Medical Device Technologies Pty Ltd v Health Administration Corporation - [2023] NSWSC 602

Supreme Court

New South Wales

Medium Neutral Citation: Medical Device Technologies Pty Ltd v Health Administration Corporation [2023] NSWSC 602
Hearing dates: 27 – 28 February, 1 – 3, 6 – 7, 13 – 17, 21, 27 – 29 March, 5 April, 3 – 4 May 2023
Date of orders: 07 June 2023
Decision date: 07 June 2023
Jurisdiction: Equity - Commercial List
Before: Stevenson J
Decision:
Defendant’s purchase order terms and conditions not incorporated into the agreements; no sale by description under s 18 of the Sale of Goods Act 1923 (NSW); ventilators not fit for purpose under s 19 of the Sale of Goods Act; plaintiff engaged in misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law; plaintiff to repay $10.395 million

Catchwords:
CONTRACTS — express terms — incorporation of terms — whether purchaser’s standard terms and conditions incorporated by reference into contract
CONSUMER LAW — sale of goods – respiratory ventilators – whether goods were accepted — whether there was a sale by description – whether purchaser made known particular purpose for which ventilators were required – whether there was an implied condition as to fitness for purpose – whether ventilators were suitable for use in any clinical setting
CONSUMER LAW – misleading or deceptive conduct – whether vendor made misleading or deceptive representations in ventilator user manual brochure – whether vendor provided purchaser user manual brochure as an intermediary or principal

Legislation Cited:
Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law
Health Administration Act 1982 (NSW)
Sale of Goods Act 1923 (NSW)

Cases Cited:
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2020) 278 FCR 450; [2020] FCAFC 130
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54
BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086
Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12
Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149
County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193
Dialogue Consulting Pty Ltd v Instagram, Inc (2020) 291 FCR 155; [2020] FCA 1846
Gardam v George Wills & Co Limited [1988] FCA 289
Gibson v Manchester City Council [1979] 1 All ER 972
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 180
Gonzalez v Agoda Company Pte Ltd [2017] NSWSC 1133
Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1
Grant v Australian Knitting Mills Limited (1935) 54 CLR 49; [1936] AC 85
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; [1978] HCA 11
Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110
Noone (Director of Consumer Affairs Victoria) v Operation Smile (Australia) Inc (2012) 38 VR 569; [2012] VSCA 91
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44
Re Australian Organic Eggs Pty Ltd [2022] VSC 747
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177

Category: Principal judgment
Parties: Medical Device Technologies Pty Ltd (Plaintiff/Cross-Defendant)
Health Administration Corporation (Defendant/Cross-Claimant)
Representation:
Counsel:
J R Clarke SC with T J Kane (Plaintiff/Cross-Defendant)
D B Studdy SC with C Ernst (Defendant/Cross-Claimant)
Solicitors:
Johnson Winter Slattery (Plaintiff/Cross-Defendant)
Gilbert + Tobin (Defendant/Cross-Claimant)

File Number(s): 2020/268161

TABLE OF CONTENTS

The claims in the proceedings

Decision

Ventilators

The Shangrila Ventilator and the VG70 Ventilator

Events leading up to the Agreements

HealthShare’s decision to purchase 100 VG70 Ventilators from RAPP
Therapeutic Goods Administration approvals
Consideration of “lower performance options”
Further discussions between HealthShare and MDT
HealthShare’s “Desktop Review”
15 April 2020
20 April 2020
21 April 2020

Who made the decision to purchase?

The Agreements

The First Agreement
Were the Purchase Order Terms and Conditions thereby incorporated into the First Agreement?
The Second Agreement

The article in The Guardian

Delivery of the Shangrila Ventilators

The technical tests – Dr Cook

The “Cancellation of Ordered Ventilators” brief

The clinical tests – Dr Gatward

The decision

The expert evidence

The contested functions of the Shangrila Ventilator

Pre-setting tidal volume
Volume control
The User Manual
Did the Shangrila Ventilators have “conventional” Volume Control?
The brochures
HealthShare’s pleaded case
Dr Barkalow’s evidence
Reliance

Pressure control mode
The User Manual
The MDT Shangrila Brochure

Accuracy of oxygen concentration
Expiry of oxygen sensors
Oxygen sensor calibration
Conclusion

Alarms
High Pressure Alarm
Circuit Disconnect Alarm
Other Alarms

Oxygen hoses
Patient circuit and expiratory valve calibration
Synchronised Intermittent Mandatory Ventilation
CPAP mode

Claim in contract – Sale of Goods Act

Did HealthShare accept the Shangrila Ventilators for the purposes of section 37 of the Sale of Goods Act?
Were the Shangrila Ventilators fit for purpose?
Particular purpose
Did MDT provide HealthShare with the MDT Shangrila Brochure and the User Manual merely as an intermediary?
Did HealthShare rely on MDT’s skill or judgment – Ms Hanigan
Did HealthShare rely on MDT’s skill or judgment – Dr Morris
Were the Shangrila Ventilators reasonably fit for the purpose of being used in a clinical setting for treating patients with COVID-19?

Was there a sale by description?

Misleading or deceptive conduct

Principles
The representations relied on
1. The ventilators were fit for the purpose of use by NSW Health in treating COVID-19 patients
2. The ventilators have a conventional volume-controlled ventilation mode and can reliably provide precise tidal volume
3. The ventilators would function in accordance with the specifications in the User Manual
4. The ventilators are intended to be used in common wards and ICUs
5. The ventilators are suitable for use in wards, emergency departments, ICUs or sub-acute care departments
6. The ventilators are capable of delivering FiO2 of between 40%-100% with ±20% accuracy
7. The ventilators can deliver volume control ventilation and the tidal volume on the ventilators can be pre-set
8. The ventilators trigger a continuous high-pressure alarm when the patient airway pressure exceeds a set limit

Conclusion

Judgment

On 11 March 2020, the World Health Organization declared COVID-19 to be a worldwide pandemic.
In April 2020, as part of the New South Wales Government’s response to the pandemic, the defendant, Health Administration Corporation, entered into two agreements (“the Agreements”) with the plaintiff, Medical Device Technologies Pty Ltd (“MDT”) to purchase a total of 348 “Shangrila 510S Integrated Respirator” ventilators (“the Shangrila Ventilators”) for a total of $20.79 million: around $60,000 each. The Shangrila Ventilators were manufactured in China by Beijing Aeonmed Co., Limited (“Aeonmed”), and to be imported into Australia by MDT.
Health Administration Corporation is a corporation established pursuant to the Health Administration Act 1982 (NSW).^[1] The relevant dealings were between MDT and representatives of an administrative unit of Health Administration Corporation known as HealthShare NSW. The parties referred to Health Administration Corporation as “HealthShare”. I shall do the same.
1. Section 9.
HealthShare paid MDT $10.395 million of the $20.79 million purchase price, that is, half the purchase price, by two instalments on 27 and 30 April 2020.
MDT caused the Shangrila Ventilators to be delivered to HealthShare between 16 June 2020 and 15 July 2020: 48 on 16 June 2020, 2 on 1 July 2020, 100 on 15 July 2020 and 198 between 15 and 20 July 2020.
HealthShare then conducted several rounds of technical and clinical testing.
HealthShare contends that the testing revealed the Shangrila Ventilators did not meet basic performance parameters, rendering them unfit for use in any clinical setting.
On 7 September 2020, HealthShare, by its solicitors, purported to reject the Shangrila Ventilators, terminate the Agreements and demand that MDT refund the $10.395 million paid on 27 and 30 April 2020.
The questions in these proceedings are whether:

HealthShare was entitled to take this step;

MDT is obliged to refund the $10.395 million to HealthShare; or rather

HealthShare is obliged to pay MDT the balance of $10.395 million purportedly payable under the Agreements.

The Shangrila Ventilators have never been used and remain in storage.

The claims in the proceedings

MDT seeks to recover the unpaid $10.395 million it contends is due under the Agreements.
HealthShare contends that it was entitled to terminate the Agreements and is entitled to a refund of the $10.395 million deposit on three bases:

breach of the terms contained in HealthShare’s standard “Purchase Order Terms and Conditions” that it contends were incorporated into the Agreements;

breach of the conditions it contends were implied into the Agreements by ss 18 and 19 of the Sale of Goods Act 1923 (NSW) (correspondence with description and fitness for purpose respectively); and

MDT’s alleged misleading or deceptive conduct, for the purposes of s 18 of the Australian Consumer Law (“the ACL”),^[2] principally arising from representations said to have been made by MDT in brochures and a user manual (“the User Manual”), to which I will return.

2. Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law.

Decision

HealthShare has not established that the Purchase Order Terms and Conditions were incorporated into the Agreements.
HealthShare has not established that the transaction recorded in the Agreements was a sale by description within the meaning of s 18 of the Sale of Goods Act.
HealthShare has established that the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act.
HealthShare has established that, to an extent, MDT engaged in misleading or deceptive conduct within the meaning of s 18 of the ACL.
I understand that it is common ground that it follows, from those conclusions, that MDT should now repay the $10.395 million it received from HealthShare in April 2020, but I will invite submissions about this, and such other matters as now require resolution.

Ventilators

A ventilator is a piece of equipment which delivers positive air pressure to a patient who is unable to breathe or is breathing insufficiently. The main functions of a ventilator are to facilitate oxygenation, that is, the delivery of oxygen to a patient, and ventilation, that is, removal of carbon dioxide from the patient’s lungs.
A ventilator works as follows:

oxygen and air are received from cylinders or wall outlets;

the pressure of the gas is reduced and blended according to the fraction of inspired oxygen, expressed as FiO₂, which is set by the operator of the ventilator; and

the gas is delivered to the patient based on the “mode” of ventilation that is set by the operator.

Ventilators function in different “modes” depending on the needs of the patient and the complexity of the ventilator. “Volume control mode” enables the operator to set the volume of air that is delivered to the patient. “Pressure control mode” enables the operator to set a certain air pressure as the target variable. When a ventilator is in volume control mode, the pressure will vary, whereas when a ventilator is in pressure control mode, the volume will vary.^[3]
3. This summary is taken with gratitude from HealthShare’s opening submissions and is based on the evidence of Dr Richard Morris AM which, in this respect, was uncontroversial.

The Shangrila Ventilator and the VG70 Ventilator

Aeonmed manufactured two different ventilators: the Shangrila Ventilator and the VG70 Ventilator.
MDT understood that it was the exclusive supplier in Australia of both types of ventilator. As I set out below, at the outset of the COVID-19 pandemic, MDT sought to market both types of ventilator to HealthShare. Ultimately, HealthShare acquired Shangrila Ventilators from MDT and acquired VG70 Ventilators from another supplier, RAPP Australia Pty Limited (“RAPP”). I return to this below.
There is no dispute that the Shangrila Ventilator has less functionality than the VG70 Ventilator. MDT accepts that the Shangrila Ventilator has “lesser functionality than a typical ICU ventilator”.^[4]
4. Plaintiff’s closing submissions at par 25.
MDT contends that the Shangrila Ventilator was properly characterised as an “emergency transport” ventilator. As I set out below, MDT made clear to HealthShare that this was how MDT characterised the Shangrila Ventilator.
MDT’s position is that:

“… There is no doubt that in ordinary times, the ICU doctors from [HealthShare] who have given evidence in these proceedings would much prefer to treat patients with a typical ICU ventilator, with its superior functionality.
But whether or not the Shangrila will be purchased by [HealthShare] for use in an ICU in ordinary times is not the proper lens through which to view this case.”

MDT’s position is that:

“… [HealthShare] purchased the Shangrila, being an emergency transport ventilator, so that it had a lower performing ventilator at the lower end of its stockpile if it became necessary to use it as the pandemic developed.”

On the other hand, HealthShare contends that, whether or not the Shangrila Ventilators can be characterised as “emergency transport ventilators”:

“The ventilators were acquired for use by [HealthShare] in clinical settings, to treat patients with COVID-19. Subsequent testing of the ventilators, however, revealed that they did not conform to their specifications. There were basic defects in the functionality which rendered them unfit for use in any clinical setting.”

Events leading up to the Agreements

Following the outbreak of the COVID-19 pandemic, there was a significant increase in the global demand for ventilators. HealthShare was unable to procure ventilators under its existing supply arrangements and began sourcing ventilators outside its normal tender based supply channels.
HealthShare later described the circumstances as follows:

“In early 2020 the worldwide supply for ventilators was extremely uncertain due to a wide range of factors including unprecedented levels of demand, international border closures, and vendors making allocation decisions based on need rather than orders received.
As a result, ventilators were purchased from a number of suppliers, including suppliers that had not been used by [HealthShare] previously. All ventilators purchased from unknown suppliers are put through an assessment process to ensure that they are of an appropriate quality and standard for [HealthShare].”^[5]
5. Document dated 24 July 2020 entitled “Cancellation of Ordered Ventilators”: see [266]-[269] below.

A number of potential suppliers of ventilators approached HealthShare in late March 2020.
MDT first contacted HealthShare on 26 March 2020. MDT had not previously dealt with HealthShare. HealthShare had not previously purchased ventilators manufactured by Aeonmed and had not previously dealt with MDT concerning the supply of ventilators.
On 26 March 2020, MDT’s Sales and Marketing Manager, Mr James Bellas, wrote to Mr Rod Treadwell, then Executive Director, Procurement, at HealthShare, stating that MDT had “access to” 600 “CE accredited patient ventilators from our supplier”.
Mr Bellas’ reference to the ventilators being “CE accredited” was a reference to the fact that the Shangrila Ventilators had been certified by the International Electrotechnical Commission as complying with a number of international standards including standard EN 794-3 which is the European standard for emergency and transport lung ventilators.
Mr Bellas attached two brochures to his email.
The first referred to the Shangrila Ventilator. I will refer to this as the “MDT Shangrila Brochure”.
The MDT Shangrila Brochure was entitled “Fighting against COVID-19”. It was in the nature of a promotional brochure and did not contain any detailed technical specifications. It stated on its cover:

“With the massive global outbreak of COVID-19, Aeonmed customized this respiratory work station to save more lives according to the clinical requirements.”

The MDT Shangrila Brochure depicted the Shangrila Ventilator on a stand. Under the heading “Working Scenarios”, the MDT Shangrila Brochure stated “Ward, Emergency Department, Sub–acute Care Unit”. The brochure made various other statements to which I will return.
A copy of the MDT Shangrila Brochure is attached to these reasons.
The second brochure attached to Mr Bellas’ email related to the VG70 Ventilator and, unlike the MDT Shangrila Brochure, contained detailed technical specifications. It described the VG70 Ventilator as a “Superior Mobile ICU ventilator” and a “Comprehensive ICU ventilator”. A copy of this brochure, to which I will refer as the “VG70 Brochure”, is attached to these reasons.
Mr Treadwell referred Mr Bellas’ email to Ms Akua Addai-Aboagye, who was then a Category Manager, Strategic Procurement Services, at HealthShare.
At that time, Ms Addai-Aboagye was also dealing with approaches from other potential suppliers of the Shangrila and VG70 Ventilators.
One of those potential suppliers was RAPP.^[6]
6. See [22] above.
On 26 March 2020, several hours after Mr Bellas’ email to Mr Treadwell, Mr Simon Lloyd from RAPP wrote to Ms Addai-Aboagye stating that RAPP had been “working closely” with the Government of Victoria and had “been able to secure production of 4,450 ventilators for” the Government of Victoria. Mr Lloyd continued:

“There is a mix of 2,425 Portable Transport Ventilators and 2,000 ICU ventilators that the Government of Victoria have order[ed] and I would like to extend our services to the Government of New South Wales. Given the unprecedented demand on manufacturers of these devices there is now a global shortage and this is only expected to get worse if action and orders have not been placed.
…
If there is anything RAPP can do to assist [the] Government of New South Wales in securing Ventilators please let me know as quickly as you can. The matrix have [sic] shifted and it’s not about getting the ventilator one wants, it’s now just about getting a ventilator, quite literally things are changing buy [sic] the hour in this critical time.”

Mr Lloyd’s email thus drew a distinction between “portable transport ventilators” and “ICU ventilators”. Mr Lloyd attached hyperlinks to “information relating to types of ventilators we have already secure[d] for the Government of Victoria”. Those hyperlinks were to the VG70 Brochure and to a brochure concerning the Shangrila Ventilator that was different to the MDT Shangrila Brochure sent by Mr Bellas to Mr Treadwell. This brochure was entitled “Shangrila 510S Emergency Transport Ventilator” and showed the ventilator in a bag attached to a gurney alongside two “emergency” personnel. This brochure contained technical specifications of the Shangrila Ventilator and described it as a “Multi-functional Emergency Transport Ventilator”. To distinguish this brochure from the one sent by Mr Bellas to Mr Treadwell, I will refer to this brochure as the “RAPP Shangrila Brochure”, although each of these brochures bears Aeonmed’s logo and each appears to have been published by Aeonmed.
A copy of the RAPP Shangrila Brochure is attached to these reasons.

Mr Lloyd also provided hyperlinks to brochures relating to ventilators not manufactured by Aeonmed. These have no relevance here.
The following day, 27 March 2020, Mr Lloyd send a further email to Ms Addai-Aboagye with quotations for the supply of ventilators, including the Shangrila Ventilator, which Mr Lloyd described as an “Emergency Transport Ventilator” and the VG70 Ventilators, which Mr Lloyd described as “Mobile ICU Ventilators”.
RAPP’s quotation for the Shangrila “Emergency Transport Ventilator” was at a unit price of $15,615 (excl. GST) and for the VG70 “Mobile ICU Ventilator” at a unit of price of $35,785 (excl. GST); more than double the Shangrila price.
As I set out below, the price that HealthShare ultimately agreed to pay MDT for the Shangrila Ventilators was considerably more than either of these prices: $67,500 per unit for the first 148 units and $54,000 per unit for the second 200 units; an indication that demand outstripped supply.
Ms Addai-Aboagye’s responsibility was to locate possible sources for ventilators. It was not her responsibility to decide what ventilators should be purchased.
On 30 March 2020, Ms Addai-Aboagye sent copies of Mr Lloyd’s emails to Mr Rodney Zanetic, an engineer in the Medical Equipment Unit of the Strategic Procurement Unit Services unit of HealthShare.
As I set out below, unlike Ms Addai-Aboagye, Mr Zanetic was involved in the decision as to what ventilators were to be purchased. He participated in a “Desktop Review” of the Shangrila Ventilator which ultimately led to HealthShare’s decision to enter the Agreements.
Mr Zanetic thereby received a copy of the VG70 Brochure and the RAPP Shangrila Brochure. He did not receive any brochure from MDT concerning the Shangrila Ventilator.
A short time later on 30 March 2020, Ms Addai-Aboagye replied to Mr Bellas’ 26 March 2020 email to Mr Treadwell referring to “your notification of 300 potential units of ventilators available” and requesting a “brochure” and “technical specification sheet”.
Mr Bellas replied the same day:

“I have attached the information, however in these uncertain times the market place is being overwhelmed and our manufacturer and supplier has allocated a production slot for MDT for 300 ventilators for delivery in late June 2020.
We have requested fast track approval from TGA and from our discussions with them they are pulling out all the stops for these much needed ventilators.
The quantity available is only 300 of the AEONMED Shangrila 510S, these are priced at $30,000 per unit and are [a] proven bedside ventilator with a 12 month warranty.
AEONMED has been swamped by orders globally and with the US President invoking war power level acts for production to hold all manufactured goods in the USA over the weekend, the demand has increased significantly.
For NSW Health to secure this last production spot from AEONMED, a purchase order and payment for 60% of the order value would need to be completed by no later than noon Tuesday the 31st of March.
In full transparency to NSW Health, we have quotes with other Health departments with same conditions, and at this stage no more production slots of these volumes will be available.
I have attached the brochure, CE certificate and technical data sheet as requested and can issue a formal quote should you be able to meet the order and payment terms applied by AEONMED and MDT.
Kia, sorry for the short time frame but global demand is outstripping supply 10 to 1, in these unusual times. This is not how we normally operate and again apologise for the pressure this is placing on procurement.
We already have professional and product liability insurance and are currently increasing the coverage, but we have premium for $20 Million, will forward certificate on order.”

Mr Bellas attached to his email a copy of the MDT Shangrila Brochure; that is the same document he had sent Mr Treadwell on 26 March 2020.
Mr Bellas also attached a Shangrila “Technical Data” sheet that set out such data and also stated:

“Shangrila 510S Integrated Respiratory Work Station is customized to save more lives in the global outbreak of COVID-19 pandemic.”

I will refer to this document as the “MDT Shangrila Technical Data Brochure”. A copy is attached to these reasons.
Mr Bellas also attached to his email a document entitled “EC Certificate” dated 16 July 2016 which stated, of Aeonmed:

“The Certification Body of TÜV SÜD Product Service GmbH declares that the aforementioned manufacturer has implemented a quality assurance system for design, manufacture and final inspection of the respective devices / device categories in accordance with MDD Annex II. This quality assurance system conforms to the requirements of this Directive and is subject to periodical surveillance. For marketing of class III devices an additional Annex II (4) certificate is mandatory.”

Ms Addai-Aboagye replied on the same day, saying that she would “review with the team here and get back to you”.
Ms Addai-Aboagye replied to Mr Bellas, later on 30 March 2020:

“Thanks well noted,
Just to let you know we have been approached by 3 vendors for this same product.
Can you confirm if you are the registered distributor for this?”

One of the “3 vendors” to whom Ms Addai-Aboagye referred was RAPP.
Another was Taleb Medical Pty Limited. Also on 30 March 2020, Mr Taleb Taleb, from Taleb Medical wrote to Mr Zanetic with a quotation to supply 200 VG70 Ventilators, which his brochure described as a “full critical care ventilator” at a unit price of $39,992. Mr Taleb stated that he had “been completely swamped with calls and proposals for more ventilators” and that he had “a price and availability as it stands an hour ago”.
Also on 30 March 2020, Ms Addai-Aboagye wrote to Mr Bellas:

“Do you have the VG870 [sic]?
Bedside ICU ventilator”

Ms Addai-Aboagye was obviously referring to the VG70 Ventilator. As I have said, she had received quotations from RAPP concerning both the Shangrila and the VG70 Ventilators and from Taleb Medical concerning the VG70 Ventilators.
Later on 30 March 2020, Mr Lee Gannon, the Managing Director of MDT, wrote to Ms Addai-Aboagye:

“The models AEONMED [that] are [on] offer are:
Shangrila 510S - Bedside
VG70 - ICU
Both units are invasive and can be used in CPAP mode (non-invasive). James [Bellas] incorrectly provide[d] advice, just to clear this up. I have attached brochures for each to assist you.
The VG70 is not available for some time if you would like we can check timings but I believe availability would be August maybe and we would need to TGA [sic] unit. At present AEONMED has offered 300 Shangrila - Bedside for delivery in late June. These units have been specifically designed for the Coronavirus Pandemic and used in Wuhan.
We have no movement on payment and conditions [because] the supplier has extreme demand and [is] only covering these quantities because we have been their distributor for some time."

Mr Gannon attached “brochures for each” to his email. These were the MDT Shangrila Brochure and the VG70 Brochure that Mr Bellas had sent Mr Treadwell on 26 March 2020.
Thus, although Ms Addai-Aboagye had made an enquiry about the VG70 Ventilator as a “Bedside ICU Ventilator”, Mr Gannon described the Shangrila Ventilator as being “bedside” and described the VG70 Ventilator as being an “ICU” ventilator.
Finally, on 30 March 2020, Ms Addai-Aboagye wrote to Mr Treadwell and to Ms Susie Giddey, the Associate Director of Strategic Procurement at HealthShare, stating:

“Just to give some clarity on the Aeonmed brand vents and the x 3 distributors that have come forward with a commercial offer for the same equipment.
• Medical Device Technology deadline for the Mid Acuity – Shangrila 510S – 300 units is tomorrow 12pm. They are in contact with federal through industry – details in blue.
• They claim no stock of the High Acuity vents VG70, while RAPP Australia has offered these in stock so has Taleb.
Need your guidance on which distributor and which ventilator to move forward with?”

In that email. Ms Addai-Aboagye described the three proposals as follows:

Vendor

Offer

Medical Device Technology

Shangrila 510S – ICU Mid Acuity – Invasive & Non-Invasive

VG70 – ICU High Acuity – Invasive & Non-Invasive

Taleb

VG70 – ICU High Acuity – Invasive & Non-Invasive

RAPP Australia

Shangrila 510S – ICU Transport/Ward Use – External and Intra-Hospital Use

VG70 – ICU High Acuity – Invasive & Non-Invasive

In her email to Mr Treadwell and Ms Giddey, Ms Addai-Aboagye described the Shangrila Ventilator as being “mid acuity” and the VG70 Ventilator as being “high acuity”. She also used the initialism “ICU” in relation to each of the Shangrila and VG70 Ventilators although she had received no communication from MDT describing the Shangrila Ventilator as an “ICU” ventilator. Nor had she received any such communication from RAPP. RAPP had described the Shangrila Ventilator as an “emergency transport ventilator” as opposed to the VG70 Ventilator which RAPP described as a “mobile ICU ventilator”.
Pausing the narrative for a moment, it can be seen that by the time Ms Addai-Aboagye sent her email of 30 March 2020 to Mr Treadwell and Ms Giddey, HealthShare had received two brochures from MDT concerning the Shangrila Ventilator, being the MDT Shangrila Brochure and the Shangrila Technical Data Brochure.
HealthShare had also received from MDT, and also from RAPP, the VG70 Brochure.
HealthShare had also received, from RAPP, the RAPP Shangrila Brochure.

HealthShare’s decision to purchase 100 VG70 Ventilators from RAPP

On 31 March 2020, Mr Lloyd from RAPP sent Ms Addai-Aboagye a “revised quote of 100 units only of the VG70 and related items” at a unit price of $38,035, a little more than the $35,785 unit price quoted on 27 March 2020.
Ms Addai-Aboagye replied several minutes later, stating that “ETA June 30th (or earlier) on site in Sydney is the condition of this potential purchase to help us bridge potential gaps”^[7] and sought confirmation that the “manufacturer has authorised RAPP Australia to distribute”, that the VG70 “is as per specification attached” (being the VG70 Brochure), and “100 units confirmed for 30th June delivery or earlier”.
7. Ms Addai-Aboagye stated “bridge potential caps”, but this appears to be an error. In any event, the facts do not turn on this.
Mr Lloyd replied a short time later, confirming that RAPP was authorised to distribute the VG70 Ventilators, stating that “we currently have 2,000 units ordered and scheduled for the Government of Victoria”, confirming that the VG70 would be in accordance with the VG70 Brochure and, as for 30 June 2020 delivery said:

“As advised, every attempt will be made to deliver them prior to the 30th June. I can’t guarantee delivery prior at this stage, I can only confirm the completion of the product and its availability to be shipped will occur by the 30th June.”

A short time later, and also on 31 March 2020, Mr Lloyd wrote to Ms Addai-Aboagye:

“Given the deadline has passed I can no longer guarantee the offerings as outlined below. If the NSW Government is still interested you will need to advise as other countries commitments will have most likely filled the held allocations that were available for the VG70, what [e]ffect that has had now is unknown and would need to be determined.”

These communications give insight into the urgent situation HealthShare faced. Each of MDT, RAPP and Taleb Medical was emphasising that, because of the pandemic, ventilators were in short supply globally and that urgent decisions were required to secure supply of stock.
At around this time, Dr Richard Morris AM, then a Staff Specialist in Anaesthesia at St George Hospital and Visiting Medical Officer in Intensive Care at Shoalhaven District Memorial Hospital, joined a Technical Advisory Group established to develop an initial testing and simulation testing regime for ventilators that had not previously been used in NSW hospitals.
By 1 April 2020, Dr Morris had reviewed the VG70 Brochure. On that date, he wrote to Ms Giddey and to Mr Zanetic:

“After having looked at the four page brochure for the VG 70 ventilator from AEOMED [sic]. This appears to be a full function ICU ventilator. The specifications cover the range of functions required. Usefully it has a turbine for air supply so only a compressed oxygen supply is needed. It doesn’t list the oxygen consumption nor the exact type of circuit and sensors. I have been unable to find a more detailed Users Manual. Requesting a copy from the supplier would facilitate a more complete evaluation.
I support taking this device forward as a potential ICU level ventilator.” (Emphasis added.)

Later on 1 April 2020, Mr Zanetic wrote to Ms Addai-Aboagye:

“The VG70 was reviewed and approved by Nhi’s team. According to the below email, [RAPP] are able to supply 100 units in June. Is this worth pursuing. Either with this supplier, RAPP, and/or with Medical Device Technologies?”

Mr Zanetic’s reference to “Nhi’s team” was a reference to Dr Nhi Nguyen, an Intensive Care Specialist at Nepean Hospital, who in March 2020 joined the State Health Emergency Operations Centre (“SHEOC”) as an intensive care adviser. SHEOC was a body established to manage and oversee clinical operations in New South Wales hospitals and health facilities, to support the healthcare workforce and to facilitate procurement of medical equipment in New South Wales during the COVID-19 pandemic.
I will return below to Dr Nguyen who worked closely with Dr Morris at this time. Mr Zanetic’s reference to “Nhi’s team” having reviewed and approved the VG70 Ventilator may have been a reference to Dr Morris’ review of the VG70 Brochure.
On 2 April 2020, Ms Giddey wrote to Mr Lloyd at RAPP:

“We have your quotation for 100 ventilators which we should process today.”

Later on 2 April 2020, HealthShare placed a purchase order with RAPP for 100 VG70 ventilators at a unit price of $38,035.
HealthShare delivered that purchase order to RAPP early on 3 April 2020.
Mr Lloyd responded within minutes in an email that gives some impression of the urgency of the situation with which HealthShare was faced:

“We require 70% on order and the balance prior to shipment.
In relation to our conversation I do understand the frustration surrounding the terms but we are not working in a normal global environment at the moment. The manufacturers we are dealing with globally are requesting payment in full on order or they won’t even schedule.
I will be entering this order into our system and issuing a PO^[8] but I am required to make payment to secure the production slot until such payment is made its [sic] not locked. The deadlines that I have been communicating are absolute, given we are competing globally for these products, missing these deadlines can have substantial impacts on the previously secured schedules. In some instances customers are actually outbidding other customers to secure ventilators, it’s that competitive.
Please advise once payment is made [and] I will have our accounts confirm receipt.”

8. Purchase Order.

Therapeutic Goods Administration approvals

In the meantime, on 3 April 2020, the Therapeutic Goods Administration approved the Shangrila Ventilator and stated that its intended purpose was to be:

“… mainly used in the emergency rooms of hospitals, transfer after operations, field and occasions where first-aid or transfer is needed for care of adult, paediatric, infant patients weighing at least 3.5kg.”

Consideration of “lower performance options”

Ms Rachel Hanigan was the Chief Procurement Officer of the NSW Rural Fire Service, but had joined HealthShare’s COVID-19 taskforce to manage and coordinate the response of NSW Government agencies to the pandemic.
On 7 April 2020, Mr Zanetic wrote to Ms Giddey and to Ms Hanigan referring to HealthShare’s order of 100 VG70 Ventilators from RAPP and said:

“ … I’m wondering if it is worthwhile to seek feedback from the SHEOC team to, given the chance of securing ICU capable ventilators is diminishing, consider including the lower performance options” (Emphasis added.)

Further discussions between HealthShare and MDT

Having secured an order for 100 VG70 Ventilators from RAPP, HealthShare’s position so far as concerns MDT was that it preferred to acquire the VG70 Ventilators, rather than the Shangrila Ventilators.
Thus, Ms Addai-Aboagye gave this evidence:

“Q. At the time, the position that NSW Health was taking, to your knowledge, was that it was trying to acquire the VG70 in front of the Shangrila. Correct?
A. I can recall that, yes.
Q. That’s because it was a higher specification?
A. Correct.”

And later:

“Q. As at April 2020 NSW Health was willing to acquire either the VG70 or the Shangrila ventilator, correct?
A. If - yes according to what they’ve written in the emails, yes.
Q. Was it your understanding that they wanted the VG70 before the Shangrila if they could get it, correct?
A. Correct.”

From 8 April 2020, Mr Gannon and Ms Hanigan exchanged emails concerning the possible supply by MDT to HealthShare of VG70 Ventilators. Ms Hanigan said “let’s be ambitious and say 500”. Nothing came of this as MDT was not able to source VG70 Ventilators.
Ultimately, on 20 April 2020 Mr Gannon wrote to Ms Hanigan, Mr Zanetic and others:

“We have just been contacted by our AEONMED manufacturer and they have confirmed they can obtain 48 Shangrila 510S Ventilator[s] in May from a local distributor who is willing to sell his product. The acquisition will be through AEONMED and all factory warranties and insurances hono[u]red. The amount would be higher than standard factory pricing. AEONMED want this to be very clear, this is not standard practice and preferences is through normal order processes.
These are available in May 2020.
$67500 (1 Yr Warranty) - Confirmed
$90,000 (5 Yr Warranty) - Just awaiting confirmation on warranty amount and whether AEONMED will also allow for us to purchase an additional warranty. This price should be very close.
Once again, we need a quick response to obtain these units. These units will go quickly due to the delivery time of May.” (Emphasis in original.)

Ms Hanigan called Mr Gannon and they had this conversation:

“[Ms Hanigan] said:   HealthShare is interested in purchasing the ventilators, are they still available?
[Mr Gannon] said: Yes they are available.
[Ms Hanigan] said:   Will the Shangrila 510s be suitable for NSW Health and meet our needs for COVID?
[Mr Gannon] said: I only deal with the best. I have run a large global corporation since 2008 so I understand the global market. Also my wife is an emergency doctor in Queensland. I would never recommend anything but the best ventilators for NSW or she’d be up me.
[Ms Hanigan] said:   Can you send me the final quote and expected delivery dates?
[Mr Gannon] said: Yes, I’ll email it over as soon as I can.” (Emphasis added.)

HealthShare relies on the passages in this conversation that I have emphasised as the occasion on which it made known to MDT the “particular purpose” for which it required the Shangrila Ventilators so as to enliven s 19 of the Sale of Goods Act.
The “particular purpose” that HealthShare contends it thus made known was “that it required the ventilators for use in a clinical setting for treating patients with COVID-19”. I return to this below.
Mr Gannon gave evidence that, at about this time, he had this conversation with Ms Hanigan:

“[Mr Gannon] said: The Shangrila units are an emergency ventilator. They are not intended for ICU. If NSW Health wants to acquire ventilators suitable for the ICU, the VG70 ventilator would be suitable. MDT has 200 Shangrila units which it can obtain from our AEONMED distributor and its distributors.
[Ms Hanigan] said: We are trying to source ICU ventilators like the VG70, but I will put this forward.” (Emphasis added.)

Ms Hanigan denied that Mr Gannon told her the Shangrila Ventilators were “not intended for ICU”. Responding to a statement made by Mr Gannon in an earlier affidavit to the same effect,^[9] Ms Hanigan said:

“That statement is incorrect. Mr Gannon did not state that the Shangrila ventilators were not suitable for the ICU at any time. …
I would have never put the ventilators to HealthShare for desktop review if Mr Gannon or Mr Bellas had told me the ventilators were not suitable for treating COVID-19 patients, including in ICUs. My involvement in the procurement was as a member of the COVID-19 taskforce, so my entire focus in procuring ventilators was to procure ventilators that could be used to treat COVID-19 patients. If Mr Gannon or Mr Bellas had told me that the ventilators were “not ICU” ventilators at any time, I would have ended the conversation and not proceeded with the procurement.”
9. Which was not in proper form, was objected to, rejected and replaced with the evidence at [101].

However, notwithstanding Ms Hanigan’s denial, I think it likely that the conversation to which Mr Gannon deposed did take place. That is because, several weeks later, on 1 May 2020, after the Agreements were entered, Mr Gannon wrote to Ms Hanigan:

“Once again, we have been very clear [the Shangrila Ventilators]^[10] are not full ICU ventilators, the specifications provide detail [of] the clear functionality of these units.”
10. These words do not appear in Mr Gannon’s email, but it is what he meant. I discuss this below at [243]ff.

I return to this communication below.^[11]

HealthShare’s “Desktop Review”

11. Ibid.

HealthShare then conducted what the parties described as a “Desktop Review” of the Shangrila Ventilator.
Because of MDT’s contention that HealthShare did not rely on MDT’s skill or judgment when deciding to purchase the Shangrila Ventilators, it is necessary to examine this process in detail, and to understand the compressed time that HealthShare understood was available, by reason of the exigencies of the pandemic, to make decisions as to what ventilators were to be purchased.

15 April 2020

On 15 April 2020, Dr Morris suggested to Mr Zanetic that a standard be adopted to assess ventilators to be used during the pandemic. Dr Morris suggested the TGA guidelines as the standard for locally made ventilators.
Mr Zanetic replied saying that he agreed that a guideline should be adopted “to base our decisions on” and that he had been using “the ICU mid and high acuity technical requirement HealthShare published in 2018 for the ventilation tender”.
Dr Morris replied, agreeing with Mr Zanetic’s suggestion and saying that Mr Zanetic’s proposal looked “more detailed than the TGA and could be combined with the TGA minimum standards nicely”.

20 April 2020

As I have said,^[12] on 20 April 2020 Mr Gannon wrote to Ms Hanigan, Mr Zanetic and others stating that MDT had “just been contacted” by Aeonmed “and they have confirmed they can obtain 48 Shangrila 510S Ventilator[s] in May from a local distributor who is willing to sell his product”. Mr Gannon said “these are available in May 2020” and “we need a quick response to obtain these units” because “these units will go quickly due to the delivery time of May”.
12. See [96] above.
A short time later, Mr Zanetic wrote to Dr Morris and Dr Nguyen:

“Please find attached a ventilator for review. Product brochure, TGA submission and technical assessment. This appears to be a purpose built emergency transport ventilator pending TGA approval. I have copied the evaluation summary below.” (Emphasis added.)

The “product brochure” to which Mr Zanetic referred was the RAPP Shangrila Brochure, a link to which Mr Lloyd from RAPP had sent Ms Addai-Aboagye on 26 March 2020^[13] and which Ms Addai-Aboagye had sent Mr Zanetic on 30 March 2020. As I have said, this brochure was different in form to the MDT Shangrila Brochure and the MDT Shangrila Technical Data Brochure that MDT had hitherto sent HealthShare, although the RAPP Shangrila Brochure contained the same technical specifications as were set out in the MDT Shangrila Technical Data Brochure. The RAPP Shangrila Brochure that Mr Zanetic provided Dr Morris did not state that the Shangrila Ventilator had “conventional volume control”. This point is relevant to HealthShare’s misleading or deceptive conduct claim, to which I return below.^[14]
13. See [44] above.
14. See [534]ff.
The “evaluation summary” to which Mr Zanetic referred was a document created by Mr Zanetic to analyse whether the Shangrila Ventilator complied with a number of “minimum requirements”.
Mr Zanetic used a format usually adopted to assess tenders made to HealthShare for the possible supply of products. Mr Zanetic completed the document as if assessing such a tender from MDT. The “minimum requirements” adopted by Mr Zanetic for this purpose were for an ICU mid-acuity ventilator. Mr Zanetic noted, using an “x”, that the Shangrila Ventilator did not comply with many of these “minimum requirements”.

21 April 2020

The following day, 21 April 2020, Dr Morris replied:

“I can’t find a user manual or more specs on the web to clarify these queries. Otherwise it looks like it has the modes we are interested in. You might ask for the manual if you want to take this one further.” (Emphasis added.)

Mr Zanetic replied:

“Attached is the only other document that I can find. I will reach out and request a user manual.”

The “other document” to which Mr Zanetic referred was the further brochure that Mr Zanetic had evidently located on an online search. A copy of this brochure is attached. Because this brochure depicted the Shangrila Ventilator in a bag, the parties referred to it as the “Shangrila in a Bag Brochure”. I shall do the same.
The Shangrila in a Bag Brochure stated, amongst other things:

“Shangrila 510S is a universally used model. Not only for emergency ventilation, but also it is suitable for ideal transport ventilation. The circumstances include on-site emergency treatment, pre-hospital transport, inter-hospital transport, and even intra-hospital transport.”

This brochure contained technical specifications similar to those in the RAPP Shangrila Brochure and the MDT Shangrila Brochure. It did not contain any statement to the effect that the Shangrila Ventilator had conventional volume control.
Dr Morris replied:

“Based on this document. The airway pressure alarms are covered. The inspiratory times will also be okay because the rate and I:E ratios^[15] available mean you would cover that range. The [minute volume] monitor would give you an alarm if the tidal volume was not achieved or overachieved.
So I think it is fine.” (Emphasis added.)
15. The proportion of each breath cycle in either the “inspiratory” (breath in) or “expiratory” (breath out) phases.

At this point, Dr Morris was saying, in effect, “so far, so good”.^[16]
16. As he agreed at T869.1.
At around this time, Mr Zanetic “searched online for publicly available information” about the Shangrila Ventilator and, in addition to locating the Shangrila in a Bag Brochure, located a document that was in the same form as the MDT Shangrila Brochure but, unlike that brochure, did not bear Aeonmed’s logo at the bottom right hand corner of the front page. Rather, it bore the logo of “Allied Scientific Pro”; evidently another purported distributor of Aeonmed products. To distinguish this version of the brochure from the MDT Shangrila Brochure, I will call this version of the brochure the “Allied Scientific Shangrila Brochure”. A copy of that brochure is attached to these reasons.
Several hours later, Mr Garth Worboys, an Incident Controller in the COVID-19 Procurement & Supply Chain, representing the Ministry of Health, wrote to Dr Morris, copying in Mr Zanetic, Dr Nguyen and others:

“Thank you for your time on the phone just now and for providing clarity on our ventilator reporting.
This report is being provided to the [Premier] on a regular basis and is helping to inform decision making on our ICU capacity, so your support in clarifying this is much appreciated.
As discussed, can you please confirm via return email that each of the below nine ventilator categories (including both homecare single circuit and transport single circuit) would be appropriate for use on patients in the ICU and could support them for up to a month.

Ventilator Category

Ventilators - Homecare - Non Invasive and Invasive

Ventilators - Homecare - Non Invasive and Invasive - Air supply only, Single circuit, locked user interface and programming capabilities

Ventilators - ICU High Acuity - Non Invasive and Invasive

Ventilators - ICU Mid Acuity - Non Invasive and Invasive

Ventilators - ICU Neonatal/Paediatric - Non Invasive and Invasive

Ventilators - MRI Compatible - Non Invasive and Invasive

Ventilators - Transport / Ward Use - Non Invasive and Invasive - External and Intra-Hospital Transport

Ventilators - Transport / Ward Use - Non Invasive and Invasive - External and Intra-Hospital Transport, High-Flow, Neonatal configuration option

Ventilators - Transport / Ward Use - Non Invasive and Invasive - Single circuit, Intra-Hospital Transport

Team – can you please re-prepare last night’s PowerPoint slide and Excel spread sheet incorporating detail from all nine of the above ventilators, with commentary on what has changed and documented note re this clinical advice. Please send through by 12pm.”

Mr Worboys was thus enquiring, on behalf of the Ministry of Health, and evidently also on behalf of the Premier, as to whether any of the nominated “nine ventilator categories” would “be appropriate for use on patients in the ICU and could support them for up to a month”. Those “categories” ranged from an “ICU High Acuity” invasive ventilator at one end of the spectrum to a non-invasive “Homecare” ventilator of the other, and included three categories of “Transport/Ward Use” and “External and Intra-Hospital Transport” ventilators. As I have set out above, in his email to Dr Morris the previous day, Mr Zanetic had described the Shangrila Ventilator as an “emergency transport ventilator”.^[17] This appears to reflect the urgent need that the Ministry of Health saw to source a wide range of ventilators for use in an ICU setting in the short-term, including ventilators that were not designed for ICU use.
17. See [110] above.
Dr Morris replied:

“I am happy that all the classes of ventilator listed below could be used for a month or more for supporting an ICU patient during this COVID outbreak. Therefore I believe that they should all be included in the numbers of ventilators available at this time.”

Dr Morris’ reply appears to show that his view was that, at least for the next “month or more”, ICU patients could be supported by any one of the nine classes of ventilator the subject of Mr Worboys’ enquiry. This no doubt reflected the urgency of the situation with which HealthShare was faced in these early days of the pandemic, and was consistent with Mr Zanetic’s earlier observation that consideration of “lower performance options” may be worthwhile.^[18]
18. See [91] above.
In that regard, Dr Morris gave this evidence in cross-examination:

“Q. What you were saying is that it is the case that transport or ward ventilators can be used for a month or more for supporting an ICU patient during this COVID outbreak; correct?
A. So, I was saying this in the context of discussions with a policeman about advice for the Premier. I wasn't saying it in the context of deciding which ventilators we should use for caring for patients.
Q. I understand. It wasn't specific to any particular ventilator as to whether it was suitable or not; correct?
A. Yep.
Q. It was a recognition that transport ventilators were going to be included in the reserve stockpile that New South Wales Health was counting as to whether it had enough ventilators; correct? You nodded but you have to say for the transcript?
A. Yes.
Q. What you were really being asked was, is there a general reason why transport ventilators can't be used, because they can only be used for up to 14 days, or is it in fact appropriate for transport ventilators to be used for a month or more, and you were saying that that was correct; they can be?
A. My recollection of this email was I was being asked whether we could provide the Premier with some surety that we were going to have enough ventilators. I wasn't, in fact, discussing with my peers what the capacity of those ventilators or how long you could use them. It was simply a statement to the Premier to give them confidence in our acquiring ventilators.
Q. It was working out what ventilators could be included in New South Wales Health's stockpile of useable ventilators?
A. No. What I'm saying is that my recollection of this was that this was information we were providing to the Premier via the police about whether we had adequate stockpiles. I wasn't making a statement about whether we'd be able to use these ventilators on the patients.
Q. Because that might depend upon their functionality; is that right?
A. True.
Q. A ventilator might be included in the stockpile for valid reasons, that you might want to have access to that ventilator; correct?
A. No, the - what I'm saying is that this email was all about what we were saying to the Premier, not about what we were using as criteria for our stockpile for ventilators we'd use.
Q. I understand that. I'm not suggesting otherwise. I understand it was information for the Premier, but you weren't saying something that was untrue to be passed to the Premier; correct?
A. Correct. But I wasn't saying something that perhaps fully explained the situation.
Q. The position was, as you understood it, that New South Wales Health wanted to know how many ventilators it had in its reserve stockpile, right? You've just nodded; you've got to say yes?
A. Yes.
Q. It was important to know how many ventilators New South Wales Health could have access to during the COVID pandemic; correct?
A. Yes.
Q. Some of the ones that were being included in the reserve stockpile included the much lower performing options like the transport/ward ventilators, or even single circuit home care ventilators; correct?
A. Yes.
Q. The reason they were being included in the information to be provided to the Premier is that those ventilators were to be counted as possible ventilators that might be used if needed during the COVID pandemic crisis; correct?
A. No. I'd just go back to my previous comment - sorry.
Q. I was going to add on after I said, "correct", but subject to an assessment of whether a particular ventilator you considered to be appropriate?
A. I'm uncertain.
Q. You say what you were going to previously say?
A. Well, what I was going to say is that this doesn't include the use of anaesthesia machines from existing operating theatres in this list. So, these numbers were, in fact, distinct from the numbers that we were using for our calculations for the available ventilators. So, this is a - this was a specific request by the police as to what they could tell the Premier was happening, rather than a discussion of clinical decision making around what were suitable ventilators for us to use.
Q. What was being conveyed to the Premier is that the possible stockpile of ventilators that might be used included all of these categories?
A. Yep.
Q. You weren't saying, without looking at a specific ventilator, that you would approve it for use in a particular situation unless you knew what the situation was?
A. Yes.”

Dr Morris’ reference to “discussions with the policeman” was evidently referenced to his exchange with Mr Worboys. Dr Morris agreed that he understood that HealthShare was seeking to compile a reserve stockpile of ventilators to deal with the pandemic. However, he emphasised that he was not meaning to endorse the use of any specific ventilator.
On the question of HealthShare’s consideration of “lower performance ventilators” Dr Morris said:

“Q. What did you understand by the phrase, lower performance ventilators?
A. So, my understanding was that there's a range of features in intensive care ventilators, from some of which are nice to have, and some of which are must have, and so we were aiming initially to have all of those nice to have features, but we were progressively narrowing down what we regarded as must have.” (Emphasis added.)

In the meantime, Ms Hanigan wrote to Mr Gannon, also on 21 April 2020:

“Health[Share] do wish to proceed with the S510s & have requested the user manual. Can you please provide?”

Ms Hanigan’s statement that HealthShare wished to “proceed” with the Shangrila Ventilators was evidently prompted by Dr Morris’ statement, made several hours earlier, that “I think it is fine”.^[19]
19. See [119] above.
Mr Gannon replied a few minutes later, providing the User Manual and stating:

“As requested, please find attached the User Manual and TGA approval for the Shangrila 510S Ventilator.
Please noted [sic] MDT will be developing a User Video and app on the arrival of the units and putting in place a training program is required by owners/user of the equipment.
This morning AEONMED has also advised that:
1. 50 units are available in June (Shangrila 510S)
2. 50 units are available in July (510S)
These are in addition to the first 50 we have offered in May and are through the same supplier which has agreed to sell.
Additional Information of Interest
We are also bringing in another 300 units for the Federal Government in June.
…
Timings are tight and the market is still moving quickly, a little slower than last week though. Once NSW has indicated they are fully committed we will provide a formal quote and guarantee of supply for all units.” (Emphasis in original.)

Mr Gannon was thus telling Ms Hanigan that MDT was able to make available 150 Shangrila Ventilators.
Ms Hanigan wrote to Mr Gannon:

“Thanks very much. Can we talk about pricing and delivery for the further units?”

Ms Hanigan then wrote to Mr Zanetic:

“Attached are the user manuals. Can you please request [sic; review] manuals ASAP so I can potentially secure further units below if we’re quick.”

I will return to the detail of the User Manual below. For present purposes it is sufficient to say that, under the heading “Intended Use”, the User Manual stated:

“Shangrila510S ventilator is mainly used in the emergency rooms of hospitals, transfer after operations, field and occasions where first-aid or transfer is needed, for care of adult, paediatric, infant patients weighing at least 3.5kg.
The Shangrila510S Ventilator is intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport. The ventilator conforms to the principle of simple and easy operation requested for emergency equipment. It can be used by many medical units and clinical offices at all levels to perform emergency treatment for accident affairs, such as first-aid center, ambulance, anesthesia unit, chest surgery, cranial surgery, respiratory unit, various large mines, factories, swimming places. The Ventilator is applicable for the patient weighing at least 3.5kg infant, children and adult patients.”

Mr Zanetic replied to Ms Hanigan stating “I will send through for clinical assessment”.
Mr Zanetic then wrote to Dr Morris:

“We have managed to source the user manual for the 510S and there is the possibility to secure 100 of these units so the team would like to move fairly quickly on this one. Are you able to perform a review and let me know if there is anything that changes your assessment?”

Again, Mr Zanetic’s email bespoke the urgency with which HealthShare saw a decision needed to be made.
A short time later on 21 April 2020, Mr Zanetic wrote to Dr Morris:

“I have updated the technical assessment based on the additional information available in the user manuals. I don’t see anything in the manual that would change the initial assessment.” (Emphasis added.)

The words I have emphasised show that Mr Zanetic did not rely on anything in the User Manual to change his “initial assessment” of the Shangrila Ventilator.
Several hours later, Mr Zanetic sent Dr Morris a further update of his “technical assessment”. He said:

“I’ve reviewed the spreadsheet once again based on the new brochure I had sent through earlier today [the Shangrila in a Bag brochure]. I don’t see anything in the user manual or brochures [plural: Mr Zanetic was referring to both the Shangrila in a Bag Brochure and the RAPP Shangrila Brochure] that would change the initial assessment. Please confirm.” (Emphasis added.)

This shows that Mr Zanetic still placed no reliance on the User Manual, and now also not on the “brochures” concerning his updated assessment of the Shangrila Ventilator. That updated assessment still showed an “X”, denoting non-compliance, in relation to numerous of the ICU mid acuity “Technical Specification Requirements” in Mr Zanetic’s spreadsheet.
Dr Morris then made an assessment of the Shangrila Ventilator based on the User Manual and the technical data provided by Mr Zanetic.
Several hours later, Dr Morris replied:

“Having looked at the brochure I am happy that it now satisfies all the requirements.” (Emphasis added.)

Although Dr Morris referred to having looked at the “brochure”, he said in cross-examination that he should have referred to the “attachments”, including the User Manual. He agreed he was speculating about this, but it seems likely to be correct, as by now Mr Zanetic had sent him the User Manual.
The email in which Dr Morris made this statement was sent a little under two hours after Mr Zanetic had sent his first update of his technical assessment,^[20] albeit only two minutes after Mr Zanetic sent his second update.^[21] In his email Dr Morris did not, as Mr Zanetic had requested, in terms confirm Mr Zanetic’s opinion that nothing in the User Manual or the “brochures” changed the assessment represented by Mr Zanetic’s spreadsheet. Nor did Dr Morris express any disagreement with that opinion.
20. See [139] above.
21. See [141] above.
However, I am satisfied that, prior to concluding that the Shangrila Ventilator “satisfies all the requirements”, Dr Morris gave careful attention to both the User Manual and the brochures^[22] that Mr Zanetic had forwarded to him.
22. That is the RAPP Shangrila Brochure, see [45] above; the Shangrila in a Bag Brochure, see [116] above; and, perhaps, the Allied Scientific Shangrila Brochure, see [121] above.
Thus, in his affidavit evidence, Dr Morris described the process he undertook as follows:

“I read the User Manual and the [RAPP Shangrila Brochure] in full during the desktop review. The most important elements in the documentation for the purpose of my review were the modes of ventilation, the displays, the technical specifications, the types of peripheral and consumable equipment required and the troubleshooting section. I also reviewed the diagrams and images of the ventilators which are contained in the User Manual and the [RAPP Shangrila Brochure].”

Further, in cross-examination, Dr Morris said that he was not “working in a clinical role” in the several hours he considered the question on this day and that he had “ample time to review the documents, and [he] wouldn’t have responded until [he] had reviewed them”.
I find that Dr Morris reached the conclusion that the Shangrila Ventilator satisfied “all the requirements” based in part on what was said in the User Manual, as well as in the brochures to which his attention was directed, and on the basis of his assessment that although the Shangrila Ventilator did not have all of the features of an intensive care ventilator that it would be “nice to have”, it had the features that “[he] regarded as must have”.^[23]
23. See Dr Morris’ evidence at [128] above.
Mr Zanetic then wrote to Ms Hanigan:

“I’ve had feedback from the clinical team that they are satisfied with the 510S to proceed further.”

Who made the decision to purchase?

It is not clear which particular person at or on behalf of HealthShare made the decision to purchase the Shangrila Ventilators.
As described by Ms Giddey in cross-examination, following the clinical approval by Dr Morris, the process was that this clinical approval was sent:

out through HealthShare;

across to SHEOC; and

across to the Premier’s procurement group, who reported to the Premier.

However, the communications between Ms Hanigan and MDT from 21 April 2020, which I consider in detail below, show that by then, a decision had been made to purchase the Shangrila Ventilators.
There is no suggestion in the evidence of the intervention of any other clinical advice, following that of Dr Morris. I am satisfied that the decision to purchase was based on Dr Morris’ conclusion that the Shangrila Ventilator “now satisfies all the requirements”.^[24]
24. See [144] above.

The Agreements

What followed were communications leading to the formation of the Agreements.
As I have set out above, HealthShare contends that HealthShare’s standard “Purchase Orders Terms and Conditions” were incorporated into the Agreements. The reason for this is that those Terms and Conditions were referred to in a hyperlink in the two purchase orders that HealthShare sent to MDT during the negotiations to which I will now turn.
Determination of whether HealthShare’s contentions are correct requires a careful analysis of the communications between the parties between 21 April 2020 and 1 May 2020.
The question of whether a contract has been formed is often considered in terms of whether an offer has been made and that offer has been accepted. It has been said that the “offer and acceptance analysis is a useful tool in most circumstances and indeed is ‘normal’ and ‘conventional’”.^[25]
25. Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [74] (Heydon JA, with whom Mason P and Ipp AJA relevantly agreed), quoting Gibson v Manchester City Council [1979] 1 All ER 972 at 974 (Lord Diplock).
However, as has been said:

“It is often difficult to fit a commercial arrangement into the common lawyers’ analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of ‘offer’, ‘acceptance’, ‘consideration’ and ‘intention to create a legal relationship’ which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship …
Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled”.^[26]
26. Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 (McHugh JA, Hope and Mahoney JJA agreeing), cited with approval in Brambles Holdings Limited v Bathurst City Council (supra) at [74].

It has been recognised that some “parties may drift into a contractual relationship” in commercial circumstances,^[27] and, as a result:

“… having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation.”^[28]
27. Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269 at [51] (Nettle JA, with whom Chernov and Ashley JJA agreed).
28. Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369] (Allsop J, as his Honour then was, with whom Drummond and Mansfield JJ agreed).

When this occurs:

“The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract”.^[29] (Emphasis added.)
29. Ibid and the cases cited therein (including Brambles Holdings Limited v Bathurst City Council (supra)).

To determine mutual assent, the court must look to “the whole of the parties’ interactions (written and spoken) and their conduct, to determine whether, viewed objectively, the parties mutually assented to the essential elements of a bargain and intended to be bound.”^[30]
30. Re Australian Organic Eggs Pty Ltd [2022] VSC 747 at [99] (Button J).
Ultimately, the question is whether:

“… in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of [the parties] think as to whether there was a concluded bargain?”^[31]
31. Brambles Holdings Limited v Bathurst City Council (supra) at [81] (Heydon JA).

For the reasons that follow, my conclusion is that the Purchase Order Terms and Conditions were not incorporated into the Agreements and that a reasonable person in the position of the parties would have concluded that there was a concluded bargain before HealthShare delivered the purchase orders containing the hyperlink to the Terms and Conditions.

The First Agreement

On 21 April 2020, Ms Hanigan wrote to Mr Gannon:

“ … can we talk about pricing and delivery for the further units?”

A short time later, Ms Hanigan spoke to Mr Gannon on the telephone. Ms Hanigan asked Mr Gannon to “provide a written quote including delivery dates”. Mr Gannon said he would.
A short time later, Ms Hanigan wrote to Mr Gannon:

“Could you kindly send me a formal quote so I can have it approved and raise a PO^[32] to you.”
32. Purchase Order.

Mr Gannon replied, a minute later:

“Can you confirm if just the 50 units or the additional 100?”

Ms Hanigan immediately replied:

“Apologies it’s for the 48 in May and the subsequent 100.”

At exactly the same time, Mr Zanetic wrote to Ms Hanigan:

“I’ve had feedback from the clinical team that they are satisfied with the 510S to proceed further.”

Mr Gannon replied to Ms Hanigan:

“Thank you. We will now^[33] confirm units still available and payment terms to ensure we can meet deadlines.
Once this is completed, we will provide our formal quote for action.
You will have it by COB.”
33. The email read “not” but this is clearly a typographical error.

Mr Gannon’s reference to confirming “payment terms” appears to be a reference to MDT confirming payment terms of the supply of the Shangrila Ventilators from Aeonmed to MDT. The matter was not explored in cross-examination.
Several hours later, and also on 21 April 2020, Mr Gannon wrote to Ms Hanigan:

“As requested, please find the attached quote for 148 Units.
We await your PO, this arrangement is in place and we need to ensure timings and payment approvals are quick.”

The quotation attached to Mr Gannon’s email specified that the total amount due was $9.99 million for 148 Shangrila Ventilators. The quotation read:

“Shangrila 510S Integrated Respiratory Workstation (1 Year Warranty)
(Units available in late May 48 Units, late June 50 Units, and late July 50 Units)
Payment Terms:
Payment of 50% by COB Monday 27 April 2020
Payment of the balance of unit prices on delivery of units payable with[in] 7 days (This would be three payments)” (Emphasis in original.)

The quotation then set out details of MDT’s bank account.
The provision by MDT of its quotation constituted an offer by it to sell the 148 Shangrila Ventilators to HealthShare.
On the following day, 22 April 2020, HealthShare sent MDT an email that MDT contends constituted an acceptance by HealthShare of the offer made by MDT in its 21 April 2020 quotation.
The email was sent by Ms Teresa Kusnadi, Category Officer, Strategic Procurement Services at HealthShare. The heading to that email read, in bold:

“PO 37879543 from NSW Health to secure stock of 148 units ventilator” (Emphasis added.)

The email read:

“My colleague, Rachel [Hanigan] has been in contact with you in regards to purchase of 148 Ventilator unit[s].
Please kindly use PO 37879543 for this, a copy of the PO will follow later today or tomorrow.
Can you please kindly advice [sic] about payment arrangement needed as per your email below?
Susie Giddey (from HealthShare) cc’d on this email will advise where the delivery of the units will need to be delivered to.” (Emphasis added.)

MDT placed emphasis on the fact that the heading to this email recited the Purchase Order number in the context of the statement “to secure” the 148 ventilators. That does suggest that HealthShare had created a purchase order number with a view, ultimately, to secure the 148 ventilators.
However, in the passage I have emphasised in this email, HealthShare also sought MDT’s “advice about payment arrangements needed as per your email below”, a reference to Mr Gannon’s email attaching the quotation.
In fact, MDT had specified in its quotation its proposed “payment arrangements” under the heading “Payment Terms”. The enquiry made by HealthShare in its 22 April 2020 email shows that, inconsistently with there being the necessary “mutual assent” at this stage, HealthShare had not understood this.
What this email does show is that, at this stage, HealthShare contemplated that it would be MDT, not HealthShare, that would be proposing payment terms: an unsurprising position in the circumstance of a global shortage of ventilators and strong competition for the supply of ventilators.
MDT replied a few minutes later:

“Payment is as per terms on the quote provided. We require 50% payment by the latest Monday 27 April 2020, sooner would be great if possible.
Once we receive formal PO we will submit a corresponding invoice.”

That email shows that there was still no “mutual assent” as MDT was reiterating its requirement, stated in the quotation, that HealthShare pay half the purchase price by 27 April 2020; a matter not yet agreed.
The email also shows that, at this stage, MDT contemplated it would receive a purchase order (“the PO”) before it sent its invoice. That is not what happened.
Thus, about an hour later, Ms Kusnadi sent Mr Gannon an email:

“To arrange for the payment – can you please kindly issue me [a] tax invoice (not proforma) and have the following so I can pass to our accounts
1. Bill to: HealthShare NSW Acc Payable, c/o Parramatta
2. Please include the ETA on the tax invoice (for rolling delivery)
3. Make a reference of the PO number i.e. 37879543.”

Several hours later, and also on 22 April 2020, Mr Gannon replied:

“As requested, if you need any changes please advise.
The critical date is the first payment by Monday 27 [April] 2020.
We are a little more flexible with others.” (Emphasis added.)

Mr Gannon attached MDT’s invoice directed to HealthShare for $9.9 million.
The invoice stated:

“Payment of 50% by COB Monday 27 April 2020
Payment of the balance of unit prices on delivery of units payable with[in] 7 days (This would be three payments). ETA for each delivery 30 May - 48 Units, 30 June - 50 Units and 30 July - 50 Units.
NSW Purchase Order: 37879543” (Emphasis in original.)

Details of MDT’s bank account followed.
Mr Gannon’s statement in the passage I have emphasised in his email that “if you need any changes please advise” shows that “mutual assent” had still not been achieved. Mr Gannon was evidently referring to when payment of the balance of the purchase price would be made. The invoice proposed that such payment be made within seven days of the three proposed delivery dates. Mr Gannon was saying that MDT was “flexible”, that is amenable to further negotiation, about that matter. Thus, there was still no final agreement on terms.
Several minutes later, Ms Donna Bonser, Site Supervisor, Purchasing | Supply Chain Operations for HealthShare sent Mr Gannon at MDT an email:

“Please see attached PO: 37879543.”

Ms Bonser made no reference to Mr Gannon’s statement about MDT being “flexible” about when the second half of the purchase price would be paid. On the face of it, Ms Bonser’s note bespoke HealthShare’s acceptance of the offer made in MDT’s invoice.
A copy of the Purchase Order is attached to these reasons.
As can be seen at the foot of the Purchase Order, in font slightly smaller than used in the balance of the Purchase Order, are the words:

“All goods or services are to be supplied in accordance with our terms and conditions, which can be viewed under ‘Purchase Order Terms and Conditions’ at start="198">

The hyperlink in those words provided access to the Purchase Order Terms and Conditions.

On 27 April 2020, HealthShare paid MDT $4.995 million, being half the amount in the 21 April 2020 tax invoice.

Were the Purchase Order Terms and Conditions thereby incorporated into the First Agreement?

The critical question is whether the Purchase Order Terms and Conditions were thereby incorporated into the First Agreement.

If they were, Ms Bonser’s email delivering the Purchase Order constituted a counteroffer by HealthShare, as the Purchase Order Terms and Conditions contained terms inconsistent with those proposed by MDT in its invoice. In particular, cl 7 of the Purchase Order Terms and Conditions provided:

“7. Price and payment
7.1 Price for the Goods and/or Services set out in the purchase order is fixed and includes all costs and charges, including for taxes, labelling, packing, delivery, freight and unloading, unless otherwise stated in the Agreement.
7.2 The Supplier must invoice the Agency within 30 days after delivery of the Goods or on completion of all Services, unless otherwise stated.
7.3 The Agency must pay the Supplier for the Goods and/or Services by the end of the month following the month in which a Correctly Rendered Invoice or Statement is received …”

In closing submissions, HealthShare contended that “the purchase order constituted a counteroffer the terms of which included the Purchase Order Terms and Conditions”.

In closing oral submissions, this was how the matter was put by senior counsel for HealthShare:

“STUDDY: … We say this is an offer or probably more particularly a counteroffer by HealthShare, saying here are our terms and conditions.
HIS HONOUR: A counteroffer to what?
STUDDY: To what had been put by way of the invoice sent at 4.26pm at 2682 to 2684, being the invoice and with the statement ‘If you need any changes please advise.’
HIS HONOUR: What is your position? This is a counteroffer?
STUDDY: Yes.
HIS HONOUR: To?
STUDDY: To the invoice we've got.
HIS HONOUR: To the offer in the invoice.
…
HIS HONOUR: Just to repeat what I said before; that means you'd have to show, wouldn't you, an acceptance of that counteroffer.
STUDDY: What we say in our written submissions is that the acceptance of what was attached to her email was the supply by MDT of the ventilators.”

Thus, HealthShare’s case is that Ms Bonser’s 23 April 2020 email was a counteroffer to the offer made by MDT in its invoice, which counteroffer was accepted by MDT by delivery of the ventilators. The invoice estimated the ventilators would be delivered in stages: 48 on 30 May 2020, 50 on 30 June 2020 and the final 50 on 31 July 2020. As I have said, the ventilators were in fact delivered between 16 June 2020 and 15 July 2020.^[34] Thus, HealthShare’s case is that there was no contract until then.
34. See [5] above.

This would be a surprising result.

It would mean that, as no contract was formed until, at the earliest, delivery of the first batch of ventilators on 16 June 2020, and perhaps not until final delivery on 31 July 2020, HealthShare would have no legally enforceable commitment from MDT to deliver any ventilators.

And yet on 27 April 2020, it paid MDT $4.995 million for those ventilators.

It would also mean that had MDT been unable to supply any ventilators, HealthShare, not having a contract on which to sue, would have been obliged to pursue MDT to seek restitutionary relief to recover the $4.995 million.

That cannot have been what HealthShare intended.

In closing submissions, senior counsel for HealthShare submitted that the explanation might have been that those at HealthShare who authorised the payment of the $4.995 million believed, albeit on HealthShare’s case, mistakenly, that there was a binding agreement with MDT at the time of the payment. But there is no evidence that that was so. HealthShare did not call evidence from whoever it was that authorised the payment.

That was sufficient to identify a “particular purpose” for the purposes of s 19 of the Sale of Goods Act. The general purpose identified by Ms Hanigan was the use of the ventilators by HealthShare in a clinical setting: “suitable for NSW Health”. The particular purpose identified was the use in a clinical setting to treat patients with COVID-19: “meet our needs for Covid”.
It was not necessary for HealthShare to identify, at the time of entering into the Agreements, “how these lower performing ventilators were actually intended to be used in a world where the preferable functionality [as a specialised ICU ventilator] were simply not available”, to adopt the language of MDT’s closing submissions.
I am satisfied that, in her exchange with Mr Gannon, Ms Hanigan identified the “particular purpose” for which HealthShare required the Shangrila Ventilators.

Did MDT provide HealthShare with the MDT Shangrila Brochure and the User Manual merely as an intermediary?

In closing oral submissions, it was submitted on behalf of MDT, for the first time, that MDT provided HealthShare with the User Manual merely as an intermediary and without itself making any representations as to its contents.
It was submitted, with reference being made to the observations made by the High Court in very different circumstances to those here, in Google Inc v Australian Competition and Consumer Commission:^[66]

“The provision of [the User Manual] does not constitute representations of what is in the user manual. So intermediaries who pass things on and don’t otherwise say they’re warranting the correctness of it are not making the representation themselves.”
66. (2013) 249 CLR 435; [2013] HCA 1 at [69] (French CJ, Crennan and Kiefel JJ (as her Honour then was)).

I do not accept that submission.
MDT was acting as a principal in its dealings with HealthShare. It was aiming to conclude a contractual relationship with HealthShare, not as the agent for Aeonmed, but on its own account. MDT did not pass on to HealthShare the User Manual on a “for what it’s worth” basis. MDT was no “mere conduit”.^[67] A reasonable person in HealthShare’s position would have understood that MDT had “adopted or endorsed”^[68] the accuracy of the User Manual.
67. Gardam v George Wills & Co Limited [1988] FCA 289 at [42] (French J).
68. Google v Australian Competition and Consumer Commission (supra) at [15] (French CJ, Crennan and Kiefel JJ (as her Honour then was)).
It must have been obvious to Mr Gannon and Mr Bellas that HealthShare would rely on the contents of the User Manual as accurately and comprehensively explaining how the Shangrila Ventilator was to be used and what its functionality was.

Did HealthShare rely on MDT’s skill or judgment – Ms Hanigan

To enliven the implied condition as to fitness for purpose in s 19 of the Sale of Goods Act, it is necessary for HealthShare to show that it relied on MDT’s “skill or judgment”.
In closing submissions, HealthShare’s case that it relied on MDT’s skill or judgment when deciding to buy the Shangrila Ventilators was stated to be based on identified paragraphs of two of Ms Hanigan’s affidavits.
In the first affidavit, Ms Hanigan set out extracts from the emails that Mr Gannon sent her on 1 May 2020 following her enquiry concerning the article in The Guardian to which I have referred above.^[69]
69. See [243]ff above.
Those extracts were:

“I have requested a response from AEONMED. Please note AEONMED did sell an older model which is a 510.
These units are now a very old unit, if sitting on shelves for a long while and not checked, certainly, you would have problems.
The units acquired by the UK were not Shangrila 510S Respirator Workstations as being supplied to Australia, through MDT [as] a dealer.
Oxygen supply – AEONMED has assured no issues with Shangrila 510S Respirator Workstations. All units test before export.
Once again, we have been very clear are not full ICU ventilators, the specifications provide detail [of] the clear functionality of these units.”

I have set out the third and fourth of those extracts above.^[70] The first and second extracts were from an earlier email sent by Mr Gannon on 1 May 2020.
70. Ibid.
The final extract, commencing with the words “once again” is the passage from Mr Gannon’s 1 May 2020 email that I have found points to the probability that, despite Ms Hanigan’s denial, MDT had been “very clear” that the Shangrila Ventilators were not “full ICU ventilators”.
The affidavit then set out the following passages to which HealthShare points as showing its reliance on MDT’s skill or judgment:

“Based on the statements by Mr Gannon recorded above, I understood that the issues with the [AEONMED] Shangrila Ventilators were only applicable to the older model purchased in the United Kingdom (the 510 model) and not the AEONMED Shangrila Ventilators which MDT was supplying to HealthShare (the 510s model).
I understood Mr Gannon’s reference to “specifications” which detail the functionality of these units to be a reference to the AEONMED Shangrila Ventilators user manual. I recall that I was comfortable with Mr Gannon’s explanation because HealthShare’s clinical team had done a desktop review and deemed it was suitable based on the functionality stated in the user manual (as set out in paragraph 17 above). Had I not been comfortable with that explanation, I would have immediately escalated the issue to the COVID-19 taskforce and to HealthShare.” (Emphasis added.)

In the first of those paragraphs, Ms Hanigan is stating her understanding that the issues identified in The Guardian were only relevant to the Shangrila 510 ventilator and not to the 510S Shangrila Ventilator.
What is here stated by Ms Hanigan appears to confirm that she misunderstood Mr Gannon’s email. She saw the reference to having been “very clear” that ventilators were “not full ICU ventilators” as being a reference to “the older model purchased in the United Kingdom”, being the Shangrila 510 model. It is in that context that she made the statement at the end of the passage that I have emphasised above.
In any event, Ms Hanigan is speaking here of events that occurred on 1 May 2020; after the Agreements have been entered.
The second passages relied on by HealthShare are from Ms Hanigan’s second affidavit.
In the first of those identified passages, Ms Hanigan stated that she “understood that [she] could trust MDT and Mr Gannon to provide reliable advice and information through the ventilator procurement process”.
In the remaining passages on which HealthShare relies, Ms Hanigan said that:

she was “reassured” that Mr Gannon had direct connections from Aeonmed and was therefore a reliable source of information about Aeonmed products;

she had developed a trust in Mr Gannon and Mr Bellas and MDT as a reliable authorised source of information;

she relied on Mr Gannon’s statement, set out above, that the Shangrila Ventilators would be “suitable for NSW Health and meet our needs for COVID” by “continuing with the procurement of Shangrila Ventilators”;

she relied on Mr Gannon’s assurance in his 1 May 2020 email that the ventilators referred to in The Guardian article were not the same model as those being supplied by MDT and said that she would not have continued with procurement of the Shangrila Ventilators in the absence of the “assurances” in that email; and

in reliance on “Mr Gannon’s representations” in his 1 May 2020 email, she forwarded his “advice” to the COVID-19 Taskforce under the cover of the email that I have referred to above, confirming that The Guardian was referring to a ventilator other than that being supplied by MDT.

The latter evidence relates to events which occurred on 1 May 2020, after the Agreements were entered.
The effect of the former evidence is that Ms Hanigan continued with the “procurement” of the Shangrila Ventilators, relying on Mr Gannon’s agreement that the Shangrila Ventilator would be “suitable for NSW Health and meet our needs for COVID” and his statement that “I only deal with the best”.^[71]
71. The conversation on 28 April 2020 referred to at [97] above.
However, as MDT submitted, Ms Hanigan played no role in deciding whether to approve the purchase of the Shangrila Ventilators.
As MDT submitted:

“Ms Hanigan had nothing to do with assessing whether the ventilators were required or suitable for use in a clinical setting for treating patients with COVID-19. Her role was not to know which category a ventilator was in or what the potential uses of a ventilator were, but rather she was just trying to obtain leads to provide them to Mr Zanetic, for him to liaise with others within NSW Health.”

Thus, Ms Hanigan gave this evidence in cross-examination:

“Q. It wasn't your job to know whether a ventilator was in one category or another; correct?
A. Correct.
Q. You were just trying to get the lead and provide it onto Mr Zanetic; correct?
A. Correct.
…
Q. You didn't read the TGA certificate suitability for use reference?
A. No.
Q. It's because it wasn't your job, and you weren't taking any interest in whether it was specifically suitable for one thing or other, other than if it was an appropriate one, as you understood, to pass to Mr Zanetic?
A. Correct.
…
Q. That's what you would usually do with all of this material, isn't it?
A. Correct.
Q. You would send it to Mr Zanetic because it was for Mr Zanetic to make that decision, correct?
A. It was someone in Health. I don't know if he was on his own making those decisions but people within the Health team.
Q. As far as you understood it was for Mr Zanetic or others he may speak to?
A. Yes.
Q. To make the decision on behalf of NSW Health as to what to do next?
A. Correct.
Q. It wasn't for you?
A. No.
Q. He would tell you what the answer was one way or the other, correct?
A. Correct.
Q. You would continue to act as the liaison with on this occasion MDT, correct?
A. Correct.”

It must follow from this evidence that HealthShare, through Ms Hanigan, did not rely on MDT’s skill or judgment when deciding to purchase the Shangrila Ventilators.

Did HealthShare rely on MDT’s skill or judgment – Dr Morris

However, as I have set out above in my description of the Desktop Review by Mr Zanetic and, more particularly, by Dr Morris, HealthShare did place reliance on the brochures that Dr Morris reviewed and on the User Manual.
Although HealthShare did not, in its closing submissions, in terms rely on the evidence of Dr Morris in relation to the question of whether or not, for the purpose of s 19 of the Sale of Goods Act, it relied on MDT’s skill or judgment, the proceedings were conducted upon the basis that this was HealthShare’s position.
Thus, in relation to the allied question of whether HealthShare relied on the representations that it contends MDT made, and that it contends were misleading or deceptive, HealthShare referred in its submissions to the detail of Dr Morris’ evidence; and MDT engaged with the detail of those submissions. Indeed, one of the representations that HealthShare alleges that MDT made is that the Shangrila Ventilators were not fit for the purpose of treating COVID-19 patients. Thus, in substance, the proceedings were conducted by both sides on the basis that HealthShare’s case on reliance was based on Dr Morris’ role in the Desktop Review.
There was, ultimately, no dispute about the following matters in HealthShare’s closing submissions:

“The [U]ser [M]anual was also reviewed by Dr Morris, who had earlier reviewed the COVID-19 Brochure. Following his review of the [U]ser [M]anual, Dr Morris formed the view that the Shangrila 510S would be suitable for use in NSW during the COVID-19 pandemic. Dr Morris reviewed the modes listed in the [U]ser [M]anual and the COVID-19 Brochure and relied on those documents as an accurate description of the functionality of the ventilators, which he had not used before.
Dr Morris gave evidence that the most important elements in the documentation for the purposes of his review were: the modes of ventilation; the displays; the technical specifications; the types of peripheral and consumable equipment required; and the troubleshooting features. He reviewed the [U]ser [M]anual and the COVID-19 Brochure in full as part of his desktop review, including the diagrams and images contained in those documents. Dr Morris gave the following evidence about particular features of the COVID-19 Brochure and [U]ser [M]anual:
a) Dr Morris reviewed the intended purpose stated in cl 1.1.1, the working scenarios identified in the brochure, and the images that depicted the ventilator assembled on a stand.
b) As to volume control ventilation, Dr Morris reviewed cl 3.3.2 and the statement in the brochure that the Shangrila 510S has ‘conventional volume-controlled ventilation mode’ and ‘can provide a precise tidal volume’. Based on these statements, Dr Morris understood that the tidal volume could be pre-set on the Shangrila 510S and that the ventilators could provide a precise and accurate tidal volume in functioning in volume control mode. His evidence is that, if those documents had not stated that the tidal volume could be pre-set, he would not have recommended that HealthShare NSW proceed with the transaction.
c) As to the oxygen concentration delivery, Dr Morris reviewed cl 9.7.3 which stated that the Shangrila 510S could deliver fraction of inspired oxygen (FiO₂) of between 40-100% with a ±20% accuracy. While that accuracy range was not as precise as he would normally expect for a ventilator used in the NSW Health system, he decided that this range would be sufficient given the difficulty in sourcing ventilators during the pandemic. Dr Morris’ evidence is that if the [U]ser [M]anual had indicated the accuracy was in fact ±50%, he would not have recommended that HealthShare NSW proceed with the transaction.” (References omitted.)

It was on the basis of Dr Morris’ statement on 21 April 2020 that, having reviewed all of the material, including the User Manual, he was “happy that it now satisfies all the requirements”,^[72] that HealthShare entered the Agreements.
72. See [144] above.
It is true that Mr Zanetic said in the emails he sent Dr Morris on 21 April 2020 that he did not think that “anything in the manual … would change the initial assessment” that he had made about the Shangrila Ventilators. But Dr Morris was the person whose opinion was critical to the decision made by HealthShare to purchase the Shangrila Ventilators. It is clear that Dr Morris relied on what was said in the User Manual.
In those circumstances, my conclusion is that HealthShare did, through Dr Morris and for the purposes of s 19 of the Sale of Goods Act, rely on MDT’s skill or judgment when deciding to purchase the Shangrila Ventilators.

Were the Shangrila Ventilators reasonably fit for the purpose of being used in a clinical setting for treating patients with COVID-19?

This question is to be answered as at the date the Agreements were entered and must be considered in light of the following matters, that I have discussed in detail above.
First, HealthShare understood that the Shangrila Ventilators were emergency transport ventilators.^[73]
73. See Mr Zanetic’s email to Dr Morris on 20 April 2020: [110] above.
Second, Mr Gannon had told Ms Hanigan, and HealthShare thus knew, that the Shangrila Ventilators were not “full ICU ventilators”.
Third, and as I have set out above,^[74] the User Manual stated that the “Intended Use” of the Shangrila Ventilators was:

“Shangrila510S ventilator is mainly used in the emergency rooms of hospitals, transfer after operations, field and occasions where first-aid or transfer is needed, for care of adult, pediatric, infant patients weighing at least 3.5 kg.
The Shangrila510S Ventilator is intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport. The ventilator conforms to the principle of simple and easy operation requested for emergency equipment. It can be used by many medical units and clinical offices at all levels to perform emergency treatment for accident affairs, such as first-aid center, ambulance, anesthesia unit, chest surgery, cranial surgery, respiratory unit, various large mines, factories, swimming places.”
74. See [135] above.

Fourth, HealthShare knew, from Mr Zanetic’s analysis, that the Shangrila Ventilators did not meet many of the ICU Mid-Acuity specifications that Mr Zanetic had incorporated into his technical assessment process, as part of the Desktop Review.^[75]
75. See [104]-[155] above.
Fifth, HealthShare knew, because of the exigencies of the pandemic, that it needed urgently to source as many ventilators as it could, including “lower performance options”.^[76]
76. See [91] above.
I have discussed, at length above, HealthShare’s case as to the shortcomings of the Shangrila Ventilator.
Critically, I have come to the following conclusions:

it is possible to pre-set tidal volume on the Shangrila Ventilator, although not at the press of a button, and only with some difficulty;^[77]

the Shangrila Ventilator does have volume control, but not conventional volume control, that is, volume control which maintains volume in the face of changes in a patient’s pulmonary impedance;^[78]

the Shangrila Ventilator does not operate in pressure control mode as stated in the User Manual;^[79]

the Shangrila Ventilator does not reliably, accurately or efficiently deliver the fraction of inspired oxygen in accordance with the ranges specified in the User Manual, or at all.^[80]
77. See [295]-[302] above.
78. See [303]-[356] above.
79. See [357]-[369] above.
80. See [370]-[407] above.

The conclusion to which I have come is that these four factors combine to compel the conclusion that, notwithstanding the matters that I have set out at [518] to [522], the Shangrila Ventilators were not reasonably fit for the purpose of being used in any clinical setting for the treatment of patients with COVID-19.
In particular, I find that the fact that the Shangrila Ventilator cannot accurately deliver the fraction of inspired oxygen^[81] shows it is not reasonably fit for this purpose. As I have said, the evidence is that the accurate and timely display of oxygen concentration is core to the functionality of a ventilator.^[82] That must particularly be so in the treatment of a respiratory disease such as COVID-19.
81. See [370]-[407] above.
82. See Dr Gatward’s evidence at [375] above.
It may be, as MDT submitted, that there is some use to which the Shangrila Ventilator could be put. An example given was as a transport ventilator taking a patient away from ICU for investigations to other areas of the hospital. Another example given was the weaning of a patient off ventilation, that is, when a patient is returning to spontaneous breathing and the ventilator is being used as a part of an assisted breathing process. It may be that having the Shangrila Ventilators is better than having nothing or, as MDT somewhat brutally put it in closing submissions, better than “using a bag to try to ventilate sick patients”.
But assuming all those matters in favour of MDT, I am persuaded that the Shangrila Ventilator was not reasonably fit for the particular purpose for which it was purchased: treating patients with COVID-19. I find that the Shangrila Ventilator was not fit for the purpose, in any clinical setting, of treating patients with COVID-19.

Was there a sale by description?

Section 18 of the Sale of Goods Act provides:

“Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and if the sale be by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.”

HealthShare contended that the Agreements comprised a sale of goods by description and that the relevant description was that the Shangrila Ventilators:

“a) had ‘been specifically designed for the Coronavirus Pandemic and used in Wuhan’;
b) were ‘customized …to save more lives according to the clinical requirements’ during the COVID-19 pandemic;
c) could be used by a patient diagnosed with COVID-19;
d) were of suitable quality for use by NSW Health and would meet its needs during the COVID-19 pandemic because MDT ‘only deal with the best’ and ‘would never recommend anything but the best ventilators for NSW’;
e) had ‘conventional Volume-Controlled ventilation mode’ and ‘can provide a precise tidal volume’;
f) had working scenarios which included ‘Ward’, ‘Emergency Department’ and ‘sub-acute Care Unit’;
g) were assured by AEONMED not to have issues as to oxygen supply; and
h) functioned in accordance with their specifications.” (References omitted.)

But these matters do not comprise a “description” of the goods for the purposes of s 18 of the Sale of Goods Act. Rather, these are representations as to the nature and quality of the goods. A sale by description is a sale of goods in which the sale is predicated on the description of the goods: for example, “woollen under-garments, a hot water bottle, a secondhand reaping machine”.^[83] The relevant “description” of the goods was in the quotation and invoice for the First Agreement and in the invoice for the Second Agreement, namely:

“Shangrila 510S Integrated Respiratory Workstation”
83. The examples given by Lord Wright in Grant v Australian Knitting Mills Limited (1935) 54 CLR 49; [1936] AC 85 at 61.

The goods supplied were as described, albeit not, as I have found, reasonably fit for the purpose for which they were purchased.
There was no sale by description.

Misleading or deceptive conduct

HealthShare contends that MDT made a number of representations which are said to have been false and thus misleading or deceptive for the purposes of s 18 of the ACL.
In view of the conclusion to which I have come concerning the Shangrila Ventilators not being fit for purpose, I will deal with this aspect of HealthShare’s case relatively briefly.

Principles

There was no dispute about the relevant principles.
They were summarised this way in Australian Competition and Consumer Commission v TPG Internet Pty Ltd:^[84]

“The applicable principles concerning the statutory prohibition of misleading or deceptive conduct (and closely related prohibitions) in the ACL are well known and there was no dispute between the parties concerning those principles. The central question is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error (that is, to form an erroneous assumption or conclusion about some fact or matter.^[85] A number of subsidiary principles, directed to the central question, have been developed:
(a) First, conduct is likely to mislead or deceive if there is a real or not remote chance or possibility of it doing so.^[86]
(b) Second, it is not necessary to prove an intention to mislead or deceive.^[87]
(c) Third, it is unnecessary to prove that the conduct in question actually deceived or misled anyone.^[88] Evidence that a person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential. Such evidence does not itself establish that conduct is misleading or deceptive within the meaning of the statute. The question whether conduct is misleading or deceptive is objective and the Court must determine the question for itself.^[89]
(d) Fourth, it is not sufficient if the conduct merely causes confusion.^[90]
(e) Fifth, where the impugned conduct is directed to the public generally or a section of the public, the question whether the conduct is likely to mislead or deceive has to be approached at a level of abstraction where the Court must consider the likely characteristics of the persons who comprise the relevant class to whom the conduct is directed and consider the likely effect of the conduct on ordinary or reasonable members of the class, disregarding reactions that might be regarded as extreme or fanciful.”^[91]

84. (2020) 278 FCR 450; [2020] FCAFC 130 at [22] (Wigney, O’Brien and Jackson JJ).

85. Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 at 198 (Gibbs CJ); Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 at [98] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [25] (French CJ).

86. Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 180 at [8] (Toohey J), referred to with apparent approval in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] (Gleeson CJ, Hayne and Heydon JJ); Noone (Director of Consumer Affairs Victoria) v Operation Smile (Australia) Inc (2012) 38 VR 569; [2012] VSCA 91 at [69] (Nettle JA, with whom Warren CJ and Cavanough AJA agreed at [33]).

87. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; [1978] HCA 11 at 228 (Stephen J, with whom Barwick CJ and Jacobs J agreed) and 234 (Murphy J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 197 (Gibbs CJ); Google Inc v Australian Competition and Consumer Commission (supra) at [6] (French CJ, Crennan and Kiefel JJ (as her Honour then was)).

88. Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at 202 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 198 (Gibbs CJ); Google Inc v Australian Competition and Consumer Commission (supra) at [6] (French CJ, Crennan and Kiefel JJ (as her Honour then was)).

89. Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at 202 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 198 (Gibbs CJ).

90. Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at 202 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 198 (Gibbs CJ) and 209-210 (Mason J); Campomar Sociedad, Limitada v Nike International Limited (supra) at [106] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Google Inc v Australian Competition and Consumer Commission (supra) at [8] (French CJ, Crennan and Kiefel JJ (as her Honour then was)).

91. Campomar Sociedad, Limitada v Nike International Limited (supra) at [101]-[105] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Google Inc v Australian Competition and Consumer Commission (supra) at [7] (French CJ, Crennan and Kiefel JJ (as her Honour then was)).

The representations relied on

1. The ventilators were fit for the purpose of use by NSW Health in treating COVID-19 patients

As I have found that, in fact, the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act, the question of whether or not MDT made a representation to this effect is something of a moot point.
In any event, in HealthShare’s Cross Claim List Statement, this representation is said to arise from “the conduct pleaded at paragraph 4A”, which comprised:

statements made by Mr Gannon in his email to Ms Addai-Aboagye on 30 March 2020;^[92]

a statement that Mr Gannon made to Ms Addai-Aboagye on or about 30 March 2020 that the Shangrila Ventilators operated in CPAP mode;

the statements made by Mr Gannon to Ms Hanigan on 20 April 2020 to which I have referred;^[93] and

statements made in the MDT Shangrila Brochure.
92. See [66] above.
93. See [97] above.

Whether or not these statements, taken together, amount to a representation that the Shangrila Ventilators were fit for purpose, the wider point is that HealthShare has not established that the decision to purchase the Shangrila Ventilators, which was made on the basis of Dr Morris’ conclusions, had any connection with any of these matters. In particular, as I have said, Dr Morris did not see the MDT Shangrila Brochure.

2. The ventilators have a conventional volume-controlled ventilation mode and can reliably provide precise tidal volume

The statement the subject of this alleged representation was made in the MDT Shangrila Brochure, and thus also in the Allied Scientific Shangrila Brochure. I have found that the Shangrila Ventilators did not have conventional volume control. Thus, the statements in these brochures were not correct, and thus misleading or deceptive.
But Dr Morris did not rely on any document provided to HealthShare by MDT which stated that the Shangrila Ventilator had conventional volume control. He did not have the MDT Shangrila Brochure. And MDT did not provide HealthShare with the Allied Scientific Shangrila Brochure. Mr Zanetic found it online.^[94] When making his decision concerning the ventilators, Dr Morris had the RAPP Shangrila Brochure and the Shangrila in a Bag Brochure. There were no statements in those brochures that the Shangrila Ventilators had “conventional volume controlled ventilation mode” or that they could reliably provide “precise tidal volume”.

3. The ventilators would function in accordance with the specifications in the User Manual

94. See [121] above.

In closing written submissions, MDT accepted that the making of this representation was implicit from its provision to HealthShare of the User Manual.
As I have set out above, in closing oral submissions it was submitted on behalf of MDT that it provided the User Manual to HealthShare as an intermediary and without itself making any representations as to its contents. For the reasons I have set out above, I do not accept that submission.
As I have explained, the Shangrila Ventilators did not function in accordance with all of the specifications in the User Manual, particularly in relation to the oxygen concentration function.
This representation was false and thus misleading or deceptive.
HealthShare relied on this representation to enter the Agreements.
HealthShare also submitted that this representation arose because of the statement made by Mr Gannon to Ms Hanigan in his email of 1 May 2020 that the “specifications provide detail of functionality”.^[95] That may be so, but that email was sent after the Agreements had been entered.

4. The ventilators are intended to be used in common wards and ICUs

95. See [102] above.

This representation arose by reason of the statement in the User Manual as to the “Intended Use” of the Shangrila Ventilators.
I have set out above the complete statement made in the User Manual under this heading.^[96] It included that the Shangrila Ventilator is “intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport”.
96. See [135] and [520].
I have found that, as Mr Gannon said in his 1 May 2020 email to Ms Hannigan, the Shangrila Ventilator was not a “full ICU ventilator”.
I do not see that statement as qualifying what was stated in the User Manual.
But I cannot see how this representation was false. The Shangrila Ventilators were intended to be used “in common wards and ICU”.
The problem is, as I have found, they were not fit for that purpose.

5. The ventilators are suitable for use in wards, emergency departments, ICUs or sub-acute care departments

I have found that the Shangrila Ventilators were not fit for the purpose and thus not suitable for use in any clinical setting.
However, like the alleged representation that the Shangrila Ventilators were “fit for purpose”, this representation is stated by HealthShare to arise from the matters referred to at par 4A of the Cross Claim List Statement and thus has the causation difficulties to which I have referred in respect of that representation.

6. The ventilators are capable of delivering FiO₂ of between 40%-100% with ±20% accuracy

As I have discussed above, this representation was expressly made in the User Manual.^[97]
97. See [372]-[380] above.
I have found that the Shangrila Ventilators are not capable of reliably performing in this way. For that reason, my conclusion is that the statement made in the User Manual to this effect was misleading or deceptive.
I think it likely that Dr Morris relied upon this statement in the User Manual as part of his consideration during the Desktop Review.

7. The ventilators can deliver volume control ventilation and the tidal volume on the ventilators can be pre-set

This alleged representation is also said to arise from statements made in the User Manual.
For the reasons I have set out above, my conclusion is that the Shangrila Ventilators did have a volume control function and that tidal volume on the Ventilators could be pre-set.

8. The ventilators trigger a continuous high-pressure alarm when the patient airway pressure exceeds a set limit

Again, this representation is said to arise from statements made in the User Manual.
For the reasons I have set out above, I am unable to conclude that the high-pressure alarm on the Shangrila Ventilators did not operate when a patient airway pressure exceeded a set limit.

Conclusion

I understand that MDT accepts that it will follow from my conclusion that the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act that it must now return the $10.395 million paid to it in April 2020.
However, I will now invite submissions from the parties about that, and as to what orders should be made to reflect these reasons and what, if any, further matters require determination.

**********

MDT Shangrila Brochure

VG70 Brochure

RAPP Shangrila Brochure

MDT Shangrila Technical Data Brochure

Shangrila in a Bag Brochure

Allied Scientific Shangrila Brochure

Purchase Order 37879543

Endnotes

Decision last updated: 07 June 2023

Medium Neutral Citation:	Medical Device Technologies Pty Ltd v Health Administration Corporation [2023] NSWSC 602
Hearing dates:	27 – 28 February, 1 – 3, 6 – 7, 13 – 17, 21, 27 – 29 March, 5 April, 3 – 4 May 2023
Date of orders:	07 June 2023
Decision date:	07 June 2023
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Defendant’s purchase order terms and conditions not incorporated into the agreements; no sale by description under s 18 of the Sale of Goods Act 1923 (NSW); ventilators not fit for purpose under s 19 of the Sale of Goods Act; plaintiff engaged in misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law; plaintiff to repay $10.395 million
Catchwords:	CONTRACTS — express terms — incorporation of terms — whether purchaser’s standard terms and conditions incorporated by reference into contract CONSUMER LAW — sale of goods – respiratory ventilators – whether goods were accepted — whether there was a sale by description – whether purchaser made known particular purpose for which ventilators were required – whether there was an implied condition as to fitness for purpose – whether ventilators were suitable for use in any clinical setting CONSUMER LAW – misleading or deceptive conduct – whether vendor made misleading or deceptive representations in ventilator user manual brochure – whether vendor provided purchaser user manual brochure as an intermediary or principal
Legislation Cited:	Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law Health Administration Act 1982 (NSW) Sale of Goods Act 1923 (NSW)
Cases Cited:	Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2020) 278 FCR 450; [2020] FCAFC 130 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086 Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149 County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 Dialogue Consulting Pty Ltd v Instagram, Inc (2020) 291 FCR 155; [2020] FCA 1846 Gardam v George Wills & Co Limited [1988] FCA 289 Gibson v Manchester City Council [1979] 1 All ER 972 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 180 Gonzalez v Agoda Company Pte Ltd [2017] NSWSC 1133 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 Grant v Australian Knitting Mills Limited (1935) 54 CLR 49; [1936] AC 85 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; [1978] HCA 11 Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Noone (Director of Consumer Affairs Victoria) v Operation Smile (Australia) Inc (2012) 38 VR 569; [2012] VSCA 91 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 Re Australian Organic Eggs Pty Ltd [2022] VSC 747 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Category:	Principal judgment
Parties:	Medical Device Technologies Pty Ltd (Plaintiff/Cross-Defendant) Health Administration Corporation (Defendant/Cross-Claimant)
Representation:	Counsel: J R Clarke SC with T J Kane (Plaintiff/Cross-Defendant) D B Studdy SC with C Ernst (Defendant/Cross-Claimant) Solicitors: Johnson Winter Slattery (Plaintiff/Cross-Defendant) Gilbert + Tobin (Defendant/Cross-Claimant)
File Number(s):	2020/268161

Vendor	Offer
Medical Device Technology	Shangrila 510S – ICU Mid Acuity – Invasive & Non-Invasive
Medical Device Technology	VG70 – ICU High Acuity – Invasive & Non-Invasive
Taleb	VG70 – ICU High Acuity – Invasive & Non-Invasive
RAPP Australia	Shangrila 510S – ICU Transport/Ward Use – External and Intra-Hospital Use
RAPP Australia	VG70 – ICU High Acuity – Invasive & Non-Invasive