A S Properties Pty Ltd v Touche Ross Services Pty & Anor [1990] QSC 274

IN THE SUPREME COURT OF QUEENSLAND Before Mr. Justice Shepherdson BETWEEN: A.S. PROPERTIES PTY. LIMITED TOUCHE ROSS SERVICES PTY. PETER GRENFELL WINDSOR JUDGMENT - SHEPHERDSON J. No. 2126 of 1985 Plaintiff Defendant Third Party Delivered the Twenty-Third day of August, 1990. CATCHWORDS 0 ,,.,,---,\ Negligence - Contract - Retainer - Breach - Damages. ---- ./ Counsel: Mr. Dutney for the plaintiff. Mr. Chesterman Q.C. with Mr. O'Donnell for theDefendant. Solicitors: Messrs. John M. O'Connor & Co. for the Plaintiff and Third Party. Messrs. Morris Fletcher & Cross for the Defendant. Hearing Dates: 23rd, 24th, 26th, 27th, 30th April and 1st, 2nd, 3rd and 4th May, 1990. -- 1 of 66 -- C r "- ,,,,-----... r \__ IN THE SUPREME COURT OF QUEENSLAND BETWEEN: 't> AND: A.S. PROPERTIES PTY. LIMITED TOUCHE ROSS SERVICES PTY. PETER GRENFELL WINDSOR JUDGMENT - SHEPHERDSON J. No. 2126 of 1985 Plaintiff Defendant Third Party Delivered the Twenty-Third day of August, 1990. This case arises out of the purchase by the plaintiff of a company which was not operating profitably at the time of purchase. The price agreed to be paid by the plaintiff was 1 . 8 million dollars. The purchase was to be achieved by the plaintiff accepting transfers of all issued units in a trust named Payroll Deduction Services Unit Trust of which a company Payroll Deduction Services of Australia Pty. Limited was trustee. The vendors to the plaintiff were Kythera Investments Pty. Limited ("Kythera") and James Stanley Morris as trustee for the Delaney Family Trust. The shareholders of the trustee were HWL Nominees Pty. Limited and Service Nominees (Qld.) Pty. Limited representing respectively the interests of J. S. Morris as trustee and Kythera. The agreement for sale is found in Ex. 1. It is a comparatively short document and I shall now set out the text of it omitting the execution by the parties and attachment "A" which was a document described as "GUARANTEE AND INDEMNITY" addressed -- 2 of 66 -- 2 to Kythera- and "Bri oe11- Nominees Pty. Limited" and signed by Peter Grenfell Windsor. Windsor is the above named third party. The reference to Bri Dell Nominees Pty. Limited appears to have been an oversight. This company was originally a joint vendor with Kythera but Ex. 1 shows that James Stanley Morris as trustee for the Delaney Family Trust was substituted for it. The correction was not carried over to the Guarantee and Indemnity. , - "AGREEMENT FOR SALE OF PAYROLL DEDUCTION SERVICES ·oF AUSTRALIA BETWEEN: KYTHERA INVESTMENTS PTY. LIMITED (hereinafter called 'Kythera') -and JAMES_ STANLEY MORRIS AS TRUSTEE FOR __ THE DELANEY FAMILY TRUST ( hereinafter called 'J. S. Morris' ) . ( hereinafter together called. 'the unit holders') of the one part AND A S PROPERTIES PTY LIMITED (hereinafter called 'the Purchaser') AND PETER GRENFELL WINDSOR (referred to in the attachment hereto marked 'A' as 'the Guarantor'). WHEREAS: A. B. The unit holders are the holders_ of all the issued units in the PAYROLL DEDUCTION SERVICES UNIT TRUST (hereinafter_ called 'the Trust'). PAYROLL DEDUCTION SERVICES OF AUSTRALIA PTY. LIMITED is the Trustee of the Trust (hereinafter called 'the Trustee' ) . C. The shareholders of the Trustee are HWL NOMINEES PTY LIMITED and SERVICE NOMINEES (QLD) PTY LIMITED respectively representing the interests_of .J.S. Morris and Kythera. D. The directors of the Trustee are Mr R O'Brien; Mr R Davidson; and Mr B Delaney. NOW IT IS HEREBY AGREED AND DECLARED AS FOLLOWS: 1. That the unit holders hereby agree to sell all units and loan.accounts held by them in the Trust to the Purchaser and the Purchaser hereby agrees to Purchase the.same from the unit holders for a consideration of $1,800,000.00 payable as follows: (a) An amount of $1,000.00 _ upon the execution hereof . .. ,, ,i ::..,, , '_..--, iJ 0 -- 3 of 66 -- ic C 2. 3 (b) An amourit of $449,000.00 thirty days. following the date of execution hereof. (c) An amount ··Of $630,000.00{ on 15 July 1982. (d) An amount of $720,000.00 on 15 September, 1982. (~) An a~ount representing the balance of monies payable hereunder on 30 June 1983. Upon the payment of the amounts .referred to in Clause 1(a) and (b)'hereof the unit holders shall deliver to the Purchaser instruments of Transfer of all of the units and loan accounts duly executed by' the holder of the particular units and loan accounts in favour.of the Purchaser or of a person of (sic) persons nominated by it and. in· proper registrable form together with unit c. ·certificates, if any, in respect of those units .. ·· 3. Prior to the date thirty days after the date hereof the unit holders shall: (a) · Cause to be prepared financial statements for the trust including a balance sheet of the Trust showing the financial position of the Trust as at such date and a profit and loss statement for the period from 1 July 1981 to such date. Such balance sheet shall identify one liability namely a loan account by Kythera and assets which comprise the benefit of contracts entered into· in relation to the operations carried on by the Trust and known as 'net pay~ and other services presently been (sic) carried •On together with softwear (sic) associated therewith. (b) Transfer to another entity the benefit of all Leases entered into by the Trustee on behalf of the Trust including, without limited (sic) 0 the generality of the foregoing, the Lease of· all premises, computer installed in the Melbourne offices, motor vehicles, partitions, piant, furniture and f.i ttings utilised by the . company and all service agreements relating thereto. (c) Transfer all employees presently employed by the Trustee on behalf of the Trust to another entity and -- 4 of 66 -- 4. 5. (d) 4 .. indemnify the Trust Trustee in respect liabilities arising as -of such Transfer. and the of all a result. Satisfy all creditors of Trust, other than Kythera respect of all claims . up to including ,such date. the in and . .. ( e) Arrange for the Trustee to consent to the transfer of the units to be assigned hereunder. ( f) Arrange for the benefit of . the concept known as 'Motor Card~- to be assigned to_ a new entity · for nominal coniideration. That the· · purchase of the units is• conditional upon a satisfactory 'Performance Report' being made by Touche, Ross Services Pty. within fourteen days of the date hereof that the operations carried on by the Trust and known as 'n.et pay' and other services presently carried on together with softwear (sic) associated therewith do perform as described to clients and Principal Service Organisations using the · services of the business conducted by the Trustee. The parties hereto hereby agreed that the sale price hereinbefore ref erred to shall be applied firstly in satisfaction of the acquisition of the loan account of Kythera with the Trust, such loan account being acquired at par .value and thereafter in satisfaction of Purchase price in respect of the units. 6. • ·The unit· holders hereby jointly and severally agree that they shall at all times hereinafter whenever reasonably required by the Purchaser so to do assist in the provision ·of full · information and explanation in relation to the business and affairs of the Trust and will· cause the computer and premises presently leased by the Trust :and -to be assigned to a-new entity pursuant to the terms hereof to be made available for~use by the Trust in relation to the business of the Trust for a period of . twelve months following the date of Transfer of the units at rates be agreed upon between the unit holders and the Purchaser and default of agreement at the normal rates being charged by the. new entity in respect of utilization_ of time upon such computer, 0 0 0 0 -- 5 of 66 -- C C ic 5 there being no rental payable for premises during that period of twelve months. 7. The unit holders hereby covenant and agree that they will use their best endeavours to provide the services of Mr Brian Delaney,Managing- director, - as manager of thebusiness operations of the Trust for a period of-six months following the date ofTransfer of units and will otherwise cause the Trustee to act in accordance with the wishes of the Purchaser. 8. The parties hereto hereby further agree and declare that they shall take all such steps and do all acts and things and execute all documents as may be reasonably required by any of the other·parties to give effect to this agreement. IN WITNESS WHEREOF the parties hereto have hereunto. affixed their hands on the 31st day of January 1982." The agreement for sale was initially conditional upon the requirements of cl. 4 of Ex. 1 being met. In the events which happened, the plaintiff treated those requirements as met, told the vendors the sale was no longer conditional and entered into possession. The plaintiff paid certain of the purchase moneys agreed to be paid by cl. 1 of Ex. 1 and after several months ceased to make further payments and in effect walked away from the business. No units were ever transferred to the plaintiff who, in this court, told me in effect that by about August or September, 1982 it realised the business it had bought was worthless and decided not to continue funding it. Thereafter, one of the vendors in Ex. 1, Kythera, sued the present plaintiff and the abovenamed third party Windsor for balance purchase moneys owing to it. That action began in this court (Writ. No. 487 ·of 1983). On 11 th November, 1983 the present plaintiff and Windsor delivered a defence and counterclaim. The defendants to the counterclaim were Kythera and Morris. An office copy of ·that defence and counterclaim is , .. " :: ~ -- 6 of 66 -- 6 Ex. 19 before me·.: · -Ih short, the ·defence and counterclaim· were primarily based on alleged fraud by Brian Delaney in respect.of representations made at the Gold Coast in January, ,1982 by -which representations the·plaintiff and Windsor claimed·to have been-· induced ·to enter into Ex. 1 .· · The plaintiff and Windsor also ·t sought by their couriterclaim ( inter alia) damages for deceit and breach of contract. On 20th February, 1985 the plaintiff and Windsor obtained judgment by· default on their counterclaims ·in the, sum., of $462,477.76.·· A photocopy of the formal judgment by Mr. Justice 0 Williams is ·Ex. 8. · This judgment proved fruitless. and, the Q present · action was then begun later in 1985. The initial statement of claim in the action was delivered on 14th October, 1986~··rt was amended on 11th October, 1989. 'The plaintiff has sued the defendant alleging . an oral retainer made in or about January, 1982 between Peter Grenfell Windsor for. the plaintiff and a Frank Wolf for the defendant 0 whereby the defendant was to do certain work for reward and further alleging that in performance of that retainer the defendant gave advice on which the plaintiff acted in proceeding with the contract (Ex. 1) and "that that advice was negligently gi veti ·. and in breach of the contract of retainer. · The defendant in its defence denied liability and indeed denied any·oral agreement between Windsor and Wolf as alleged in the statement of · claim "on the terms alleged or any other terms". The above brief outline of the history of events leading to. the trial before me enables me to more·· fully deal with the · evidence. 0 -- 7 of 66 -- I I C 7 · As . to the alleged ,oral . agreement· between Wind.sor and Wolf, the evidence of both thes~ men given before.me was subjected to the ·. closest scrutiny and criticism by ,counsel. in cross-examination ano in their addresses. . There is . a clear conflict between them as to the terms of the agreement or retainer. and the: t.ime and· place at which it was made. .Wolf departed from the defendant's pleading in that a retainer was admitted. The.relevant events occurred over eight years ago and the passing of the years has, I thought, impaired the recollections Q of both Windsor and Wolf. Admittedly the present· action, wa~, not begun until 1985 but nevertheless, the matter has taken quite.a~ long time to come to trial. 0 C Before I turn to the evidence of Windsor and.Wolf as to the retainer there are some general comments _I wish to make. First, neither man made.any contemporaneous notes as to the terms of the retainer save for some rather terse skimpy notes which Wolf swore he made on 3rd February, 1982. I · thought it very_ _, ~ <' - • surprising that Wolf who is a well qualified accountant holding a doctorate in philosophy and who had had practical experien~e . . with. the defendant -since 1980, did not. ·attempt. to make any contemporaneous wo.rthwhile note of Windsor's oral inst.ructions to him and of what Wolf said . were variations of those instructions. It _is trite to say that_memories are fallible and become even, more so as particular events recede into the past. But I should have thought that the defendant who carried on the business of _management consultants should, in - 1 9 8 2, have had a " , . ; . system for.accurately _recording retain,ers given it by clients. Obviously if a retainer is found in a written document e.g. a letter, that letter will normally be the source to which the -- 8 of 66 -- /.· 8 person. reta:i.ried:•w·ill ':turnr: to f irid out- exactly· what it .is, that he has been retained to do. If a ·retainer is given orally, how much more commercially sensible it would be, if the person to whom the retainer· is given; writes · a contemporaneous· note of the terms · of the retainer and, if he has any doubt, checks ;those terms with the client. It maybe, although it was not so in the present case, that where there is -an oral·retainer,: a letter should be written by the consultant to· the client confirming . the retainer . and specifying its terms and any·:other necessary details. If that 0 were- done there would be much less likelihood of a dispute about Q a retainer and its terms. ·· Doctor Wolf's qualifications were a. degree of Accounting· Econoilfics, a Bachelor of.· Arts Accounting and Economics with . Honours and a Doctorate of Philosophy •· in · Accounting and Managetn~nt'rnformation·Systems. The doctorate.was obtained from the· ,;un·iversity of British Columbia in Vancouver but I do not 0 know b·:t what· tertiary institution the other degrees • were confe.rred: in ·1·9ao--he joined the defendant as -a consultant in management consulting practice. I find it very surprising that, given· his training; he.obviously had no system in early 1982 for reco·fding· oral retainers or their terms although I must say I was··not ·t:old exactly what· the doctorate embraced. Windsor, by contrast·, did not appear to· have any university or . similar level·. qiialification. He was, and is, principally. interested in superannuation and if either Windsor or Wolf were not · t6 ···have made' '. notes of·· an· oral -retainer I · should have• expected' .that person to have· been Windsor rather · than Wolf. ·· This case really :_emphasises· the need for :professional · persons . . . deali~g <~fth: cf:terits:•:'to :make and·; retain_, contemporaneous·. ?J.nd 0 -- 9 of 66 -- .) C 9 reasonabl:y detailed:diary notes and-specially so ~lien_ a retainer is given orally. - Peter Grenfell . Windsor was I find a man who in 1982 was primarily interested-in superannuation. He says that his main interest in life is superannuation work and.I have no.doubt that that '.Was. so in -1982 .· He was_ then, and still is, the managing director of the plaintiff. Exhibit 1 was prepared by solicitors acting for Kythera. When Windsor signed Ex. 1 he paid $1,000.00 to Binder ·Hamlyn in Brisbane. -Prior to Ex. 1 coming into being, Windsor .was, as I find, actively._ working for Australian C1 Superannuation Plans Pty. which was an incorporated body acting as a consultant for employers and using a trustee company .i11 Canberra named Australian Superannuation Nominees Limited, and showing those employers and their employees ._ how. to arrange __ superannuation using a trustee. In January, 1981 Windsor was I . . managing director of Australian Superannuation Plans Pty. and in . :·~ ' February; 1981 he. had dealings with the defendant_._ '.l'h_ose dealings were with Anthony Lewis Hayward who was then a me:r:nbe=f C of ·the. defendant resident at and stationed in Canberra. 'l'h~se dealings required the defendant to audit the trust funds and.the trustee. company used by Windsor which ... as. I have said was Australian Superannuat_ion Nominees . Limited. During_ these dealings in 1981 Windsor and Hayward had a number of discussions about improving _Windsor's - company's bookkeeping_ methods. by "computerisation'.'. In the course of these discussions Haywa~d ref erred - Windsor to Dr. Frank Wolf of. the defendant's Sydney office sometime before the end of 1981. Wolf and Windsor met in ;, 1981.~ · Hayward, gave oral: evidence before me .. He. is now retired . . · . Windsor :had•· told me that after having signed Ex. 1 he telephoned Hayward in ~anberra. Accor~:j.ng.to,Windsor he told -- 10 of 66 -- 10 Hayward: t:hat: he:: had found'.· a ·business- that looked J.ike sa:ving: a lot of difficulty and time in getting ''our- automated processes working", ·that he had signed a contract for .. the .. purchase of that business, that it' was · subject -to the proper · working of that business being verified,· that he was concerned that Hayward be directly involved in it ;·because ·he personally was the auditor, of the trustee company and auditor of the trust funds and that he, Windsor, · did not want in any way to enter into a very large purchase where ·it · was not going to : be used 0 by Australian Superanrtuation Nominees ,Limited and that he, Hayward, would have 0 to be :p'ersonally :satisfied in any event as· to the. security of Q the :money entrusted to ·the process and that.unless it was going ' ' ' to be entirely suitable to Hayward it was no use to Windsor. Windib:r·said he asked Haywifrd who should be involved in doing-a report·toevaluate the business. According. to Windsor, Hayward said· that he would get back to him, that-· Hayward did speak to him'J:ater·on·the·same day-and mentioned the names of Dr .. Frank 0 Wolf and an Andy Caswell. Windsor of course knew Wolf.but:he had'not•heard of Caswell~ According to Windsor, Hayward told him '·that · "Wolf ·was·· a very · capable fellow and had business_-_ experience:- hisown family had a company that he had detailed invblv~ment in - and he was an astute and commercial and capable fellow".•··· .. Hayward ih his·evidence· before me agreed generally with the conversation deposed to by Windsor but there were parts he did not ·accept. He told 'ine-- -he· could not· recall.iWindsor having said he had signed ·a con.tra·ct and that· he did. not believe that Windsor had said that he- was concerned that Hayward be ;:directly - involved because ·he·was tlie·auditor of the trustee·company.and the . trust· -funds held : .. bf· that: company·~ - '=According- to Hayward, 0 -- 11 of 66 -- C 11 Windsor:said -that he'.wa-nted::to _have .the system of.. the business evaluated:. and not: the bu~iness. Hayward :.agreed he had.. referred Windsor to Wolf_, but said he . did not . say . that Wolf . had any involvement in a :family-business because he, Hayward, .would not have-·-· known·· about · that .. · ·. Hayward denied having said . anything about Caswell being a ·s.ehior _computer .specialist as claimed. by Windsor. -Hayward further said that he recollected having been told .. by .. Windsor · that Windsor was interested in acquiring a computer based· p~yroll ,business. in Melbourne, . that he asked Hayward in relation to staff to evaluate it, _that he recommended Q Dr. Wolf,. that.he spoke. to Dr. Wolf a_bout it, that he would.have phoned Dr. Wolf immediately to tell him what he had told Winds.or so that Wolf would be aware of the referral to him and that as.. far as he was aware· at that time Windsor knew Wolf. , Haywa:i;-d _ha_d .., .. ·. ;; no .notes : of . his conversation .with Windsor. I_ thought .. that Hayward·was honestly.doing·his best-to tell .me truthfully what 0 ··"'·' •'> he recollected of. the conversation which he had with Windsor.in January, 1982. C· ,, L do not think it necessary to state now which. of Windsor.' s version or Hayward' s version of these conversations is the mo_re accurate. I have however mentioned these variations in their respective recollections because of Mr. Chesterman' s _strong attack on Windsor's credit. Both Windsor and Hayward generalty agree .that. thez:e0 was a. telephone. conversation in about January,.· 1982. ,-_: There .is no ,doubt that-. Hayward. did ring .Wolf to alert him to.expect the phone.call. from,Windsor. Winds~or, who was then ip Bri._sbane,: -,said he .. .received. a.- telephone call from Wolf who was then. in·,Sydney. This w.ap said by. -Windsor to be withi.n 24 hours of . his . telephone· conv_ersation with Hayward~ . According. to·•.. ' -- 12 of 66 -- 12 Windsor; 'Wol·f· sai-ci hEt·had·had: a discussion:with:Hayward and that he understood that Windsor needed a· job done.-· Windsor went on to say that··he told Wolf· '·'that we had entered into a contract: to purchase a business· that· had a time deadline on it",•- that it would be:necessary to go to Melbourne to do this and that:the way tb acc·omplish it would be for Windsor to· go "with--themll -to . Melbourne to see the business, that Windsor had not been on.the site and that if Wolf ·was able to come with Windsor in that.way. Winas·or would get· back to him with the· time and the way of. doing. it. Windsor ·further said that Wolf mentioned that he was-going 0 to be. assisted· by Caswell and that he very briefly told·. Wolf 0 that'-• the business which he had contracted to buy was . an automated money processing business and that he, Windsor, was particularly . inte·rested. in it for collecting superannuation contributioris and ·other types of contributions for the trustee in Canberra. Windsor said that Wolf agreed to do this. There-- was ·'corive:rsation· about arranging flight tickets. Windsor then 0 spoke of later·telephoning Wolf to confirm the ticket-and flight arriirigern~nts :::_ .that he, Windsor, had booked Wolf ·and Caswell on 0 the \,:a.me( f'light, that ·it was a connecting flight which would meet:the fiight from·Brisbane in Sydney and that the three would then.go on together to Melbourne. Windsor then told me thab, as arranged·;: he flew· from· Brisbane and met the other · two at Sydney Airport' who joined· ·the· flight and the · three travelled . to Melbourne together~ The flight was, he said, on 3rd °February,- 1982. and' there ·was no· cffspute about this date. Windsor told me about arrangements' he:. had· made with Delaney who was in -Melbourn_e and. for.Delan:ey·to·meet Windsor, Wolf and·a third man who would - inv'estiga:te ·the business. Windsor obviously·· here had cl:. , 4 of-· the contract in .rirind. :: .. · ·· ·, -- 13 of 66 -- ! C) 13 .. The:r::e. ,was ,no <l_isp~te betwe~n Wolf and Windsor. that Windsor and . Wolf . and Caswell . were on . the same plane from Sydney to Melbourne.: Windsor _ claimed that the three sat together. . Wolf said , he . _did not have a good recollection of. the plane trip although. h~ did say "I - believe we met. Mr. Windsor on the aeroplane and we :- travelled . down from . Sydney to Melbourne together". This was said after a reference to Caswell and I infer· .. that Wolf was in effect agreeing that he, Windsor and Caswell .. probably sat_• togethe_r. during .the flight. Caswell did not recall , Wind_sor being on the same plane and indeed he did. not recall meeting him until arrival.at Tullamarine near Melbourne. Caswell's poor recall on this aspect is understandable becaus~ he was Goncerned only _with the computer aspect of the purcha~e . .. According to Windsor, he spoke to Wolf_ during this _plane, __ trip and mentioned a number of matters .. He said that he showed Wolf_ and Caswell a copy of the contract , and . that Wolf _ made writte11 potes_. Windsor spoke in some detail of the.matters which he says he discussed. He said he told Wolf that .. the _ C purchase, was a major thi_ng representing _Ila major opportunity _in view of. our client activity up here in Queensland" and that the business as he understood it was one of processing employee pay rolls .and that it was able to transfer from employees' pay, moneys into savings. accounts or investment accounts of _ the employees~ choice; that the business had been going for some two years a~d prior to ~hat had been 18.months in the conceptual stage; that the bus1;ness was .run by a company acting as trustee of a -0nit trust and that the contract was actually to purchase - . . . . - .. , .:, ' . ·. all_. ofJ th.e units_ . _in ",that trust;. that . the_ entrepreneur who st~rted _and was promoting it,- Delaney - was very energetic and seemed "like a good marketing fell ow" but th.a.t Delaney had_ -- 14 of 66 -- 14 covere:d so -muc:fr" -fnformatfon in" the meetings•-- which - he had with- him that he, Winds.or~ ·was not quite-sure what exactly it was,and that he rieea.e·d· to be ;exactly sure of what- was going on with the busin~ss; that he -w-anted Wolf ·and Caswell to - assume ·that :·he; Windsor,- - did - no-f understand and 'had not understood anything about the business and that they were to· take the lead and ·ask any - questions at a meeting which they were to attend with Delariey and that they - we·re to· look• ·at whether it was a viable - business. He- further said that he emphasised the need 'for 0 confidentiality:... that the people in the "PDS (Payroll Deduction Servibes)~business were not to know that we were-lookingto;be O the:t~. as purchasers but -- there as potential users"; - "that they were l to ·go through everything as if' it was· a fresh start' and·, I hadh-~ t" actlJ.ally' .given - them any information" - and that he, Windsor, . ,i~'as . con.fused- as to actually who was 'dealing with· PDS anl-' i·''w1hted to know ·exac'tly 'who it was"; that he explained that ... ~.-,<:- ;: .,. : ) part. of -- the con tract' dealt with Motor - Card where the --- team · of 0 Del~hey' a'nd Cilrrie who was responsible for the software· side of - things had another concept called Motor Card which was going on Q and - that· they were going to develop Motor Card - with a separate company and a separafe unit trust; that he~ Windsor, was concerned about: the pos'sibility that some of the software _;that would· properly be- part of the Payroll · Deduction • Services property could become transferred to Motor Card and he, Windsor,· wanted to be su:i;-e - "t;~~t all- the .. software 'development· ·that' was part of the - Contract acb.ialiy was· retained and that' · the purchaser did not fJnd itself obliged to continue consulting requirements with someone else; that he was concerned that the rig~ts to_ the software belopged to P.D.S. and that he wanted to . . . ·, ~ make sure that all the software that wa::. used by P.D.S. actually -- 15 of 66 -- I 15 stayed with -P-.D~S-.·, and that it was not a_ matter of paying someone· e·lse for the. -use . of it; ,that. he __ asked them to particularly identify all major modules or all aspects of the !c I .software and to do a stocktake "where we could make sure that we took·and retained delivery of that property"; that he wanted a performance·report- for the purposes.of the,contract; that the business actually did what clients expected of it; _that there was· ·not. going to - be. any. disappointed client particularly Australian Superannuation Nominees Pty .. Limited and that the other names that had been mentioned were going to be happyand Ci that: that would be a useful base for Windsor's other marketing :C activities· and "that if it wasn't going to be a happy: . . J association _ between this company. and . their clients, then it wasn't going to be any advantage for us" and that Windsor wanted to be' sure that the security of the enterprise was intact._ It is Windsor's evidence and the plaintiff's case that the defendant's retainer and_ its terms were spelled out by Windsor to ,wolf and to Caswell during this plane trip from Sydney_ to. C Melbourne on 3rd February, 1982. _ · Wolf denies these claims saying in short that he did not receive any contract or copy of it, that there was no mention of a contract and that the discussion with Windsor during the plane .. trip was only in very general terms and that he did not make notes. He said:- ·"We ·didn't talk about the retainer on the trip down. We talked only in very general terms about the nature of the business that we would be looking at and who we would be seeing in the course of the day." It is the defence case at trial that ufere was a retainer, but on different terms from that alleged by the plaintiff and that the retainer alleged by the defence came into existence -- 16 of 66 -- ;:----~--------------------------- 16 later' :on' 3rd·" Febrria::ry; . 1'982 after· a ·meeting: at which Windsor; Wolf, ·caswei'.L and ·Delaney were present. I should· at this stage·· also say that Caswell swore<to having. no recollection of travel:ling from Sydney to Melbourne by • - air •wi tli · Windsor.- 'He believed he first,. met Windsor . at Tulla.marine in Melbourne at the • conclusion -· of . the flight~ Caswell said · that he·· ·and Wolf had · sat , together . during the flight. Wolf's recollection and Windsor's-recollection:of seating on-~his trip·I·have already mentioned. · · Brian Delaney met Windsor', Wolf and Caswell at Tul1amarine 0 on 3rd·February, 1982 and drove them to his office in,Melbourne Q where the ·· business · of Payroll Deduction Services of Aus.tralia: ( "PDS") · ·operated.· There a· meeting was held. Windsor recorded pare of this meeting on a small tape recorder which he placed-· on a t"a:1:>ie. . He said he :obtained Delaney's -prior assent to this cou:ise ~- · • 1· have 'no· reason· to doubt him on this aspect .. , The whole meeti-ngwas'not recorded because the tape ended part way thr6ugh the meeting . and- was not replaced. Exhibit 4 .. is. a· 0 tra.hscript of the conversation recorded and there is no dispute Q that>:it accurately records what was said and by whom while the . ' tape ·was· running. The · tape itself did not identify, the specikers'· ·voices but the· person who prepared the transcript has,·· with Windsor's' assistance, provided a legend in Ex. 4 from which the Viirious'voices are· identified in the transcript. · .. ·. This Ex.··· 4 shows ·'that a number of matters were discussed, with Delaney sp'eakirig - for ·much of the time ... At this meeting Delaney spoke of the two services which he .said P.D.S~ . was capable of performing.· · They were Payroll Deduction Services and . · Nett Pay. At that tiine P.D.S. operated a computer based system arid the leading'fechnical·person wasran Currie,who·had.-devised: -- 17 of 66 -- 17 a programme for it .and which _programme was then. being used ... The computer was a Main Frame type. There were ,then six clients involved : in Payroll. Dedubtion Services~: P. D.S. did not then actually have the Nett Pay Service operating_although a reader of Ex. 4. · or a person l.istening to. Delaney speak during that conference could.well .have believed that Nett Pay was, or.was about to be, offered to the general business community. · As I understood the. ~i tnesses, payroll deduction services C involved a client employ~r, say Monsanto_Chemicals, sending int~ P.D.S. a list showing its employees and deductions wh~ch these Ci employees •- had asked . Monsanto to . pay from · their _ respective salaries. The deductions ,might be to say Medibank or __ a , ., particular union for union.fees. A cheque for the total listed deductions accompanied the. list. P.D.S. _ banked this_ cheque. P.D:.S. already had on its computer files a _list of Monsanto's employees and the name of the recipient and the usual amount of ' , ·, ' . '_,:,1"'' the deduction required -- by that employee from his. pay. An operator at P.D.S. then manually fed the information from. the client's list into the computer. This was done by using. the . . . ' - computer-keyboard. The process was speeded up in that Monsanto reported· to P.D.S. _only variables in the usual deductions which as.I have said were already on the computer files. P.D.S._ then checked, again using the computer,_. and ,sometimes manually,, to see that the total cheque received from the client balanced.with the. total-• of the ·.various deductions from. all. the employees' salaries which were.requi~ed to be made,as ~art of the payroll deduction. service. . ,Onc_e this was done, P ~J?-· S. had a complet.e print out, provided-bythe_computer, .which_ showed the identity of · the __ ·. recipient of ~ach _ deduction and the identity of each employee and, the amount for each _employee_~ If .for example there . -1:. -- 18 of 66 -- 18 were a produced 'a p,ririt 6ut· foi- Medibank., · That print· out, which was produced by' the ··colhputer, showed the identity of ~each employee, the amount .of e~ch ·employee 1 ·s payment to Medibank and the total being paid ·to . Medlbank:. . 1? ·.If. S ~ would then,· at: the appropriate time, i.e. before the payment was due to say, Medibank, either send by post or deliver by hand the print out to the particular institution e.g. Medibank plus a cheque for the total' of the deduction payments due to that institution.. This cheque was not drawn by P. D.S. but by Trustees Executors and Agency Company 0 Limited who was the trustee for P. D.S. moneys and to whose 0 acco.unt the cheque for that particular client was banked on receipt. . In this . fashion the client employer e.g. Monsanto sloughed off.a lot of its responsibilities to its employees and, if P. D.S. was efficient, ensured that the employee's obligations to pay certain deductions were met. P.D.S .. did not charge the employer client any fee for this service .. , Nor did it. charge the employee. The payroll deduction · 0 scheme• was designed to earn income from any profits earned on Q the short term money market by P.D.S. investing through Trustees Executors and Agency Company Limited the cheque received from the employer client _until the time came to draw against it and pay .. deductions due to a particular .institution. These particular . institutions are the "Principal Service Organisations" referred.to in cl. 4 of Ex. 1. ' . Payroll deduction service was one aspect of P.D.S.'s operations. The other aspect was nett pay which really was an extension of payroll deducti_ons. I note that in Ex. 4 at p. 10 when Dr. Wolf .asked "What i.s. the fundamental difference between the nett pays and the payroll distribution" Delaney said:- -- 19 of 66 -- 19 ·11S ame thing.· ... , .. rt' s exactly the same thing. . Net pay is termed · · for · because payments for . distribution service,Frank, covers deductions as well as net pay. The net pay is only one. It's the biggest . proportion of •. what is going to be this business. Deductions are seen to come along as a sort of a •... incidentally we do use deductions as ,well and what we charge for this is whatever commission you' re. getting and the acceptance to Net Pay. Net Pay is the big problem from the security point of view." I have not bothered continuing with the rest of Delaney's comment but will later refer to Ex. 4 and part of what Delaney C1 said. 0 0 C Nett pay, as I und~rstood the evidenc~, was intended "to :,-· ....., - ' . ~ ( ~ result in P.D.S., if it operated that system, not only making -. ,(. . the various deductions required by employees but actually paying to each employee of a client employer either in cash ·or by .. credit to a particular nominated account e.g. with a bank or a . . ' building or credit society, the amount of pay to which that ~ '· . . .. employee was entitled. The method of operation of nett pay was to be similar'tb that for payroll deductions save that if nett pay· were operating, the employer retained income tax deductions'and was· to pay to P. D.S. the balance of the amount ( af ~er income fax) due to each employee, allocating how much each employee might require to be paid out of his or her salary for particular deductions before the nett balance was to be paid to ·the"' . . particular employee. These deduction payments, in the case of nett pay,.· were intended to cover i terns apart · from say. Medibank · subscriptions and union ·fees· and to include' other items such as .. local authority rates and house loan repayments. Al though in Ex. 4, one finds Del~ney spEifaking of commission ,. for P.D.S. on nett pay, it seems that if nett pay were· to .. ,..... - , operate, P.D.S. expected to earn substantial income on the short' '.;., -- 20 of 66 -- 20 term money market "f rbm the moneys · received · from 'the ·employer client and held uritil · pa:id out· to employees. I should here, ·say·. that, 'after having· heard all · the evidence, I ·am·we11· sat:i..sfied that in February, 1982·and indeed during all material· times· in 1982 ,· in the · system operated -by· P.D.S. for payroll deductions, the computer performed·functions only from the instant the information received from the client was fed into the computer ("input") and upto and including·the 0 emission from the computer of the print out for the particular inst.ibition showing the total amounts, names of employees and individual amounts in respect of deductions ("output"). During Q the·evid~nce at the trial' this output emission was on occasions called hard copy. At this meeting on 3rd February, 1982 Wolf made. some notes. They f°orm·part of.l!:x. 53 and he claims that at one stage of that meeting ·he had a conversation with Windsor during which he says in effecfthe terms of the defendant's retainer by Windsor were spelled out~ 0 · · · It ·1s· appropriate that· I now turn to Wolf's evidence .. as to Q the ... · retainer. Wolf agreed he had had dealings· with Windsor twice before Windsor telephoned him about the P. D.S. matter. He said Windsor telephoned him and said words to the effect·"! am-- looking 'at acquiring a computer~ a payroll business and I would like you to have a look at it· for me. The business· is· in Melbourne" and asked whether he, Wolf, would be able to look.at the business.· Wolf said he would be happy to · help but because of "the computer orientation" he felt it important that a Mr. Caswell be invo'lved -and he told Windsor that Andy Caswell was a technl.ca1· · coinputer consultant with the defendantl· According to Wolf, Windsor agreed. -- 21 of 66 -- C 21 Wolf•• agrees - tl!at , •. ar:rangemen:ts _ were _ Ill.a.de to travel to Melbourne a day or so later and.that he,~nd Caswell travelled ' • • . -.;_ ~ • 1 ,' ' with Windsor ~Y plane f~om Sydney to Melbourne on 3rd February, 1982. __ I have _ already_ mentioned Windsor's. evidence as_ to the conv~rsation in the aeroplane and Wolf's r~sponse to that. Wolf_ - gave evidence as to his recoll~ction of the meeting with Delaney, Caswell and Windsor at Delaney's office on the 3rd of February. Wolf described that meeting as "really divided into _a number of . segments"; he spoke of a walk through the l .: ., .• business .with Delaney, of Caswell and him spending some time (: with _Currie talking about the computer_ and then that "we had a more_ specific look. at the facilities on the premises". He then spoke of "a wrap up meeting with Delaney, Windsor, Caswell" and himself. At this stage of his evidence, Wolf referred to notes which he said he had made at that time. He said in effect about this (~, wrap up meeting, Windsor said II I'd like yqu __ to take a stock take of the software that comprises the P.D.S. system. I'd like yo~ ( to examine whether the system does what a user of that system would expect it to do"; that Windsor called that "a performa?ce report" and that Windsor indicated he would like that in say te_n day~ time or within ten days time; that Windsor indicated ~hat he would like to look at the issues of the. security of the system and that at that point he, Wolf, suggested that a cost/benefit analysis should be carried out looking at various client configurations and client/member's size configuration for the sy_stem. 'I'h_ese notes are qn the last sheet of Ex. 56 - a bundle of nine sheets which are now stapled __ but which were loose at the -- 22 of 66 -- 22 trial. · I had ·the nin'e· sheets stapled by· my., associate. .I .,shall later return to that last sheet and other writings on it. Before I ·do so I should. say that earlier in his evidence-in-chief . Wolf ' was .· asked a number . of . questions by Mr. Chesterman. One ·of these-questions was "Did he (Delaney) say that an operation. kn.own as nett pay was ready for immedi.ate introduction?" Wolf replied "No".- This answer was in my view incorrect .. Exhibit 4 shows that during ·the meeting-op, 3rd February, 1982 Delaney said:- ·IINow we are ready to hit with nett pay Monsanto is the_ first one that is coming on. We've got William Adams .· -very keen to come in on; nett pay. There .is a lot of. work to be still done in the nett pay area ... on the :,:.marketing side .. \. then again we haven't had the tiesll, (seep. 10 of the transcript for Ex. 4.). Later (at p. 15 of the transcript) I find Delaney addressing Wolf and saying:- "Exactly ... when we get on to the new system that we ·: :. have· got · Frank, you will· see why, what we are doing. Now that the others are not doing as well it may pay to· go .. into this· now . . . so what we have discussed to date is the deduction pay roll deduction which is only · one · part · of our total .· package . . . the other area we have only completed just prior to Christmas was going · •·into the·distribution of nett pay and in fact we have changed our operating name to Payments Distribution : · Service · to overcome a lot of problems with Payroll Deduction Services". Doctor Wolf, in cross-examination, agreed that one of the representations made by Delaney at the meeting related to the service known as nett pay. He further said:- . . "Nett pay was the outcome of a· process of taking -• deductions· from the : individual's gross pay. So nett pay was simply a by-product of the process of payroll ·deduction·s". · He understood· "nett"·. to mean nett to the_. individual i.e. the .. employee and he further said. that, · from the meeting . on_ 3rd of February .. he ·felt 'that. -there was · no significant .. difference ·, ..... ~•-.: ... _. 0 0 0 0 -- 23 of 66 -- C)- C: .,-....,,·t:·· 23 between P: D.S.- .and '~the'.'. Nett Payroll· ·concept', .p-~ D.S. : meaning. payroll deductions servicd: Bearing in mind that at the trial, the defendant admitted a retainer by the plaintiff, I still have to determine first of all what were·the terms of that retainer. · In doing this I am confronted with ihat I have said is a clear conflict -between Windsor and Wolf as to those terms and when and where . the retainer· came into being~- Mr. Chesterman's submissions on the terms of the retainer,. while directed· to 'asserting that Windsor was a most unsatisfactory, unreliable and evasive witness, were in the·.main directed to a - submission· that the defendant's retainer was to examine only the software in Payroll Deduction Services. I point out that the defence of the defendant denied not only the oral agreement pleaded by the plaintiff in para. 4 of its statement of claim but also that · any agreement was made between Windsor and Wolf on behalf of the defendant on the terms alleged or any other terms. This denial was notpersisted.in at 0 the trial· and after having heard ·· Dr.. Wolf's . evidence · and considered Exs. 2, 3 and 14 there was clearly a contractual arrangement between the defendant and Windsor with Windsor acting on behalf of an incorporated body. Exhibit 14 is a photocopy of the defendant's account addressed to "Mr. P. Windsor G.P.O. Box 22, Brisbane, Qld." - it was for "professional services rendered in the·evaluation of ·the E.D.P. facilities of a proposed acquisition - $2,950\00 11 : plus out of pocket travelling expenses related to interstate visits·. E.D~P. 'cieans Electroniri Data Processing. · Wolf:: said' he 'did·· not hear of A. S. Properties Pty. Limited (the plaintiff) until August 1982 so perhaps that is the reason -- 24 of 66 -- 24 why the defence' includihg . th'e - d~niai' 'of; ·retainer Wl. tfr the plaintiff was .drawn· as· it is. However, it• is quite· ·clear that · in Jan:~ary 1982 Wolf .. w~s 'tiav:ti1g dealings with Windsor .. Exhibit 43, a ietter written by" Wolf and s"igned by the defendant's .. director and. addressed to" "Mr. Peter Windsor, Austral'iari· Superannuation Plans·, G·.P.(>. Box 22; Brisbane~ Qld .. 4001" shows that Wolf was the·n dealing·· with Windsor as to an urgent need which Australian Superannuation Plans had for a computer facility within its office. Exhibit 43 is dated 6th Jariuary; 1982. One notes from that letter that it·mentioned·to Windsor 0 the names, positions and duties of Wolf, Caswell and Hayward.in 0 t ·.. . '•. relation to a proposed as·signment ~ Exhibit 2 is a letter dated 11th February,' 1982. signed by· Mr. Neal, a director of ·the.defendant, the text of which was, as . . ~ I find, composed by Caswell. That letter :was addressed to "Mr.· P. Winsor (sic)' Australian Superannuation Plans,. G.P.O. Box 22, Brisbane, Qld. 4001. Exhibit 3 is a further letter - this time dated 17th February, 1982 ... but ·written by Wolf arid . signed by Neal and add;~"s.sed to -"Mr.· P. ·wiridsor, Australian Superannuation Plans; G.P.O. Box 22~ Brisbane~ Qld. 4001". Why should Wolf write to Windsor c/- ·of· Australian ,. Superannuation.Plans as ·shown iri Ex. 3 if, as·windsor asserts, Wolf was shown the ·contract.during the.plane trip to Melbourne? One might fairly expect Wolf to have noted from the ·contract·. · that A. S. Properties . Pty. Limited was the purchaser and not ✓ : ,,. Australian Superannuation Plans.. It may well have been the cas.e · that Wolf did. not notice 'tiie addre'ss on . Ex .. 3, .. that · ad.dres's having ~~en ~~tint~ fhe let£~~ by Wolf;~ se~~eta~Y~ ~nd take~ , . ~ , : ~ ~ .• ·.:-·.·.,.. ... , • ·- .~ r ~~,"'_·-.,·., ·~ ..• ,, • .:. .• from earlier records. 0 0 -- 25 of 66 -- 25 Wolf - denies having seen. the contract _or a copy of the contract on the plane trip or at all. Exhibit 2 sheds some light -on this aspect .. _.It is clear from Caswell's evidence that his instructions as to what .work he was to.do came from Wolf. I find that Wolf did not see Ex. 2 nor was he consulted about it before.it was sent off to Windsor - it was_signed by the partner Neal in accordance with _the defendant's practice. Caswell, in cross-examination, did tell me that at the time Wolf gave him instructions, Wolf in effect told him that a company acquisition was pending _and that the_principal asset of the company which 1 C: was . being .. sold _ was computer software,. so his task was to determine, that "this software was a real entity, a physic1;1l entity and that it did perform a,ccording to.specifications which I would derive by the first meeting in Melbourne". C C I find therefore that Wolf kpew at the time he gave Caswell instructions and before the meeting in Melbourne on 3rd February, 1982 that he had spoken to _Cas_well and informed him as I have just set out. I thought Caswell's recolleqtion of the various events was impaired by the passage of time. I accept however that the address on Ex. 2 was probably obtained by a secretary in the defendant's office p~obably, I find, from the earlier correspondence Wolf had had with Windsor (see for example Ex. 43). I find that Caswell did not write the address which appears on Ex. 2. I thought Caswell _was genuinely surprised to find .. Ex. 3 which he_ said gave .Win_dsor the same information as Ex. 2... Exhibit 3 came rrom ~olf and . it was quite clear tha.t Wolf.did not.consult with Caswell before he sent off Ex. 3. I have the c.lear .impression, that once Caswell had done what was . . . . . . . - expected of him at Payroll Distribution Services in Melbourne, ; . -- 26 of 66 -- ---------------------~-~----~--- 26 ther~ \,1as no'-' co-.;:.operation'- or: co~ordination:between - him and, Wolf as to reporting to Windsor. -- I' am - satisfied however that Caswell was aware· of the ne·ed· to have the letter (Ex. • 2): to Windsor -- within 10 days of the meeting on 3rd February, 1982. I thought Windsor· a rather garrulous man·· and, given that propensity, I should have thought it very surprising if he were to have flown from Sydney · to Melbourne, sitting next to Wolf, without discussing ·the contract to - buy Payroll Deduction Services of ·Australia. Throughout his quite'long stay.in the witrtess· box•windsor·was adamant that he showed Wolf a copy.of_ the - contract while travelling on the plane. Wolf denied. this 0 occurred, denied-- they talked about the retainer 11 on the -trip_ down" and denied that on the plane he made notes of anything which Windsor ha·d · told hini. on the plane. Wolf further -- denied that the:t'e was any 'mention of a contract. · He said there --was a discussio:ri'Of who :they were going to see,-· of the general terms of the nature of the· business but no details in terms -of the nature of the people and their roles in the - historical development of the - business~ Wolf remembered that· the -·name "Delaneyi' was· mentioned among the persons he was likely- to- see in Melbourne; he further said that confidentiality and that the ' - business was possibly going to be sold was alluded to during the flight he used in evidence the phrase "masking our involvement" and said that the confidentiality was "to the staff of PDS". _In cross-examination Wolf said of the plane journey "I have a very limited recollection" and "I don't have a goo.a recollection of th~t plane trip". He knew that Windsor and he sat together but could not recall the seating configuration. 0 0 -- 27 of 66 -- ic C 27 : Windsor -did stumble at times .in giving evidence e.g. when giving Wolf the. instructions on the acquisition and the need. for confidentj.ality.he said in cross-examination.., .III explained to him that Australian Superannuation Plans was not to be known as the.purchaser and we had a separate company that was going to be the .. owner". · . I: asked him !!Well, just explain that to me. Although it was Australian Superannuation Properties that signed the . contract who _ was the real buyer?" and he answered - "The real. purchaser was A.S. _Properties". I then said - "I thought you just Aaid you told him it wasn't to be known that A.S. Plans was the. buyer" and he agreed "That's right". After an adjournment Windsor was asked about the. evidence I have just recounted. He answered:- . l'My concern was that the people who - or the companies that some of the clients that were held out to be users · of . P. D.S. were in the. insurance . and superannuation business. Century Life, A.M.P. Etnaand those companies would have been reluctant to. have Australian Superannuation Plans, a superannuation .. service company acting as their collector or processor of contributions going to them. Therefore the holding· .. in the· units in P.D.S. Unit Trust was to be done by a company that was just an investment company A. S. · Properties.. A. S .. Properties was to just hold thos.e units and Australian Superannuation Plans was not .... itself to be directly connected with P.D.S. in. any capacity other than recommending it as a user". Having had ·an ample opportunity of observing both Windsor and Wolf in the witness box I find that during the plane trip between Sydney and Melbourne Windsor and Wolf did discuss the business of Payroll Distribution Services and that it was more than a discussion in general terms as Wolf claimed . WoJ.f . - _, conceded in cross-examination that confidentiality was discussed and this accorded ~ith Windsor's evidence that he. emphasised t·o Wolf the need for confidentiality; Wolf also conceded that -- 28 of 66 -- 28 Delaney's name was. 'ir:entioried ·•and: that he 'liad'· a' vefy limH~ed recoiiection. of th-~ plane trip. ·, At thi;'.point then·i return to Ex.-53 which contains the' 9 pages of handwritten -notes which·· Wolf said· he made cm "3rd -· February, 1982 during arid after ·the meeting. at Payroll Distribution Services. These notes were originally in.separate sheets and Wolf continued to assert that they represented what he wrote during and · after the meeting. Page 9 of the notes·· has worried me acutely because near the top is - written the .. name ,,,. . '~ "Brian Donnelly". This is _ in Wolf's handwriting. · ·why, I nave asked myself should Wolf have written "Donnelly" when,· after ~; . having spent several hours in Delaney's company he knew the ~a~e . . . was "Delaney"? Wolf could not give any· explanation for· this·. It is on this sheet, i.e. sheet 9, that Wolf asserts 'are his notes of what Windsor told him on 3rd February, 1982 after the meeting with Delaney. Written on the 9th sheet immediately below "Brian Donnelly" appear:- ,iPayr~ll Deduction Services. . . Through subsidiaries and trusts 18 month·s + ·2 years preparatory. ,. . . Buying Co. with clean B/S. Agreement to transfer out of Co. ~ all leases to premises plantequip. - staff - motorcard. '' _,)Wolf :was questioned abe>ut. each of_ these matters. As to the first of. these_ matters_ J1e s~_id that he believed that_ that was _ saying that., Payr9J,.l .. -.D~dt1qt~on Services was. run. t_hro~gh a 0 0 0 0 -- 29 of 66 -- C 29 subsidiary and a trust or trusts but when asked "subsidiary of. what?" he replied "I don't know"~ ::When asked about the remaining items and.particularly where he got that information from on 3rd. February he_ answered - "Well that must have been referred .to at the concluding meeting on that day". When referred to the:contract and particularly cl. 3 thereof, Wolf said:. ~I certainly hadn't seen the contract on that day. So someone in conversation set the stage for the issues that had to be .resolved in terms of oursubsequent involvement in the exercise. I am not sure _whether that was Delaney or Mr. Windsor who set the stage but I certainly didn't see the contract on that . day." When pressed about whether there was a contract at the meeting Wolf said again that he was absolutely certain he didn't see the contract on that day - he maintained he was absolutely certain and that there was just no doubt in his mind on that point. He added that he was never aware of the purchase price until litigation had started. Although as I have said Wolf persistently denied having C seen the contract or a copy of it on 3rd February, 1 982 it is tolerably clear that of the above matters appearing ~n Ex. 53 the references to Payroll Distribution Services thr.ough subsidiary and trusts, the reference to the clean balance sheet, the reference to the transfer out of the company of all leases of premises, plant and equipment, the transfer of staff and motorcard do in fact refer to terms of·· the contract of sale Ex. 1. In my view, all these matters which I have identified i.n Ex. 53 - could · only have come from Windsor- or the contract or both. ·· I· find that it is · more probable·_ than not that the handwriting on the·9th sheet of Ex. 53 down to-"Motorcard" was -- 30 of 66 -- 30 made , by Wo1f"· while ·•. on· the- aeroplane and . that, Windsor did show Wolf a copy of the contract -while on the plane and that Wolf then had an~ opportunity·· to. read the name of -the purchaser. I find also that the words "get customers (66)" appearing on Ex. 53's 9th· sheet were made by Wolf at the.same time. What.they meant was not·explained. The next pieces of handwriting on the 9th sheet of Ex .. 53 read:- n_1 . Identify software· components ( stocktake) 2. 3. Do services deliver to clients what they say they will do. Performance report - 10 days. All aspects conditions. of security of software. Restraint of trade agreement. Any ,;_4. Model 5,000 client - 3 locations - C~B. analysis. Ian·.Currie Ownership·. of license." The first·three ·of these items are consistent with what Windsor says ·he asked,Wolf, during the plane trip, to do e.g. to make sure · that ·· the · software · was retained i.e. that there be a - oi 0 0 stocktake · of the· modules of the programmes, make a performance (J report to .. tell Windsor whether or not the - business did what clients expected of it, that there was security in ownership of the business and its operations and that P.D.S. had exclusive. rights of ownership of·the software. As· to the fourth of these matters which-I have listed above it seems to·me· to>be also consistent with what Windsor says he asked·· Wolf while on · the plane to do, - namely to check the reliability ·of processing -money when committed to . it . and . se_e that it actually got to-~ts destination .. It may have been and it probably was the·: fact· that when writing down item 4 "Model 5,000 client'figure·:3·locations c~B. analysis'~ Wolf.·was putting -- 31 of 66 -- C: / C: C 31 into·· his ·own ·words'-'what: was· to: be done to ascertain · that- ·there was the'sought-fdr reliability in proces£ing-rnoney committed to P.D.S. and that money· reaching its destination~ I find that items·l, 2 and 3 were written on the 9th sheet of Ex. 53 while in ttie ·plane and probably that·item·4·was added by Wolf after the meeting. The name "Ian Currie" was probably written after the ·meeting as also were the words "authorship· of license". Wolf maintained that it was he who suggested the contents of item 4 and he explained that C.B. analysis meant cost benefit analysis.'.·,'_ I should say that the inclusion in item 3 of the words "performance report - 10 days" is consistent with cl.· 4 of the contract:· That clause ·uses the words "performance report", identifies it as to be made by Touche Ross Services Pty. and says that the performance report was to be made within 14 days of the date of the dontract i.e; 14 days after: 31st Januaryj 1982 ~ ' The agreed date of the flight and the meeting with Delaney· was 3rd February, 1982 - so 10 days· gave the defendant just enough time to make the report and enable the plaintiff-to meet · the requirements of cl. 4. This i tern · 2 on sheet 9 of ' * Ex.~53:in'Wolf's handwriting has confirmed my view that Windsor· probably showed Wolf the ·contract ·or a·copy of it on the plane. Item 4 was consistent with what Caswell later did when he examined and : tested the P. D.S. computer. He produced -dummy (model) companies and used statistics · from· these and their imaginary employees, when fed into the computer, to test the machine's capabilities. I find that item 4 was probably written by Wolf'after·the meeting with 'Delaney and after he had spoken with Caswell who -was the computer expert~ - I should here · say that I-'· find that Wolf was not· a computer-- expert at that time. -- 32 of 66 -- 32 As he· said· in the·· witness box,·.:... "My expertise at ·that time was. more in the strategic and-financial evaluation of an acquisition opportunity rather than the·technical aspects .of that evaluation task"~ He further said· that the• technical. side of. the evaluation ·task was·really Caswell's expertise rather than.his.· !·find that Wolf ·knew on 3rd February, 1982 and at other material times that Windsor did not know very much about computers and software. I do not find that Wolf received instructions from Windsor on 3rd February, 1982 after the meeting with Delaney.•.: I find Oi that '·he · received these instructions during the plane . trip 10 betweien· Sydney and Melbourne which preceded the meeting. I find that<\these instructions which constituted the terms of the defendant's retainer were:~ ': .. ', 1 . To do a stocktake of the software in Payroll Deduction Services i.e~- ta identify-the software components.· 2. ·· To provide within 1 O· days a performance report to determine Q whether or not the business of P.D.S. did what their· ··· c'iients expected of it. 3. _:To ch'eck that - ownership- of the business was . secure. i.e. that P: D.S. had exclusive rights to the software and seciurity in relation to its operations. 4. · ·To check reliability of processing money cornrni tted to the P. D.S. · system i.e ... that the money actually got . to its ··destination~-·,·· ..· ·rn addition,· I find that during the plane journey Windsor told Wolf that· at the· meeting with Delaney, Wolf was in effec_t to take the lead and ··ask any - questions which he thought· ,needed to be asked, that he" emphasised the need for confidentiality .- .' .. - .. -~ ~· .... - . . . :,,~ .. 0 -- 33 of 66 -- 0 C 33 i.e., that,,the,·people ,in _P.D.S.: were not,.to_·::-know., that he _was. looking to be there ·as·_p1.,1:r:chaser but as,pptential user. ,·.· I• find also. that ,Windsor did tell Wolf.. during the ,plane trip.' what . "nett pay" ·meant namely that nett pay .. was a way of capturing , the balanc;:e of an employee' s · pay •·after his other deductions. had been processed and in effect ,that where people were . .apathetic they would not spend all their mo_ney and it would remain in that employee's account which might be with . a particular building society. r think it important to note that Wolf was .not an expert in computers and computer software- - that person in this case was Caswell and. it was he who, after being .given. instructions. by. Wolf, ·performed or had the duty to perform the tests which .. he thought necessary to carry out Wolf's instructions to him... I shall .·come · later to what Caswell did. To return to the matter of the retaine:r: and its ter~.s,-' I should mention that Wolf's -evidence was that he saw Windsor_ .. on 5th ,February, 1982 in hi~ (Wolf's) office in Sydney. . . According to Wolf this meeting on 5th. ,February ,.. was prearranged. • Windsor denied any such meeting. . According to Wolf he - made notes of that meeting. These notes are on.· two sheets of paper being Ex.· 54. I caused the two sheets. to be stapled together. The first sheet is headed P.D.S. Wolf told me that:: he would have . put P. D. S .· on the piece of paper when Windsor came in because he thought they were going to talk about P.D.S. He told me however, when referring to . the notes in Ex., 54, !'all of this relates to_ his plans. i~ relation to.A.S_. Plans,-· ,providing trade associations with superannuation services".: Wolf me that at_ this meeting on 5th li'ebruary he to.Id Windsor that the software was available from another source but -- 34 of 66 -- 34 he (Wolf) · made ;no--note of that~ He also told -me that -at~. this same meeting Windsor had altered instructions which· he had given him on 3rd ··February so 'as ·to limit the amount of work which Wolf was to do. Again,··· Wolf made no note of that· alteration. The notes contain a certain amount of what could- be regarded as Wolf's shorthand which even he·could not interpret with any certainty in the witness box e.g. the words "ability to absorb · E 11 • · According to Wolf, Windsor gave him altered instructions as to what the defendant was to do in performing its retainer. He claimed the-following conversation occurred:- Wolf - ; •',:-,;.. .. "How much is the system costing or going- to-. cost?". Windsor - (in a casual way) "Millions". Wolf - "Well, I don't think its worth that". Windsor - "Look, I don't want you to focus on that at all". · -wolf : _., ~, . ·"One of my partners has told me that similar software is available and operational in New ·Zealand"~- Windsor was not · inte.rested. · ·.;Wolf'·.;:.-· "In· carrying out this exercise· we would create a number of dummy companies with a number of transactions and put them through. tb:e computer". Windsor - "Yes, that's exactly what I want you to do". As I have said, Wolf made no note at all of these conversations nor of what he called these altered instrGctions and which he claimed limited the amount of work the defendant was to do under its retainer. I found this rather extraordinary considering that Wolf told me he did make notes of instructions in Melbourne on 3rd. Fel;>ruary, . 1982 ( see p. 9 of Ex. 53) . I thought Wolf very •• ;·1,._ unconvincing on Ex. 54 and on his claim as to the above 0 0 0 0 -- 35 of 66 -- C• , 35 conve:rs.ation and alter.ea _instructions. He had .no idea. of.· what . . . . . . the ,words "State Bank of S.A." in Ex. 54 meant. He admitted. that. _altl:1ough he st.ar~ed Ex. 54 with "P:D.S.',' meaning. Payroll Deduction Services and that his notes in Ex. 54 related to A.S. Plan~.he.claimed he ~iscussed P.D.S. with Windsor and received what;he called clarification of earlier instructions on _matters that shou.ld be given fundamental focus yet he made no record or note.of hjs discussions -with Windsor on this occasion nor of his "clari.fications". I 0 finq. that there.was no meeting between Windsor and. Wolf C on 5th February, 1982 when Wolf. gave, as he said, advice . to Windsor in regard to the acquisition of P.D.S. and when c, C according to him Windsor gave altered instructions. Ex. 54 does not relate to such a meeting. I find I should here add that Ex. 3 was, according to Wolf, given by him to Windsor in his (Wolf's) office~ However, because.pf Windsor's evidence that once he received Ex. 2, he rang Delaney and confirmed that the contract was unconditional telling him that "we. had a goer", .Ex. 3. plays• no part.· in the negligence aspect of this case. On Wolf's credibility, I return to my earlier comments about the need or at least desirability for professional men such as Wolf to have kept a contemporaneous note of an oral ' retainer. These comments apply equally to any variation of the terms of a retainer. I thought that Wolf had a very patchy recollection of his dealings with Windsor concerning P. D.S. and that his evidence i_n Court depended very heavily on constructions he placed bn what skimpy notes he did make. There were, as I have already pointed -- 36 of 66 -- 36 out,'· occasions· -when ·he· could not decipher or .interpret :what he had written~ · · The inajor outstanding -and. 'common feature of the evidence of both Wolf·· and •windsor was·· that there was a. retainer of 'the defendant by ·windsor .- A ·further ·outstanding common feature .,is that· the defendan·t purported to perform that- retainer. The terms'of the retainer I'have had to sort out and find as.best. I can from my observations of the witnesses especially Windsor and Wolf ·and from relevant exhibits. · Th ~preferring Windsor's evidence to Wolf's evidence as :to the terms of the retainer, itmust not be thought that ·I accept· Wind~fo-r ·as a witness of truth in all aspects of -his evidence .. :· · ;Mr·.. · Chesterman for the defendant · made a . number .. of · criticisms · of Windsor's evidence · and in deference . to. his. subrrdss·ions I should say that· while I have - doubt:.s ·-. about 0 0 Wind~or' s ·evidence· in some · areas, I have accepted him ,,as truthfui·a:nd·generally· accurate in what he says were the terms Q of the retainer. I did not believe him however when he said he asked Wolf:..to ensure.the business was viable. ·r accept Windsor as generally truthful when it came to his evidence as to his objects in the acquisition of P.D.S. by the plaintiff. Windsor was, ·as ·I have already said, very interested. in superannuation·. · He· was the major director in Australian Superannuatic:m· ·Plans (A.S. Plans) ·as ·well as being the major director of the p-Iaintiff. In early 1982 he believed that.- an. - occupational benefits plan in the Queensland building industry was to be: extended t-o :other states. He told me that althoug_h there was. no legislation ,then existing, - there was what he ·called the B.u.s: Scheme which ·he described· as having_ ·been ·operating for some years and being "a requirement that people employed in 0 -- 37 of 66 -- 37 the ·building _,industry _,i_n: Queensland have contributions made. on their behalf by their employers to the extent of 3 per cent per ·\_ salary".: He further. ,described the scheme as ;"agreement. between the people who organised and represented ,the.employers and the building .unions who organised the labour involved". Windsor, at the _time with which I- am, concerned, expected that the company A. S .. Plans would be a trustee - of the occupational benefits plan for the Queensland building industry. He said he foresaw that with that scheme in place and extended interstate the company A.S. Plans:stood to become a major beneficiary of a very large amount-of money - millions of dollars - he expected to become available through the - 3 per cent salary contributions. Windsor's plans were-to put P.D.S. into operation and apply ~t to everyone inthe building industry. He told Mr. Chesterman.in cross-examination that he saw the value.in the P.D.S. business in that it would allow and facilitate .the collection.of mon~ys being superannuation or occupational benefit moneys which moneys would be channelled direct to the trustee company A.S. Plans for c--=: investment, the investment decisions being _taken by people in Queensland who represented a combination of.the Master Builders' Association and the Building Unions. He further told Mr.: Chesterman in cross-examination that whether or not that came.to fruition depended on being able to have a facility to collect contributions. When asked in effect about P.D.S. and its :compvter programming effectively processing anticipated payments, he answer_ed __ ..,. _ -- "Well, the computer programming is not .the only thing that processes it. P.D.S. had to have the ability on being appointed a collection agent by the trustee that _ the processing of the contributions would be all done: ,effectively. • : · How they .did it is not really the concern of the trustee". -- 38 of 66 -- 38 He further' told- Mr"'. Chesterman ·that·-his plans in' effeet-,involved being able to' handle · a very· large number of transactions, ,in -a very ·time critical· way and to "do it efficiently -and reliably-·- and securely" . He gave an example· to Mr. Chesterman by • saying - · "It was critical that, for example, -there could be 60,000. oo- employed or self employed cont_ributors who would be ·able - to ·have all their pays proces-sed -~ ,... efficiently and quickly and in a timely way". It seems to me that with those plans, which I am satisfied . ; Windsor had, it was essential that P.D.S. be able to perform the Q functions which he believed it could. As I have already mentioned the contract, Ex. 1, mentioned "nett pay" as one of its functions. I should here say that Wolf in his· cross~examination told Mr. Dutney that at the meeting on 5th February, 1982 he knew that the reason why Windsor was interested in acquiring P.D.S. was so that it would be "a y •• ~ :. "' 0 vehicle to facilitate the sale of membership to Australian Superannuation Plans" .. Wolf understood that P.D.S. would be an Q agent for collecting funds for Australian Superannuation Plans. Even. though I have found there was no meeting of Wolf and Windsor on 5th February, nevertheless I find that Wolf had acq~ired the k~owledge I have just mentioned before the report Ex. 2 was sent to Windsor. I should I think now refer specifically to certain of the criticisms which Mr. Chesterman made of Windsor. One was that Windsor simply_co~~enced this action against the defendant after he had found his earlier judgments against Kythera were fruitless. Thus, it was said, Windsor made up his story on which he has based the present action. I reject this argument. There was, after allJ a ~etainer betwe~n_the plaintiff and the defendant and I know of no requirement that a person with a " ~·-.,. 0 -- 39 of 66 -- 39 number~ ,_.of:- causes of action .must pursue them s;i,multan~ously. Next, Mr. Chesterman points out that Windsor did not complain to the qefendant although he k~ew.by late 1982 that the.business he had bought was not profitable. Further, it i~ said that when in September; 1982 Windsor spoke to Wolf there was no complaint by Windsor about the -defendant's advices on, which he relied in deciding to proceed with the contract (see Ex. 56). I do not regard this lack of complaint as significant. It seems to me, in the history of the various events, that Windsor was forced to retaliate ,against Kythera when sued by that company and "it :C probably was the situation that in September 1982 he was unaware that he may well have had a good cause of action against the defendant. Windsor is not a lawyer and in September 1982 he·was about to withdraw from P.D.S. and about to cease putting further money into what was turning out to be a bottomless hole. C As I have already said, I have preferred Windsor's evidence to that of Wolf as to the making of the retainer, the circumstances in which it was made and the terms of it, although I did not find that Windsor asked Wolf to check to see that the business was viable. When Windsor read the letter which is Ex. 2 he notified Delaney that the contract to buy P.D.S. would proceed. I find that in making that decision he relied on the statement in the last paragraph of Ex. 2 reading: "We believe you can have the highest confidence in the system performing the functions described to you by Brian Delaney". · I find that Ex. 2 was treated by Windsor as the performanc_e report referred to in cl. 4 of the contract of sale Ex. 1. The further letter, Ex. 3, was not relied on by Windsor in electing to proceed with the purchase on an unconditional basis. There -- 40 of 66 -- 40 was I ··find (and' this was ·conceded by Mr. •-Chesterman:)., the necessary"pio:X:imity between ,the.plaintiff and the defendant to found~the ~6tion i~ negligence. I find that when the -plaintiff purchased •the business 'it was concerned to use one of the functions of the business•"nett pay" in order to carry out the objectives stated by Windsorand which· I have already mentioned. "Nett • pay" is ·. specifically mentioned in cl. 3 of the c6ntract Ex. 1. I find that. II nett pay 11 .· was '•important· for Windsor· and the plaintiff · and particularly for Windsor in pursuing his objectives as I have 0 already stated them .. I am satisfied that when Windsor decided 0 to pr~ceed with the purchase, he knew that the business had not been profitable up to that date but he believed that,·· given .the operations of P. D.S.· which he believed he was buying which operations included "nett pay" and given the capabilities of the computer and software he was buying, he expected the company would become profitable-within about one year. The' plaintiff's pleading against the defendant has alleged a number of particulars of breaches of contract and negligence. The plaintiff bears the onus of proving each particular alleged. Success in proving one particular will suffice. It• is unnecessary to here recount each such particular. I shall refer to some only. Before I do so·I should say that I am well satisfied-of the foliowing matters relative to the defendant's performance of its retainer. 1. Wolf· was not an:·expert in computers. 2. Caswell was the· expert in computers. 3. · Wolf took· Caswell to-Melbourne dn 3rd February, .1982 · solely because he was an expert in computers. 0 -- 41 of 66 -- 0 10 41 4. Wolf: gave· Cas.wel·l', instrμctions · as t.o what he. was to do in performance of the defendant's retainer. They were that Caswell was to look: at the .. soft~are at Melbourne. and .establish that it existed and that it, did do what it. purported to do. 5. That these instruction~ from Wolf did not change. 6. That Caswell received . those . instructions prior to the meeting in Melbourne on 3rd February, 1982. 7. Wolf knew from what Windsor had told him before the meeting of 3rd Febru~ry, 1982 that his instructions included evaluating the P.D.S. system from a user's point of.view (see Ex. 53 - 9th sheet) - that Windsor had asked him "Do the P.D.S. services provide the sort of .service that a . client of-that system would expect it to do?". 8. That Wolf attended the meeting on 3rd February, 1982: and 9. heard Delaney say that nett pay was operating or abo.ut.,.to operate and Wolf at that meeting believed that there was no significant difference between payroll deduction: service and the nett pay concept. That Wolf knew that Windsor required P.D.S. to integrate with his overall business plan with the emphasis on sale of membership to Australian Superannuation Plans. 10. Wolf understood the service or services provided to clients by P .D.S. to _be the accumu_lation of data- in:relat:i,onship to an -individual's deducti_ons from the client's pay roll, the distribution of those deductions to the organisations which were recipients of.those .deductions and the allocation qf the balance to the individual's bank. account - that these -·.services involved :paying principal _service organisations /( -- 42 of 66 -- 42 · ~nd' p~ying the employees 'the hett · pay to which they· ,were entitlea.·· 11 . 'Wolf-·• ga.ined the understandings refereed to in the 0 last inention:ed finding· through the discussions with Delaney at the meeting on:3rdFebruary, 1982. 12. Wolf understood his · brief was to conduct tests of ·the P.D~S. system as if lie were acting for a potential user and to conduct the· sort·bf tests and ascertain the sortssof ·information that·a potential user of the system wou.1a·want to know - "Does the system do what the user of· the,_- system ""would expect it•to do?" ., •"~ . 13. - Wolf. knew that w•indsor did not use ·computer parlance. 1 4. -A"fte'r the· meetin:g with Delaney on 3rd February, 1982; -- Wolf knew · that in relation to ··the nett· pay aspect· of -- the - -- °§ervides what the potential user would be interested in was 'that :th~ emp1oy·ees were paid on time in the right amount, 0 0 with· ·tne money· going to the employee either in cash; , if Q : tha~t" wa~( :the way: the pay roll was handled, or into. the 'employe~' s correct bank account if it was a non cash pay 0 .. . · - roll, and that there· were appropriate trails and . ; :re 0 cbriciliatiorts statements so the employer would know what amounts went to· each of the principal deduction agencies :"arid ~b ·forth".·· -·wolf understood at the meeting on :3rd . . February,· 1982 that· the concept of 11 does the system do what . ' a user would' expect' it to do?" is exactly what the computer ·technician 'would'· Cali· the functional integrity of· the coinpute·r: · ~- .; ·' ' ~' 15. Caswell at no stage was asked to look at 'the software or the systems·: bf P~'r>. S':- or any' aspect· :of it from a user's point of '.iieJ. aria~· that -that" sort of expression i.e. · llfrom -- 43 of 66 -- 'O 43 . ·a user's point of view" was never mentioned .to him in terms of his particular duties in performing the retainer. 1 6. Caswell, · in perf arming the . instruc.tions which he received ,,from Wolf, -believed that a company acquisition was pending and that the principal asset of the company which was being :sold, was· computer software so that his. task was to 0 ·determine that.this software was a real entity, a physical .entity . and that it did. perform according to the specifications which he would derive by the first meeting .· in Melbourne . . .1 C;i 17. Wolf knew that Caswell in conducting his.tests never.went past the output stage of the computer. where a; hard cop,y .or •a print· out was produced and that Caswell did not go on,to ,, ~ see whether or not the machine was capable of producing say a magnetic,tape that could be put into a system like Cemtex • e • •• •r 0 io · or sent to a bank which had a simi.lar compatible systelll,. 18. Wolf--.agreed that part of the system P.D.S .. provided. was • .. that. clients were more interested in getting. the result. at the end, that is past the computer stage, .a.nd putting ~he • money in the ·bank. Wolf knew that there was no purpose_ to the, whole exercise unless it was to get money into _the various- accounts and he regarded . it as "absol~tely imperative. that the software work". Caswell, in performing his.tests did not.look at. actual.disbursements of funds by •. P. D.S.. Wolf also did not look at thes~ matters. Wolf knew •.i ,that one of. the important aspects of a system like P.D.S., where there was a very restricted time within which t_o actually , convert the. data _which. was supplied. from the employer into a deposit ... in .. an employee's. bank account, was .... ; the ,level of automation which. perm.:i:-t~ed that to be done, -- 44 of 66 -- 44 '· -. that 'is :at· ·the ·iripub: and :output ,areas; to:.enable that:-to :,be done ·within the: specified· time -frame~·. ,, . .·' .. ~- . 1 9 . Wolf .: agreed that· the·· areas mentioned • in the last matter were not looked at by the defendant.t s · report (Ex. 2). Wolf knew·that the tests performed by Caswell-on behalf of:the defendant proved that P.D.S. did perform only, up to ·the stage where the system produced the hard• copy before · it went toa bank or-wherever the ultimate destination. was. 20. · Iri ·early 1982 ·wolf knew what Cemtex was. Cemtex was :an acronym for Central Magnetic Tape Exchange., , It was then 0 · · and : is, a ·system of· paperless transfer of . funds between Q ~::banks-· arid their customers. The customer of. a bank. is known· · ··· as·"the "user"; ·' The customer 'prepares ·a- tape in a standard --·'format and: lodges·it with its banker who-in turn, in 1982, ,_._,iodged .. it' with a Cemtex · operator- that is -a. bank •which -· _;- prov::i.d·ea- a bureau service to all other banks participating. :.:: In ~l982'· "in Victoria the State Savings- Bank, as it was then 0 ; . knc:rw:n, ·was the. Cemtex 'operator. The State Savings Bank , 'processed all of the tapes· received and at the end,--of' .the Q day· distributed to all of the receiving -banks,· known:. ·as '·ledger banks, ' a computer file in tape form of all · the ·· - transactions for that particular bank.~ This was a .system . ; where funds would be moved between bank accounts .and paid - i"hto bank accounts without money being handled and· without. < 'pap'er work. ; 21. ·In' June 19:81· P.D.S.· :sought information, from the: State : Sa'vings Bank --about access ·to the : Cemtex , system ( se_e Ex:~· 38).' · -p~o.-s·. was provided with a: number but.thereafter there was no communication from P .D.S. in relation ·to:.the use of automatic bank deposit facilities. Wolf knew at the -- 45 of 66 -- 0 45 , :.time .. Caswell ,performed, hi.s tests that the .method by which P. D.S. actually got its cheques to .. Medibank, building -societies and· the like, was eithe:r>by posting the.cheques .· .. in the. mail or ,by an employee. o~ .. P_.D.S .. going to .the , : particular institution with a manually written deposit slip and a list generated by the computer together with a cheque and handing these .documents to .a teller across the counter. 22. Wolf knew that.that method descril?ed,in the last numbered matter caused delay yet he knew that "nett pay" meant nett to the individual employee. With Wolf.' s · understanding of "nett pay~' following .. the meeting in Melbourne on 3rd February, 1982 and his understanding . ~ of Windsor's plans for using the business which . the plaintiff had. contracted.to.buy and with Wolf's understanding of the need to ,ensure .that an .. employee' s: entitlements to nett pay -.whether paid.by cash or by credit.to a bank or other account - were paid on the day. expected by the employe_e it is indeed surprising that Wolf did not cause Caswell to. investigate . the .. computer's ci operations past the point where the computer proved its abil_i ty to,print out the list showing the total _amounts,to be paid to a particular institution, e.g. Medibank or a Credit• Union and showing also the amount to be paid for each particular employee relevant.to that institution. There is in evidence before me a letter dated. 6th January, ·1982 :written by Wolf and addressed to Windsor of Australian Superannuation Plans. I shall . mention that .. letter again later but it shows that. at.. that time Wolf was aware.that Austr~lian Superannuation .Plans.had.what was called in the .Jetter .'"an . urgent. need· for a pomputer .. facility within your of.;f:ice''. -- 46 of 66 -- 46 '' ·'ea.swell. wa::i 'the Computer expert acting-for -the defendant: in the. matter before ·me· .:.. Wolf· was not~ Caswell· took his instructit>ns from Wolf. and,· as I have found,:. Wolf at no stage gave ·caswe11· instructions to"ensure· that the nett'pay aspect of the P . D. s . ·computer dpera ted so that·· the employee could ··receive his, "nett pay at the Cdrrect time and in the correct manner, i. e ~ in cash or by c:redi t to ah account. Wolf knew of Cemtex .. and that the Cemtex facility then available enabled a body admitted to it~' ti~e,· to produce a magnetic tape to the State Bahk· of Victo~ia such tape · containing all . necessary informabionc · to enable that. bank to ·transfer funds direct to other <banks . or inst1tuf:i.ons· an:d numbered accounts within those other banks· or· ins:ti tut"ioni3. - · ·· The ·defend ant's· duty of· care to the plaintiff did not dep~nir updh, Wolf's' krtow'ledge of the precise purpose to which the inforti{afibri.' which :Windsor had sought from it via Wolf was· to be put. It was enough if Wolf knew, or ought to have known, that Windsbr'' ·~~s reqtiestirrg . the·. performance report for a serious 0 0 0 purpd~e\· :thaf he propo:sed · to act upon it and that he might Q suf:fer loss 'if it' proved inaccurate (Shaddock and Associates Pty. v. Par:tani.a.tta •city Council (No.· 1) (1981) 150 C.L.R. 225 at 253) •.. I have formed the clear view in this·preseritcase that Wolf did n.6t; ·fullt appreciate~, when he ought to have done so, exactly how the nett pai aspect· worked or was capable of working if prop~~ly ~tiliz~d. He had heard Delaney discuss it and had; as Ex~ 4 .. shows, had. discussion·s with Delaney about•· it~ ·· He had heard Delaney say that· nett pay was in use or about to come into·.·· use. Wol'f, as T haVe ·already said, realised the importance of· beirig able to get the'nett pay· ·tb the 'ultimate recipient on· time• -- 47 of 66 -- 0 47 and_ in-,.the correct. amount and, form. Yet he never. instructed Caswell,:. the computer expert, to check t_hese matters. Windsor was, as Wolf . well . knew, virtually ig~orant . of_ computers and their capabilities.. Wolf knew what Windsor's plans were if he proceeded with the purchase under the contract Ex. 1. Caswell's tests :were: designed to show that the computer did indeed function accurately and satisfactorily from input to output, i.e. -from the insertion into the computer system of the information from the client up to the production by the computer of the print. out (hard - .copy) for the particular institution . . ( Q showing the amount. being paid to that institution and :the identity of each person and that person's payment relevant to that institution. Caswell did not investigate Cemtex or ind~ed the capacity of the P. D ..s. computer to use any electronic t,ape for transferring funds to the ultimate recipient of "nett pay". I am satisfied Caswell took neither of these steps because Wolf 0 did not so instruct him. The report, Ex. 2, told Windsor that he could _have the cl highest confidence in. the system performing . the .. functions described to him by Brian Delaney. This statement can only have_ ref erred to the .functions described by Brian Delaney on 3rd February, 1982 when both Wolf and Caswell were present. One of these-functions- was_"nett_pay". I find that "nett pay" was at no time a.viable function of the computer system whi_ch. the . plaintiff hqd agreed to buy. I find that nett pay cou-ld never successfully have been. performed by P.D.S. using .the computer and software. which it had when Caswell: ,-inspected.it... I find. that. a proper investigation from the 7 user's-point_of vJew would hav~ reveale~ manual inpu~ and output, i.e. data.having to.be keyE:d_manually,into the system, -- 48 of 66 -- 48 . cheques. ha~i~:~/ tc/ b~ manually; . banked or poste'cl 'wh.ich/ having regard to the time constraints in relation to distributiohs 'of nett . pay .. r~f erred . to . in the . eviden'ce, , c·ould ' not •. have ·· ·been sat:i..sfad:orily .. achieved~- I .. had evidence from the Systems Opera tor . Sheedy who was employed by the com'pany p. D. s .' from May 1982 to March 1984 that, to·use his words, he found no automated output time .that' interface to the banks ... He ·found that. if P.D~S. had bank output he had to manually' write all ·of the • !', _. deposff slips for the 'banks~ Sheedy meritioned that the aim'with . : ~ :.'f \··; .. . . . '- ' . - . . - . . . ··. . . . . ' interface would have had to have been to interface with· the bank 0 Cemteic system which. is the central . magnetic tape.: exchan'ge ·. 0 systen1·. ·- -I--am satisfied Cemtex was never operated by P.o.s·.' al thoiigh ·· i. t did·, .. as I ··have· said, earlier· obtain a· number; Sheed:? d~scribed Cemtex ·a·s a system which had been used when he . ,:-.-~: .•. ;-.;.i..~~--~··, ... ,; ···-. -·., • :·. -. . . - .. explained "interface" as any point·of connection or conjunction and . i~ 'the .. course ·of his evidence told me that if nett pay was to he ju'.st: treated as another deduction it would not meet any of 0 th~: deadlines· required· to be met by the employer or the e'mployee - o and' ther~fore wouia· be· subject to extreme penalties. I accept She-edy' s evidence. which g~aphically illustrated the flaws in the P. D.S. nett pay . facility , from the output - stage onwards. I accept particularly the evidence that to his knowledge there was no e'xternal. aut.'oinatic· interface and that'' if there had been he would not have ·w~itten bank deposit slips.· I understood Mr. Sheedy to be saying that there, ·was rio "exte:i:-nai. autom~t~d: ·• interface between the comp'ute"r system which the plaintiff "bough_t .:: and the· bank tct wh-~m· the "cemtex --t~pe: had· it existed·, ·was to·· have been gi.;en; 'that '·the time taken up wit:li manual bank deposit -- 49 of 66 -- 0 49 slips - tor example would_ have .prevented P. D.S. operating nett pay and meetJng. clients'_ de_a~lines. There was evidence from persoris other __ than Sheedy that "net.t pay." was not, and never became available, on the P. D.S. comp~ter~. I refer to the evidence of Mr. G.E.L. Burkett who is a national. bus_iness manager employed by Telecom and who in 1982 was seconded to work for P. D .. S., being employed there from 21 st June,. 1982_ until 17th December, 1982. I mention also the eviden9e of Robert Joseph Jarmain who was then the manager PersonneL_.of Monsanto Chemicals in Victoria who in 1981 was Q involved with Payroll Deduction Services in respect of employee payroll .deductions. He told me that apart from this service Monsanto haq been told by P.D.S. that they were developing a system which would enable Monsanto to pay its wages employees their __ salaries direct to a bank account and thereby avoiding ca~h payments direct to the employees. Jarmain understood that P.D.S. would arrange for the employees' nett pay to be deposited C direct to a bank account. or a building society but nothing came of it. Then there was the evidence of Mr. T. W. Tanoczky, a management consultant who was employed by P.D.S. from 18th May, 1982 to.22nd December, 1982. He told me that he first heard of nett pay when he saw Brian Delaney in April _1982. _ I have I hope by_ now made clear that the . computer system which the plaintiff bought was limited and that because of manual input and output_ its ability _to expand and accommodate nett pay especi~lly was severely limited. Windsor's objectives and. aims for ult_imate . 'l:lse of the system were to be achieved through increased us.es of such a system and the operation of the •• ~ -• • ~• C ' • • nett pay aspect on_ the P.D.S. computer would have become even more labour intensive and this was by reason of the need for -- 50 of 66 -- 50 manuai · ·input and :·output·. · I . f:ind that WindsoJ?t s intentions . and objectives in ·acquiring· the business related to its. use in the development .. ·of occupational benefits plans particularly for the building· industry. · I have already mentioned these. I -find also that to achieve that··end the services provided by P.D.S. were seen by Windsor as essential to process superannuation deductions and also gave him the opportunity to significantly expand A.S. Plans' superannuation base.· . I find also: that because · he anticipated· deductions were to be based· upon ·a percentage· of pay rather than · being static deductions. the required functions could not be carried out without the nett pay facilitf·bperating. In·· the end;:·· I am well satisfied that the defendant .· did breach its retainer and was negligent in:- a. Failing to advise the plaintiff through Windsor that the operation known as "nett pay" was not ready for immediate introduction. b. F.ailing to advise the plaintiff that the business was not ready_ for and capable of .· immediate expansion with particular emphasis on the "nett pay" facility of the P.D.S. computer. c. Failing to advise the plaintiff that the business was labour intensive and would become more labour intensive with "nett pay" and P.D.S. not being a Cemtex user. d. Advising the plaintiff through Windsor that it could have the highest confidence in the system operated by the business performing the function described to Windsor b_y Delaney at tp.e meeting on· 3rd February, 1982 and particularly nett pay. 0 0 0 0 -- 51 of 66 -- 0 51 ·:In,making ·_thes.e ,.findings: I· have n~t:, over;tooked Wolf's knowledge of the requir~ments of Australian Superannuation Plans as evinced in the· above letter Ex. 43. + That letter dated 6th January, .1982 was (~s I have said) written by Wolf and addressed ' . to Windsor. It was signed by Mr. J.A.P. Heathcote a director of the defendant and it commenced as follows:- . . ."At your .. recent meeting with Dr. Frank Wolf .it was recognised that there is an urgent need for a computer facility within your office". I do not propose to refer in detail to that letter .. Suffice. to say· that .. the letter, in dealing with the staffing .of the ·- c·i assignment referred - to in the_ letter says_ - C "The final technical review of this project will be performed by Mr. J.A.P. Heathcote a director of Touche Ross Services Pty. Mr. Heathcote is a specialist in. the electronic data processing area". One is I think entitled to wonder why Wolf did not enlist '' ' Heathcote's aid in deciding what instructions should be ·given to .. •· ~ -~ Caswell, particularly after he had heard what Delaney had said at the meeting of 3rd February, 1982 as to the nett pay facility and particularly considering that he knew of Windsor's· "ur·gent (". . ~ need for a computer facility within the A.S. Plans office" and knew of Windsor's aims and objectives to use the P.D.S. computer facilities for the advantage of A.S. Plans. I should I think also refer to an allegation that the defendant was negligent and ' ' ' in breach of its retainer in that it failed· to advise · the plaintiff that all necessary documentation including manuals had not been compiled and was not available to the plaintiff. ' . I find that there was no manual compiled by P.D.S. in the sense that there was no one book containing·· ·rnstructions for the ... ' , ... computer operator and that that was the state of affairs when Caswell inspected and tested the computer· and its modules. -- 52 of 66 -- 52 There· >were·· I'. find a· ·number of sources -from which an operator. could · find ·his· way -·to operate· the computer and access; . the various modules . - · ·Currie, the designer ·.artd joint creator of ~the programmes in the computer system which the plaintiff bought, agreed that ··if there were a new team of· people coming· in to operate ·the computer these people - would have had. difficulty with· the computer. He went on to say - "If we sold it-to a third party I would have sat down and given them much better documentati-on".- Ian eamp who was the - programmer in charge of P. D. s. , in: early 0 1982 °:and ·who with Currie had written some of· the software for·· Q that:syseem -said in his evidence, which was taken on commission,·· . that' in-·: early 1982 there· was very little documentation ·of ,the. system;.:. <-All i.ri all, : bearing in mind that the witnesses have been ask~d ',to <recall events which occurred over eight years ago, I am left :with the clear view that in early 1982 there were no manuals··a.s--such to inform an incoming programmer exactly how the, · computer and its software worked and exactly what modules were in the:•computer. The contract which is Ex. 1 provided for Motor Cardto•be removed from the P.D.S. computer. Had there been a completely riew -team;df persons coming into operate the computer after ·the plaintiff agreed to proceed with its. purchase· then there - were -no ·manuals·· or documentation compiled · for their instruction.-• However; · in the events which happened, Camp - stayed:. · - on ·and obviously'-h±s· prior knowledge continued. There was no documentation including.'manuals compiled sufficient to enable a completely-·• new · team •of .: -operators · to · under:stand. the· system • properly. Motor card'·was one programme in ·the computer and that was· to· be wi'thdrawri· pursuant to the.,.2ontract ... Although I.:find · 0 0 -- 53 of 66 -- I 0 53 there.was technically a.breach.of the allegation to which I have referred· I do not regard . that· breach as significant nor -do I ;.- regard' it as causative of negligence. "'lt was not a matter on which the· plaintiff relied in deciding to proceed with the purchase~-·· · I realise I have spent some time in _dealing w±th the issues of credibility and liability but that has been brought about by the mass of material and the lapse of time since these events occurred. · If I should be found to be wrong in my acceptance_, of () Windsor's ve-rsion of the retainer in preference to. Wolf~ s, nevertheless,_· in my view, if Wolf's version of the retainer were acted on·.: the same result in liability must .be achieved .... I-.say 0 that because of Wolf's admitted knowledge of the various ... matters,· which knowledge_ I have h-ighlighted earlier in these reasons. I refer especially to his ,knowledge of the "nett,paylf facility of the P.D.S. computer and-his evidence that he was~- instructed (inter alia). to see - if the services~ deliver: to. clients what-they say they will do (see Ex.-_53 -_ 9th:sheet). Whatever version of the retainer is accepted as·the correct one., the defendant undertook (inter alia) to see that the services offered by-P.o~s. delivered. to clients what the clients expected of -it and .to give a performance report-within_ 10 days. Having undertaken that retainer the defendant -owed a- duty to explain _- fully. and properly -. in _its report to. the - plaintiff all, matters relevant to the P .. D.S. system including difficulties in bringing nett pay-• into operation ( see Cornish v. Midland Bank plc (Hume_s third .party) (1985). 3 All ;E.R~ 51-3 at p. 520 per _Gledewell L. J. ) . · I should however say that_ on Wolf's , story he kne_w the intending .. purchaser_ was Wi-ndse>r or .:9:Il,, enti-ty ,associated- with -- 54 of 66 -- 54 Windsor and he never asked•its name. It·seems 'to me that-even if I actea· ·on Wolf's evidence as to the retainer it was clear that Wolf, knowing that the purchaser was.either Windsor:or an entity associated with Windsor cannot now·compl.ain on behalf of the defendant that his retainer was with Windsor alone. Windsor knew from Ex. 43 what Windsor's needs for A.S. Plans were. I turn now to the issue of damages. ·"The ·measure·· of recoverable damages for negligent misstatement is the amount of money necessary to restore the plaintiff to the position·he was in before the statement, subject to the loss being foreseeable" (Shaddock & Associates Pty. Ltd. v. Parramatta City Council (No. 1) (supra) at p. 255 per·Mason J.·as he then was). I have also found breach of contract. · In this ca:se,·I take the view that it makes no difference to the assessment of damages whether the··aW:ard' is on a contractual basis or a tort basis. "·Therplaintiff itself paid to its vendors under its contract 0 0 (Ex·.· '·1) · two·· sums totalling $101,000.00. · These moneys · it Q borrowed - $1,000.00 from A.S. Plans and $100,000.00 from-· Mr.· John :Gallagher: · The loan from Gallagher was guaranteed by Q A.S. Plans (see Ex. 45). I am satisfied both these sums are recoverable.· The plaintiff·· thereafter paid no further moneys ··to the· vendors under the'contract. It took over the business ·it·· had bought.· · Moneys to fund its operations were put into it until September·19a2. Windsor admitted that all moneys put into the running of· the· P. D. s. business came from ·A~ s .· Plans.·• · There· was · never . any transfer tci the plaintiff of the units which it · had bought. ( see' c'l. ·2 ···of Ex: ··1) • continued to operate. The·Board·of Directors of-P.D.S.· The plaintiff has claimed the following further moneys:- -- 55 of 66 -- I C1 j C 55 1 . , Paym~nts to ...J .L.. Garner a.nd Associates -~~consultants~ 2 •. Payments to other consultants ,. -_. Derbyshire and Bourke - , including. PAYE. tax- deduc_tions - 3. Rent. on premises - 4 •. Other payments including lease costs paid to solicitors, payments to other employees of P.D.S., airfares, accountants' fees, .advances to the company_P.D.S. .-. all detailed in a list produce~ during an address and relying on detailed evidence and.which I dp nqt find it necessary to set out - $36,739.97 $38,036.40 $11,233.42 , '-'!.: $68,504.87 $154,514.66 All these payments were made 1:>y A.S. ~lans and, it is said, were paid on behalf of the plaintiff. The plaintiff has also claimed the.following debts incur;t"ed by it:- 1. Interest and costs on debt to John Gallagher 2. Costs and outlays paid to John M. O'Connor &.Co. solicitors - in respect of the action .by Kythera - $90,564.96 $9,944.00 $100,508.96 It,appears that these payments were a_lso Jllade by A.S. _Plans. The defendant has submitted that .. none of these items totp.~ling some $255,000.00, .all of whic.h w_ere, paid by A. _s. Plans is recoverable because:- ,· -- 56 of 66 -- 56 1 . . ,.They were, paid .. by A; s. ·. Plans. and there is, no , satisfactory. evidence that the plaintiff incurred .a liability to. A.S. · Plans to repay these moneys. 2. · As a· .. matter of· law they are irrecoverable since . the plaintiff knew. when it bought the· business that tl'),e business was not then profitable and it bought ,the business because of the potential it expected to realise. In evidence Windsor. conceded that, apart from the ,above $10l,OOO.OO,.and all other payments were made by A.S. Plans. ,He also: conceded that .at :the time of purchase the company bought 0 had-not been .transformed into a completely profitable busines_s Q because ·-.it was indicated to him that "they still were deficient on the market, that they hadn't got out and brought in the very much larger market that would be necessary to substantiate that bus:ines-sll ~ , . ·r am satisfied that at. the time of. the purchase Wind-sor -·had- what ·r- regard as starry .eyed hopes that with use of the · P-. D.S.- · Services on one particular job ( which was not identified)· the - plaintiff would generate - in excess. of . five million dollars in ·.fees in one year. > A·. S. · Plans put no further moneys into . P. D.S. after , September 1982. I' find that·by late April·or .early May, -1982 Windsor knew that .P.D.S. was not then. operating.profitaQly. He had a report - (Ex. 2 2) from Mr. Toomey who . was the Queensland Manager: of P. D.S., Windsor having set up what he called a branch · of P. D.S. in Queensland. This branch was in the off ice of A. S_. Plans; 'That· report is headed "Budget for Queensland 11 _ •.. _ This Ex. 22 shows a projected expenditure sheet and Toomey knew that· income ·would: -not. outstrip , operating .expenses "whilst P. D. s. markets·deductions ,onlyll. Toomey recommended that P.D.S~ market- what • he,, called a :moduJ.:ar:.package which .would .comprise one ._or 0 0 -- 57 of 66 -- 0 57 more- of- -a, ,mixture; of three modules· one of which. was "nett, pay either non cash or fixed cash. mode" .. In early June 1982 Windsor had a report dated 10th June, 1982-(Ex. 23) from John L. Garner and Associates who were salary and personnel management consultants. That. report was addressed to Mr. Delaney. as ·managing director of Payroll Deduction Services of Australia Pty. Limited. This letter discussed among other things marketing plans and recruitment · advertising. In the letter Garner spoke of high profit potential and future expenses and said 011 I have no idea where the money to support this activity Q will come from". He went on - "Before making the appoinb:nents I feel morally bound to . satisfy myself that· funds will .. be C available to the firm". ·•Windsor was aware of the plaintiff's contractual liabil_i ty to pay further moneys to the vendors. The. plaintiff was obliged to pay $449,000.00 on or about 2nd . March, . 1982, .a further $630,000.00 on 15th July, 1982 and a final payment of $720,000;00 on:15th September, 1982. The plaintiff was unable:to pay_the. __ $449,000.00; it borrowed $100,000.00 which it paid to the vendo:r:s. __ ,. in return for an agreement by a Mr. Bland who controlled one of the vendor companies that there would be a notional lending to the·plaintiff of $350,000.00 which would be notionally returned to-Bland by way of part payment of the purchase price. The $100,000.00 which, I have mentioned was ·borrowed from- Mr. Gallagher on about 9th March, 1982. -- The plaintiff bears the_-onus of proof of_ the damages which it-seeks . . . The present case is one where- the plaintiff, induced by the_ defendant's negligent misstatement in Ex~ 2 and _breach of its retainer elected to proceed with. a~c9ntract to buy.~he P.D.S. -- 58 of 66 -- 58 business. -It kr.i.ew ·· at· the · time·· ft·· decided to proceed that'; ··the · business being - bought' was not, to that stage; profitable: ~- It proce~d-ed in: the expectati"on that the business would become very profitable within one year and that these huge profits would-be obtained through use of the facilities of which it believed the P. D.S. · computer was capable. The ·defendant was therefo're prepared to put money into the company in expectation of what I find were very large ·profits. Whether those expectations were realistid-is not :t6 th~ point. ·. ·• By .. the end of · September 1 9 8 2 ·i . e. after some seven ·months, 0 Windsdr 'decided· that no further moneys would be put into keeping· Q . . . P. D. S ~ o"perating. In short; he in effect elected·· to determine the· contract. I find that continuing to fund the running of P.D;.-s'.-·i.mtil September, 1982 was in the circumstances 'Of this If the plaintiff is to be restored 'to the posit.i"oii in which ·it. was before it elected to proceed/ why shouid it:. riot :r'ec~ver all it spent, if the object of damages for· 0 negligent .. : rni·sstatement is. to restore · the · plaintiff to; the position·it was ir{before the statement? The statement here is 0 of course. the pas·sage in Ex. 2 which is earlier. set out. • . I find that what 'the plaintiff did, so far as running' the business purchased was concerned, was to continue to employ'for a .. certain· time persons employed before the plaintiff took control. It also engaged other persons · and extended · the: ·· business operations from Melbourne to Brisbane~ Brian Delar:iey conti~ued in . employment-. as also·- did·. Ian Cainp. 'Among ··other - persons emp'loyed were· 'She·eay who I have already mentioned_, Tanbczky / ··:surkett' a'ha- Garne:t .. Tanoc;.;ky commEmced in· May· 1982 and coritinue·a: until D~cember 1982 when he left and when, he ·said- .. the c"ompany: ·certairily was' hot making any progress:. ---Burkett ·to'.ld -- 59 of 66 -- 0 59 me that.: just- af.ter_ he arrived. to work for P.D.S. on 21st June, 1982· one .of .its customers, .Monsanto Chemicals, withdrew from _the P.D.S .. service and one of the reisori~ §iven.was that nett pay was.not- available to them although it had been promised . . , Garner in .1982 carried out work as .. a consultant on instructions from Mr. Windsor. He told me he was paid by. Australian Superannuation Plans (A.S._Plans) . . I .find also . that Windsor leased vehicles for use by employees put on to P.D.S. and as I have mentioned Windso~ set up anoffice_in Brisbane - it.was in an area .already leased by Q A.S. Plans .. The material before me shows that on 10th August, 1982 A.S. Plans paid $30,000.00 to P.D.S. at a time when_ th,at company ..was .still controlled by a board of directors of wh!~~ a solicitor, Rodney Davidson, was the chairman. Exhibit 13 before me is a photocopy letter dated 28th September, 1982 writt~n by Davidson and addressed to Windsor advising Windsor that .. a Q special. meeting of the company Payroll Deduction Services Pty .. -• Limited had then recently passed the following resolution:_--_ ''In. the current circumstances it is resolved thatunless funds are to hand by 5.00 p.m. on Monday, 27th September, 1982 .to meet existing creditors and $30,000 for two months' operating expenses, the company and - • the unit trus.ts trading operation will cease, the Managing Director being authorised to take all -necessary implementatary action." By this time W,indsor had ~ecided that enough was enougtiand the further $30,000.00 was not paid . . I turn now to Mr. Chesterman's argument that, apart from the .$101,000.00, the plaintiff was under no liability to A.S. Plans for any . moneys which it had paid . into P .D.S. The plaintiff's. claim is in _short that A.S. Plans lent these moneys to the plaintiff and that. the plaintiff acknowledged its liability -to A. S •. Plans for these l_oans. . The plaintiff relies -- 60 of 66 -- 60 on a· photocopy·:o-:e- "Minutes of Meeting of Director's of, Australian Superannuation Plan"s Pty.· held· 10.00 a.m. ·Monday, 8th February,· 1982 · at 505 'Qti.~en ·, Street~ ·. Brisbane" (Ex. 5) -~ · The photocopy is signed by Windsor as Chairman ·and its text ass:erts that Windsor· and James a co-director - were present. It is~unnecessary 0 to refer in detail t:d these-minutes but it shows a resolution·to support the coqimif.ment entered into by A.S. Properties Pty·. Ltd. for the purchase of all beneficial interests in·P~D.S. and·to assist that companyis acquisitions by advancingmoneys necessary for· purcha~e and initial operation with·any financing required 0 in addition to the vendor finance being obtained from-associates 0 to preserve ··confidentiality.· The plaintiff next relies on a document (Ex. 6) ·headed "Acknowledgment, by'A.S~ Properties Pty. Ltd. ·· of the terms of its indebtedness·· to Australian Superannuation Plans Pty.". Again it is signed by Windsor and is ·simply ~: photocopy arid undated. It reads:- . ,:i,A. S .. PROPERTIES' PTY LIMITED hereby accepts that it is liable .for $101,000 advanced on its behalf by . Ausfralian. Superannuation Plans Pty'. in the purchase of Payroll Deduction Services of Australia and that all ·payments· made by that company for the purchase, operation or othe.rwise in respect of that business will' increase the · indebtedness· ·· to Australian Superannuation Plans Pty., and that all such advances on behalf of this Company will attract interest at the annual rate of 20% compounding on monthly rests, and that no part of the loans or interest shall become due· and repayment of the loan or interest shall not be required in ·any event prior· to· July 1983 and thereafter only if and when demanded by the lender. For anq on behalf of A.S. PROPERTIES PTY. LIMITED. P.G. Windsor ·f.'ianaging·Directoi." I was not· impress·ea· by the absence of the· original minutes nor the abs~rice . of' the· origi~al acknowledgment. 'and the lack. of a date thereciri. -·•- 0 0 -- 61 of 66 -- '' 0 61 These- two. documents, · Exs. 5 and 6, , and. their. intended efficacy have considera~le doubt cast on them by Ex. 32 which is a photocopy .of a letter dated 14 ·, September, 1982 on the letterhead of Austra,lian Superannuation Plans, Brisbane office, addressed to Burkett as Regional Manager of Payroll Deduction Services. of -Australia Pty. Limited. ,This letter commences:- '-'Would you please acknowledge the following amounts as loans which have been made to your company in order to meet its operating costs". It . then sets out amounts paid to personnel named as , Toomey, Tanoczky .. an~ Sheedy,. consultants named as_ J. Garner a~d () Associates and Boundy and Scanlan, .vehicles being a Stat~sman and a B.M.W., premises at 503 Queen Street and various expenses . . . . ·- and _advances as follows - . 26th July, 1982 - $2,000.00; ._10th __ August:, 1982 - $30,000.00; the total amount in Ex. 32. is - $99,459.55. Exhibit 32 is quite inconsistent with Exs. 5 and . 6. I consider it significant that Ex. 32 was written on 1~th September, 1982 and received by Burkett on 1 5th September,. 1982 and not long before Ex. 13 was written by Davidson. A.S. Pians was then obviously concerned that payments it had made be treated as loans if the company were to be wound up and not: as payments of capital~ The. next matter which. has caused me concern about the damages claimed is that over the years Windsor has given various and differing figures for the various payees~ There is· some consistency in some but there is much inconsistency. I instance the, following exhibits. Exhibit 19 which is. ,a photocopy of the defence. and counter.claim dated 11 th _November, 1983 in the action by Kythera Investments in which the total amount claimed, including $100,000.00 for Windsor' s personal time is, -- 62 of 66 -- 62 $462,477.76.· Exhibit:,31 which is·a-letter on the letterhead of Australian Superannuation Plans and dated 16th July, . 1982 addressed to'Mr. Scanlan the· accountant.· It sets out what is called "a schedule· of- expenditure incurred by Australian Superannuation Plans , in relation . to P .D.S.". It includes details of $21,343.52 paid to consultants Garner; Toomey and Tanoczky, three· vehicle lease payments totalling $2,180.10 · and particulars of · monthly rental and motor vehicle lease fees. Exhibit ·34 which is the plaintiff's. answer to interrogatory No.- 8 gives details of amounts claimed ,_to have been expended as 0 alleged· in paragraph 15 of the statement of claim in the present Q action. It is unnecessary to particularise these matters. Exh:i.bi t' 35, which is an office copy of Windsor's affidavit of 26th November, 1984 sworn in the Kythera action showing how a total-claim of $462,477.76 is made up. Exhibit.36 which is a photocopy bf a number of pages of figures including details of acttial:payments to·consultants and motor vehicle expenses .. .- . 'I' should· at this stage say that I am not prepared to find that ·the·· expenses of setting up a Brisbane office and the cost of leasing motor cars for consultants employed were foreseeable and-recoverable as damages - assuming that the plaintiff was liable to A.S. Plans for these debts. In view of the differing figures forthcoming from Windsor over the years· and· especially because of Ex. 32· I am not prepared to accept th'at there is at law any liability from the · plaintiff to Australian· Superannuation Plans for moneys which A.S~~ Plans paid allegedly on behalf of the plaintiff. In reaching this decision I have been influenced by matters.· I have already ·mentioned and the following. further matters:- 0 0 -- 63 of 66 -- c\ 63 1. Failure· by :Windsor- to 'produce the originals of. Exs. 5 and 6 .. 2 . The·. fact that the copy . of the balance sheet . of the pl-aintiff· as at 30th June, 1982. (Ex. 27) shows only one • liability to Australian Superannuation Plans Pty. and that :.is .what is called unsecured loan - $100,0_00.00. This $100., 000. 00 is, I am satisfied, the money b~rrowed from Gallagher repayment of which was guaranteed by A.S._ Plans. Exhibit 27 shows ... that · the plaintiff did not trade in 1981./82. and. its only asset at 30th June, 1982 was its ' investment in Payroll Deductions · System shown as $100,000.00. 3. The fact· that there· are -· no fi~ancial statements of _.the plaintiff since 30th June, 1982. In the· result the plaintiff has satisfied me that_ it ,is entitled to $101,000.00. damages only. - - It is .entitled .. ~to interest on $1,000.00 for eight years and.seven months at_12 per cent. I calculate this interest at $1,030.00. As for interest on.. the $1 0 0 , 0 0 0 . 0 0 , the evidence showed that this money._ was. - ' ' ; _ borrowed and not repaid finally until July, 1987 .• The evidence shows .that on 13th ·July, 1984 the plaintiff paid Gallagher $40,000.00; that on 14th Juty, 1986 it paid $60,000.00 and 14th July, 1987 made a final payment of $86,442.87. The loan was made_ on 9th March, 1982 (Ex. 7). According to Gallagher's .. evidence it was at commercial interest rates "'."" 1 5 per cent. There was some - suggestion the .interest may have been capitalised. I am not satisfied that this in fac_t occurred. I,intend to act on Gallagher's,evidence as a 9uide to the interest which: -I .~hall_ allo~ tJ;ie.- _p~aintiff on t;he $100,000.00. In the result I allow the plaintiff interest on -- 64 of 66 -- 64 $100,000.00 at: 15 pe'r -cent from' 9th · March, 198'2 to 13th: July, 1984 - $35,178.10. · ·I allow interest on $60,000.00-at 15 per cent from- 13th Jury, 1984 to 14th July, 1986 -· $18,024.66. In the result I give·judgment for the plaintiff against the defendant for $155, 232·: 76 made up as follows:- Damages as above' - · · Total Interest·as above - . $101;000~00 $ 54,232.76 Total ·· $155,232.76 This ·leaves the claim of the defendant· against the third party Peter Grenfell Windsor. The defendant has alleged that 0 the third party being a director of the plaintiff and acting on Q the plaintiff's behalf in its dealings in relation to the purchase of the business referred to in the contract (Ex. 1) owed a duty to the plaintiff to exercise reasonable care in acting on the plaintiff's behalf and that the third party failed to exercise reasonable care in a number of particulars. These particulars include allegations that the third party failed to properly assess the business for the purpose of acquisition by 0 the plaintiff and made the contract conditional only upon the Q plaintiff obtaining a report from the defendant that the vendor's "nett pay" and other computer operations performed as the vendors described to clients and the principal service organisations using the business rather than making the contract conditional upon the plaintiff obtaining a report from the defendant or some other qualified consultant assessing the business as satisfactory for the purpose of acquisition by the plaintiff. In the view which I take of the matter the defendant has signally failed to prove any breach by the third party of his obligation to exercise reasonable care in acting for and on the -- 65 of 66 -- Q .; 0 0 65 plaintiff's behalf in the acquisition of the business. I find in particular that he was not negligent in making the contract conditional upon the plaintiff obtaining •· a report from the defendant that the vendor! s "nett pay" and other computer operations performed as the vendors described to clients and principal service organisations using the business. I dismiss the defendant's claim against the third party. I order the defendant to pay the plaintiff's costs of the 1iie,lv.,~ 1~e.vv.e... CA!X-t-5 . . actionAto be taxed and I order the defendant to pay the third party's costs -of the third party proceedings to be taxed. -- 66 of 66 --