RACV Insurance Pty Ltd v Unisys Australia Ltd
[2001] VSC 300
•24 August 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 8219 of 1996
| RACV INSURANCE PTY. LTD. AND ANOTHER | Plaintiffs |
| v | |
| UNISYS AUSTRALIA LTD. AND OTHERS | Defendants |
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JUDGE: | Hansen J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5-8, 12-15, 19-22, 26-28 February; 1, 5-8, 13-15, 19-22, 27-30 March; 2 April; 15 May 2001 | |
DATE OF JUDGMENT: | 24 August 2001 | |
CASE MAY BE CITED AS: | RACV Insurance Pty Ltd v. Unisys Australia Ltd | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 300 | |
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Trade Practices – Misleading or deceptive conduct – Contract to design, supply and install a computer system including imaging for document retrieval in motor claims insurance business – Representations – System will be configured with all current claims on-line and inactive claims near line – On-line retrieval in vicinity of 2-4 seconds – Reliance in entering contract – State of system – Termination – Representation false – Damages – Trade Practices Act 1974 (Cth.), s. 52.
Contract – To design, supply and install a computer system incorporating document imaging – Part of new workflow management system – Installation – Failure – Attempted rectification – Retrieval times – Whether agreement to defer consideration of retrieval times – State to which system brought – Whether agreement to defer live date – Termination -Damages – Whether damages recoverable by related corporation to recover expenditures on project.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr. G. Griffith Q.C. & Mr. G.G. McArthur | Phillips Fox |
| For the Defendant | Mr. E. N. Magee Q.C., Mr. J.P. Moore | Baker & McKenzie |
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TABLE [L1]OF CONTENTS
Introduction........................................................................................................................................ 1
Definitions.......................................................................................................................................... 4
Evidence............................................................................................................................................... 5
Pleadings............................................................................................................................................ 13
(a) Overview.............................................................................................................................. 13
(b) Statement of Claim............................................................................................................. 15
(c) Defence and Counterclaim................................................................................................ 21
(d) Reply and Defence to Counterclaim................................................................................ 26
Background....................................................................................................................................... 27
Submissions on s. 52: a narrow case introduced?................................................................. 121
Response times: excluded or not agreed?............................................................................... 126
Agreement with Doherty?............................................................................................................ 141
Test results....................................................................................................................................... 148
Situation at termination................................................................................................................ 153
System live date moved to 3 July 1996?..................................................................................... 178
Section 52......................................................................................................................................... 182
Damages........................................................................................................................................... 220
(a) Section 52............................................................................................................................ 223
(i) Amounts paid to Unisys............................................................................................... 224
(ii) Amounts paid to third parties....................................................................................... 229Deloittes.......................................................................................................................... 229
External training............................................................................................................ 233
Price Waterhouse............................................................................................................ 234
Capital expenditure........................................................................................................ 236
Vaughan......................................................................................................................... 236
Memorex Telex............................................................................................................... 237
Zoologic.......................................................................................................................... 240
(iii) Labour of plaintiffs wasted.............................................................................................. 241
Jennifer Bearder.............................................................................................................. 246
Stanley Bearder.............................................................................................................. 247
Lisa Joy Chesson-Kistas.................................................................................................. 247
Justin Taylor Doherty.................................................................................................... 248
Jason Ellenport............................................................................................................... 248
George Pipertzis............................................................................................................. 248
Justin Whitford............................................................................................................... 248
Andrea Wilson................................................................................................................ 248
Peter Gill........................................................................................................................ 249
Craig Donald Haw......................................................................................................... 249
Benjamin Connell........................................................................................................... 249
(b) Post-contract section 52.................................................................................................... 249
(c) Contract.............................................................................................................................. 250
Counterclaim................................................................................................................................... 254
Conclusion....................................................................................................................................... 255
Orders............................................................................................................................................... 256
HIS HONOUR:
Introduction
This is a claim for damages arising from a computerisation project that went wrong.
The idea was simple enough. A substantial motor vehicle insurer with claims operations conducted at seven locations processing 70,000 or so claims per annum involving about 1,000,000 pieces of paper, seeks to reform its work processes to produce speedier and more efficient handling of claims, cost savings and increased client satisfaction. How is this to be achieved? The answer is: re-design the processes involved in handling claims and then implement the changes by way of a new computer-based system incorporating the imaging of documents and the electronic storage and retrieval of information. That leads the insurance company to deal with a corporation of substantial size and experience in computer technology and commercial solutions, which agrees to design, supply and install the desired workflow management system based on the imaging of documents. This system, with the electronic storage and retrieval of information to a screen at the employee's desk, would replace the existing paper-based system under which files were stored, retrieved and handled manually. Conceptually it seemed clear.
Yet from a contract in December 1993, to the complete failure of a system handed over as complete in March 1995, to the termination of work on the second attempt in June 1996, and then to the present litigation, there is nothing to see, apart from the bitter experience, but years of wasted money and effort. As if that was not enough, these two corporations, apparently possessed of sufficient if not spare resources to enable them to do so, have now devoted relatively huge amounts of time and money in slugging it out in court for 32 days in an unedifying and possibly pointless fight over past events, in a contest as to who was at fault. The insurer was RACV Insurance Pty Ltd ("RACVI"), a subsidiary of Royal Automobile Club of Victoria ("RACV"). The party who contracted with RACVI to design, supply and install the computer system was Unisys Australia Ltd ("Unisys"), a United States corporation registered in Australia. RACVI claims that Unisys contravened s. 52 of the Trade Practices Act 1974 or broke the contract, and claims damages accordingly.
The writ was filed on 20 December 1996. There were two plaintiffs and three defendants. The plaintiffs were RACVI and RACV Group Services Pty Ltd ("RACVGS") formerly called RACV Data Processing Pty Ltd. RACVGS is also a subsidiary of RACV.
RACVGS was the entity within the RACV group that was responsible for the procurement of computers and related equipment for entities in the group. It also provided information technology services to RACVI. As long ago as 23 February 1979 it had entered into a written agreement with RACVI for the provision of data processing services. Hence RACVGS employed persons skilled in information technology. Further, although RACVI was the named contracting party in the written contract with Unisys the equipment was, in fact, to be acquired by RACVGS on behalf of RACVI. To that end, RACVI provided finance for the purchase of the equipment. In the result RACVGS made payments to Unisys and to third parties and devoted considerable effort and staff time to the project. It was joined as a plaintiff to recover these costs.
In addition to Unisys, which was the first defendant named in the writ, Deloitte Ross Tohmatsu and Deloitte Touche Tohmatsu, were respectively named as the second and third defendants. This is the accounting firm commonly (and in this judgment) referred to as Deloittes. It was sued in the name of the firm as it was called at different times in the relevant period. Deloittes involvement arose out of the fact that pursuant to an engagement from RACVI it assisted and advised RACVI on the matter of the new workflow management and imaging system both prior and subsequent to the engagement of Unisys.
The plaintiffs and Deloittes reached a settlement prior to the trial. They signed terms of settlement on 29 August 2000. Deloittes agreed to pay the plaintiffs a stipulated sum on 15 September 2000 in full settlement of all claims. The settlement sum was not appropriated to the claims, interest or costs. If Unisys is liable to pay damages there is an issue as to the extent to which the settlement sum is to be brought to account in reduction of as to defect the amount payable by Unisys. It is common ground that for that purpose the GST on the settlement sum paid by Deloittes is to be ignored. The plaintiffs derived no benefit from it as they paid the amount to the Commissioner of Taxation and Deloittes is entitled to a credit for the amount. I have not mentioned the settlement sum in view of a confidentiality clause in the terms.
It is appropriate to make some reference to the nature and size of the trial which took 32 sitting days. The trial was conducted on witness statements with a court book. By the end of the trial the plaintiffs had called 10 witnesses and Unisys 12 one of whom had not provided a witness statement. In addition, six witness statements and one affidavit were received into evidence by consent without the necessity to call the witness. There were three witness statements from one witness and two from another. The evidence was of a factual and technical nature concerning the computer system. To the close of evidence the transcript ran to 2,731 pages. It extended to 3,178 pages by the close of final addresses in which counsel spoke to written submissions which ran to 378 pages and five supporting files of authorities. Then, six weeks later, on 15 May 2001 Unisys applied for leave to amend its defence to raise a new point; following a hearing the application was withdrawn (see [54] below). At the outset of the trial the court book consisted of 49 lever arch files (vol. 1 devoted to the pleadings) which contained 18,935 pages. I also was given another lever arch file which contained the December 1993 agreement and which seemed to comprise several hundred pages at least. When finally tendered at the conclusion of evidence the court book was reduced, by the agreed discarding of thousands of pages, to 28 volumes including vol. 1 containing the pleadings. I am, however, left with many thousands of pages of oral and documentary evidence. In the practical world, in which other litigants are prevented, by litigation such as the present indulged in by parties with deep pockets, from getting their cases on, or whose cases are refixed because of limited judicial resources, there must be a limit on the extent of the time I can take to discuss and analyse the documents and the evidence in this judgment, let alone scour the thousands of pages to see what is there to which little or no reference has been made. I am, as I must be, guided by counsel's final addresses in identifying the issues and the relevant materials. I emphasise though, that even then, they did not at that stage refer to every possible piece of evidence. That is for the obvious reason that it was impractical to do so and because so much of it was not necessary to refer to for the resolution of the issues as they were finally left for determination. I do emphasise that in arriving at these reasons for judgment I have read and considered, subsequent to their making, all that counsel said in final addresses, both oral and written, and in their opening addresses, and the evidence of the witnesses.
Definitions
In this judgment the following expressions bear the following meaning and relate to the following facts and matters:
Deloittes December 1992 study
Means the Motor Vehicle Claims Workflow Management Study prepared by Deloittes in December 1992.
ECF
Means electronic claims form.
Functional Specification
Means the Functional Specification dated March 1994 prepared by RACVI
InfoImage
Means a set of hardware and software products used in combination to constitute a product called InfoImage provided by Unisys and customised for clients.
July response
Means the Unisys response to the RFP dated July 1993.
LAN
Means the local area network of RACVI consisting of a network of cabling, hubs and routers connecting the personal computers of claims officers to the Unisys workflow system.
October response
Means the supplementary Unisys response to the RFP dated October 1993.
PMP
Means the Project Management Plan dated 24 December 1993.
RFI
Means the document issued by RACVI titled Workflow Management Project – Motor Vehicle Claims, Vendor Symposia Briefing dated March 1993; and referred to as the request for information.
RFP
Means the document issued by RACVI titled Workflow Management and Imaging System, request for proposal dated June 1993.
SCR
Means system change request.
Unisys contract
Means the contract made 24 December 1993 between RACVI and Unisys.
Unisys Corporation
Means the United States parent of Unisys.
Woozle
Means a software package developed by RACVIS to operate as the interface between the RACV mainframe computer and the Unisys WMS system.
WMS
Means workflow management system.
Workflow Narrative
Means the Workflow Narrative dated May 1994 version 2.2 approved by Unisys and accepted by the plaintiffs
Evidence
The following witnesses were called by the plaintiffs:
(a)Robert Alexander Mitchelson who was general manager of RACVI at all relevant times until he retired in December 1995. He was the senior management person responsible to the board of RACVI and to the chief executive officer of RACV. He signed the Unisys contract on behalf of RACVI.
(b)David Charles Hurford who from 1992 was assistant general manager of RACVI reporting to Mitchelson and in January 1996 was appointed general manager following Mitchelson's retirement. He continued in that position until 30 March 2000 when he retired from RACVI.
(c)Paul Arthur Lang who was employed by RACVI as claims services manager between September 1992 and December 1996 inclusive when he retired from RACVI. He reported to the general manager.
(d)Lisa Joy Chesson-Kistas who was employed by RACVI as a claims consultant in the motor vehicle section. By reason of her expertise in the claims area she was involved in the project from 1992 and on a full-time basis from at least November 1993 to its end in June 1996.
(e)Craig Donald Haw who as an employee of RACVGS worked full-time on the project from February 1994 until it ended in June 1996. He was responsible for technical input in respect of the interfaces between the Unisys workflow and electronic imaging system and the existing RACV computer system. He was not responsible for any aspect of the Unisys system including its design, functionality and performance. He is now employed by RACV as Unix administrator.
(f)Justin Taylor Doherty (formerly Clack) who was employed by RACVI from 2 February 1993 until 15 August 1997. He was project assistant and later project operations manager for RACVI during the implementation of the Unisys WMS system. He was responsible for RACVI's day to day operational issues relating to the WMS. He worked full-time on the project from August 1994 until the start of July 1995 except for November 1994 and from July 1995 to end June 1996 was almost full-time.
(g)Dennis Hakme, who as an employee of Memorex Telex conducted an analysis of the LAN in the March to May 1996 period.
(h)Peter Malcolm Jenkins who was finance manager of RACVI in 1996 and is now employed by RACV. He produced accounting records of RACVI relating to and recording the payment of various accounts and wages information to establish items in the plaintiffs' particulars of loss and damage.
(i)Gregory Errol Blashki, an independent accountant, who as an expert gave opinion evidence to establish a general increase in labour costs suffered by RACVI as a result of the Unisys contract.
(j)Peter George Thorne, a consultant and a principal fellow in the Department of Computer Science and Software Engineering at the University of Melbourne. He was formerly head of the school of computer science located in the science and engineering faculty and deputy dean of the latter, although having moved from being a full-time staff member to more of an associate capacity with some teaching and research, he retains the rank of reader and associate professor.
(k)The following three witnesses whose evidence in witness statement form was tendered by consent without the need to call the witness:
(i)Glen Williamson who as an employee of FileNet tested the Unisys system in November 1997. The statement was provided following a critical comment on the testing in a report of an independent expert engaged by Unisys, Brian Bertram Hesom.
(ii)Benjamin Connell, an employee of RACVGS, whose brief witness statement was likewise directed to dealing with statements in Hesom's reports.
(iii)Heath Jarrad Sheftz who in 1996 was employed by RACVGS as a PC support technician and whose brief statement dealt with an issue raised in two Unisys witness statements as to the effect of the RACVI PCs on the performance of the WMS system in terms of response times.
The following witnesses were called by Unisys:
(a)Craig Mitchell Felsenthal, an employee of Unisys, who in 1993 was customer relationship manager, and who was the first at Unisys to become aware of the RACV project.
(b)Brian Patrick Josephson, who was employed by Unisys from April 1987 until May 1996. He became the marketing manager for InfoImage shortly before its launch in October 1989 and in 1994 and 1995 was the lead sales specialist for the product. His involvement in the RACV project commenced in early 1993 and concluded shortly after the Unisys contract was signed.
(c)Ruth Elizabeth Willis, an employee of Unisys with a background in mainframe development of software. She had no experience with the InfoImage product when she became involved in the RACVI project. She was bid manager for the production of Unisys' response to RACVI's request for proposal and worked on the bid until the contract and subsequently as a project manager to manage the environment (but not the technology) including risk and issue management. She scheduled staff to perform the technological aspects of the implementation, gave tasks and a completion date and checked what they had done. Her involvement ceased in April 1995 following RACVI's acceptance of the system. She is no longer employed by Unisys.
(d)Vincent Joseph Wall who from 1994 to 1996 was employed by Unisys in the management consulting group to work in imaging and workflow. He was involved in several aspects of the RACV project from the commencement of his employment in early 1994 until sign-off in March 1995.
(e)Neil John McFarlane, an employee of Unisys who was involved with the WMS project at several points. Pre-contract he provided advice as to the capacity of the LAN at RACV to support a WMS system which used InfoImage; and in mid 1994 and again in or around March 1996 he was called into to consider the LAN.
(f)John Thomas Chmura, who for some years until 5 December 2000 was an employee of Unisys and its predecessor companies. In his last position he was the systems architect specialising in image document management, workflow and records management and under various titles had worked in that area of computer processing since 1991. His involvement with the RACV project was to run three courses for RACV and Unisys staff at the Unisys office and at the request of Willis work full-time at the RACV from 5 September to 7 November 1994 as a consultant in building the InfoImage solution taking into account the customised functionality. This involved defining the InfoImage application for RACVI, that is, telling the InfoImage system how to behave in doing its work. He taught two more courses late in November 1994 to RACV and Telstra personnel, after which his involvement was almost ended. He returned to RACVI in June 1995 to review problems with the system.
(g)Geoffrey Edmund Olsen, an employee of Unisys between 1991 and 1999. He worked on the project from the first to the last. He assisted in the demonstration in May 1993 and thereafter worked on technical aspects as a member of the team and in that respect on the configuration of the system to be installed and following the award of the contract he was engaged full-time on the implementation of the InfoImage system until the project was terminated in June 1996. He gave evidence over five days.
(h)Kenneth Ross Johnson who commenced employment with Unisys on 23 May 1994 as a consultant for the imaging services division. He said he was employed with a view to becoming a systems administrator for RACVI system and as such be on site during the warranty period. He was assigned to the RACV project in June 1994 at RACVI's office, read materials on InfoImage and attended lectures by Chmura, and performed a variety of tasks in developing the system. In August 1995 he attended a meeting at Plymouth in the United States to discuss the rebuild of the system. He continued to be involved up to termination of the project in June 1996.
(i)James Joseph Esmonde, who since December 1994 has been employed by Unisys as the service delivery manager in Cross Industries. He became involved with the RACVI project in May 1995. While Birthisel was on the technical side, Esmonde worked on the business management side. His role, he said, was not "getting involved deeply into the technical aspects of products; it was to ensure that we had resources available to do that sort of thing". An instance is that he requested Birthisel be appointed to project manage the team. He also performed a liaison role with RACVI. He was involved to termination in June 1996.
(j)David Vernon Birthisel, a Manager in Unisys' systems integration practice who has been employed in various roles by Unisys since March 1986. His involvement with the RACV project commenced in May 1995 when he succeeded Willis as Project Manager. He reviewed the system that had been accepted in March 1995. He recommended that RACVI stop adding new claims (which meant handling them on the old manual paper-based process) and shortly thereafter recommended that the Unisys system be abandoned altogether and that RACVI fully return to the manual system, and that the Unisys system be rebuilt. He was involved through the subsequent rebuild of the system until the termination of the project in June 1996.
(k)The following witnesses whose evidence in witness statement or affidavit form was tendered by consent without the need to call the witness:
(i)Kevin d'Souza who has been employed by Unisys since 1993 as a technical specialist with a background in designing and developing operating systems. In a short witness statement he referred to specific involvements with the RACVI project, initially at the request of Willis in or around late 1994 when over a couple of months he completed some self-contained tasks in conjunction with Wall and Olsen, and some time later at the request of Birthisel.
(ii)Daniel Rouqueirol who has been employed by Unisys since 1986 and is a program manager. His involvement commenced in early 1994 when he was primarily responsible for getting a team together to work on the RACVI project. He chose people who had been involved in the pre-sale, and who included Willis, Olsen and Wall. His short witness statement referred to a few matters and said his involvement ended when the system was accepted and went live around April 1995.
(iii)William H. Maier, a former employee of Unisys Corporation who retired in November 2000. He had been a software support manager since 1991. He described the support group system in the United States and how it operates including sending analysts to customer installations overseas and, after a brief reference to the number and range of customers using InfoImage and to the Unisys or NT platform, he referred generally and with somewhat broad observations, to the RACV project.
(iv)Michael Aaron Bromberg who, as associate general counsel for Unisys Corporation, produced the following copy licence agreements: an agreement between Unisys Corporation and FileNet Corporation dated 3 August, and an agreement between Unisys Corporation, Sigma Imaging Systems Inc. and Empire Blue Cross and Blue Shield Inc. dated 17 March 1990.
(l)Brian Bertram Hesom, an independent consultant with experience in computer technology including process redesign and the implementation of new processes. He gave opinion evidence as to a report he had prepared (which was tendered) in which he answered a series of questions put to him by Unisys' solicitors.
(m)Duncan Nicholas MacCallum who is now a partner in Deloittes Consulting but who at the times relevant to this case was employed by Deloittes as a principal consultant and whose expertise was in information technology. In August 1992 Deloittes was engaged by RACVI to provide consultancy services in the re-engineering of the process and systems in its motor claims business. MacCallum was the lead person for Deloittes. He was involved both pre and post-contract although not continuously in the post-contract period. He gave evidence on a variety of matters. A witness statement had not been provided for him as a result, as I understood it, of Deloittes having settled on confidential terms and his reluctance, however inspired, to confer with Unisys' lawyers.
What is produced is a very large body of evidence in various forms, written, oral and documentary, and of wide scope and content. The question arises as to the convenient way to deal with it. There is too much to set it out, witness by witness, as to do so with references to the documents would involve an exposition of enormous length and time in preparation. I judge an exercise of such a kind to be unnecessary in the resolution of this case. The appropriate course is to identify the issues in the pleadings, then to set out the background facts in sufficient detail to provide the context in which the dispute arises, and in the course of which make findings of fact, and then identify and resolve the issues counsel left for determination and in the course of doing so deal with the facts relied on and make any necessary findings. I shall proceed accordingly.
I conclude this section by noting an attack that each side made on the other in final addresses as to not calling witnesses and the inference to be drawn in consequence. Counsel for the plaintiffs said that without explanation Unisys had failed to call a series of witnesses who had a significant role in events, and identified them as Andrew Walker, Rudra Kumar, Bruce Wilson, Barry Hughes, Bill Walsh, Murray Bergin, David Lupton, Mike Weise, and the seven persons (other than Olsen) named by Willis as having technical knowledge on the Unisys project team. Counsel submitted that the inference to be drawn is that if called none of these persons would have given evidence to assist Unisys' case.
Counsel for Unisys objected, in effect, that this submission was a case of the pot calling the kettle black. That was because there were a number of persons who had been involved in the project and who the plaintiffs did not call without satisfactory explanation for the failure. This point was made during the trial, when evidence was being given. It is sufficient in this respect to refer to Robinson, Monument, Lourdes, Rutzou and Wilson. In Robinson's case, a witness statement had been served but he was not called. From time to time counsel also referred to Green but in doing so he overlooked the evidence that he died several years ago.
It was clear to me that the parties devoted considerable time and resources to the preparation of this case including consideration as to who should give evidence and as to the scope of their evidence. In the result there were witnesses that each side might have called but did not, and without explaining why. I consider it difficult to say that in this respect one side erred to a significant degree more than the other. It is impossible to speculate as to the evidence that any such person might have given. The simple fact is that on each side witnesses who might have been called were not called and the inference is properly to be drawn that if they had been called their evidence would not have assisted the respective case. Beyond that the honours are about even and neither side gains advantage under this head of attack. It was a closely fought case with each side engaging in a deal of considered forensic finessing and adversarial position taking.
Pleadings
(a) Overview
The statement of claim was amended several times, the last being during the trial. It was an elaborate and complex document. In addition to incorporating particulars provided from time to time it included two annexures, the first being particulars under para. 20 of representations made by Unisys, the second being particulars of loss and damage. In all, the pleading runs to 143 pages. To this pleading Unisys filed a defence and counter-claim and to that, in turn, there is a pleading in reply.
By the end of the trial the parties had abandoned a number of the claims or allegations in the pleadings or otherwise clarified their position. It is thus necessary to identify those parts of the pleadings that were relied on at the end of the case and those that were not. Without that clarification it would be impossible to appreciate, from a mere perusal of the pleadings, which issues the parties left for determination.
The plaintiffs' claim against Unisys was pleaded on three alternative bases: negligent statements, contravention of s. 52 of the Trade Practices Act, and breach of contract. It was pleaded that Unisys made negligent statements and contravened s. 52 both in the period leading up to the December 1993 contract and subsequently in the period to termination in June 1996. There was but the one plea of breach of contract. This structure of pre and post-contract pleas is explained by the presence in the contract of provisions which limited the amount of damages payable by Unisys (cl. 19(a)(ii)); required termination to be preceded by a notice of default and a failure to rectify within 60 days (cl. 22(a)(ii)); and an entire agreement provision which excluded from the contract written or oral communications not in the written document (cl. 24(d)). The post-contract pleas may be understood as an attempt to avoid these exclusionary or limiting provisions.
When the case was opened counsel for the plaintiffs said that primary reliance was placed on the claim under s. 52. The negligent statement case was embraced by the s. 52 case and was unlikely to arise for separate consideration. The claim in contract was alternative and secondary and was complicated by issues concerning the contract provisions just referred to, and issues concerning the two plaintiffs. Hence, counsel proposed that I should deal with the s. 52 claim first and, if that claim succeeded, not deal with the other bases of claim, including the post-contract claims. Consistently, in his final address, counsel for the plaintiffs' placed primary reliance on the claim under s. 52. He said that the contract claim was "subsidiary" and a "fall-back". He addressed no separate submission on the negligent statement case and I take it to be abandoned; counsel's position was that if the plaintiffs could not succeed on the s. 52 claim they would not succeed in negligence.
With that introduction I now turn to the pleadings. I do so as summarily as possible. I omit reference to the pleadings concerned with the claim of negligent statements.
(b) Statement of Claim
The pleading of the s. 52 case commences in para. 19. This claim is made by both RACVI and RACVGS. It is alleged that between March and December 1993 Unisys provided information to RACVI (or RACVI and RACVGS) and responded to the RFI and the RFP with a proposal for the supply of hardware and software for a WMS system utilising a suite of products called InfoImage. In extensive particulars "the Unisys proposal" is said to be contained in the July and October 1993 responses, certain correspondence, the InfoImage brochure, and the demonstrations and conversations. In para. 20 it is alleged that in the "proposal" Unisys made a number of representations all of which, in para. 21, are alleged to have been false. They are called the "proposal representations". In his final address counsel for the plaintiffs abandoned reliance on the representations alleged in sub-paras. (i), (l), (m), (n), (q), (r), (s) and (t) of para. 20. The representations relied on are:
(a) the Unisys proposal would:
(i)Provide a technically sound solution and platform capable of meeting the business requirements of RACVI and/or RACVGS then and in the future (sub-para. (a)).
(ii)Meet the performance and reliability criteria set out in the RFP (sub-para. (b)).
(iii)Provide a WMS system catering for the number of staff requiring access to documents (sub-para. (c)).
(iv)Provide adequate storage capacity to provide, on a "date-forward" basis, for all open claims on-line, all claims near-line for three months following closure, and closed claims older than three months off-line (sub-para. (d)).
(v)Provide high speed image access for on-line claims with a retrieval time in the vicinity of 2-4 seconds (sub-para. (e)), and image access for near-line claims with an expected response time in the vicinity of 20 seconds maximum (sub-para. (f)).
(vi)Provide image access using the WMS system which would provide improved customer service for RACVI through faster response and more efficient operations (sub-para. (g)).
(vii)Provide a system performance that would not degrade during peak load but would offer highest performance at peak times (sub-para. (h)).
(b)Unisys had appropriately skilled staff to work on the WMS project trained in workflow and image management (sub-para. (j)), and in large project implementation (sub-para. (k)).
(c) In relation to any prototype demonstration by Unisys –
(i)it would utilize the same techniques as Unisys would use in live system developments (sub-para. (o)), and
(ii)it would be a live Stage One system for immediate use by RACVI should the project schedule so determine (sub-para. (p)).
Moving on in the pleading for a moment, para. 29 pleads the entry into the Unisys contract on 24 December 1993 for the design, supply and installation of a WMS system. It is alleged that RACVI entered into the contract on its own behalf or on behalf of itself and RACVGS. In final address the plaintiffs abandoned the allegation that RACVGS was a party to the contract. That concession was correctly made. It meant that RACVGS was a plaintiff only in respect of the s. 52 claims.
In para. 29A(a) it is alleged that RACVI entered into the contract in reliance upon the proposal representations. In sub-para. (b) it is alleged that RACVI entered into the contract in reliance upon representations and advice of Deloittes; understandably enough, RACVI did not pursue that allegation, nor did Unisys seek to establish that in its case.
The next part of the pleading to note is para. 29C in which it is alleged that Unisys engaged in conduct in contravention of s. 52. This is the pre-contract plea. The conduct relied on is the making of the proposal representations, or the making of them in a positive and unqualified manner, or (as alleged in paras. 22 and 23) the silence of Unisys in relation to the qualification appearing on p. 10-1 of the July 1993 response or the location of that qualification in the response document without drawing it to the attention of the plaintiffs. Insofar as the proposal representations were with respect to future matters, the plaintiffs rely on s. 51A of the Trade Practices Act (para. 29D).
The plea in para. 22 is a little awkward to express in a few words. In essence it alleges:
(a)The qualification on p. 10-1 of the July response was intended by Unisys to negate:
(i)the mandatory performance requirements of the RFP,
(ii)all performance requirements for the WMS system and the contract,
(iii)the proposal representations as to performance alleged in para. 20(a)–(f).
(b)At all times relevant to the contract Unisys was aware from the RFP that the plaintiffs:
(i)required the WMS system to meet the mandatory performance requirement dated in the RFP,
(ii)believed the Unisys proposal met such requirements,
(iii)were unaware of the matters in (a).
(c)Unisys was under a duty to make the plaintiffs aware of its intention in (a) above, but did not do so.
(d)RACVI would not have entered into the contract if it had been aware that the qualification on p. 10-1 would be relied on by Unisys to have the effect referred to in (a).
The plea in para. 23 is another way of trying to get to the same result under s. 52. Essentially the allegation is that by placing the qualification on p. 10-1 away from the part of the response where one would have expected the qualification to appear, and not drawing attention to it, Unisys was aware that the qualification might not come to the notice of the plaintiffs or alternatively they might not regard it as negating the representations in the Unisys response as to performance and retrieval times.
In para. 29E the plaintiffs allege that they suffered loss and damage as a result of Unisys' contravention of s. 52.
The statement of claim then turns to the contract and pleads the terms thereof in para. 30(a)-(k). Of these sub-paras. (b)-(h) inclusive and (k) correspond to the proposal representations in para. 20(a)–(h) and (o), which are summarised in (a), (b) and (c)(i) above at [21]. Two other terms are alleged in para. 30: one is that the hardware and software when designed, delivered and installed would be capable of handling the functional requirements of RACVI (sub-para. (a)); the other, in sub-para. (j), corresponded to one of the abandoned representations and I take it to be abandoned. Indeed I note that in final address counsel for the plaintiffs addressed only on the terms in sub-paras. (a)–(f), (h) and (i) of para. 30.
One has now arrived at the point at which the statement of claim concerns itself with post-contract events. Paragraph 31A pleads post-contract conduct and repres-entations for the alternative s. 52 case; this section of the pleading continues to para. 31X with the balance of the s. 52 pleading in paras. 32-33A. For the reasons mentioned the separate pleading of the post-contract negligence case (in paras. 31Y-31ZE) may be ignored. Finally, paras. 36, 37 and 39 concern the claim of breach of contract.
In final address counsel for the plaintiffs stated how and to what extent they relied upon the matters alleged in the post-contract s. 52 pleas in paras. 31A-31X. If the plaintiffs succeeded on the pre-contract s. 52 claim there would be no need to separately consider the post-contract s. 52 claim as the former would pick up the several events and facts alleged in relation to the latter and the damages that would apply as a result. Hence, if the pre-contract s. 52 claim succeeded, the post-contract s. 52 claim would not have to be considered. Nor would the post-contract s. 52 claim need to be considered if the breach of contract claim succeeded without cl. 19(a)(ii) applying to reduce the damages. The post-contract s. 52 claim would arise for consideration only if the pre-contract s. 52 claim failed and the contract claim failed altogether or succeeded but cl. 19(a)(ii) limited the damages to an amount less than the actual loss. Only then did the plaintiffs pursue the post-contract s. 52 claims in paras. 31A-31X and, even then, as counsel stated, only to a limited extent. Counsel pursued only the allegation in para. 31I that is alleged to arise from the failure to inform RACVI of the matters set out in para. 31H.
The allegation in para. 31H is that in the course of redesigning the WMS system from July 1995 Unisys concluded or ought reasonably have concluded that a WMS system implemented in conformity with such redesign would not comply with the proposal representations and performance criteria in the Unisys proposal and/or the contract. In para. 31I it is alleged that by engaging in the redesign work without informing the plaintiffs of those matters Unisys expressly or impliedly represented that the WMS system when redesigned would comply with the proposal representations and the performance criteria. It is alleged that this conduct contravened s. 52 (para. 32), that s. 51A is relied upon if necessary (para. 32A), that relying upon and induced by the representation the plaintiffs did not terminate but pursued the project with Unisys and expended money and devoted staff time to it (para. 33), and as a result suffered loss and damage (para. 33A).
Finally, on the contract claim, it is alleged that Unisys broke the terms alleged in para. 30 (para. 36), that on 27 June 1996 RACVI terminated the contract (para. 37), and had suffered loss and damage. I note that in final address counsel for the plaintiffs contended only for a breach of the terms alleged in para. 36 (a)-(f), (h) and (i). They did not pursue the terms referred to in sub-paras. (g), (j) and (k).
It is now appropriate to set out the damages sought. Counsel provided two lists, one for the s. 52 claim and the other for the contract claim.
On the s. 52 claim $3,618,773 was sought, made up as follows:
(a)
Amounts paid to Unisys
(i) by RACVI
431,250
(ii) by RACVGS
1,165,904
1,597,154
(b)
Amounts paid to third parties, namely—
(i) Deloittes
221,243
(ii) for external training
42,960
(iii) Price Waterhouse
393,855
(iv) Capital expenditure
500,000
(v) Vaughan
25,250
(vi) Memorex
10,213
(vii) Zoologic
30,034
1,223,555
(c)
Labour of the plaintiffs wasted
(i) RACVI
608,839
(ii) RACVGS
189,225
798,064
$3,618,773
There is no dispute as to the quantum of the amounts in (a) paid to Unisys. Nor, save as to the amount paid to Deloittes, is there an issue as to the quantum of the amounts in (b) paid to the third parties. The issue with Deloittes is not how much Deloittes was paid, but, rather, as to the amount that is properly to be claimed on this account. Item (b)(iv), capital expenditure, was fixed by agreement during the trial at $500,000. Thus while Unisys disputes liability, and with the one exception of item (b)(i) there is no issue as to the quantum of the amounts in items (a) and (b). Item (c) is in a different position. It is disputed in its entirety.
It is convenient to note that if the plaintiffs were to succeed on the post-contract s. 52 claim referred to at [29]-[31] a question would arise as to whether any of these amounts, or any part thereof, was not recoverable because the loss was incurred prior to the occurrence of the relevant breach or contravention. In final address counsel for the plaintiffs identified the damages sought under this head of claim as:
(a)
Deloittes fees from August 1995
181,326
(b)
Memorex
10,213
(c)
Labour wasted after July 1995
(being 4 RACVI and 3 RACVGS employees)
322,797
$514,336
The claim is put on the basis that by July 1995 Unisys should have informed RACVI of its knowledge or awareness of the inadequacy of the WMS system referred to in para. 31H (see [31]), that if it had done so RACVI would have terminated the contract and thus would have avoided the subsequent incurring of the above expenses. As it was Unisys did not advise RACVI which continued with the project in ignorance of the truth and incurred the above expenses. Hence the claim.
On the alternative contract basis of claim $5,393,855 is sought made up of:
(a)
The amount paid to Price Waterhouse
$393,855
(b)
Estimated savings not made by RACVI
$5,000,000
As mentioned above, the quantum of item (a) is admitted. Item (b) is disputed.
The statement of claim sought interest pursuant to the principles in Hungerford v Walker. Counsel for the plaintiffs abandoned this claim in his opening address. Also abandoned in opening was a pleaded claim for exemplary or aggravated damages.
(c) Defence and Counterclaim
Commencing for present purposes with the pre-contract s. 52 case, the defence, inter alia, admits that in meetings between March and December 1993 Unisys employees provided information to RACVI employees, admits that Unisys responded to the RFP with "the Unisys proposal" (the expression in para. 19 of the statement of claim), refers to the terms of the proposal for its meaning and effect, alleges it did not provide information to RACVGS and otherwise denies the allegations in the said para. 19. The denial of dealing with RACVGS was repeated throughout the defence.
Then, in relation to the pleading of the proposal representations in para. 20 of the statement of claim, the defence:
(a)refers to the Unisys proposal and in particular p. 10-1 of the July response and point 12 on p. 7 of the PMP;
(b) denies it made the representations;
(c) alternatively, if it made any representation, claims –
(i)none was made to RACVGS and RACVGS was not entitled to rely or act upon any such representations;
(ii)as to response times, any such representation was negatived on p. 10-1 and point 12 of the PMP which stated that response times were to be finally negotiated once the system required by the functional specifications was installed;
(iii)otherwise, if any representation was a matter of opinion, the opinion was honestly held on reasonable grounds; and if it was as to a future mater Unisys had reasonable grounds for making it; and
(iv) the representations were not false.
See paras. 14–15J which plead to paras. 20-23 of the statement of claim.
Later (in para. 25) the plea of a contravention of s. 52 is denied. An important allegation in paras. 15E and 15J is that even if (as alleged in paras. 22(5) and 23(5) of the statement of claim) it was true that RACVI would not have continued to deal with Unisys or entered into the contract if the plaintiffs had been aware that the qualification on p. 10-1 would be relied on by Unisys to negative performance requirements, the plaintiffs caused their own loss by entering into the contract without reading all the contract documents or understanding their terms and effect. This plea is based on the failure to appreciate the effect of the qualification on p. 10-1 of the July response and point 12 on p. 7 of the PMP. It is further alleged in para. 23 that the plaintiffs did not rely on the proposal representations in entering into the contract but, rather, relied on their own assessment and on representations and advice of Deloittes. Counsel for Unisys did not seek to establish the latter point concerning Deloittes and I took it to be abandoned.
In relation to loss and damage, the defence raises an issue of causation. It is alleged that the plaintiffs were the cause of their own loss by entering into the contract without reading the documents constituting it or understanding their terms and effect. This plea is based on the failure to appreciate the effect of the qualification on p. 10-1 of the July response and point 12 on p. 7 of the PMP. It is further alleged that the plaintiffs relied on their own assessment in entering into the contract and on representations and advice of Deloittes.
The claim for loss and damage is not admitted in any respect. That is, of course, subject to the admissions or concessions at trial and referred to earlier.
The contract is admitted in para. 22 as one wholly in writing. In para. 33 the defence addresses the terms of the contract. It does so briefly. It relies on the written word in the contract documents; refers in particular to cl. 24(d) of the contract (the entire agreement clause), the said p. 10-1 of the July response and point 12 on p. 7 of the PMP; and otherwise denies all the terms alleged by RACVI. Similarly, in relation to breach of the contract, the defence denies the allegation and relies on the terms of the contract and in particular, in relation to response times, on the said p. 10-1 and point 12 (para. 70).
I now refer to some parts of the defence which pleaded to the post-contract s. 52 claim. In para. 34 Unisys admits that between December 1993 and March 1995 it undertook design work. In paras. 37 and 38 Unisys alleges that it delivered a WMS system to RACVI in about March 1995 pursuant to and in compliance with the terms of the contract. It referred to the "Acceptance Sign Off" signed by Lang dated 29 March 1995. It denied the allegation of the plaintiffs that it did not comply with the proposal representations and performance criteria in the proposal and/or the contract.
It is important to point out here that at an early stage of the trial counsel for Unisys conceded that in fact the system delivered in March 1995 failed, and had to be re-designed before it could function. If the facts had been made admitted in the defence the plaintiffs might properly have required particulars of the respect or respects in which, or as to the reason or reasons why, the system failed and had to be re-designed. By not admitting in the defence what was an undeniable fact, as counsel conceded, Unisys avoided committing itself on the issue pre-trial. The consequence of the denial of the issue in the defence, was that the pleading was misleading and obfuscated on an important issue. Unisys was thus enabled to avoid giving particulars of the fact. It was an important issue for the light it might have thrown on what had happened, and the admission and particulars would have assisted the plaintiffs pre-trial. It would also have saved time at the trial. In any litigation, but in particular litigation such as the present in which the costs must be enormous, the course taken by Unisys was unacceptable and is to be recorded with condemnation.
In para. 31G Unisys admitted that it undertook work on the WMS system from in or about mid-October 1995. Unisys denies the allegations in paras. 31H and 31I of the statement of claim; these are the post-contract pleas the plaintiffs rely on. Further to that denial Unisys alleges that if it made the representation in para. 31I it had reasonable grounds for making it and any opinion involved was honestly held (para. 66).
In para. 69 Unisys denied that the plaintiffs had suffered loss and damage as a result of the alleged post-contract contravention of s. 52. That general denial stands. But in final address Unisys' counsel expressly abandoned reliance upon the plea in para. 68 that the cause of any such loss and damage was the negligence or breach of contract by Deloittes or its contravention of s. 52.
As to the termination of the contract on 27 June 1996 Unisys alleges (in paras. 70 and 71):
(a) It was not then in breach.
(b)If it was then "in default of any material condition" of the contract as referred to in cl. 22(a)(ii) thereof, RACVI was entitled to terminate if Unisys had "not rectified the default within 60 days of written notice from you of the default". As RACVI had not given such a notice it was not entitled to terminate the contract. Further, if there was any "default" it would have been rectified within 60 days.
(c)Hence, RACVI had not been entitled to terminate and its actions constituted a repudiation of the contract which Unisys accepted.
From this point the defence proceeds to raise some specific matters and then moves to the counterclaim. The remaining matters in the defence are:
(a)On the contract claims cl. 19(a)(ii) was relied on to limit any liability to pay damages to the greater of $100,000 or the total amount paid to Unisys in the 12 months prior to the default giving rise to liability (para. 75A(e)). Counsel for Unisys did not rely on this clause in respect of the s. 52 claim.
(b)The plaintiffs did not mitigate their loss by correcting outstanding problems (para. 75A(f)).
(c)A plea of contributory negligence (para. 76). As expressed the plea was directed, and confined to, the circumstance of a finding that the plaintiffs had suffered loss or damage as a result of any "breach of duty" by Unisys. As thus expressed the plea was made in relation to the claims of negligent statement based in tort. It was also clear from statements of counsel that contributory negligence was not available in respect of the claim in contract and had been considered not to be available in respect of the claim based on a contravention of s. 52. Counsel abandoned the plea in final address.
(d)Further on causation, any loss or damage was caused by RACVI's failure to comply with cls. 5(a) (paras. 76A-76C) and 15(a) (paras. 76D-76F), and by providing numerous system change requests ("SCRs") under cl. 5(c) of the contract (paras. 76G and 76H). Clause 5(a) required RACVI to provide a functional specification. It is alleged that the failure to provide it meant that Unisys could not properly develop the software in accordance with cl. 5(b). Clause 15(a) required RACVI to provide an operating environment in accordance with specifications provided by Unisys and which RACVI did not provide in respect of the LAN and Woozle. Compliance with the SCRs is alleged to have required Unisys to design a system that was fundamentally different to the WMS system as originally proposed by RACVI in the RFP. In para. 76J it is alleged that "accordingly" any loss and damage suffered by the plaintiffs was caused by these matters.
In final address counsel for Unisys abandoned the plea in para. 76J. He also abandoned the plea in paras. 76D-76F. That left paras. 76C and 76G and he relied on them only as factors which went to explain why Unisys was on the job as long as it was seeking to perform its task. He did not press paras. 76C and 76H in the sense of pressing reliance on them and seeking affirmative answers in terms of the allegations. For one thing, the claim in para. 76H was not established. That case was not run. More importantly, they were only pleas to establish the defence in para. 76J and that was abandoned.
This brings me to the counterclaim. As against RACVI a claim is made:
(a)For $162,968 as the balance owing on invoices rendered by Unisys.
(b)In conversion or detinue for the value of the replacement server provided to RACVI and alleged to remain the property of Unisys, the value being claimed at the Unisys invoice price of $385,360.
(c)For $32,129 for work carried out in accordance with system change requests agreed by the parties.
(d)For $25,738 for the services agreed in or about 19 October 1995 to be performed by an employee of Unisys Geoffrey Edmund Olsen to assist with the development of restart/recovery procedures and test plans. This claim was abandoned in final address.
Finally, there is a counterclaim against RACVGS. It is made on the basis that Unisys is found liable to RACVI. It claims contribution in the amount of any liability including interest and costs. The claim is based on the breach by RACVGS of its retainer by RACVI to provide services in relation to the workflow management project. It is alleged in para. 99 that if RACVI suffered any loss and damage as it alleges, the loss and damage was caused by RACVGS's breach of duty and retainer. Counsel for Unisys did not press this claim, indeed it was not mentioned at all in their lengthy and detailed final address. I take it to be abandoned.
(d) Reply and Defence to Counterclaim
Little need be said at this stage about the reply and defence to counterclaim. Issue is joined on the defence. In the defence to counter-claim:
(a)It is admitted the amount of $162,968 was not paid but liability is denied on the basis that no benefit was received, or that under the Trade Practices Act the obligation to pay the amount should be set aside or the amount should be added to the damages payable by Unisys.
(b)Possession of the server is admitted. It is alleged that Unisys provided it pursuant to its obligation to rectify a defect. Clause 18(a) and (b) of the contract relating to a warranty period is relied on by RACVI in this respect. There was no separate agreement for its purchase. Hence the server became the property of RACVI. In the alternative, if it remained the property of Unisys, RACVI claimed a lien over it until Unisys met its liabilities, at which time it may be collected; this claim of a lien was not relied on in final address and I take it to be abandoned.
(c)The system change requests are admitted but liability is denied as in (a) above.
I conclude this section with a reference to the application to amend the defence made on 15 May, six weeks after the conclusion of final addresses. I referred to this at [8]. The application was inspired by the decision of the Queensland Court of Appeal in I. & L. Securities Pty. Ltd. v. HTW Valuers (Brisbane) Pty. Ltd. [2000] QCA 383, delivered on 22 September 2000, in which it was held that under s. 87(1) of the Trade Practices Act a court could reduce the damages payable to a plaintiff on account of the plaintff’s own fault in causing the loss in question. I was informed that counsel for Unisys were not aware of the decision until shortly after the trial. The amendments sought by counsel were:
(a)to para. 76 to extend the plea of contributory negligence to the case of loss or damage suffered as a result of a breach of the Trade Practices Act, and
(b)to add a new para. 76AA to contend that any damages under s. 82 or s. 87 of the Trade Practices Act should be apportioned by taking into account the contributory negligence of the plaintiffs or either of them, and/or causes of the plaintiffs' loss or damage for which they were responsible.
After a short hearing on 15 May I adjourned the further hearing of the application for two days. The adjournment gave Unisys an opportunity to further consider the application and address further submissions in light of matters raised in the hearing thus far. Later in the morning on 15 May my Associate was informed by counsel for Unisys that the application was withdrawn. No further hearing was had on the matter.
Background
RACVI conducted business as a motor vehicle and general insurer. To give a broad picture of the claims area as it was: in 1993 the claims process was paper based, each claim having its own paper file; the system was labour intensive and considered inefficient, the ability to locate and retrieve files being a problem with inability or delay in doing so producing inefficiency in handling claims and telephone inquiries; seven separate branches of RACVI handled claims although in 1993 the claims work was centralised in the Melbourne office; there were approximately 90 claims consultants divided into six groups each with a team leader; in 1992 they handled approximately 75,000 claims which involved about 1,000,000 documents. The system of working was described by the general manager, Robert Alexander Mitchelson, in an evident understatement, as "logistically complex", and that it was "essential (for RACVI) to keep abreast of development of systems and procedures which would enable efficient physical handling of the volume of insurance paperwork and generation of relevant management information". A possible solution to the problem of handling an increasing number of claims, and to do so in a cost-effective and efficient way with improved service, was to introduce new technology which might include document imaging. That would involve computerisation and a system of electronic retrieval of documents. At Mitchelson's instigation in 1990 RACVI began to consider the issue.
Following an overseas trip for the purpose Graham Snooks, finance manager for RACVI, recommended to Mitchelson that RACVI proceed further to investigate workflow managing and imaging. He authorised a team of Snooks with Roger Green and Shayne Lourdes of RACVGS to move the issue forward. Green, who died several years ago, was then information technology manager. At the time the aim was to develop an internal solution which would be led by Green's department. The committee worked through 1991. In November 1991 an analysis was prepared of the steps in the handling of a motor claim. It was essential to have a narrative, or diagrammatic, statement of the existing workflow process before one could decide how that process might be made more efficient and, in turn, to know what any computerised system had to accommodate.
By the end of 1991, as a result of concerns as to the ability of RACVGS to manage the project, Mitchelson authorised Snooks to approach a consultant to assist RACVI in the implementation of information technology. In March 1992 Snooks approached Duncan Nicholas MacCallum, a consultant employed by Deloittes. MacCallum is not an accountant, his background is information technology. MacCallum wrote to Mitchelson who authorised Snooks to continue preliminary discussions with Deloittes. A particular matter of concern was the ability of RACVI and RACVGS not merely to determine on the appropriate course of action to result in the design and implementation of an appropriate system but also to work together effectively in that regard.
In the meantime, in April an internal RACVI committee called the Workflow Committee had been set up to examine a report on the user requirements for a workflow/imaging system. The committee produced a report dated 7 May 1992. The report identified the committee's brief as being to specify claims procedures, determine workflow priorities, determine workgroups within the system and to establish software and hardware requirements. The members of the committee were Shayne Lourdes as chairman, Paul Robinson, an operations analyst as secretary, Julie Dean, a manager of customer service in motor claims, Teresa Segota, a supervisor in motor claims, and Lisa Joy Chesson-Kistas, a claims officer in motor claims. Subsequently Lourdes became part of the RACVGS information technology group. In her evidence Chesson-Kistas said that Lourdes and Robinson were in a group in RACVI that was "looking at technology and the way in which we could move"; her input was as to the motor claims process. The report recommended that RACVI commit to developing workflow/imaging technology to replace the existing paper-based system. The committee considered that an expert in the field should be engaged to assist in developing the system. The report noted that functional specifications would be attended to as part of the design phase of the project, and that the user must be able to add to, modify and generally make any system appropriate for day to day business needs. The report detailed a number of basic functions of the system. Conveniently, it defined Workflow Management as a software program that enables a user to monitor and control the flow of work electronically. Document imaging was the best form of putting information into the system and removed the need to maintain the paper file system. The report dealt with issues in a general way.
On 30 July 1992 Snooks recommended to Mitchelson that an external consultant be appointed "to guide us in this particular project (of a new claims system) and to train our staff in all facets of project management and related subjects". Mitchelson agreed and, in the result, on 6 August 1992 he received from MacCallum a proposal for the appointment of Deloittes to provide consultancy services in relation to the implementation of a document management and workflow management system involving image processing for the claims administration function. Mitchelson met MacCallum on 7 August and then, or by September 1992, RACVI engaged Deloittes to provide consultancy services. MacCallum had the carriage of the project for Deloittes. The consultancy was broad but basically required Deloittes to assist in the re-engineering of RACVI's claims process and systems and, once the best business processes were identified as those to put in place, to assist in determining who would help in providing the appropriate system. As MacCallum said in evidence, the aim was to increase the efficiency of the processes, including by reducing the time to process a claim, reducing the costs to RACVI of the processes, and providing improved service to RACVI's members.
Following the appointment of MacCallum, Paul Arthur Lang, then claims services manager of RACVI, co-ordinated the foundation of a group within the RACVI by drawing together representatives from RACVI claims and from RACVGS information technology ("RACVGS IT") to assist MacCallum. This group became known as the New Claims Process Team. In her witness statement Chesson-Kistas said the group consisted of Lourdes, Robinson, Vernon Spelderwinde, John Monument, Adrian Wilson and herself. It would seem from Lang's witness statement that some others were involved. MacCallum was to work with the Team. At a meeting he informed them he had been appointed by RACVI to document the work of the motor claims department as the first stage of the process leading to the introduction of imaging and workflow. He said that a project team comprised of personnel from user, operations and IT (being RACVGS), had been appointed to work in conjunction with him. In the first stage they would interview personnel throughout the claims operation and review procedural and systems documentation. In this he would have input from the RACVI members of the team. Chesson-Kistas, for instance, said she would provide the user perspective and comment on the extent to which the technology as demonstrated would fit with RACVI's business requirements and processes in the claims department. The IT staff seconded to the Team were concerned with the interface between workflow/imaging technology and the existing IT systems. MacCallum said he would endeavour to diagram and describe workflows with the new technology. He also said that if the project went forward he would be responsible for detailing user requirements to potential vendors and evaluating the systems proposed leading hopefully to selection of a candidate.
Chesson-Kistas assisted MacCallum in his work in establishing requirements. She gave him the reports of November 1991 and May 1992. She also developed, at his request, an analysis of document numbers titled Analysis of Documentation on Motor Vehicle Claim Files, dated September 1992. The objective stated in the report was to analyse and determine the documentation on a claim file by claim type. It was stated that, in respect of a predicted 70,000 claims in March 1993 it could be expected that the motor vehicle claims department would generate 734,038 documents per annum and receive 314,562 documents per annum.
MacCallum produced a two-volume report titled Motor Vehicle Claims Workflow Management Study. He presented it to the Team in December 1992. It was read and discussed at meetings. Chesson-Kistas thought it contained a good summary of the existing processes. The report indicated improved customer service and productivity as well as increased efficiencies and cost savings. Lang was impressed at the potential for substantial gains in these areas. Mitchelson was careful to consider these aspects as there had to be a justifiable return on investment if the project was to proceed. The report is too long and detailed to refer to it at length but there are two parts that should be mentioned as they will arise later. The first reference is to the requirements for the image services facility. Under the heading Referal and Access it was required that there be "High speed access to documents through pre-staging and magnetic caching", and that there be "Access to active claim documents within 2 to 4 seconds, from the magnetic cache, or, other pre-staging area. It not pre-staged, then access within 30 seconds". The second respect to note is that in Section Five Benefit/Cost Analysis there appeared a summary table prepared by MacCallum, which presented a four year cash flow analysis without allowance for any tax benefits resulting from investment in a computerised workflow management/imaging system. It will be necessary to return to this in dealing with an item in RACVI's claim for damages. In short, the report clearly pointed to the need for a technology solution. The report recommended the appointment of a project taskforce including representatives of RACVI and RACVGS IT to plan and undertake subsequent stages of the project. Mitchelson accepted the recommendation and authorised Lang and Robinson (as project co-ordinator) to put the team together. This was the New Claims Process Team.
On 5 March 1993 MacCallum met with Lang, Robinson and Chesson-Kistas to discuss technical initiatives, the plan proposed by Deloittes, dates and the process going forward. It was a preliminary meeting.
On 11 March 1993 Robinson advised the project team that the first meeting would be held on 18 March. He sent the note to John Monument of RACVGS IT, Chesson-Kistas and Wilson with a copy for information to Spelderwinde, Lang, Lourdes and MacCallum. The note attached a list of meeting dates to the stage of approval of provider, as follows:
Review team plan/review user requirements
18 March
Review draft request for information document and confirm demonstration/site visit schedule
29 March
Demonstration/site visits
31March/29 May
Evaluations
Next day
Determine recommendations and prepare short list
3 June
Present draft report to facilitators
24 June
Present recommendations to claims management
15 July
Review draft request for proposal
5 August
As far as Chesson-Kistas was concerned, she was to work on the project full time from March until December 1993. The Team (comprising those persons to whom the notice was sent) met on 18 March. During the meeting MacCallum spoke about the request for information document which he was then developing. The minutes record it would be circulated to the Team the following week. It was to set out the user requirements which the vendor of a workflow management and imaging system had to meet. He also addressed on the presentations and key evaluation criteria. He provided a proposed schedule of software demonstrations by 10 providers including Tower Technology, Filenet, Unisys and Kodak. Each demonstration would be held over half a day and be based on information requirements in the RFI. In discussion at the meeting it was allowed that RACVGS IT might also seek to be the provider or vendor.
On 25 March the team met Mr Schmidt of DBV Insurance. This was a German company which had recently installed Unisys' workflow/imaging technology called InfoImage. Unisys had brought this fact, and Mr Schmidt's presence in Melbourne, to MacCallum's attention and he arranged the meeting on the basis that gain could come from hearing his experiences with the Unisys system in an insurance environment. Unisys was represented at the meeting by Brian Patrick Josephson who since 1989 had been employed by Unisys as a marketing manager and then as a sales specialist for InfoImage. There are issues between Chesson-Kistas and Lang on the one hand and Josephson on the other as to statements of Josephson at the meeting. I find that the former had a more accurate recollection and accept their evidence. The purport was that the Unisys technology had been successfully used in the USA and Europe, Schmidt said it provided efficiencies and good returns and Chesson-Kistas spoke of the large volume of claims and the need to process them on a daily basis and to have speedy access to stored information.
The New Claims Process Team met next on 30 March. It would seem that by this time MacCallum had completed the request for information document (the RFI). It is a 71 page document titled Workflow Management Project – Motor Vehicle Claims, Vendor Symposia Briefing and dated March 1993. Having been read and approved by the Team it was provided to the 10 selected potential vendors.
The purpose of the RFI was to provide relevant information concerning the project to the potential vendors, including the requirements of the demonstration and the criteria by which they would be assessed. It provided a common basis to facilitate a comparative evaluation of the demonstrations. Hence it set out the background to the project and the intention of RACVI to provide a more efficient service for clients by approving the claims process and developing and implementing a computerised workflow management system. It stated time goals to be attained in handling claims. It described the existing system and with diagrams and narrative referred to a new proposed process.
Section Four of the RFI was concerned with technical requirements. In this section it was stated, inter alia:
"Workflow Management Architecture
The major considerations in establishing the architecture for the provision of workflow management facilities to a centralised claims process, with some supporting activity in the current branch environment, are:
• Performance and reliability
• Security and integrity of data, indexes, process scripts, etc.
• Ease of end user operations
• Communication infrastructure
• Development and database environments.
These factors, combined with the centralisation of claims and the need to ensure consistent work practices, suggest that a centralised workflow management architecture is the most appropriate solution."
"Image Services Architecture
The major considerations in establishing an image services facility are:
• Retrieval and distribution requirements
• Performance and reliability
• Security and integrity of data, indexes, and images
• Communication infrastructure
•A central image storage facility with connectivity to the Amdahl mainframe host application and/or the Workflow management System
• Role of optical and magnetic storage."
"Workflow Management Functionality
The Workflow Management environment must provide for development and execution of automated workflow paths or scripts. The following functions are considered minimal:
•Application Programmer's Interface (API) and user exits (or, remote procedure calls)
•Data Manager, or, standard relational database product with SQL (Structured Query Language) interface
• Portability of operating software (client and server)
• Activity, or, workflow map builder
• Workflow simulator for performance analysis
•Status monitor for displaying the status of work flowing through the system
•Audit trail to track the history of activity in the system
•Case and folder management functions
•Queues definition
•Activities definition
•Routing – dynamic
- guaranteed
- parallel
- rendezvous
•Support of rule-based routing
•Management reporting utilities
•Support for forms and screen design
•Recognition technology for machine printed characters or codes on forms
•System administration for users, groups, authorities, security and other operational requirements.
Image Service Functionality
The Image Services environment must provide the following minimum functionality:
•Image capture (scanning and committal) of varying documents, including double sided multi page
•Availability of automated indexing techniques
•Management of colour photographs
Zoologic
Counsel for Unisys submitted that this claim was similar to the Memorex Telex claim. It deals with Woozle, a software package developed by RACVGS to operate as the interface between the RACV mainframe computer and the Unisys WMS system. The two had to work together to exchange information relating to policies and claims.
Haw gave evidence as to the circumstances in which Woozle came to be developed, of acting in accordance with information supplied by Olsen in that regard and of dealings with other Unisys personnel in para. 27 of his witness statement in reply. The work included the necessity for modifications to the software on further advice and instructions of Unisys. I accept his evidence.
Also, in his initial witness statement Haw produced the invoices of Zoologic which were paid by RACVGS and make up the claim of $30,034. The work was carried out for Zoologic by Andrew Gelme who worked on site under Haw in the development of Woozle. The invoices record work carried out between September 1994 and July 1995.
The cost was essential to enable the Unisys system to be implemented in the RACV context. If it were not for the Unisys contract and the consequent need for the RACV main frame and the Unisys system to operate together the cost would not have been incurred. The only purpose of Woozle was to link the two. Further, it was not submitted that once the Unisys contract was terminated, RACVGS derived benefit from Woozle.
In the circumstances, for reasons given above in relation to other items, RACVGS is entitled to succeed on this claim. There was clearly a causal relationship between the incurring of the cost and the conduct of Unisys in contravention of s. 52.
(iii) Labour of plaintiffs wasted
As noted at [34], under this item RACVI claims $608,839 and RACVGS claims $189,225. The former item is the product of two components which in dollar terms are $358,869 and $250,000. I shall at once explain the nature of these items and how the claim is put.
The respective amounts of $358,869 and $189,225 are calculated on the same basis. The amount of $250,000 is arrived at in a totally different way and applies only to RACVI.
Under the first two amounts the plaintiffs seek to recover the costs (being salary plus applicable payroll tax) of certain members of their staff engaged on the WMS project. In respect of RACVI there are eight and for RACVGS there are three members of staff.
The claim by RACVI for $250,000 was advanced on the basis of evidence of an accountant, Gregory Errol Blashki. He made a calculation relying on certain assumptions provided to him by RACVI. The purpose of his exercise was explained by counsel in opening the case to be "to cross-check whether or not the claim for labour time seemed to make sense". For that purpose, acting on the basis of information provided to him by RACVI which he assumed to be correct, he carried out an analysis of increased staff costs in two periods, March 1995 to February 1996 and February to June 1996. He produced a calculation which showed that over those periods the labour cost of RACVI, after deducting an increase in the number of claims and salary increases in the period, had increased by $654,874. On his instructions, which were supported by evidence of Lang in this respect, the only factor that remained (after allowing for those two items) that could have caused this general increase in costs was the WMS project. That was because staff who were devoted to the project had to be replaced by other staff engaged for the purpose and by extra overtime.
Counsel's statement in opening that the Blashki evidence was put forward in the nature of a cross-check was re-visited on two subsequent occasions. The first was in a discussion which arose out of an objection to Blashki's evidence, at the point when Blashki was to be called. The second was in final address.
At the first point, there was an objection concerning Blashki's evidence. In the discussion which followed I inquired as to the use to be made of the evidence. At first counsel said, consistently with his opening, that the evidence was produced "effectively to support" the claim for wasted staff costs put forward by Doherty (who had given evidence the previous day and to which evidence I refer below) "and that's all". He said, correctly, that the calculations of Blashki and Doherty were done on a different basis and that if the amount calculated by Blashki was claimed separately "it would be a duplicitous claim". (It would be duplicitous because the labour costs which formed the basis of Blashki's calculation included the costs of the particular employees which the plaintiffs sought to recover under their claim for wasted staff costs which in part Doherty was called to advance.) But, in response to a further question, counsel changed his ground. He said that if the claim for wasted staff costs calculated by Doherty was not accepted, RACVI sought the amount calculated by Blashki. As finally presented by Blashki that amount was $654,874. I had the clear impression at this stage of the case that counsel was uncertain and somewhat feeling his way as to what would become of the claim and how and to what extent it might come to be presented in final address. In final address counsel changed his ground on the Blashki aspect. (He also changed ground on the matter of Doherty's evidence but I refer to that below.) He did not submit that RACVI was entitled to recover the $654,874 calculated by Blashki. Nor did he submit that the Blashki calculation was there to merely support the primary claim of wasted staff costs. Rather, and, it would seem, on the basis of accepting Blashki's evidence but doing a simpler exercise to establish the labour cost per claim increased in the periods March 1994 to February 1995 and March 1995 to February 1996, it was submitted that I could conclude that a figure "substantially less" than Blashki's figures "could be estimated by your Honour as a measure of the wasted labour costs as a result of the reduction in productivity during the time it was sought to implement the system". The figure put forward as that which could be estimated was $250,000. That is the amount claimed and that is how it was arrived at. It was not Blashki's figure. No witness, expert or otherwise, put it forward as a calculated estimate of loss, and it was not put forward as calculable from evidence given. It is a figure in the air put forward as a minimum or conservative estimate which I should feel comfortable in adopting.
It is convenient to now conclude on this aspect of the claim. That is, the claim for $250,000. The first point to note is that while counsel still relied on Blashki's evidence RACVI did not seek to recover the amount calculated as RACVI's increased general labour costs. Hence, to the extent RACVI was ever seeking recovery of the amount thus calculated, the claim is abandoned.
The second point is that having carefully considered the evidence I am not satisfied, on the balance of probabilities, that it does establish what Blashki concluded. That is because, in my view, the evidence is not reliable. Blashki assumed that the wage increases in the period in question were those advised to him by RACVI; and see the evidence of Peter Malcolm Jenkins as to those rates. A critical step in Blashki's calculation was to represent those wage increases as a percentage annual salary rate increase in the two periods in question. In cross-examination of Jenkins, based on actual wage records of RACVI, it was established that there were wage increases at appreciably higher percentage rates than advised to Blashki. Blashki could only say that he had accepted as correct the wage increases advised to him by RACVI. I find that the increases advised to Blashki were changes to the base salary, and not overall wage increases in fact. Furthermore, the figures provided to Blashki were not for all the workforce in the relevant departments. RACVI had no sound answer to the resultant criticism of the inadequacy of the information on which Blashki acted. It was not an answer to talk about the changing profile of a workforce with new employees coming in at the bottom and others going out at the top. Blashki was concerned with overall wages in the two RACVI departments in question and from them had to determine an annual salary rate increase. To only consider the changes in the base salary to part of the workforce without taking account of other movements in salary for all of the relevant workforce was to take account of part but not the whole of the relevant information. In cross-examination Blashki agreed that if the annual percentage rates of increase were those put to him by counsel for UNISYS his calculations would alter to the extent that on the logic of Blashki's exercise, RACVI not only had no additional labour costs as a result of the WMS project but had saved wages. The full extent of this saving was subsequently calculated and in final address put by counsel for Unisys at $240,000. It is important to note that the percentages put to Blashki by UNISYS's counsel were not challenged by RACVI. They were stated by UNISYS's counsel to have been calculated from RACVI's wages records, and I accept that as the fact. RACVI had ample opportunity to go to the records and demonstrate that UNISYS had misused them but RACVI never suggested that Blashki or myself had been misled with inaccurate information in this respect. To conclude this paragraph, whether it is the fact that RACVI saved an amount of about $240,000 would involve an analysis of its business of a more profound and rigorous kind than was provided to me. Nevertheless the exercise engaged in by counsel was sufficient to demonstrate the unreliability of the Blashki exercise.
It is not a satisfactory answer on this aspect of the case to refer to evidence of Lang as to the WMS project being "an enormous drain on staff resources, particularly from April 1995, when Insurance tried to use the UNISYS system", or to the need to engage more staff, or to the inconvenience caused by trying to cope with the system and in reverting back to the paper based system; see Lang's witness statement paras. 51 and 52. He said that because staff were required for the WMS project a number of full-time claims officers, probably three or four, were employed late in 1993 and in 1994 who would not otherwise have been employed. This may be accepted as descriptive of the situation, but it does not establish, let alone provide, a reliable quantification of the claim. I have rejected Blashki's calculation, and it is not pressed by RACVI as quantifying the claim in question. Then, the figure claimed in lieu, $250,000, is an estimate in the air without sufficient evidentiary base. No such base was provided by the simple calculation of counsel which showed that the cost of labour per claim had risen; it is interesting that the items and figures which are the basis of that calculation were taken from Blashki's exercise. Hence Blashki could himself have put counsel's exercise forward as a basis of calculating a loss, but he did not do so. And, as UNISYS noted, the rate of increase under this calculation was explicable as being consistent with the evidence of increased wage rates in any event.
I now return to the claims of the plaintiffs to recover the staff costs of particular employees.
Extensive particulars of this claim were set out in annexure B to the statement of claim. There were numerous employees and in relation to each particulars were provided of their time spent on the project and their remuneration including overtime. The plaintiffs did not provide a witness statement by each such person to establish the relevant facts concerning them. In fact, only a few of such persons provided witness statements and gave evidence. In what way, then, did the plaintiffs propose to establish their claims? The answer was simple: principally by the evidence of Doherty. But the evidence of Doherty turned out to be insufficient, speaking generally, as was stated by counsel for the plaintiffs in final address. As counsel so bluntly, but sensibly and correctly stated in final address, I should "forget those particulars" in annexure B. It is unnecessary to go through the explanation why that was so, but counsel was correct in his concession. The cental point was that Doherty could not verify as correct the claim in the particulars. The result was that in final address counsel reduced the claim to a total of 11 employees, eight from RACVI and three from RACVGS. The question is whether in respect of those 11 persons there is evidence which establishes the claim as ultimately put forward by counsel in final address. I address that issue below. It should be noted that in respect of some of the employees counsel relied on particular evidence of Doherty as to the actual work, and period of work, of the employee. The 11 employees are –
RACVI RACVGS Jennifer Bearder
Peter Gill
Stanley Bearder
Craig Donald Haw
Lisa Joy Chesson-Kistas
Benjamin Connell
Justin Taylor Doherty
Jason Ellenport
George Pipertzis
Justin Whitford
Andrea Wilson
Before turning to the individual employees I should refer to an overall submission of UNISYS. The submission was that the claim was misconceived in that the true measure of the loss was to be found in the cost of the extra staff engaged to fill the gaps caused by the devotion of existing staff to the WMS project. The existing staff were not engaged for the purpose of the project. They would have been employed in any event at the wage levels applicable to them from time to time. They may have had some extra overtime due to the WMS project but that is not the claim; it is also conjectural. Hence, as damages under s. 82 for a contravention of s. 52 are to put a plaintiff in the position it would have been in had the contravention not occurred, the loss in respect of staff costs is represented by those costs attributable to the WMS project which it would not otherwise have incurred. I referred above to Lang's evidence of the numbers of new staff employed as a result of the WMS project. The plaintiff did not present or quantify a claim to recover the costs relating to such staff. In my view the UNISYS submission is correct and the claim should fail. Nevertheless, lest I be wrong in this conclusion, I make the following findings concerning the 11 employees.
Jennifer Bearder
Ms Bearder did not give evidence. I accept that in 1994 she worked on the project but Lang said only that she and several other named employees worked "full-time on the workflow project during the whole or part of 1994". It was submitted that I could conclude that she worked full-time for a few months in early 1994 and, on that basis, that the amount proved was six fortnight's salary and payroll tax. I reject the submission. The claim must fail for want of proof as to the period of time she worked on the project. The evidence is insufficient to establish any particular or even approximate time. I am left in the position that any estimate of time on my part would be speculation and not arrived at on the balance of probabilities on the evidence.
Stanley Bearder
Mr Bearder did not give evidence. It was submitted that on the evidence I could be satisfied that he worked full time on the project from July 1995 to June 1996 but not be satisfied as to other times. I reject the submission. I accept that he worked on the project but the evidence is quite insufficient to establish that he worked full-time in the year in question. Counsel relied on evidence of Lang and Wall but that was addressed to an earlier period. He also relied on evidence of Doherty but that was insufficient because Doherty could not answer counsel's question as to the proportion of Bearder's time after August 1994 that he (Bearder) spent working on the WMS project. He had no memory. That is the evidence. The claim fails.
Lisa Joy Chesson-Kistas
I accept her evidence that she worked full-time on the project from signature of the contract in December 1993 to termination in June 1996. It is also the fact that she worked on the project prior to that time. The claim in respect of her wages is made from 1 November 1993 to 30 June 1996. I find that she worked full-time on the project throughout that period, and that her earnings and overtime in that period were $109,754, The claim was made as from 1 November 1993 on the basis that by at or about that time UNISYS was selected as the preferred vendor. It should be inferred, it was submitted, that if UNISYS had not made the representations in contravention of s. 52 another vendor would have been selected or the project would not have proceeded. On the basis of that inference, including its factual premise as to contravention, it seems open to commence the claim at 1 November. In any event I heard no opposing submission on the point and in the scheme of things the amount is too small to spend longer on it. The claim succeeds.
Justin Taylor Doherty
I accept the evidence of Doherty that he worked full time on the project from August 1994 to the start of July 1995 except for the month of November 1994 and that from July 1995 to the end of June 1996 he was engaged 95 per cent of his time on the project. The claim succeeds but subject to allowance being made for November 1994 and on the proportional basis of 95 per cent for the year July 1995 to June 1996.
Jason Ellenport
He did not give evidence. I accept Doherty's evidence that Ellenport worked on the project for two months in 1994. The claim succeeds.
George Pipertzis
He did not give evidence. Doherty recalled him being involved but could not say from his memory when he worked on the project or what proportion of his time he spent on it. Vincent Joseph Wall of UNISYS said Pipertzis worked in the testing phase which was in the order of "months, from the first test, through to going live on the training". He thought about October 1994 to about March 1995 sounded about right. The balance of his answers cast doubt on Pipertzis's efficiency but are confirmatory that he was engaged full-time in that period. I accept that he was so engaged. The claim succeeds.
Justin Whitford
He did not give evidence. Doherty said he was engaged full-time on the project in the latter half of 1995 and throughout 1996. I accept that evidence. The claim succeeds as presented for the period commencing 1 August 1995 then concluding 31 May 1996.
Andrea Wilson
She did not give evidence. I am satisfied, on the basis of Doherty's evidence, that she was engaged full-time on the project in the year to determination in June 1996. Doherty used the word "almost" in the course of his answer but regarding his evidence overall I am of the view that he meant she was only engaged on the WMS project. The claim succeeds.
Peter Gill
He did not give evidence. I accept the evidence of Craig Donald Haw that he (Gill) worked full-time on the project from January 1995 to January 1996. The claim succeeds.
Craig Donald Haw
He did give evidence. I accept his evidence that he worked full-time on the project from February 1994 to the end of the project in June 1996. The claim succeeds.
Benjamin Connell
He gave evidence by way of a witness statement that was tendered by consent. The statement did not say when he worked on the project. Doherty said in evidence that he (Connell) assisted Haw on technical issues, that he was involved "in the latter half of the project, close to if not 100 per cent", but he "would be having a very rough guess" and "couldn't give you a precise answer in regards to" how long Connell "worked close to if not 100 per cent on the project". The last part of his evidence was directed only to the "close to if not 100 per cent" part of the evidence. It did not qualify the evidence that that was the order of his time spent on the project. The evidence satisfied me on the balance of probabilities that Connell was engaged on the project in the period of the last 10 months to termination in June 1996, as RACVGS contends was the case. I accept that Connell worked close to 100 per cent of his time on the project but that an allowance should be made for his time spent on other matters and in that regard I allow 10 per cent as a conservative estimate. Subject to that the claim succeeds.
(b) Post-contract section 52
I set out the claims under this head at [35]. The claims are self-explanatory in light of the early decision concerning the three items. It is necessary to mention only one matter concerning the claim for labour wasted. The claim is in respect of eight of the employees referred to in discussing the pre-contract s. 52 claim I have already considered their position. One of the eight is Stanley Bearder and for the reasons given earlier this claim would fail. The other seven - Chesson-Kistas, Doherty, Whitford, Wilson, Gill, Haw and Connell – succeeded earlier and they would succeed here.
(c) Contract
I now turn to RACVI's claim for damages on the alternate contract basis.
I do so because the discussion refers to the commercial benefits in a financial sense which RACVI took into account in deciding to enter into the contract and proceed with the project. As such they relate to matters discussed earlier in the judgment and may aid in some relevant understanding. However, I do not consider the issues concerning the construction and operation of cll. 19(a)(ii) and 22(a)(ii) of the contract. That is consistent with the fact that I have not dealt with RACVI’s contract claim.
At [36] I identified the two items of loss claimed under this head as the amount paid to Price Waterhouse and $5M as estimated savings not made. I dealt with the former at [567]-[571]. The claim is rejected for the reasons given in that discussion. It remains to deal with the latter item of loss and to that I now turn.
It is common ground that damages for breach of contract are to be awarded on the basis of putting RACVI , so far as one can with money, in the position it would have been in if the contract had been performed. Relevantly, on RACVI's case, that meant by providing by 1 July 1995 at the latest a system configured with current claims on-line in the sense it retrieved folders and documents within 2–4 seconds and was technically sound and reliable. With such a system RACVI would have had a more efficient claim system and saved considerable labour. Hence the claim for savings not made. The savings lost, and now being claimed, are the savings in reduced staff costs which would have been achieved if the system had been operational by 1 July 1995.
But, what is the amount of these savings and how are they to be measured? The difficulty arises because the system never worked and, as a result, no savings in fact were achieved. In that situation it is necessary that RACVI establish the best estimate it can, with persuasion on the balance of probabilities, of the savings it would have made. It has sought to do that and I refer below to the basis of its claim for $5M. It is not fatal to the claim that RACVI cannot provide the figure which with logic it could have if the project had proceeded, and which would establish the amount of damages to be awarded on ordinary principles. The next step is to observe that even if RACVI is unable to establish its claim, it may yet be entitled to recoup its expenditure reasonably incurred under the contract, such being reasonably taken to be the detriment suffered by it as the innocent party. See The Commonwealth of Australia v. Amann Aviation Pty Ltd (1991) 174 CLR 64. In their joint judgment in Amann Mason CJ and Dawson J stated, at 86, that:
". . . in a case where it is not possible to predict what position a plaintiff would have been in had the contract been fully performed . . . it is not possible as a matter of strict logic to assess damages in accordance with the principle in Robinson v Harman but the law considers the just result in such a case is to allow a plaintiff to recover such expenses as is reasonably incurred in a reliance on the defendant's promise. In this case, the law assumes that a plaintiff would at least have recovered his or her expenditure had the contract been fully performed. It will still be open to the defendant, however, to argue that . . . the expenditure claimed by a plaintiff would nevertheless not have been recovered. . ."
See too Deane J at 126. Further reference might be made to the judgments in Amann, including on the matter of the onus of proof falling on the defendant to establish that the net value of the plaintiff's benefits would not have covered the expenditure, but it seems unnecessary to go further into the discussions of principle in the case as counsel for Unisys referred to no authority on this claim and in reply in final address said nothing on the references made to Amann by counsel for RACVI.
How, then, did counsel for RACVI seek to establish the claim for loss of savings? The answer is short. He relied on an analysis by MacCallum in the Deloittes December 1992 report titled Motor Vehicle Claims Workflow Management Study. The analysis was contained in Section Five titled Benefit/Cost Analysis. The analysis showed cumulative savings over a four year period of $5,063,000 which, for present purposes, counsel rounded down to $5M. Two other documents were relied on to support this analysis. The first document is a report signed by Lang on 27 August 1993 seeking an allocation of funds for the WMS system in the 1994/1995 capital budget. The author of the report is stated to be Shayne Lourdes, manager of insurance operations. The report included an analysis of savings in staff costs of $5,200,000 over four years. The second document is a memorandum from Lang to Mitchelson dated 7 September 1994 in which he advised the implementation of changes to work processes and structures relative to the WMS project, and provided a cost/benefit analysis summary which showed savings of $5,475,000 over four years.
Each was submitted to be a reasonable estimation in terms of the apparent consideration given to the matter. I am satisfied that each represented a considered view held after taking into account available information. In that respect I have had the benefit of seeing MacCallum, Lang, and also Mitchelson give evidence. The first analysis of MacCallum was formed in light of the detailed analysis of the role of employees in the various categories in the claims process, the time devoted to aspects of their work and likely efficiencies and savings in effort as a result of the WMS system. The two subsequent estimates were evidently based on understandings similarly arrived at. In forming that view I take account of the fact that Lang did not address either document in his evidence. I have regard to the terms of the documents, the context and to my impression of Lang as a sensible and careful person. As far as the board of directors of RACVI is concerned, I find it to be a reasonable assumption that in determining to spend the amounts it did under and in pursuance of the Unsiys contract RACVI reasonably anticipated savings in staff costs in the order of $5M or so over a four year period. The minutes of the meeting of directors of RACVI held on 9 November 1993 record that the capital budget for 1994/1995 was approved and that some 75 per cent or $3M or more of the total approved amount related to the WMS project. This is consistent with the order of expenditures in the August 1993 memorandum signed by Lang. In fact total expenditures exceeded $3M and it is sufficient in that regard to refer to the items making up the claim at [34], and to the actual scale of the expenditure set out in annexure B.
The submissions of counsel for Unisys were very brief. In essence it was submitted that there was no evidence that the savings claimed would have been made. MacCallum did not have an accounting background. His expertise was in information technology and particularly application systems and re-engineering. He described his analysis as being a fairly simple cost/benefit analysis. It was his assessment of where benefits would come from, putting a cost on the benefit to RACVI and weighing it up against the cost of implementing the manual and technology interventions involved in the WMS system. The analysis did not address tax or financing issues. It was, he said, kept "at a fairly simple level". Nevertheless he considered it a reasonable estimate having regard to the staffing levels pre and post the introduction of the WMS system. I have already observed that Lang did not address his memorandum of August 1993 in his evidence. Nor did a witness address the September 1994 document. In other words those documents went into evidence as part of the court book without evidence from a witness as to them, in particular without an explanation of the process that led to the statements in them. Moreover, there was no evidence from any other person, such as, for example, an independent accountant to provide an expert opinion as to the savings in the area of staff that might reasonably have been achieved.
This does not lead me to conclude, as submitted, that it is established that "such savings" (meaning, I think, savings as claimed) were available to be made by RACVI. I find, on a balance of probabilities that savings were to be made. That, in my view, is well established when one stands back and regards the course of events overall. RACVI's entry into the Unisys's contract was preceded by the most careful and anxious consideration and ultimate confidence that when implemented the WMS project would achieve substantial benefits including greater staff efficiency and reduced numbers of staff per claim. It is consistent with that view that RACVI determine to proceed and incur the substantial expenditures involved. I find that without the expectation of benefits of the order of $5M or so that would not have occurred.
It is, however, another question as to the level of the savings that might actually have been achieved. This is a matter of estimation and it must be allowed that actual savings may not have achieved the level of expectation or thereabouts in a reasonably proximate sense. Variables and contingencies must be allowed for, as a matter of commercial reality, but the present issue is at what level in terms of an ultimate dollar value? No submissions were addressed on this aspect, rather, the figure of $5M was urged upon me on the basis that I could be confident that without savings of that order RACVI would not have proceeded to a contract involving $3M plus of expenditure. The proposition is founded on evident common sense. But that alone does not constitute sufficient evidence to establish the claim. Finally, it was submitted that if I concluded the evidence was inadequate to establish the claim advanced "insofar as determining what the expected savings would have been", I could assume that the savings would have exceeded $3M because that was the sum to be expended to produce the savings.
Having considered the evidence and all that counsel said, I conclude that it is not established on the balance of probabilities that staff costs of $5M or thereabouts would have been saved. No other figures were provided which could found an alternative but lower figure as savings forgone. In other words there is no cogent basis upon which I could find an amount between $3M and $5M. I am however satisfied that the expenses incurred by RACVI under and in pursuance of the Unisys contract were reasonably incurred and that it is properly to be assumed that RACVI would have achieved savings in at least that amount had the contract been performed. In my opinion it is just that RACVI succeed on its claim to that extent. It would be necessary to hear the parties as to the amount.
Counterclaim
I set out the items of counterclaim at [51] and relevant admissions and contentions in the defence to it at [53]. In final address counsel for Unisys put the claim on this basis, namely, that RACVI is liable for the amounts unpaid on invoices and system change requests if it is held to have wrongly repudiated the contract, otherwise not. The same approach was taken by counsel for RACVI who submitted on these items that RACVI "stands and falls with liability". It is common ground then that these items follow the event.
That leaves the matter of the server. In final address counsel put this as a claim in detinue and sought the invoice value of the server. In fact the claim was also pleaded in conversion. A difficulty confronting the claim is that the invoice relied on pre-dated by months the alleged time of conversion or wrongful detention in August 1996, when the server remained in situ at RACVI's premises, and there was no evidence of value at that latter time. Doubtless there could be an enquiry as to value, although RACVI has no use for the server and is content for Unisys to collect it when the case is resolved. The more fundamental point, which is fatal to the claim, is that the server was provided by Unisys on the basis that RACVI would not be charged for it, and RACVI never agreed to pay for it. Unisys provided the server at its own suggestion and expense in lieu of the servers it had provided previously as part of the system that had failed. The original servers were paid for and Unisys did not refund the amount it received for their supply. Unisys provided the replacement server in seeking to make the failed system operational. When supplied and installed it became part of the system which RACVI (and RACVGS) paid for. The provision of the replacement server was a cost Unisys undertook in attempting to overcome the problems and honour its contractual obligations. The claim is rejected.
For these reasons the counterclaim will be dismissed.
Conclusion
Each plaintiff succeeds on the pre-contract s. 52 case and damages are allowed as claimed with the following exceptions. The relevant amount paid to Deloittes is $338,545 against which, or against the damages generally payable to RACVI, is to be allowed any excess of the settlement sum after assessment of RACVI's party and party costs against Deloittes. For that purpose and in default of agreement there will be a reference to the Taxing Master to assess the costs; see [561]. The claim to recover the amount paid to Price Waterhouse, and the claim for labour of the plaintiffs wasted, fails.
If it be desired I will hear counsel on the matter of the set-off raised by Unisys in reply; see [537]. Otherwise the claim will not be allowed. The counterclaim fails.
Orders
I will adjourn the further hearing for one week with a direction that counsel confer and submit minutes of orders in accordance with the judgment. I will hear counsel on any matters including costs and make final orders on the resumed hearing.
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