GMB Research & Development Pty Ltd v The Commonwealth of Australia & Anor [1997] FCA 934

FEDERAL COURT OF AUSTRALIA PRACTICE AND PROCEDURE - notice of motion for determination of several questions of liability prior to trial, pursuant to Federal Court Rules, O 29, r 2 - principles governing the circumstances in which questions should be determined before trial - proposal for staged determination of issues of liability - principles to be applied. Federal Court Rules, O 29, r 2.

The Wik Peoples v Queensland (Fed Ct/Drummond J, 26 May 1994, unreported). GMB RESEARCH & DEVELOPMENT PTY LIMITED v THE COMMONWEALTH OF AUSTRALIA & ANOR NG 328 of 1997 Sackville J Sydney 28 August 1997

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 328 of 1997

BETWEEN: GMB RESEARCH & DEVELOPMENT PTY LIMITED

Applicant

AND: THE COMMONWEALTH OF AUSTRALIA

FIRST Respondent

ANDY MACDONALD

SECOND RESPONDENT

JUDGE(S): SACKVILLE J.

DATE OF ORDER: 28 August, 1997

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The notice of motion filed by the respondents on 23 July 1997 be dismissed. 2. Costs of the motion be costs in the cause. 3. The applicant prepare short minutes of order giving effect to the agreement between the parties and the Court's ruling on disputed issues in relation to the applicant's notice of motion filed on 23 June 1997. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 328 of 1997

BETWEEN: GMB RESEARCH & DEVELOPMENT PTY LIMITED

Applicant

AND: THE COMMONWEALTH OF AUSTRALIA

first Respondent

andy macdonald

second respondent

JUDGE(S): sackville j.

DATE: 28 August, 1997

PLACE: SYDNEY

REASONS FOR JUDGMENT Background The applicant in the principal proceedings ("GMB") is a supplier of computer software for records and information management systems. It has instituted proceedings against the first respondent ("the Commonwealth") and the second respondent (Mr MacDonald). The latter was, at material times, the head of the Office of Government Information Technology ("OGIT"), within the Commonwealth Department of Finance. According to GMB's case, pleaded in a further amended statement of claim filed on 21 July 1997, OGIT, on or about 8 October 1996, circulated to the public a Request for Proposal for Whole of Government Records Management System ("RFP"). GMB provided a response to the RFP on 22 November 1996, but was not selected to proceed to the second stage of the evaluation process. GMB alleges, inter alia, that eleven other tenderers were selected to proceed to the second stage of the evaluation process, notwithstanding that they failed to comply with the mandatory requirements of the RFP. The relief sought by GMB includes damages for what is said to be the Commonwealth's breach of contractual obligations owed to GMB and its misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("TP Act"). Two notices of motion filed in the proceedings were made returnable before the Court on 28 August 1997. The first was filed by GMB on 23 June 1997. The motion sought a number of orders, including leave to file and serve an amended application; leave to serve a notice to answer interrogatories; an order requiring the respondents to give discovery of certain categories of documents; and an order that all issues of liability and the nature of relief be determined separately and before the determination of any issue of quantum. The second notice of motion was filed by the respondents, on 23 July 1997. As amended, the motion sought an order pursuant to Federal Court Rules ("FCR"), O 29, r 2, that questions identified in a schedule to the motion be separately decided, before any further trial of the proceedings. The schedule listed a series of questions, framed by reference to a number of paragraphs or particulars in GMB's further amended statement of claim, filed on 21 July 1997. At the hearing on 28 August 1997, Mr Campbell QC (who appeared with Mr Lancaster for GMB) and Mr Bennett QC (who appeared for the respondents) agreed that the respondents' motion should be dealt with prior to GMB's motion. Mr Bennett's written submissions in support of GMB's motion did not press all the questions identified in the schedule. Accordingly, the list of questions proposed by GMB for separate determination was somewhat shorter than had originally been indicated. After hearing argument from Mr Bennett, I formed the clear view that the questions identified in the schedule to motion (in its modified form) were not suitable for separate determination. For his part, Mr Bennett, while not abandoning the motion, supported an alternative approach. Under this approach, all issues in the case except damages (which the parties agreed should be determined separately) and except what I shall describe as the "mandatory RFP requirements question" would be dealt with at the first stage of the case. The mandatory RFP requirements question would be dealt with at the second stage (if necessary), while damages would be dealt with (again if necessary) at the third stage. In substance, the mandatory RFP requirements question is whether the Commonwealth wrongly permitted the eleven tenderers, other than GMB, to proceed to the second stage of the evaluation of responses to the RFP, notwithstanding that (as GMB alleges) those tenderers failed to comply with certain mandatory requirements specified in the RFP. It is part of GMB's case that, by allowing the other tenderers to proceed to the second stage, the Commonwealth breached its contractual obligations to GMB and, having regard to representations made by the Commonwealth or on its behalf, engaged in misleading and deceptive conduct in contravention of the TP Act. At the hearing, I delivered a brief ex tempore judgment. In that judgment, I concluded that the respondents' motion should be dismissed. I also expressed the view that the alternative approach adopted by the respondents, although having some apparent attractions, should not be implemented. I indicated that I would provide a somewhat more detailed statement of my reasons for reaching these conclusions. My reasons are contained in this judgment. In relation to GMB's motion, the parties reached agreement on some issues and I made rulings on disputed issues. In particular, the parties agreed that issues of liability should be determined separately from any assessment of damages. I asked Mr Campbell to bring in short minutes of order to give effect to the parties' agreement and my rulings on the disputed issues. I do not think it necessary to refer further to GMB's motion. The Pleadings The first claim pleaded by GMB is in contract. It alleges that, by reason of the submission and acceptance of GMB's response to the RFP, a contract was concluded between it and the Commonwealth (par 8). It is said that the express terms of the contract included a provision that proposals which failed to meet any mandatory criteria would be excluded from further consideration (par 9(d)). Paragraph 10 of the statement of claim, as amended, alleges that the following were implied terms of the contract: "(a) fairly evaluate the applicant's Response; (aa) evaluate all responses to the RFP fairly and in a manner that would ensure equal opportunity to the applicant and other persons who submitted responses; (b) exercise reasonable care while evaluating the applicant's Response; (c) evaluate all responses to the RFP in the same way (including by applying the same criteria, by subjecting the responses to the same standards and by applying the criteria and standards consistently)." This form of pleading owes more than a little to the recent judgment of Finn J in Hughes Aircraft Systems International v Air Services Australia (1997) 146 ALR 1 (Fed Ct/Finn J). In addition, par 11 alleges that the contract included an implied term that, if GMB's response met the mandatory criteria, it would pass to the next evaluation stage, namely, "the Proof-of-Concept test". GMB claims that its response met the mandatory RFP requirements (par 12). Paragraphs 12A, 12B and 12C plead an alternative case to that made out in par 12. In substance they allege that if, contrary to GMB's case, the RFP imposed certain mandatory requirements which GMB did not fulfil, the responses from the eleven named tenderers to the RFP also failed to comply with each of those mandatory requirements. The significance of the allegations in pars 12A, 12B and 12C to the claim in contract is that, if made out, they would, or might, demonstrate that the Commonwealth breached the implied terms pleaded in pars 10(a), (aa) and (c), and (perhaps) the express terms pleaded in par 9(d). This emerges from par 13, which alleges that, in breach of its contract with GMB, "(c) [the Commonwealth] did not fairly evaluate [GMB's] Response; ... (e) [the Commonwealth] did not evaluate all responses to the RFP fairly and in a manner that would ensure equal opportunity to [GMB] and other persons who submitted responses; (f) [the Commonwealth] did not evaluate all responses to the RFP in the same way (including by applying the same criteria, by subjecting the responses to the same standards and by applying the criteria and standards consistently); (g) [the Commonwealth] decided to vary a requirement in the RFP during the course of consideration of responses to the RFP, and did not require [GMB] to provide revised pricing on the variation and did not permit [GMB] to vary its original response to the relevant requirement." The particulars to par 13, inter alia, repeat the allegations made in pars 12A, 12B and 12C. Paragraph 14 addresses similar issues, by alleging that the Commonwealth failed to evaluate all responses to the RFP fairly and in a manner that would ensure equal opportunity to GMB and other persons who submitted responses. Again the particulars refer, inter alia, to the facts and matters in pars 12A, 12B and 12C. The significance of pars 12A, 12B and 12C is not, however, confined to GMB's pleaded contract claim. GMB's TP Act claim rests on allegations that the Commonwealth made representations relating to evaluation of responses to the RFP. These representations are said to have been made at an industry briefing held on 15 October 1996; in the RFP itself; and by reason of the Commonwealth's conduct (including the "circumstances in which [GMB's] Response was submitted to [the Commonwealth]") (pars 18, 19, 20, 20A). GMB alleges that the representations made by the Commonwealth included some to the effect of the implied contractual terms reproduced earlier (par 20A). It also says that the Commonwealth represented that the representations it had made would continue to apply until such time as the Commonwealth notified GMB that they would no longer continue to apply. GMB pleads that the Commonwealth engaged in misleading and deceptive conduct (par 23). The particulars to this allegation include allegations that the Commonwealth did not evaluate all responses to the RFP fairly or in the same way. The particulars also allege that the proposals of the eleven tenderers identified failed to meet the mandatory criteria, in the manner pleaded in pars 12A, 12B and 12C, yet the Commonwealth continued during and after the Proof-of-Concept phase, to evaluate the responses of those tenderers. It is also pleaded that the Commonwealth at no stage notified GMB that it (the Commonwealth) proposed to act contrary to the representations it had made (par 23B). The statement of claim goes on to plead a cause of action in negligence and one based on what is said to be a failure to accord procedural fairness. The pleadings also claim relief on the grounds that the Commonwealth's decision was unreasonable and that the Commonwealth had acted inconsistently with assumptions made by GMB in circumstances where the Commonwealth knew or ought to have known that its conduct would cause detriment to GMB. I do not think it necessary to specify in detail the allegations made to support these claims. The Principles Both Mr Campbell and Mr Bennett agreed that the principles governing the circumstances in which a question should be determined before trial under FCR, O 29(2), are conveniently and accurately set out by Drummond J in The Wik Peoples v Queensland (Fed Ct, 26 May 1994, unreported), at 3-4: "The principles governing the circumstances in which a question arising in an action should be determined before the trial of the action under O 29(2)(a) are well settled. By O 29, r 1, the term 'question' includes any question or issue of fact or law in any proceeding, the distinction being between decisive 'issues' and non-decisive 'questions': see Landsal Pty Ltd v REI Building Society (1993) 113 ALR 643 at 647. Pursuant to O 29(1), the procedure is available for the preliminary determination of a question or issue 'whether raised by pleadings, agreement of parties or otherwise". For the procedure to be appropriate it is no longer necessary that the decision on the preliminary question must be conclusive of that issue, whichever way it is decided: it is enough that, if it is decided in one way, that will be decisive of the issue. Carl Zeiss Stiftung v Herbert Smith & Co [1969] 1 Ch 93 at 98; Orison Pty Ltd v Strategic Minerals Corp N.L. (1987) 77 ALR 141 at 149-150. The procedure can be appropriate even though a decision on the preliminary issue or issues will not determine the litigation: it is enough if the determination will 'substantially narrow the field of controversy'. See CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 at 606 and O 29(4). Whether the procedure is appropriate in a particular case will in large part depend upon the Court being satisfied that, even if it will not put an end to litigation, a determination of the preliminary issue in one way will substantially shorten the trial or result in a significant saving in time or money. CBS Productions Pty Ltd v O'Neill, supra, at 607; Famel Pty Ltd v Burswood Management Ltd [1990] ATPR 51,084 at 51,086 and 51,087. The attitude of the parties is also relevant in deciding whether to use the procedure. TVW Enterprises v Duffy (unreported, Toohey J, 28 March 1985); Blurton v Minister for Aboriginal Affairs (1991) 29 FCR 442 at 449."