TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH

[2015] NSWCA 343

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343

Hearing dates:

25, 26, 27 February 2015;Written submissions 6, 25 March 2015

Decision date:

06 November 2015

Before:

Macfarlan JA at [1];
Meagher JA at [5];
Bergin CJ in Eq at [154]

Decision:

1. Appeals 2014/139124 and 2014/139128 dismissed with costs.

Catchwords:

CONTRACT – construction – contract for purchase of software – where software required authenticity check every three months to continue operating – whether breach of term that licence to use would be of unlimited duration – whether breach of warranty that software would be fit for purpose

 

CONTRACT – implied terms – where individual contracts of supply in commercial relationship involving purchase, re-sale, installation and maintenance by distributor – whether implied term in supply contracts that original supplier would provide parts and support services to distributor as required for continued operation of systems for their lifetime, irrespective of whether distributorship arrangement terminated, and at prices applicable to ongoing resellers or distributors – whether conduct and statements of parties supported implication – whether implication of term necessary for reasonably effective operation of supply contracts with distributor

 

ESTOPPEL – equitable estoppel – conventional estoppel – whether assumption adopted between parties as to ongoing obligation of original supplier to provide to distributor and reseller parts and support necessary to ensure effective operation of systems for their lifetime – whether conduct, including statements between parties, points plainly to adoption of assumption said to constitute conventional basis of supply relationship

AUSTRALIAN CONSUMER LAW – unconscionable conduct under Australian Consumer Law, s 21 – whether supplier acted unconscionably by withdrawing support and ceasing direct supply to distributor and reseller

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2 (Australian Consumer Law), ss 21, 22, 232
Uniform Civil Procedure Rules 2005, r 51.53(1)

Cases Cited:

Attorney-General (ACT) v Eastman [2008] ACTCA 6; 163 ACTR 46
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
Baird Textiles Holdings Ltd v Marks & Spencer plc [2002] 1 All ER (Comm) 737
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Byrne v Australian Airlines Ltd [1995] HCA 24; 185 CLR 410
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; 160 CLR 226
Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438
DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; 83 NSWLR 728
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603
Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; 59 CLR 641
J J Savage & Sons Pty Ltd v Blakney [1970] HCA 6; 119 CLR 435
Mackay v Dick (1881) 6 App Cas 251
Moratic Pty Ltd v Gordon [2007] NSWSC 5; 13 BPR 24,713
PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446
Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40
Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; 69 NSWLR 603
Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387

Category:

Principal judgment

Parties:

TMA Australia Pty Ltd (First Appellant)
TMA Tech Pty Ltd (Second Appellant)
Indect Electronics & Distribution GmbH (First Respondent)
Indect Pty Ltd (Second Respondent)

Representation:

Counsel:
M Einfeld QC with H N Newton (Appellants)
M Dicker SC with J O’Connor (Respondents)

  Solicitors:
JDK Legal (Appellants)
Mason Black Lawyers (Respondents)

File Number(s):

2014/1391242014/139128

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2014] NSWSC 409

Date of Decision:

11 April 2014

Before:

Ball J

File Number(s):

2013/255364
2012/262302

HEADNOTE

[This headnote is not to be read as part of the judgment]

Between June 2008 and July 2012, the appellants, TMA Australia Pty Ltd and TMA Tech Pty Ltd (collectively TMA), purchased car parking guidance systems from Indect E&D or Indect P/L (collectively Indect). Following a series of disputes between the parties, Indect advised TMA in May 2013 that TMA would no longer be a distributor of its products; that Indect would no longer directly supply equipment, parts or services to TMA; and that TMA would need to obtain those parts and services from an Indect distributor. TMA commenced two proceedings against Indect.

In the Licence Proceedings, TMA claimed that the inclusion by Indect of an authenticity check feature in four of the systems purchased involved a breach of the supply contract and unconscionable conduct. That feature required that software be checked every three months to enable the software to continue operating.

In the Supply Proceedings, TMA claimed that irrespective of whether it remained a distributor of Indect products, it was entitled to receive ongoing supply of parts and support from Indect for the systems resold and installed by it on commercial terms no less favourable than those previously offered or those offered to other distributors. That entitlement was said to arise by reason of a contractual implied term, an equitable estoppel and unconscionable conduct on the part of Indect in withdrawing its support of TMA.

The primary judge found in favour of Indect and dismissed both proceedings.

The issues before the Court were:

in the Licence Proceedings, whether the inclusion of the authenticity check feature amounted to a breach of a term providing for a licence to use the software for an unlimited duration, or a breach of a warranty that the system would be reasonably fit for purpose;

in the Supply Proceedings, whether the implication of a term requiring Indect to supply parts and services directly to TMA to ensure the continuing effective operation of the systems supplied was necessary for the reasonably effective operation of the supply contracts;

whether Indect’s ongoing obligation to support TMA was adopted as the conventional basis of the supply relationship between the parties with respect to each system purchased and resold such that Indect should be estopped from denying that obligation; and

Whether Indect acted unconscionably in contravention of s 21 of the Australian Consumer Law by withdrawing the supply of parts and support to TMA in May 2013.

The Court held, dismissing the appeals:

In relation to (i)

(Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing)

The fact that the software did not operate continuously without technical assistance or regular updates did not shorten or breach the licence granted for its use: [50]. The subject matter of each purchase order was the then current version of the software, which here included the authenticity check: [52], [54]. There was no breach of contract and no unconscionable conduct: [1], [54], [57], [154].

In relation to (ii)

(Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing)

The individual contracts for supply did not address the agency or distribution arrangement, or secure the ongoing supply of parts and services to TMA: [96]. The proposed term would have qualified the parties’ positions under the informal distributorship arrangement in existence between them: [102]. Notwithstanding the representations and assurances relied on by TMA as confirming the ‘obviousness’ of the term to be implied, the term was not necessary for the effective operation of the individual supply contracts: [1], [103], [154].

In relation to (iii)

(Per Meagher JA, Bergin CJ in Eq agreeing)

The question whether the conduct and statements of the parties viewed objectively shows sufficiently clearly the adoption of an assumption intended to affect an aspect of their existing or contemplated legal relationship may be addressed assuming that TMA has established error on the part of the primary judge in relation to the findings made as to what was said between the parties: [106], [112], [122], [155].

(Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing)

Taking the evidence at its highest from TMA’s position, it did not establish that the parties conducted their relationship on the basis that, with respect to each system sold, Indect was bound to provide parts and support on the terms asserted – either by reason of a conventional or promissory estoppel: [4], [124], [125], [136], [154].

In relation to (iv):

(Per Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing)

The primary judge erred in formulating unconscionability under s 21 too narrowly: [144]. TMA had an opportunity to negotiate a parts and labour supply agreement with Indect and, absent such an agreement, the systems installed by TMA could still be maintained via other Indect resellers: [149]. Indect did not engage in conduct that was against good conscience: [1], [148], [154].

Judgment

1. MACFARLAN JA: I agree with the orders proposed by Meagher JA and, subject to the following, with his Honour’s reasons.

2. Contrary to his Honour’s conclusion in the second sentence of [123] below, I consider that Indect made statements to TMA in or to the effect of the assumption said by it to have been adopted. Whilst the statements referred to in [22] and [92] below made by Indect and TMA representatives at presentations and meetings with prospective customers were directed to the prospective customers, their making and repetition by and in the presence of Indect and TMA representatives amounted to implicit representations by each of those companies to the other to the effect of the statements. Thus, when Mr Fowler of Indect said to prospective customers that “Indect will provide TMA with spare parts and the necessary backup to support the software for the life of the system” (see [110] below), Mr Howell of TMA could reasonably have understood that as an assurance to that effect by Indect to TMA.

3. Furthermore, I do not agree with his Honour’s conclusion in the same paragraph that none of the relevant statements were promissory. Indect and TMA representatives’ explicit statements to prospective customers were promissory (for example, “Indect will provide TMA … ”). The corresponding implicit statements by Indect to TMA discussed above were therefore likewise promissory.

4. Notwithstanding these differences, I agree with Meagher JA’s conclusion that TMA’s representation case fails (as do the other aspects of its claim). I agree, in particular, with his Honour’s third and fourth reasons stated in [123] and his conclusion, with reasons provided in the following paragraphs, that: “[n]one of the evidence relied on shows that both parties conducted their relationship on the basis that, with respect to particular systems, Indect had agreed to provide parts and support on the conventional basis asserted” (see [124] below) and that “TMA’s conduct from late 2011 was not consistent with the continued existence of the assumption contended for” ([125] below).

5. MEAGHER JA:

Overview

The dispute which is the subject of these appeals arose from the breakdown of a relationship concerning the supply, sale and installation in Australia of car parking guidance (CPG) systems manufactured in Austria by the first respondent, Indect Electronics & Distribution GmbH (Indect E&D). Between June 2008 and July 2012 one or other of the appellants, TMA Australia Pty Ltd (TMA Australia) and TMA Tech Pty Ltd (TMA Tech), purchased CPG systems from Indect E&D, or its Australian subsidiary (Indect P/L), for sale to car park operators throughout Australia. Unless it is necessary to distinguish between the respective appellants and respondents, I will refer to them collectively as TMA and Indect.

6. Four of Indect’s systems purchased by TMA Tech in orders that were dated between September 2011 and July 2012 included a feature which required that the operating software be checked for authenticity every three months, failing which its functionality was significantly reduced.

7. By late 2011 there were disputes between Indect and TMA as to the latter’s payment of outstanding invoices; as to the sale of the CPG systems through another distributor, SABAR Technologies Pty Ltd; and as to the appointment of Wilson Technology Solutions as an authorised Indect distributor and agent. By the end of January 2012, TMA was refusing to deal with Indect P/L and demanding an exclusive distribution agreement with Indect E&D. At the same time TMA Tech commenced to experience difficulties with the functionality of the four CPG systems requiring the authenticity check.

8. In August 2012, TMA Tech commenced proceedings against Indect E&D and Indect P/L seeking orders that they remove the authenticity check feature from the four systems which contained it (the Licence Proceedings).

9. In May 2013, Indect E&D advised TMA that it would no longer directly supply equipment, parts or services to it and that TMA would need to obtain those parts and services from one of Indect E&D’s local distributors in the future. In so advising Indect E&D was not refusing to meet any ongoing warranty obligations to TMA. Nor was it refusing the indirect supply or support to TMA which might enable TMA to service or maintain systems it had sold and installed. Indect was, however, refusing direct supply on the distributorship terms which had previously applied between the parties.

10. As a result, in August 2013, TMA Australia and TMA Tech commenced proceedings against Indect E&D and Indect P/L (the Supply Proceedings) claiming that they were entitled to receive ongoing supply of parts and support on “commercial terms no less favourable than those previously offered to TMA Tech and/or TMA Australia or alternatively terms no less favourable than those previously provided to other similar purchasers”. The final relief sought included orders requiring that Indect E&D and Indect P/L supply the TMA parties with the parts and support necessary to enable the continued operation of the CPG systems previously sold and installed by them. That relief also included an order permanently restraining Indect E&D and Indect P/L, and their agents from directly or indirectly supplying parts and support for those CPG systems other than through TMA. TMA thirdly sought interlocutory relief restraining the supply of those parts and services to the owners and operators of those systems other than by TMA, and requiring that Indect supply those parts and services to TMA on the same commercial terms as previously offered.

11. On 20 September 2013, Robb J made orders that, until the final determination of the proceedings, Indect E&D supply those parts and services to TMA Tech at prices and upon the terms specified in the “then current price list applicable to Indect E&D’s distributors and/or agents in Australia”. Those components and services, when supplied, were only permitted to be used by TMA Tech for the purpose of replacing or repairing defective or malfunctioning components or software in systems that had been supplied by TMA: TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2013] NSWSC 1375.

12. The effect of the final relief sought in the Supply Proceedings, if granted, is that the TMA parties alone may supply parts and services sourced from Indect E&D to the owners or operators of systems previously sold by them. That claimed right continues for the lifetime of each system, a period estimated to be of about 15 years.

13. The primary judge (Ball J) determined the claims in the Licence Proceedings and the Supply Proceedings adversely to TMA Australia and TMA Tech: TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH; TMA Tech Pty Ltd v Indect Pty Ltd and Ors [2014] NSWSC 409.

14. Before turning to the issues in the appeals from the orders of the primary judge, it will assist an understanding of what follows if I introduce the following subjects by way of background:

• the CPG system;

• the parties and principal players;

• the 15 transactions between Indect and TMA; and

• the breakdown of the relationship between the parties.

The CPG system

15. The CPG system, which was first designed and manufactured by Indect E&D in about 2003, assists drivers of motor vehicles to locate unoccupied car spaces within a car park. The system consists of sensors and lights in individual parking bays which detect the presence of vehicles and indicate whether or not the bay is occupied; signs which indicate the number of available bays and their location; and computer software which controls the signs and provides centralised information as to the operation and use of the car park. Each system is designed to meet the individual requirements and features of the car park in which it is to be installed. For its continuing reliable operation, the system requires ongoing technical maintenance and support, including the replacement of defective parts, the rectification of computer software faults or errors and the supply of updated software and parts. To a significant extent, the only source of those parts, and of that updated software, is Indect E&D.

The parties and principal players

16. The owners and operators of Indect E&D are Mr Ingo Herwich and Mr Richard Schreiner. In 2008 that company sought to establish itself and its product in the Australian market. At that time Wilson Technology submitted a tender for the supply and installation of Indect CPG systems to Westfield, including at its Doncaster Shopping Centre in Victoria. That tender was accepted but did not proceed because of a dispute between Westfield and Wilson Technology as to the terms of supply. Westfield recommended to Mr Herwich that Indect E&D approach TMA Australia to undertake the sale and installation of its CPG systems.

17. TMA Australia was a wholly owned subsidiary of TMA Group of Companies Ltd. The chief executive officer of that group is Mr Anthony Karam. In early 2008 the business of TMA Australia included the supply, installation and maintenance of car park access control systems, parking meters and security systems. In June 2011, the business of TMA Australia, which then included the supply, installation and maintenance of Indect’s CPG systems, was taken over by TMA Tech, another subsidiary in the TMA group.

18. At the beginning of 2008, Mr Dale Fowler and Mr Mosstyn Howell were employed by Wilson Technology. When Westfield determined not to acquire an Indect system through Wilson Technology, each left that employment, seemingly to better pursue the opportunity to supply and install Indect systems in Australia. In April 2008, Mr Howell commenced employment with TMA Australia, as its National Sales Manager. Shortly afterwards, Mr Fowler commenced providing consultancy services to Indect E&D. From that time he acted as Indect E&D’s sales representative in Australia, promoting its systems and assisting TMA Australia in tendering for their supply to prospective customers. In October 2009, Indect P/L was incorporated with Mr Fowler as a minor shareholder and its only employee. From about March 2010, Indect P/L, through Mr Fowler, became Indect E&D’s sales representative.

The transactions between the parties

19. Between 2008 and 2012, TMA purchased, supplied and installed 15 Indect CPG systems. Below is a table listing the location of each car park in which such a system was installed, the date of the purchase order by TMA and the abbreviated identity of the operator of the car park at that location.

Date	Location	Operator
6.6.08	Westfield Doncaster (Vic)	Westfield
30.10.08	Westfield Hornsby (NSW)	Westfield
30.1.09	Westfield Parramatta (NSW)	Westfield
7.5.09	Top Ryde Shopping Centre (NSW)	Wilson Parking
1.4.10	Royal Children's Hospital (Vic)	Wilson Parking
6.7.10	South Wharf Shopping Centre (Vic)	Wilson Parking
30.8.10	Centro Box Hill (Vic)	Centro Properties
31.8.10	Fisher Street Car Park, Fairfield (NSW)	Secure Parking
26.5.11	The Concourse, Willoughby (NSW)	Willoughby City Council
10.6.11	Westfield Belconnen (ACT)	Westfield
8.7.11	IKEA Springvale (Vic)	CBRE
1.9.11	Rhodes Shopping Centre (NSW)	Mirvac
1.2.12	Warringah Mall Shopping Centre (NSW)	AMP Capital Investors
19.4.12	Highpoint Shopping Centre (Vic)	General Property Trust
9.7.12	Perth Arena (WA)	AEG Ogden

20. The purchaser and supplier of the CPG systems installed in the Rhodes Shopping Centre, Warringah Mall, Highpoint Shopping Centre and Perth Arena was TMA Tech. Each of those four systems used software containing the authenticity check feature. The remaining systems were purchased, supplied and installed by TMA Australia. Five of the systems - those installed in The Concourse, Westfield Belconnen, IKEA Springvale, Rhodes Shopping Centre and Warringah Mall - were sold by Indect P/L. The remaining systems were sold by Indect E&D.

21. The general course of business between TMA and Indect, by which each of the supply contracts was entered, was described by the primary judge at [7] (which is extracted at [76] below). It was the appellants’ case at trial that certain statements and assurances were made by Indect in the course of their dealings from early 2008 until late 2012. The effect of those statements was that Indect would continue to support TMA in the maintenance of the systems which TMA had installed for the duration of their lifetime. The fact that those statements and assurances were made or given was said to have formed the conventional basis on which each supply contract was made and performed, so as to give rise to an estoppel preventing Indect from denying that it was legally bound to support TMA with respect to each of those systems for its lifetime. The statements were also relied upon as circumstances in which those contracts were made and, as such, were said to be relevant to the implication of a term in the contracts to the same effect.

22. At the presentations and meetings with prospective customers which were attended by representatives of TMA (usually Mr Howell and occasionally Mr Karam) and Indect (usually Mr Fowler and, on at least one occasion, Mr Herwich), the two entities were referred to as a “team” or “partners” in relation to the sale, installation and maintenance of the systems. It was made clear nonetheless that TMA was selling the system and that the system would be installed and, at least initially, maintained by TMA in accordance with warranty obligations. In that context, reference was made to Indect’s reputation and product reliability, and to TMA’s capacity to install and thereafter maintain and service the systems throughout their operational life.

23. TMA Australia or TMA Tech entered into separate supply contracts with each car park operator. Indect was not a party to those contracts, the terms of which varied from operator to operator. They usually contained express warranties, but did not, with the exception of the contract for Warringah Mall, provide for any ongoing maintenance or servicing of the system by TMA following the expiry of those warranty periods which, in all cases, were three years on equipment installed in the car parking area and one year on all other components (namely, computers and peripherals, including software).

24. As the primary judge observed at [26] and [27], the evidence did not identify the nature of the rights to use the operating system’s software that were granted to TMA, and subsequently to the car park operators. Nor was any attempt made to describe with precision the functionality that the different software provided. What was clear, however, was that the subject of the sale and supply to TMA included licences to use any relevant software and the ability to transfer or otherwise convey the benefit of those licences to the owner or operator of the car park.

25. Between 2008 and May 2013, TMA maintained and serviced each of the systems which it had installed, including after the expiry of any relevant warranty periods. It did so by obtaining parts and software support from Indect, as and when required. Where charges were made for parts or service, TMA was invoiced as Indect’s only Australian distributor and at Indect’s prevailing prices. It was accepted that there was an informal agency or distribution arrangement between them. There was, however, an issue as to whether that arrangement was exclusive.

26. As detailed below, between October 2011 and August 2012, TMA entered into four long term maintenance agreements and an agreement in relation to the Warringah Mall CPG system.

Date of Agreement	Location	Commencement	Duration
13.10.11	Warringah Mall Shopping Centre	1.9.11	10 years
19.4.12	Westfield Hornsby/Parramatta	1.4.12	5 years
19.4.12	Westfield Doncaster	1.4.12	5 years
19.4.12	Westfield Belconnen	14.10.14	5 years
23.8.12	Centro Box Hill	1.7.12	5 years

27. Although the first mentioned agreement is dated 13 October 2011, the final purchase order for the system to which it relates is dated 1 February 2012. That agreement is described as a Preventative Maintenance Supply Agreement. However, it contains several features that are unusual for a long term agreement dealing only with maintenance. The services to be provided include the installation of the Indect system which is described as “owned by TMA Tech Pty Limited until the conclusion of this agreement”. The agreement provides for the payment of a monthly fee of $3000 to TMA during the 10 year term and that, upon its termination, “all monthly payments for the equipment for the life of the contract will be due and payable and the ownership of the equipment will be transferred to the customer”. On the face of it, the agreement extends beyond maintenance and effectively provides for the funding of the acquisition under a hiring arrangement.

The breakdown of the relationship

28. In mid to late 2009 there were discussions between Indect and TMA concerning the appointment of TMA as Indect’s exclusive agent or dealer in Australia. At that time a draft contract was prepared but never progressed beyond a draft stage. In an email dated 11 August 2011 Mr Fowler described the relationship, as it existed two years later, in the following terms:

…

Indect acknowledges that discussions were conducted between TMA and Indect in 2009 regarding the possibility of TMA being the exclusive sales and marketing group for the Indect products. A number of drafts of an agreements [sic] were swapped at the time (around September/October 2009). The last draft of the agreement was sent by Indect to TMA. TMA rejected the contract/agreement. No further progress was made in these discussions.

Indect has treated TMA as a Premium Partner for Australia. Indect actively promotes TMA, their products and services. When we have had an enquiry, we have handed it straight to TMA and highly recommended TMA to our clients. As a result, TMA was also able to sell S&B to clients of ours such as RCH. Even when we have had definite projects/partners such as with RCH, Centro Box Hill, Westfield, we have simply handed these to TMA. Indect has also deliberately chosen not to sell directly to end users even upon request.

Indect also promotes TMA as our local "competency centre". We advise companies that TMA has fully trained technicians and that TMA can support their installations with parts, training and ongoing service.

The above, however, does not mean Indect is bound by an exclusivity agreement. We have simply been assisting you exclusively. This has been based on our relationship with TMA and also to support TMA for the effort they have made supporting the Indect product. None of the above has changed. We continue as always to promote TMA as a premium partner and to support TMA in the full to assist TMA to win as many projects as possible.

…

This noted, Indect is free to work with other suppliers within the Australian or any other market. TMA is not the exclusive agent for Indect products in this or any other market. We are happy to keep on co-operating with TMA and providing our full support to TMA in all of their activities, but any attempt by TMA to attempt to restrict our ability to work in the Australian or any other market will be seen as a hostile move to restrict our ability to trade.

29. Mr Karam responded immediately noting that the “only issue I take with your email is the agency issue,” and stating that TMA would pursue all legal remedies available to protect its current “agency status”. He also suggested a meeting with Mr Herwich and Mr Schreiner to resolve that question.

30. At this time Indect also claimed that there were significant payments outstanding from TMA. Those amounts included in excess of €21,000 withheld by TMA to cover potential liabilities to Westfield in relation to the Belconnen project, including liabilities for late delivery and completion.

31. In November 2011 Mr Fowler wrote to Mr Howell threatening to disable the Belconnen system, to withdraw sales and technical support, and to stop further deliveries to TMA, in the face of the continuing non-payment of outstanding invoices. In response, and out of concern as to the threat made by Mr Fowler, TMA changed all the remote log-on passwords for the Indect systems in Australia so that Indect no longer had remote access to those systems, including the access necessary to rectify software issues as they arose: Judgment [8].

32. From September 2011 Indect permitted competitors of TMA to tender for the installation of its systems in Australia and on 30 November 2011 it was announced that one of those competitors, SABAR Technologies Pty Ltd, had been successful in winning the tender for the supply of an Indect system to the Sydney Airport car park: Judgment [9].

33. What then occurred is sufficiently summarised by the primary judge:

[12]   The various matters came to a head in late 2011 and early 2012. On 14 December 2011, Mr Karam sent Mr Herwich a detailed email setting out a summary of the various issues between the parties and TMA's views on them. The email stated that TMA would like to continue the agency relationship with Indect but that it was not prepared to do so if it had to continue to deal with Indect Pty Ltd. Mr Herwich replied in detail the following day setting out Indect's position in relation to each of the issues raised by Mr Karam. On the question whether to terminate the relationship, Mr Herwich said:

The main reason why we are hesitating to simply "say goodbye" is that we do not want to damage TMA's reputation by losing a worldwide supplier (especially with the situation at Sydney airport where we still have no contract from Designa...) and that we will still have to give to TMA (or in case that you decide to stop also support for the installations that TMA made - we have to support someone else) support for existing installations.

Mr Herwich went on to say:

This is why we came to the idea to sell the distribution rights so that we have a very clear separation of responsibilities and at least a small but stable income from Australia. We see this as the only option at the moment.

You and me, we discussed that already. I just wanted to summarize.

[13]   Mr Karam replied on 15 December 2011 by saying that he thought Indect wanted to terminate its presence in Australia because it was unprofitable, that he was not going to beg Indect to stay and that he proposed a "sensible separation" on terms that included:

1.   TMA will move to fix all the issues at Belconnen and offset that against any money owed by TMA to Indect - This will resolve this matter and should avoid LD's

2.   Once this is complete TMA will remit all outstanding money to Indect

3.   TMA will continue to complete those jobs that have already been commenced with Indect. Indect will need to support this. These sites include Doncaster and RCH Melbourne

4.   TMA will no longer order any new systems from Indect

5.   Indect will continue to honour it's [sic] warrantee [sic] commitments for the installations completed by TMA

6.   Indect will continue to supply parts and assistance of which TMA will pay for the sites already installed by TMA as TMA has maintenance agreements that need to be honoured.

7.   Indect will withdraw from the market for a period of 10 years

8.   TMA will allow Indect to complete the sale of the system to Sydney Airport with out the need to compensate TMA

Indect did not accept those terms and the relationship continued. However, TMA maintained its position that it was no longer prepared to deal with Mr Fowler and insisted that it should be entitled to place any new orders with Indect E&D directly.

[14]   On 20 and 21 February 2012, Mr Karam and Mr Herwich met in Dubai in an attempt to resolve the issues between them. There is a dispute concerning what happened during the course of those meetings. However, the meetings did not result in a resolution of the disputes.

[15]   On 9 March 2012, Indect Pty Ltd commenced proceedings in the Magistrate's Court in Heidelberg to recover outstanding invoices in respect of the Belconnen project. Those proceedings remain unresolved.

[16]   There were further meetings in Sydney on 26 and 27 April 2012 between Mr Herwich and Mr Karam and TMA's solicitor during which 3 options were discussed. One was for an exclusive distributorship. The second was for a non-exclusive distributorship. The third was for no distributorship. Again, no resolution was reached.

…

[18]   Some time in mid-2012, TMA began to promote a CPG system designed and manufactured by TCS International, a competitor of Indect.

34. As explained in [9] above, in May 2013 Indect advised TMA that it no longer had credit with Indect and that it would need to place orders for any equipment with one of Indect’s local distributors. That would have the consequence that TMA would pay an amount for parts and services in excess of the amount it had been paying as a distributor and agent of Indect. In June 2013 Indect appointed Wilson Technologies Solutions as its “NEW fully authorised reseller of Indect systems”: Judgment [20].

The issues on appeal

The Licence Proceedings

35. TMA Tech claimed that the inclusion of the authenticity check feature in the software supplied and installed with the last four CPG systems was a breach of Indect’s obligation to provide a licence permitting the use of that software for the lifetime of each system; and a breach of an implied warranty as to the fitness for purpose of the system as purchased. The primary judge rejected each of these claims.

The Supply Proceedings

36. TMA Australia and TMA Tech claimed, in relation to each of the CPG systems purchased and installed, that the purchaser (either TMA Australia or TMA Tech) was entitled to ongoing supply from the seller (either Indect E&D or Indect P/L) of the parts and services necessary to enable the operation of that system during its lifetime. That supply was to be on terms no less favourable than those previously offered to TMA or to other “similar purchasers”.

37. TMA Australia and TMA Tech alleged that there were implied terms to that effect in each of the supply contracts with Indect E&D or Indect P/L. Separate terms were alleged with respect to the supply of spare parts and the supply of technical services. Those terms were said to be implied as a matter of fact; as a matter of law; as a result of a course of dealings between the parties; or by reason of custom or usage in the market for the supply of such systems.

38. Alternatively, it was alleged that Indect E&D and Indect P/L were prevented from denying that they were bound by such obligations by reason of a conventional or promissory estoppel. Finally, TMA Australia and TMA Tech sought orders securing supply on the described terms pursuant to s 232 of the Australian Consumer Law (ACL), enacted as Sch 2 of the Competition and Consumer Act 2010 (Cth). Those orders were sought on the basis that in refusing to supply TMA on those terms each of Indect E&D and Indect P/L had engaged in unconscionable conduct in contravention of s 21 of the ACL. The primary judge rejected these claims and dismissed the Supply Proceedings.

39. If the appeal is successful the TMA parties seek final orders continuing the interlocutory orders made by Robb J in September 2013. Those orders require ongoing supply of parts and services by Indect E&D to TMA Tech at the then current price list applicable to its distributors or agents in Australia. No orders are sought for supply by Indect P/L and no restraining orders are sought preventing Indect E&D from supplying, either directly or indirectly, those parts and services to the third party owners or operators of the relevant systems. However, the terms of the orders made by Robb J require that the components or parts and services “necessary to permit the continued operation in good working order” of the relevant systems be supplied by Indect E&D to TMA Tech, leaving no further possibility of supply by Indect E&D either directly to the car park operators or to a distributor or agent for supply to those operators; and the appeal was argued on that basis (tcpt 25/02/15, p 18.5).

The Licence Proceedings appeal

TMA Tech’s case at first instance

40. Each of the terms relied on by TMA Tech was said to be partly express and partly implied. The first was a term that the licence to use the software forming part of the system would be of unlimited duration (or would be at least for the life of the system). The other was a warranty that the system, including the software and any licence to use it, would be reasonably fit for the purpose of operating the system for its economic life.

41. TMA Tech submitted that the effect of the authenticity check feature was that Indect P/L only granted a licence for a three month period because the software stopped operating at the end of that period unless a code, which confirmed the authenticity of the software, was provided to the system. This process permitted it to operate for a further period of three months.

42. As the primary judge found at [10], that “checking” could be done in three ways:

… If the system is connected directly to Indect's server in Austria over the internet that check occurs automatically. In other cases, every 3 months it is necessary to load the relevant file manually. That can be done by a technician in Austria who is given remote access to the system. Alternatively, the relevant file can be emailed to Australia to be incorporated by someone locally.

43. The first and second of those options were not available to TMA Tech after November 2011 when it changed the remote log-on passwords, thereby preventing Indect from obtaining remote access to the systems.

Reasoning of the primary judge

44. The primary judge made the following relevant findings, none of which is challenged. The authenticity check feature was introduced as a standard feature of the software that Indect distributed globally, and was introduced to make unauthorised copying of that software more difficult. That feature was a part of the operating software which Indect P/L agreed to supply and did supply to TMA Tech as part of the last four systems: Judgment [28], [29].

45. Addressing TMA Tech’s argument that the inclusion of the authenticity check meant that the software licence was only granted for a period of three months, the primary judge concluded at [31]:

… The fact that that software had a particular feature that meant that it had to be connected directly to Indect's server in Austria, or required updating every 3 months with an authenticity check file, did not mean that in fact the licence Indect granted to its software was for some shorter period of time. It simply meant that one of the characteristics of the software that was the subject of a lifetime licence was that it required a direct connection with Indect's server or the periodic inclusion of the authenticity check file in order to function normally.

46. His Honour also rejected the argument that by reason of the inclusion of that feature the software was not reasonably fit for purpose. To enable the software as supplied to function continuously, it was necessary that Indect P/L supply an authenticity check code every three months to enable the confirmation of authenticity to be made. That could be achieved by Indect P/L permitting a direct connection to its server or by its providing TMA Tech, or the car park operator, with the updated authenticity check file every three months. Accordingly, in order to give business efficacy to the supply agreement it was necessary to imply a term requiring Indect P/L either to permit such a direct connection or to provide the updated authenticity check file every three months.

46. The primary judge continued at [32]:

... Unless that term is implied, neither TMA nor the car park operator would get the system for which they contracted (TMA with Indect, and the car park operator with TMA). However, Indect accepts that it is bound by such a term. And if such a term is implied, it is difficult to see why the systems are not fit for the purpose for which they were acquired.

Determination of the Licence Proceedings appeal

48. TMA Tech maintained the arguments dealt with and rejected by the primary judge.

49. As to whether there was a breach of the term that the licence to use the software would be of unlimited duration, it was submitted that the “real question” raised by this issue was whether Indect P/L had breached “the term of the sale contracts that it would provide a perpetual unlimited software licence such as would permit the software to operate continuously for the life of the system. Or by introducing this device, did the software licence that was being provided cease to be perpetual or unlimited in its lifetime?”

50. That formulation of the question does not sufficiently distinguish between the duration of the licence to use and the subject matter of that licence. A licence granted for an unlimited period would permit TMA Tech and, it is assumed, any assignee or sub-licensee, to use the supplied software for the life of the system. The fact that the software as supplied was not capable of functioning or operating continuously during that period without technical assistance or regular updates did not mean that the duration of the licence granted was somehow shortened or came to an end. The primary judge reached that conclusion and was right to do so.

51. In addition TMA Tech submitted that the relevant systems were not fit for purpose because the software did not permit them to operate continuously. It was also submitted that the provision of software which required regular updating meant that the system was not fit for purpose because it “stopped every three months”. In support of these arguments it was emphasised that TMA Tech had not been told of the new security feature at the time of purchase.

52. That TMA Tech may not have been aware of the inclusion of the authenticity check feature when the first of these systems was supplied is beside the point. As the primary judge found, the subject matter of each of the relevant purchase orders was the “then current version of Indect’s software”: Judgment [27]. That finding is not challenged. Nor did TMA Tech allege that what was delivered was different from what had been specified.

53. The authenticity check was introduced as a standard feature of software distributed globally: Judgment [28]. The software performs its functions upon its updating every three months. The facility to enable that to occur is available to the operator and can be undertaken remotely, with little or no involvement of that operator, if an Indect technician is given remote access, or if the system is connected directly to Indect’s server. More significantly, it was not suggested that there was any difficulty or any unreasonable or onerous burden involved in permitting the three monthly authenticity check to occur. The primary judge did not err in holding that there had been no breach of the warranty as to fitness for purpose.

54. TMA Tech described the primary judge’s reasoning, which depended in part on the implication of a term to facilitate the three monthly check, as putting “the cart before the horse” because such a term should not be implied to remedy a prior breach of contract in supplying software containing that feature. This argument does not take account of the primary judge’s unchallenged finding at [27], referred to at [52] above, that there was no such breach of contract.

Conclusion: Licence Proceedings appeal

55. There is one further matter arising from these proceedings. TMA Tech also alleged that by supplying CPG systems with the authenticity check feature, Indect engaged in unconscionable conduct in contravention of s 21 of the ACL. The unconscionable conduct was said to be the supply of the four systems with that feature “as the continued operation of [those systems] … is subject to Indect either intentionally or unintentionally failing to provide a new code when it is required”. In support of that allegation particulars were given of four occasions on which the code had been provided only after TMA Tech had advised that the software had stopped working. The primary judge did not address this allegation.

56. The grounds of appeal do not include that his Honour failed to do so. Grounds 1 and 2 assert error in dismissing the unconscionable conduct claim, but only on the basis that the supply or provision of the software was in breach of Indect’s contractual obligations and accordingly unconscionable. No oral submissions were addressed to these grounds on the basis that they raised any other questions in relation to unconscionable conduct. Similarly, TMA Tech’s written submissions commenced with the proposition that Indect’s conduct was unconscionable because it was in breach of an agreement to supply perpetual licences in respect of the software. Those written submissions then referred to other unpleaded conduct.

57. The primary judge did not err in concluding that there was no breach of any contractual obligation on the part of Indect P/L in supplying software which contained the authenticity check feature. It follows that the only basis upon which it is said the primary judge erred in failing to conclude that there was unconscionable conduct is not made out.

58. Grounds 1 and 2 in the Licence Proceedings are rejected. Grounds 3 and 4 do not arise because they are concerned with questions of relief only. The appeal in this proceeding should be dismissed with costs.

The Supply Proceedings appeal

Overview

59. The notice of appeal challenges the findings as to the implied terms (grounds 1 and 2), the conventional and promissory estoppels (grounds 7 to 13), the unconscionable conduct (grounds 14, 15 and 16), and as to the representations said to have been made concerning Indect’s willingness to provide TMA with ongoing support (grounds 3, 4, 5 and 6).

60. In its written submissions TMA described the relevance of the findings concerning those representations as follows:

… the history of Indect’s repeated assurances from early 2008 until late 2012 – to the effect that Indect would continue to support TMA in its maintenance of the Indect systems beyond the warranty periods and for the lifetime of the systems – permeated their business dealings throughout; and that the frequency and consistency of those assurances formed the accepted basis of their contractual arrangements (for the purposes of both conventional estoppel and the implication of terms into the contracts).

61. I will first address the grounds challenging the rejection of the case as to terms being implied into the agreements between the parties. In doing so I recognise that TMA relies, in support of its argument for the implication of those terms, on the fact that the representations and assurances were made.

Implied terms (grounds 1 and 2)

TMA’s claim

62. The implied terms are said to be terms of each of the supply contracts. It is submitted that they are to be implied as a matter of necessity, taking into account the various representations made. The other pleaded bases for the implication of the terms are not pressed (see [37] above).

63. At this point two matters should be noted. First, as his Honour observed at [84], the implied terms as formulated in the pleading do “not identify the terms on which the parts and services are to be supplied” (see [70] below).

64. This omission was addressed in the course of the appeal when the implied term and convention for which TMA contends was reformulated as follows:

During the operational lifetime of each car park guidance system purchased by TMA from Indect and installed by TMA (“the Systems”), Indect will provide to TMA, at the prices and upon the terms applicable from time to time to Indect’s resellers and/or agents (where not covered by relevant warranties) parts and software support as required by TMA for the purpose of ensuring the continued and effective operation of the Systems; provided that TMA is not entitled to the discount, if any, accorded to distributors in Australia at the relevant time.

65. Secondly, the effect of the implied term contended for remains as it was before the primary judge (see Judgment [85] (also extracted in [70] below)), namely that TMA was the only party to whom Indect was to supply parts and support for the systems sold and installed by TMA.  

The primary judge’s reasoning

66. In considering whether the terms should be implied as a matter of fact, the primary judge did not proceed on the basis that each of the five conditions in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 had to be satisfied. Having referred (at [70]) to the observations of McHugh and Gummow JJ in Byrne v Australian Airlines Ltd [1995] HCA 24; 185 CLR 410 at 442 concerning the need for caution against such an approach where “it appears that the parties themselves did not reduce their agreement to a complete written form”, the primary judge proceeded (at [79]ff) to consider whether the implication of the term was “necessary for the reasonably effective operation of the contract” in the circumstances of this case.

67. His Honour answered that question in the negative in relation to each of the 15 supply contracts. Significantly, he recorded (as remains the position in this Court) at [81]:

The submissions made by TMA wrap up a number of features of the relationship between TMA and Indect and TMA and its customers and, in doing so, fail to identify with sufficient precision the nature of the contracts into which it is alleged the terms are to be implied. The relevant contracts are contracts for the sale of systems that are to be on-sold to customers. …

68. As the primary judge also noted, it was not an express term of the contracts between Indect and TMA that Indect would make available to any operator of its system, parts and software support for its operational lifetime: Judgment [82]. Indect sold the systems on terms that did not require it to provide parts and technical assistance for that period, although there may have been good commercial reasons for it to do so if it wished to continue to supply in the Australian and other markets. In the circumstances it was not necessary for the effective operation of the supply contracts between Indect and TMA that Indect be bound to supply those services to TMA for the life of the equipment: Judgment [83].

69. The primary judge observed that the entity that would need to acquire spare parts and services during that period was the purchaser from TMA (or any subsequent owner or operator of the car park) and not TMA itself: Judgment [81]. Accordingly it was reasonably to be expected that over time that owner or operator would look to Indect or TMA, or some other distributor or agent of Indect, for that ongoing supply. Viewed prospectively, whether TMA would be a distributor of Indect parts and services for the whole of the lifetime of each system was uncertain and depended on whether it remained willing to be so, and had an agreement with Indect which permitted it to do so. The question whether the owner or operator of the car park would obtain those parts and services from Indect directly, or from TMA, or from some other distributor was equally uncertain.

70. The primary judge took three further matters into account in rejecting the implied terms. Two of them are referred to in [63]-[65] above:

[84]   The implied terms … do not identify the terms on which the parts and services are to be supplied. Implicit in TMA's submissions, and in the interlocutory orders that have been made, is the assumption that those terms should be the same as the terms made available to distributors of Indect's products in Australia. As things have turned out, it is possible to identify those terms because other distributors have been appointed. However, at the time the earlier orders were placed, there were no other distributors and it is not apparent how the terms can be identified in those cases. The content of those terms cannot be identified by reference to subsequent events. At the time each order was placed it must be possible to identify the terms on which Indect was required to supply the parts and services that are said to be the subject of the implied term for the life of the relevant system. TMA offered no explanation for how that could be done.

[85]   The effect of the implied terms for which TMA contends is that it is to be treated as a distributor of Indect's products for the purpose of obtaining parts and support for the systems it sold for the life of those systems (whether or not the customer seeks to acquire those services from TMA or not). … But the terms on which Indect may be willing to supply distributors of its products will be affected by the benefits it obtains from the distribution agreement. …

[86]   As I have said, it is to be expected that a customer will need maintenance services in connection with the system it buys; and it has a choice whether to seek to enter into a formal contract to acquire those services and, if so, from whom. If the customer enters into a maintenance agreement with TMA that runs for a period of time, and TMA has no formal distributorship agreement with Indect, TMA takes the risk that its distributorship agreement will not remain on foot. That risk can be addressed by TMA by making it a term of the maintenance agreement that it is entitled to terminate the agreement if its distributorship is terminated or by seeking to enter into some specific arrangement with Indect in relation to that agreement. However, the existence of the risk - which is a risk that can be controlled by TMA - is not a reason for implying into each of the 15 contracts the terms contended for by TMA. …

The argument on appeal

71. TMA made several submissions in support of the implication of the term as formulated. First, it was said that none of the contracts between Indect and TMA had been reduced to a complete written form. The consequence was that caution was required against an automatic or rigid application of the criteria identified in BP Refinery. Secondly, it was submitted that the contracts between Indect and TMA should not be treated as individual contracts of sale, but rather seen more broadly as involving purchase, re-sale, installation and maintenance. That was relevant when considering what was necessary to give business efficacy to those contracts. Thirdly, it was said that implication of the term was necessary because otherwise TMA could not ensure that the systems it had supplied operated for their lifetime. Some of the parts could only be sourced through Indect. Without the term there would also be uncertainty of future supply because of the risk that Indect might leave the Australian market. The term would provide certainty of supply to TMA because it would not have to rely on relationships with its competitors acting as distributors of Indect, to source its parts.

72. Finally, it was submitted that regard must be had to the circumstances in which the supply contracts were made. Several circumstances were said to be relevant. They were that, consistently with performance of the implied term, Indect had provided support, parts and maintenance to TMA and third party operators beyond the period of the express warranties. Secondly, Indect had made statements to TMA that it would support TMA and the systems for their operational lifetime. Thirdly, statements were made in presentations to prospective customers that Indect and TMA could provide long term preventative maintenance contracts for the systems. Fourthly, statements were made in relation to particular tenders that Indect and TMA could guarantee long term support and spare parts availability. The second, third and fourth of these circumstances constitute the representations described by the primary judge at [42]-[66] which are the subject of the contested findings at [91]-[108].

73. In response it was submitted on behalf of Indect that the primary judge applied the correct principles; that it was not necessary to imply the term to ensure the reasonable and effective operation of the supply contracts; and that the term was uncertain, inequitable and inconsistent with the informal distributorship arrangement between the parties that was able to be terminated on reasonable notice.

74. At this point it is necessary to refer in more detail to the terms of the supply contracts and to the representations and assurances relied on by TMA.

The terms of the Indect supply contracts

75. The CPG systems consisted of the hardware and software described in [15] above. Each system had an operational life of about 15 years and required ongoing service and maintenance, including the replacement of parts, the rectification of software problems and the provision of software updates.

76. The primary judge described the usual course of negotiations resulting in a supply contract at [7]:

… generally TMA, with the assistance of Mr Fowler (and later Indect E&D) [sic], prepared a specification for a particular site and Indect would provide a quote based on that specification. TMA would then tender or submit a proposal to the operator of that site based on the quote. On occasions, Mr Fowler attended presentations given by TMA to prospective customers and he was given copies of tender documents, although not copies of the final contracts. If TMA was successful, it would sign a contract with the operator and then issue a purchase order to Indect for the necessary components. Each system was bespoke in the sense that it had to be designed specifically for the car park in question largely using standard equipment and software that had been designed and manufactured by Indect. No formal contract was signed between Indect and TMA relating to the equipment and software to be supplied by Indect. However, Indect E&D's invoices contained a number of terms relating to the supply of the system and in many cases purported to incorporate by reference its standard terms and conditions. The evidence, however, is unclear about the particular form those standard terms and conditions took in the case of each contract. Significantly, the invoices set out some terms concerning the warranty period provided by Indect.

77. For example, Indect E&D’s one page quote for the supply of the Doncaster system to TMA Australia was dated 29 May 2008 and provided for the supply of sensors, indicators, signage, electrical cabling and computer hardware, software licences and “support” which was described as follows:

SUPPORT: Putting into operation, in Australia, lump sum.

SUPPORT: Engineering support, in Austria, lump sum.

Documentation SUPPORT in Austria, lump sum.

Switch on support per 100 spaces (no mounting of components included)

System train the trainee incl doc, German or English (no end user training) at INDECT in AT.

78. The “software” referred to included a “Single licence ICOM Indect SSA application, Incl. Interface SKIDATA™ System 450” and a “Licence for INDECT SSA per space”.

79. Indect’s terms included the following warranty provisions:

Warranty conditions	Exchange of defective parts by shipment; faulty parts have to be sent back to INDECT. No warranty claim on software bugfixing if there is no DSL connection supplied on site (servicepacks only installable by high bandwidth remote maintenance).
Warranty period	3 years on sensors and signs; all other components 1 year

…

Our general terms of business apply, property of INDECT until fully paid.

INDECT provides 2nd level support during regular business times. First Level Support to the end customer by TMA.

80. TMA Australia accepted that quote by its purchase order No 15407/19872 dated 6 June 2008. It then entered into a written agreement with a company in the Westfield Group (Westfield Design & Construction Pty Ltd) for the supply and installation of that system at the Westfield Doncaster site.

80. Taking another example, Indect P/L’s quote for the supply of the system installed at Rhodes Shopping Centre was dated 16 June 2011. It was for sensors, bay indicators, communication modules, computer hardware, computer software licences and signage. The quote included the following terms:

…

Components

All parts are supplied without fixing materials (screws, tap bolts etc)

Rail, strut, rods, cable and all cableing [sic] and containment is specifically exluded [sic]

Excludes all installation labour and commissioning labour. Quote specifically supply of goods only ex factory.

Linemarking not included.

Computer peripherals not included.

Warranty:

3 years on all equipment installed in the parking area; all other components (computer and peripherals): 1 year

Indect reserves the right to replace or repair at their discretion.

Warranty by return to base.

Faulty parts to be sent to INDECT Electronics and Distribution, Austria for changeover.

No freight costs are payable by Indect.

No warranty claim on software bug fixing if there is no DSL connection supplied on site.

Service packs are only installable by high bandwidth remote maintenance.

82. TMA Tech accepted that quote by its purchase order No 100147 dated 1 September 2011. It then entered into a written agreement with Mirvac Real Estate Pty Ltd, as manager of the Rhodes Shopping Centre, for the supply and installation of that system.

The representations and assurances

83. The representations and assurances dealt with by the primary judge fall into two groups. The first consists of six statements said to have been made to Mr Karam by Mr Herwich. The second consists of a further six statements, or series of statements, said to have been made by Indect or, in its presence, to prospective customers in relation to particular tenders. It is sufficient at this point to record Mr Karam’s evidence as to what was said to him by Mr Herwich and the primary judge’s findings as to that evidence.

84. The six statements said to have been made by Mr Herwich to Mr Karam: The first of these statements is alleged to have been made during one of the early conversations between Mr Herwich and Mr Karam before May 2008. Mr Herwich told Mr Karam that “Indect E&D would support TMA Australia and all the Indect PGSs that TMA Australia sold for their system life”. The primary judge was not satisfied that, if such a statement was made, it was to be understood as a binding undertaking by Indect to support TMA for 15 or more years come what may. His Honour was prepared to accept that something may have been said to the effect that Indect would support TMA as its agent or distributor and also would support its own systems, one way or the other, for their lifetime: Judgment [91], [93], [94].

85. The second statement, made in the context of negotiations for the Westfield Doncaster system, is a slightly different version of the first. Mr Herwich said that “the Indect system has a 15-year life and Indect will fully support TMA and the products for that time”. The primary judge was not satisfied that Mr Herwich had made a statement in those terms, finding instead that their conversation related to the prompt installation of the system: Judgment [95]. The third was that in early 2009, in the context of the tender process for the Top Ryde Shopping Centre, Mr Herwich said of Indect’s “new generation sensor” that TMA should be able to buy it for the next 10 to 15 years and made a similar statement in relation to the “old sensors”. The primary judge did not accept that these statements were made: Judgment [96].

86. The fourth statement arises out of Mr Herwich’s meeting with Mr Karam in Dubai in February 2012. The circumstances of that meeting are described by the primary judge at [48]-[55]. Mr Karam relied on an email sent by Indect to TMA and then by TMA to Westfield on 23 February 2012 in which Indect said (intending that TMA should communicate the substance of the email to Westfield) “we want to confirm INDECT’s continued support of TMA for the sale, distribution and maintenance of the INDECT product in the Australian and New Zealand market”. At that time there was a dispute between Indect and TMA as to the terms on which TMA might continue to act as a distributor of Indect’s products. Westfield (Mr Clee) was aware of that dispute. He responded almost immediately to TMA’s email which attached Indect’s email (described by Mr Karam as confirming “Indect’s and TMA’s continue[d] relationship”) and in terms which laid bare the essence of Indect’s email:

This email does not clarify the issue of exclusivity, nor the broader current or future playing field for the installation, maintenance and technical support of Indect technology in Australia.

It simply confirms that TMA are on that field of play.

Can you please ensure that the written formal confirmation does deal with that broader context …

87. The primary judge considered the Indect email to state only that Indect then intended for TMA to continue as a distributor of its products, with no indication as to how long that would remain the case: Judgment [97]. His Honour also found that Mr Karam could not have understood Indect’s email as saying that the support referred to would continue indefinitely, or for the life of any system, as Mr Karam asserted: Judgment [98].

88. The fifth statement was made in April 2012 and in the context of the successful tender for the Highpoint Shopping Centre. In response to an inquiry from Mr Karam as to Indect’s ongoing support in light of a $30,000 per day liquidated damages provision in the contract, Mr Herwich responded that TMA had Indect’s support for the sale, installation and maintenance of the systems. The primary judge described as “implausible” that in response to such a specific question concerning a particular project, Mr Herwich would have volunteered an assurance requiring that Indect supply to TMA parts and services for the life of each of the systems supplied by it: Judgment [99].

89. The final statement was said to have been made to Mr Karam at a meeting between Mr Herwich, Mr Karam and TMA’s solicitors on 26 April 2012. There was discussion about the terms of any ongoing distributorship arrangement. Mr Karam said that, even if no agreement was reached as to such an arrangement, Indect needed to continue providing TMA with parts and support, to which Mr Herwich responded “That’s right”. The primary judge rejected the suggestion that by such a response Mr Herwich agreed that, even if the distributorship was not going to continue, Indect would still support TMA for the life of the systems that it had supplied: Judgment [101].

90. The six statements said to have been made to potential clients or in relation to tender responses: As to these statements, the primary judge observed at [104]:

… It seems clear that Indect's position was that it was happy to commit to a representation that it would provide parts and services to the customer for a period of 10 or more years. But it does not follow from that fact that it was making a representation to TMA concerning its willingness to continue to supply those goods and services through TMA. …

91. The first was made in writing and in relation to the Westfield Doncaster system. On 5 May 2008 Mr Fowler sent Mr Howell an email attaching a draft proposal to be sent to Westfield which stated that “(w)e can also supply you with a preventative maintenance contract for the system”. The second concerned a tender for the Canberra Airport car park. On 10 August 2008 Mr Fowler sent Mr Howell an email which noted that the tender called for a “9 Year maintenance agreement from the end of the warranty”. In cross-examination Mr Fowler accepted that at the time he had no objection to TMA offering such a maintenance agreement in circumstances where the tender requested that Indect E&D guarantee that it would provide parts and support for 10 years.

92. The third was a series of statements which the primary judge found were made by Mr Fowler to potential clients, and in the presence of Mr Howell, to the effect that “Indect will provide TMA with spare parts and the necessary backup to support the software for the life of the system”: Judgment [107].

93. The fourth was another series of statements made in February 2010 in connection with the tender for the Brisbane Airport site. Those statements were written in the ‘Notes for Presentation’ and included that Indect as manufacturer and software developer could guarantee supply of parts for 10 years or more. The fifth representation was made by Indect’s signing on 27 July 2009 of a “Support & Spare Part Availability Guarantee” by which it guaranteed to TMA to provide support and spare parts availability for the Canberra Centre project for a period of 10 years from delivery.

94. The sixth consisted of statements made in two different tender documents. In February 2011 Indect stated that spare parts would be available for equipment for a minimum of 10 years and that it would guarantee spare parts availability for 10 years. In June 2011 a statement was made that Indect would provide a guarantee confirming service support for hardware and software delivered with the system, and parts availability, for a minimum of 10 years.

Proposed term not necessary to give business efficacy

95. The primary judge did not apply in any rigid way the criteria identified in BP Refinery. As is noted in [66] above, he focussed on whether the implication of the term was “necessary for the reasonable or effective operation” of the contract.

96. The difficulty for TMA’s argument remains that identified by the primary judge at [81] (extracted in part in [67] above). That argument does not address why it was necessary to imply the terms to secure the “reasonably effective operation” of each supply contract. Those contracts do not address the agency or distribution arrangement between Indect and TMA, or the ongoing supply of parts and services to the owner or operator of the car park after any warranty periods have expired.

97. Indect supplied TMA knowing that TMA was reselling and installing each system. To the extent that Indect undertook warranty obligations in relation to hardware and componentry, it must be taken to have agreed to perform those obligations on the equipment as installed, and notwithstanding that TMA no longer owned it. It also must be taken to have understood that TMA had “sold” the benefit of those warranty obligations, none of which continued for more than three years.

98. With respect to computer software, what was “sold” were licences to use that software for the purpose of operating the installed system. The identity of the licensor and the terms of those licences in relation to maintenance, modifications and updates are not known. The parties proceeded on the basis that the duration of the licences extended for at least the expected lifetime of the systems and that TMA and the operator of the car park had the benefit of whatever rights were granted.

99. To the extent that TMA undertook any warranty obligations in favour of third party purchasers, it had the benefit of promises from Indect in the same terms. To the extent TMA undertook any obligations in favour of a third party with respect to computer software, it had the benefit of the licence agreement with the licensor, being either Indect or some other entity. It was not necessary to imply a term providing for the ongoing and exclusive supply by Indect of parts and services to TMA to secure to it the benefit of its contract with Indect or to protect its position with respect to obligations undertaken under the contract for the on-sale and installation of the system.

100. The matters to which TMA refers as making it necessary to imply the term are directed essentially to the desirability of securing the ongoing availability of parts and support to the owner or operator of the car park. This focusses on a subject which is not dealt with by the supply contracts. It is also a matter which, as the evidence showed, could be addressed in ways not involving the overseas equipment manufacturer (Indect) giving a binding undertaking to a local distributor which has the effect of requiring the owner or operator to take supply from that distributor only for the lifetime of the system.

101. Ordinarily for a term to be implied it must be “reasonable and equitable” and not operate so as to favour the interests of one party over another: BP Refinery at 283; Byrne at 442 – 443. Here the proposed term would require Indect to provide parts and support for the 15 systems to TMA at agency rates and irrespective of whether TMA remained an Indect distributor; whether the parts and support would in fact be supplied by Indect directly to the installed systems; and whether the customer preferred to take supply from Indect or from a distributor other than TMA. If the purpose of the term is to secure the ongoing availability of parts and services to the owner or operator of the CPG system, as proposed it goes beyond that purpose and in doing so, favours the interests of TMA over those of Indect and that third party (Byrne at 442). Each of these considerations makes it unlikely that the implication of the term was so obvious that it went without saying, or that it was necessary in the relevant sense (Byrne at 444).

102. The proposed term also would qualify the position under the informal distributorship arrangement between Indect and TMA. That arrangement, not being for a fixed term, was terminable on reasonable notice: see, for example, Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438. Termination would bring to an end the relationship under which TMA supplied and installed Indect’s CPG systems and provided parts and support for those systems. The proposed term, if implied, would continue that relationship, on an exclusive basis and for an extended period, but only in respect of systems installed by TMA, and irrespective of whether those systems were owned by the party originally supplied by TMA. This consideration speaks against the implication of the term because it would produce an outcome inconsistent with the exercise by either party of an existing contractual right.

103. Finally, TMA relies on the various representations and assurances said to have been made, as confirming the “obviousness” of the term to be implied. This submission misunderstands the third of the conditions specified in BP Refinery (that the term be so obvious that “it goes without saying”). That condition is not a freestanding one justifying implication. The criteria described in BP Refinery, as McHugh and Gummow JJ note in Byrne, are “cumulative” (at 442) and “might overlap” (at 441). Furthermore, as appears from the passages in the judgments of Scrutton LJ in Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592 and MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, which are cited in BP Refinery at 283, it is because of the necessity to imply the term that it may be said, had the parties turned their minds to the question, that they would have responded that its inclusion was a matter so obvious as to be unnecessary to spell it out. The term in question does not answer that description.

104. TMA’s appeal against the rejection of its argument for the implication of the suggested term should be rejected.

The representations (grounds 3, 4, 5 and 6)

105. TMA challenges the primary judge’s findings as to the statements made by Mr Herwich to Mr Karam (grounds 3 and 4) and by Mr Fowler in Mr Howell’s presence to existing and potential customers (grounds 5 and 6). The principal significance of those findings is to the asserted assumption relied on by TMA as giving rise to an estoppel. In that context and as appears from the analysis which follows TMA had to establish, by reason of those statements and the parties’ other conduct, that they adopted an assumption or convention that Indect was bound under each supply contract to provide directly and exclusively to TMA the parts and services necessary to ensure the operation of that system for its lifetime.

106. That directs attention not only to what was said between the parties but also, and more significantly, to whether what was said, viewed objectively, showed sufficiently clearly that they had adopted an assumption intended to affect an aspect of their existing or contemplated legal relationship constituted by each supply contract. As Mance LJ noted in Baird Textiles Holdings Ltd v Marks & Spencer plc [2002] 1 All ER (Comm) 737 at [91], the requirements necessary to establish the estoppels relied on here include “an unequivocal promise to found a promissory estoppel or conventional conduct of sufficient clarity to found an estoppel by convention and, secondly, the objective intention to affect some actual or apparent pre-existing legal relationship”.

107. The primary judge at [89] described this question as being whether the statements made “carried with them the implication that Indect would provide TMA with parts and support for the life of the systems”. In relation to each representation or assurance, he proceeded to consider that question and the anterior question whether the statement was in fact made. In doing so, his primary focus was on the second of these questions and on occasions his Honour only made a finding as to that question: see, for instance, Judgment [91], [93], [95], [99]. Answering the question whether statements were in fact made required consideration of the sometimes conflicting evidence of Mr Karam and Mr Herwich: Judgment [92], [96]. Where there was conflict, the primary judge preferred the evidence of Mr Herwich. In doing so, he made adverse findings as to Mr Karam’s credit. Those findings were based in part on assessments of aspects of Mr Karam’s evidence as being “implausible” ([96], [99]), “objectively unlikely” ([93]) or “unlikely” ([95]).

108. TMA challenges these findings as to Mr Karam’s credit and as to whether statements were made in the terms he alleged. It submits that his Honour’s assessment of that evidence failed to take account of uncontroversial contextual evidence and, in some cases, evidence of Mr Herwich, which in each case was consistent with Mr Karam’s version of events. If this Court considers the primary judge to have erred in making these assessments and findings, TMA submits that the Court can substitute its own findings as to what was said.

109. In response Indect says that there was no error in the primary judge’s findings, including his assessments based on the demeanour of the two witnesses; that even if this Court might have come to a different view, those findings were available and should not be disturbed; and that if this Court should conclude otherwise, there would have to be a new trial because of the credit issues arising.

110. TMA’s principal challenge in relation to the second group of statements, being those made by Mr Howell and Mr Fowler, is that his Honour erred in not finding that statements similar to those made by them in the presentations to Bovis Lend Lease, TAC Pacific and Willoughby City Council (see Judgment [107]), were also made on other occasions. In TMA’s written submissions to this Court these representations were described as the “Customer Representations” and were that Mr Howell said “[w]ith the support of Indect, TMA will maintain the system for the life of the equipment” and that Mr Fowler said “Indect will provide TMA with spare parts and the necessary backup to support the software for the life of the system”. This aspect of TMA’s challenge to the primary judge’s findings does not require consideration of any credit findings because his Honour found each of Mr Howell and Mr Fowler to be an honest witness: Judgment [107].

111. Irrespective of how the challenges to these findings of primary fact are determined, it remains necessary also to resolve the second question referred to in [106] above. The primary judge answered that question in the negative. At [115] he concluded, in relation to the conventional estoppel claim:

It is clear from what I have already said that the parties did not adopt an assumption that their relationship would be conducted on the basis that Indect would provide parts and support to TMA for the life of the systems bought by TMA irrespective of whether TMA remained a distributor of Indect's products or not. Any assumption made by the parties was an assumption concerning the support that Indect would provide TMA while it remained a distributor. When the question whether the distribution agreement should continue arose, there was clearly an issue between the parties concerning what would happen if it were terminated. That issue was never resolved.

112. Assuming error on the part of the primary judge and that all of the statements contended for were made, TMA is only entitled to a new trial if there is a real prospect of this second question being answered differently, and favourably to it. Otherwise no substantial wrong or miscarriage would have been occasioned by any errors made in relation to the findings as to what was said: Uniform Civil Procedure Rules 2005, r 51.53(1). For that reason I propose to address the challenges to the primary judge’s conclusions with respect to the estoppel claims on the basis that statements were made by Mr Herwich, in the terms claimed by Mr Karam, and by Mr Fowler and Mr Howell, in the terms of the Customer Representations.

Conventional estoppel (grounds 7, 8 and 9)

TMA’s claim

113. TMA’s argument on appeal focussed on its claim to a conventional estoppel in relation to each of the supply contracts. It was accepted that if the evidence did not sustain that claim, it was unlikely that TMA could establish a promissory estoppel.

114. The convention alleged to have been adopted was between the Indect and TMA parties to each supply contract and was said to prevent the Indect party from denying an ongoing obligation to supply the TMA party directly with the parts and support necessary to enable TMA to ensure the continued effective operation of the relevant CPG system. The unstated corollary of that obligation was that TMA would make that supply and support available to the owner or operator of the system. That follows because the object of the obligation which Indect is said to have been estopped from denying could not be achieved without TMA’s continuing provision of supply and support to that owner or operator: Mackay v Dick (1881) 6 App Cas 251.

The relevant principles

115. In Moratic Pty Ltd v Gordon [2007] NSWSC 5; 13 BPR 24,713 at [32], in a passage adopted by this Court in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; 69 NSWLR 603 at [200] and Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [573], Brereton J described the matters necessary to establish an estoppel by convention as being:

… (1)   that [the plaintiff] has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff.

116. As Campbell JA observed in Franklins v Metcash at [574], the need for the one assumption to be adopted by both parties, and for it to be the conventional basis of their relationship, is established by High Court authority including Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; 160 CLR 226 at 244 and Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; 59 CLR 641 at 676-677.

117. In Queensland Independent Wholesalers Ltd vCoutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46 (in a passage applied and approved by the Court (Moore, Stone and Dowsett JJ) in Attorney-General (ACT) v Eastman [2008] ACTCA 6; 163 ACTR 46 at [45]), McPherson J (Andrews CJ and Demack J agreeing) emphasised the need for the evidence to establish clearly the assumption adopted as to the terms of the relevant legal relationship:

… the principle invoked first requires that evidence be identified which establishes the conventional basis for the assumption relied upon. The word “conventional” in this context carries connotations of agreement, not necessarily express but to be inferred, or at least a demonstrable acceptance of a particular state of things, as the foundation for the dealings of the parties. There must, as the passage from Lord Denning’s judgment [in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 120-121] acknowledges, be at least a “course of dealing between the parties”; that is to say acts or conduct which impinge upon what his Lordship described as “their mutual affairs”. … To produce that consequence the acts or conduct relied upon must point plainly, if not unequivocally, to the assumption put forward as the conventional basis of relations. A course of dealing that is explicable by reference to some other equally plausible assumption inevitably falls short of establishing that the parties accept as the basis of their relations the particular assumption contended for.

Was there a common assumption adopted as to ongoing supply of parts and support to TMA under each supply contract?

118. The assumption for which TMA contends is set out in [64] above. As explained in [114] above, the “legal relationship” with respect to which it is said that assumption was adopted is that established by each contract for the supply of a CPG system. The adoption of that assumption is said to follow from Indect’s conduct in making the statements referred to and, in continuing to supply TMA with parts and software support, following the expiry of the express warranty periods in those contracts.

119. The primary judge’s ultimate conclusion at [115] (extracted in [111] above) was based in part on his findings as to the statements made to TMA or in its presence. TMA challenges those findings and contends for findings consistent with the evidence of Mr Karam, Mr Howell and Mr Fowler.

120. In relation to Mr Karam’s evidence, the findings contended for include that Mr Herwich made statements to Mr Karam in the circumstances described by the primary judge at [43]-[57] and addressed in [84]-[89] above.

121. In relation to the evidence of Mr Howell and Mr Fowler, the findings contended for are that the statements referred to in [22], [90]-[94] and [110] above (see also Judgment [59]-[66]) were made by Mr Fowler to potential customers in the presence of Mr Howell or in tender responses and emails, or by Mr Howell in Mr Fowler’s presence.

122. Accepting that the evidence establishes that these statements were made in the circumstances described, it nevertheless falls a long way short of establishing that, at any time in the period from 2008 to 2012, the parties made and proceeded on the basis of a shared assumption that under each contract of sale Indect was liable also to supply TMA for the next 15 years or so with the parts and software support necessary to ensure the continued and effective operation of the system sold and installed. Nor does it establish the existence of a shared assumption that Indect had promised to do so, irrespective of whether TMA remained an Indect reseller, at prices applicable to such resellers and irrespective of whether the third party owner of the system preferred to acquire parts and support from Indect directly or from another an Indect reseller other than TMA.

123. That evidence does not, adopting McPherson J’s language, “point plainly, if not unequivocally, to the assumption put forward as the conventional basis” of the parties’ relationship. First, at no time was any statement made by Indect to TMA in or to the effect of the assumption said to have been adopted (as set out in [64] above). Nor at any time did TMA say or indicate to Indect that in entering into, or having entered into, a supply contract it was proceeding on the basis that its rights included to receive ongoing supply for the lifetime of the system notwithstanding that it may cease to be an Indect reseller. Secondly, the terms and context in which the statements were made did not indicate clearly that they were intended to be promissory, as distinct from merely representational: see J J Savage & Sons Pty Ltd v Blakney [1970] HCA 6; 119 CLR 435 at 442. Furthermore, none was made with reference to the parties’ understanding of an aspect of their respective rights and obligations under the contract of supply. Thirdly, where statements as to the provision of future “support” were made, they were expressed in general terms. They did not specify the “support” referred to or how it was to be provided. The following questions were left unaddressed: was it support of TMA in its capacity only as reseller of the particular system, or did it refer more generally to TMA’s position as Indect’s reseller and distributor in Australia; if it was the latter, did it extend to support after TMA ceased to hold that position; and did support of any system encompass support which might be provided by Indect directly to the third party owner or operator, or by some other authorised Indect reseller to that owner or operator. Fourthly, the statements relied on do not identify the terms on which the parts and services were to be supplied or the circumstances in which those or other terms were to apply.

124. None of the evidence relied on shows that both parties conducted their relationship on the basis that, with respect to particular systems, Indect had agreed to provide parts and support on the conventional basis asserted. The fact that Indect continued to supply parts and software to TMA after the expiry of any relevant warranty period was, at best, equivocal. During those periods TMA was the only agent or distributor of Indect’s products in Australia and their supply, on the terms on which it occurred, was equally explained by the existence of that arrangement and a commercial motivation on the part of Indect to ensure its product could reliably be maintained.

125. Furthermore, TMA’s conduct from late 2011 was not consistent with the continued existence of the assumption contended for. Mr Karam’s email of 14 December 2011 included, a proposal under the heading “TMA and Indect’s Future Relationship”:

TMA would like to continue our agency relationship with Indect

TMA will not continue in this relationship if we have to deal with Dale [Fowler] or Indect Australia, TMA wants a direct relationship with the Austria and just wants to deal with Austria [sic]

If Indect agrees to move forward on this basis TMA will send a team to Austria to reconfirm all the business rules and the implement them moving forward. [sic]

126. By this email, Mr Karam made clear that TMA was not prepared to continue its agency relationship with Indect if it had to deal with Indect P/L. That is inconsistent with TMA having proceeded on an assumption that it was obliged to continue to deal with Indect P/L, at least in relation to the systems which it had obtained from it. In addition, the “sensible separation” proposed by Mr Karam in a subsequent email in December 2011 (see Judgment [13], which is extracted at [33] above) made no reference to the asserted convention. If the position was as TMA maintained, Indect would have been required to continue to “honour” not only its warranty commitments but also its commitment to provide exclusively to TMA parts and support for the lifetime of each system sold. The proposed terms of separation demonstrate that TMA was only concerned to obtain an assurance that Indect would provide it with supply to enable it to perform “maintenance agreements” that had to be “honoured”. At the time of that email none of the four long term maintenance agreements referred to in [26] above had been entered into.

127. Reference also should be made to Mr Herwich’s “say goodbye” response to Mr Karam’s email of 14 December 2011. That response is set out, in part, by the primary judge at [12] (which is extracted in [33] above).

128. Commenting that Indect’s entry into the Australian market had not been profitable, Mr Herwich first suggested that one option for Indect was to “offtake and leave this market”. His response continued:

On the other side: The main reason why we are hesitating to simply “say goodbye” is that we do not want to damage TMA’s reputation by losing a worldwide supplier (especially with the situation at Sydney airport where we still have no contract from Designa …) and that we will still have to give to TMA (or in the case that you decide to stop also support for the installations that TMA made – we have to support someone else) support for existing installations. So there will be costs for IED anyways. But at least, we would have a limited loss in the future when we decide to offtake.

129. In reply, Mr Karam by his further email proposed the “sensible separation” referred to in [126] above.

130. TMA relies on Mr Herwich’s “say goodbye” response as being an acknowledgment of a pre-existing obligation on the part of Indect “to give to TMA … support for existing installations”, being the “installations that TMA made”. That statement is said to be an admission as to the existence of the assumption contended for and evidence of an occasion on which the parties conducted their relationship by reference to it.

131. In response, Indect submits that to the extent that the expression “have to give TMA … support” conveys a sense of obligation, the obligation referred to is a moral or commercial one between Indect as manufacturer and the owner or operator. That is said to be made clear by the reference to the obligation’s continued existence notwithstanding a decision by TMA to stop supporting its customers and to have been confirmed by the evidence of Mr Herwich:

A.   … What I say is that Indect has to – has the duty as a system supplier to keep all the systems up and running by any means, if by this distributor or reseller or by the other, when the client contacts us, we have a duty to support the system to continue working.

132. There are at least three reasons why the email exchange between Mr Karam and Mr Herwich in mid December 2011 does not point at all to the existence of the convention claimed by TMA to have been adopted. First, Mr Karam’s email of 14 December 2011 makes plain that TMA will not deal with Indect P/L and sees its future dealings with Indect as governed by their “agency relationship” and not any other pre-existing or ongoing arrangement. Furthermore, there is no reference to any other existing obligation. Secondly, the premises underlying Mr Herwich’s “say goodbye” email include that TMA is free at any time to withdraw its support for existing installations, and that Indect nevertheless has an ongoing obligation to support those installations, whether in partnership with TMA or via someone else. Neither premise is consistent with an assumption that Indect is obliged to support TMA, which in turn is obliged to support each of those installations for its working life. That being so, the only plausible explanation for the obligation to which Mr Herwich was referring is that it was the moral or commercial one of a supplier standing by its product and customers. Finally, as is noted in [126] above, in his response to Mr Herwich, Mr Karam also makes no reference to TMA’s reliance on, or Indect’s breach of, the asserted convention.

133. It follows that, irrespective of whether there were errors on the part of the primary judge in making findings as to what was said between the parties, his Honour’s ultimate conclusion in relation to the conventional estoppel claim was correct, even assuming the additional findings contended for by TMA were made. Grounds 7, 8 and 9, which are argued for on the basis that those findings should have been made, must be rejected.

Promissory estoppel (grounds 10 and 11)

134. The pleaded equitable estoppel is formulated by reference to Brennan J’s statement of the relevant principles in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 at 428–429:

… to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.

135. The assumption or expectation necessary to establish an equitable estoppel must be as to a legal relationship which exists or is expected to exist and that expectation must be induced by a promise intended by the promisor and understood by the promisee to affect their legal relations with the result that it is treated between them as something which the party estopped is “bound to do or not to do”: Waltons Stores at 421-422 (per Brennan J); DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; 83 NSWLR 728 at [49]. The necessity that the expectation be one intended to affect legal relations between the parties was also emphasised by Mason CJ and Wilson J in Waltons Stores at 406:

The foregoing review of the doctrine of promissory estoppel indicates that the doctrine extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. [Attorney-General (Hong Kong) v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114] suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party.

136. For the reasons given in relation to the claim to a conventional estoppel, the evidence relied on by TMA, taken at its highest, does not establish that TMA assumed that upon entry into each supply contract Indect was bound by a promise in the terms contended for, or that Indect by that conduct induced TMA to adopt such an assumption or expectation. Grounds 10 and 11 also should be rejected.

Detriment (grounds 12 and 13)

137. The question of detriment does not arise because there was no relevant assumption or expectation adopted either by the parties mutually or by TMA induced as a result of Indect’s conduct. I will, nevertheless, deal shortly with this question.

138. TMA’s case at first instance in relation to detriment was summarised by the primary judge at [88]:

... The detriment TMA says it suffered [as a result of acting upon the representations referred to] was potential losses arising from its inability to perform any of the agreements by which it supplied the relevant systems to its customers, loss of reputation and the potential cost of replacing Indect CPG systems with alternative systems. Implicit in this claim is the assumption that TMA's customers were entitled, under the agreements they had with TMA, to be supplied with parts and support for the life of their systems. However, TMA never sought to make good that assumption. It did lead evidence that TMA Tech had entered into a number of maintenance agreements with some of its customers. However, it was not pleaded that its obligations under those agreements formed part of the detriment on which it relied, although the case appears to have been fought on that basis. That is, it appears to have been assumed that part of TMA's case is that it entered into the maintenance agreements as a result of representations of continued support by Indect.

139. The primary judge concluded that TMA did not suffer any detriment arising from its entry into the various contracts for supply with Indect because those contracts did not “require it to provide” ongoing support to the car park owner or operator: Judgment [111]. On appeal, TMA submits that the primary judge did not address the detriment it identified, namely that departure from its assumption of ongoing supply would cause significant detriment because it would “no longer be able to service the maintenance needs of its customers, with obvious though incalculable damage to its reputation and profit-earning capacity”. Moreover, it was submitted that another likely consequence was that TMA would be in breach of the long term maintenance agreements it had entered into with Westfield and Centro.

140. Contrary to that submission, the primary judge did address each of these arguments. As to the first, his Honour observed that the contracts that TMA entered into did not require it to provide any ongoing maintenance. Nor did the evidence suggest that the car park owners or operators would be unable to obtain such parts or services from Indect or another authorised reseller, if necessary: Judgment [111]. As to the second, his Honour found that by the time those long term maintenance agreements were entered into (see [26] above) it was clear that there were serious problems with TMA’s relationship with Indect and there was no basis for TMA to continue to assume the existence of an ongoing promise in the terms alleged: Judgment [113]. Each of those findings was available on the evidence. The four maintenance agreements were entered into in April 2012, after Mr Karam had received Westfield’s email which confirmed the fragility of TMA’s position as it was reasonably to be understood (see [86] above) and after the relationship had been described by Mr Fowler as “completely dysfunctional”. The primary judge’s conclusions in relation to detriment are not shown to have involved error.

Unconscionable conduct (grounds 14, 15 and 16)

141. TMA argued before the primary judge that Indect acted unconscionably in contravention of s 21 of the ACL by peremptorily withdrawing the supply of parts and support to TMA in May 2013. The specific matters said to be relevant to whether Indect engaged in such conduct included the relative strengths of the bargaining positions between the parties; whether what was done was reasonably necessary to protect Indect’s legitimate interests; whether there was any undue pressure or unfair tactics used by Indect; whether TMA could obtain that supply from any other source; and whether Indect unreasonably failed to disclose any intended conduct that might affect TMA’s interest: ACL, subss 22(1)(a), (b), (d), (e) and (i); Judgment [120].

142. The primary judge observed at [122] that whether a party had engaged in conduct which was, in all the circumstances, unconscionable within s 21(1) directed attention to whether:

… Indect sought to take advantage of some disabling condition or circumstances that seriously affected TMA's ability to make a rational judgment concerning its own best interests in a way that at least involved a real degree of moral obloquy on the part of Indect. …

143. Addressing that question his Honour concluded at [123]:

In my opinion, none of the matters that TMA points to establishes that Indect engaged in unconscionable conduct in this case. What TMA has done is to taken a number of matters that are aspects of the relationship between TMA [sic]. It points out that, in some sense or another, those matters have some of the characteristics listed in s 22 of the ACL. It then invites the court to conclude from that that Indect engaged in unconscionable conduct. However, in doing so, it has taken the matters on which it relies out of context and failed to explain how Indect's conduct involves a taking advantage of some disabling condition or circumstances affecting TMA in a way that involves at least a real degree of moral obloquy.

144. It is accepted by Indect that in addressing TMA’s argument, the primary judge erred in formulating too narrowly what may constitute unconscionable conduct. Unconscionability for the purposes of s 21 is not constrained by general law principles and is a broad concept, as explained by Allsop P in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699 at [291], in a passage cited with approval by Sackville AJA (McColl and Leeming JJA agreeing) in PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 at [106].

145. This error on the part of the primary judge requires that this Court address the question whether Indect’s conduct in 2013 was unconscionable. That conduct included the termination of the informal distributorship arrangement which had been in place since 2008. As explained at [9] above, it did not involve any refusal by Indect to continue to meet any continuing warranty obligations under individual contracts of supply.

146. In its written submissions TMA argued that Indect’s conduct was unconscionable having regard to the following matters: the “perpetual” nature of the software licence supplied to TMA under each contract; Indect’s representations as to the provision of parts and support following the expiry of any warranty period; Indect’s position of strength because it was the principal supplier of parts and software support for its systems; Indect’s insistence after May 2013 that TMA purchase parts and support through an authorised Indect reseller; TMA’s inability after May 2013 to obtain identical or equivalent parts or support from a person other than Indect; and the asserted consequences for TMA and its “customers” of the decision to no longer supply TMA.

147. In oral argument TMA’s case as to unconscionable conduct was stated shortly and as follows:

What is unconscionable in this case is the pre-emptory termination in May 2013 of our right to continue maintaining our clients’ systems using Indect parts and software, and it’s the pre-emptory shutting down of our rights that were represented countless times to us that we would have, and represented to our customers in our presence and in the presence of Indect, by Indect in our presence and by us in Indect’s presence, that is contrary to the exercise of good conscience, when at the point in time at which this happened Indect had an entire strength of bargaining position and we had zero. There’s nothing we could negotiate, no opportunity we were given to negotiate.

148. When addressing this argument, it may be accepted that unconscionability includes “something not done in good conscience” or “conduct against conscience by reference to the norms of [the] society … in question”: Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 at [41]. In my view there was nothing about the relevant conduct of Indect that answered either of those descriptions. Its action in May 2013 was the outcome of a period of disputation between commercially sophisticated parties, that dispute having commenced in mid 2011. The overarching relationship between the parties was one under which TMA had been the sole reseller and distributor of Indect’s products in Australia for a number of years. In the absence of any resolution of their dispute that relationship was terminable on reasonable notice (see [102] above). TMA’s argument did not include that Indect had not given any or any reasonable notice before bringing their relationship to an end.

149. Against that background the specific matters relied on by TMA fall for consideration. The relevance of the “perpetual” nature of the software licence is not obvious. The benefit of the licence was held by the car park owner or operator. Secondly, Indect made no binding promise (either in contract or by reason of any estoppel) to supply TMA directly and exclusively with parts and services for the commercial life of each of the installed systems. The fact that Indect was the principal or sole supplier of parts and support for its systems was only of significance to TMA with respect to any ongoing obligations it had to third parties. TMA had no such ongoing obligations under its contracts for supply with Indect nor under its contracts of resale, and the long term maintenance contracts entered into in April 2012 were made at a time when there was significant uncertainty as to whether it would remain an authorised reseller. TMA had the opportunity to negotiate a specific parts and labour supply agreement with Indect before it entered into any of those agreements. The fact that TMA could no longer secure supply of Indect parts and support as an authorised reseller did not have the consequence that the owners or operators of the CPG systems installed by it could not secure parts and supply, either from Indect directly or via another authorised Indect reseller.

150. Although the primary judge formulated the relevant question too narrowly, he did in my view correctly summarise the overall position of the parties at [124]:

TMA's entitlement to acquire parts and support from Indect arose from its appointment as a distributor of Indect's products, and not from individual agreements by which it ordered particular systems. Although the parties negotiated for a formal distribution agreement, no formal agreement was entered into. In part, that was because TMA wanted an exclusive right to distribute Indect's products in Australia and Indect was only prepared to grant that right at a price that TMA regarded as unacceptable. Indect terminated the informal distribution agreement that existed between them in circumstances where a dispute had arisen concerning the payment of Indect's invoices which became the subject of court proceedings, TMA refused to deal with Indect's Australian subsidiary, TMA itself began distributing the product of one of Indect's competitors and itself commenced proceedings against Indect. The termination of the distributorship occurred after lengthy negotiations between Mr Karam and Mr Herwich which were unsuccessful in resolving the disputes between them. It was not suggested that those negotiations were conducted in anything other than good faith. TMA was not labouring under some disabling condition or circumstances that affected its ability to look after its own interests. It simply wanted its distributorship to continue, on terms that were unacceptable to Indect, because a continuation of a distributorship was commercially advantageous to it. Viewed in that context, there can be no basis for saying that Indect acted unconscionably in terminating TMA's distributorship. Nor did it act unconscionably in refusing to provide TMA with the benefits of a distributorship following termination.

151. In the result, Indect’s conduct in terminating its relationship with TMA in May 2013 was not unconscionable in any relevant sense.

Conclusion

152. The appeals in the Supply Proceedings and the Licence Proceedings should be dismissed with costs.

153. There is no need to make any order discharging the orders made by the primary judge pending the determination of these appeals because, in their terms, those orders only apply until that determination.

154. BERGIN CJ in Eq: I agree with Meagher JA that these appeals should be dismissed for the reasons given by his Honour.

155. Having regard to the approach adopted by Meagher JA in deciding these appeals (with which I agree) it is not necessary to deal further with the matters raised by Macfarlan JA.

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Decision last updated: 06 November 2015