The Builders Warehouse Group Ltd t/as Campbells Hardware and Timber v Multinail Australia Pty Ltd
[1997] FCA 204
•25 MARCH 1997
CATCHWORDS
TRADE PRACTICES - representations made in respect of industrial saws and computer software whether misleading or deceptive - whether any reliance by representee on representations - reliance.
Trade Practices Act 1974 (Cth) - ss 52, 87
Cases Referred To
Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608
THE BUILDERS WAREHOUSE GROUP LIMITED T/AS CAMPBELLS HARDWARE AND TIMBER v MULTINAIL AUSTRALIA PTY LIMITED
QG 66 OF 1994
DRUMMOND J
BRISBANE
25 MARCH 1997
IN THE FEDERAL COURT OF AUSTRALIA No QG 66 of 1994
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
BETWEEN:THE BUILDERS WAREHOUSE GROUP LIMITED T/AS CAMPBELLS HARDWARE AND TIMBER
Applicant
AND:MULTINAIL AUSTRALIA PTY LIMITED
Respondent
AND:MULTINAIL AUSTRALIA PTY LIMITED
Cross-Claimant
AND:THE BUILDERS WAREHOUSE GROUP LIMITED T/AS CAMPBELLS HARDWARE AND TIMBER
Cross-Respondent
MINUTES OF ORDERS
CORAM: Drummond J
DATE: 25 March 1997
PLACE: Brisbane
THE COURT ORDERS THAT:
The applicant’s proceeding is dismissed.
The applicant pay one half of the respondent’s cost of that proceeding save for the reserved costs the subject of Order 3.
By consent:
(a)the applicant pay the respondent’s costs, save for costs of counsel, incurred by it in respect of the directions hearing of 17 April 1996
(b)the respondent pay the applicant’s costs of the respondent’s notice of motion which came before Kiefel J on 24 March 1995.
There be judgment on the cross-claim for the cross-claimant, with costs.
The respondents in the consolidated proceedings, Pryda (Australia) Pty Limited), C J Rogers and K R Sheldrick, have liberty to apply on notice to the other parties in those proceedings.
The District Registrar make enquiry, at a time and place appointed by him, as to the damages suffered by the cross-claimant by reason of the cross-respondent’s acquisition from Pryda (Aust.) Pty Limited up to 31 December 1995 of any nail plates and other materials the subject of the agreement of 20 May 1993 between the cross-claimant and the cross-respondent.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA No QG 66 of 1994
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
BETWEEN:THE BUILDERS WAREHOUSE GROUP LIMITED T/AS CAMPBELLS HARDWARE AND TIMBER
Applicant
AND:MULTINAIL AUSTRALIA PTY LIMITED
Respondent
AND:MULTINAIL AUSTRALIA PTY LIMITED
Cross-Claimant
AND:THE BUILDERS WAREHOUSE GROUP LIMITED T/AS CAMPBELLS HARDWARE AND TIMBER
Cross-Respondent
CORAM:Drummond J
DATE:25 March 1997
PLACE:Brisbane
REASONS FOR JUDGMENT
The applicant (“Campbells”) seeks an order pursuant to s 87 the Trade Practices Act 1974 (Cth) setting aside an agreement in writing dated 20 May 1993 which it entered into with the respondent (“Multinail”). Under the agreement Campbells undertook to purchase from Multinail its total requirement to 31 December 1995 for nail plates and ancillary connectors and bracing for use in its business of manufacturing timber roof trusses. Campbells alleges it entered into this agreement in reliance on certain representations made by Multinail which were misleading or deceptive in contravention of s 52 the Trade Practices Act 1974. Multinail, in turn, contends that, in breach of the agreement, Campbells agreed to purchase nail plates and connectors from Pryda (Aust) Pty Limited; Multinail cross-claims for a declaration that Campbells is bound by the agreement and seeks an enquiry as to damages.
On 31 March 1994, Multinail issued proceedings in this Court against Pryda for an injunction to restrain it from selling nail plates and accessories to Campbells until expiry of the 20 May 1993 agreement with Campbells and for damages for inducing Campbells’ breach of contract. Campbells commenced this action on 18 May 1994 following demands by Multinail to honour the agreement of 20 May 1993 in circumstances in which Multinail was, by its action against Pryda, threatening to disrupt Campbells’ arrangements with Pryda and in which it must have been apparent to Campbells that, if it continued upon its course of procuring nail plates from Pryda while its agreement with Multinail remained on foot, Multinail might well sue it for breach of contract.
In July 1994 Beazley J ordered that the two actions be consolidated and that the issues raised in Campbells’ pleading in this action be determined separately, and prior to all other issues in the consolidated proceedings. Under the order for consolidation, Pryda was entitled to be present at and participate in the trial of these separate issues. However, at the start of the proceedings before me counsel for Pryda sought to be excused from participating in the trial, on the basis that Pryda agreed to be bound by my determination on the issue of Campbells’ contractual liability to Multinail.
In December 1990, the respondent, Multinail, entered into a written agreement with James McEwan Limited, which operated a number of timber roof truss plants under the name “McEwans”, for the supply by Multinail of nail plates and connectors, computer hardware and software and training services for a period of three years, expiring on 31 December 1993. In August 1992 a receiver was appointed to the McEwans group of companies; McEwans were the largest customer of Multinail in Queensland and then owed Multinail a substantial sum. Multinail entered into negotiations with the receivers and continued to supply them with the same services and products it had previously supplied to McEwans. In January 1993 the receivers sold the truss plants to Jamieson Equity Limited, a company in which a Mr Robertson was interested. Shortly thereafter, the applicant was incorporated, and commenced to carry on this truss manufacturing business as “Campbells Hardware and Timber”. Mr Taylor, the managing director of Multinail, was keen for Multinail to continue as a supplier to Campbells. The truss making industry and the business of supplying materials to truss makers are both highly competitive. Taylor knew that Multinail’s competitors were actively seeking Campbells’ custom. He had a number of discussions with Mr Robertson, the incoming managing director of Campbells, prior to the execution of the agreement of 20 May 1993.
Many of the representations alleged by Campbells to have been made by Multinail are in writing. They are contained in two brochures, entitled “Campbells” and “Proposal to McEwans”, which were prepared by Taylor and presented to Robertson at the meetings held on 8 February and 27 April 1993 respectively, and in certain correspondence between the parties. Campbells allege that oral representations were also made to Robertson by Taylor on behalf of Multinail. Robertson died in January 1995, although he had prepared and signed a detailed statement on 3 May 1994, which was put in evidence by Campbells.
Campbells asserts that, as early as the 8 February meeting, Multinail knew Campbells was interested in acquiring new machinery and software for its truss plants and that, with that knowledge and in order to induce Campbells to enter the nail plate supply agreement of 20 May 1993, it made inaccurate representations about the technologically advanced nature of its machinery and software. The first meeting on 8 February 1993 was attended by Taylor and Mr Dew (a director of Multinail Holdings Pty Ltd) on behalf of Multinail, and Robertson on behalf of Campbells, together with four of Campbells’ employees, Mr Wald (the manager of Campbells’ Oxley plant), Mr Clarke (a Regional Manager), Mr Murphy (the Manager of Campbells’ Caloundra plant) and Mr Marsh (formerly an area manager of McEwans but then a senior Campbells employee).
Taylor believed at the time of the 8 February meeting that Robertson was interested in upgrading Campbells’ truss plants, including equipment. He was told this in January by Multinail’s Queensland Sales Manager, Mr McGraa, who was in contact with Campbells’ employees formerly employed by McEwans, including Marsh, Murphy and Clarke, in order to ascertain Campbells’ intentions following its acquisition of the truss plants from the McEwans’ liquidators. McGraa also told him that Robertson, who had no background in timber or fabrication, but who was an experienced business manager, would soon be taking control of Campbells. The possibility that Robertson might have in mind acquiring new equipment explains why the brochures Taylor prepared for his meetings with Robertson in February and April were not limited to information about nail plates, but also extolled Multinail’s equipment, including its software. Taylor and Dew were keen to supply truss manufacturing equipment to Campbells and saw the renegotiating of the nail plate supply agreement as an opportunity to do this.
Robertson says he told Taylor at the 8 February meeting that “McEwans had intended to close the truss plants however, it is my company’s intention to expand and to upgrade both equipment and staff”. Taylor, however, says that Robertson told him he did not intend to buy any new equipment at that stage, but wanted to look at what could be done to increase production by better training of Campbells’ existing staff and by improving the existing machinery. Dew’s recollection accords with Taylor’s: Robertson said he was “not really interested in re-equipping the plants with new capital equipment at this early stage but [was] more interested in trying to improve the performance of the men on the old equipment”. Wald (who had left Campbells by the time of the hearing) and Clarke were the only two Campbells employees present at the meeting who were called to give evidence. In his affidavit evidence, Wald says that Robertson said Campbells did not want to outlay any money on new equipment but wanted to see what could be done to increase production using the old equipment; he obtained a promise from Taylor to carry out an evaluation of Campbells’ operations and to develop training programs for Campbells’ employees; in cross-examination, however, Wald was equivocal, at one stage accepting the suggestion that Robertson may have said something to the effect that he intended to expand and upgrade both equipment and staff while, a little later, expressing doubt as to whether Robertson mentioned new equipment. Clarke suggests Robertson asked about Multinail’s “technology” at this meeting, and wanted to know “where Multinail were heading with technology and system development”, but was not very specific about this aspect either in his affidavit or his oral evidence. Marsh and Murphy are still employed by Campbells; it was from discussions with them that McGraa had got the impression, which he relayed to Taylor, that Robertson might be considering the upgrading of equipment. However, they were not called to give evidence, from which I am invited by the respondent to infer that their evidence would not have assisted Campbells’ case.
Taylor had prepared an agenda prior to attending the 8 February meeting. It listed “Trusstar”, “Multinail Training” and “New Equipment” among the topics he intended to raise. During the meeting Taylor made the following notes on this agenda:
“- short training courses
- evaluation of existing staff
- levels of competency
- 3 courses over 6 mnths
max 8-10 per courses
- assessment on all staff
__________________________________________
- Rockhampton for evaluation
- New Equipment
- Modest
- TQM prog @ Oxley & Cal”
“Oxley & Cal” is a reference to the truss plants at Oxley and Caloundra. “TQM” means “Total Quality Management”.
On 2 March 1993 Taylor wrote to Robertson setting out his “Detailer Evaluation Program Recommendations” for evaluating Campbells’ staff and their work practices. He again wrote to Robertson on 14 April 1993 on the topics of “Detailer Evaluation & Training” and “Truss Equipment & Layout Evaluation”. On the first topic, he referred to the imminent implementation of the staff evaluation program and on the second topic he described Multinail’s plans for:
“… the next phase of your requests and that is an evaluation of the equipment and materials flow of each truss plant on an individual basis.
Preliminary plans have already been prepared and it is in this area that I propose that we meet with you on a personal basis to present you with the concept of our plans to assist the truss plants to increase their efficiency and quality and increase production whilst lowering costs and employee numbers.”
The notes Taylor made in the course of the 8 February meeting, in my opinion, support his evidence, as does that of Wald, that Robertson was concerned with whether improvements in the efficiency of existing staff and machinery could be obtained and that Robertson’s only interest in new machinery was limited to the possibility of acquiring a small amount of additional equipment for the Rockhampton plant. The correspondence following the 8 February meeting provides further support for Taylor’s evidence. I do not accept that Robertson indicated any intention, at the 8 February meeting, of re-equipping Campbells’ plants with new truss making machinery.
Mr Wise is a management consultant to the manufacturing industry. He had, however, no technical knowledge of truss fabrication. He was the main witness called for Campbells; the only Campbells employee who gave evidence for Campbells was Clarke and his brief evidence was confined to what occurred at the 8 February meeting. Wise was contacted by Robertson some time in March 1993 to discuss the profitability of the McEwans’ truss plants that Campbells was acquiring. He said that, on that occasion, Mr Robertson indicated that “if the existing system could not be fixed to make the plant profitable” then Campbells would either sub-contract out truss manufacturing or shut down the plants. He does not suggest that Robertson was then interested in a possible upgrading of existing plant, although Wise says he raised this with him as one of the areas he should examine.
In early April 1993 Wise conducted a review of two of the major truss plants at Oxley and Caloundra. He prepared a preliminary report dated 19 April 1993 in which he identified areas in which efficiency could be improved at those plants; this mainly involved increasing the efficiency of utilisation of existing plant. But Wise also identified the need for computer hardware improvements and certain machinery upgrades, including the acquisition of new saws and a roller press for the Caloundra plant. However, Wise says that, shortly after giving this report to Robertson, the latter told him that he wanted to pursue short term improvements first and re-equipment and automation at a later stage. Wise made further investigations. By letter dated 21 April 1993 seen by Wise, Mr Truskinger, the Software Co-ordinator of Multinail, responded to queries by Wald, made at Wise’s request, in relation to Campbells’ existing computer system. Wise understood from this letter that Multinail’s software, TrusSource, would only run on a local area network. In the letter, Truskinger advised against installing a full network, saying it offered no advantage and would not be cost effective.
Robertson met with Taylor and Dew again on 27 April 1993. No one else was present. In the period between the initial meeting on 8 February and this meeting, Taylor had received information from McGraa, who had spoken with Murphy and other Campbells staff members. On 19 March 1993, McGraa reported to Taylor that he had been:
“informed by one of McEwans’ staff that GangNail [one of Multinail’s competitors] are aware that our current agreement with McEwans expires towards the end of 1993. They, GangNail, are reported to be preparing a submission that ‘virtually guarantees’ McEwans’ changing back. This offer will cover all aspects of software, hardware, training, plate and ancillary prices, and equipment.”
Counsel for the applicant relied on this memorandum to show that Taylor knew Robertson was likely to be interested in new equipment and pitched his presentation to Robertson accordingly. Taylor’s denial that McGraa’s information had any influence on him, either in calling the further meeting with Robertson in late April 1993 or in preparing the further brochure “Proposal to McEwans” is, I think, inconsistent with his action in calling on McGraa, by his memo of 24 March, for an “immediate analysis of each of the McEwans truss plants with regard to” their premises, materials handling equipment, jig, press and saw types, computers, staff etc; it is also inconsistent with the contents of the “Proposal to McEwans” brochure which Taylor presented to Robertson at the April meeting. I think that Taylor continued to believe that there was a possibility that Robertson might consider the acquisition of new machinery and for that reason was keen to continue to urge on Robertson the excellence of Multinail’s equipment.
Wise gave a detailed report to Robertson on 1 May 1993. In it, he made recommendations for immediate improvement by way of introduction of Total Quality Management procedures and for longer term capital improvements; his recommendations for immediate implementation included the networking of the PCs Campbells’ staff used to prepare truss designs and quotes. Under the heading “Long Term Improvements”, Wise commented on possible machinery upgrades but said:
“At this stage a fully automated facility is not cost justified.
Automation needs would be reviewed once the project teams had analysed set up and non value added time, so cost benefits of automation can be accurately quantified.”
Wise’s attentions at this time were focused on identifying ways in which the efficiency of Campbells’ existing plant and equipment could be improved by reorganising various aspects of its operations. This reflects his acceptance of what Robertson told him about wanting to concentrate on increasing the profitability of the existing operation.
Robertson suggests that, following the information obtained from Taylor concerning Multinail’s new equipment “we [presumably he and Wise] decided that upgrades were needed to the first plant in Townsville”. He claims that Marsh, who he describes as the regional manager with responsibility for the purchase and installation of truss plant equipment in Townsville, had extensive discussions with Taylor, who recommended certain equipment as the best available and which would improve production; Robertson says this equipment was ordered and installed in July and August 1993. While Multinail may have supplied some equipment at this time to the Townsville plant, I do not accept this evidences any interest by Robertson in a general re-equipment of Campbells’ plants. Campbells did not attempt to develop a case to that effect; it did not call any evidence to expand on what Robertson had to say here. It may be that there was a particular problem at Townsville which necessitated the acquisition of some new plant.
Clarke described Robertson in this way:
“I don’t think he immediately accepted anything. He always struck me as being the sort of person that would check salient facts anyhow. He didn’t waste a lot of time on things that ... he didn’t think were important, but he would certainly take the time to verify things.”
This suggests that, if Robertson was interested in what Taylor had to say about Multinail’s equipment and software, he would have made further enquiries about that not only of Taylor, but also of his senior and experienced staff members. That accords with the probabilities in that, while Robertson was an experienced manager, he had no experience of the timber industry. There was no evidence that Robertson sought any such information. There is no evidence that any one else from Campbells took any action, at about the time of Taylor’s representations concerning Multinail’s new equipment, to suggest that Robertson or any one else at Campbells then had any interest in re-equipping. Robertson’s lack of interest in what Taylor told him about Multinail’s equipment is shown by the fact that he did not even mention Taylor’s brochures to Wise, who was, prior to 20 May 1993, extensively involved in advising Robertson how best to improve the profitability of the truss plants and in contact with Robertson on an almost daily basis.
Robertson does not suggest there was any discussion about new machinery at the 27 April meeting; he focuses in his statement on the representations regarding the new supply agreement. Taylor says he then asked Robertson whether he would have any requirements for new equipment and was told by Robertson that he would review that and let him (Taylor) know and that he wanted to see what improvements could be achieved through training first, although some new computers may be needed. Taylor followed this meeting up with a letter dated 29 April 1996 which purported to answer certain questions raised by Robertson at that meeting. The letter dealt with training; the availability of management reports from the existing TrusSource software; computer upgrades; a brochure on the “SteelWood Truss System” and a CV for a new plant manager for the Gold Coast plant. It confirms what Taylor and Dew say; no mention is made of new machinery, despite Taylor’s continuing eagerness to sell new equipment to Campbells.
On 10 May, Robertson wrote to Taylor attaching Wise’s two reports and advising that he intended engaging Wise Technology to implement TQM at Caloundra and requesting Taylor’s input. Taylor responded to Robertson on 13 May and spoke to Wise on 19 May. Taylor also sent a memo to Truskinger on that day, saying: “Discussions [with Wise] centred around three main areas that Mr M Robertson of Campbells wants Mr Wise to consider on a TQM basis. These being:
(a) Estimating and Detailing.
(b) Jig Set Up Times
(c)J.I.T. (just in time) cutting and delivery of components to the jigs.”
The identification of these three areas is consistent with what Wise says in his first affidavit, and demonstrates that new equipment was not then identified by Wise as an area of concern to Robertson. Taylor does not deal with new equipment in this memo to Truskinger or in his letter to Robertson of the same date, save that he did take the opportunity to refer to the Auto-Truss Set Jig in direct response to item 2, after saying that set up times cannot be improved with the current machinery. In his letter to Robertson of 19 May, Taylor also refers to “new saws”, as follows:
“New saws with motorised angulation change of Heads, Lengths, etc, are now being manufactured in Wauchope and will speed up cutting changes to seconds; hence, more pieces per minute.”
Taylor was not writing in response to matters raised by Wise in his 1 May report: this appears to be another attempt by Taylor to interest Robertson in new machinery, in the hope that, should Campbells decide to upgrade their equipment, they would look to Multinail. The rest of the letter is consistent with Taylor’s assertions that Robertson wanted to improve efficiency using the existing equipment, staff and software.
In the months following the execution of the new agreement on 20 May 1993, Wise continued to be involved with Multinail employees in discussions regarding networking Multinail’s software. On 26 May 1993, Truskinger wrote to Wise Technology and set out some “foreseen problems in running on a PC network”. He concluded:
“Making TrusSource run on a network is not a great task in itself, but making it a networkable piece of software is.
Given the hardware currently available at McEwans and the software they use we see little advantage for McEwans in installing a network for their truss estimating and detailing facilities.”
On 3 June 1993, Wise wrote to Truskinger about the potential networking problems with Multinail software and said that he thought that these problems could be overcome; he suggested an “initial test”. Testing took place from mid-July 1993 and a report was prepared by Wise and forwarded to Taylor on 7 September 1993. Wise advised Taylor that Wise Technology were then submitting manufacturing specifications for the Campbells Truss Plants, ie, a list of the new equipment Wise had recently been asked by Robertson to recommend. In addition, he said that Wise Technology wanted to pursue the network option as soon as possible and enclosed the test report on networking of Multinail’s software. Truskinger’s comments on Wise’s test report were sent to Wise under cover of Taylor’s letter of 21 September 1993. On 15 October 1993, Truskinger wrote to Wise Technology in relation to its computer networking proposal, setting out the changes that would have to be made to Multinail’s TrusSource software. Wise again wrote to Multinail on 21 February 1994, requesting advice as to the time that would be needed for alterations to the Multinail software to include networking, multiuser and design and quoting, all in one program.
Although Robertson said that “As the TQM project progressed ..., it became clear that we needed new truss manufacturing equipment” and suggested that by 19 May 1993, ie, the day before the supply agreement was entered into, he had decided that upgrades were needed, it was not until about 7 September 1993 that Wise said he received instructions from Robertson to proceed to identify the new equipment he thought Campbells should acquire. Apart from Wise, no other evidence was led on behalf of the applicant to corroborate Robertson’s statement: there was no evidence from members of Campbells staff such as Marsh or Murphy that they had any discussions with Robertson prior to or soon after 20 May about the possibility of new equipment or that they themselves considered that new equipment might be desirable. The documentary evidence is to the contrary: it reveals that Campbells did not start to investigate possible new equipment for its various plants until late 1993.
As I have said, Wise Technology was commissioned to develop a specification for automating the plants, which involved the acquisition of computerised saws, in September 1993. By December 1993 the specification for saws and jigs was complete and Wise had received quotations from GangNail, Pryda and Multinail. By about this time Wise says he had decided that the best saw for Campbells was the Auto Omni, which was available from Pryda, and the next consideration was the interface between Multinail software and that saw’s software. It was in that context that Wise gave consideration to other software packages apart from Multinail’s. Robertson at this stage rejected Wise’s offer for Wise Technology to develop software for integrating Multinail’s design software and the Pryda software controlling its saw, saying that would be too risky and that Campbells would end up with a situation where each supplier could point his finger at the other, if the entire system did not work.
Taylor says that he was telephoned by Robertson on 24 January and told that Wise had recommended that all equipment be supplied by Pryda, except for one or two small items. He offered Taylor another opportunity to quote for the entire range. Robertson confirms Taylor’s evidence. Robertson also said that, by this time, it was clear to him that if Campbells bought equipment and software from one supplier, it would also need to purchase nail plates from that same supplier.
Taylor submitted a quote for the supply of new equipment on 9 February 1994 and further information by letter dated 14 February. Wise subsequently wrote to Taylor on 21 February 1994, referring to Taylor’s “offer of 14 February”; in this letter Wise set out Multinail’s specific requirements as to the computerised saw and as to the TrusSource software. Taylor then had a meeting with Robertson on 23 February 1994. It was at this meeting that Taylor withdrew the tender of 9 February. At this meeting, Robertson also told Taylor that Pryda were offering a cheaper price for nail plate and when pressed, he admitted to Taylor that Pryda would not guarantee the equipment unless they got the plate supply agreed under the contract. Taylor asked him about the nail plates and whether Robertson intended honouring the agreement of 20 May 1993. Robertson told Taylor he would continue to acquire the plates for the Townsville, Mackay and Rockhampton plants from Multinail, but could not run the risk of Pryda saying its equipment did not perform because the wrong nail plates were being used; he said they would therefore be obtaining plates from Pryda for the other, larger plants, where Pryda equipment would be installed.
There was a further meeting between Taylor, Dew and Robertson on 24 March 1994 which was called by Taylor. Robertson says he told Taylor Campbells had decided to go ahead with the acquisition of Pryda equipment and nail plates for its major plants. Multinail promptly sued Pryda and this litigation followed.
The Representations
The alleged representations relate to the nature of the 20 May agreement; the technical quality of Multinail’s software used by Campbells staff for pricing and designing trusses, and for controlling the saws and jigs; the technical quality of its truss manufacturing equipment and the compatibility of Multinail’s nail plates with truss making equipment supplied by other manufacturers.
Nature of the 20 May Agreement
On about 7 May 1993 Taylor had a telephone conversation with Robertson, during which it is alleged Taylor made the following oral representations.
5(a)(ii) - that the agreement [ie the 20 May 1993 agreement] would effect an extension of the current binding contract for a further two years; apart from updating and restating the details of the respondent’s services, equipment on loan and prices.
5(a)(iii) - apart from the said extension, updating and reinstating there would be no commercial difference between the current binding contract and the agreement.
These representations are also alleged to have been made in writing, in a letter from Taylor to Robertson dated 10 May 1993 and by delivery under cover of that letter, of the draft of the new agreement. The letter states:
“As also discussed, I have included a proposed agreement to continue the existing agreement between our companies until December, 1995.”
Recitals 2 and 5 of this agreement states:
“2.Multinail has been supplying Campbells Truss Plants (previously known as McEwans) with Campbells total requirements for truss nail plate and ancillary connectors and bracing under a contract expiring 31 December, 1993.
...
5.In consideration of Multinail loaning Campbells these computers on the terms set out herein, Campbells has agreed to extend the Supply Agreement until 31 December, 1995.”
The significance of the applicant’s complaint based on these representations is that the 1990 agreement between Multinail and McEwans contained a right of early termination by either party, on three months’ notice in writing; no such term appeared in the new agreement. Robertson says that he would not have signed the new agreement on 20 May 1993 if he had known that, unlike the old agreement, it did not give Campbells the right to terminate it on notice.
It is common ground that Taylor and Robertson spoke on 6 or 7 May about Robertson wanting replacements for the outdated computers at Campbells’ Townsville and Mackay plants. It is also common ground that there was, on this occasion, some discussion about the new supply agreement. Robertson says: “In this telephone conversation and in previous conversations, Peter Taylor referred to the entering into of a proposed new heads of agreement using words to the effect: ‘The proposed heads of agreement will be an extension of the old agreement and there is no material difference between the two.’ I do not recall the dates of those other conversations specifically, except where they have been previously identified.”
Whether Taylor said this is, I think, of critical importance to Campbells’ case here: statements of the kind made by Taylor in his letter of 10 May and in recital 5 of the new agreement about the parties having agreed to extend the old agreement cannot, in the context in which they were made, carry the implication that the terms of the new agreement did not materially differ from the terms of the old agreement.
Taylor denies ever making any oral representation of the kind alleged by Robertson. What Taylor says he told Robertson in this early May conversation was that he would like to get the new agreement signed as soon as possible and, in response to Robertson’s request for it, said it would be forwarded to him shortly, as happened on 10 May. He acknowledges that one reason why he wanted to ensure there would be a continuation of the supply agreement entered into with the receivers of McEwans was to offset the costs that Multinail were incurring by supplying additional computers, training and evaluating staff, and the extra engineering and support functions that Multinail were giving to Campbells free of charge.
It is apparent that both in Taylor’s letter of 10 May 1993 and in the accompanying draft agreement statements were made on behalf of Multinail to the effect that the proposed agreement would continue or extend the existing agreement to 31 December 1995. But I do not accept Robertson’s evidence that Taylor went beyond that and orally represented that there would be no material difference between the proposed new agreement and the existing one.
Robertson’s account of the circumstances in which he executed the new agreement is unacceptable. He says that at the 27 April meeting, Taylor, at his request, agreed to send him a copy of the existing agreement: Taylor and Dew deny this and, in making this denial, Taylor said: “They had a copy of the existing agreement and Mr Les Marsh signed the agreement way back in 1990. He was at the first meeting and he had their copy of the agreement so that there was no instruction or request to me to supply that agreement.”. Taylor and Dew say that what Robertson asked them to do was to prepare the new agreement and send it to him. Robertson says that, after examining the new agreement, he instructed his secretary to turn up a copy of the original agreement. Despite “exhaustive enquiries”, so Robertson says, it could not be located and only then did Robertson make a “conscious decision to rely on” what Taylor had told him about it. The implication in Robertson’s evidence is that it was because he considered it so important that he have access to a copy of the original agreement before signing the new agreement to check the one against the other that he caused the exhaustive inquiries he spoke of to be made.
It was important for Robertson to have access to the old agreement before binding Campbells to the new one: even though the old agreement was not binding on Campbells, the clear inference from Taylor’s evidence, not challenged on this point, is that the prices for the nail plates and associated accessories which Campbells was obtaining from Multinail at the time Robertson came to sign the new agreement were fixed pursuant to the old agreement. Campbells alleges in its pleading that one of the representations made to it concerning the new agreement included an assertion that it did, in effect, contain price schedules different from those in the old agreement. Robertson must have known that. By clause 1 of the McEwans’ standard form purchasing agreement incorporated in the old agreement, the prices McEwans agreed to pay Multinail for nail plates and accessories were those set out in the detailed price lists in Appendix B to that agreement. The new agreement fixed the prices which Campbells would have to pay for those same items as from 1 March 1993, once it was executed by Campbells. Robertson cannot have failed to realise that. By clause 2 of the new agreement, Campbells agreed “to purchase from Multinail its total requirement for truss nail plate and ancillary connectors and bracing for its truss plant divisions up until 31 December 1995”, ie, for two and a half years, at the prices set out in the third schedule; the form of this schedule generally mirrors the price lists in Appendix B to the old agreement. A comparison of the two sets of price lists shows that, for some items, eg, ML and MN connectors, the 1993 prices are higher than the 1990 prices; for other items, eg, steel channel webs, the 1993 prices are lower than the 1990 prices; and for other items, eg, ancillaries, such as multigrips, the 1993 prices are the same as the 1990 prices. It is inconceivable that any manager, let alone one as experienced as Robertson would appear to have been, would commit his company to a major supply contract without ensuring that the new prices provided for by that contract were reasonable when compared with the prices currently being paid and fixed under the old agreement and, given his unfamiliarity with the timber industry, without also discussing that matter with his senior staff. Robertson’s statement is silent about these crucial considerations, save that he says that, while not mentioning the new agreement, he did discuss with unidentified senior Campbells staff “the character of Multinail”, who told him it was a reliable supplier with competitive prices.
Given the extraordinary nature of Robertson’s evidence that, although well aware of the importance of access to the old agreement before he signed the new one, he signed without checking it against the old one and without taking advice from one or other of Campbells’ senior staff, the importance, whenever possible, of calling evidence to confirm his account is obvious. Robertson suggests that his secretary’s search was abortive because many of McEwans’ files had been lost following McEwans going into receivership and following its move to a new head office. But no evidence was called from any source to confirm what Robertson had to say about instigating the search for the old agreement in May 1993. Robertson says that a copy of the old agreement was finally located in April 1994 at one of Campbells’ Maroochydore offices as a result of a further search which he then instigated. By this stage, Multinail was threatening to sue Campbells for breach of contract. He records his surprise at then being told by Mr Ross Kinneally, Campbells’ external solicitor with responsibility for the conduct of Campbells’ case, that there was an important difference between the two agreements in that the new one did not contain a termination provision of the kind contained in the old agreement. Again, no attempt was made by Campbells to lead any evidence confirming what Robertson had to say about instigating a second lot of searches or what he said Kinneally told him, even though such evidence should have been available if Robertson’s account can be believed.
It is difficult to accept Robertson’s claim that it was because of his failure to locate a copy of the old agreement that he made a conscious decision to rely on what he claims Taylor told him about it.
He claims he had Taylor’s promise to send him a copy of the old agreement, yet he did not contact Taylor after his allegedly abortive search and did not make any attempt to explain why he failed to call on Taylor to keep his promise when the document in question, which he considered so important, could not, according to him, be located in McEwans’ files.
Robertson said that “During this whole period [ie, up to 29 March 1994] I was the only person who knew of the existence of the Heads of Agreement dated 20 May, 1993”. He explained keeping the new agreement to himself because he believed, on the basis of what he says Taylor told him, that it was just an extension of the earlier McEwans agreement. The new agreement is, in form, a detailed, self-contained document, not a short note extending a separate earlier agreement; its form does not suggest that it is unnecessary to bother checking it against the old agreement. Moreover, he earlier said that his secretary knew about it and that he told Marsh he had signed it, although “[my] advice to him was simply that I had extended the old agreement”. Wise also knew of it; he learned of it in October 1993.
I do not accept that, apart from his secretary and apart from mentioning to Marsh only that he had signed the new agreement, he kept it secret from everyone in Campbells. For Robertson to bind Campbells for two and a half years to this major commitment without first checking on the terms of the old agreement and without taking advice from senior staff such as Marsh is not only against the probabilities: it would conflict with Robertson’s own practice, remarked on by Campbells staff such as Clarke, of not making decisions without taking such advice, a practice he also followed in late 1993 when, with the assistance of Wise and Marsh, he investigated and ultimately decided three of the Campbells plants should be re-equipped with Pryda machinery and software.
Contrary to what he claimed, Robertson must, in any event, have revealed some details of the new agreement to a number of Campbells staff. That agreement contains nail plate pricing information: Campbells could not have quoted on any work without the relevant staff knowing the costs to Campbells of the materials supplied under this new agreement. It also includes in the Second Schedule an inventory of existing Multinail computer equipment installed in Campbells’ plants and the list of new computer equipment to be loaned by Multinail until 31 December 1995 to Campbells and clause 1(c) obliged Campbells to insure all this equipment, at its own cost. It is impossible to accept that Robertson kept all this information to himself.
The absence of Marsh from the witness box assumes particular importance here. It was he who actually signed the agreement of 1990 on behalf of McEwans, with Taylor signing on behalf of Multinail. He might be expected to have a copy of this important agreement or at least to know something of its terms. The old agreement incorporates, as I have mentioned, McEwans’ standard form purchasing agreement; not only the old agreement itself, but also this standard form was signed by Marsh. He signed this form immediately underneath clause 10, which gave McEwans the right to terminate the agreement upon notice. It is noteworthy that, while nothing in the old agreement, including the McEwans’ standard form purchasing agreement incorporated in it, expressly obliged McEwans to deal exclusively with Multinail (in contrast to clause 2 of the new agreement), the termination provision in clause 10 of the McEwans’ standard form ensured that McEwans was not locked into a long term exclusive purchase obligation with Multinail. It is likely that Marsh, as an experienced McEwans senior manager who was apparently involved in negotiating this major supply agreement, would have been well aware of this important provision incorporated in the old agreement. Marsh, moreover, worked closely with Robertson. He was one of the four people Robertson selected to sit in at the meeting of 8 February 1993. He was one of the two Campbells’ employees on whom Robertson relied heavily in making his decision to acquire new machinery in late 1993-early 1994. He was still in Campbells’ employ at trial, but did not give evidence. There was no explanation for this. It is significant that, apart from his secretary, the only person Robertson says he told he had signed the new agreement with Multinail was Marsh, who Robertson claims he did not realise was the very person who had signed the old agreement: yet Robertson claims nothing else passed between Marsh and himself with respect to this matter. I infer that the evidence Marsh can give about whether Robertson knew of the critical difference between the two agreements when he signed the new one would not assist Campbells’ case because it would conflict with what Robertson has had to say. I do not accept that Robertson, in his state of unfamiliarity with this particular industry, did not take the advice of someone skilled on Campbells staff, such as Marsh, about whether it was appropriate for him to sign the agreement which committed Campbells for two and a half years, especially when he was looking closely at the time at re-organising Campbells’ operations to improve profitability.
Campbells’ case, based almost entirely on what Robertson has to say in this regard, amounts to a case that Robertson was duped by Taylor into signing the new agreement, which differed materially from the old agreement in that it bound Campbells for two and a half years to an exclusive arrangement with Multinail and did not give Campbells the right to cancel the agreement at any time, provided only that three months’ notice was first given. Robertson refers to his surprised reaction to learning this from Campbells’ solicitor. Yet it took a long while for this complaint to emerge. The whole purpose of Campbells’ originating application was to obtain an order setting aside the agreement of 20 May 1993; but, in the first statement of claim filed on 19 May 1994 with the originating application in which this relief was sought on the basis of certain false representations allegedly made by Multinail prior to its execution, Campbells did not suggest that any representation touching on the similarity between the old agreement and the new agreement, of the kind now contained in paragraph 5(a)(ii) and (iii) of Campbells’ further amended statement of claim, had been made. Then, the only representation touching on either agreement was that now contained in paragraph 5(a)(i) of Campbells’ current pleading to the effect that Multinail had a contract for nail plate supply binding on McEwans until December 1995; Campbells did not seek to rely on this allegation at the trial because of Robertson’s acknowledgment that he well knew that, even though the contract may have bound McEwans, it was not binding on Campbells at the time he signed the new agreement. Robertson says he had obtained a copy of the old agreement by April 1994, ie, prior to filing the first statement of claim, and the solicitor acting for Campbells in the dispute with Multinail then drew his attention to the significant difference between its terms and those of the 20 May 1993 agreement. But it was not until Campbells’ amended statement of claim filed 10 June 1994 that Campbells alleged, for the first time, that Multinail represented to Campbells that the proposed new agreement was an extension of the old contract and included the same terms and conditions. Robertson’s statement, signed on 3 May 1994, was no doubt the source of this new allegation. It was conceded by counsel for Campbells that no complaint was ever made by Campbells of this deception until this allegation was raised in Campbells’ pleading in June 1994. If there is any truth in what Robertson has to say in his May 1994 statement about being deceived by Taylor in this regard, it is difficult to understand why complaint was not made about that matter well before mid 1994 and, in particular, why, when Multinail had, in March 1994, put Campbells on notice that it might sue if Campbells persisted in obtaining nail plate supplies from Pryda in breach of the agreement of 20 May 1993, Multinail’s threat of action did not produce the response that the agreement was void for misrepresentations immediately Robertson says he was “surprised” to be told in April 1994 of this “significant difference” between the two agreements.
For the reasons stated, I think it likely that Robertson was well aware of the differences between the two agreements when he signed the new one. That Robertson was content to bind Campbells to it, although he knew it differed significantly from the old agreement, is not improbable: the Multinail agreement was attractive to Robertson because of the computer equipment and training and other services Multinail was prepared to provide free of charge. At that stage, he was concerned with maximising the usefulness of the existing plant which was running on Multinail software and other makers’ machinery; he was not then considering changing from Multinail’s software and said he did not then know of the practical incompatibility of the software with other manufacturers’ nail plates and so was unlikely to have sought or been offered advice that would have flagged what was then for him a matter of no relevance.
Much of Robertson’s statement of 3 May 1994 is devoted to the issue of what Taylor said about the nature of the old agreement. My rejection of Robertson’s detailed evidence on this topic reflects adversely on the reliability of what he says on other topics. I am not prepared to accept Robertson’s evidence on any critical issue unless it is confirmed by acceptable independent evidence.
Software and Machinery
Multinail made various representations, couched in wide terms, as to the technologically advanced nature of its software and truss making machinery. It is apparent from the evidence called by Multinail, which I accept, that, at relevant times, Multinail’s software was preferred by a number of truss makers to that of its competitors, including Pryda and GangNail: Multinail’s software appears to have had the capacity to cope with a wider range of truss shapes, it was easy to operate and, so far as service is concerned, it was well supported by Multinail. But Campbells’ case as to the falsity of the representations made by Multinail with respect to its software focused heavily on the inability of Multinail’s software used in designing trusses to operate all the PCs used by Campbells’ detailers in a network and on the absence in the Multinail software of any capacity to download the cutting information required by the truss making machinery from the truss design information in the databases of the PCs operating with the Multinail software direct to that machinery, if the machinery were itself controlled by a computer incorporated in it. Multinail sought to answer the case here made by Campbells and these two issues became major matters of contention at the trial. Campbells’ case that Multinail misrepresented the quality of its saws and jigs focused in large part on the proposition that the Omni Auto saw and Omni Jetset jig, available at all material times in Australia from Pryda, were much more technologically advanced than anything Multinail was capable of producing. Whether this was so and whether Multinail was capable of matching the Omni saws and jigs with equipment of at least comparable sophistication were the issues to which most time was devoted at the trial.
In determining what a statement in wide language about the advanced technical nature of the maker’s equipment can be taken to convey to prospective customers, it is, I think, proper to take into account the level of technological development of similar products that are then available, at least from the competitors of the maker of the statement, and that it was made in circumstances in which it was intended by the maker to be acted on by the recipient (as Taylor confirmed was his intention in making the statements relied on by Campbells as constituting misrepresentations. It is by reference to these considerations that I think findings as to whether Multinail made representations about its software and machinery of the kind alleged by Campbells are to be made.
The following representations are alleged to be contained in the brochure entitled “Campbells”, given by Taylor to Robertson at the 8 February meeting.
5(b)(v) - that the respondent manufactured and was in a position to supply truss manufacturing machinery in the categories of saws, presses, jigs and materials handling which was at the leading edge of technology.
During the hearing the respondent was granted leave to amend its pleading to allege that it “manufactured and was in a position to supply against forward orders truss manufacturing machinery in the categories of saws, presses, jigs and materials handling which was at the leading edge of technology”. The amendment is, I think, a fair reflection of Multinail’s concern at its ability to make good the representation contained in its brochure; as the case unfolded, Multinail acknowledged that it did not have in production saws and other equipment which were as advanced as equipment available from others, and, in particular, from Pryda. However, its position was that it had the capacity in early 1993 to produce such equipment, even though it had not then had any opportunity, for want of purchase orders, to demonstrate that capacity. Campbells, for its part, did not suggest that Multinail had to have expensive pieces of machinery sitting on the shelf if these representations were to be true, but submitted that, if the representation was not to be misleading, Multinail should be able to deliver within a reasonable time, a capacity which it says Multinail lacked in May 1993.
On the third page of the “Campbells” brochure, under the heading “Advantages - 1993”, the following appears:
“To assist the fabricator towards this process [of installing and operating the equipment], Multinail is now producing equipment which is at the leading edge of technology in the following categories:
1. Saws.
2. Presses
3. Jigs
4. Materials Handling
and providing services in the areas of:
5. Software
6. Training
7. Engineering and Technical Support
8. Product Support
9. Marketing.”
In the following pages of the “Campbells” brochure this appears: under the heading “saws”, four ranges of saws, including the “Command 4”, are listed and it is said: “These saws are being produced in Wauchope...” and: “Sixteen of these saws have now been manufactured and installed in truss manufacturing companies in Australia”. I therefore find that by giving Robertson the “Campbells” brochure, Multinail made a representation to the effect alleged in paragraph 5(b)(v) of Campbells’ pleading.
5(b)(viii) - that the respondent produced and was in a position to supply software (meaning software as aforesaid) that was the most efficient, up-to-date and trouble free available.
It is clear enough from paragraphs 5(b)(vi) and (vii) that the representation alleged is intended to be a representation of the quality of Multinail’s software for use both in designing trusses and in controlling the machinery used to make trusses. In alleging that this representation was made, Campbells points to item 5, “Software”, in the “Campbells” document:
“Multinail’s software has been recognised in the last two years as being the most efficient, up to date and trouble free available in the market place today.”
Counsel for Multinail submitted that the Campbells’ allegation is an impermissible gloss on what Multinail actually said. But, in my view, a representation that Multinail’s software of the kind here in question had been recognised over the last two years as being the “most efficient, up to date and trouble free” available in the market place implies that Multinail has already produced such software and was in a position to supply it. I find that a representation to the effect alleged by Campbells was made by Multinail in its “Campbells” brochure.
The applicant alleges that at the 8 February meeting, and again in a telephone conversation in mid-March 1993, Taylor also made an oral representation to the following effect:
5(b)(i) - that the respondent manufactured or produced and was in a position to supply to the applicant the best and the most advanced and flexible truss manufacturing equipment, computer software and nail plates available in the market.
Taylor denies he ever made such an oral representation, as well as denying that he met Robertson in mid-March. Dew and Wald, an independent witness, support Taylor, in so far as they say no such statement was made by him at the meeting, although in cross-examination Wald was prepared to concede the possibility that “new” or “latest” technology may have been discussed at the 8 February meeting. Clarke of Campbells says that Robertson did ask about Multinail’s “technology” at the 8 February meeting; he recalled Taylor speaking about a computerised press and about software, and recalls Taylor saying something to the effect that “Multinail had the best technology available in Australia”. The overall tenor of the “Campbells” brochure and the “Proposal to McEwans” brochure tabled by Taylor at the 27 April meeting with Robertson, his eagerness to sell new machinery to Campbells, together with the evidence of Clarke, makes it more probable than not that an oral representation to the effect alleged by Robertson to have been made on a number of occasions by Taylor and referred to in paragraph 5(b)(i) was made, at least at the meeting of 8 February.
At the 27 April meeting Taylor presented the second brochure, entitled “Proposal to McEwans”. The following representations are alleged to be contained in this document:
5(b)(ii) - that the respondent manufactured and was in a position to supply truss manufacturing machinery at least equivalent to any other such machinery available in the world.
Page 16 of the Proposal contains the following:
“MULTINAIL’S new machinery facility, its experienced staff and large range of established, efficient truss producing machinery is at least equivalent to any other similar equipment manufactured in the world”
Counsel for Multinail relied on what appears at page 15 of the Proposal, viz:
“These items verify MULTINAIL’S intention of developing the best machines to suit the truss plant production and price level, as well as showing the ability to produce leading edge technology and the capability to produce to the volume of market needs.”
and submitted that Multinail would not fairly be understood to have made the representation of present ability to supply the machinery referred to, but only that it was in a position to supply against forward orders truss manufacturing machinery at least equivalent to any other such machinery in the world. But, at page 16 of the Proposal, Multinail speaks of a large range of established, efficient truss producing machinery. Moreover, “these items” in the passage set out above from page 15 of the Proposal are described at page 14, where it is said that the Multinail development team “has in the last twelve months designed the only known” fully automatic computerised jig changing machines; has “Redesigned and Developed” a range of European Saws to suit the Australian market; and that three ranges of “Flow Thru Saws” (being the Compact, Master and Command) “are being built”. I am satisfied that a reading of the statement at page 16 of the “Proposal” document in its context justifies a finding that that statement amounts to a representation to the effect alleged.
5(b)(iii) - that the respondent’s computerising of such machinery was leading the world.
At page 16 of the Proposal, the following appears:
“The advances in new technology of computerising machinery is leading the world and signifies MULTINAIL’S intention to continue to support and progress this industry.”
Counsel for Multinail again dismisses Campbells’ pleading as talking statements out of context. But this unqualified statement is a sufficient foundation for finding the representation alleged was made.
5(b)(iv) - that the respondent had designed the only known fully automatic computerised jig changing machine meaning that the respondent manufactured and was in a position to supply a jig changing machine which was fully automatic and computerised to a level not exceeded by that of any other manufacturer.
At page 14 of the Proposal, the following appears:
“MULTINAIL maintains a very active Research & Development team for machinery to assist the fabricator to become more and more efficient.
This development team has in the last twelve months designed the only known
- Fully Automatic Computerised Jig Changing Machine
- Australian and World Wide Patents applied for.”
This statement sufficiently proves that Multinail made a representation to the effect alleged.
5(b)(vi) - that the respondent produced and was in a position to supply the best, most versatile and most easy to use software; meaning software for the computerised design and sale of trusses; and their manufacture and supply by computerised sawing and jig setting.
At page 9 of the Proposal, the following appears:
“MULTINAIL for some years now has been recognised for having the best, most versatile and most easy to use Software. This enables the detailer to gain the maximum advantage in the fastest possible time with the most efficient results in timber, steel and labour costs. Comparisons with other truss software has proved these facts.”
The “comparisons” said to prove the “facts” in the Proposal were, so Taylor said, made by Multinail’s customer service staff in the field and reported back to him. Multinail submits that at no time did it represent that it “produced and was in a position to supply” the best software; only that it was “recognised for having” such software. But for Multinail to say that in this context is well capable of carrying the implication that it produced it and was in a position to supply it. I find that a representation to the effect alleged was made.
5(b)(vii) - that the respondent’s software enabled a detailer to achieve results (meaning towards or in manufacturing and supplying trusses) more efficiently and faster than could be achieved by the use of any other software.
I find a representation to this effect was made in the passage at page 9 of the Proposal quoted above.
Falsity of Representations as to Software
Networking
One of Wise’s key recommendations to Robertson was that the software in use by Campbells should be capable of operating a networked system. When Wise commenced his investigations, the Campbells staff member responsible for designing trusses for a customer and its staff member responsible for pricing and quoting on those designs could not access each other’s files, but had to copy the information onto a floppy disk and transfer it to his own PC, a time consuming activity; networking would overcome this inefficiency by permitting the controlled sharing of data by all those using the computer system for design and estimating purposes. Wise says that, before he became involved, Campbells staff were also re-entering data when they won a job, rather than finding the quote on its floppy disk; this decreased efficiency and thus profitability. Networking would enable successful quotes to be quickly called up, any amendments made to the design quoted on rather than a fresh design being made, and the cutting information quickly generated for the saws. Networking would also facilitate the standardisation of the design parameters used by the various Campbells staff members responsible for truss design: the fact that some used different design parameters meant that when the optimum ones were not used, the result was a more costly truss design than was necessary to do the job and possibly too costly to win the job as well. Wise was also concerned at the inefficiency involved in the existing Multinail software which worked in a way that prevented the PC on which the Campbells detailer was working from using his PC for other tasks while work completed on that PC was being printed, another deficiency that could be overcome by networking.
In April 1993 Multinail’s software, TrusSource, installed at Campbells’ plants, did not have networking capacity of the kind required by Wise. By his letter of 21 April 1993, Mr Truskinger, Multinail’s software development manager, recommended against networking as a solution to some of the difficulties identified by Wise. In this same letter, Multinail claimed its software could, however, run on a local area network (LAN), in which data could be readily transferred between PCs, something that would have satisfied many of Wise’s requirements. But Wise said that when in mid 1993 he had TrusSource tested in the simplest of LAN environments, it did not work reliably and, in an internal memorandum to Taylor on 9 June 1993, Truskinger said that TrusSource was unsuitable for use in a network and “It would take many months for 2 programmers to make it fully networkable”. He, in effect, expressed his concern that it could not meet Wise’s requirements. On 15 October 1993, Multinail acknowledged to Campbells that its TrusSource software would have to be fairly extensively modified if it were to be able to operate a LAN that would allow the designer and the estimator direct access to each other’s files and which would permit Campbells’ detailers ease of access to information relating to successful quotes, because “TrusSource was intended to be a single user system” and because it was designed to deal separately with quotations and designs and pricing of jobs. In fact, practical networking capacity with the functions desired by Wise was only introduced in TrusSource software in version 5.5 released in December 1994.
Counsel for Multinail relied on the evidence of several of Multinail’s customers, including Mr Sly (of Slyco), Mr Tapiolas (of Parkside), Messrs Bite and Oldham (of Ezi Frame) and Mr Wald (now of Bill’s Trusses), to support the truth of the assertion in the “Campbells” document, referred to in paragraph 5(b)(viii) of Campbells’ claim, that its software was the most efficient, up-to-date and trouble free available. I have already referred to the reasons why Multinail’s software was preferred by a number of truss makers to that of its competitors. But Wald said he had never seen TrusSource used in a network environment; Tapiolas did not operate TrusSource in a network: he had only two people in his estimating and detailing department who each used stand alone computers; and none of the other witnesses referred to TrusSource’s capabilities in this important regard.
Networking capacity was not an idiosyncratic requirement of Wise’s: as at 2 July 1993, Taylor acknowledged that a number of other customers of Multinail were also requesting that the software have networking capacity and, of other suppliers, at least Pryda’s software then had that feature. Truskinger confirmed Wise’s evidence that Pryda’s software, as early as May 1993, had the networking capacity that Wise wanted. It is clear that Pryda’s software was then more advanced than was Multinail’s (although it was by no means trouble-free, as Campbells’ experience with it in late 1994 showed). It follows that the representations alleged in paragraph 5(b)(i), so far as that relates to software, and in paragraph 5(b)(viii) of Campbells’ pleading were misleading. It was, I think, misleading for Multinail to claim that its software was the most advanced and up-to-date available when it had a major limitation not present in at least one of its competitors’ systems, viz, the inability to operate in a network environment.
In view of the evidence called by Multinail as to the advantageous features of its software, I would not have been prepared to find that the representations alleged in paragraphs 5(b)(vi) and (vii) were misleading if they had been made before Multinail learned of Wise’s requirement of networking. Moreover, even if it goes beyond puffery not capable of amounting to misleading conduct that contravenes s 52 the Trade Practices Act 1974, I would not accept that, for Multinail to say, without more, that its software is “the best”, should be regarded as misleading because its software lacked a particular feature which was sought by only some users, given that it had useful features which the software of others lacked.
Taylor did not know, when he prepared the Campbells document for tabling at the meeting of 8 February 1993, that Campbells was interested in software that could operate its computers in a network. It was only after Wise was retained by Campbells at the beginning of April that Wise identified this as an important requirement. It appears that he raised the question of the networking capacity of Multinail software with Multinail sometime in April: Truskinger’s letter to Wald of 21 April 1993 was the former’s response to queries raised by Wald at Wise’s instigation. It was, at the meeting of 27 April, that Taylor tabled the “Proposal to McEwans” which contained the representations as to Multinail’s software about which Campbells makes a complaint in paragraphs 5(b)(vi) and (vii) of its pleading: he may then have known of Wise’s interest in networking. It is plain, from the context in which the two Multinail brochures were prepared, that Multinail anticipated that Campbells might place reliance on the statements in both documents: Taylor conceded as much in cross-examination. Wise, in his letter to Robertson of 1 May 1993, had identified networking as an important requirement of the software, if the full range of efficiencies he had in mind were to be achieved. Robertson gave Taylor a copy of Wise’s letter under cover of his own letter of 10 May 1993 and Taylor replied to Robertson on 19 May 1993 with some detailed comments about Multinail’s software and its capacity to be upgraded to meet Wise’s requirements.
Given Taylor’s, ie, Multinail’s, awareness by no later than 10 May 1993 of the significance Wise attached to the Campbells detailers being able to operate in a networked system, for Multinail to allow the representations in both brochures to stand thereafter, without qualification, when Multinail’s software in fact lacked networking capacity, amounted to misleading conduct for the reasons discussed in Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 at 609 and 618.
I find that at no time in 1993 did Multinail’s software have, in a practical sense, the capacity to operate in a networked environment. It follows from what I have said that the representations alleged in paragraphs 5(b) (viii) and 5(b)(i) (in so far as that relates to software) were misleading. It also follows that Multinail engaged in misleading conduct by making the representations alleged in paragraph 5(b)(vi) and (vii) of Campbells’ pleading and by failing to qualify them when, prior to 20 May 1993, it realised the importance Wise attached to the software being networkable. I consider that this last finding is open, despite the pleadings, in view of the way the parties conducted the case on the issue of software misrepresentation.
Download Capacity
When a fabricator has computer-controlled saws and jigs, the cutting information, if not directly downloadable from the computers on which the trusses are designed, has to be fed into the computers controlling the saws and jigs either from floppy discs to which the truss-designer has transferred that information or by being keyed in manually to the keypads of the computers controlling the machinery. There are substantial time and cost savings to the fabricator if the software used by its employees to design trusses to customers’ requirements has the capacity to download the design, ie, cutting information, direct to the computer-controlled saw and jig.
Both the computer-controlled Auto Omni saw and the Omni Jetset Jig-setting System, manufactured in the United States by ESCO and supplied in Australia by Pryda, had this capacity from some time prior to 1993. The Auto Omni saw has only 14 axes, not the more conventional 18, but a special timber holding system incorporated in the Auto Omni saw enables it to perform all functions that a saw with 18 axes can perform. I accept Kearon’s evidence that software was available in Australia in early 1993 from his company, Pryda, to enable cutting information to be downloaded directly from the design computer to the computers controlling the Auto Omni saw and the Omni Jetset jig.
The only saw in Multinail’s range which Multinail at trial suggested was downloadable was the Command Saw. But no Command Saw had been manufactured by Multinail, at least up to the date of the trial. As at May 1993, Multinail was only able to supply conventional saws. In February 1994, the computerised saw, which Multinail offered to sell to Campbells, could only be loaded with the cutting information stored in the Multinail design software from a floppy disc, not directly from the design computer.
Truskinger says he was involved in a project where Multinail, with assistance from a software consultant, developed a download from TrusSource to a saw made by a New Zealand manufacturer at Slyco in March or April 1993 and to a jig there in late 1993-early 1994. This involved TrusSource downloading to Slyco’s saw and jig and this feature was not incorporated into Multinail’s own software product line. Truskinger said that the same software consultant who worked on the Slyco project in May 1994 submitted a quotation to Multinail to amend TrusSource to include, as a standard feature, this downloading capacity, but, up to the time of swearing his affidavit in June 1995, Multinail had not proceeded with this proposed amendment to its software because of lack of customer demand.
Taylor says that Multinail had, by June 1992, the capacity to produce a computer-controlled jig setting machine called the Auto TrusSet, but it was not until mid 1994 that Multinail actually delivered software that could download instructions direct to the Auto TrusSet software in the computer controlling that jig: the first Auto TrusSet jig so operated was delivered to Slyco in June 1994.
In view of Multinail’s demonstrated capacity in early 1993 to develop software with the capacity to download cutting information direct from its design software to the software controlling the New Zealand saw installed at Slyco, I am not prepared to find that the representations alleged in paragraphs 5(b)(vi), (vii) (viii) and 5(b)(i) (with respect to software) were misleading, in so far as Campbells’ case here is that Multinail could not, in May 1993, provide software with the capacity to download cutting information direct from the design software to the software controlling computerised saws.
The evidence is unclear as to whether, as early as May 1993, Multinail had the capacity to produce software capable of downloading instructions from its design software direct to a computer-controlled jig. Because Campbells has failed to discharge the onus of proof that rests on it, I am not therefore prepared to find that any of these representations were misleading, in so far as Campbells’ case is that in May 1993, Multinail could not produce downloadable software to run in its computerised jig.
Falsity of Representations as to Machinery
While Multinail ultimately pleaded that it only represented it could supply advanced saws and jigs “against forward orders” and while Campbells accepted that the representations it relied on could mean that any of the represented products could be supplied within a reasonable time, Campbells says that the representations implied that the products were developed and not merely something the development of which could be carried out for the first time, if and when an order was received from a customer. I accept Campbells’ submission. I find that, as at May 1993, Multinail had no ability to supply “against forward orders” saws (as opposed to jigs) that were at the leading edge of technology.
In early 1989 Multinail purchased plans from Clary Engineering Inc for the manufacture of a saw called a shortcutter, or a rafter cutter: Taylor describes a shortcutter as having “a manual controlled operation, not electric or not a motorised nor a computerised...”. These were the only saws that had been manufactured by Multinail for truss-makers as at May 1993. In the brochure “Campbells”, under the first heading, “Saws”, four ranges of saws are listed. The brochure says “These saws are being produced in Wauchope” and that “Sixteen of these saws have now been manufactured and installed in truss manufacturing companies in Australia”. In fact, as at May 1993, 14 to 16 short cutter saws had been manufactured, but none of the more advanced “Compact 4”, “Master” or “Command” saws referred to in the brochure had been manufactured.
In September 1992 Multinail entered into an agreement with Delbeike of de Pauw, a Belgium company, to purchase the plans for a computerised saw. These de Pauw drawings were essential to Multinail’s ability to develop the capacity to produce such a saw, including one that was downloadable from the design computer.
The design information received by Multinail was incomplete, and it proved difficult to bring the de Pauw technology into production. Taylor wrote to Delbeike on 30 March 1993 complaining of confusing and inadequate drawings and said that Multinail were using their own technology to develop the saws themselves. The design information from de Pauw was, in any event, not for a fully computerised saw: not all axes of movement were computer-controlled - it had 11 computer-controlled axes and 4 motorised axes. By early 1993, Taylor was also confronted with another difficulty in developing a computerised saw on the basis of the de Pauw information: de Pauw was taken over by Alpine Engineering and Alpine disputed Delbeike’s right to sell the design information for a computer-controlled saw to Multinail. On 11 June 1993, it wrote to Multinail to advise that it considered Multinail’s 1992 agreement with Delbeike was “null, void, and of no force or effect” because Delbeike had, by 1991, already transferred to Alpine all his rights to the technology the subject of his 1992 agreement with Multinail. Taylor disputed Alpine’s claim by his letter dated 30 June 1993 and Alpine appears not to have pursued the matter. But Taylor was unable to get the complete plans and Multinail had to go ahead without them to try to develop a computerised saw. Mr Burgess, a research and development technician employed by Multinail, says he began work in early 1993 on the mechanical side of the task of developing the de Pauw drawings to the stage where a computerised saw could be made and that he would have worked on it for a “couple of months” before handing the part-completed task to another Multinail employee, Mr Ian Bird. The de Pauw drawings did not include any drawings or specifications for the electronic components of the saws. It was not until mid to late 1994 that Multinail began to look at developing the electronic components of the Command or Mark IV Saw.
Only in October 1993 did Multinail produce the first saw developed from the de Pauw plans: this was sold to Mr John Potter’s Universal Trusses in Canberra. It was a Master Saw Mark I or “Compact” Saw; this is described by Mr Bagnall, an electrical engineer in charge of Multinail’s saw manufacturing operations, as “power-assisted”, but not automated or computerised. Bagnall describes the Mark II Master Saw as “a semi automated sequenced drive system powered by a P.L.C. [programmed logic control] and C.P.U. [central processing unit]”: it is not a fully computer-controlled saw either. He describes the Mark III saw as “a fully automated computer controlled system”: but the cutting information is loaded into the Mark III saws that Multinail has built by being entered through the keypad on the computer incorporated in each saw. He describes the Command Saw as “a fully automated computer controlled system linked to TrusSource design software or any other software”. He said that, between October 1993 and the date of his affidavit, 13 June 1995, three Mark I, three Mark II and two Mark III saws had been built and put into service.
Dew at one stage suggested Multinail started building its advanced technology saws from the day it got the de Pauw plans; and that one saw was supplied to Universal Trusses in May 1993. Taylor said the first saw from the de Pauw plans was nearly complete in March and they were testing it in May. I reject this evidence. The first saw based on the de Pauw plans was only delivered to Universal Trusses on 15 October 1993. It appears there was some difficulty with this saw No MM-CS4001. An invoice for $83,500 was issued by Multinail to Universal Trusses in September 1993, and a second invoice or “quotation” for $89,000 for this same saw was sent by Multinail in March 1994. Taylor suggested the delivery of two invoices such a long time apart may have had something to do with Universal Trusses seeking finance for the saw. However, Bagnall, who prepared the second invoice, while denying that there were any major structural or mechanical alterations made to the machine, said that Potter required adjustments to be made to the saw, as a result of an electrical malfunction. But that does not explain the terms given to Universal Trusses and set out in the second invoice (even though the document does contain a request by Multinail that “In return, we simply ask that all truss plate and ancillary items are purchased from Multinail”): a credit of $15,000 immediately, followed by monthly credits of $1,750 for the next three years, plus a 12 month warranty on the altered saw commencing from delivery on 15 October 1994, as well as repairs “to bring [the] machine up to scratch”. Multinail did not produce any operations manuals for any of its Master Saw range until 1994. Bagnall also said that, between the end of 1993 and early 1994, Multinail was engaged in certain redevelopment work on the sub-structure of the Mark I saw. Dew acknowledged that the Mark I saw ultimately delivered to Universal Trusses in late 1993, the first developed from the plans purchased from Delbeike in late 1992, took a lot longer and was more costly to build than would have been the case if the Delbeike information had been complete. The evidence suggests the Mark I saw first delivered to Universal Trusses in October 1993 was effectively a prototype on which Multinail had to carry out further development work to get it into production in early 1994.
The first Mark II was supplied to Slyco in July 1994; it initially contained certain design defects which had to be remedied before it could be put into use. The first Mark III was supplied to Slyco in October 1994. Even at the date of trial, no Mark IV saw or Command saw (the only kind of saw that is fully automated and downloadable) had been made.
Even if Multinail should be regarded as only having represented that it could supply “against forward orders”, in January 1994 Wise asked Multinail how long it would take to get a fully computerised, downloadable saw: he was told that a computer-controlled saw linked with the Multinail software would take a lead time of twelve months to produce and even so, the download to that saw would be by floppy disk and only 15 axes of the saw would be computerised, when Wise wanted all 18 to be computer-controlled. Soon after, Multinail submitted a tender to Campbells for the supply of such a saw. The tender was not acceptable to Wise (or Robertson). Wise advised Multinail by letter of 21 February 1994 that he required that all 18 axes be computerised and that the design information be downloaded directly from Multinail’s software, not via a disk. This letter also contained the terms on which Campbells was prepared to buy such a saw from Multinail. One of these terms required the inclusion in the proposed contract of a penalty clause, if the computerised saw Wise specified was not fully installed and working by 31 December 1994. Multinail’s response was to withdraw its tender. Bagnall gave evidence that the reason for the 12 months lead time proposed in Multinail’s tender was the then-existing demand on Multinail’s productive capacity. I do not accept this explanation: it is contradicted by Multinail’s order book. It is more likely that the reason for the 12 months lead time was that the Universal Saw delivered in October 1993 was something of a prototype and Multinail, in January 1994, was not confident it could develop and deliver a Mark IV saw, three editions more advanced than the saw delivered to Universal Trusses, within 12 months.
Dew says that, although Multinail wanted to get the machinery order, they were only prepared to get it on commercially realistic terms and were not prepared to accept the “unreasonable” liquidated damages clause proposed by Wise; this is so even though they were given 12 months to deliver the saw. Taylor says he withdrew the tender because it relates to saws and jigs, and Wise’s letter suggested Wise was only interested in purchasing saws, so Taylor wanted to re-submit his quote dealing with saws only. But by this time Taylor was well aware, following his conversation with Wise on 18 February and the letter of 21 February 1994, of the importance of a fully automated and fully downloadable saw. The most likely explanation is that Multinail withdrew its tender because it could not risk exposure to liquidated damages, even though given one year to deliver the saw, since it could not be confident of developing and manufacturing the Command saw which would not, any event, have satisfied Wise’s requirements.
The delivery time for the Auto Omni saw, in contrast, was substantially less than 12 months: three to five months, ie, the time necessary to arrange for manufacture and delivery from the United States. The first to come to Australia arrived in February 1993.
Taylor contended that all the ESCO machinery which Pryda ultimately supplied to Campbells in 1994, eg, the Auto Omni saw and the Omni Jetset jig, could have been supplied by Multinail as at 20 May 1993: he relies on a letter of 27 March 1995 from a Canadian dealer, Pacific Automation, as evidencing that Multinail could have obtained the Auto Omni saw and Jet Set jig from that dealer for on sale to Campbells in early 1993. But Taylor never contacted ESCO to see if this was, in fact, practicable: he said that no one ever asked him to supply an Auto Omni saw, and so he never tried. Kearon claims that Pryda has an exclusive distributorship arrangement with ESCO for the supply in Australia and New Zealand of Auto Omni saws and Omni Jetset jigs, a claim he supports with a letter confirming this arrangement from the President of ESCO. Taylor did not suggest that, prior to the commencement of the litigation, he ever drew Campbells’ attention to the possibility of Multinail supplying Campbells with ESCO saws and jigs. I do not accept that Multinail would have been able to procure such equipment from Pacific Automation in Alberta for on sale to Campbells at any time in 1993 or 1994. In any event, Multinail’s representations were to the effect that it produced its own equipment, including saws, which were at the forefront of technology, a representation not satisfied by an alleged ability on the part of Multinail to procure the saws of another manufacturer for sale to Multinail’s customers.
For Multinail to say in May 1993 that its saws were at the leading edge of technology was false. Multinail well knew that. It was aware of the Auto Omni saw well prior to early 1993: the Auto Omni saw had been in production in the US by ESCO since 1985. Multinail’s case is that it had some fairly easily remedied operating deficiencies, eg, it was poorly guarded: but that does not detract from the fact that the Auto Omni saw was, in early 1993, available in Australia and far more technologically advanced than any saw Multinail was then capable of producing (although, like the Pryda software, it too was not trouble-free, at least so far as concerns Campbells’ experience with it in October 1994). Multinail had purchased design information from Delbeike in late 1992 with a view to developing more advanced saws, including computerised saws, than those which it was then making. But, as at May 1993, because of the deficiencies in the Delbeike information, it was in the midst of grappling with developing its first compact or Mark I saw, ie, the simplest of its new range of saws, and was a long way from being able to produce a saw as advanced as the Auto Omni.
I accept that the representations alleged in paragraphs 5(b)(ii), (iii), (v) and also 5(b)(i) and made by Multinail were misleading in so far as they extend to truss making saws, a most important type of truss making machinery. I have already referred to the limited evidence which does not enable me to make any finding whether Multinail, as at May 1993, had the capacity to produce a fully-computerised and downloadable jig. I am not therefore prepared to find that Campbells has shown that the Multinail representations in paragraphs 5(b)(ii), (iii), (iv), (v) and also 5(b)(i) of its pleading were misleading, in so far as they cover jigs.
Multinail’s contention, advanced in material filed well before trial, that in May 1993 it had an existing capacity to produce and deliver a saw that was at the leading edge of technology, a contention it persisted in trying to maintain through the trial, was exposed as one without any substance, as the trial proceeded, in part by documentation belatedly discovered by Multinail to Campbells. It was a contention that those controlling Multinail must have known could not be substantiated, when they decided to make it. That Multinail was aware of the falsity of its representations as to the sophistication of its saws is further shown by the evidence concerning the ploys adopted by Multinail employees in seeking to sell Multinail saws. Auslebrook, a New South Wales truss manufacturer, attended an industry exhibition in Sydney in March 1995; he was there told by Burgess, the Multinail research technician, that Multinail had available a fully computer-controlled downloadable saw. Auslebrook pressed Burgess for details; he had just spent $400,000 on an Auto Omni saw. He was given a number of different explanations as to where he could see the Multinail saw and, when he maintained his interest, he was ultimately told by Burgess that Multinail did not have such a saw either in production or under development, but would be very interested in developing one jointly with someone prepared to invest in that development. I accept Auslebrook’s precise evidence, in view of the likelihood of his interest in whether Multinail had a saw comparable to the Auto Omni which he had just bought and in view of Burgess’ vague evidence concerning the particular industry exhibition. Auslebrook’s experience with Burgess is also similar to that which Mr Spriggs, a Victorian truss maker, had in early 1995 when he spoke with Mr Ford and McGraa of Multinail about his interest in acquiring a fully computerised saw. No doubt Multinail, which had produced a number of increasingly sophisticated Master saws ranging from Mark I through to Mark III between late 1993 and early 1995, then felt sufficiently confident to undertake development of a fully computerised saw. But even as late as 1995, that would have involved Multinail in moving into a yet more sophisticated area of saw manufacture than it had hitherto undertaken.
Compatibility of Nail Plates
Campbells alleges that Taylor made a further oral representation in a telephone conversation on or shortly prior to 20 May 1993:
5(c) - that the respondent’s nail plates could be used in truss manufacturing equipment available from or supplied by sources other than the respondent.
Although Robertson, in his detailed statement, sets out at length his account of various conversations in which various of the oral representations relied on by Campbells were made to him, all he has to say in support of this allegation in Campbells’ pleading is that the eleventh of 11 different considerations that he claims influenced his decision to sign the agreement of 20 May 1993 was that: “Peter Taylor also assured me that Multinail nail plates could be used in any truss manufacturing equipment. He assured me of this consistently until March, 1994.” The only evidence that such a representation was made comes from Robertson; he does not attempt to put in context when, prior to 20 May 1993, he says Taylor made this representation; he deals with the matter in the briefest of ways.
Taylor says that the substance of this statement attributed to him by Robertson is, in fact, true. But he denies making the representation alleged at the time alleged. He says the question of the compatibility of nail plates was only raised at a much later stage, after Robertson advised him in early 1994 that he intended to purchase Pryda nail plates, because he was purchasing Pryda equipment: the reason Robertson gave him for changing to Pryda nail plates was that Multinail plates could not be used with Pryda equipment. Taylor told Robertson that was incorrect and that Multinail nail plates could be used in any manufacturer’s equipment. Some confirmation for what Taylor says is provided by paragraph 70 of Robertson’s statement: Robertson says that at the meeting on 23 February 1994, at which Taylor withdrew Multinail’s tender for the supply to Campbells of new saws and other equipment, he told Taylor of Pryda’s superior equipment and software and that they had offered Campbells better prices for nail plate supply than those which Campbells were paying to Multinail under the 20 May 1993 agreement; he says that when Taylor withdrew the Multinail tender, he told Taylor Campbells would continue to take the nail plates they required for their Townsville, Mackay and Rockhampton plants, but would use Pryda nail plates in the other plants. Robertson says that in the course of this conversation: “I also asked ‘incidentally are your nail plates identical to Pryda nail plates and will they work with Pryda software in this new equipment’.” Taylor says Robertson did ask such a question on this occasion and that he responded by saying “the plates are identical and will work”.
Counsel for Multinail refers to evidence to support Taylor’s evidence that Multinail nail plates can be used with other truss manufacturing equipment that was given by various truss makers: Sly, Tapiolas and Bite. Mr Hawkins of Bostich, a Multinail competitor, also agreed that “in the main” one manufacturer’s nail plates are interchangeable with other manufacturers’ pressing machinery.
I accept that in a physical sense, it is possible to use nail plates supplied by any manufacturer in equipment supplied by the others. But there is a practical problem if one maker’s plates are used with truss design software of another maker, a problem to which Robertson was, by early 1994, alert, as paragraph 70 of his statement shows. The nail plates of the different makers differ as to tooth shape, tooth spacing and strength. The engineering values of the nail plate to be used are programmed into the truss design software; if the software is Multinail software, then the Multinail nail plate engineering values will already be programmed into it. The truss is designed by the truss maker’s detailer who uses this software to do that and the truss is manufactured in accordance with that design. The integrity of the truss is jointly guaranteed by the truss manufacturer and the nail plate manufacturer; this is a requirement of local councils and other building authorities. Whilst it may theoretically be possible for other engineering values to be keyed into one plate manufacturer’s design software, to enable other manufacturers’ nail plates to be used, as Dew suggests is the position, Hawkins says this does not happen in practice. He says each manufacturer’s software is protected by copyright; once the fabricator is using a particular manufacturer’s software, his only practical choice is to use that manufacturer’s nail plates. Otherwise he may face a copyright infringement claim and will not be able to give the guarantee of the design integrity of his trusses that building authorities require. Kearon of Pryda confirmed that if Multinail nail plates were used with Pryda software operating the Omni equipment, Pryda would not guarantee the integrity of the truss design. What Hawkins says explains the common practice in the truss making industry of nail plate suppliers offering software and computer equipment free of charge to truss fabricators: by this means, a plate supplier is able to lock truss makers into using only its plates.
By the time in late 1993 or early 1994 when the decision was made to re-equip the larger truss plants with Pryda equipment, Campbells was committed to a nail plate supply agreement requiring it to procure all its plates from Multinail for a further two years. Robertson says that, when he signed the agreement on 20 May 1993, he did not understand the connection between software, automated manufacturing equipment and nail plates. (Campbells were then using Multinail plates and software but its truss making machinery was supplied by others.) But by late 1993, when Robertson intended to re-equip some of Campbells’ plants with Pryda products, an intention carried into effect in early 1994 immediately after Taylor withdrew Multinail’s own tender for new equipment, Robertson was aware of the practical difficulties for Campbells if it were to attempt to use Multinail plates in Pryda machinery controlled by Pryda software. He says that by early February 1994: “it was apparent to me that if we bought equipment and software from a particular supplier, we would also need to purchase plates from that supplier.” Robertson also realised by late 1993-early 1994 that Campbells could “fall between two stools” if anything went wrong, ie, it would be difficult to identify who was responsible for any problems with Campbells trusses if it used Multinail plates with Pryda equipment and Pryda software. At the meeting of 24 March 1994 called by Taylor and Dew, after Multinail had, to Robertson’s knowledge, written to Pryda threatening them with legal action in respect of their having induced Campbells to breach its contract of 20 May 1993 with Multinail, Robertson says he told Taylor and Dew that: “Having elected to use Pryda software which is necessary to drive the saw and jigs, the integrity of the design will depend on using Pryda nail plates. Pryda has also guaranteed performance of all equipment and I have to be able to hold one party responsible for the equipment’s performance. It would only give Pryda an escape hatch if we used plates from other suppliers and the equipment did not perform.” He says that he made it clear to Taylor at this meeting that he believed there were good technical reasons why Campbells had to use Pryda plates in the Pryda equipment and software that they intended to acquire in order to be able to hold Pryda contractually responsible should there be any problems.
I have already explained why I do not regard Robertson as a source of reliable evidence. I am not prepared to find, on the basis of Robertson’s brief statement, that, prior to contract, Taylor made any representation of the kind alleged in paragraph 5(c) of the further amended statement of claim. When Robertson signed the agreement of 20 May 1993, he was, on his own evidence, ignorant of the practical difficulties of using one manufacturer’s plates with another’s software. I think it was only when he decided upon Pryda equipment and software and learned of this practical problem if Campbells were to continue to use Multinail plates, that I think he first turned his mind to the matter. I also think that it was only after Robertson became aware of these considerations that there was any discussion with Taylor, probably instigated by Robertson, about whether Multinail plates were compatible with other manufacturers’ software and equipment; this took place in late 1993, at the earliest.
Reliance
I have found that Multinail made misleading representations to Campbells prior to the latter’s entry into the 20 May contract, with respect to the level of technology of its saws and with respect to its software, in so far as it lacked the capacity to operate in a networked environment that it was represented to have. However, for Campbells to escape liability under the agreement of 20 May 1993, it must be shown that Robertson relied on those misleading representations in entering into that agreement. I am not prepared to find that Robertson did that.
A finding that Campbells placed reliance on Multinail’s misleading representations as to its saws and software in entering into the agreement of 20 May could only be made if Robertson’s evidence to that effect is acceptable. I am not prepared to accept that evidence, since there is, in my opinion, no convincing corroboration for what Robertson has to say about committing Campbells to the agreement of 20 May in reliance on the correctness of what he was told by Multinail about its machinery and software.
It is apparent that Multinail’s software of the kind installed at Campbells in May 1993 did not, without substantial modification, have the capacity to support a fully networked operation of the kind Wise considered necessary for Campbells. The evidence indicates that it was not until the end of 1994 that Multinail modified its software to give it this capacity. I also accept that, despite what Wise was told by Multinail prior to 20 May 1993, Multinail’s software did not then have, for any practical purpose, the limited networking capacity that, eg, Truskinger told Wald on 21 April it did have. But there is no justification, in my opinion, for a conclusion that, if Robertson had, at 20 May 1993, known that the Multinail software then installed at Campbells was only effective in supporting stand alone PCs and could not be used to permit the networking of the PCs, he would have refused to commit Campbells to the new nail plate supply agreement.
Wise, the consultant on whom Robertson relied and who, to the exclusion of all of Campbells staff save Clarke, was Campbells’ main witness, quickly learned that Multinail software lacked the networking features that he considered so important: he confirmed in his evidence that, by the time he sent his facsimile of 3 June 1993 to Truskinger, he was aware of that and said that thereafter, he tried to devise a way “to alleviate the problems”. To this end, in conjunction with Multinail’s staff, he conducted tests on Multinail’s software in July and was in fairly continuous contact with Multinail’s staff through at least into October 1993. He says that, by then, he was aware that making Multinail’s software fully networkable was likely to be very time consuming. He says he discussed this deficiency in Multinail’s software with Robertson on a number of occasions and “particularly in the period from December 1993 to February 1994”. His proposed solution initially was for his company, Wise Technology, to develop software which would overcome the problem. But he says Robertson rejected this because of his having become aware by then of the need to use the same maker’s software and nail plates.
Robertson himself says that Wise was always very critical of the Multinail software because it could not be networked. Robertson suggests that Wise’s criticisms, together with his disillusionment with Multinail’s equipment installed in the Townsville plant that had generated problems by September 1993 and his concern about the reliability of advice given by Taylor in November 1993 as to new equipment needed at the Bundaberg plant, ultimately played a part in causing him to set up what he described as “a full scale investigation to find the most commercial solution for Campbells” in November-December 1993. Robertson says that, from late 1993, Taylor was kept informed of this investigation, which included the assessment by Campbells of the equipment of other manufacturers, even though he told Taylor that he still regarded Multinail as the preferred supplier. Robertson also says that, in this context, Taylor was told “he had to address the software issues (which we thought he could do)”. Yet Wise, who plainly kept Robertson fully informed throughout 1993 and early 1994, says he was aware, by October 1993, that Multinail software, for practical purposes, lacked the all important networking capacity. Despite the knowledge Robertson must have had by October 1993 of this networking deficiency in Multinail’s software, he did not reject Multinail as the organisation which Campbells might ultimately select as the supplier of the new equipment and software that he had by then decided Campbells should acquire.
Robertson also says that, as information was gathered in the course of the Campbells’ investigation about other manufacturers’ equipment which might serve Campbells’ purposes and after a quote for such equipment was obtained from Pryda at the end of 1993, he still tried to persuade his advisers, who included Wise, to stay with Multinail “as a change in supplier would require a change in software and training programs”. He carefully considered estimates prepared by Mr Fittler, also of Campbells, of the financial position for Campbells if it changed to Pryda nail plates and software instead of staying with Multinail nail plates and software: Campbells had received from Pryda a quote for the supply of nail plates at prices substantially less than those Campbells was paying to Multinail. At the beginning of February 1994, he told Taylor of this and gave Taylor a list of the new machinery on which Pryda had quoted so that Multinail would have an opportunity of tendering for the supply of the same kind of new equipment. Robertson says that, at this time, he well realised that, if Campbells bought equipment and software from a particular supplier, it would also need to purchase nail plates from that same supplier.
Following receipt of Multinail’s tender for new machinery on 9 February 1994, Robertson prepared a memorandum for Marsh and Wise in which he identified the issues he considered favoured Pryda and those which favoured Multinail as the organisation to be awarded the new machinery supply contract. Favouring Pryda was, firstly, the fact that it had proven saws, jigs and presses which Campbells were interested in acquiring, whereas Multinail could not point to anywhere where the equipment the subject of its tender was actually operating and, secondly, the fact that Pryda’s nail plate prices were lower than Multinail’s. The first two points that Robertson considered favoured Multinail’s tender were:
“1.One supplier responsible for lot - software will work.
2.Staff trained and familiar with software etc.”
His memorandum called on Marsh and Wise to discuss his points and reach a consensus promptly and advise him of their view.
By this stage, Robertson was, as he says, well aware of the deficiencies long the subject of comment to him by Wise, of the lack of networking capacity in the Multinail software. But Robertson clearly did not regard himself as having been misled by what he had been told by Multinail earlier in 1993 about the excellence of its software. Moreover, the complaint by Campbells that Multinail’s representations as to the quality of its software were false because it was not networkable only emerged late in the day. Although Robertson, in his statement of 3 May 1994, mentions passing on to Taylor Wise’s reports of 19 April and 1 May 1993 in which Wise advocated the advantages of networkability, he says nothing at all to suggest that he accepted Wise’s recommendation or that he placed any significance on Multinail’s software having the capacity to support Campbells’ computers in a network. The only mention Robertson makes of Wise’s constant criticisms of the lack of networking capacity in Multinail’s software is that these criticisms played a part in his ultimately establishing the investigation in late 1993 that resulted in Campbells deciding to acquire new equipment and nail plates from Pryda, in the course of which investigation he says he told Taylor that Multinail would have “to address the software issues”. Robertson nowhere says he regarded himself as having been misled at the time he signed the 20 May agreement into believing that Multinail’s software was networkable. The first statement of claim of 19 May 1994 pleads a misrepresentation that Campbells could supply the most advanced flexible truss manufacturing equipment, computer software and nail plates, a misrepresentation repeated in its amended statement of claim of 10 June 1994; Campbells’ further particulars of the allegation that this representation was false, provided in September 1994, make no mention of the lack of networking in Multinail’s software. It was not until Campbells filed its further amended statement of claim on 24 March 1995 that complaint was made, for the first time, by Campbells that Multinail had misrepresented its software because that software was not networkable.
In the mass of documentation in evidence concerning Multinail’s software, which includes correspondence between Wise and Multinail, internal Multinail memoranda and internal Campbells memoranda, there is, consistently with what Robertson had to say in his own memorandum of 11 February 1994, an absence of any suggestion of concern on the part of Robertson about the lack of networking capacity in Multinail’s software. It is plain that Wise regarded this as an important deficiency; he told Robertson so in his reports of 19 April and 1 May 1993. But I do not accept that Robertson, as early as the time he signed the agreement of 20 May 1993, shared that view at all. The absence of any such concern on his part in the contemporaneous documentation and the positive indication in his conduct in late 1993-early 1994 that culminated in his memorandum of 11 February 1994 of lack of any such concern, coupled with the references in the material to Campbells’ detailing staff being satisfied with the existing Multinail software and the late emergence of complaint, in my opinion, prevent Campbells from being able to establish that Robertson relied on the representations made to him by Multinail as to its software, which I have found to be misleading, in deciding to commit Campbells to the 20 May 1993 agreement.
For similar reasons, I am not prepared to find that Robertson placed any reliance on Multinail’s misrepresentations as to the technologically advanced nature of its saws when he committed Campbells to the agreement of 20 May 1993.
The evidence to which I have already referred showing that Robertson insisted into early 1994 that Multinail continue to be considered as a possible supplier of the new equipment he had then decided Campbells should acquire is inconsistent with his having regarded himself as having been misled by what Multinail told him about its equipment at the time he signed the new agreement in May 1993. By late 1993, Robertson was well aware that the Auto Omni saw was much more sophisticated than anything that Multinail could supply. He acknowledged this in his memorandum of 11 February 1994, to which I have already referred; far from ruling Multinail out of consideration for the new machinery contract because it had misled him in May 1993 into thinking that its saws were the most technically advanced available, he insisted that Multinail remain a candidate for the award of the contract and that Marsh and Fittler give him their views on the entire package, comprising both new machinery and nail plates, that Robertson had then identified Campbells should acquire and whether it would be more advantageous for Campbells to contract with Pryda or with Multinail. There is also a lack of complaint, not only by Robertson in his statement of 3 May 1994, but also in the contemporaneous documentation of any concern by Campbells with what it had been told by Multinail prior to 20 May 1993 about the sophistication of Multinail’s saws that is similar to the lack of complaint in respect of what Multinail then said about its software. It was not until Campbells provided further particulars of the allegations in the first two versions of its statement of claim that Multinail had falsely represented it could supply the best and most advanced flexible truss manufacturing equipment that Campbells first indicated that Multinail’s pre-contract representations as to its saws were false because others, including Pryda, could supply saws which were downloadable from the design software.
It is very likely, in my opinion, that it was Robertson’s realisation in late 1993 or early 1994 that Campbells could not continue to use Multinail plates in the Pryda equipment he had by then decided to acquire and his determination nevertheless to proceed with the Pryda acquisitions in the full realisation that that would put Campbells in breach of its agreement with Multinail that precipitated this litigation; it was only after it became imperative to get out of the Multinail supply agreement, because of the decision to re-equip with Pryda plant, that some excuse had to be found to justify the clear breach of contract to which Robertson was then committed.
Once Multinail made it clear to Campbells, by the letter Taylor sent to Robertson immediately after the meeting of 24 March 1994, that Multinail would not release Campbells from the agreement of 20 May 1993 to the extent necessary to permit Campbells to acquire Pryda plates for use at the large plants at Oxley, Caloundra and Bundaberg which it intended re-equipping with Pryda equipment, and intended to commence proceedings against Pryda to prevent their intrusion into Multinail’s existing contractual relationship with Campbells, Robertson had to find some basis for getting out of the contract with Multinail. He focuses in his statement of 3 May 1994 on the representations he claims Taylor made with respect to the nature of the 20 May agreement and to a lesser extent on the representation as to the compatibility of Multinail plates with other makers’ equipment and software. But he has little to say in his statement about the representations concerning Multinail’s advanced machinery, including its saws and concerning its software, which I have found includes a misrepresentation as to it being fully networkable, compared with the complaints that could be expected if the position was, as Campbells now contends, that Robertson placed such significance on the latter representations that it could properly be said that he relied on them in deciding to commit Campbells to the new agreement on 20 May 1993. It seems to me Robertson was fully prepared to enter into the plate supply agreement in May 1993, when he did not at that stage envisage changing plate supply.
There will therefore be judgment for Multinail on Campbells’ application. Once it is clear that Campbells cannot avoid the contract of 20 May 1993, it has no answer to Multinail’s cross-claim. There will therefore also be judgment for Multinail on its cross-claim. There will be the enquiry Multinail seeks by the District Registrar as to the damages Multinail has suffered from Campbell’s breach of contract.
The issue as to whether Multinail, in May 1993, had the capacity to produce a fully downloadable saw was the major issue litigated in terms of time spent at the trial. It was an issue which I have said Multinail must have known it could not hope to win, something that became very clear as the full story of Multinail’s difficulties in developing a fully computerised saw from the de Pauw plans emerged during the course of the trial. Multinail’s documents relating to the development of its saws from the de Pauw plans were of central significance to this major issue in the case. The fact that Campbells’ solicitors apparently accepted for a time Multinail’s assertions with respect to Multinail’s non-disclosure of all these documents does not detract from the plain relevance of the documents in question. For these reasons, I consider that Multinail’s failure on this issue, notwithstanding its success in the action, justifies depriving it of a successful litigant’s ordinary entitlement to all its costs. Most of the costs of this litigation will have been incurred in the action commenced by Campbells, with a limited amount of costs only being incurred in Multinail’s cross-claim. Campbells will be ordered to pay one half of Multinail’s costs of Campbells’ proceeding. Campbells must pay all of Multinail’s costs of its cross-claim.
I certify that this and the preceding 69
pages are a true copy of the reasons
for judgment herein of the Honourable
Justice Drummond.
Associate:
Date: 25 March 1997
Counsel for the applicant: G M Egan
Solicitor for the applicant: Hill & Taylor
Counsel for the respondent: E J P F Lennon QC
Solicitor for the respondent: Kinneally Mahoney
Solicitors for Pryda (Australia)
Pty Limited; C J Rogers and
K RSheldrick: Arthur Robinson & Hedderwicks
Dates of hearing: 4-15, 21 March 1996 and 27 May 1996
0