Khuu and Lee Pty Ltd v Micropos Pty Ltd - [2010] SADC 14

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
KHUU AND LEE PTY LTD v MICROPOS PTY LTD AND OTHERS
[2010] SADC 14
Judgment of His Honour Judge Robertson
2 February 2010
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - REPRESENTATIONS
Claim under the Trade Practices Act 1974 and Fair Trading Act 1999 (Vic) for misleading or deceptive conduct – contract for the sale of a retail point of sale computer system – Plaintiff operated Asian supermarket and warehouse – Plaintiff alleged representations prior to the contract that system could be developed to also deliver warehouse functions – representations alleged to be made in meeting between Director of Plaintiff and Third Defendant acting on behalf of First Defendant in a meeting on 13 March 2004 – representations alleged to have been affirmed by Second Defendant on behalf of First Defendant in a meeting between the Director of the Plaintiff and Second Defendant on 14 March 2004 – claim for damages.
Held: Alleged misrepresentations not proved – claims for misleading or deceptive conduct dismissed

SALE OF GOODS - CONDITIONS AND WARRANTIES - IMPLIED CONDITIONS AND WARRANTIES
Contract for sale of a retail point of sale computer system – conditions of reasonable fit for purpose and merchantable quality implied in the contract by the Goods Act 1958 (Vic) – alleged that design problems of some functions and malfunction of some functions made the System not fit for purpose or of merchantable quality - claim for damages.
Held: System not fit for purpose or of merchantable quality – breach of implied condition in Contract by Micropos Pty Ltd – damages awarded of $47,307.56
Trade Practices Act 1974 (Cth) ss 53, 82; Victorian Fair Trading Act 1999 (Vic) ss 9, 159; Victoria Goods Act 1958 (Vic) ss 3, 16, 19, 52, referred to.
Bonython v The Commonwealth (1950) 81 CLR 486; Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 149 CLR 599; Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48; Southern Cross Homes (Broken Hill Inc) v Chapman [1999] SASC 491; Grant v Australian Knitting Mills Pty Ltd (1933–34) 50 CLR 387; Grant v The Australian Knitting Mills Ltd (1935) 54 CLR 49; Grant v Australian Knitting Mills Ltd [1936] AC 85; Lexmeade (Basingstoke) Ltd v Lewis [1982] AC 225; George Wills and Co Ltd v Davids Pty Ltd (1957) 98 CLR 77; David Jones Ltd v Willis (1934) 52 CLR 110; Toteff v Antonas (1952-53) 87 CLR 647; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; Re Robert Durham and David Greig v Aduke Pty Limited and Harry Hollander [1989] FCA 451; Westsub Discounts Pty Ltd v Idaps Australia Ltd (1990) 17 IPR 185, applied.
Vacwell Engineering Co Ltd v BDH Chemicals Ltd [1971] 1 QB 88; Milne Construction Ltd v Expandite Ltd [1984] 2 NZLR 163; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Wardley Australia Ltd v Western Australia (1992) CLR 514; Marks v GIO Australia Holding Limited (1998) 196 CLR 494, discussed.
Houghton v Arms (2006) 225 CLR 553; Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; Hardwick Game Farm v Suffolk Agriculture Poultry Producers Association [1969] 2 AC 31; Field v Leeds City Council [1999] CPLR 833; Factortame Ltd v Secretary of State for Environment, Transport and Regions (No 2) [2003] QB 381; FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33; Flavel v State of South Australia (2007) 96 SASR 505; Pavich v Bobra Nominees Pty Ltd (1988) ATPR [Digest] 46-039; Unisys Australia Limited v RACV Insurance Pty Ltd [2004] VSCA 81; Hadley v Baxendale (1854) 9 Exch 341; NRMA Ltd v Morgan (1999) 31 ACSR 435, considered.

KHUU AND LEE PTY LTD v MICROPOS PTY LTD AND OTHERS
[2010] SADC 14
CONTENTS
Page
1.Introduction........................................................................................................... 6
2.Application of the Victorian Fair Trading Act and Goods Act............................. 7
3.History of the Plaintiff and its Business............................................................... 9
4.History of Micropos............................................................................................ 10
5.Plaintiff’s Compalints.......................................................................................... 10
6.POSWorld Retail System.................................................................................... 11
7.Back Office Computer and POS Terminals........................................................ 14
8.Ms Zheng’s Description of the POSWorld Retail System................................. 15
9.Function of the Back Office Computer............................................................... 16
10.Summary of the Plaintiff’s Case.......................................................................... 17
11.Summary of the Defendants’ Case...................................................................... 18
12.Misleading or Deceptive Conduct – Legal Principles....................................... 19
13.Evaluation of Witnesses...................................................................................... 20
14.Misleading or Deceptive Conduct Pleaded In The Statement of Claim............ 22
15.Factors Leading up to Mr Khuu’s visit to Melbourne....................................... 24
16.Mr Khuu’s Trip To Melbourne.......................................................................... 26
17.Meeting with Ms Zheng on 13 March 2004....................................................... 27
18.Ms Zheng’s evidence regarding the events of 12 March and 13 March 2004. 31
19.Evidence of Ms Zheng regarding preparation and delivering of Quotation...... 34
20.Mr Khuu’s Evidence Regarding Receipt of The Quotation.............................. 34
21.Mr Khuu’s Evidence of the Telephone call to Ms Zheng................................. 35
(i)Notes of Conversation made by Mr Khuu...................................................... 36

22.Ms Zheng’s Evidence of the Telephone Conversation..................................... 37
23.The Meeting at Scicluna’s on 14 March 2004.................................................... 37
(i) Evidence of Mr Khuu.................................................................................... 37
(ii) Evidence of Ms Zheng................................................................................... 39
(iii) Evidence of Mr Mac...................................................................................... 40
(iv) Credibility Issue on Thermal Printer.............................................................. 41

24.The Contract....................................................................................................... 42
25.Paragraph 6 of the Statement of Claim – Ms Zheng........................................... 43
26.Installation of the POSWorld Retail System....................................................... 43
(i) The First Visit; 24 - 26 March 2004.............................................................. 44
(ii) Second visit; 3 – 6 April 2004....................................................................... 44
(iii) Evidence of Ms Zheng regarding the Second Visit....................................... 46
(iv) Evidence of Mr Khuu regarding visits of Mr Mac......................................... 47

27.ISDN Line............................................................................................................ 48
28.Third Visit of Mr Mac: 30 May – 2 June 2004................................................... 49
29.Evaluation of the Evidence of the Visits by Mr Mac.......................................... 51
30.Conclusions Regarding The Visits of Mr Mac................................................... 57
31.Issue of Run Time Errors................................................................................... 57
(i) Mr Khuu’s evidence..................................................................................... 59
(ii) Evidence of Ms Zheng................................................................................... 61
(iii) Evidence of Mr Mac...................................................................................... 62
(iv)Visit To Adelaide by Ms Zheng: 24 – 26 April 2004...................................... 63
(v) Evidence of Landy Quin................................................................................ 63
(vi) Evidence of Mr Khuu Regarding Ms Zheng’s Visit........................................ 64
(vii)Screen Capture Dated 22 June 2004............................................................ 64

32.Evaluation of the Evidence Regarding Run Time Errors.................................. 66
33.Introduction to the Issue of Executable Files on The Back Office Computer.. 68
34.EGBOffice Program Versions Found on EGBOffice Computer........................ 70
35.EGBOffice Program Versions Found on EGBOffice1 Computer...................... 70
36.Introduction to the 31 May Version Issue......................................................... 73
37.Introduction to Preliminary Issues Relevant to the Executable File................ 75
38.PCAnywhere Program......................................................................................... 76
39.Issues of Copying Process of 30 June Executable File..................................... 76
(i)Mr Heyworth’s involvement with the System in May/June 2005.................... 76
(ii)Events of November 2005.............................................................................. 77
(iii)Copies of Executable File.............................................................................. 78

40.Issue of Third Party Interference....................................................................... 79
(i) Real VNC Program........................................................................................ 79
(ii) Mr Heng Lee................................................................................................. 79

41.The Executable File Versions Dates Issue........................................................ 81
(i) Mr Heyworth’s Evidence regarding the Dates of the Versions...................... 81
(ii) Plaintiff’s Chain of Evidence Submission...................................................... 83
(iii)Other “Objective” Evidence.......................................................................... 88
(a)Facsimile of 17 May 2004 88
(1)Packing List Function.......................................................................... 89
(2)Tax Invoice.......................................................................................... 91

(b) Other functions on 5 June 2004 Version................................................. 93
(1) New Supplier Window Modification................................................... 93
(2)Stock ID Problem............................................................................... 94

42.31 May 2004 Version.......................................................................................... 94
(i) Ms Zheng’s Evidence on 31 May Version..................................................... 95
(ii) Evidence of Mr Khuu.................................................................................... 96
(iii)Demonstration of 31 May Version................................................................. 96
(iv) The Issue of D92 and 31 May Version.......................................................... 99

43.Conclusions on the Executable File Versions Dates Issue and the 31 May 2004 Version issue 104
44.Issue of Customising......................................................................................... 107
45.Correspondence In July and August................................................................ 108
(i) Fax – 23 July 2004...................................................................................... 109
(ii) Subsequent Correspondence....................................................................... 111

(iii) Submissions of Plaintiff on Fax of 23 July 2004......................................... 115
46.Misrepresentation Claim conclusion................................................................ 118
(i)Evaluation of Mr Khuu’s Evidence.............................................................. 120
(a)The Role of paragraph 6 of the Statement of Claim 120
(b)The Bare Bones Submission 121
(ii).The Role of the Contract.............................................................................. 122
(iii)The Absence of the Warehouse Functions in the Contract........................... 123
(iv)The Meeting of 13 March 2004................................................................... 125
(v)Lack of Complaints...................................................................................... 126
(vi)14 March 2004 Notes.................................................................................. 127

(vii).     Documentary Evidence –Fax of 17 May 2004........................................ 127
(viii)     Documentary Evidence – Fax of 23 July 2004....................................... 129
         (ix) Incremental Increase in the Size of the Executable File............................... 129
(x)   Summary...................................................................................................... 129
         (xi) Meeting at Scicluna’s of 14 March 2004.................................................... 130

47. Conclusion......................................................................................................... 131
48.Sale of Goods Claim – Introduction.................................................................. 131
49.Sale of Other Systems in Australia.................................................................... 132
50.Section 19 of The Goods Act............................................................................. 132
51.Expert Evidence................................................................................................ 133
52.Legal Principles................................................................................................. 134
53.Issues Regarding the Expertise Evidence....................................................... 137
(i)Qualifications and Experience of Mr Heyworth.......................................... 138
(ii)Qualifications and Experience of Ms Zheng................................................ 139

54.Brief Summary Mr Heyworth’s June 2005 Report.......................................... 140
(i)Grading of the Severity of the Criticisms..................................................... 140
(ii) Classification of Criticisms by Type............................................................. 141
(iii) Guidelines Relied Upon by Mr Heyworth.................................................... 142
(iv) Issue of Destructive Testimony..................................................................... 143
(v)The Utility of Mr Heyworth’s Report as a Result of the Misrepresentation
Case Conclusion................................................................................................. 144
(vi)Brief Summary of Mr Heyworth’s conclusions............................................. 144

55.Failure to Cross-Examine Mr Heyworth on Ms Zheng’s Report.................... 145
56.Plaintiff’s Case based upon Mr Heyworth’s June 2005 Report....................... 147

57. 1. Functions That Do Not Store or Manipulate Data Properly and

Accurately................................................................................................... 148

1.1 Functions that record data incorrectly....................................................... 148
(i)Paragraph 212 – Sales Report Item Costs Incorrect............................... 148
(ii)Paragraph 217- Debtor Credit Report Totals Do Not Match Invoices 150
(iii)Paragraph 220 - Debtor Credit Report Shows Wrong Totals................. 154
1.2 Functions that either manipulated data improperly, in the sense that they did so without the user taking action or giving permission, and/or did not record the
data provided by the user............................................................................ 155
(i) Paragraph 121 – Item Maintenance Screen Event and Calculation Errors 156
(ii)Paragraph 124 – Item Maintenance Quantity Calculation Error 157
(iii)Paragraph 125 – Item Maintenance Profit Calculation Error............... 159
(iv Paragraph 126 – Item Maintenance Last Item Cost Not Saved
Paragraph 180 – New Debtor Error on Delivery Information................ 161

(v)Paragraph 185 – Account Sale Edit Loses Debtor Discount Level......... 162
(vi) Paragraph 254 – Correction Stock Adjustment Multiple Adjustments Not
Visible After Saving............................................................................... 165

1.3Functions That Permit The User To Overwrite And Delete Data Without
Warning...................................................................................................... 166
(i)Paragraph 155 – Purchase Sundry Invoice Entry Overwrites Data Without Warning 166

(ii) Paragraph 164 – Purchase Order View Has No Delete Confirmation 168
(iii)Paragraph 251 – Correction Delete Item............................................... 169
1.4Functions that do not check to see whether the data being entered by the user is
appropriate for that field ............................................................................ 170
1.5Functions that allow data to be manipulated or altered in circumstances where it
would be inappropriate to do so................................................................. 172

(i)Paragraph 186 – Account Sale Credit Allows Change After Invoice Printed 172
(ii)Paragraph 230- Purchase Report Change Invoice 174

58.2. Functions that, when operated by the user in any way could cause the System to cease functioning [“crash”]............................................................................................................ 175
(i)Paragraph 99 – Application Crashes When Left Running Overnight.......... 175
(ii)Paragraph 101 – Application Crashes Trying To View Two PDF Reports... 175
(iii)Paragraph 149 – PDE Stock Take Stock Report Crashes........................... 177
(iv)Paragraph 165 – Purchase Order View Fails After Export To Excel........... 179

(v)Paragraph 189 – Account Sale Crashes On Delivery Address Change....... 180

(vi) Paragraph 205 - Report Collect Transactions Error.................................... 180
(vii)Paragraph 207 – Sales Report Pie Chart Run Time Error
Paragraph 208 – Sales Report Bar Graph Run Time Error................................ 181
(viii)Paragraph 213 – Sales Report Crashes When Selecting Department..... 183
(ix)Paragraph 221 – Debtor Credit Report Tree Error..................................... 184
(x)Paragraph 231 – Stock Report Run Time Error On Export......................... 185

59.3. Functions that when operated by the user in an unexpected or incorrect fashion, cause the System to cease functioning [“crash”]............................................................................... 186
3.1Functions where the user entered data exceeding an unknown field length
caused the System to cease functioning [“crash”]...................................... 186
(i)Paragraph 110 - System Input Limited To Unknown Number Of Characters 186
(ii)Paragraph 135 – Inventory Category Maintenance Data Base Field Length Error 188
(iii)Paragraph 158 – Purchase New Supplier Cannot Identify Length Of Data To
Type Into Fields...................................................................................... 190

(iv) Paragraph 179 – New Debtor Error With Long Data........................... 190
(v)Paragraph 188 - Account Sale Crashes With Long Comment................. 191
(vi)Paragraph 253 – Correction Stock Adjustment Run Time Error With Long
Comment............................................................................................... 192

(vii) Conclusions.......................................................................................... 192
3.2Functions where the user makes a mistake in entering data cause the System to
cease functioning [“crash”]........................................................................ 195
(i)Paragraph 133 Inventory Item Sale Data Error..................................... 195
(ii)Paragraph 177 – System Validation Logic Fails Adding New Debtor 196
(iiiParagraph 178 – New Debtor Number Not Validated............................. 196
(iv)Paragraph 184 – Account Sale Crashes With Wrong Debtor Number ... 198
(v)Paragraph 194 – Review Invoice Crashes With Non-Existent Invoice.... 199
(vi)Paragraph 195 – Review Invoice Crashes With Non-Numeric Input...... 199
(vii)31 May 2004 Version .......................................................................... 200

60.4. Functions that are partially completed or “inoperative” functions............. 201
(i)Paragraph 176 – Debtor Search Function Missing..................................... 201
(ii)Paragraph 183 – Debtor Credit Limit Unused............................................. 201
(iii)Paragraph 198 – Debtor Payment Terms Cannot Be Varied....................... 204
(iv)Paragraph 199 – Invoice Report Content Errors........................................ 204
(v)Paragraph 201 – Picking Slip Not Printed.................................................. 206
(vi)Sub-Menu Items Which Have No Function.................................................. 208
(vii)Paragraph 222 – Account Sales Payment Features and Debtor Credit Reporting 210
(viii) Paragraph 233 – Report Account Receivable Missing or Unavailable....... 212
(ix)Paragraph 243 – Administrator User Function Disabled
Paragraph 244 – Administrator Permissions Disabled................................ 213
(x)Paragraph 245 – Administrator Login History Lost..................................... 214
(xi)Paragraph 255 – Program Online Help Missing......................................... 214

61.5. Functions That Are Defective But Are Not Able To Be Categorised........ 219
(i)Paragraph 128 – Item Maintenance Unable To Edit Promotion Special Prices 219
(ii)Paragraph 197 – System Cannot Reprint Invoice At Historical Date........... 220
(iii)Paragraph 232 – Stock Report Does Not Show Items With Zero Stock........ 223

62.Point of Sale Software........................................................................................ 225
(i)Paragraph 256 - Touchscreen Menu Item Error......................................... 225
(ii)Paragraph 257 – Touchscreen Security Error............................................ 226
(iii)Paragraph 258 - Touchscreen Payout Security Error................................. 227
(iv)Paragraph 259 – Touchscreen SecurityError............................................. 228
(v)Paragraph 261 – Touchscreen Refund Calculation Error........................... 229
(vi)Paragraph 264 – Touchscreen Account Update Error................................ 230

63.Poor Design Functions...................................................................................... 231
64.Evidence of Mr Paul Vermont........................................................................... 232
65.Conclusion......................................................................................................... 233
66.Damages in the Misrepresentation claim......................................................... 241
(1)Introduction ................................................................................................ 241
(2)Legal Principles........................................................................................... 242
(3)Issues of Causation..................................................................................... 244
(4)Expert Evidence........................................................................................... 245
(5)Heads of Damages Claimed......................................................................... 246
(i)System Cost - $48,818.28........................................................................ 246
(ii)PC Anywhere Cost - $294.55 248
(iii)Modem/Printer Cost – $870.00.............................................................. 249
(iv)Data Entry - $9,288............................................................................... 249
(v)Wasted Time – $85,548.05...................................................................... 256
(a)Convert Back to Manual System, While Research – 585 Hours........ 271
(b)Data Distribution Error – 32 Hours................................................. 273
(c)Data Error- 5.08 Hours.................................................................... 274
(d)Generates Sales/Supplier Order/Statement – 528.94 Hours.............. 275
(e)Manual Invoicing to Customers – 117.3 Hours................................ 282
(f)Price Tagging when Price of Stock Changed – 206.24 Hours.......... 283
(g)Replenishment of Stock at Shop or Warehouse – 591.92 Hours....... 285
(h)Research New Software – 71 Hours................................................. 287
(i)Rotate Stock Between Shop and Warehouse – 80.4 Hours............... 287
(j)Tracking Previous Cost for Price Comparison – 27.58 Hours.......... 288
(k)Transfer Stock to/from Warehouse and Shop – 160.5 hours............ 289
(l) Period from January 2005 to 31 March 2005.................................. 291
(m)Hourly Charge Rate.......................................................................... 293
(n)Conclusion........................................................................................ 294

(vi)Out of Date Stock - $165,914.80......................................................... 297
(vii)Sale of Stock Below Cost - $23,405.46................................................. 318
(viii)Conclusion........................................................................................ 321

67.Sales of Goods Claim Damages......................................................................... 322
(i)Formulation of Claim................................................................................... 322
(ii)Measure of Damages................................................................................... 322
(iii)Consideration of the Heads of Damage....................................................... 323

(a) Introduction 323
(b) System cost 323
(c)PC anywhere Cost.................................................................................. 324
(d)Modem/Printer Cost 324
(e)Data Entry ............................................................................................. 324
(f)Wasted Time............................................................................................ 325
(1)Convert Back to Manual System While Research........................... 325
(2)Data Distribution Error and Data Error........................................ 326
(3)Generate Sales/Supplier Order/Statement...................................... 327
(4)Manual Invoicing to Customers..................................................... 327
(5)Price Tagging When Price Stock Changed.................................... 327
(6)Tracking Previous Cost for Price Comparison.............................. 328
(7)Summary........................................................................................ 328
(8)Replacement Cost........................................................................... 328

(g)Conclusion..................................................................................... 330

76.Counterclaim..................................................................................................... 330

Introduction

These proceedings arise from the sale by the Defendant Micropos Pty Ltd (“Micropos”) to the Plaintiff in March 2004 of what has been described as a integrated hardware and software computer System in March 2004. At the time Micropos described the System as the POSWorld Retail Store Business Management P.O.S. System. (sometimes called the “POSWorld Retail System” and sometimes called “the System”). It was a point of sale retail System, suitable for a small to medium size retail grocery business, including Asian stores. In March 2004 the System was being used by a substantial number of small or medium size independent grocery retailers, mainly Victoria. The installation of the System at the Plaintiff’s Warehouse commenced in late March 2004 and continued into early April. In the months thereafter the business relationship between the Plaintiff and Micropos continued until there was a complete breakdown of the relationship in late July/early August 2004. The proceedings were instituted by the Plaintiff about the middle of August 2004.
The Plaintiff’s claim is divided into two parts. The first part of the claim seeks damages against Micropos for misleading or deceptive conduct in breach of Section 52 of the Trade Practices Act 1974 (Cth) (“TPA”) and Section 9 of the Fair Trading Act 1999 (Vic) (“FTA (Vic)”. The claim against the second Defendant Trong Mac (“Mr Mac”) and the third Defendant Ning Lan Zheng (“Ms Zheng”) is for damages, for misleading or deceptive conduct in breach of Section 9 of the FTA (Vic). At all relevant times each of them were employees of Micropos. Initially, the claim against Mr Mac and Ms Zheng, included a claim as accessories to the alleged breach of Section 52 by Micropos, pursuant to Section 75B of the TPA. This claim was abandoned at the stage of final addresses.
The claim under the TPA and the FTA (Vic) against Micropos and under the FTA (Vic) against Mr Mac and Ms Zheng arise from alleged misrepresentations made by Ms Zheng and Mr Mac on 13 and 14 of March 2004 prior to the Plaintiff entering into contract for the purchase of the System. Initially, the claims under the Fair Trading Act Legislation were made under the FTA (Vic) and alternatively the South Australian Fair Trading Act (1987), but towards the end of the Trial the Plaintiff elected to seek relief solely under Section 9 the FTA (Vic). I will sometimes call this claim the “Misrepresentation Claim”.
The claim for damages in the Misrepresentation Claim was initially for the sum of five hundred and twenty six thousand, five hundred and sixty four dollars and ninety-five cents ($526,564.95). However, by the time of the final address, the Plaintiff had reduced the quantum of some heads of claim and abandoned others leaving a claim for three hundred and sixty two thousand, seven hundred and ninety dollars and nine cents ($362,790.09) damages. During the final address Mr Ower, Counsel for the Plaintiff, further reduced the claim to a sum of three hundred and thirty four thousand one hundred and thirty nine dollars and fourteen cents ($334,139.14)
The second part of the Plaintiff’s claim is against Micropos solely and it arises from the Victorian Goods Act 1958 Part I (“Goods Act (Vic)” ). The Plaintiff claims that Micropos breached implied conditions in the Contract for the sale and supply of the System alleging that the System was not reasonable fit for purpose nor was it of merchantable quality. It is claimed that such conditions were statutorily implied into the Contract of sale and supply by Section 19 of the Goods Act (Vic). Under this part of the claim, the Plaintiff seeks one hundred and eighteen thousand, and seventy seven dollars and forty five cents $118,077.45 damages. I will sometimes refer to this part of the Plaintiff’s claim as the “Sale of Goods Claim”.
The Sale of Goods Claim was initially brought under the Goods Act (Vic) and the South Australian Sale of Goods Act (1895). However, towards the end of the Trial the Plaintiff elected to maintain its claim solely under the Goods Act (Vic).
I should mention that many of the heads of loss and damage, which form the Plaintiff’s claim against Micropos under the Goods Act (Vic) are also included in the claim under the TPA and the FTA save for one head, namely “Replacement Cost”. The Plaintiff does not seek to claim those same losses from Micropos under the Goods Act (Vic), if it is successful in its claim under the TPA or FTA (Vic).
There is one matter which I should mention before I conclude the Introduction. The litigation was conducted in a most acrimonious atmosphere. The antipathy which Mr Kai Khuu, the Director of the Plaintiff and Ms Zheng held for each other was palpable. Enormous mistrust between the parties was also obvious. I make these observations at this early stage for two reasons. The first being that I formed the view that acrimony between the parties contributed to the extraordinary length of a Trial, which had been initially estimated to be ten days. The Trial continued for a period of seventy two hearing days over a period of a little over one and a half years. The second reason is that the acrimony and mistrust are relevant to the evaluation of Mr Khuu and Ms Zheng as witnesses. It will be seen that I have been highly critical of both of them as witnesses. The evidence given by each of them needs to be evaluated against the background of that acrimony and mistrust.
Application of the Victorian Fair Trading Act and Goods Act
In the Introduction to these Reasons, I indicated the Plaintiff elected to proceed under the FTA (Vic) and the Goods Act (Vic) and not under the South Australian legislation. I agree with that election. The circumstances which have lead to these proceedings indicate that it is the Victorian Acts which are to be applied to the claims and not the South Australian counter parts of the Fair Trading Act 1987 and the Sale of Goods Act 1895.
It is not in dispute that the alleged misrepresentations, which form the basis of the Misrepresentation Claim were made in Victoria, and that the Contract for the sale and supply of the System was entered into by the Plaintiff and Micropos in Victoria.
Section 9 (1) of the FTA (Vic) provides:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.
The terms of this Section are exactly the same as Section 56 of the South Australian Fair Trading Act (1987).
Section 159 of the FTA (Vic) establishes a right to action for damages where there has been contravention of the Act. The relevant parts of Section 159 are:
“(1) A person who suffers loss, injury or damage because of a contravention of a provision of this Act may recover the amount of the loss or damage or damages in respect of the injury by proceeding against any person who contravened the provisions or was involved in the contravention.
(2) Proceeding under this Section may be brought before the Tribunal or in any court of competent jurisdiction”.
These proceedings were issued in this Court and were served out of the State upon the Defendants who are domiciled in Victoria. The proceedings which were served upon the Defendants provided with respect to the Fair Trading Act claim, that either South Australian Fair Trading Act 1987 or the FTA (Vic) was the relevant legislation. The Defendants filed appearances and subsequently a Defence in the proceedings. None of the Defendants pleaded in their Defence or any other pleadings that this Court was not the proper forum for the Trial of the action.[1] Since that time this litigation has proceeded without any objection by the Defendants that this Court is not the proper forum for the Trial of the Action. Accordingly, in my view, the Defendants have submitted to the jurisdiction of this Court, albeit that they are domiciled outside the State of South Australia.
[1] See: Rule 22.01 District Court Rules 1992
Having reached that point, the only question remaining is whether the FTA (Vic) or the South Australian Fair Trading Act 1987 is the applicable Act relevant to the Plaintiff’s claim for misleading or deceptive conduct against Mr Mac and Ms Zheng.
As I stated earlier, the alleged misrepresentation, which form the basis of the claim for misleading or deceptive conduct are alleged to have been made in Victoria. Mr Ower submitted (and endorsed by Mr Pennell, Counsel for the Defendants) that this Court, is a Court of competent jurisdiction, within the meaning of that expression in Sub-section 2 of Section 159 of the FTA (Vic). It was contended that this arises as a result of the Defendants submitting to the jurisdiction of this Court. Mr Ower submitted that this Court has the capacity to apply the provisions of the FTA (Vic) with regard to the Plaintiff’s claim for damages for misleading or deceptive conduct. I agree with this submission.
With regard to the Sale of Goods Claim, Mr Ower submitted that Goods Act (Vic) is the relevant legislation. Mr Pennell also endorsed this submission. It was submitted that the Contract for the Sale and Purchase of System was a contract for sale of goods, which was made in Victoria. Mr Ower submitted that as a result the proper law of the contract is the law of Victoria. Mr Ower submitted that as Section 19 of the Goods Act (Vic) implies conditions of reasonably fit for purpose and merchantable quality into a contract for sale of goods, and as the proper law of the Contract is that of Victoria then it follows that the provisions of Section 19 are relevant to the Contract.
The principle regarding what is the proper law of a contract has been expressed by Lord Simonds in Bonython v The Commonwealth.[2]
“…the substance of the obligation must be determined by the proper law of the contract, that is the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connection”.
[2] (1950) 81 CLR 486 at 498

As the contract was formed in Victoria, it is clear that it is the Law of Victoria which governs the contract. It must follow that the Goods Act (Vic) is the relevant legislation applicable to the Contract.
I have already indicated that the Defendants have submitted to the jurisdiction of this Court in relation to the Plaintiff’s claim. As the Goods Act (Vic) is the relevant legislation then there is nothing to stand in the way of this Court applying the provisions of that Act in the course of the resolution of these proceedings.
I should finally mention for completeness that the terms of Section 14 of the South Australian Sale of Goods Act 1895 are for the most part similar to the terms of Section 19 Goods Act (Vic). All Australian State legislation governing sale of goods were modelled on the English Sale of Goods Act 1893.
History of the Plaintiff and its Business
The Plaintiff was incorporated in approximately 1999. The shareholder of the Plaintiff is a family trust controlled by Mr Khuu and his sisters. Mr Khuu is the sole Director of the company. The Plaintiff appears to operate as the alter ego of Mr Khuu.
The purpose of the incorporation of the Plaintiff was for it to take over an Asian grocery business operated under the name Lien Heng Asian Grocery. (“Lien Heng”) The grocery business was then and is still conducted from Shop 7, Western Mall, in the Adelaide Central Market (sometimes called “Central Market Store”). The business was initially established by Mr Khuu’s parents in 1993. In 1999 Mr Khuu joined the business after spending a year and a half working at General Motors Holdens as a Project Engineer. This followed his graduation from University with a degree of Manufacturing Management in Engineering.
Lien Heng is primarily a retailer of Asian groceries but the business also retails fresh vegetables and kitchenware. The store area is quite small but functions as a small supermarket, in that generally the customers serve themselves and pay for their purchases at a checkout. Mr Khuu said that the products in the store targeted customers with origins from South East Asia including Malaysia, Singapore, Vietnam and Cambodia. He said that in recent years the business has also stocked a few Chinese products as well as products from Indonesia and the Philippines.
Prior to 2003, the Lien Heng business also operated a small Warehouse in Adelaide. This became necessary because the business was continually expanding its range of stock. The Warehouse was used solely for the use of restocking the grocery store. In 2003 a larger Warehouse at Thebarton (sometimes called “Thebarton Warehouse”), was acquired by the Plaintiff. I will need to return to subject of the Thebarton Warehouse shortly, as it plays a central role in many of the issues arising in these proceedings.
History of Micropos
Micropos was incorporated in June 2002 and as parts of its business it marketed and sold (and still does) the POSWorld Retail System. The Directors and shareholders are Ms Lok Yan Lee Mac and Mr Jiyan Yi. Ms Zheng is the Company Secretary. Ms Lee Mac is the wife of Mr Mac and Mr Yi is the husband of Ms Zheng. At all relevant times Ms Zheng and Mr Mac were employees of Micropos. From 1998 and prior to the incorporation of Micropos, the POSWorld Retail System was marketed and sold by E.G. Business Equipment Pty Ltd. (“EG Business”) Ms Zheng, Mr Mac, and Ms Lee Mac and Mr Yi are directors of E.G. Business and Mr Trong Mac and Ms Zheng are also shareholders. E.G. Business continues to sell the POSWorld Retails System.
Plaintiff’s Complaints
In general terms, the major complaints of the Plaintiff are that the System does not have the functions alleged to have been represented to Mr Khuu by Ms Zheng, in discussions held prior to signing the Contract. These functions are mainly associated with a warehouse business. It is alleged that Mr Mac affirmed with Mr Khuu that the System could provide the functions alleged to have been represented by Ms Zheng. The Plaintiff alleges that it was represented to him by Ms Zheng that the system had functions which were not only suitable for a retail grocery business but also for a substantial reasonably large wholesale warehouse business distributing mainly Asian food products. It is not in dispute in these proceedings that the POSWorld Retail System sold by Micropos to the Plaintiff (and to the market), was a retail point of sale system. It is also not in dispute in these proceedings that the System cannot provide the warehouse functions it is alleged that Ms Zheng and Mr Mac represented to Mr Khuu. The cental issue in the Misrepresentation Claim is what representations were made to Mr Khuu. The other complaint, made in the alternative by the Plaintiff, is that, in any event the functions in the point of sale System delivered by Micropos contained many errors and omissions and that as a result, Micropos breached the terms implied in the Contract by the Goods Act (Vic) that required the System to be reasonably fit for its purpose and to be of merchantable quality.
With respect to the Sale of Goods Claim, it was Mr Khuu’s evidence that after the System was installed by Micropos, he encountered problems with a number of its functions and this continued over time. I will refer to this evidence later. Mr Khuu said that, as a result of the problems he continued to encounter, in May 2005, he employed the services of Mr James Heyworth a person with expertise in the computer field to give him advice. The scope of Mr Heyworth’s expertise has been challenged by Micropos and I will deal with that challenge at a more appropriate time. For the present I need to indicate that Mr Heyworth has expertise in both the field of computer hardware and computer software. I have chosen to mention Mr Heyworth at this early stage because I am about to embark upon a reasonably detailed description of the parts which make up the System. In doing so, I propose to rely substantially on the evidence of Mr Heyworth where he has described the structure of a computer system similar to that comprised in the POSWorld Retail System.
POSWorld Retail System
It is not in dispute that substantially the POSWorld Retail supplied to the Plaintiff comprised:
·Five Point of Sale Terminals (Checkouts). Four Point of Sale Terminals were to be installed in the Plaintiff’s Central Market Store. The other Point of Sale Terminal was to be installed at the Thebarton Warehouse to service a retail outlet conducted at the Warehouse. There was a computer associated with each Point of Sale Terminal.
·A sixth computer described as the “Back Office” computer;
·A software program to be operated on the Back Office computer to provide for stock control functions and accounting functions;
·A software program to be operated on each of the Point of Sale Terminal computers which was specific to the needs of retail points of sale functions.
In addition to the computers, there were other items of hardware including a Portable Data Entry Unit for use with the Back Office computer and a laser printer. The Point of Sale Terminals each included touchscreens, scanners, Magellan Scales and thermal receipt printers which together with the computers comprised the Point of Sale Terminals. There were also a variety of other hardware items.
Having described the System in broad terms, it is now necessary to briefly describe the functioning of the System in more detail.
There are a number of components, which make up a computer. Each computer has a central processing unit (“CPU”) which, in simple terms, is the brain of the computer. It is the CPU which receives the instructions from the software to enable the computer to perform its functions. The CPU operates and interacts with what is described as input and output devices. With regard to the Back Office computer, such items as the keyboard and the mouse are described as input devices. They are used by the operator to enter information into the computer. The point of sale computers, apart from the keyboard, have other input devices such as the bar code scanner, the scales and the touchscreen. Clearly, these are devices tailored to a supermarket environment, which enables the operator to instruct the computer to perform a particular function. Output devices are devices, which take information from the computer hard drive or memory and display it. Output devices are the computer screen that displays data and the laser printer, which operated with the Back Office computer. With respect to the POS Terminals, the thermal printer cash register receipt is another output.[3]
[3] T63-64
Included in each computer is a hard drive, which is used to permanently store information on the computer. In other words, it acts as the memory of the computer. When the power of the computer is turned off the hard drive retains or saves the information so when the power is restored the information on the hard drive can be used again. The hard drive memory is to be contrasted with the random access memory (“RAM”), which is a high-speed non-permanent memory. The way in which the computer operates to read the information off the hard drive is to load it into the RAM, which then communicates with the CPU. The RAM function enables the CPU to operate more quickly than if it had to rely upon the hard drive to retrieve the information. The RAM is a temporary form of storage. When the computer is turned off, it does not retain the information. There is a constant transfer of information between the hard drive and the RAM and in many cases they can be seen as the same memory system of the computer, but they operate at different speeds and with a different degree of permanence.[4]
[4] T65-66
I now turn to the software of the System. I mentioned that Micropos has designed and produced software to enable the Back Office computer to function and software to enable the Point of Sale computer terminals to function. With regard to the Back Office, Micropos chose Microsoft Windows XP Professional as the Operating System, which is the foundation upon which the System functions. In other words, the software produced by Micropos interfaces or interacts with the Microsoft Windows Operating System (“Operating System”) to enable the computer to perform the functions required of it by the user. One of the functions of the Operating System is to control the operation of the hard ware.
I have mentioned that in this System Micropos produced software to enable the System to deliver stock control functions and accounting functions in the Back Office computer. It also produced software to enable each Point of Sale computer, which formed part of the each Point of Sale Terminal, to function. The Micropos software which operated in the Back Office computer is in the form of what is known as an “executable file”. It requires a particular expertise for a programmer to develop an executable program or file. The developer of the software program, in the first instance, needs to choose a programming language for the production of the program, which in this case, is compatible with the Microsoft Windows XP program.
Microsoft Windows has a number of programming languages, which can be chosen by a software programmer. In this case Mr Heyworth said that the programmer chose the program language called Microsoft Visual Basic. A programmer using the Visual Basic language writes a set of instructions, which are in a very structured form of English - like logical expression. Whilst it uses English, a person who is not a programmer would not be able to understand it. A programmer adapts the Visual Basic language to achieve the objectives being sought, which in this case was the POSWorld Retail System. Visual Basic does not have any knowledge of stock control or other business uses. It is a programming language for writing instructions to the Operating System and the computer.[5] The programmer proceeds to execute an instruction in the Visual Basic language telling it to compile the program written by the programmer into a single unified executable file that is an exact translation of the source code produced by the programmer.[6] The compiled information is stored in an executable file on the hard drive. The executable file is in a form that the computer understands. In other words, it is then in a language which can be understood by the CPU of the computer. The executable file compiled by the programmer can be transferred from the hard drive of the computer used by the programmer onto hard drives of other computers.
[5] T98.32
[6] T84.16
Mr Heyworth said that a compiled program in the form of a executable file would not allow for a substantial alteration of its behaviour. If the operator of a computer program wishes to have modifications made to the program or a new business function then it would be necessary for the programmer to write more source code and then recompile the program to produce a new version of the executable file.[7] Mr Heyworth said that most software programs will allow some configurations of a minor nature without the necessity of re-writing the executable file.
[7] T87.36
Mr Heyworth said business data is stored on a computer in files on the hard drive and managed by the Operating System. He said that in the case of the POSWorld Retail System the data base program is managed by the Microsoft SQL Server. The Microsoft system supplies a Microsoft Data Engine which creates files in the SQL server format. Those files are different than the executable file on the hard drive. Each data base within the file system stores various records, the length of fields in those records and the type of data being stored at a very precise level. Mr Heyworth said the majority of the business data is stored in the Microsoft SQL Server data base format. He said that by using a standard data base such as the Microsoft SQL Server, it means that reports can be examined and extracted.[8]
[8] T92-93
It was Mr Heyworth’s evidence that apart from the Operating System and the business applications, there were other utility programs provided by the Operating System. In the case of this Operating System, it uses a program called Adobe Reader, which can display pictorial documents in electronic form. There was also a program called Notepad and another entitled Microsoft Excel which was a spreadsheet program.
Back Office Computer and POS Terminals
The Back Office computer is so described because it performs the functions that would be undertaken in the back office of business that maintained record keeping manually. The Back Office computer in the System undertook the inventory management system and sale system. It also had a number of reporting and analysis functions.[9]
[9] T145.16
By contrast, the Point of Sale Terminal was designed primarily to operate as a fast cash register.[10] The executable file is a cash register program and has a data base of all the inventory items in the store or supermarket. When the bar code of an item of stock is activated through the touchscreen or the scanner, the price is automatically retrieved and fed into the cash receipting function of the Terminal.[11] In this case the System was integrated so that the POS Terminals and the Back Office computer would communicate with each other.
[10] T145.8
[11] T134.24
The Back Office computer had two parts, the executable file and the data base. I have mentioned earlier that the data base was managed by the Microsoft SQL Server. The data base contained all of the Plaintiff’s business records, including the stock inventory. Mr Heyworth said that the data base could be looked at as a collection of spreadsheets, each spreadsheet being one set of records in the computer. Each spreadsheet had a number of columns, which contain different information or fields.[12]
[12] T719.30
Ms Zheng’s Description of the POSWorld Retail System
Ms Zheng said the main purpose of the POSWorld System was for a retail customer to handle their stock control. She described it as an integrated package in which the Point of Sale transactions were communicated to the Back Office computer. It was her evidence that the System was designed for use by small or medium size independent grocery stores. She described the software as “off-the-shelf” software. By that description she said that it was software which once it had been configured and set up, would function immediately.[13]
[13] T1930-1931
Ms Zheng said that the System consisted of a Back Office computer and Point of sale computer terminals. In the System sold to the Plaintiff she said there is a central stock control system in that all of the stock control was done through the Back Office computer at Thebarton. This central stock control system was to be contrasted with another stock control system available from Micropos. Under that system each store does its own stock control.[14] She said that in that case where there are two stores then each store has its own Back Office computer, which controls the stock at that store. Ms Zheng said in the Plaintiff’s System each Point of Sale Terminal had a limited Back Office system for producing shelf labels, cashier control and for credit sales.[15] Ms Zheng said that each Point of Sale terminal in the Plaintiff’s System at the end of each day transferred to the Back Office the details of transactions undertaken at each terminal during the day. She said this could be done automatically or alternatively there was a function, which transfers the details automatically.[16]
[14] T3415-3418
[15] T3411.15
[16] T2693-2694
Ms Zheng said that Micropos used either Microsoft Windows XP or HP as the Operating System.[17] She also said that Micropos used the Microsoft SQL system to store the data base and operate the data base for the System.[18]
[17] T2007
[18] T2008
I mentioned earlier that Ms Zheng said that the POSWorld retail system was an off-the-shelf system, but it still needed to be properly configured and set up before it could function. Ms Zheng said the configuration of each system was undertaken by an experienced Technician. As I understood her evidence, there were some configurations, which were common to every system and some configurations that needed to be undertaken to suit the customer’s needs. She said that the Technician needed to properly program and configure the scanner and scales to make them compatible with the point of sale system as designed.[19] She said that the point of sales terminals needed to be properly configured, so they could communicate effectively with the Back Office computer. Further, she said the touchscreen and printers need to be configured properly. An example of configuring for the customers needs, were the type of touch points that were to be used on the touchscreen. This would depend upon the type of business being operated by the customer. She said further configurations such as logo, address, telephone number of the customer and the ABN number all needed to be properly configured.[20] One such example was to configure receipts and tax invoices in both English and Chinese language or any other language that Microsoft Windows permitted. She also said that configuration needed to be undertaken to permit Micropos software to function with Microsoft Windows.[21]
[19] T1933.25
[20] T1931 – T1935
[21] T3621-3622
At this early stage of the Reasons, it is important to understand that when Ms Zheng refers to configuration she is not referring to an activity which involves amending or modifying an executable file.[22] The versions of the Micropos executable file and the functions of the executable file play a central role in this litigation. Issues arising regarding the versions of an executable file will be dealt with in due course. For the present all that needs to be understood, is that configuration in the context to which I have referred does not involve modifying, altering or in any way dealing with the executable file. During the Trial, attempts were made to have Mr Heyworth and Ms Zheng explain in simple terms the meaning of configuration, but each ended up in failure. My Heyworth gave a convoluted and complex explanation, which was difficult to understand. Ms Zheng explain it by use of examples and did not provide a comprehensible explanation. What is clear is that the Windows software contains tools to enable configuration to take place.[23]
[22] T3622; 3082-3085
[23] T3085.11

I did not detect any difference in substance in the general description provided by Mr Heyworth and Ms Zheng regarding the function of the Micropos System.
Function of the Back Office Computer
The Back Office computer operated a series of menus, with each having a number of sub-menus. The main Menus consisted of:
·Inventory
·PDE Communication (portable data entry)
·Purchase
·Label
·Account Sale
·Host File
·Administrator
There was a further main menu item entitled “Help” on the main menu bar but it was not active. Some of the sub-menu items also contained further sub-menus. For example in the main menu item “Purchase” under the sub-menu “Supplier” there were three separate functions.
Upon the operator activating a sub-menu item the particular item would appear on the computer screen. For example if under the Inventory main menu the operator activated the Item Maintenance sub-menu for a particular category of stock, then a window would appear on the screen relating to that stock category which contained detailed information about it including the department in which it was held, details of supplier prices, details of the various price sale levels and profit margins for each sale price level. Every category of stock in the data base was recorded in separate Item Maintenance windows. Another sub-menu under the Inventory menu was “New Item”. This function was used for the recording of new categories of stock acquired by the business. Upon the sub-menu being activated the New Item Window would appear on the screen. There were a substantial number of fields in that screen which would be populated by the operator recording various details regarding that new stock item, such as the description, name of the supplier, cost and the various retail price levels relating to that stock item. The fields in this Window were the same as contained in the Item Maintenance Window.
I will touch on the functions of the Back Office computer later in these Reasons. Mr Heyworth described the Back Office computer as a fairly complex system.[24]
[24] T492.12
Summary of the Plaintiff’s Case
I have mentioned that the Plaintiff and Micropos entered into an agreement for the sale and installation of the POSWorld Retail System by Micropos. With regard to the Plaintiff’s claim for misleading or deceptive conduct, the Plaintiff alleges that prior to entering into the contract, Micropos, initially through Ms Zheng, misrepresented the system had a number of functions which the Plaintiff required, particularly in relation to the operation of the Thebarton Warehouse and the System did not have those functions. It is also part of the Plaintiff’s case that Mr Mac, prior to Contract being entered into, affirmed the functions represented by Ms Zheng were available in the System and were indeed part of the System. The Plaintiff says, relying upon those representations, it entered into the Contract and as a result suffered loss and damage.
With regard to the Sale of Goods Claim, being an alternative claim, it is the Plaintiff’s case that Micropos knew that the Plaintiff required the System for the purpose of operating a wholesale grocery warehouse business and a retail grocery store or alternatively of operating a retail grocery store. The Plaintiff claims that there was an implied condition in the Contract, through Section 19 of the Goods Act (Vic) that the System would be reasonably fit for both those purposes or alternatively, for the purpose of operating a retail grocery store. Furthermore, the Plaintiff claims that a further condition was implied in the Contract pursuant to Section 19 of the Goods Act (Vic) namely that the System would be of merchantable quality.
It is the Plaintiff’s case that the Back Office computer program and the Point of Sale computer program supplied contained a number of functions that:
·did not store or manipulate data properly and accurately;
·when operated by the user in any way, caused the System to cease functioning (“crash”);
·when operated by the user in an unexpected or incorrect fashion caused the System to cease functioning (crash);
·were partially completed or “inoperative” functions; and
·were defective but were not able to be categorised.
The Plaintiff claims that as a result of the inadequacy of the functions, the System was not reasonably fit for the purpose of operating a wholesale grocery warehouse and retail grocery store, or alternatively operating a retail grocery store and was not of merchantable quality. As a result, the Plaintiff claims it has suffered loss and damages by reason of the breaches of the implied conditions in the Contract by Micropos.
Summary of the Defendants’ Case
Ms Zheng and Micropos deny that prior to the Contract, Ms Zheng made the representations alleged by the Plaintiff. Mr Mac also denies that he affirmed that the System had the functions, which the Plaintiff alleges Ms Zheng represented to the Plaintiff through Mr Khuu. Furthermore, it is the Defendants’ case that the POSWorld Retail System was a Point of Sale a retail system suitable for a small to retail medium grocery business. It is the Defendants’ case that the System was never, in fact a warehouse system and could never have been modified or extended to enable it to also provide functions suitable for a warehouse business. Micropos denies that the System, was not fit for purpose or was not of merchantable quality.
In the first instance, Micropos states that the System was sold and delivered to the Plaintiff as a stock control system with accounting features for a retail grocery business. It says that the System was never sold to the Plaintiff as a warehouse system and a retail grocery business system. Further, the System functioned adequately as a point of sale retail system. Micropos denies that it is in breach of the implied conditions in the Contract.
I now turn to consider the Plaintiff’s Misrepresentation Claim.
Misleading or Deceptive Conduct – Legal Principles
Before I turn to the facts relating to the Misrepresentation Claim, it is convenient to briefly refer to the applicable legal principles.
Section 52(1) of the Trade Practices Act 1974 provides:
“(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive” .
Section 9 (1) of the Fair Trading Act 1999 (Vic) provides:
“(1) a person must not in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
When a case such as this, seeks to apply the misleading or deceptive conduct provisions of Section 52 of the TPA or Section 9 of the FTA (Vic) then the issue for determination is whether there has been any misrepresentation. This was made clear in Taco Company of Australia Inc v Taco Bell Pty Ltd[25]where Dean and Fitzgerald JJ made the following observations regarding Section 52:
“Irrespective of whether conduct produces or is likely to produce confusion or misconception, it cannot, for the purposes of a Section 52, be categorised as misleading or deceptive unless it contains or conveys, in all the circumstances of the case, a misrepresentation. The difficulty which will commonly arise in a s 52 case is determining whether the conduct contains or conveys, in all the circumstances, a misrepresentation and in assessing the significance to that question of evidence that one or more persons were in fact led into error.”
[25] (1982) 42 ALR 177 at 202
These observations apply equally to a claim pursuant to Section 9 of the FTA (Vic).
Although it would not appear to be a relevant issue in this case, it is important to remember that a defendant does not need to have an intention to mislead or deceive (intend to make a misrepresentation) for there to be a breach in Section 52 (or Section 9). The only relevant factor is whether viewed objectively, the conduct was misleading or deceptive. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd.[26]
[26] (1978) 140 CLR 216 at 223
For Section 52 to apply (or Section 9) misleading or deceptive conduct must be made in the course of trade or commerce. Concrete Constructions (NSW) Pty Ltd v Nelson.[27]This is also not an issue in this case. It is clear that if the alleged misrepresentations were made then they were made in the course of trade or commerce. The only issue in these proceedings is whether the Defendants, or any of them, made the alleged misrepresentations.
[27] (1990) 149 CLR 599 at 602 – 604
I mentioned earlier that in the Statement of Claim, the Plaintiff sought to attach liability to Ms Zheng and Mr Mac through the accessorial provision of Section 75B of the TPA. However, at the time of final addresses, the Plaintiff, through its Counsel Mr Ower, abandoned that claim and sought to make Ms Zheng and Mr Mac liable for the alleged misrepresentations pursuant to s 9 of the Fair Trading Practices Act 1974 . In doing so, Mr Ower relied upon the decision of the High Court in Houghton v Arms.[28] In that decision, the High Court held that whilst employees of a corporation who made misrepresentations created the liability of the of the corporation under Section 52 of the TPA, those employees were personally liable under Section 9 of the FTA (Vic). In other words, notwithstanding that the employees had been acting in the trade or commerce for the corporation and not for themselves, they were still liable under Section 9.
[28] (2005) 225 CLR 553
Evaluation of Witnesses
Before turning to the evidence I should briefly evaluate the various witnesses. There is a direct conflict in the evidence of Mr Khuu and that of Ms Zheng and Mr Mac regarding the alleged misrepresentations. This conflict will need to be resolved. There is documentary evidence, which will be relevant in determining what was expressed by Mr Khuu and Ms Zheng in the conversations held on 13 and 14 March 2004, and the conversation which was held between Mr Khuu, Mr Mac and Ms Zheng on 14 March 2004. There are other witnesses whose evidence will need to be evaluated, along with the evidence of Mr Heyworth, as an expert witness.
With regard to Mr Khuu, regrettably, on some occasions, I felt he did not give truthful evidence. I also considered him to be disingenuous and evasive on occasions. I concluded that he suffered from a poor memory. There were occasions when he gave his evidence by reconstructing. In other words, he gave the appearance that he was relying on his memory to give his evidence, when in fact, he did not have any memory and was giving the evidence by reconstruction. He was at times argumentative and failed to answer questions directly. I also thought that he deliberately exaggerated on occasions. I mentioned at the start of these Reasons that his antipathy towards Ms Zheng was palpable. It was clear that he completely mistrusted Ms Zheng and any other person connected with Micropos. I felt that the emotions he displayed provided some explanation for his generally poor performance in the witness box.
I concluded that Mr Khuu was an intelligent man. He was well educated. He gave the appearance that as a businessman he was demanding and a person who sought to exact as much benefit as he could from the transactions with Micropos. That in itself is not a criticism, but it is relevant to the evaluation of some of his evidence.
I have been quite critical of Mr Khuu as a witness. There are parts of his evidence that I simply cannot rely upon. There are other parts of his evidence upon which I am prepared to rely.
Regrettably, I also felt that Ms Zheng on occasions gave untruthful evidence. Like Mr Khuu I thought she was evasive and disingenuous at times. On some occasions she became very argumentative. She also failed to answer questions directly from time to time. On some occasions she would attempt to plead the case of Micropos in long rambling answers, which were not responsive to the question. I felt at times she gave evidence by reconstructing in the same manner as Mr Khuu. I thought she displayed a better memory than Mr Khuu.
I also mentioned early in these Reasons that she had an antipathy towards Mr Khuu and that she mistrusted him. It was plain that she felt that Mr Khuu was unjustly attacking the POSWorld Retail System, which was at the time the Plaintiff purchased the System being operated by many clients of Micropos. She appeared to feel that Mr Khuu was not making genuine complaints about the System and had brought these proceedings seeking to gain financial benefits to which he was not entitled. All of these emotions also provided some explanation for her performance in the witness box.
I felt that Ms Zheng was an intelligent woman. She is well educated. She also has had considerable experience as a businesswoman. Whilst I have also been quite critical of Ms Zheng as a witness, there is evidence given by her upon which I cannot rely and there are other parts of her evidence upon which I am prepared to rely.
I thought that Mr Mac did not display a particularly good memory. However, I felt he displayed a more reliable memory than that of Mr Khuu. There were quite a number of occasions when he frankly stated that he could not remember. He attempted to respond directly to the questions. He did not appear to be carrying the emotional baggage which was displayed by Mr Khuu and Ms Zheng. I thought he was of moderate intelligence. Regrettably, I also thought he gave some untruthful evidence. Like the other two witnesses, there is some evidence of Mr Mac upon which I could not rely and other evidence upon which I am prepared to rely.
I have mentioned that there is some evidence of each of those witnesses upon which I am prepared to rely. However, I would need to scrutinise and analyse the evidence closely before I concluded that I could rely on the particular evidence.
With regard to each of the witnesses, I propose to make further observation regarding their evidence at the time I consider that evidence more closely.
As for the other witnesses I will evaluate the evidence of each of those witnesses at the time I consider their evidence.
Misleading or Deceptive Conduct Pleaded In The Statement of Claim
Before turning to the facts, it is appropriate to refer to Paragraph 6 and Paragraph 7 of the Statement of Claim which sets out the Plaintiff’s case of misrepresentation upon which it relies for the purpose of its claim under Section 52 of the TPA and Section 9 of the FTA (Vic).
Paragraph 6 pleads that Mr Khuu at a meeting with Ms Zheng (held on 13 March 2004) expressly or by implication made known to Ms Zheng the particular purpose for which the System was being acquired and indentified the various functions which Mr Khuu said he told Ms Zheng he required of the System. Paragraph 7 pleads that during the meeting on 13 March 2004, Ms Zheng on behalf of Micropos represented that the System to be supplied by Micropos could provide all of the functions pleaded in Paragraph 6 with the exception of a customer of the business being able to make purchases at both retail and wholesale level via modem or the Internet.
During the course of his final address, I asked Mr Ower to identify which of the functions set out in Paragraph 6 were alleged to be express representations made by Ms Zheng and which were implied. He did so.[29]
[29] T4435-4443
I set out Paragraph 6 of the Statement of Claim and those functions which Mr Ower said were subject of express representations and those which were said to be implied:
“6.During the course of the meeting pleaded at paragraph 5, Mr Khuu on behalf of the Plaintiff expressly or in the alternative by implication, made known to the Third Defendant [Ms Zheng] on behalf of the First Defendant [Micropos] the particular purposes for which the Required System was being acquired, namely the purpose of using the Required System to:
6.1     manage the Plaintiff’s warehouse stock inventory including but not limited to the following functions:
6.1.1recording the type, amount and price of stock at the warehouse (Mr Ower made no comment on this function)
6.1.2   recording information in relation to each item in the warehouse including;
(a)     type; (implied)
(b)     location; (implied)
(c)     barcode; (implied)
(d)     ordercode; (implied)
(e)     Package size; (implied)
(f)    “best before date”; (express)
(g)     wholesale price; (implied)
(h)     retail price; (implied)
(i)    margin. (implied)
6.1.3recording certain products as coming from a preferred supplier and a second preference supplier; (express)
6.1.4   recording quotations received for such stock suppliers; (express)
6.1.5prompting stock orders, from suppliers either by pallet or container, once present level of stock became low; (express)
6.1.6generating stock orders, either by pallet or container at the command of operator; (express)
6.1.7generating a “picking slip”, being a slip detailing all stock to be included in either an order or transfer; (express)
6.1.8provide orders to suppliers by way of telephone modem or the internet; (express)
6.1.9monitor expiry and “best before” dates for stock and prompting warnings in relation to them. (express)
6.2     manage the Plaintiff’s shop stock inventory, including but not limited to the following functions:
6.2.1   recording the type, amount and price inventory of each store; (express)
6.2.2   producing a sales analysis report over a period of time; (implied)
6.2.3prompting a transfer of stock from warehouse, once present level of stock became low; (express)
6.2.4generating a transfer of stock from warehouse at command of operator; (express)
6.2.5   modifying the level of margin on stock sold at each store; (express)
6.3     manage customers’ accounts, including but not limited to the following functions:
6.3.1recording customer details, such as name, address, telephone , level of credit permitted;      (implied)
6.3.2   recording customers’ order history, including:
(a)    payment history and method of payment; and
(b)    outstanding payments due; (express)
6.3.3categorising customers by differing categories, including by level of credit permitted; (implied)
6.3.4   generating multi-copy invoices and receipts for orders; (implied)
6.3.5prompting orders of certain stock for new customers based upon previous orders; (express)
6.4     non-account sales at retail “cash register” store level by way of touch screen and cash drawer located at both the warehouse and retail stores; (express)
6.5     access to information and functions pleaded at paragraphs 6.1 to 6.3 above from a remote location via modem or Internet (such as warehouse to shop and shop to warehouse); (express)
6.6     recording (and subsequently generating) all information required for taxation compliance in relation to the functions pleaded in paragraphs 6.1 to 6.3 above; (implied)
6.7     allow customers to make purchases at both retail and wholesale level via modem or the Internet; (express)
The effect of Mr Ower identifying which of the alleged representations pleaded in Paragraph 6 were express is that it is the Plaintiff’s case that Mr Khuu at the meeting of 13 March 2004 expressly informed Ms Zheng that he wanted a system which could provide those functions. Mr Ower said that all of the functions pleaded in sub-paragraph 6.1.2 were relevant to a warehouse business. Mr Ower said that the functions referred to in sub-paragraph 6.2 related to the Plaintiff’s Central Market store and the functions set out in sub-paragraph 6.3, 6.4 and 6.7 related to both a warehouse business and a shop business.
Factors Leading up to Mr Khuu’s visit to Melbourne
Mr Khuu said that within a period of six to twelve months after he took over the Central Market Store from his parents in 1999, he concluded that the business should expand beyond one store. The business was being operated on a manual system. He said everything was done manually including orders, receipts, stock, price tags, ordering products and activities of this nature. Mr Khuu said he formed the view that if he was going to expand the business then he needed a computer system in order to maintain control. Mr Khuu said from that time he began to investigate computer systems to determine their functionality.

During cross-examination, Mr Pennell challenged Mr Khuu regarding the absence of any documents to support the claim. He asked Mr Khuu whether he had any evidence of the cost of the honey at $19.90. Mr Khuu responded that a tax invoice had been discovered. He was asked whether he had any proof of the sale price of honey at $17 and Mr Khuu said that he believed he did. He was also asked whether he had any evidence that the normal price for the honey was $17. Mr Khuu said he believed he could produce evidence to support the cost price, the sale price and the normal price of honey but he was not able to do so at that time.[847] He was also asked by Mr Pennell whether he could provide any documentary evidence in relation to the cost price, the sale price and the normal price in relation to any of the items in Appendix 15. Mr Khuu said he had documents but he did not have them at the time.[848]
[847] T1397-1398
[848] T1398.24
Mr Khuu never produced any documents in support of Appendix 15. He did not offer any explanation for the absence of these documents, indeed, the subject of the documents that he said he held in support of this claim was never raised again during the Trial.
I am now asked to assess damages on the oral evidence of Mr Khuu. I have already pointed out that I do not accept his evidence regarding the normal price of the TCC Coconut Milk. I have referred to the strange response when I asked whether the sold price, was the price he sold the goods at and he said “I think so”. I have pointed out that Mr Khuu had a poor memory. The basis of the presentation of his head of damage was simply the production of the Schedule contained in Appendix 15. Appendix 15 cannot be used as a basis to prove the truth of the facts contained in it. There is no other evidence to support the details in the appendix. Mr Khuu did not give evidence affirming the details contained therein.
There is no evidence upon which I can rely to evaluate this head of damage. Even if the Schedule prepared by Mr Khuu, which is now Appendix 15, did have some evidentiary status, I would not be satisfied that I could rely upon it. There is no independent evidence regarding the accuracy of its contents.
Furthermore, even if I felt that I was in a position to assess damages based upon the material contained in Appendix 15, I would have still reached the conclusion that the Plaintiff’s claim fails. On Mr Khuu’s evidence, most of the items in the Schedule were sold at a lower price as a promotion, to encourage customers to come to the Warehouse so that Plaintiff could sell the Dragonfly Rice and the Golden Phoenix Rice. I have already concluded that any losses suffered on the sale of those two categories of rice, were not causally connected to the contravening conduct of the Defendants. That being the case, there could not be any claim that the losses on these promotional products in Appendix 15.
With regard to the return of the TCC Coconut Milk and the Pantai Sweet chilli sauce to the suppliers, I am not satisfied that Mr Khuu needed to return the TCC Coconut Milk because he did not have any opportunity to promote the sale of that milk and that he was therefore left with an oversupply of stock.
The Plaintiff’s claim under this head of damage fails.
(viii)Conclusion
I have concluded that the Plaintiff would have suffered the following losses if it had been successful in the Misrepresentation Claim:
System Cost..................................................................... $48,818.28
         PC Anywhere Cost................................................................ $294.55
         Modem/Printer Cost............................................................. $870.00
         Data Input............................................................................ $2,200.00
         Wasted Time....................................................................... $8,900.00
         Out of Date Stock (general stock)................................. $55,000.00
  Total:   $116,082.53
I mentioned earlier in the Reasons that the Plaintiff has been using the System, in a limited fashion since April 2004. That is a period of nearly six years. Mr Khuu said his use was confined to using the POS Terminal as a cash register. In my view the evidence indicates that some use has been also made of the back office computer EGBOffice. I indicated earlier the Defendants should be given some credit for the use of the System. There is no evidence regarding the value of the use. In my view a credit of $5,000 would be appropriate. This sum is to be deducted from the sum of $116,082.53 leaving a total of $111,082.53.
If the Plaintiff had been successful in its Misrepresentation Claim I would have assessed damages of $111,082.53.
I now turn to consider the claim for damages pursuant the Sale of Goods claim.
Sale of Goods Claim Damages
(i) Formulation of Claim
At the Final Address of Mr Ower, the Plaintiff’s claim for damages in the Sale of Goods Claim was formulated in the following manner:
System Cost:  $48,818.28
                  PC Anywhere Cost:  $294.28
                  Modem/Printer Cost:  $870.00
                  Data Input:  $9,288.00
                  Wasted Time Cost:  $54,799.90
   (1565.14 hours @ $35 per hour)
                  Replacement Cost:  $4,026.72
  $118,077.45
(ii)    Measure of Damages
Section 59 of the Goods Act (Vic) provides:
59. Remedy for breach of warranty
(1) Where there is a breach of warranty by the seller or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may-
(a) set up against the seller the breach of warranty in diminution or extinction of the price; or
(b) maintain an action against the seller for damages for the breach of warranty.
(2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty.
(3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.
(4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent him from maintaining an action for the same breach of warranty if he has suffered further damage.
This Section is in similar terms to Section 52 of the South Australian Goods Act. The measure of damages set out in the sub-section (2) is similar in terms to the first limb of the measure of damages in breach of contract laid down in Hadley v Baxendale[849] where Alderson B stated:
“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive I respect of such breach of contract should be such as may fairly band reasonably be considered either as arising naturally, i.e. according to the usual course of things, from such breach of contact itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probably result of the breach of it.”
Emphasis added
[849] (1854) 9 Exch. 341
The measure of damages outlined in Section 59 has application to the present circumstances. Each of the terms of the Contract implied into it by Section 19 of the Goods Act (Vic) were conditions. As a result of Micropos breaching both conditions implied in the Contract, the Plaintiff was entitled to treat the Contract as repudiated by Micropos. However, by its actions and the institution of proceeding to recover damages the Plaintiff elected to treat the breaches as breaches of warranty.[850] The measure of damages set out in Section 59 applies to breaches of warranty so it is applicable here as a result of the Plaintiff’s election.
(iii) Consideration of the Heads of Damage
[850] Section 16
(a) Introduction
The damages for the Sale of Goods Claim are to be assessed in what appears to be an artificial environment. It was the Plaintiff’s case that it wished to purchase a System which provided warehouse functions and Point of Sale functions. I have rejected the Plaintiff’s Misrepresentation Claim so the effect of this decision is that the Plaintiff purchased what it bargained for, namely a Point of Sale Retail System. The artificiality arises because all of the Plaintiff’s actions from and including the time it terminated its relationship with Micropos was premised on the basis that he wanted a warehouse system and a point of sale system. Mr Khuu said that he terminated the relationship with Micropos because he reached the conclusion that Micropos had no intention of delivering the warehouse functions. These facts indicate that the Plaintiff would never have used the retail Point of Sale System solely as a Point of Sale System. But for the purpose of the assessment I need to assume that the Plaintiff intended to purchase a Point of Sale System and it purchased what it intended to, namely a Point of Sale Retail System. This artificial environment has caused difficulties in considering the damages claim of the Plaintiff.
(b) System Cost
The Plaintiff is entitled to recover the sum of $48,818.28. It was part of the purchase paid by the Plaintiff for the System. The System was a retail Point of Sale System. As I mentioned the System was unreliable with regards to the Accounts Receivable Reports Functions so that the Plaintiff could not have managed its accounts accurately. There were many other defects with the System which I have referred to earlier in these Reasons. I am satisfied that System as a Point of Sale System was of no use to the Plaintiff in the condition it was delivered to the Plaintiff. The Plaintiff is entitled to recover that part of the purchase price that it paid. I reject the submission by Mr Pennell that Micropos should only be liable to repay the cost of the software because all of the hardware was delivered in working order for the same reasons as I expressed when dealing with damages in the Misrepresentation Claim. The System was an entire system consisting of hardware and software.
(c) PC Anywhere Cost
As I stated when dealing with damages in the Misrepresentation Claim, the fact that PC anywhere could be used with other software is not the point. The Plaintiff purchased it to operate with the System it purchased. I have found hat the System was of no use to the Plaintiff because of the problems I have identified in the Sale of Goods Claim. As a result, the Plaintiff is entitled to the return of the cost of purchase, namely the sum of $294.55.
(d) Modem/Printer Cost
This equipment was used as part of the System. The Plaintiff purchased it as Mr Mac had overlooked bringing it with him to Adelaide when he installed the System. As the System is of no use to the Plaintiff then the Plaintiff is entitled to recover the cost of $870, which was paid by the Plaintiff.
(e) Data Entry
I assessed this claim in the Misrepresentation Claim at $2,200. That is the appropriate amount to consider under the Sale of Goods Claim. The only issue which needs to be considered is whether the Plaintiff is entitled to recover it under this claim.
There is a difference between this claim and the Misrepresentation Claim with regard to this head of damage. Under the Sale of Goods claim the assumption needs to be made that the replacement system is to be a retail point of sale system. Ms Zheng said in evidence that quite often when a Micropos System was installed in place of another system, which I infer is a point of sale system, Micropos transferred the data base from the other system to the Micropos System.
The Plaintiff is replacing the Micropos System with a system known as Pronto. Mr Khuu said that the data could not be transferred from the Micropos System to the Pronto System. The Plaintiff entered into written agreements with a company called Manufacturing and Distribution Software Pty Ltd (“MDS”) for supply of the Pronto software and with Loftus IT to supply the hardware. There was no reference in either of the written agreements for the transfer of the data on the Micropos System to be transferred to the Pronto System. It was this absence of any reference to the transferring of stock data from the Micropos System and the evidence of Mr Khuu that satisfied me that the Plaintiff had proved its loss. The evidence is not strong but it was the combination of the two pieces of evidence which caused me to be satisfied.
However, the circumstances here are different. The evidence of Mr Khuu related to the Pronto System. The Pronto System is not simply a point of sale system. Mr Khuu said he was researching for a warehouse /point of sale system. He said he was looking for a system which included the warehouse functions he said he outlined to Ms Zheng.[851] The documents in Exhibit P2 associated with the installation of the Pronto System, including the two agreements indicate that the Pronto System has warehouse functions and retail point of sale functions.[852]
[851] T1158.27
[852] P110-171
In considering this head of damage, as I said, I need to assume that the replacement system would be a retail point of sale system only. Mr Khuu’s evidence is not relevant, in these circumstances, because it is directed to a different system. The absence of any reference to transfer of data in the written agreements has no relevance in the circumstances. It is a different system. All I am left with is the evidence of Ms Zheng that often stock data is transferred by Micropos from an existing point of sale system to the Micropos point of sale system. In the absence of any contrary evidence there is no reason why I should not accept it.
This claim by the Plaintiff fails.
(f) Wasted Time
The Plaintiff sought to recover the cost of Wasted Time for the following categories of activities:
Convert back to normal system while research:        585 hours
                  Data Distribution error:  24 hours
                  Data error:  5.08 hours
                  Generate Sales/Supplier/Order Statement:           129.94 hours
                  Price Tagging when price of stock changed:         206.24 hours
                  Research new software  71 hours
                  Tracking previous cost for price comparison:        27.58 hours
The total hours claimed was 1565.14. The hourly rate claimed was $35 thus making a total claim of $54,799.90.
(1) Convert Back to Manual System While Research
It was Mr Khuu’s evidence that the task of converting back to manual involved him in marking the cost price for all new products received in the warehouse or where there was a change of product price. He said it also involved him in tagging new items of stock and all items of stock where there had been a change of price in the Central Market Store. He said he was also involved in researching a replacement computer which would supply warehouse and point of sale functions. I have included in this head of claim, the claim for Research New Software 71 hours, which was made separately to the claim under the head of loss.
In relation to the Sale of Goods Claim I need to assume that Mr Khuu would be researching for a replacement Point of Sale system. Mr Khuu’s evidence that before he approached Micropos, he had researched a considerable number of point of sale systems. The evidence indicates that there were a number of retail point of sale systems in the market place suitable for an Asian retail grocery business.
In my view 25 hours for research for a new replacement point of sale system over a period of six weeks would be ample for Mr Khuu to complete his research, in view of his knowledge of point of sale systems gained in research prior to approaching Micropos.
I mentioned that Mr Khuu said the converting back activities involved price tagging at the Central Market Store. As I stated earlier, the Central Market Store remained on a manual system due to the failure of Mr Khuu to instruct Micropos to install the four POS Terminals in the store. Therefore the tagging time is not a valid claim under this heading.
The difficulty of assessing damages under the Sale of Goods claim, as a result of my conclusions in relation to the Misrepresentation Claim is highlighted when consideration is given to the activity of tagging cost prices at the Warehouse. On the assumption that the Plaintiff purchased what it bargained for, on the evidence of Mr Khuu, the Plaintiff would not be purchasing large quantities of stock for his Warehouse business. However, it can be assumed that it would have continued to purchase stock to be housed in the Warehouse for selling in the Central Market store. The quantity would not have been anywhere as great as actually entered the Thebarton Warehouse. A small allowance will need to be made for this activity. The period of the work would be for six weeks which is the time I consider it would have taken for the Plaintiff to replace the Micropos System with another point of sale system. For the purpose of assessing damages I conclude that the six weeks commences at the time Mr Khuu began his research, which is recorded in the Diary as 16 August 2004. The period ends at the end of September.
I assess damages under this head at $1,200.
(2) Data Distribution Error and Data Error
I reject these claims on the same basis as my rejection of them when I was considering damages under the Misrepresentation Claim.
(3) Generate Sales/Supplier Order/Statement
The claim for wasted time for generation of Sales Orders is based upon the malfunction of some of the Account Sales functions in the System. I have mentioned that six weeks would have been a reasonable time for the Plaintiff to have replaced the Micropos System with another point of sale system. The period, as I said, ends at the end of September.
In relation to this claim, under the Misrepresentation Claim I assessed the entitlement of $800 for the period to the end of September. It is appropriate to allow that amount under the Sale of Goods Claim.
The claim for Generate Supplier Order is premised on the basis that the System did not have a purchase re-ordering function[853] and as a result extra time had to be taken up by Mr Khuu in identifying the levels of stock for the purpose of re-ordering. It is not disputed that such a function was not part of the Micropos System. Mr Khuu said he expected such a function. The fact that the System did not meet his expectation is not relevant. It was not held out that the System had such a function. On the assumption I am required to make in assessing damages under the Sale of Goods Claim the Plaintiff received what it bargained for. As a result this claim fails.
[853] T1017.32
With regard to the claim for Wasted Time arising from the absence of a function to produce Monthly Statements I indicated in the Misrepresentation Claim that the System should have included such a function because it should have been a part of the Account Payable/Account Receivable functions referred to in the Contract.
I mentioned that I consider six weeks would be a reasonable time for the Plaintiff to replace the point of sale system. There are only five entries in the Diary referring to manually prepared Monthly Statements totalling 1 hour and 25 minutes. After discounting for time that would have been taken to use the function if it was in the System I allow 1 hour and 15 minutes Wasted Time at $20 per hour. I assess the loss at $25.
(4) Manual Invoicing to Customers
I disallow this head of loss for the same reasons I gave in the Misrepresentation Claim.
(5) Price Tagging When Price Stock Changed
I disallow this head of loss for the same reasons I gave in the Misrepresentation Claim.
(6) Tracking Previous Cost for Price Comparison

As I mentioned in the Misrepresentation Claim this head of loss arose because of the cost of product problems the Plaintiff was experiencing with the Item Maintenance Window. This claim arises from the malfunctioning of the System. The first entry in this category was on 6 May 2004.
I have concluded that a reasonable time to be allowed to the Plaintiff to replace the retail point of sale system was to the end of September. The total time taken in the manual tracking process required for that period to the end of September was approximately 16 hours.
The appropriate hourly rate is $20.
I allow this claim at $300.
(7) Summary
I set out hereunder the amounts I have allowed for the Wasted Time claim:
Convert Back to Manual System While Researching          $1,200
  Generate Account Sale  $   800
  Generate Monthly Accounts  $   25
  Tracking Previous Cost  $   300
  $2,325
(8)    Replacement Cost
Under this head the Plaintiff claims the sum of $4,026.72.
When giving his evidence in November 2007 Mr Khuu said he located a supplier called MDS which sold a software program called “Pronto”. He said the Plaintiff entered into an agreement with MDS in or about March or April 2007 for the supply of the Pronto system. He said the Plaintiff also entered into an agreement with Loftus IT to supply the hardware to enable the Pronto System to operate. Mr Khuu said that about November the initial stage of the implementation of the Pronto Software had been completed. He said there were two stages to go.[854]
[854] T1171-1172
Exhibit P2,[855] included the written agreement with MDS and the written agreement with Loftus IT. There was also a document which appeared to be associated with MDS entitled a “Project Charter Document”. That document contained the following statements under the main heading “Project Scope and Objectives”:
[855] pp110-15
Integration
Provide and implement PRONTO-Xi system whereby LIEN HENG TRADING’s Financial Accounts, Customer, Supplier and Inventory Information, Warehouse control and Point of Sale processing, are maintained, viewable and operational from a single integrated source.
Software based control across the entire enterprise
Provide operational support from the bulk warehouse through to remote Point of Sale locations so that the entire scope of business is driven as a single entity.
Point of Sale processing
To provide a POS system appropriate to a grocery business with graphical displays of items selected and the ability to process special discounts or similar offers.
Improved efficiency in warehouse operations
To provide the ability to drive all warehouse operations from goods receipt through putaway and picking to replenishment of picking locations from bulk and despatch.
It is clear from those passages that the Pronto system produced warehouse functions and point of sale functions. That is consistent with the evidence given by Mr Khuu that he was, in his research, seeking a system which provided warehouse functions and point of sale functions. The evidence is not clear whether the Pronto system delivered all of the warehouse functions which Mr Khuu said he raised with Ms Zheng.
In his submissions, Mr Ower referred to an Account Statement from MDS dated 22 March 2007 and three invoices of MDS directed to the Plaintiff[856] which he said recorded an amount of $52,845. It was Mr Ower’s submission that the Plaintiff was entitled to the difference between that amount and the amount paid by the Plaintiff to Micropos of $48,818.28, namely the sum of $4,026.72.
[856] Exhibit P2[pp160-171]
There can be no doubt that in a claim of this nature under the Sale of Goods legislation such as the Goods Act (Vic) that a buyer would be entitled to the difference between the replacement cost of goods and the goods which the buyer was replacing due to the faulty nature of such goods, if it is established they are of no use to the buyer. However, in my opinion Mr Ower’s submission seeking replacement costs fails at the threshold. The Plaintiff was not replacing the Micropos retail point of sale system with another retail point of sale system. The Pronto System provided warehouse functions and a point of sale system.
Another difficulty that this head of loss has is that none of the written material which Mr Ower relied upon to establish the sum of $52,845 clearly indicates what was supplied to the Plaintiff for which the invoices were issued. No evidence was given regarding the contents of the invoices. Mr Ower never addressed on their contents. At one point I thought that Mr Ower was suggesting in his Final Address that the Pronto System was a point of sale system but that cannot be correct. The evidence clearly indicates otherwise. In my opinion, even if the threshold question was not present the Plaintiff has not established what was provided by MDS which led to the issuing of the invoices. What is clear is that the sum of $52,845 does not represent the cost of supply of replacement point of sale system.
For all these reasons I disallow the claim.
(g) Conclusion
With regard to the Sale of Goods Claim I allow the following amounts:
System Cost:  $48,818.28
                  PC Anywhere Cost:  $     294.28
                  Modem/Printer Cost:  $     870.00
                  Wasted Time Cost:  $ 2,325.00
  $52,307.56
However, as I said when I was dealing with damages in the Misrepresentation Claim, Micropos is entitled to an allowance or credit for the Plaintiff’s limited use of part of the System for a period of nearly six years. I have concluded that a reasonable sum for such use is $5,000.
Accordingly, the sum of $52,307.56 is reduced by the sum of $5,000 leaving a sum of $47,307.56.
There will be Judgement for the Plaintiff on its claim under the Goods Act (Vic) against Micropos Pty Ltd for the sum of $47,307.56.
The Judgment sum awarded to the Plaintiff includes the repayment of the part of the purchase price paid to Micropos, the cost of the purchase of PC Anywhere and the cost of a modem/printer. In those circumstances it is appropriate, in my opinion, to order the return of all of the hardware and software which Micropos delivered initially to the Plaintiff after the damages have been paid. I will hear the parties on the terms of the order.
Finally I will hear the parties on interest and costs.
Counterclaim
It follows from my findings on the Plaintiff’s claim under the Goods Act (Vic) that the Counterclaim of Micropos Pty Ltd must be dismissed.