TMA Australia Pty Ltd v Indect Electronics and Distribution GmbH
[2013] NSWSC 1375
•20 September 2013
Supreme Court
New South Wales
Medium Neutral Citation: TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2013] NSWSC 1375 Hearing dates: 10, 13 September 2013 Decision date: 20 September 2013 Jurisdiction: Equity Division Before: Robb J Decision: 1. Interlocutory orders will be made generally in the form of the draft short minutes of order provided by the plaintiffs.
2. The court will hear the parties as to the precise form of the orders.
3. The costs of the interlocutory application will be each party's costs in the cause.
Catchwords: INTERLOCUTORY RELIEF - balance of convenience - mandatory interlocutory injunction - breach of contract - implied terms in contract - conventional estoppel - unconscionable conduct - assurances by defendant Legislation Cited: Australian Consumer Law
Competition and Consumer Act 2010 (Cth)Cases Cited: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57
Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499
Megaloconomos v Metro Goldwyn Mayer Pty Ltd (1953) 54 SR (NSW) 275
Patsalis v State of New South Wales [2012] NSWSC 178
The Mayo Group International Pty Ltd v Hudson Respiratory Care Inc [2005] NSWSC 445Category: Interlocutory applications Parties: TMA Australia Pty Ltd (First Plaintiff)
TMA Tech Pty Ltd (Second Plaintiff)
Indect Electronics & Distribution GmbH (First Defendant)
Indect Pty Ltd (Second Defendant)Representation: Counsel:
M Einfeld QC with J L Clark (Plaintiffs)
M Dicker SC with J O'Connor (Defendants)
Solicitors:
JDK Legal (Plaintiffs)
Mason Black Lawyers (Defendants)
File Number(s): SC 255364/13 Publication restriction: Nil
Judgment
The first plaintiff ("TMA Australia") and the second plaintiff ("TMA Tech") are both subsidiaries of a company called TMA Group of Companies Ltd.
TMA Australia was, until 2 December 2009, called TMA Group of Companies Pty Limited. On that date the first plaintiff changed its name to its present name.
Both plaintiffs are incorporated in Australia. Relevantly, they have engaged in the business of supplying car parking guidance systems for installation in car parks, including shopping centre car parks, since 2008.
From its inception until 30 June 2011 the business was conducted by TMA Australia. TMA Tech has conducted the business since 1 July 2011.
The first defendant ("Indect E & D") is a company incorporated in Austria. Indect E & D has at relevant times engaged in the business of supplying hardware and software components for car parking guidance systems. Indect E & D's factory and warehouse facilities are situated in Austria. Orders for products sold by Indect E & D must be sent to Austria, and the product delivered from there. Indect E & D maintains a computer facility in Austria which can be used for the remote diagnosis and rectification of defects in the software components of Indect E & D's car parking guidance systems installed in other countries, such as Australia.
The second defendant ("Indect PL") is an Australian company. It is almost wholly owned by Indect E & D. Indect PL has from time to time acted as the Australian representative for Indect E & D, and provided services to that company in relation to the marketing of its products in Australia. Indect PL does not maintain stocks of spare parts or other components of Indect E & D's car parking guidance systems. Indect PL does not employ any technicians.
At all relevant times Mr Anthony Karam has been the chief executive officer and a director of both plaintiffs. Mr Mosstyn Peter Howell is a sales director employed by TMA Tech. Both gentlemen swore a number of affidavits on behalf of the plaintiffs, which were read in the application.
Mr Ingo Herwich is a director of Indect E & D. Mr Dale Fowler is a director of Indect PL. Mr Fowler is the only employee of Indect PL. The affidavit evidence of these gentlemen was read on behalf of the defendants.
There was no material dispute between the parties concerning the nature of the product supplied by Indect E & D. Since about 1993 Indect E & D has developed a business supplying car parking guidance systems. It has carried out the design work necessary to develop its product at its office at Brunn am Gebirge, Austria. Mr Herwich called the company's product the "IED guidance system", and it will be convenient to use that name. The IED guidance system uses electronic sensors and lights to assist the drivers of motor vehicles to locate free car spaces in a car park. Once the guidance system is installed, a light is positioned above each car space. If a car space is free, the light above that space is green. If a car space is occupied by a vehicle, the light above that car space is red. The guidance system consists of the parts and components which form part of the hardware, including the lighting and signs that are installed in the car park, and the computer software used to operate the electronic lighting system.
It was common ground that the IED guidance system is a bespoke product, in the sense that the system must be specially designed to meet the idiosyncratic requirements of each car park operator, including concerning the number of available car parking spaces, the size and dimensions of the car park, and the functional requirements of the operator. The IED guidance system can be configured and programmed to offer various data gathering and display functions to the operator. An IED guidance system once installed in a particular car park is capable of expansion if the car park itself is expanded. As the IED guidance system is a bespoke product, the expansion of the system or the replacement or repair of defective parts or software requires access to Indect E & D's products and services.
An IED guidance system once installed in a particular car park has a service life of some 10 to 15 years or thereabouts.
As the IED guidance system is comprised of many mechanical and electronic components it will over the course of its service life require maintenance and the provision of replacement components from time to time. As the operation of the system depends on the effective operation of the installed software, which is prone to the development of occasional defects, access to suitably qualified technicians to investigate and repair software defects will be required.
If the maintenance of the hardware and software components of the installed IED guidance systems cannot be achieved by Australian hardware technicians and software engineers, the effective operation of the systems may require the supply of replacement components by Indect E & D, and the use of that company's computer facilities to investigate and repair software malfunctions. Mr Herwich gave evidence that Indect E & D employs technicians who provide ongoing second level remote computer technical assistance to the distributors of the IED guidance systems upon request. Those technicians are located in Brunn, Austria.
The parties agreed generally that in the period from 2008 TMA Australia and TMA Tech contracted with Indect E & D or Indect PL to acquire IED guidance systems to enable those plaintiffs to supply car parking systems to car park operators. In the following table the name of the relevant plaintiff and the date of the contract between Indect E & D or Indect PL and the particular plaintiff is taken from the relevant purchase order, except in the case of Top Ryde Shopping Centre, where the purchase order is missing, so the date given is the date of the quotation. The total cost in euros taken from the relevant plaintiff's purchase order is set out in order to give an approximate indication of the relative size of the contract.
TMA Australia
Date
Cost
Westfield Doncaster (Vic)
6.6.08
€444,975
Westfield Parramatta (NSW)
30.1.09
€380,433
Top Ryde Shopping Centre (NSW)
7.5.09
€361,889
Westfield Hornsby (NSW)
5.7.09
€381,745
Royal Children's Hospital (Vic)
1.4.10
€62,115
South Wharf Shopping Centre (Vic)
6.7.10
€6321
Centro Box Hill (Vic)
30.8.10
€81,587
Fisher Street Car Park, Fairfield (NSW)
31.8.10
€6485
The Concourse, Willoughby (NSW)
26.5.11
€79,121
Westfield Belconnen (ACT)
10.6.11
€407,892
TMA Tech
Rhodes Shopping Centre (NSW)
1.9.11
€275,594
IKEA Springvale (Vic)
8.7.11
€28,091
Warringah Mall Shopping Centre (Vic)
13.7.11
€56,389
Highpoint Shopping Centre (Vic)
19.4.12
€617,205
Perth Arena (WA)
9.7.12
€98,500
It was common ground between the parties that no distribution agreement, and in particular no exclusive distribution agreement, was ever entered into between either of the plaintiffs and Indect E & D. The plaintiffs do not claim any relief on the basis that they have a legal right to distribute Indect E & D's products and services in Australia. The plaintiffs' claims relate solely to the IED guidance systems which they have already acquired from Indect E & D for the purpose of providing the car parking systems listed in the table set out above. The plaintiffs accept that, save in relation to the rights which the plaintiffs assert they continue to have arising out of the specific contracts that they have already made with Indect E & D or Indect PL, the defendants have a free right to decline to deal further with the plaintiffs, or provide to them any additional goods or services.
Indect E & D supplies its products to other distributors in Australia, including Wilson Technology Solutions Pty Ltd, SABAR Technologies Pty Ltd and Team Electrical Australia Pty Ltd. Those companies are direct competitors of TMA Tech, being the plaintiff which now conducts the plaintiffs' business.
The commercial relationship between the plaintiffs and the defendants has entirely broken down.
In these proceedings Indect E & D has adopted the position that it will continue to honour all warranties which it has given to either plaintiff in connection with the supply of IED guidance systems to the plaintiffs.
However, Indect E & D declines to provide any replacement components or computer software services to either plaintiff for the purpose of ensuring the maintenance of the car parking systems which either plaintiff has sold to the car park operators referred to above, where the request for products or services is not covered by a subsisting warranty. That is the position whether or not one of the plaintiffs is contractually bound by an ongoing maintenance contract or any other obligation with particular operators.
Indect E & D will not take positive steps to prevent either plaintiff acquiring any necessary replacement components or computer software services provided that the plaintiff places an order with any of Indect E & D's other continuing distributors in Australia, and acquires the relevant products on the distributor's commercial terms. Indect E & D will supply any products ordered by its continuing distributors notwithstanding that the distributor will on-sell the product to one of the plaintiffs.
There are two proceedings on foot in this court involving the plaintiffs and the defendants. The first, being Case No 2012/262302, was commenced by TMA Tech against Indect PL by summons filed on 22 August 2012. TMA Tech filed a statement of claim in that matter on 26 November 2012. In essence TMA Tech claims orders to enforce what it alleges are software licences of indefinite duration relating to the IED guidance systems which Indect E & D sold to TMA Tech in relation to its contracts with Rhodes Shopping Centre and Warringah Mall Shopping Centre. The evidence suggests that the dispute that led to the commencement of these proceedings, as well as the commencement of the proceedings, was one of the causes of the breakdown in the commercial relationship between the plaintiffs and the defendants.
The second proceedings, being Case No 2013/255364, are the proceedings in which the plaintiffs make the interlocutory claim which is now before the court.
On 5 September 2013 the Chief Judge in Equity made an order by consent that the two proceedings be set down for hearing together commencing on 24 February 2014, with evidence in one being evidence in the other.
Consequently, the effective period of operation of any interlocutory orders which the court may now make will be from the date the orders are made until the trial judge gives judgment following the hearing beginning on 24 February 2014, or makes some other order which affects the continued operation of those orders.
The present proceedings were commenced by the plaintiffs when they were given leave on 22 August 2013 to file their statement of claim in court. On the same date the plaintiffs filed their notice of motion seeking the interlocutory relief which is the subject of the present reasons for judgment.
It will be convenient to outline the allegations made by the plaintiffs in their statement of claim, although the summary given will be confined to the information necessary to give a general indication of the causes of action asserted by the plaintiffs, and the basis of those claims in so far as may be relevant to the issue of whether the plaintiffs are entitled to the interlocutory relief which they claim.
In summary:
(1) The plaintiffs allege that the relevant plaintiff entered into an agreement with one of the defendants to purchase the IED guidance system which was necessary to enable that plaintiff to implement its contract with each of the 15 car park operators. In each case the contract is said to arise out of an identified quote provided by the defendant and an identified purchase order delivered by the plaintiff in response to the quote.
(2) Indect E & D is alleged to be the contracting party in relation to what are called the Doncaster Agreement, the Hornsby Agreement, the Parramatta Agreement, the Top Ryde Agreement, the RCH Agreement, the South Wharf Agreement, the Box Hill Agreement and the Fisher Street Agreement (with TMA Australia); and the Highpoint and Perth Agreements (with TMA Tech). Indect PL is alleged to be the contracting party in relation to the Concourse Agreement and the Belconnen Agreement (with TMA Australia) and the IKEA, Rhodes and Warringah Agreements (with TMA Tech).
(3) The plaintiffs allege that they entered into the written agreements set out in the schedules with the car park operators which are there identified.
(4) The plaintiffs allege that each contract between the plaintiff and a defendant contained an implied term (recognising that the relevant quotes and purchase orders did not contain express terms to the effect alleged).
(5) The implication of the terms was put separately on the bases that they were to be implied as a matter of fact, as a matter of law, or by course of dealing, or by custom and usage.
(6) Two implied terms were alleged by the plaintiffs to be included in each contract between the relevant plaintiff and Indect E & D or Indect PL as the case may be. The first, which was called either the Indect E & D Supply Term, or the Indect PL Supply Term, was to the effect that the relevant defendant would supply the relevant plaintiff "with spare parts and components in respect of the hardware and software for car parking guidance systems for the duration of the operation of the installation of each respective shopping centre or complex car park and/or the economic life of the hardware and software".
(7) The second implied term was described as the Indect E & D or Indect PL Support Term and was to the effect that the relevant defendant would provide the relevant plaintiff "with technical advisory services and support for the maintenance and repairs in respect of the hardware and software for car parking guidance systems in respect of the hardware and software for car parking guidance systems for the duration of the operation of the installation at each respective shopping centre or complex car park and/or the economic life of the hardware and software".
(8) The plaintiffs allege that each relevant defendant has breached each of the implied terms by conduct identified in the particulars to par 48, commencing on 30 April 2013.
(9) They further allege that they have suffered and will continue to suffer damage if the defendants do not supply them with spare parts and components and support in conformity with the Supply Terms and the Support Terms.
(10) By separate cause of action the plaintiffs allege that by communications dated 19 June 2013 and 6 August 2013 Indect PL hindered or prevented or interfered with the ability of each plaintiff to perform its obligations under its contracts with the car park operators, by making negative comments about the plaintiffs' capacity to perform the contracts, and advising the operators to deal in the future with distributors other than the plaintiffs.
(11) The plaintiffs separately allege that the defendants are estopped from denying assumptions which they induced the plaintiffs to make, called the Indect E & D or Indect PL Supply Assumption and the Indect E & D or Indect PL Support Assumption (which have similar content to the equivalent implied terms), arising out of representations identified in the particulars to pars 60 and 68.
(12) Separate conventional estoppel claims are alleged against each defendant based upon equivalent allegations to the estoppel claims.
(13) The conduct by the defendants on which the other causes of action are based is alleged by the plaintiffs to give rise to a claim that the defendants have engaged in unconscionable conduct under the Australian Consumer Law.
(14) Finally, the plaintiffs allege that the defendants have contravened section 46(1) of the Competition and Consumer Act 2010 (Cth) by having taken advantage of a substantial degree of market power in denying the plaintiffs the supplies sought by them (although this aspect of the plaintiffs' claim may be ignored for the purposes of this application, as their counsel indicated that it was not relied upon as a basis for obtaining the interlocutory relief which the plaintiffs have sought).
By their notice of motion seeking interlocutory relief the plaintiffs claim mirror relief against each of the defendants in relation to the contracts to which each defendant is a party. In summary the plaintiffs claim:
(1) An order, until further order, at general law or under section 232 of the Australian Consumer Law, restraining the defendant from supplying each of the car park operators listed in the schedules to the statement of claim "with spare parts and components in respect of the hardware and software for the car parking guidance systems at the shopping centres and similar complexes listed in" the schedules to the statement of claim.
(2) An order is sought on the same basis against each defendant restraining it "from hindering or preventing [the relevant plaintiff] from supplying each of the [operators] with spare parts and components in respect of the hardware and software for the car parking guidance systems in respect of the TMA Installations".
(3) An order is sought that Indect E & D supply each plaintiff with the "inventory" that is the subject of purchase orders identified in par 5 of the notice of motion.
(4) An order is sought, until further order, that Indect E & D provide each plaintiff in relation to the contracts that the plaintiff has entered into with car park operators: "(i) with spare parts and components in respect of the hardware and software for the car parking guidance systems; and (ii) with technical advisory services and support for the maintenance and repairs in respect of the hardware and software for the car parking guidance systems, on commercial terms no less favourable than those previously offered to [the plaintiffs] or previously provided to other similar purchasers".
During the course of final submissions senior counsel for the plaintiffs reformulated the interlocutory orders sought. Those orders will be considered further at the conclusion of these reasons. Senior counsel for the defendants advised the court in his opening submissions, quite properly in the court's opinion, that the defendants would not submit on the evidence that the plaintiffs had not established that there was a prima facie case or serious question to be tried in relation to the causes of action upon which the plaintiffs relied (which excludes the misuse of market power claim). However, the defendants would submit that the case was very weak, and was insufficient to justify the court granting the interlocutory orders sought by the plaintiffs.
Given the limited nature of the concession made by the defendants it will remain necessary for the court to consider the evidence to form a view about the strength of the plaintiffs' case in relation to the causes of action upon which they rely on this application.
As the plaintiffs accept that the defendants are free to decline to supply IED guidance systems or replacement components and services to enable the plaintiffs to enter into new contracts for the installation of car parking guidance systems, the issue is whether on an interlocutory basis the court should compel the defendants or either of them to supply replacement components and services in relation to any of the 15 existing installations.
For some time before the parties' commercial relationship broke down Indect E & D required the plaintiffs to pay cash before it supplied products and services. The plaintiffs accept that any interlocutory orders made by the court should provide for payment on the same cash terms.
The 15 installations appear to fall into three relevant categories; namely, installations in relation to which one of the plaintiffs has a current maintenance contract with the operator; installations which are still under the original warranty but are not the subject of any current maintenance contract, and installations which are no longer under warranty and are not the subject of a maintenance contract. The plaintiffs have not suggested that in the time between now and the determination of these proceedings at trial they propose to enter into any new maintenance agreements.
The evidence discloses that TMA Tech has entered into written maintenance agreements with the operators of the shopping centres set out in the following table. The table gives the date of the maintenance agreement, the commencement date for the provision of services, and the duration of the agreement. Westfield Parramatta and Hornsby are treated as being separate agreements for the purposes of the table, but in fact there is a single maintenance agreement between TMA Tech and Westfield in relation to those shopping centres.
Date
Commence.
Duration
Warringah Mall
13.10.11
1.9.11
10 years
Westfield Doncaster
19.4.12
1.4.12
5 years
Westfield Hornsby
19.4.12
1.4.12
5 years
Westfield Parramatta
19.4.12
1.4.12
5 years
Westfield Belconnen
19.4.12
14.10.14
5 years
Centro Box Hill
1.7.12
1.7.12
5 years
Mr Howell gave evidence at par 92 of his 21 August 2013 affidavit that at present the following four installations remain under warranty: Royal Children's Hospital (until 20 December 2013), Highpoint (until 13 March 2014), Westfield Belconnen (until 13 October 2014), and Perth Arena (until 24 October 2017). While Mr Howell's evidence does not make the position clear, the plaintiffs accepted that the four installations remain covered by Indect E & D's warranty (rather than any separate warranty given by one of the plaintiffs in its sale contract with the car park operator). Consequently, Indect E & D will honour the warranty obligations owed to these operators.
In relation to the balance of the installations the relevant supply agreements between one of the plaintiffs and the operator do not contain terms which require the plaintiff to provide maintenance services or replacement parts following the end of any applicable warranty.
The plaintiffs submitted that they are entitled to interlocutory orders which require the defendants to supply replacement parts and services in relation to the maintenance of the IED guidance systems which were supplied to operators who are not parties to current maintenance agreements, and whose installations are not under warranty, because assurances were given to those operators by the relevant plaintiff and Indect E & D, before they agreed to acquire an IED guidance system, that they would receive TMA support with assistance from Indect E & D throughout the operating life of the system. Those assurances gave rise, it was said, to a legal obligation on the part of the plaintiffs to provide maintenance services to the operators, but even if they did not the plaintiffs had what they described as a "moral business obligation" to assist the operators. Both the plaintiffs and the operators have relied upon Indect E & D to supply the necessary replacement parts and maintenance services. A long-standing practice has developed if not a legally binding obligation.
The plaintiffs' entitlement to interlocutory relief in relation to installations whose operators are parties to current maintenance agreements with TMA Tech may depend upon the terms of the maintenance agreements in so far as the performance of those terms requires the supply of replacement components or diagnostic and remedial services by the defendants. The plaintiffs submitted that although the various maintenance agreements were not in identical terms, the terms of each agreement were materially representative of the terms of the others, and that there were no significant or material differences. The defendants did not challenge this submission. The court will therefore consider, as a representative example, the Parking Guidance System - Maintenance Agreement (Doncaster) between Westfield Shopping Centre Management Co (VIC) Pty Ltd and TMA Tech, which is undated, but which was executed on behalf of TMA Tech on 19 April 2012. The material terms are:
(1) By clause 3.1 TMA Tech agrees to supply the Service.
(2) "Service" is defined in clause 1.1 as meaning "the provision of the service specified in Item 6 of Schedule 1 for the Shopping Centre".
(3) Item 6 of Schedule 1 describes the services as being "more particularly described in Schedule 2".
(4) Schedule 2 is a detailed scope of works. It provides for TMA Tech to conduct preventative maintenance and also supply reactive labour and parts in response to occasional defects which require remediation. Particular requirements include:
"Preventative Maintenance Including Re-Active - That Contractor will provide scheduled preventative maintenance services and re-active, business hours, maintenance services when required by the Manager under the fee structure identified in Item 4 of Schedule 1... All parts provided would be charged at the rates defined in TMA Inventory Schedule (Appendix 1)."
"Comprehensive Maintenance - the Contractor will provide scheduled preventative maintenance services, reactive business hours maintenance services and supply replacement parts when required by the Manager under the fee structure identified in Item 4 of Schedule 1."
"Contractor shall provide free remote access and phone assistance which will connect the relevant staff of the Manager with a suitably qualified technician. The suitably qualified technician must be able to remotely access the site..."
"The Contractor must maintain an adequate store of commonly required spare parts in order to replace defective parts and consumables within the agreed incident level timeframe. Less commonly required parts that are not held by the Contractor must be sourced in a timely and efficient manner in order to minimise equipment downtime. The Contractor will provide a clear delivery date upon the receipt of an order for stocked items and provide regular updates on the progress of the consignment..."
The scope of works includes provisions which govern the required response time by TMA Tech in relation to incidents with different levels of seriousness in relation to disruptions to the operator's car park.
(5) Under clause 7.2 the Manager may terminate the agreement if the Contractor fails to take all necessary action to rectify any breach of the agreement within seven days of being given written notice of the breach.
(6) The term of the agreement is defined in clause 1.1 by reference to Item 3 of Schedule 1, which provides that the term is for 5 years commencing on 1 April 2012.
It is necessary to examine the basis of the plaintiffs' claim that the defendants were, and remain, obliged to supply them with replacement parts and services to enable the plaintiffs to properly maintain the IED guidance system in the installations in which those systems have already been installed by one of the plaintiffs.
The plaintiffs started by relying on the physical nature of the IED guidance system, in that it is a system comprised of a substantial number of components which are inherently susceptible to mechanical or electrical failure, and which require for their effective operation to be controlled and monitored by a computer system operating on software, which would require support for its continued effective operation. During the lengthy expected service life of the installation in the ordinary course the need would arise for a significant level of replacement of the physical components and the diagnosis and remediation of software faults on an occasional and continuing basis. As the system is bespoke in the sense described above, so that replacement parts must be supplied by Indect E & D, and software developed by Indect E & D must be serviced by technicians familiar with the relevant codes held by Indect E & D, it would, so the plaintiffs argue, be obvious to a party in the position of the defendant who supplied the IED guidance system, as it would equally be expected by a buyer in the position of one of the plaintiffs, that the defendant would be prepared to supply replacement parts and services necessary for the ongoing maintenance of each installation during its service life.
That expectation, so the plaintiffs say, would be reinforced by the circumstance that Indect E & D is an Austrian supplier with no established repair and maintenance facilities in Australia. The product would be unattractive to potential purchasers unless Indect E & D persuaded purchasers that they could rely upon the availability of the necessary component parts and services to keep the installation operative over its service life by means of the local presence of a technically qualified repairer in the position of the plaintiffs, and the continuing ability and preparedness of Indect E & D to supply all necessary replacement parts and to support the installation by making available all necessary service support.
Mr Howell in his 2 September 2013 affidavit gave evidence of cooperation between the plaintiffs and the defendants in marketing IED guidance systems to car park operators. He said that prior to many of the presentations given to prospective customers he and Mr Fowler met to plan the presentation. On a few occasions Mr Herwich was said to be involved in the planning discussions. During the presentations potential customers asked Mr Howell and Mr Fowler about how the car parking guidance system would be supported following installation, including who would be providing any necessary maintenance and repair work and spare parts, who would be providing technical assistance, the availability of spare parts, the response time for maintenance, the terms of warranties, and the availability of maintenance agreements.
Mr Howell said that in relation to the Top Ryde, Royal Children's Hospital and The Concourse, Willoughby, Shopping Centres he gave a presentation with Mr Fowler to the potential customers. At these presentations he said in the presence of Mr Fowler:
Howell: "TMA's Indect's Australian-based partner. If you want an Indect car parking guidance system, you will be contracting directly with TMA. TMA provides a turnkey solution from Indect, so that no part of the installation or maintenance of the system is outsourced. With the support of Indect, TMA will maintain the system for the life of the equipment". "
Mr Fowler added words to the effect:
"Fowler: "The local service and maintenance of the car parking guidance systems will be provided by TMA. TMA's staff are trained by Indect at its factory in Austria. TMA provides very reliable customer service and support. Indect will provide TMA with spare parts and the necessary backup to support the software for the life of the system".
The plaintiffs tendered a number of PowerPoint presentations which were said to be prepared by the plaintiffs and the defendants. The presentations were intended to be used to aid the marketing of the IED guidance systems to potential customers. It is sufficient to note that each of these presentations created a strong appearance that TMA and Indect were a team for the purpose of supplying and maintaining car parking guidance systems to car park operators.
Mr Karam gave evidence that in early 2008 Mr Herwich "told me that Indect E & D would support TMA Australia and all the Indect [car parking guidance systems] that TMA Australia sold for their system life". Mr Herwich denied that he made a statement to that effect, and said that whenever he discussed with Mr Karam the support that Indect E & D would provide he only said: "Indect will support TMA Australia in accordance with the terms of the contractual warranties."
Mr Karam said that some time in early 2008 while TMA Australia was negotiating with Westfield in relation to the Doncaster Shopping Centre he had a conversation to the following effect:
"Karam: Westfield's contract requirements are extremely onerous. We will be assuming significant obligations for maintenance of the systems we install. If TMA is going to commit to installing your product for Westfield and any others, I need to know that, if there is any problem with it, you will provide TMA with all necessary support for the life of the system.
Herwich: I understand you risk a lot. Don't worry. We will give a three-year warranty for replacement at no cost to you. But also the Indect system has a 15-year life and Indect will fully support TMA and the products for that time. Neither of us can afford it to fail."
Mr Karam also gave evidence of a discussion with Mr Herwich at the time of TMA Australia's tender to install the Indect system at the Top Ryde Shopping Centre in 2009 to the following effect:
"Karam: We are tendering for Top Ryde.
Herwich: You can tender on our new generation sensor. It is modified to make installation easier and cheaper.
Karam: Has the new sensor been tested.
Herwich: Yes.
Karam: I need to know it will be available to us for 10-15 years. Will it be?
Herwich: Yes.
Karam: What do I do about sites with the old sensors and will I still be able to buy the old sensors for the next 10-15 (sic years)?
Herwich: Yes, no problem."
Mr Karam said that he met Mr Herwich in Dubai on about 20 February 2012 at the time that TMA Tech was negotiating maintenance agreements with Westfield, at which time the following conversation occurred:
"Karam: We are negotiating the maintenance agreements with Westfield. Westfield need confirmation that Indect still support us. Can you give me that confirmation in writing?
Herwich: Sure no problem."
In his evidence Mr Herwich denied that any of these three conversations occurred.
Mr Howell gave evidence of two conversations which he had with Mr Fowler in mid July 2008 in the following terms:
Howell: Would Indect provide a price and support TMA if it tendered for the Doncaster project?
Fowler: I'm certain we will be able to but I'll get confirmation from Ingo Herwich.
Within 24 hours of this discussion Mr Fowler said:
Fowler: I talked to Ingo. Indect will help TMA to prepare the tender and if TMA are successful we would also provide training to TMA staff, and support in installation, commissioning and maintenance of the product going forward".
Mr Fowler denied that this conversation took place.
TMA Tech entered into formal maintenance agreements with Westfield in relation to the four car parking systems at Doncaster, Hornsby, Parramatta and Belconnen on 19 April 2012. It appears that in February 2012 the plaintiffs and Indect E & D were attempting to resolve the various differences that had arisen between them by negotiating a formal distribution agreement. Mr Karam met with Mr Herwich in Dubai to negotiate a resolution. On 21 February 2012 Mr Karam sent an email to Mr Herwich in which he listed 16 points which he claimed had been agreed during the meeting in Dubai. The parties did not in the event agree on any distribution agreement.
Earlier, on 2 February 2012 Mr Fowler on behalf of Indect PL sent an email to a number of employees of Westfield. Mr Fowler advised Westfield of changes that had occurred in the Australian market with the Indect product. Indect E & D had appointed new dealers including Wilson Technology Solutions and SABAR Technologies. Mr Fowler indicated that Indect would support the new dealers, which would have the benefit of creating competition in the local market. Mr Fowler did not mention either of the plaintiffs, and in particular did not say that the plaintiffs were no longer distributors of the Indect product or that Indect E & D would no longer supply products and services to the plaintiffs.
Mr Karam gave evidence that at the time Westfield was putting pressure on TMA Tech because Indect E & D had failed to perform its obligations to provide TMA Tech with the components for the installation at Westfield Belconnen which caused it to run over schedule. One of the recipients of Mr Fowler's email, Mr Clee, sent an email to Mr Karam on 9 February 2012 and asked:
"Please let us know when you're in a position to walk us through the catalyst for and the impact of the restructure below [apparently referring to Mr Fowler's email, which was part of the email chain].
In due course we will require full clarity on how TMA will in future source:
1. Replacement Parts.
2. Technical Services (e.g. Report Development, etc.)."
Mr Karam replied by saying that he would be meeting with Indect on the 20th of the month to resolve the problem.
On 21 February 2012 Mr Herwich sent an email to Mr Karam. The subject heading was "Cooperation TMA - INDECT". This email appears to be the confirmation in writing that Mr Karam said Mr Herwich agreed to give during the Dubai meeting. Mr Herwich said:
"Further to Westfields (sic) recent correspondence with you, we want to confirm INDECTs continued support of TMA for the sale, distribution and maintenance of the INDECT product in the Australian and New Zealand market".
The defendants submitted that a short email statement in this form could not have been intended to bind either defendant to supply product and services to the plaintiffs for a long and indefinite period, and without any qualification as to the applicable terms and conditions.
The court cannot resolve this conflict of evidence on this interlocutory application. If the plaintiffs' evidence is accepted at trial it is capable of establishing at least that the plaintiffs entered into the contracts with the operators of the car parks in reliance on assurances by Indect E & D that it would provide support over the operating life of the installed car parking systems. More significantly Mr Herwich's 21 February 2012 email is capable of being construed as a clear statement by Indect E & D that it would continue to provide TMA Tech support for the sale, distribution and maintenance of Indect E & D's products on a basis which was unqualified as to time.
This evidence is capable of supporting a finding at the trial that TMA Tech entered into the maintenance agreements with Westfield some two months after Mr Karam received Mr Herwich's email in reliance upon the assurances contained in that email.
Mr Howell gave evidence that in May 2011 he had a conversation with Mr Fowler concerning a proposal that TMA Tech would agree with the owner of the Warringah Mall Shopping Centre to provide an Indect car parking guidance system. Mr Howell's version of the conversation was:
"Howell: We are negotiating with AMP Capital to replace the Warringah Mall car parking guidance system with an Indect system. They need it on the basis that the cost of the equipment and installation will be rolled into monthly maintenance fees under a 10-year preventative maintenance agreement. Under that agreement, TMA will provide maintenance and repair of the Indect system. Can you assist us to develop and support a proposal?
Fowler: That's great news, we certainly can."
Mr Howell's evidence was that later in May he informed Mr Fowler that TMA Tech had been successful with Warringah Mall.
The plaintiffs did not provide any specific evidence that they brought to the attention of Indect E & D the intention of TMA Tech to enter into the maintenance agreements with Westfield, save for what may be inferred concerning the discussions between Mr Karam and Mr Hurwitz which led to the latter's 21 February 2012 email. Mr Karam gave some general evidence that on most of the occasions when one of the plaintiffs tendered for the sale of further Indect systems he spoke with Mr Herwich and discussed the tender.
On 2 May 2013 Indect E & D informed TMA Tech that "because of the legal activities of TMA re the software licence, Indect board is refusing any further orders as that will probably make this situation worse."
Indect E & D further advised TMA Tech on 13 May 2013 that TMA no longer had any credit with Indect E & D and that TMA should contact one of Indect E & D's distributors in Australia, and would have to purchase at the prices that the local distributor would offer.
On 8 April 2013 Mr Fowler sent an email to Mr Robert Paoletti, a representative of Schneider Electric, which operated the car park at the Royal Children's Hospital in Victoria, in which Mr Fowler advised: "TMA is no longer an authorised distributor of Indect. They have no factory trained technicians and Indect will not supply them with any components going forward. Nor will Indect provide them with any factory support."
On 6 August 2013 Mr Fowler on behalf of Indect PL, under the subject heading "Parts and Service for Indect Parking Guidance Systems", sent letters in materially identical terms to the operators of the South Wharf Shopping Centre, the Highpoint Shopping Centre and the Rhodes Shopping Centre in which he advised that spare parts or components required for the effective operation of the system could be obtained from Indect's authorised distributors. Upon request Indect would supply the contact details for an Indect authorised distributor. That distributor would be able to supply any parts or service required.
These letters did not mention TMA Tech or suggest that TMA Tech was not a distributor of Indect products. However, the letters apparently caused consternation to their recipients, who in each case contacted TMA Tech to seek reassurance about that company's continuing ability to provide spare parts and services.
As has been noted above, the defendants accepted that on the present state of the evidence the plaintiffs have established a prima facie case, or a serious question to be tried, in relation to the relief that they seek: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [19], [70] - [71]. The defendants submit, however, that the strength of the case which has been established is not sufficient to justify the granting of the interlocutory relief sought. This submission was made at a time when the plaintiffs sought the wider interlocutory relief set out in their notice of motion.
The plaintiffs based their claim for interlocutory relief primarily on their claims for breach of contract, conventional estoppel and unconscionable conduct. The plaintiffs did not focus on their estoppel or interference in contractual relation claims, and explicitly disclaimed reliance on their misuse of market power claim for the purposes of their interlocutory application.
The plaintiffs did not make elaborate submissions as to how the evidence supported the finding of implied terms in the contracts for the sale of the individual IED guidance systems, or how the making of the assurances by the defendants gave rise to legal obligations on their part to provide replacement parts and maintenance services to the plaintiffs for the operating life of the IED guidance systems. It should be acknowledged, as the defendants submitted, that if these proceedings go to trial complex and difficult questions may arise as to the detail of any legal obligations which the defendants' conduct may impose upon them.
However, the evidence at this stage of the proceedings does strongly support a finding that the relevant plaintiffs entered into agreements for the purchase of IED guidance systems from the defendants, and the on-sale of those systems to car park operators, and also that TMA Tech entered into a number of long-term maintenance contracts with a number of car park operators, on the basis of unqualified assurances by the defendants that Indect E & D would supply replacement parts and maintenance services for the life of each of the IED guidance systems, or during the term of the maintenance agreements entered into by TMA Tech.
On a prima facie basis the evidence establishes that Indect E & D gave the assurances alleged by the plaintiffs specifically in the context of the proposal that TMA Tech would enter into the maintenance agreements, in circumstances where Indect E & D must have appreciated that TMA Tech would rely upon those assurances. The full extent of the legal consequences of TMA Tech entering into the maintenance agreements in reliance on the assurances cannot clearly be known at this point. However, the likelihood that TMA Tech will be granted relief on a final basis in respect of the assurances is sufficiently high as to justify the making of orders pending the final hearing to require Indect E & D to supply any necessary component parts and support services to TMA Tech on an interim basis on proper commercial terms.
The position is less clear in relation to the cases where one of the plaintiffs has supplied an IED guidance system to an operator where the system is not under warranty and no maintenance agreement is in place. The evidence at this stage is relatively strong that the defendants gave the same assurances to the plaintiffs as were given by Indect E & D in relation to the proposed maintenance agreements. However, the legal consequences of those assurances in respect of the operating lives of the IED guidance systems may be unclear. Nevertheless, the fact of the assurances having been given is sufficient, even in these cases, to justify the granting of the limited interlocutory relief now sought by the plaintiffs, in relation to the issue of whether the plaintiffs have established a sufficient likelihood that they will be granted final relief which is consistent with the interlocutory orders.
Ultimately, the contest was fought primarily on the issue of whether the balance of convenience justified the granting of the interlocutory relief as finally sought by the plaintiffs.
The plaintiffs acknowledged the reality that they were seeking interlocutory injunctions of a mandatory nature. That position is clear from the final form of the orders which have been sought, which unequivocally would require Indect E & D to supply parts and services to TMA Tech.
The plaintiffs relied primarily on the decision of Gummow J in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499. In that case his Honour considered a submission that normally a court asked to grant a mandatory interlocutory injunction should only do so if the court felt a high degree of assurance that at the trial it would appear that the injunction was rightly granted, and that the degree of assurance involved a higher standard than is required for a prohibitory injunction.
Gummow J noted at p 501 in relation to the case before him:
"In contrast, the present case offers none of those special features which reflect equity's reluctance to compel the continuation of contractual or other associations requiring personal trust and confidence between the parties to the litigation or between the defendant and third parties, particularly where the question of satisfactory performance is one of taste, opinion and degree... Nor is there any difficulty in framing the terms of mandatory relief so that there is sufficient definition of what will have to be done to comply with the order..." "
The position is the same in the present case. The interlocutory orders sought will, if granted, require Indect E & D to sell its products to TMA Tech on its standard commercial terms on the same basis as to its other Australian distributors, and to provide services on similar terms where those services, though perhaps complex, are technical matters, and have been provided to the plaintiffs in the ordinary course of business from time to time since 2008.
At p 502 his Honour set out his reformulation of the relevant proposition in the following terms:
"... It is another way of saying that the features which justify describing an injunction as 'mandatory' will usually also have the consequence of creating a greater risk of injustice if it is granted rather than withheld at the interlocutory stage unless the court feels a 'high degree of assurance' that the plaintiff would be able to establish his right at a trial. I have taken the liberty of reformulating the proposition in this way in order to bring out two points. The first is to show that semantic arguments over whether the injunction as formulated can properly be classified as mandatory or prohibitory are barren. The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term 'mandatory' to describe the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a 'high degree of assurance' about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction."
In the present case there does not appear to be any significant likelihood that the granting of the mandatory injunction sought will cause any harm, or even inconvenience, to Indect E & D. This conclusion is supported by the following observation made by Gummow J at p 503:
"...it has long been the case that interlocutory mandatory injunctions would be more likely to issue where the defendant was compelled, not to embark upon a fresh course of conduct, but, as here, to revert to a course of conduct pursued before the occurrence of the acts or omissions that provoked the litigation."
That is the case here. The injunctions sought by the plaintiffs will only require Indect E & D to continue to do what it has done in its dealings with the plaintiffs in the ordinary course of business since 2008. Indeed, Indect E & D made clear at the hearing of the interlocutory application that it would in any event honour on a continuing basis its subsisting warranty obligations.
The court accepts Gummow J's discussion of the relevant principles, as have other judges including Young CJ in Eq (as his Honour then was) in The Mayo Group International Pty Ltd v Hudson Respiratory Care Inc [2005] NSWSC 445 at [57] and Schmidt J in Patsalis v State of NewSouth Wales [2012] NSWSC 178 at [25].
It should be noted in relation to the discussion by Young CJ in Eq in The Mayo Group case at [52] - [57] of the decision in Megaloconomos v Metro Goldwyn Mayer Pty Ltd (1953) 54 SR (NSW) 275 that in the present case there is evidence that Indect E & D was aware of TMA Tech's proposal to enter into the long-term maintenance agreements, and encouraged that course by assuring TMA Tech that it would provide continuing support.
The plaintiffs submitted that many factors contribute to the balance of convenience favouring the granting of the interlocutory relief which they now seek.
First, the plaintiffs point to the fact that Indect E & D acknowledges that it is bound by continuing warranties and that it will honour those warranties. That will mean at least in relation to the four Shopping Centres whose IED guidance systems continue to be under warranty that Indect E & D may have to supply the same products and services as would be required by the interlocutory orders up to the end of the last warranty period on 24 October 2017.
Secondly, the making of the orders will be at no financial cost to Indect E & D, as the supply will be on commercial terms, and indeed by payment of cash before supply, and at prices equivalent to those which Indect E & D charges its other Australian distributors.
Thirdly, it is in the interests of the third party carpark operators for Indect E & D to be required to continue to supply product and services to TMA Tech, as that will satisfy the expectations of those parties which arose from the assurances which they were given before they agreed to acquire the IED guidance systems or enter into maintenance agreements with TMA Tech.
Fourthly, the forced withdrawal of TMA Tech's participation in the servicing and maintenance of the existing IED guidance systems will have the consequence that the operators will be compelled to deal with other distributors with whom they are not familiar, and who do not have a working knowledge of the installations owned by those parties.
Fifthly, it is inevitable if the plaintiffs cannot support their customers in accordance with the assurances that have been given to operators that the plaintiffs' reputation with those operators will be damaged, as will their reputation in the market generally, given its relatively confined scope.
Sixthly, the defendants' invitation to deal with Indect E & D through its other Australian distributors, who are direct competitors of the plaintiffs, is unrealistic in the practical business world. The plaintiffs would be placed at the mercy of their competitors.
Finally, the plaintiffs submit that the consequences of the court's making the interlocutory orders will not impose any significant inconvenience on Indect E & D. The orders will apply only in relation to the existing sites. They will have effect for some six months or so. Furthermore, there is a case to be made that, even though Indect E & D for its own commercial reasons has decided that it does not wish to distribute its products in Australia in the future through the plaintiffs, the peremptory withdrawal of Indect E & D's support from existing installations through the expected participation of the plaintiffs would probably impair Indect E & D's own reputation in the Australian market.
Additionally, the plaintiffs put the submission that, to the extent that the issue should be considered to be a separate requirement before the court grants interlocutory relief, damages are likely to be an inadequate remedy. That is so, say the plaintiffs, if the plaintiffs were precluded from honouring their legal and moral obligations to support their existing customers. They also say that damages will be inadequate if, as the defendants contend, the plaintiffs are required to obtain the products and services they require from Indect E & D by placing the necessary orders with the current Australian distributors. The plaintiffs submit that it is improbable that those distributors will faithfully support the plaintiffs, particularly as they will be in continuing competition with TMA Tech in relation to the supply of car parking guidance systems to new purchasers for installation in new car parking stations. The court accepts the argument that in all of the circumstances there is a likelihood that the plaintiffs would suffer damage which may not readily be ascertainable or provable.
In response to these arguments the defendants placed primary reliance on the submission that the avenue is available to the plaintiffs of obtaining all of the products and services that they require by placing the necessary orders with Indect E & D's current Australian distributors. The defendants say that if this course were to be followed it would be possible to quantify the plaintiffs' losses by calculating the aggregate mark up which the plaintiffs will have to pay to the distributors, above the wholesale price that the plaintiffs would otherwise have paid to acquire the products and services directly from Indect E & D. The defendants say that there is no evidence before the court that the plaintiffs have placed orders with the current distributors in circumstances where the orders have been declined, or performed in an unsatisfactory manner, or at an inappropriate price. The defendants submit that in the absence of evidence the court should infer that the current distributors would deal with the plaintiffs in a commercially fair and efficient manner.
The conclusion which the court reaches is that the strength of the arguments put by the plaintiffs as to why the balance of convenience favours the making of the interlocutory orders now sought by the plaintiffs outweighs the contrary arguments put on behalf of the defendants. It is true that the plaintiffs have not led evidence which proves in a positive way that the plaintiffs' competitors would take commercial advantage of any change in the plaintiffs' circumstances which put the plaintiffs in the hands of their competitors. However, in view of the fact that there will be ongoing competition between the plaintiffs and their competitors, which may be fierce, in relation to the limited number of car parking operations which are of sufficient size to warrant the acquisition of the IED guidance system, or the competitor system now marketed by TMA Tech, it is not realistic to assume that the competitors would not take advantage of the situation. Furthermore, given the limited time frame since Indect E & D decided to cease supplying its products and services directly to the plaintiffs, it is not realistic to require the plaintiffs to be able to tender significant, positive evidence that the course of dealing through the current distributors will not be practicable.
The plaintiffs have offered to give the usual undertaking as to damages.
For reasons which now need not be explored the court would have hesitated to make interlocutory orders in terms of the plaintiffs' notice of motion.
However, as has been mentioned, the plaintiffs have recast the interlocutory orders which they seek so that their claim is now significantly more confined than in its original terms. In essence, as formulated in draft short minutes of order, the plaintiffs seek orders until the final determination of these proceedings or further order that Indect E & D supply TMA Tech with components or parts and diagnostic and repair services, solely for use by TMA Tech in servicing the maintenance requirements of the 15 existing installations. The short minutes include specific restrictions and qualifications on the rights of TMA Tech and the obligations of Indect E & D. The defendants have submitted to the court an amended version of the short minutes of order furnished by the plaintiffs. The plaintiffs have advised the court that they do not consent to all of the amendments which the defendants have suggested in relation to the original draft.
The court will make interlocutory orders substantially in the form of the draft short minutes of order provided by the plaintiffs. However, the court will fix a time for the hearing of further argument as to the precise terms in which those orders should be made.
As to costs the court considers that the costs of the interlocutory application should be awarded to the parties who succeed at the final hearing. The interlocutory orders have primarily been made on the basis of the balance of convenience. The entitlement of the plaintiffs to the final relief which they seek is an open question. The interlocutory relief ultimately sought by the plaintiff was much narrower than that claimed in their notice of motion. It is unlikely the court would have granted the interlocutory relief which the defendants came to court to oppose. That, as it turns out, the plaintiffs have not sought interlocutory relief at this stage against Indect PL does not justify that company being awarded its costs outright. It was properly joined in the application, and the evidence concerning its particular involvement in the events relevant to the interlocutory dispute would most probably have been necessary even if it had not been joined as a defendant.
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Decision last updated: 23 September 2013
TMA Australia Pty Ltd v Indect Electronics and Distribution GmbH [2013] NSWSC 1375
Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Limited [2015] FCA 460
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