Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) v Symbion Health Limited (formerly Mayne Group Limited) - [2006] NSWSC 654

No judgment structure available for this case.

CITATION: Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) v Symbion Health Limited (formerly Mayne Group Limited) [2006] NSWSC 654

HEARING DATE(S): 29/05/06-1/06/06, 5/06/06-9/06/06, 14/6/06-16/06/06, 19/06/06-23/06/06, 26/06/06

JUDGMENT DATE :
14 July 2006

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Parties held not to have entered into legally binding relations in relation to letter agreement. Damages award for breach of contract on roll out case.

CATCHWORDS: Contract - Claim for damages of $100,000,000 for breach of contract and for loss and damage occasioned by misleading and deceptive representations - Contract for provision of plaintiff to defendant's hospitals and health care facilities of food procurement, catering and associated eProcurement services - Whether parties entered into legally binding relations - Masters v Cameron issues - Certainty - Authority to bind corporation - Construction

LEGISLATION CITED: Evidence Act 1995 (NSW)
Trade Practices Act 1974 (Cth)

CASES CITED: ADC v White [1999] NSWSC 43
Allen v Carbone (1975) 132 CLR 528
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101
Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd [2003] FCA 934
Australian Granodiorite Limited v Devex Pty Limited (unreported, Supreme Court of New South Wales, Brownie J, 28 May 1991)
Australian Workers Union New South Wales Branch v Minister for Natural Resources & Ors (1991) 26 ALD 461
B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147
Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61
Briginshaw v Briginshaw (1938) 60 CLR 336
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Commonwealth v Verwayen (1990) 170 CLR 394
Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433
FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251
Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551
Hadid v Australis Media Limited (unreported, Supreme Court of New South Wales, J Sperling, 30 June 1997, BC 9707967)
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68
Inland Revenue Commissioners v Raphael [1935] AC 96
Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, Supreme Court of New South Wales Court of Appeal, McHugh, Mahoney and Hope JJA, 23 December 1988 BC 8801158))
International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243
L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235
Lakatoi Universal Pty Ltd & Walker [2000] NSWSC 113
Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181, (2001) 76 ALJR 246
Masters v Cameron (1954) 91 CLR 353
Meehan v Jones (1982) 149 CLR 571
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170
Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61
Pascoe v Commissioner of Taxation (Cth) (1956) 30 ALJ 402
Pedler v Richardson (unreported, Supreme Court of New South Wales, 16 October 1997, Young J, BC9705263)
Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114
Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105
Prenn v Simmonds [1971] WLR 1381
Raguz v Sullivan (2000) 50 NSWLR 236
Reardon -Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289
Ryan (Receiver & Manager of Homfray Carpets Australia Pty Ltd) v Textile Clothing & Footwear Union Australia [1996] 2 VR 235
Troulis v Vamvoukakis (unreported, Supreme Court of New South Wales Court of Appeal, Gleeson CJ, Mason P and Stein JA, 27 February 1998, BC 9800395)
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32
Watson v Foxman (2000) 49 NSWLR 315

PARTIES: Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) ACN 003 753 526 (Plaintiff)
Symbion Health Limited (formerly Mayne Group Limited) ACN 004 073 410

FILE NUMBER(S): SC 50158/02

COUNSEL: Mr N A Cotman SC, Ms C L Parry (Plaintiff)
Mr D J Hammerschlag SC, Mr D J Pritchard (Defendant)

SOLICITORS: Sagacious Legal Pty Limited (Plaintiff)
Freehills (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 14 July 2006

50158/02 Sagacious Procurement Pty Limited v Symbion Health Limited (formerly Mayne Group Limited)

JUDGMENT

The proceedings

1 These proceedings centrally concern the contractual rights of the parties in relation to agreements entered into for the provision of food procurement and associated services by Sagacious Procurement Pty Ltd to Mayne Group Ltd.

[Sagacious was originally called National Network Support Systems Pty Ltd, then SNG Procurement Pty Ltd]

The businesses of the respective parties

2 Mayne was at material times a listed public company which owned or operated many private hospitals whose principal business divisions included 'Mayne Health'. That division included sections including:

i. a section also known as 'Mayne Health';

3 At the time of the Strategic Alliance Agreement referred to below, there were approximately 47 such hospitals. A further group of about 10 private hospitals were acquired by Mayne Health in about February 2001.

4 Mayne sold the hospitals business, including the Mayne Hospitals, to Affinity Health Limited on 1 December 2003.

5 Sagacious was a small ‘start up’ company in the business of providing procurement services using a combination of computer software (made up of various interfacing modules & components) and hardware systems together with advanced processing processes, practices and systems carried out by personnel who have the requisite know how, expertise and knowledge in the various areas of supply chain management.

6 A service of this kind, which involves using software and electronic management systems as one part of the overall service, is often referred to as an eProcurement service.

7 The combination of all of the abovementioned elements (that is, software systems and human resource services being provided in accordance with practices and systems in one co-ordinated service, and the link between the customer’s systems and those of the procurement service provider) gives rise to what is commonly termed as a ‘fully integrated eProcurement system’ [the fully integrated eProcurement system used by Sagacious being called the “Sagacious Model”].

The subject agreements

8 It is common ground that two legally binding agreements were entered into between the parties:

i. Heads of Agreement entered into on or about 24 January 2000 ["the heads of agreement"];

9 A principal issue in the proceedings concerns the status of a letter from Sagacious to Mayne of 16 April 2002 ["the 16 April letter" or “the letter agreement”].

10 The 16 April letter:

"We trust that the proposal outlined above is consistent with all of the relevant terms and conditions which have been recently negotiated and finalised and to this end, we would ask that you acknowledge your acceptance of same by signing in the space below and providing us with a copy of same."

The causes of action

11 Sagacious claims approximately $100 million as:

i. the heads of agreement;

ii. the SAA ;

Trade Practices Act

The contractual issues

12 There is a complex of interrelated issues of fact and law concerning the contractual issues.

Alleged breaches of the heads of agreement and the SAA

13 The issues concerning the alleged breaches of the heads of agreement and the SAA principally centre around issues of fact.

14 The recitals [A and B] to the heads of agreement recited that there was an intention of the parties to enter into a strategic alliance for the purpose of centralising the management of the food procurement and catering systems at Mayne's hospitals and health care facilities. The heads of agreement provided for the implementation of the procurement model into hospitals [that is, commence undertaking procurement for them] within eight months of the entry into of the heads of agreement, subject to Mayne complying with its obligations under the heads of agreement and the form of the proposed strategic alliance agreement which was to succeed it [clauses A1 and A5].

15 It was an express term of the SAA that subject to various obligations contained in the heads of agreement, Mayne would complete the implementation phase on or before 24 September 2000 [Clause 4.2 (c)].

16 Sagacious contends that:

i. by its letter of 22 September 2002, Mayne unilaterally postponed the implementation phase; [this is in issue]

17 Sagacious claims damages alleged to have been suffered by the plaintiff as a consequence of the postponement of the “roll out” of Sagacious’ services under the SAA.

18 Without being exhaustive the substance of the defence is that:

i. the delay in the roll out was as a consequence of practical problems inherent in Sagacious' procurement system and the structure of Mayne's hospital interests;

ii. Sagacious was a start up company, and was not ready, willing and able to implement the system as required by the SAA; and

iii. the arrangements between the parties, particularly those reflected in the 18 January 2002 variation and Sagacious' other conduct, are inconsistent with the maintenance by Sagacious of any pre-existing claim arising out of the delay in the roll out and constitute a compromise, accord in satisfaction, waiver or acquiescence.

The letter agreement

19 The central issue concerning the letter agreement raises a question of fact as to whether or not the context in which the document was signed was such that:

a. the parties entered into legally binding relations in relation to the document [as Sagacious contends], or

both

20 There are number of other issues for determination in relation to the letter agreement including:

Hadid v Australis Media Limited

second

a) it required further agreement between the parties,

b) it envisaged a further written agreement,

c) it was not intended to nor could govern a two and a half year period,

d) it was in any event uncertain as to its terms and operation;

e) the conduct of the parties subsequent to 16 April 2002 is consistent only with there being no agreement, that is, no intention that they by it entered into a legally binding relationship;

g) if it is an agreement, it was terminable on 3 months written notice which Mayne gave;

h) by incorporation the agreement contained a provision in the nature of code limiting any relief available to Sagacious on termination to a fixed sum or nil depending on when the notice was given.

21 Further Mayne denies the terms pleaded by Sagacious;

22 Important questions of construction of the letter agreement arise.

23 There is a denial that Sagacious suffered any damage arising out of the alleged breach of the letter agreement. The sale in early December 2003 by Mayne of the hospital business [including the Mayne hospitals] has a relevance to any claim for damages that Sagacious may have beyond that time, having regard to the inclusion of paragraph 2(b) of the letter dated 16 April 2002.

The issues raised by the Trade Practices Act representational cases

24 Sagacious pleads 3 alternative or cumulative representations which have as their foundation an assertion that Mayne held out that it spent about $23 million per annum on goods which Mayne would procure for it under the proposed arrangements between them.

25 Mayne's case includes that:

i. the representations as pleaded were not made;

ii. the representations are too imprecise and uncertain so as to have any forensic significance;

iii. in any event, Sagacious did not rely and could not reasonably have relied on any such alleged representations. Amongst other factors, Mayne points out that Sagacious entered into the SAA being the last memorial and codification of what Sagacious rights would be, yet making no provision for any minimum spend;

iv. further, Sagacious suffered and will establish no damage connected with any such alleged representations; and

The amended Cross claim

26 Mayne, as cross claimant:

i. alleges that it is entitled to the return of payments made to Sagacious in or about 2 August 2002 for $1,781,205.26 [this is not disputed, Sagacious position being one of set off];

Trade Practices Act

27 In very general overview terms it may be observed that:

i. Mayne claims that Sagacious agreed to provide goods and services to Mayne following the purported termination of the 16 April 2002 Agreement, for a 3 month period.

ii. Mayne alleges that Sagacious agreed to do so at a meeting of, amongst others, Mr Wise and Mr O’Shanassy on 31 July 2002.

iii. Sagacious denies that it entered into an agreement with Mayne on 31 July 2002 as alleged.

iv. Mr O’Shanassy says that the meeting was held on a ‘’without prejudice basis’’ and no agreement was struck to the effect alleged by Mayne. Mr O’Shanassy contends that he said only at the meeting, that Sagacious would continue to comply with its obligations under the 16 April 2002 Agreement.

The principles

28 Before turning to the facts it is convenient to set out an overview of the essential principles which inform the proper approach to a number of the issues which fall for determination.

Masters v Cameron - the principles

29 In Masters v Cameron (1954) 91 CLR 353 Dixon CJ, McTiernan and Kitto JJ set out the following three classes:

Class 1

· Where the parties have reached finality in regard to all aspects of their agreement, but propose to have the terms restated in a formal document;

Class 2

· Where the parties have reached finality in regard to all aspects of their agreement and intend no departure from this agreement, however have agreed that the performance of one or more of the terms is conditional upon the execution of a formal document;

Class 3

· Where the parties intend that they will not legally bind themselves to an agreement unless a formal document is executed.

30 The joint judgment in Masters v Cameron made the point [at 360] that in each of the first and second classes there is a binding contract:

· in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document;

· in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution.

The fourth class

31 McLelland J, in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 decided that “there is in reality a fourth class additional to the three mentioned in Masters v Cameron”. This fourth class was where the parties have reached agreement to be bound immediately and exclusively by certain terms, however they envisage the making of a further contract which will replace the first, this latter contract containing, by consent, additional terms. This decision was recently affirmed by Young CJ in Eq in Helmos at [69] but has been approved on many earlier occasions.

The proper approach to determination of a Masters v Cameron issue

32 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 [Mason P, Heydon JA and Ipp AJA] was a case in which the “difficulties” of pressing too far the classical theory of contract formation based upon offer and acceptance was commented upon (see also Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 per Mason P at paragraph 1). Heydon JA said in that case, whilst considering the principles of the law of contract that:

33 In that case, Heydon JA set out succinctly the conventional and accepted principles of the law of contract:

“The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352.
The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255.

The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong.

The fourth relevant principle is that the construction of a contract is an objective question for the court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found.”

34 Hence in determining the circumstances surrounding the formation of the agreement, the matrix of facts, it is the objective intent that is paramount. Whether any relevant individual representative thought that an agreement existed or that it did not exist, is irrelevant to the exercise unless there exists an argument concerning estoppel. As Lord Wilberforce has said:

Reardon -Smith Line Ltd v Hansen-Tangen

35 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1907) 5 CLR 647; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549; Geebung Investments (supra); Anaconda Nickel (supra) are also authorities supporting the proposition that in ascertaining the relevant intention, that is the intention to contract, relevant circumstances may include prior negotiation and subsequent conduct.

36 Presently a fundamental question falling for consideration is whether the conduct of the parties viewed in the light of surrounding circumstances shows or is indicative of a new agreement having come into existence by dint of the 16 April letter.

37 The similar issue [often arising when there is no anterior contract being replaced] has been the subject of the following observations:

“In an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at any particular time in the relationship may by reason of the parties’ subsequent conduct become sufficiently specific to give rise to legal; rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.”
[Per McHugh JA in Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988); see also Raguz v Sullivan (2000) 50 NSWLR 236 at 251]

Evidentiary considerations

38 Questions of the relevance and probative value of evidence in circumstances in which the issue concerned whether or not an enforceable contract had been entered into were also before the court in Film Bars Pty Ltd v Pacific Film Laboratories (1979) BPR 9251. As McClelland J. put it, such questions cannot properly be considered independently of a consideration of the relevant issue namely what it is in point of fact that constitutes the making of a contract in circumstances such as here obtained. As his Honour points out, such a contract is made "by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance". As his Honour (citing Williston on Contract, 3rd ed, Vol 1 paragraph 21) points out, one is not concerned with the subjective thing known as meeting of the minds, but the objective thing, the manifestation of mutual assents which is essential to the making of a contract. [At page 9254]

39 Film Bars [at page 9255] is also authority for the proposition that:

40 In short subsequent communications may have probative value depending upon the light they throw on the proper interpretation of earlier communications alleged to constitute the contract. Post contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed [cf Brambles Holdings supra].

41 Subsequent communications can also legitimately be used against a party as an admission by conduct of the existence or non-existence, as the case may be, of a subsisting contract.

42 The matter was put in the following terms by the Chief Justice (at 550 and following) with whose reasons for judgment Hope and Mahoney JJA agreed:

"…The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications : Allen v Carbone (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.

The position is by no means so clear, however, in connection with internal memoranda… or statements as to subjective intention made by individuals in the course of giving evidence. As it happens, although the learned judge had a good deal of material of this kind put before him at the hearing, it was not particularly helpful even if admissible. In the first place, a great deal of it was equivocal and individual pieces of evidence were contradictory in effect. Some of the persons who participated in the negotiations in question were called to the witness box and vigorously examined as to what was going on inside their minds at particular times. This process in the end principally served to demonstrate what might have been expected to be the case, that is to say, that the witnesses, not being lawyers themselves, were in a state of considerable confusion about the issue that ultimately emerged as determinative of the rights of the parties ……..

Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant.”

Commercial contract/certainty/construction

43 The court is dealing with a commercial document. In endeavouring to discern the parties intent and in construing the meaning of the words used, the Court will strive to give the document a commercial, reasonable and rational operation: Australian Broadcasting Commission v Australasian Performing Right AssociationLtd (1973) 129 CLR 99 at 109; Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310.

44 There is abundant authority that "the court should be astute to adopt a construction which will preserve the validity of the contract": per Mason J, Meehan v Jones (1982) 149 CLR 571 at 529; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132, per Kirby P. Further the court will strive in dealing with a commercial contract to discern the objective intent of the business relationship or other parameters of a contract in order to give effect to that which the parties may be seen to have bargained for. But always it is to the words of the document [here suggested as amounting to a binding contract] that the court must attend looking in that regard to the whole of the document to discern the parties’ intent.

45 In Biotechnology Kirby P observed at 135:

Kofi-Sunkersette Obu v A Strauss & Co Ltd

46 Hely J in Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd [2003] FCA 934 put the matter as follows at [208]:

Vroon BV v Foster’s Brewing Group Ltd

Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd

47 Where mechanical provisions intended to operate over an extended period of time are concerned, the court endeavours to follow the mechanics and provisions expressed in the contract in the endeavour to follow, always by looking at the manner in which the matter is expressed, how the parties saw the contract as a working guide to the way forward.

48 Generally the proper approach is summarised in Halsbury’s Laws of Australia volume 6 as follows:

49 An agreement may be uncertain where the language used by the parties is such that the court is unable to attribute to it a sufficiently precise and clear meaning in order to identify the scope of the rights and obligations agreed to. An agreement may be incomplete; although the language used in the agreement is perfectly clear in its meaning, part of the transaction may still remain to be agreed upon so that there is no completed agreement and the alleged agreement will fail.

50 The High Court observed in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 292-293 that:

Codelfa

"presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating".

Codelfa

51 To similar effect is the observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 (para 11), quoting with approval Lord Hoffmann in Investors Compensation Scheme [1998] 1 WLR 896 at 912-913 to the effect that interpretation of a written contract involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting.

52 In Investors Compensation Scheme at 912 – 913, it was said that:

“The background knowledge which a reasonable person in the position of the parties will be regarded as having, for the purposes of the construction of contracts, includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man with the proviso that it should have been reasonably available to the parties”.

Prenn v Simmonds

: Lakatoi Universal & Walker

53 Clearly primacy must be given to the actual words used in a written contract. McColl JA in her judgement in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 at [66] enunciated the following principles:

“[69] If the words used [in a written contract] are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, ‘even though the construction adopted is not the most obvious, or the most grammatically accurate’: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109–110 per Gibbs J (as he then was). However, in construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party’s construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result, it is essential that that intention be made “abundantly clear”: L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 251 per Lord Reid.

[70] Dealing with the circumstances where there are internal inconsistencies in a contract, Gibbs J said “it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument.”: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

[71] Gibbs J’s statement in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 that “the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 at 350 per Neill LJ (with whom Roch and Auld LL.J agreed) that the primary focus is the agreement itself which “must speak for itself, but … must do so in situ and not be transported to a laboratory for microscopic analysis”.

Antaios Compania Naviera SA v Salen Rederierna AB

Maggbury Pty Ltd v Hafele Australia Pty Ltd

54 In Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Santow JA at [22] [with whom Meagher JA and Stein AJA agreed], after referring to the above extract from Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 292–3 continued:

55 Hence I take it as axiomatic that:

· the Court endeavours to give primacy to unambiguous words used in a written contract, this matter generally being approached in the manner outlined by McColl JA in Peppers Hotel Management supra;

· the proper approach seeks the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract” (Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 citing Lord Hoffmann, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114; Peppers Hotel Management Pty Ltd supra at [66 et seq];

· commercial contracts should be construed so as to be given a sensible commercial operation: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Hide and Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 per Giles JA at [64].

The unusual parameter requiring to be treated with

56 As will appear from the narration of material events to be found in the judgment, Sagacious being a small start-up company, was very conscious at all times of the huge significance of the Mayne connection to its prospects. Sagacious had no desire to raise the litigation gun against Mayne. Its approach to contractual/logistic problems was ‘softly softly’.

57 The case put by Sagacious is that following the acknowledgement and acceptance of what is said to have been a set of binding terms and conditions to be found in the 16 April 2002 letter, Sagacious continued to treat with Mayne, which without any reference to that letter as having binding content, had proceeded to prepare a detailed contract for consideration/negotiation. Sagacious contends that depending upon the precise terms which could be so negotiated, it was prepared to endeavour to be reasonable and to move into another and substitute form of contract, which if entered into, would replace the binding 16 April 2002 letter for which Sagacious contends.

58 In many cases the focus of post-contractual conduct in the determination of the question as to whether or not a contract had been earlier formed, centres upon inconsistencies between:

i. on the one hand, the type of post contractual conduct which the parties may be expected to have engaged in had the anterior contract in fact been a binding upon them; and

actual

59 However in this case Sagacious contends that

i. its own conduct following the 16 April 2002 letter is totally explicable by reference to its position in being entirely prepared to 'test the water' of what was being proposed, as opposed to even mentioning that by the 16 April letter, it had already procured a binding agreement;

60 Mayne on the other hand contends that not only was the signature of Mr Dalton to the 16 April 2002 letter procured on a one off basis by a representation that it was only needed to be shown to potential investors, but in any event, a very close analysis of the inter partes communications, shows that this letter was only a part of a train of letters/agreements all of which were draft agreements recognised as such by both parties.

The approach taken in the judgment

61 An enormous amount of evidence was adduced by both sides of the bar table in terms:

i. of what particular persons thought ‘was’ or ‘was not’ or ‘might’ or ‘might not’ constitute the then state of contractual relations or possibilities at material times;

62 Whilst on the principles earlier set out, it plain enough that the Court:

i. must search for the genesis of the transaction, the background, the context and the market in which the parties were operating;

inter se,

The evidence

63 Eleven witnesses gave lay evidence of the events which generally took place between late 1999 [around the time when the negotiation of the heads of agreement commenced] and late July 2002 [the occasion when the relationship between the parties ended]. There were 25 folders comprising the agreed bundle, packed with the usual miscellany of letters, e-mails, handwritten notes, minutes of meetings as well as assorted other materials such as slide/power-point presentations.

64 It is simply impracticable to do otherwise in the judgment, than to set out what is regarded as the particularly structurally significant evidence and where necessary, making findings of fact as to what actually happened.

65 It seems efficient to next:

(i) to refer in some detail to the 18 January 2002 variation to the strategic alliance agreement;

The 18 January 2002 letter

66 This letter gave various billing options to Mayne. It further dealt with parameters of ‘menu design’, ‘control’ and ‘operational requirements’. The letter commenced:

"Kevin, we trust this covers the nature of our discussions over the past days, and we look forward to speaking with you to finalise this initiative.

On the assumption the above outline proposal meets with your approval, we would appreciate if you would acknowledge your agreement by signing in the space provided below.

The 16 April letter

67 The letter bearing the date 16 April 2002 [but in fact sent in final form on 17 April 2002] addressed to Mayne [to the attention of Mr Dalton] was in the following terms:

Procurement Services

We would like to initially take this opportunity to thank you for your time to date, and feel that we have met a targeted proposal that meets the financial objectives of Mayne Health (“ Mayne ”) and conversely delivers optimal service delivery in the procurement of catering materials. Our far reaching objective of securing and strengthening our long term relationship with Mayne is also achieved under this agreement.

This proposal merges all of the terms and conditions which have been negotiated and agreed to by Mayne and Sagacious Procurement Pty Limited ( “Sagacious” ). Accordingly, this letter supersedes all previous correspondence in relation to our contract renegotiation discussions to date and the presentation to Mayne Executives of 28 March 2002.

Following are the Terms and conditions as outlined in the proposal of 28 March 2002, and also including those terms and conditions applicable from the agreement dated 18 January 2002.

Condition 1 – Menu Design

(a) For the term of this agreement, Sagacious will present new annual menus recommending all specifications and brands to satisfy price requirements whilst maintaining current quality and standards. Mayne are to agree to these annual menu recommendations prior to implementation.

Condition 2 - Control

(i) site category percentages are to be agreed on a three (3) month rolling average basis;

(ii) any adjustments in price are to be adjusted in the consecutive months breakdown in category percentage spend make up;

(iv) Mayne hospitals have 48 hours to provide written submission on justification of excessive expenditure;

(v) Sagacious and Mayne to jointly analyse justification and to reconcile expenditure; and

Condition 3 – Operational Requirements

(a) This agreement does not incorporate expenditure on items outside the express SAP expense codes Sagacious currently purchase and those items are for catering use only;

(b) Sagacious and Mayne will adhere to the current catering materials database, subsequent additions will only be implemented with the joint agreement of Mayne and Sagacious;

(c) Sagacious and Mayne to jointly manage the stock take process at each hospital on a recurring monthly basis;

(d) Mayne agree that all catering external ordering facilities, i.e. commercial cards, petty cash etc, are to remain removed from each site/hospital;

(e) Sagacious agree that the monies obtained through pre-billing will be utilised for the supply of catering materials to Mayne;

(f) Sagacious are responsible for the supply of catering materials to all Mayne hospitals to ensure a 24 x 7 seamless hospital operation. Sagacious will do all things reasonable to guarantee supply;

(g) Sagacious will raise a monthly GST invoice on the 10th working day of each month. Payment of the GST invoices is to be made within 48 hours of receipt; and

Condition 4 – Proposed New Terms

(a) Sagacious agree to (and will invoice Mayne accordingly for) the application of the CPI going forward on a quarterly or annualised basis (Mayne to determine preference), using the previous quarters/annual CPI result for food only to apply to the coming quarter/year. The following example illustrates the concept.

The CPI movements are as follows:

Category	%Change Sept. 2001 Qtr to Dec 2001 Qtr (3 months)	%Change Dec Qtr 2000 to Dec Qtr 2001 (Previous Year)
Food	7.5	2.6
All groups	0.9	3.1

Therefore, the relevant figure to apply for the following year in the abovementioned example would be 2.6%.

TERM OF CONTRACT:

(a) Sagacious will provide its services (as described in this proposal) to Mayne for a period commending 1 May 2002 through to December 2004 (or any further period as agreed) (“ the Term ”); and

BILLING STRUCTURE

We refer to Attachment 1 for Schedule of Billing and provide the following explanation as to the billing process:

Step 1

Current invoicing closes off as at 30 April 2002 at $11.50 PPD.

Sagacious to raise invoice for two (2) months (1 May 2002 – 30 June 2002) based on forecast patient numbers for months of May/June at $11.50 per patient per day for core Mayne sites. Sagacious to raise invoice for two (2) months (1 May 2002 – 30 June 2002) based on forecast patient numbers for months of May to June 2002 at $10.02 per patient per day for the remaining Mayne sites (Shepparton, Wangaratta, Port Macquarie, Orange) ( “the Regional Sites” ).

Step 2

Step 3

Sagacious to raise invoice for one (1) month in advance for each month (1 January 2003 –30 June 2003) based on forecast patient numbers for months of January to June 2003 at $11.30 per patient per day for core Mayne sites. Sagacious to raise invoice for one (1) month (1 January 2003 – 30 June 2003) based on forecast patient numbers for months of January – June 2003 at $9.93 per patient per day for the Regional Sites.

Step 4

Sagacious to raise invoice for one (1) month in advance for each month (1 July 2003 – 31 December 2003) based on forecast patient numbers for months of July to December 2003 at $11.10 per patient per day for core Mayne sites. Sagacious to raise invoice for one (1) month (1 July 2003 – 31 December 2003) based on forecast patient numbers for months of July to 31 December 2003 at $9.75 per patient per day for the Regional Sites.

Step 5

Sagacious to raise invoice one (1) in advance for each month (1 January 2004 – 31 December 2004) based on forecast patient numbers for months of January to December 2004 at $11.00 per patient per day for core Mayne sites. Sagacious to raise invoice for one (1) month (1 January 2004 – 31 December 2004) based on forecast patient numbers for months of January to December 2004 at $9.66 per patient per day for the Regional Sites.

In relation to the abovementioned conditions, Sagacious and Mayne will continue to abide by the following guidelines to implement the guaranteed reduction in PPD Food:

(a) Mayne are to provide Sagacious with forecast patient numbers for 2003 and 2004 as soon as practically possible and to provide forecast hospital invoice totals in accordance with the stepped guaranteed reduction in PPD food costs as outlined above;

(b) Sagacious to continue to issue “statements of expenditure” to all sites less applicable % discount to achieve overall monthly patient per day food costs in accordance with stepped guaranteed reduction in PPD food costs as outlined above; and

RETAIL PRODUCT PURCHASING:

In relation to the extraction of the kiosk cafeterias and non-specific per patient day food expenditure items (“ Retail Product Purchasing” ), Sagacious confirm that we will be extracting these expenditure/amounts from per patient day expenditures. Our preliminary analysis indicates that the removal of these non-specific expenditure/amounts will reduce the per patient day costs by more than $0.50.

(i) upon agreement between Sagacious and Mayne, these non-specific expenditures will be extracted effective 1 July 2002;

(ii) this expenditure will be dealt with separately from the guaranteed per patient day arrangement;

(iii) Sagacious will propose a specific methodology in reporting and billing for these expenditures on 1 May 2002;

SYSTEMS UPGRADE:

(Note: excludes all hardware Capital Expenditure costs)

(i) Key Stakeholders (Mayne to view system in Sydney Corporate Office;

(ii) Mayne to agree to trial implementation;

(iii) Sagacious/Mayne to Business Process Map a trial site;

(iv) Sagacious to agree existing process and proposed process using new system;

(v) Sagacious to implement trial site for a period of not less than three (3) months; and

ANCILLARY PROCUREMENT SERVICES:

(a) Over the term of this agreement, Sagacious will develop a “Whole of Business” Catering Policy and Procedure manual to encompass the entire Mayne Health Catering Operation and associated procurement and supply of catering materials.

(i) medical centre(s), Mayne Logistics and other business units food expenditure on such products as identified; and

MISCELLANEOUS

(a) Sagacious maintain “first right of offer” on its services to any and all hospitals Mayne may acquire/develop and /or any commercial production facilities in the area of providing catering services over the term of this contract outside of those hospitals Sagacious currently services.

(b) The individual components of the proposal, as outlined above (sections 1, 2, 3, 4, 5, 6 and 7) are interdependent in terms of the rights and obligations imposed upon Mayne and Sagacious. For the avoidance of doubt, it is understood that neither Sagacious nor Mayne can arbitrarily remove any term or condition in the sections outlined above.

1. Sagacious will provide its services between 15 January 2002 and 30 June 2002 on a trial basis;

2. The guarantee per patient day rate of $11.50 will be reviewed on 15 July 2002 (or at any earlier date as agreed) and the necessary adjustments will be made so as to accurately reflect the guaranteed per patient day rate against the actual per patient day rate observed during the trial period. An adjustment will only be made from 1 August 2002, if it is found that a patient day rate of $12 is exceeded; and

We trust that the proposal outlined above is consistent with all of the relevant terms and conditions which have been recently negotiated and finalised and to this end, we would ask that you acknowledge your acceptance of same by signing in the space below and providing us with a copy of same.

Yours faithfully
Sagacious Procurement Pty Limited

[Mr O’Shanassy had appended his signature]

Paul O’Shanassy
Chief Executive Officer

Enclosures (1) – Patient Per Day Reduction

I hereby acknowledge and accept the terms and conditions as outlined above in relation to Sagacious Procurement Services to Mayne.

The approach taken to witnesses

68 It is well established that it is unnecessary for the Court to refer to all of the evidence. It is fair to say that of the several witnesses who gave evidence in relation to the period of time between 18 Jan 02 and the June/July 02 period albeit that there were many emails and faxes and meetings between the parties, there are only a few specific factual issues thrown up for determination in a structural sense: i.e. casting real light on the objective intent qua the bringing into existence of the final form of the 16 April letter. Hence it is with an eye to focusing only upon those specific factual issues that a relative brief overview of the evidence given by witnesses is given in this judgment.

Reliability of witnesses

69 From beginning to end there is a difficulty with:

i. the many changes in personnel of Mayne involved at one time or another in the material events;

70 Furthermore, of the witnesses called by Mayne, there were only a limited number of Mayne employees who had played a part in the relevant meetings or who may well have been in a position to cast light on questions such as the authority issue. Time and time again Mr Cotman SC, leading counsel for the plaintiff, was forced to ask questions of those witnesses who were called by Mayne, as to how it could have come about that invoices [for the two monthly payment for May and June 2002] in the sum of 2.6 million sent to Mayne by Sagacious, could have been processed and with whose authority. The Court is left to infer what was the answer. An evidentiary onus clearly passed from the plaintiff’s side of the Bar table to the defendant’s side of the Bar table obliging the defendant to dispel the suggestion that the proper inference was that those invoices were paid with authority. That evidentiary onus was not discharged. That does not however answer the question as to the basis upon which the authority to pay the invoices, was given.

Mr O'Shanassy

71 Mr O'Shanassy plainly had an interest in Sagacious' success in these proceedings. His reliability as a witness is dealt with through the judgment as occasion demands. In a number of areas he is regarded as giving reliable evidence. He may not always have had an accurate recollection but the nuts and bolts of the respective positions taken by the parties are fairly reflected in his evidence.

72 In other areas his evidence can only be accepted when consistent with contemporaneous written materials or with the evidence given by others who are accepted as reliable. Because of his interest in the proceedings all parts of the evidence which he has given are examined against contemporaneous documents and in light of the Court’s findings as to the reliability of the witnesses who were cross-examined.

Mr Dalton

73 Mr Dalton had made a statutory declaration on 23 August 2002. In his affidavit evidence read by Mayne in these proceedings he is seen to have substantially departed from much of what had been said in that statutory declaration.

74 Mr Dalton has sought to explain the inconsistencies between the statutory declaration and his affidavit evidence as due to the fact that the statutory declaration had been prepared after a conference which he had with a solicitor for Sagacious which took place over a few hours, [Mr Dalton not being able to recall whether or not he was actually shown any documents during that meeting]. His affidavit evidence is that he briefly reviewed the statutory declaration when it was forwarded to him but did not closely review the content of the document. He contends in his affidavit evidence, that having had an opportunity to carefully review the relevant documents and consider the entire background of the matter, he later came to appreciate that there were a number of inaccuracies and oversimplifications within the statutory declaration. He seeks to explain those in his affidavit evidence.

75 The matter of a witness having sworn to the truth of a statutory declaration and then later moving away from the declaration in many places, causes considerable difficulty in terms of an acceptance of the reliability of the witness. In truth there are very often no less than three versions of what Mr Dalton appears to have sworn to:

i. the version in the statutory declaration;

ii. the version in his sundry affidavits;

76 The Court cannot simply be blindfolded when dealing with a witness who, so very close to the events which occurred, solemnly swore a statutory declaration which is later disowned in large measure. This is the principal reason why the Court has such difficulty with Mr Dalton's reliability across many areas.

77 In all of the circumstances his evidence cannot be regarded as reliable where departing from contemporaneous documents or the evidence corroborated by other witnesses whose evidence in turn is accepted as reliable.

78 However since the statutory declaration was made on 23 August 2002, so very close to the events at hand, it cannot at every step be discounted as unreliable. The statutory declaration includes the following:

17. The 28 March 2002 meeting resulted in a letter dated 16 April 2002, which was an agreement to secure Sagacious’ procurement services for the next 2½ years. When I signed this letter and faxed it back to Sagacious on 16 April 2002, what I considered Mayne was doing was that it was securing the long term services of Sagacious up to 31 December 2004. Prior to me signing and returning this letter to Sagacious, I discussed the matter with and had the document reviewed by Camilla Woods from Mayne Group Procurement (“Woods”). It was the case that I had to deal with Mayne Group Procurement whenever significant procurement issues were being negotiated and agreed upon, on Mayne’s behalf with outside parties.

18. Prior to me seeing the letter from Sagacious dated 16 April 2002, I had seen a number of previous draft versions of the agreement contained within the letter that I ultimately signed. When those draft versions were delivered to me, usually by email, both Ms Woods and I worked on that draft letter and as the case would arise, we would amend that letter in mark-up and email our negotiated version back to Sagacious . This process took place on almost a daily basis between 28 March 2002 – 16 April 2002 until it was the case that mutually agreed upon terms were contained in that letter, which I believed I was authorised to sign on Mayne’s behalf. It was sent to me by Sagacious for signing by me on 16 April 2002. I read its contents on 16 April 2002, signed it and faxed it back to Sagacious.

Dalton: “I have negotiated an agreement with Sagacious Procurement to have a fixed cost of $11.50 per patient per day until 30 June 2002, which will provide us with the $1.3 million saving we require in food catering costs.”

Tissot: “What are the risks?”

We then discussed the pros and cons of the agreement and at the end of the discussion he said words to the following effect:

Tissot: “Go ahead and do the deal.”

20. It was then the case that Mr Tissot departed from Mayne some time during the second quarter of 2002.

Dalton: “The Sagacious contract is due to expire in August 2002. Do we want to go ahead with negotiating a new agreement with Sagacious?”

Tissot: “If they continue to deliver the savings they currently are, why wouldn’t we?”

Mayne ought to continue with its contractual arrangements with Sagacious from August 2002 onwards. In a discussion among Ms Woods, Mr Morrison and myself we collectively estimated that if Mayne got rid of Sagacious, Mayne would need to hire 32 additional employees to conduct the same services that Sagacious was then currently providing to Mayne. On that basis, we jointly concluded that it was more cost effective to continue the contract with Sagacious than to not do so.

“If we do not do a deal that extends the Sagacious contract after August 2002, we will lose out through the extra cost of 30 odd employee and inefficient buying that will result.”

This was an ongoing discussion where all three parties agreed that this would be the case.”

[emphasis added to point up some of the issues of particular significance in the litigation]

79 Ultimately, as will appear in the reasons which follow, the court is able to accept some important aspects of conversations between Mr Dalton and Mr O'Shanassy for the simple reason that Mr O'Shanassy, in answering the affidavit version of these conversations given by Mr Dalton, is selective in that which is denied and that which is not denied. That which he did not deny may be accepted as having been said in the conversations and has a dramatic impact on certain findings.

Ms Woods

80 Ms Woods was a difficult witness to assess for the reasons that:

i. her recollection failed her frequently in relation to particular detail [on a number of occasions evidenced by an answer "I don't know" or "I'm not sure"];

Events of April-May 2002: current State of contractual affairs between the parties

(a) Ms Woods received no information to say that the agreement (as set out by the letter of intent) had been accepted (transcript 690.29)

(transcript 690.33)

(c) Ms Woods was not sure as to whether she understood that the new billing and pricing system had in fact commenced to operate in May (transcript 690.48) nor could she recall whether she asked anyone whether it did (transcript 690.52)

Events of May to June

(a) Ms Woods understanding as to what was the nature of dealings between Sagacious and Mayne during this period was elicited at transcript 701.19;

81 For these and other reasons referred to below her evidence cannot be accepted as generally reliable unless clearly supported by contemporaneous written material and/or by the versions given by other witnesses whose evidence was accepted as reliable.

Other lay witnesses

82 As and when appropriate the reasons which follow will deal with the reliability of other lay witnesses. However the fact is that some of these witnesses: [Mr Briscoe, Mr Mitchell and Mr McKennay] were really only called in relation to the formal proof of documents or in relation to relatively formal matters. And although taken into account together with all of the other evidence, it has been generally unnecessary for the Court to travel into the intricate detail treated with by a number of witnesses on both sides with an eye to expressing their opinions as to the viability/prospects which Sagacious had [ or in respect of which it fell short] in terms of ultimate viability. Had it been the case that quantum required to be dealt with, this exercise would have been elevated to an entirely different dimension.

83 The evidence of Mr Laurance requires to be assessed in light of the fact that he or his company, Pivot, had a potential interest in the outcome of the proceedings [although he did not know on his evidence, what that was]. Further his affidavit was only sworn on 10 May 2006 many years after the proceedings commenced. Additionally it is true to say that he produced no relevant internal documentary evidence of his or of Pivot in support of any of his assertions.

84 In relation to his evidence [only given in the witness box] of his concerns communicated to Mr O'Shanassy in relation to the authority of particular persons within Mayne to commit it to a transaction, this evidence must be weighed against his considerable uncertainty of events in other respects. He had no recollection for example, of seeing the 16 April letter at the time but appeared to be sure that " Mr O'Shanassy [had told him] he signed up Mayne" [Transcript 506.45].

85 My assessment of Mr Laurance also takes into account the fact that he did not appear to be particularly closely involved in the affairs of Sagacious as for example his not being able to recall that by June 2002, the $11.50 PPD. guarantee had cost Sagacious a lot of money. In fact it was his son, Mr Ben Laurance who was the person within Pivot who was directly concerned with the proposed transactions. I do not doubt that this witness genuinely believed to be true that which he stated in his affidavit and in the witness box as the events which he recalled. However failing memories are a common experience in the courtroom and the Court cannot give his evidence in terms of the crucial issues going to reliability such as the authority issue, any real live weight. This is not to express any view at all as to the weight of his evidence concerning the prospects of Sagacious viability which would have, but does not, fall centrally for examination on the liability issues treated with in this judgment.

The overall picture established on the evidence

86 There is no doubt but that Mayne at particular points in time of relevance, was undergoing considerable difficulties of one kind or another. These included:

i. A need to achieve savings. [The express purpose of the heads of agreement, continuing into the strategic alliance agreement, was to provide significant and quantifiable savings to Mayne's operations. The heads of agreement involved a guarantee given by Sagacious of a minimum saving of 6% to Mayne, based upon Mayne's previous catering supply costs];

ii. Regular changes in management structure [these included numerous changes in staff during the period of present relevance];

87 The initial heads of agreement and following strategic alliance involved the concept of Mayne paying a management/administration fee to Sagacious. The fee was to be 4.75% based upon gross expenditures relating to procurement and supply of catering goods.

88 The Mayne connection was Sagacious’ lifeline from the commencement of the relationship. The financial position of Sagacious for most of the time was extraordinarily difficult. It set its sights upon the Mayne connection and business as its springboard into the future. Sagacious was not about to prejudice its prospects with Mayne unless as a matter of final last recourse. It was prepared to take risks to achieve, a solid tenure in terms of an agreement into the future.

9.1 Termination for convenience

provided always

iv. There is insufficient specificity in clause 1.3 (h) to enable the termination provision foreshadowed in the April letter to be able to be identified without scope for negotiation in a situation in which no third-party is given an entitlement to impose a particular provision in the event of disagreement.

Adjustments requiring to be negotiated

i. Mr O'Shanassy conceded [transcript 301.41-46] that he understood that operating costs would change and that any adjustment would be required to be carried out by agreement: "there had to be scope for annual review" and that such adjustments would have to occur annually

ii. That was a matter which was not provided for in the 16 April letter and would have had to have been negotiated.

“In other words, the subsequent contractual terms will be adjusted so that Sagacious receives revenue sufficient to meet the Cost of Goods (COGS) purchased for Mayne and a reasonable Sagacious overhead & profit component”.

iv. Sagacious finally submitted that this means that the letter “contemplated remuneration after July 2002 on a basis of an amount being the verified cost of the goods supplied and two increments being overheads ... and a reasonable profit allowance” and that this “does not render the contract uncertain”.

v. Sagacious then refers to authorities in which courts have considered what amount would be “reasonable” in different situations and draws an analogy to claims for an award of a quantum meruit. The contention is that the 16 April 2002 letter constituted a contract that required the defendant to pay a “reasonable” amount and that the Court must now determine that amount.

a) On the one hand, Sagacious contends that the letter fixes a formula for determining remuneration, being “ the verified cost of the goods supplied and two increments ”.

a … component”

viii. In Australian Granodiorite Limited v Devex Pty Limited (unreported, Supreme Court of New South Wales, 28 May 1991), Brownie J was considering an alleged agreement which spoke of a management agreement “ on a basis to be agreed but including profit component ”. His Honour said (at page 8) “ The expression ‘profit component’ is so elastic it seems to me to, of itself, raise very great problems concerning any argument that a truly binding agreement was reached on 9 May ”.

ix. While the mere fact that a contract refers to a “ reasonable ” sum does not, without more, make the contract uncertain, in the cases cited by Sagacious, evidence was available of what amount would be reasonable in the relevant circumstances.

x. Even accepting that the 16 April 2002 letter simply requires payment of a reasonable sum, Sagacious has not put on any cogent evidence of what such a sum might be.

reasonable

Biotechnology Australia Pty supra

Payment terms

i. There is no provision in relation to payment terms for any 2½ year period

ii. In short there is no provision as to whether the defendant was to pay in advance or in arrears, nor as to what invoice period would be required.

Penalties

ii. That was another matter which required to be negotiated.

The issue concerning the "Service Level Agreement"

218 Another significant issue concerns the use in the 16 April letter of the term "Service Level Agreement", in which respect it will be recalled that clause 7 provided that the parties would act in good faith to expedite the finalisation of the Service Level Agreement which would be provided to Sagacious by Mayne.

219 The whole question of the history of any discussions between the parties in which the terms ‘Service Level Agreement’ were used was the subject of close attention given by Mr Cotman SC to a series of requests for information by the Court [to be found at transcript 1296-3003].

220 The position appears to have been as follows:

i. The 24 January 2000 heads of agreement clearly contemplated the provision of particular services by NNSS to Mayne;

ii. Between the signing of the heads of agreement and the signing of the strategic alliance agreement, a document entitled Service Level Agreement appears to have come into existence [witness the first draft to be found at PX tab 50, given a revised date of 29 March 2000];

iii. Comments in relation to a draft of a "Service Level Agreement" were prepared on 20 April 2000 [PX 2 tab 253];

Service Level Agreement or SLA means the documents collectively forming the basis of the operational manual by which the Procurement Services, in accordance Strategic Alliance Agreement, will be delivered by NNSS to the Mayne Nickless Facilities. The components of the SLA are as follows:

(a) The Hospital and Medical Facilities list;

(b) The Occupational Health & Safety guidelines;

(c) The Risk Management Model

(d) The Food Procurement Services Model;

(e) The Performance Indicators and Performance Objectives;

(f) NNSS Organisational Structure;

(g) NNSS Resources;

(h) Communication, Reporting & Accountability;

(i) NNSS Supplier Agreements;

(j) Procurement Protocol Model;

(k) Information Security Policy;

(l) Procurement Process Model;

(m) Savings Benchmark Model;

(n) Reporting Function Model;

(o) The Procurement Product Categories & Product Items; and

the terms

HIS HONOUR: And so what I am interested to know is what sort of things would the parties have up their negotiating sleeves or within the negotiation contemplation? How difficult? Could an outsider say that there was no problem with all of that because it could be determined reasonably and objectively... Indeed, the whole idea of what a service level agreement actually does, what parameters it treats with, is a little difficult for me to follow.

HIS HONOUR: And then you have got 1.3(h)…

MR COTMAN: Yes, and then …in the service level agreement will be provisions by reference to the strategic alliance agreement, so that in a sense what has been dealt with by the authors of the letter is the matter that had - it may not have been consciously in mind, I don't suggest that there is any evidence to suggest that it was consciously in mind, but what was being really addressed was that if there was a service level agreement, it would deal with matters that are in the strategic alliance agreement, because as your Honour has already seen back at the earlier negotiation between the parties, the proffering of a strategic alliance agreement…

MR COTMAN: No, that is the point. What has been contemplated in the 16 April letter is that whatever it is, that is the final service level agreement, will be this letter plus the material from the strategic alliance agreement and one can then look to the form of document which was sent to see what material can sensibly drawn from that that can sit consistently with this letter and the material dealt with in 1(h)….

HIS HONOUR: You have to have a lot of definition in relation to that which is contractually certain and in the service level agreement world. I need to have explained to me what was, or was not, able to be made certain, and why anything else was de minimis…

MR COTMAN: That is the point, your Honour. Neither the 16 April letter nor the case depend on that question for this reason: The 16 April letter in terms takes effect according to its own terms and does so in anticipation that while there will be some bona fide negotiation and so forth towards a service level agreement, the 16 April letter otherwise governs the relationship. So that if no service level agreement is ever concluded between the parties, notwithstanding bona fide negotiation and so forth, that doesn't, with the greatest respect, interfere with the operation of the 16 April agreement--

HIS HONOUR: Where does it say that?

221 This last submission effectively puts the analysis as one of either the first or fourth of the Masters v Cameron categories. However the Courts finding is that the appropriate analysis is that of the third Masters and Cameron class.

222 In the result the case is seen to be one of imprecision in terms of what were and were not to be the terms to be incorporated, presumably by an agreement to be called "Service Level Agreement" , by way of the matters provided for in:

i. clause 7 of the 16 April letter;

223 It seems clear that the proper reading of the first sentence of nominate paragraph 3 is as follows:

224 The lack of definition in relation to just what was meant by the term "Service Level Agreement" provides yet another salient difficulty which stands in the path of Sagacious in contending that:

i. the parties are seen to have objectively intended that a particular class or classes of matter be included in such an agreement; or

225 Indeed the evidence of Mr O'Shanassy when descending into this field of discourse seemed to be very loose, as for example his evidence [already referred to] that the trial period [always contemplated as continuing until 30 June 2002] was intended to throw up results of significance which was to constitute "information [to be taken] and [to be dropped] into the finalisation of [the agreement] [transcript 292-294].” [emphasis added].

226 In some contexts it is possible to produce a tightly worded agreement which will define with sufficient precision, that which is to constitute the content of a further contractually binding document which the parties are in good faith to negotiate. The matter is always instant specific. Here the simple fact is that the whole of the suggested further negotiation by way of the finalisation of the so-called "Service Level Agreement" is simply sufficiently so imprecise as to pose yet another insuperable obstacle in the way of Sagacious’ claim that the 16 April letter should be upheld as a binding document.

227 All of this is indicative of the facts that

i. that the parties did not intend to be bound to the longer term unless they themselves filled the gaps in the matters requiring to be negotiated (rather than leaving the task to the Court or a third party).

themselves

Returning to the intermediate position case

228 As already indicated the short term analysis case [dealing with the whole of the trial period and no more], fails.

The authority issue

229 For the reasons already given it is unnecessary for the Court to proceed to a decision on the authority issue. That notwithstanding it is appropriate to make clear that had the matter required determination, the holding would have been that ostensible authority had been conferred by Mayne on Mr Dalton. He had been held out by Mayne as authorised to signify its acquiescence to the 18 January 2002 billing option 1 (b) by appending his signature to the end of that document. That holding out continued up to and including April 2002. Had the finding been that the parties intended to enter legal relations, it would have been appropriate to find that Mayne by its conduct, had clearly conferred ostensible authority upon Mr Dalton to bind Mayne to the provisions of the 16 April letter.

The representational case

230 Sagacious pleads 3 alternative or cumulative oral representations which have as their foundation, an assertion that Mayne held out that it spent “about $23 million per annum” on goods which Sagacious would procure for Mayne under the terms of an arrangement that it is alleged was contemplated between them.

231 Sagacious asserts that it relied on the representations and, but for the representations, would not have entered into the Heads of Agreement and/or the Strategic Alliance Agreement in the terms it contained.

232 The representations pleaded are founded upon one alleged conversation between Mr Ginn on behalf of Mayne and Mr O’Shanassy and Mr Clough on behalf of Sagacious. Sagacious alleges that, had it not been misled, the parties would have entered into an SAA on terms which made provision for a management fee of 8.23% or more (rather than the 4.75% within the SAA: clause 8.1) and claims as damages, the difference between the profit it earned under the SAA on application of the 4.75% management fee and the profit which it claims would have been earned on a 8.23% management fee (particulars to para 38 of amended summons).

233 This case fails at threshold for more than one reason:

i. Sagacious has been unable to prove that it suffered any damage connected with the alleged representations. It has not put a " no transaction" case. Its only case has been that Mayne would have agreed to a substantially higher management fee of 8.23% than it in fact agreed to in the transactions that were done, namely, 4.75%.

ii. Sagacious has not called anyone from the Mayne pool of witnesses nor any decision maker from Mayne to give evidence that had Sagacious asked for the 8.23% management fee, they would have agreed.

iii. Hence Sagacious has been unable to establish that Mayne would have agreed to a substantially higher figure (or to any other figure for that matter) and would have done business on that basis.

iv. The only management fees % ever referred to during negotiations were 3.75%, 4.75% and 2.5%, 3%, 3.5% at potential variable 3 to 5 year terms

v. As Mayne has submitted there is no rational basis upon which the Court could conclude either that some alternative deal would have to be done and, a fortiori , at what rate and other terms any such alternative deal would have been done on (see Troulis v Vamvoukakis (unreported, Court of Appeal, 27 February 1998, pages 27-29 per Gleeson CJ));

vi. Further there are a number of issues in terms of the reliability of the evidence as to these representations having been made. The absence of any complaint to Mayne about the allegation at any time prior to 18 November 2005, provides a clear indicator that the alleged representation was not made, not relied upon and caused no damage;

vii. even if the representations were in fact made, it is plain that they are too imprecise and uncertain so as to have any forensic significance. Mr O’Shanassy’s gave evidence in paragraph 20 of his affidavit sworn 25 August 2005, that the words used were “ of about $23 million ”. When Mr O’Shanassy was asked during cross-examination what Mr Ginn had said, Mr O’Shanassy said that Mr Ginn said “ The procurement of Mayne will be in the order of $23 odd million ” [T133.30]. The question arises as to what that means, and when a spend of either less or more than that figure ceases to be “ odd ”, “ about ” or “ in the order of ”, for example, 5%, 10%, 20%, 30%, 40% variation?

viii. Sagacious did not rely and could not reasonably have relied on any such alleged representations. Amongst other factors, the parties’ negotiations concluded with the comprehensive SAA which is the last memorial and codification of what its rights would be. It makes no provision for any minimum spend which the defendant was to direct through the plaintiff.

a) the parties were arms length commercial entities;

b) the plaintiff was, at all material times, represented by legal advisors, being Sagacious Legal Services/Mr O’Shanassy;

c) the Heads of Agreement contained precise terms and was subject to a number of drafts and negotiations (Vol 1, tabs 2, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30 and 31);

d) the SAA contained detailed precise terms and with 17 separate material schedules, is some 146 pages long, and was subject to a number of drafts and negotiations (Vol 1, tabs 36, 38, 40, 41, 42, 45, 46, 48, 50, 52, 53 and 60);

e) the various drafts of the Heads of Agreement (Vol 1, tabs 20, 25, 27 and 32) and SAA (Vol 2, tab 65) were actually prepared by the legal advisors of the plaintiff, Sagacious Legal Services/Mr O’Shanassy;

f) the per annum representations pleaded in paragraphs 21, 26 and 32 of the amended summons were not embodied in the Heads of Agreement and the SAA; and

or discussions

“This Agreement supersedes all previous agreements and / or discussions in respect of their subject matter and embody the entire agreement between the Parties SAVE any and all relevant provisions in the Original Agreement [the Heads of Agreement] concerning the Implementation Phase / Stage of the relationship between the Parties.”

234 The representational case fails.

235 It is next appropriate to deal with the quantum of loss issue in relation to the roll-out.

Loss caused by delay of the implementation phase

Experts’ approach

236 In terms of the methodology, both Mr Weeks [called for Sagacious] and Mr Kus [called for Mayne] adopted a similar approach to calculate the loss caused by delay of the implementation phase. The analysis involved:

· Determining the period of loss applicable to each hospital (from 1 October 2000 to 1 May 2001 “the Delay Period”)

· Identifying the hospitals which were affected by the delay of the implementation phase

· Calculating the Mayne food costs for the Delay Period for the hospitals which were affected by the delay of the Implementation Phase

· Calculating management fee and rebate income based on the Mayne food costs during the Delay Period.

Quantum of loss

237 The quantum of loss as calculated by the two experts was summarised in Table 4 of Mr Kus’ report dated 20 April 2006:

The Kus Report The Weeks’ Report

Number of hospitals affected by the delay to the Implementation Phase
16

19

Food procurement costs relating to the affected hospitals
$2,165,851

$3,173,351

Management fee income
$102,878

$144,535

Rebate income
$108,293

$152,142

Loss caused by delay of the implementation phase
$211,171

$296,677

Reasons for differences in quantum

238 The difference in amounts calculated by the experts is accounted for by the following:

· Mr Kus excluded three of the nineteen hospitals included by Mr Weeks in his calculation of the claim [vide Caloundra, Nambour and Nepean Private Hospitals]. Mr Kus’ reasons for the exclusion are set out in paragraph 34 of his report [which can be conveniently summarised as hospitals also being referred to by other names: hence those hospitals did not appear to have been affected by the delay of the implementation phase] The evidence of Mr Kyne confirmed the name issue.

· Mr Weeks based his calculation of food procurement costs on Sagacious’ cost of sale (“COS”) for the period 1 June to 31 December 2001 (the seven month period following the Delay Period) whereas Mr Kus used the annual Mayne food costs for the year ended 30 June 2001 to calculate the average monthly food procurement costs in respect of the sixteen hospitals.

Mr Kus’ approach is preferred

239 In my view Mr Kus’ approach is correct for the reasons expressed in his report Exhibit D4 at [50] – [52]

240 The difference in the calculations of Mr Kus and Mr Weeks is not of particular significance. In response to Mr Kus’ report, Mr Weeks stated in his report of 19 May 2006 that he was unable to confirm Mr Kus’ assumptions about the three hospitals because he did not receive any further information or instruction (at paras 5.10, 5.13, 5.16).

Allowance for uncertainties

241 An allowance is appropriate to be made in the award of damages by reasons of uncertainties concerning the evidence of some difficulties being faced during the implementation phase including:

· certain logistical problems arising out of the implementation of Sagacious’ computer software and training of hospital staff; and

· questionable resources on part of the plaintiff which placed in some doubt its ability to always adhere to the implementation timeframe

242 These problems were acknowledged in the evidence given by Mr O’Shanassy. In my view the appropriate allowance for those uncertainties is achieved by a reduction of the damages award by 5 percent.

The resultant damages award

243 In the result the damages award for the loss caused by the delayed implementation phase is calculated as follows:

Loss caused by delayed implementation $211,171
Less: 5% for uncertainties ($10,564)

Award

$200,607

The amended cross claim

244 The principal issue which arises for decision on the amended cross claim simply concerns the circumstances in which Mayne paid the sum of $1,781,205.26 to Sagacious on 2 August 2002, there being no issue but that this sum was paid on that day.

245 It will be recalled that the term of the SAA was to end on 30 July 2002.

246 The environment in which the payment was made was that Sagacious in July 2002 had asserted that the 16 April letter was a binding agreement which obliged Mayne to continue to accept goods and services after the end of the term of the SAA.

247 Mayne by a responsive letter of 31 July 2002 informed Sagacious that it disagreed with that assertion and further and alternatively gave three months' notice of its intention to cease to accept the goods and services.

248 The findings are;

i. that on 31 July 2002 the parties agreed that, without prejudice to the position of Mayne that the SAA had ended on 30 July, for the three-month notice period given to Sagacious by Mayne in its letter of 31 July, Sagacious would continue to supply goods and services to Mayne and Mayne would pay the amount of $13.40 PPD to Sagacious for those services in respect of that period;

ii. shortly before 2 August 2002, Mayne received the September 2002 pre billing invoice number 705 from Sagacious in the above-described sum in respect of goods and services to be supplied by Sagacious to Mayne during the month of September 2002;

iii. On 2 August 2002 Mayne paid that sum to Sagacious in respect of and on account of goods and services to be supplied by Sagacious to Mayne during the month of September 2002;

249 In the circumstances of the findings in the reasons above, the cross claim must succeed.

250 The amended cross claim also has a series of counts only pressed in the event that the court would find that there was a binding and enforceable agreement between the parties contained in the 16 April 2002 letter. As the reasons above make clear, no such finding is made.

Leave to file defence to amended cross claim

251 Notwithstanding the objection of Mayne to paragraph 26 (a) of the defence to the amended cross claim dated 27 June 2006, the court grants leave to Mayne to file that cross-claim.

Short minutes of order

252 The parties are directed to bring in short minutes of order on which occasion:

i. submissions will be taken on the appropriate amount of interest to be ordered on the delayed implementation award;

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Citations

Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) v Symbion Health Limited (formerly Mayne Group Limited) [2006] NSWSC 654

Most Recent Citation

Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) v Symbion Health Limited (formerly Mayne Group Limited) [2006] NSWSC 779

Cases Citing This Decision

3

Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205

MK & JA Roche Pty Limited v Metro Edgley Pty Limited [2006] NSWSC 810

Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) v Symbion Health Limited (formerly Mayne Group Limited) [2006] NSWSC 779

Cases Cited

33

Statutory Material Cited

2

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27

CITATION:	Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) v Symbion Health Limited (formerly Mayne Group Limited) [2006] NSWSC 654
HEARING DATE(S):	29/05/06-1/06/06, 5/06/06-9/06/06, 14/6/06-16/06/06, 19/06/06-23/06/06, 26/06/06
JUDGMENT DATE :	14 July 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Parties held not to have entered into legally binding relations in relation to letter agreement. Damages award for breach of contract on roll out case.
CATCHWORDS:	Contract - Claim for damages of $100,000,000 for breach of contract and for loss and damage occasioned by misleading and deceptive representations - Contract for provision of plaintiff to defendant's hospitals and health care facilities of food procurement, catering and associated eProcurement services - Whether parties entered into legally binding relations - Masters v Cameron issues - Certainty - Authority to bind corporation - Construction
LEGISLATION CITED:	Evidence Act 1995 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	ADC v White [1999] NSWSC 43 Allen v Carbone (1975) 132 CLR 528 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd [2003] FCA 934 Australian Granodiorite Limited v Devex Pty Limited (unreported, Supreme Court of New South Wales, Brownie J, 28 May 1991) Australian Workers Union New South Wales Branch v Minister for Natural Resources & Ors (1991) 26 ALD 461 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 Briginshaw v Briginshaw (1938) 60 CLR 336 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commonwealth v Verwayen (1990) 170 CLR 394 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551 Hadid v Australis Media Limited (unreported, Supreme Court of New South Wales, J Sperling, 30 June 1997, BC 9707967) Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Inland Revenue Commissioners v Raphael [1935] AC 96 Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, Supreme Court of New South Wales Court of Appeal, McHugh, Mahoney and Hope JJA, 23 December 1988 BC 8801158)) International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Lakatoi Universal Pty Ltd & Walker [2000] NSWSC 113 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181, (2001) 76 ALJR 246 Masters v Cameron (1954) 91 CLR 353 Meehan v Jones (1982) 149 CLR 571 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Pascoe v Commissioner of Taxation (Cth) (1956) 30 ALJ 402 Pedler v Richardson (unreported, Supreme Court of New South Wales, 16 October 1997, Young J, BC9705263) Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 Prenn v Simmonds [1971] WLR 1381 Raguz v Sullivan (2000) 50 NSWLR 236 Reardon -Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Ryan (Receiver & Manager of Homfray Carpets Australia Pty Ltd) v Textile Clothing & Footwear Union Australia [1996] 2 VR 235 Troulis v Vamvoukakis (unreported, Supreme Court of New South Wales Court of Appeal, Gleeson CJ, Mason P and Stein JA, 27 February 1998, BC 9800395) Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 Watson v Foxman (2000) 49 NSWLR 315
PARTIES:	Sagacious Procurement Pty Limited (subject to a Deed of Company arrangement) ACN 003 753 526 (Plaintiff) Symbion Health Limited (formerly Mayne Group Limited) ACN 004 073 410
FILE NUMBER(S):	SC 50158/02
COUNSEL:	Mr N A Cotman SC, Ms C L Parry (Plaintiff) Mr D J Hammerschlag SC, Mr D J Pritchard (Defendant)
SOLICITORS:	Sagacious Legal Pty Limited (Plaintiff) Freehills (Defendant)

The Kus Report	The Weeks’ Report
Number of hospitals affected by the delay to the Implementation Phase	16	19
Food procurement costs relating to the affected hospitals	$2,165,851	$3,173,351
Management fee income	$102,878	$144,535
Rebate income	$108,293	$152,142
Loss caused by delay of the implementation phase	$211,171	$296,677