. If the conflict remains incapable of resolution by reading down the conflicting provisions shall be severed from the document lower in the order of precedence without otherwise diminishing the enforceability of the remaining provisions of that document.

Service Level Agreement:
3 PAYMENT TERMS
Monthly maintenance and support fees are to be directly debited from the Customer's nominated account and deposited into the Pentana Solutions nominated account immediately upon installation.

4 MINIMUM CONTRACT TERM
In the event that the Customer & Pentana Solutions agree to a fixed contract term (as outlined on the Commercial Summary & Customer Acceptance section), then both the Customer & Pentana Solutions are required to fulfil the contract to the end of this term. Should the Customer or Pentana Solutions cancel the contract before the end of the term, then the party requesting to cancel the contract earlier than the agreed term will be required to payout the balance of the remaining contract term.

A. Breach of contract and damages claim
112Before descending into a review of the specific clauses relied upon by JMG in the list of key issues, some observations follow regarding the contract claim made as a whole.
113JMG’s claim for breach of contract rests solely on whether it can prove Pentana breached one or more of the specific contractual provisions upon which JMG relies. It did not plead any claim that the services provided by Pentana, for example, were negligently performed or that the Pentana DMS was not fit for purpose. Nor is any allegation made that there was a total failure of consideration on the part of Pentana or that the Pentana DMS suffered from an inherent defect for which Pentana is liable.
114JMG’s case is that the Pentana failed to deliver a working, functional DMS free of material defects. The defects and errors were evident at go-live and continued thereafter and up until the Notice was served on 29 January 2020. As Pentana failed to fix the defects and issues identified in the Notice by 28 February 2020, being the end date of the Notice Period, JMG was entitled to terminate the Agreement.
115For its part, Pentana accepts there were significant problems with discrete aspects of the Pentana DMS emerging within the first two weeks after going live, but that the Pentana DMS substantially delivered to JMG the functionality it was reasonably expected to deliver.[4] Despite some ongoing issues, the core functions of the Pentana DMS were performing adequately such that it could not be reasonably said that Pentana had failed to deliver the licensed system to JMG. Pentana maintains it had substantially resolved the majority of issues raised by JMG when the latter sought to terminate.
[4]Paragraph 16 of Pentana’s closing submissions
116Pentana did not promise JMG that it would deliver a perfectly functioning DMS within a particular time frame, let alone from the first day of go-live. Nor did Pentana covenant that there would be no defects or bugs within the DMS. In fact, clause 17.4 of the MLA expressly contemplates that defects will exist by establishing a regime whereby a customer is required to notify Pentana of any defects which Pentana is then obliged to investigate and if verified, Pentana will rectify them. At least some period is contemplated by the parties for issues to be raised and resolved by Pentana.

[127] [1927] HCA 59; 40 CLR 98
419While every case turns on its particular facts, courts have struck down such clauses as penalties where the provisions themselves do not provide a means for calculating the net loss a party would suffer if the agreement was terminated early or where there is no effort to differentiate between the type of breach that might trigger the obligation to pay the entire amount due under the agreement.[128]
[128] Zachariadis v Allforks Australia Pty Ltd (2009) 26 VR 47
420In the recent case of Bellas v Powers,[129] Robb J provided a useful summary of the relevant principles to be applied, as stated by the Court of Appeal in Arab Bank Australia Ltd v Sayed Developments Pty Ltd[130] as follows:
[129] [2023] NSWSC 1198 dated 10 October 2023
[130] (2016) 93 NSWLR 231; NSWCA 328 at [69]-[76]
“[61] The legal principles that govern the circumstances in which a provision of a contract will be treated as a penalty, and so be void and unenforceable, are not without difficulty. They have been stated succinctly in a number of recent authorities, and I consider that it is not conducive to clarity for each individual trial judge to restate the principles in his or her own terms.
[62] I consider that the principles were correctly stated by McDougall J (with the agreement of Gleeson JA) in Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328 at [69]-[76], as follows (the reference to “Dunlop” being to the decision of the House of Lords in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79):
[69] The law relating to contractual penalties has been considered by the High Court of Australia in three recent cases:
(1) Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71
(2) Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30, and
(3) Paciocco v Australia and New Zealand Banking Group Ltd (2016) 90 ALJR 835; [2016] HCA 28.
[70] Counsel’s submissions ranged far beyond those cases. However, in my view, the disposition of this appeal need not go so far.
[71] In Ringrow, the Court (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ) accepted at [12] that Lord Dunedin’s speech in Dunlop set out “the principles governing the identification, proof and consequences of penalties in contractual stipulations”, and that the decision in Dunlop “continues to express the law applicable in this country”.
[72] The relevant aspect of Lord Dunedin’s speech (Dunlop at 86–87) reads as follows:
‘2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage …
3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach
…
4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach …
(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid …
(c) There is a presumption (but no more) that it is penalty when ’a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.’

[73] In Andrews, the Court (French CJ, Gummow, Crennan, Kiefel and Bell JJ) referred to Dunlop at [69] and following. Nothing that their Honours there said cast any doubt on the position stated in Ringrow, to the effect that the principles identified by Lord Dunedin expressed the legal position in this country. That is perhaps not surprising, because the real point of the decision in Andrews was to identify that the equitable jurisdiction to relieve against penalties remained alive and well. It followed, in the Court’s view, that the penalty doctrine was not only applicable in the case of breach of contract. Since the present case involves a stipulation operative on breach of contract, that aspect of the decision in Andrews is of no significance.
[74] I turn to the decision in Paciocco. In that case, the High Court held by majority (French CJ, Kiefel, Gageler and Keane JJ) that a late payment fee imposed by the respondent bank on its credit card customers was not a penalty. Their Honours gave separate reasons: Kiefel J (with whom French CJ agreed on this point), Gageler J and Keane J. The majority judgments paid close attention to the reasoning of Lord Dunedin in Dunlop. The following propositions emerge from the majority decision:
(1) Lord Dunedin’s propositions were not “rules of law”, but “distillations of principle”: at [143] (Gageler J); compare at [32] (Kiefel J) and at [260] (Keane J).
(2) The essence of a penalty is that it is a collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach, and thus to compel performance: at [29] (Kiefel J); at [127], [159], [166] (Gageler J); at [254], [259], [273] (Keane J).
(3) One way of testing whether the impugned stipulation is penal — intended to punish — is to inquire whether the sum that it stipulates to be payable on breach (as I have indicated, the equitable origins and continuing equitable operation of the principle have no present relevance) is to ask whether the stipulated sum is extravagant or out of all proportion to, or unconscionable in comparison with, the maximum amount of damage that might be anticipated to follow from the breach: at [29], [54] (Kiefel J); at [158]-[162] (Gageler J); at [221] (Keane J).
(4) ‘Damage’ in this sense is not limited to damages recoverable upon breach of contract, but may extend to damage, or losses, caused by the impairment of other legitimate commercial interests that were intended to be protected by the stipulation: at [33], [42]-[47] (Kiefel J); at [145], [160][162] (Gageler J); at [216], [283] (Keane J).
(5) The analysis is to be made at the time, and taking into account the circumstances applicable, when the contract was made; not at the time of breach; the analysis is prospective, not retrospective (or as is said in some judgments, is ex ante, not ex post): at [62] (Kiefel J); at [169] (Gageler J).
(6) Mere disproportion between the stipulated sum and the possible damage is not enough to indicate “penalty”; the disproportion must be such that it is unconscionable for the lender to rely on the stipulation: at [54] (Kiefel J), at [164] (Gageler J); at [221], [240], [279] (Keane J).
[75] There are two remaining relevant points to be derived from the decision in Paciocco. The first is that the onus of proving that a contractual stipulation amounts to a penalty rests with the person asserting it. As Gageler J said in Paciocco at [167]:
‘[167]…The customers bore the evidentiary and persuasive onus throughout that inquiry.’

[76] The second point relates to the ‘presumption’ identified by Lord Dunedin in Dunlop at his point 4(c). That presumption is the subject of the first ground stated in the notice of contention. As Keane J said in Paciocco at [265], that presumption is “a weak one”. Further, as Gageler J said at [168], the invariable nature of the penalty compared to the amount overdue or the length of delay, although it cannot be ignored, is ‘only weakly indicative of the character of the late payment fee as a punishment.’
In relation to the ‘presumption’ to which his Honour referred at [76] (which was a reference back to par 4(c) of Lord Dunedin’s speech set out at [72]), McDougall J added at [100]:
[100] I turn to the notice of contention. The first ground relies on Lord Dunedin’s presumption (expressed in his Lordship’s point 4(c) in Dunlop). That is the ‘weak’ presumption to which Gageler and Keane JJ referred in Paciocco. If there were no other evidence, the presumption might be of some value. However, where there is evidence, the characterisation of the stipulation should be considered by reference to that evidence.”

421Pentana seeks the termination fee pursuant to clause 4 of the terms and conditions of the SLA, representing the balance of the fees of the remainder of the contract term. This clause provides as follows:
“In the event that the customer and Pentana Solutions agree to a fixed term (as outlined in the commercial summary and customer acceptance section), then both the customer and Pentana Solutions are required to fulfill the contract to the end of this term. Should the customer or Pentana Solutions cancel the contract before the end of the term, then the party requesting to cancel the contract earlier than the agreed term will be required to pay out the balance of the remaining contract term.”[131]
[131]Clause 4 of the terms and conditions of the Waverly BMW SLA is identical to clause 5 of the terms and conditions of the Berwick BMW SLA [CB Part 1,1358]
422Pentana’s case is that the clause 4 of the SLA (and 5 of the Berwick SLA) and clause 22.5 of the MLA are not penalty provisions that are unenforceable. The termination fee calculated by reference to those clauses represents the parties’ genuine pre-estimate of Pentana’s loss and damage caused by a customer’s early cancellation of the Agreement.
423Pentana made submissions and provided evidence from Mr Grammenos, in particular, his second witness statement which dealt with confidential aspects as to how the amount claimed represented liquidated damages and therefore did not amount to an unenforceable penalty. These matters are dealt within the confidential reasons attached to this judgment and marked Annexure A.
424In the alternative, if the Court finds the termination fee is a penalty, Pentana claims an amount equal to the termination fee as unliquidated damages caused by JMG’s unlawful termination and/or repudiation.[132] This alternative claim falls for determination under issue 34 of the agreed issues, which is the final issue.
[132]W & J Investments Pty Ltd v Bunting [1984] 1 NSWLR 331, 335-6 (Lee J)
425In response, JMG says that if its conduct constitutes a repudiation of the Agreement which was accepted by Pentana, then Pentana was the party that terminated the Agreement and so the conditions in clause 4 do not arise. Pentana disputes this contention. It says that JMG is liable to pay the termination fee. It was JMG, the customer, who requested to cancel the contract before the end of the term and is therefore “required to pay out the balance of the remaining contract term” to Pentana. The relevant clause is triggered upon a cancellation of the Agreement, and the obligation to pay out the balance of the remaining contract term attaches to the party requesting to cancel the contract. Thus, it is the contracting party whose conduct can be construed as amounting to a request to cancel the Agreement that is the focus of the relevant clause. The clause does not use a legal terminology of termination or acceptance of repudiatory conduct. Instead, the language used is in plain English and is directed towards the moving party behind the cancellation of the Agreement.
426Accordingly, Pentana argues that the construction put forward by JMG produces an uncommercial result. If its construction were correct, a repudiating party will be effectively exempt from the consequences imposed by this clause. That should be the case no matter the identity of the repudiating party leading to the perverse result that would discourage forthright termination of the contract in favour of repudiatory conduct intended to force the innocent party to bring the Agreement to an end. Consequently, Pentana says that JMG is indebted to it for the amount of the termination fee inclusive of GST.
JMG’s submissions
427If the Court determines that Pentana has breached the Agreement as contended by JMG, and/or that JMG has a right to terminate the Agreement, then Pentana has no right to claim damages under either the termination fee provisions of the Agreement or for the alleged repudiation by JMG.
428JMG submits it has a contractual entitlement to withhold payment of the invoices in circumstances where Pentana has failed to deliver a working Pentana DMS.
429JMG alleges that if its conduct constituted a repudiation of the Agreement, and Pentana accepted that repudiation, Pentana was the party that terminated the Agreement and so the conditions in the above clause do not arise.
430JMG claims termination of the Agreement occurred pursuant to clause 22.3 of the MLA. That provision provides for a specific process for termination for breach. JMG alleges this is not termination under clause 22.4. JMG contends that they have not sought to ‘cancel’ the Agreement, instead Pentana has repudiated the agreement by its breaches of clauses 3.1, 12.2, 17.2 and 17.4 of the MLA. Therefore clause 22.5 is not engaged. As a result, Pentana cannot seek payment of the full term of the Agreement under clause 22.5 of the MLA.
431In response to Pentana’s reliance on clause 4 of the SLA, JMG submits that it must be read down to only apply to termination without cause and not termination for cause under clause 22.3 of the MLA. This interpretation is supported by clause 27 of the MLA which provides that the terms of the MLA take precedence over the terms of the SLA. JMG contends that a valid right to terminate under clause 22.3 of the MLA must be read so as to permit termination without triggering an obligation under the SLA to pay out the entire amount due under the Agreement.
432JMG submits it is impermissible for Pentana to seek to enforce provisions of the Agreement that operate on the basis that it has or will perform its obligations under the Agreement. JMG relies on the general rule of contractual construction that it is not presumed that the parties to a contract intend that one party be entitled to take advantage of their own breach of contract to obtain a benefit or advantage over the other party. JMG contends that Pentana may not take advantage of its own breach of the agreement, in failing to deliver an operative Pentana DMS free from error or defect in accordance with the terms of the SLA by seeking compensation or damages analogous to the fees that would be paid over the full term of the Agreement.
433In the alternative, JMG contends that if the Agreement was not validly terminated, or if the variation did not bring the right to seek a Termination Fee to an end, and Pentana has suffered loss and damage as a result of the termination, then clauses 4 of the Terms and Conditions of the SLA and clause 22.5 of the MLA are penalty provisions and are unenforceable. JMG submits that $1,614,250 is not a ‘genuine pre-estimation’ of the loss and damage suffered by Pentana as a consequence of the termination of the MLA and SLA.
434In relation to clause 4 of the SLA, it is worth observing that this provision is not only a penalty, if enforced, it has the capacity to result in an absurd outcome. That is, the provision provides that if either party cancels the contract before the end of the term, then the party who cancels the contract is required to payout the balance of the remaining contract term. This means that if Pentana were to cancel the contract early, it would be required to pay JMG the balance of the contract sum.
435In construing clause 4 of the SLA, it necessary to have regard to the termination provisions in the MLA. Any loss and damage (which is not admitted) ought to be confined to fees equivalent to one month in total (i.e., one recurring monthly fee) for the provision of services under the MLA and SLA.
436In the event that the customer decided to terminate the MLA and the SLA pursuant to clause 22.4, a customer is required to give Pentana 30 days’ notice in writing after 6 months from the date the MLA/SLA commenced. The requirement that 6 months pass is not an arbitrary period of time. Nor is the requirement that 30 days’ notice be given to Pentana. It is contended that this clause points to the loss and damage which can reasonably be claimed by Pentana in the event that JMG terminates under clause 22.4. The 6 months term has been included in the MLA is because Pentana would have recuperated any costs in implementing the product after 6 months.
437As a matter of construction, the Court ought to assume that this provision has work to do otherwise it would not be included in the MLA.
438The MLA and SLA were signed by JMG on 15 March 2019. Six months from that date is 15 September 2019. By 15 September 2019, six months had elapsed since the date the MLA and SLA were signed. JMG was required to give 30 days’ notice of its intention to terminate the Agreement pursuant to clause 22.4 of the MLA (assuming it had terminated under this clause – which it did not). Consequently, Pentana would only have been entitled to one month’s recurring monthly fee and this represents a genuine pre-estimate of any loss and damage to Pentana.
439In relation to Berwick BMW, JMG maintains that Pentana is not entitled to any sum in respect of this dealership because the product was never rolled out at Berwick BMW. However, if any fees are payable in respect of Berwick BMW, then the loss and damage ought to be confined in the first instance to the upfront fee of $15,000 and the sum equivalent to the recurring monthly fee for seven months, for the provision of services under the MLA and Berwick SLA, from the date of entry into the Berwick SLA (for the reasons set out above).
Analysis
440JMG argues that clause 22.5 of the MLA is an unenforceable penalty clause. But Pentana expressly stated it did not rely upon that clause but instead relied solely upon clause 4 of the SLA. True it is, as JMG pointed out, that the MLA will prevail over the SLA under clause 27 if there is a conflict, but in my view, it was unnecessary to consider clause 22.5 when Pentana did not claim under that provision. Clause 22.5 only arises for consideration when a customer gives a notice in writing that it wishes to terminate after a period of six months has elapsed from the commencement of the Agreement. JMG did not rely upon this clause and had argued unsuccessfully that it terminated the Agreement under clause 22.3 for breach by Pentana.
441I find that JMG cancelled the contract for the purposes of clause 4. It served the Notice of Termination and sought to end the contract. It was never the desire of Pentana to end the Agreement. I consider the argument put by JMG that because Pentana accepted the repudiation, Pentana therefore ‘cancelled’ the contract to be strained and unsound. If correct, it would lead to an absurd result and work a commercial nonsense in that a repudiating party would be relieved of its obligations under this clause. This cannot have been the parties’ intention viewed objectively.
442Clause 4 clearly states that the cancelling party must pay out the balance of the remaining contract term. The amounts claimed by Pentana in its counterclaim reflect the balance of the licence fees due under the Waverley BMW and Berwick BMW dealerships agreements, plus a capital charge for Berwick BMW. There was no challenge made as to the accuracy of these calculations. The challenge made is that Pentana cannot recover those sums because they would amount to an unenforceable penalty.
443In my view, Pentana is entitled to be paid the termination fee claimed under clauses 4 and 5 of the SLA’s for Waverley and Berwick BMW respectively. The amount claimed is a genuine pre-estimate of Pentana’s loss and damage consequent upon a cancellation by a customer and was designed to protect Pentana’s legitimate commercial interests. I am satisfied that the fee claimed is not an unenforceable penalty for the confidential reasons set out in Annexure A.

Issue 34
444Given I have found that the termination fee is not a penalty, Pentana is entitled to an award of liquidated damages for the amount claimed. That being so, it is unnecessary to determine Issue 34, which was whether this sum could be recovered in the alternative as unliquidated damages.

Conclusion
445In conclusion, JMG’s claim will be dismissed. I was not satisfied JMG proved Pentana breached the contractual clauses relied upon by JMG. Nor was I satisfied the Agreement was varied as pleaded by reason of the Grammenos email, thereby giving JMG a separate right to terminate the Agreement and recover the licence fees paid to Pentana. The misleading and deceptive claim was not established.
446Pentana succeeded in its counterclaim and is entitled to have judgment entered in its favour in the sums of $38,229.48 and $1,614,250.
447I will hear from the parties as to the precise form of orders to be made consequent upon these reasons, including costs and interest.

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Certificate

I certify that these 134 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 3 November 2023.

Dated: 3 November 2023

Associate to Her Honour Judge A Ryan