Supreme Court New South Wales Medium Neutral Citation: Medical Device Technologies Pty Ltd v Health Administration Corporation [2023] NSWSC 602 Hearing dates: 27 – 28 February, 1 – 3, 6 – 7, 13 – 17, 21, 27 – 29 March, 5 April, 3 – 4 May 2023 Date of orders: 07 June 2023 Decision date: 07 June 2023 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Defendant's purchase order terms and conditions not incorporated into the agreements; no sale by description under s 18 of the Sale of Goods Act 1923 (NSW); ventilators not fit for purpose under s 19 of the Sale of Goods Act; plaintiff engaged in misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law; plaintiff to repay $10.395 million Catchwords: CONTRACTS — express terms — incorporation of terms — whether purchaser's standard terms and conditions incorporated by reference into contract CONSUMER LAW — sale of goods – respiratory ventilators – whether goods were accepted — whether there was a sale by description – whether purchaser made known particular purpose for which ventilators were required – whether there was an implied condition as to fitness for purpose – whether ventilators were suitable for use in any clinical setting CONSUMER LAW – misleading or deceptive conduct – whether vendor made misleading or deceptive representations in ventilator user manual brochure – whether vendor provided purchaser user manual brochure as an intermediary or principal Legislation Cited: Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law Health Administration Act 1982 (NSW) Sale of Goods Act 1923 (NSW) Cases Cited: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2020) 278 FCR 450; [2020] FCAFC 130 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086 Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149 County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 Dialogue Consulting Pty Ltd v Instagram, Inc (2020) 291 FCR 155; [2020] FCA 1846 Gardam v George Wills & Co Limited [1988] FCA 289 Gibson v Manchester City Council [1979] 1 All ER 972 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 180 Gonzalez v Agoda Company Pte Ltd [2017] NSWSC 1133 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 Grant v Australian Knitting Mills Limited (1935) 54 CLR 49; [1936] AC 85 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; [1978] HCA 11 Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Noone (Director of Consumer Affairs Victoria) v Operation Smile (Australia) Inc (2012) 38 VR 569; [2012] VSCA 91 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 Re Australian Organic Eggs Pty Ltd [2022] VSC 747 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 Category: Principal judgment Parties: Medical Device Technologies Pty Ltd (Plaintiff/Cross-Defendant) Health Administration Corporation (Defendant/Cross-Claimant) Representation: Counsel: J R Clarke SC with T J Kane (Plaintiff/Cross-Defendant) D B Studdy SC with C Ernst (Defendant/Cross-Claimant) Solicitors: Johnson Winter Slattery (Plaintiff/Cross-Defendant) Gilbert + Tobin (Defendant/Cross-Claimant) File Number(s): 2020/268161 TABLE OF CONTENTS The claims in the proceedings Decision Ventilators The Shangrila Ventilator and the VG70 Ventilator Events leading up to the Agreements HealthShare's decision to purchase 100 VG70 Ventilators from RAPP Therapeutic Goods Administration approvals Consideration of "lower performance options" Further discussions between HealthShare and MDT HealthShare's "Desktop Review" 15 April 2020 20 April 2020 21 April 2020 Who made the decision to purchase? The Agreements The First Agreement Were the Purchase Order Terms and Conditions thereby incorporated into the First Agreement? The Second Agreement The article in The Guardian Delivery of the Shangrila Ventilators The technical tests – Dr Cook The "Cancellation of Ordered Ventilators" brief The clinical tests – Dr Gatward The decision The expert evidence The contested functions of the Shangrila Ventilator Pre-setting tidal volume Volume control The User Manual Did the Shangrila Ventilators have "conventional" Volume Control? The brochures HealthShare's pleaded case Dr Barkalow's evidence Reliance Pressure control mode The User Manual The MDT Shangrila Brochure Accuracy of oxygen concentration Expiry of oxygen sensors Oxygen sensor calibration Conclusion Alarms High Pressure Alarm Circuit Disconnect Alarm Other Alarms Oxygen hoses Patient circuit and expiratory valve calibration Synchronised Intermittent Mandatory Ventilation CPAP mode Claim in contract – Sale of Goods Act Did HealthShare accept the Shangrila Ventilators for the purposes of section 37 of the Sale of Goods Act? Were the Shangrila Ventilators fit for purpose? Particular purpose Did MDT provide HealthShare with the MDT Shangrila Brochure and the User Manual merely as an intermediary? Did HealthShare rely on MDT's skill or judgment – Ms Hanigan Did HealthShare rely on MDT's skill or judgment – Dr Morris Were the Shangrila Ventilators reasonably fit for the purpose of being used in a clinical setting for treating patients with COVID-19? Was there a sale by description? Misleading or deceptive conduct Principles The representations relied on 1. The ventilators were fit for the purpose of use by NSW Health in treating COVID-19 patients 2. The ventilators have a conventional volume-controlled ventilation mode and can reliably provide precise tidal volume 3. The ventilators would function in accordance with the specifications in the User Manual 4. The ventilators are intended to be used in common wards and ICUs 5. The ventilators are suitable for use in wards, emergency departments, ICUs or sub-acute care departments 6. The ventilators are capable of delivering FiO2 of between 40%-100% with ±20% accuracy 7. The ventilators can deliver volume control ventilation and the tidal volume on the ventilators can be pre-set 8. The ventilators trigger a continuous high-pressure alarm when the patient airway pressure exceeds a set limit Conclusion Judgment 1. On 11 March 2020, the World Health Organization declared COVID-19 to be a worldwide pandemic. 2. In April 2020, as part of the New South Wales Government's response to the pandemic, the defendant, Health Administration Corporation, entered into two agreements ("the Agreements") with the plaintiff, Medical Device Technologies Pty Ltd ("MDT") to purchase a total of 348 "Shangrila 510S Integrated Respirator" ventilators ("the Shangrila Ventilators") for a total of $20.79 million: around $60,000 each. The Shangrila Ventilators were manufactured in China by Beijing Aeonmed Co., Limited ("Aeonmed"), and to be imported into Australia by MDT. 3. Health Administration Corporation is a corporation established pursuant to the Health Administration Act 1982 (NSW). [1] The relevant dealings were between MDT and representatives of an administrative unit of Health Administration Corporation known as HealthShare NSW. The parties referred to Health Administration Corporation as "HealthShare". I shall do the same. 4. HealthShare paid MDT $10.395 million of the $20.79 million purchase price, that is, half the purchase price, by two instalments on 27 and 30 April 2020. 5. MDT caused the Shangrila Ventilators to be delivered to HealthShare between 16 June 2020 and 15 July 2020: 48 on 16 June 2020, 2 on 1 July 2020, 100 on 15 July 2020 and 198 between 15 and 20 July 2020. 6. HealthShare then conducted several rounds of technical and clinical testing. 7. HealthShare contends that the testing revealed the Shangrila Ventilators did not meet basic performance parameters, rendering them unfit for use in any clinical setting. 8. On 7 September 2020, HealthShare, by its solicitors, purported to reject the Shangrila Ventilators, terminate the Agreements and demand that MDT refund the $10.395 million paid on 27 and 30 April 2020. 9. The questions in these proceedings are whether: 1. HealthShare was entitled to take this step; 2. MDT is obliged to refund the $10.395 million to HealthShare; or rather 3. HealthShare is obliged to pay MDT the balance of $10.395 million purportedly payable under the Agreements. 1. The Shangrila Ventilators have never been used and remain in storage. The claims in the proceedings 1. MDT seeks to recover the unpaid $10.395 million it contends is due under the Agreements. 2. HealthShare contends that it was entitled to terminate the Agreements and is entitled to a refund of the $10.395 million deposit on three bases: 1. breach of the terms contained in HealthShare's standard "Purchase Order Terms and Conditions" that it contends were incorporated into the Agreements; 2. breach of the conditions it contends were implied into the Agreements by ss 18 and 19 of the Sale of Goods Act 1923 (NSW) (correspondence with description and fitness for purpose respectively); and 3. MDT's alleged misleading or deceptive conduct, for the purposes of s 18 of the Australian Consumer Law ("the ACL"), [2] principally arising from representations said to have been made by MDT in brochures and a user manual ("the User Manual"), to which I will return. Decision 1. HealthShare has not established that the Purchase Order Terms and Conditions were incorporated into the Agreements. 2. HealthShare has not established that the transaction recorded in the Agreements was a sale by description within the meaning of s 18 of the Sale of Goods Act. 3. HealthShare has established that the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act. 4. HealthShare has established that, to an extent, MDT engaged in misleading or deceptive conduct within the meaning of s 18 of the ACL. 5. I understand that it is common ground that it follows, from those conclusions, that MDT should now repay the $10.395 million it received from HealthShare in April 2020, but I will invite submissions about this, and such other matters as now require resolution. Ventilators 1. A ventilator is a piece of equipment which delivers positive air pressure to a patient who is unable to breathe or is breathing insufficiently. The main functions of a ventilator are to facilitate oxygenation, that is, the delivery of oxygen to a patient, and ventilation, that is, removal of carbon dioxide from the patient's lungs. 2. A ventilator works as follows: 1. oxygen and air are received from cylinders or wall outlets; 2. the pressure of the gas is reduced and blended according to the fraction of inspired oxygen, expressed as FiO2, which is set by the operator of the ventilator; and 3. the gas is delivered to the patient based on the "mode" of ventilation that is set by the operator. 1. Ventilators function in different "modes" depending on the needs of the patient and the complexity of the ventilator. "Volume control mode" enables the operator to set the volume of air that is delivered to the patient. "Pressure control mode" enables the operator to set a certain air pressure as the target variable. When a ventilator is in volume control mode, the pressure will vary, whereas when a ventilator is in pressure control mode, the volume will vary. [3] The Shangrila Ventilator and the VG70 Ventilator 1. Aeonmed manufactured two different ventilators: the Shangrila Ventilator and the VG70 Ventilator. 2. MDT understood that it was the exclusive supplier in Australia of both types of ventilator. As I set out below, at the outset of the COVID-19 pandemic, MDT sought to market both types of ventilator to HealthShare. Ultimately, HealthShare acquired Shangrila Ventilators from MDT and acquired VG70 Ventilators from another supplier, RAPP Australia Pty Limited ("RAPP"). I return to this below. 3. There is no dispute that the Shangrila Ventilator has less functionality than the VG70 Ventilator. MDT accepts that the Shangrila Ventilator has "lesser functionality than a typical ICU ventilator". [4] 4. MDT contends that the Shangrila Ventilator was properly characterised as an "emergency transport" ventilator. As I set out below, MDT made clear to HealthShare that this was how MDT characterised the Shangrila Ventilator. 5. MDT's position is that: "… There is no doubt that in ordinary times, the ICU doctors from [HealthShare] who have given evidence in these proceedings would much prefer to treat patients with a typical ICU ventilator, with its superior functionality. But whether or not the Shangrila will be purchased by [HealthShare] for use in an ICU in ordinary times is not the proper lens through which to view this case." 1. MDT's position is that: "… [HealthShare] purchased the Shangrila, being an emergency transport ventilator, so that it had a lower performing ventilator at the lower end of its stockpile if it became necessary to use it as the pandemic developed." 1. On the other hand, HealthShare contends that, whether or not the Shangrila Ventilators can be characterised as "emergency transport ventilators": "The ventilators were acquired for use by [HealthShare] in clinical settings, to treat patients with COVID-19. Subsequent testing of the ventilators, however, revealed that they did not conform to their specifications. There were basic defects in the functionality which rendered them unfit for use in any clinical setting." Events leading up to the Agreements 1. Following the outbreak of the COVID-19 pandemic, there was a significant increase in the global demand for ventilators. HealthShare was unable to procure ventilators under its existing supply arrangements and began sourcing ventilators outside its normal tender based supply channels. 2. HealthShare later described the circumstances as follows: "In early 2020 the worldwide supply for ventilators was extremely uncertain due to a wide range of factors including unprecedented levels of demand, international border closures, and vendors making allocation decisions based on need rather than orders received. As a result, ventilators were purchased from a number of suppliers, including suppliers that had not been used by [HealthShare] previously. All ventilators purchased from unknown suppliers are put through an assessment process to ensure that they are of an appropriate quality and standard for [HealthShare]." [5] 1. A number of potential suppliers of ventilators approached HealthShare in late March 2020. 2. MDT first contacted HealthShare on 26 March 2020. MDT had not previously dealt with HealthShare. HealthShare had not previously purchased ventilators manufactured by Aeonmed and had not previously dealt with MDT concerning the supply of ventilators. 3. On 26 March 2020, MDT's Sales and Marketing Manager, Mr James Bellas, wrote to Mr Rod Treadwell, then Executive Director, Procurement, at HealthShare, stating that MDT had "access to" 600 "CE accredited patient ventilators from our supplier". 4. Mr Bellas' reference to the ventilators being "CE accredited" was a reference to the fact that the Shangrila Ventilators had been certified by the International Electrotechnical Commission as complying with a number of international standards including standard EN 794-3 which is the European standard for emergency and transport lung ventilators. 5. Mr Bellas attached two brochures to his email. 6. The first referred to the Shangrila Ventilator. I will refer to this as the "MDT Shangrila Brochure". 7. The MDT Shangrila Brochure was entitled "Fighting against COVID-19". It was in the nature of a promotional brochure and did not contain any detailed technical specifications. It stated on its cover: "With the massive global outbreak of COVID-19, Aeonmed customized this respiratory work station to save more lives according to the clinical requirements." 1. The MDT Shangrila Brochure depicted the Shangrila Ventilator on a stand. Under the heading "Working Scenarios", the MDT Shangrila Brochure stated "Ward, Emergency Department, Sub–acute Care Unit". The brochure made various other statements to which I will return. 2. A copy of the MDT Shangrila Brochure is attached to these reasons. 3. The second brochure attached to Mr Bellas' email related to the VG70 Ventilator and, unlike the MDT Shangrila Brochure, contained detailed technical specifications. It described the VG70 Ventilator as a "Superior Mobile ICU ventilator" and a "Comprehensive ICU ventilator". A copy of this brochure, to which I will refer as the "VG70 Brochure", is attached to these reasons. 4. Mr Treadwell referred Mr Bellas' email to Ms Akua Addai-Aboagye, who was then a Category Manager, Strategic Procurement Services, at HealthShare. 5. At that time, Ms Addai-Aboagye was also dealing with approaches from other potential suppliers of the Shangrila and VG70 Ventilators. 6. One of those potential suppliers was RAPP. [6] 7. On 26 March 2020, several hours after Mr Bellas' email to Mr Treadwell, Mr Simon Lloyd from RAPP wrote to Ms Addai-Aboagye stating that RAPP had been "working closely" with the Government of Victoria and had "been able to secure production of 4,450 ventilators for" the Government of Victoria. Mr Lloyd continued: "There is a mix of 2,425 Portable Transport Ventilators and 2,000 ICU ventilators that the Government of Victoria have order[ed] and I would like to extend our services to the Government of New South Wales. Given the unprecedented demand on manufacturers of these devices there is now a global shortage and this is only expected to get worse if action and orders have not been placed. … If there is anything RAPP can do to assist [the] Government of New South Wales in securing Ventilators please let me know as quickly as you can. The matrix have [sic] shifted and it's not about getting the ventilator one wants, it's now just about getting a ventilator, quite literally things are changing buy [sic] the hour in this critical time." 1. Mr Lloyd's email thus drew a distinction between "portable transport ventilators" and "ICU ventilators". Mr Lloyd attached hyperlinks to "information relating to types of ventilators we have already secure[d] for the Government of Victoria". Those hyperlinks were to the VG70 Brochure and to a brochure concerning the Shangrila Ventilator that was different to the MDT Shangrila Brochure sent by Mr Bellas to Mr Treadwell. This brochure was entitled "Shangrila 510S Emergency Transport Ventilator" and showed the ventilator in a bag attached to a gurney alongside two "emergency" personnel. This brochure contained technical specifications of the Shangrila Ventilator and described it as a "Multi-functional Emergency Transport Ventilator". To distinguish this brochure from the one sent by Mr Bellas to Mr Treadwell, I will refer to this brochure as the "RAPP Shangrila Brochure", although each of these brochures bears Aeonmed's logo and each appears to have been published by Aeonmed. 2. A copy of the RAPP Shangrila Brochure is attached to these reasons. 3. Mr Lloyd also provided hyperlinks to brochures relating to ventilators not manufactured by Aeonmed. These have no relevance here. 4. The following day, 27 March 2020, Mr Lloyd send a further email to Ms Addai-Aboagye with quotations for the supply of ventilators, including the Shangrila Ventilator, which Mr Lloyd described as an "Emergency Transport Ventilator" and the VG70 Ventilators, which Mr Lloyd described as "Mobile ICU Ventilators". 5. RAPP's quotation for the Shangrila "Emergency Transport Ventilator" was at a unit price of $15,615 (excl. GST) and for the VG70 "Mobile ICU Ventilator" at a unit of price of $35,785 (excl. GST); more than double the Shangrila price. 6. As I set out below, the price that HealthShare ultimately agreed to pay MDT for the Shangrila Ventilators was considerably more than either of these prices: $67,500 per unit for the first 148 units and $54,000 per unit for the second 200 units; an indication that demand outstripped supply. 7. Ms Addai-Aboagye's responsibility was to locate possible sources for ventilators. It was not her responsibility to decide what ventilators should be purchased. 8. On 30 March 2020, Ms Addai-Aboagye sent copies of Mr Lloyd's emails to Mr Rodney Zanetic, an engineer in the Medical Equipment Unit of the Strategic Procurement Unit Services unit of HealthShare. 9. As I set out below, unlike Ms Addai-Aboagye, Mr Zanetic was involved in the decision as to what ventilators were to be purchased. He participated in a "Desktop Review" of the Shangrila Ventilator which ultimately led to HealthShare's decision to enter the Agreements. 10. Mr Zanetic thereby received a copy of the VG70 Brochure and the RAPP Shangrila Brochure. He did not receive any brochure from MDT concerning the Shangrila Ventilator. 11. A short time later on 30 March 2020, Ms Addai-Aboagye replied to Mr Bellas' 26 March 2020 email to Mr Treadwell referring to "your notification of 300 potential units of ventilators available" and requesting a "brochure" and "technical specification sheet". 12. Mr Bellas replied the same day: "I have attached the information, however in these uncertain times the market place is being overwhelmed and our manufacturer and supplier has allocated a production slot for MDT for 300 ventilators for delivery in late June 2020. We have requested fast track approval from TGA and from our discussions with them they are pulling out all the stops for these much needed ventilators. The quantity available is only 300 of the AEONMED Shangrila 510S, these are priced at $30,000 per unit and are [a] proven bedside ventilator with a 12 month warranty. AEONMED has been swamped by orders globally and with the US President invoking war power level acts for production to hold all manufactured goods in the USA over the weekend, the demand has increased significantly. For NSW Health to secure this last production spot from AEONMED, a purchase order and payment for 60% of the order value would need to be completed by no later than noon Tuesday the 31st of March. In full transparency to NSW Health, we have quotes with other Health departments with same conditions, and at this stage no more production slots of these volumes will be available. I have attached the brochure, CE certificate and technical data sheet as requested and can issue a formal quote should you be able to meet the order and payment terms applied by AEONMED and MDT. Kia, sorry for the short time frame but global demand is outstripping supply 10 to 1, in these unusual times. This is not how we normally operate and again apologise for the pressure this is placing on procurement. We already have professional and product liability insurance and are currently increasing the coverage, but we have premium for $20 Million, will forward certificate on order." 1. Mr Bellas attached to his email a copy of the MDT Shangrila Brochure; that is the same document he had sent Mr Treadwell on 26 March 2020. 2. Mr Bellas also attached a Shangrila "Technical Data" sheet that set out such data and also stated: "Shangrila 510S Integrated Respiratory Work Station is customized to save more lives in the global outbreak of COVID-19 pandemic." 1. I will refer to this document as the "MDT Shangrila Technical Data Brochure". A copy is attached to these reasons. 2. Mr Bellas also attached to his email a document entitled "EC Certificate" dated 16 July 2016 which stated, of Aeonmed: "The Certification Body of TÜV SÜD Product Service GmbH declares that the aforementioned manufacturer has implemented a quality assurance system for design, manufacture and final inspection of the respective devices / device categories in accordance with MDD Annex II. This quality assurance system conforms to the requirements of this Directive and is subject to periodical surveillance. For marketing of class III devices an additional Annex II (4) certificate is mandatory." 1. Ms Addai-Aboagye replied on the same day, saying that she would "review with the team here and get back to you". 2. Ms Addai-Aboagye replied to Mr Bellas, later on 30 March 2020: "Thanks well noted, Just to let you know we have been approached by 3 vendors for this same product. Can you confirm if you are the registered distributor for this?" 1. One of the "3 vendors" to whom Ms Addai-Aboagye referred was RAPP. 2. Another was Taleb Medical Pty Limited. Also on 30 March 2020, Mr Taleb Taleb, from Taleb Medical wrote to Mr Zanetic with a quotation to supply 200 VG70 Ventilators, which his brochure described as a "full critical care ventilator" at a unit price of $39,992. Mr Taleb stated that he had "been completely swamped with calls and proposals for more ventilators" and that he had "a price and availability as it stands an hour ago". 3. Also on 30 March 2020, Ms Addai-Aboagye wrote to Mr Bellas: "Do you have the VG870 [sic]? Bedside ICU ventilator" 1. Ms Addai-Aboagye was obviously referring to the VG70 Ventilator. As I have said, she had received quotations from RAPP concerning both the Shangrila and the VG70 Ventilators and from Taleb Medical concerning the VG70 Ventilators. 2. Later on 30 March 2020, Mr Lee Gannon, the Managing Director of MDT, wrote to Ms Addai-Aboagye: "The models AEONMED [that] are [on] offer are: Shangrila 510S - Bedside VG70 - ICU Both units are invasive and can be used in CPAP mode (non-invasive). James [Bellas] incorrectly provide[d] advice, just to clear this up. I have attached brochures for each to assist you. The VG70 is not available for some time if you would like we can check timings but I believe availability would be August maybe and we would need to TGA [sic] unit. At present AEONMED has offered 300 Shangrila - Bedside for delivery in late June. These units have been specifically designed for the Coronavirus Pandemic and used in Wuhan. We have no movement on payment and conditions [because] the supplier has extreme demand and [is] only covering these quantities because we have been their distributor for some time." 1. Mr Gannon attached "brochures for each" to his email. These were the MDT Shangrila Brochure and the VG70 Brochure that Mr Bellas had sent Mr Treadwell on 26 March 2020. 2. Thus, although Ms Addai-Aboagye had made an enquiry about the VG70 Ventilator as a "Bedside ICU Ventilator", Mr Gannon described the Shangrila Ventilator as being "bedside" and described the VG70 Ventilator as being an "ICU" ventilator. 3. Finally, on 30 March 2020, Ms Addai-Aboagye wrote to Mr Treadwell and to Ms Susie Giddey, the Associate Director of Strategic Procurement at HealthShare, stating: "Just to give some clarity on the Aeonmed brand vents and the x 3 distributors that have come forward with a commercial offer for the same equipment. • Medical Device Technology deadline for the Mid Acuity – Shangrila 510S – 300 units is tomorrow 12pm. They are in contact with federal through industry – details in blue. • They claim no stock of the High Acuity vents VG70, while RAPP Australia has offered these in stock so has Taleb. Need your guidance on which distributor and which ventilator to move forward with?" 1. In that email. Ms Addai-Aboagye described the three proposals as follows: Vendor Offer Medical Device Technology Shangrila 510S – ICU Mid Acuity – Invasive & Non-Invasive VG70 – ICU High Acuity – Invasive & Non-Invasive Taleb VG70 – ICU High Acuity – Invasive & Non-Invasive RAPP Australia Shangrila 510S – ICU Transport/Ward Use – External and Intra-Hospital Use VG70 – ICU High Acuity – Invasive & Non-Invasive 1. In her email to Mr Treadwell and Ms Giddey, Ms Addai-Aboagye described the Shangrila Ventilator as being "mid acuity" and the VG70 Ventilator as being "high acuity". She also used the initialism "ICU" in relation to each of the Shangrila and VG70 Ventilators although she had received no communication from MDT describing the Shangrila Ventilator as an "ICU" ventilator. Nor had she received any such communication from RAPP. RAPP had described the Shangrila Ventilator as an "emergency transport ventilator" as opposed to the VG70 Ventilator which RAPP described as a "mobile ICU ventilator". 2. Pausing the narrative for a moment, it can be seen that by the time Ms Addai-Aboagye sent her email of 30 March 2020 to Mr Treadwell and Ms Giddey, HealthShare had received two brochures from MDT concerning the Shangrila Ventilator, being the MDT Shangrila Brochure and the Shangrila Technical Data Brochure. 3. HealthShare had also received from MDT, and also from RAPP, the VG70 Brochure. 4. HealthShare had also received, from RAPP, the RAPP Shangrila Brochure. HealthShare's decision to purchase 100 VG70 Ventilators from RAPP 1. On 31 March 2020, Mr Lloyd from RAPP sent Ms Addai-Aboagye a "revised quote of 100 units only of the VG70 and related items" at a unit price of $38,035, a little more than the $35,785 unit price quoted on 27 March 2020. 2. Ms Addai-Aboagye replied several minutes later, stating that "ETA June 30th (or earlier) on site in Sydney is the condition of this potential purchase to help us bridge potential gaps" [7] and sought confirmation that the "manufacturer has authorised RAPP Australia to distribute", that the VG70 "is as per specification attached" (being the VG70 Brochure), and "100 units confirmed for 30th June delivery or earlier". 3. Mr Lloyd replied a short time later, confirming that RAPP was authorised to distribute the VG70 Ventilators, stating that "we currently have 2,000 units ordered and scheduled for the Government of Victoria", confirming that the VG70 would be in accordance with the VG70 Brochure and, as for 30 June 2020 delivery said: "As advised, every attempt will be made to deliver them prior to the 30th June. I can't guarantee delivery prior at this stage, I can only confirm the completion of the product and its availability to be shipped will occur by the 30th June." 1. A short time later, and also on 31 March 2020, Mr Lloyd wrote to Ms Addai-Aboagye: "Given the deadline has passed I can no longer guarantee the offerings as outlined below. If the NSW Government is still interested you will need to advise as other countries commitments will have most likely filled the held allocations that were available for the VG70, what [e]ffect that has had now is unknown and would need to be determined." 1. These communications give insight into the urgent situation HealthShare faced. Each of MDT, RAPP and Taleb Medical was emphasising that, because of the pandemic, ventilators were in short supply globally and that urgent decisions were required to secure supply of stock. 2. At around this time, Dr Richard Morris AM, then a Staff Specialist in Anaesthesia at St George Hospital and Visiting Medical Officer in Intensive Care at Shoalhaven District Memorial Hospital, joined a Technical Advisory Group established to develop an initial testing and simulation testing regime for ventilators that had not previously been used in NSW hospitals. 3. By 1 April 2020, Dr Morris had reviewed the VG70 Brochure. On that date, he wrote to Ms Giddey and to Mr Zanetic: "After having looked at the four page brochure for the VG 70 ventilator from AEOMED [sic]. This appears to be a full function ICU ventilator. The specifications cover the range of functions required. Usefully it has a turbine for air supply so only a compressed oxygen supply is needed. It doesn't list the oxygen consumption nor the exact type of circuit and sensors. I have been unable to find a more detailed Users Manual. Requesting a copy from the supplier would facilitate a more complete evaluation. I support taking this device forward as a potential ICU level ventilator." (Emphasis added.) 1. Later on 1 April 2020, Mr Zanetic wrote to Ms Addai-Aboagye: "The VG70 was reviewed and approved by Nhi's team. According to the below email, [RAPP] are able to supply 100 units in June. Is this worth pursuing. Either with this supplier, RAPP, and/or with Medical Device Technologies?" 1. Mr Zanetic's reference to "Nhi's team" was a reference to Dr Nhi Nguyen, an Intensive Care Specialist at Nepean Hospital, who in March 2020 joined the State Health Emergency Operations Centre ("SHEOC") as an intensive care adviser. SHEOC was a body established to manage and oversee clinical operations in New South Wales hospitals and health facilities, to support the healthcare workforce and to facilitate procurement of medical equipment in New South Wales during the COVID-19 pandemic. 2. I will return below to Dr Nguyen who worked closely with Dr Morris at this time. Mr Zanetic's reference to "Nhi's team" having reviewed and approved the VG70 Ventilator may have been a reference to Dr Morris' review of the VG70 Brochure. 3. On 2 April 2020, Ms Giddey wrote to Mr Lloyd at RAPP: "We have your quotation for 100 ventilators which we should process today." 1. Later on 2 April 2020, HealthShare placed a purchase order with RAPP for 100 VG70 ventilators at a unit price of $38,035. 2. HealthShare delivered that purchase order to RAPP early on 3 April 2020. 3. Mr Lloyd responded within minutes in an email that gives some impression of the urgency of the situation with which HealthShare was faced: "We require 70% on order and the balance prior to shipment. In relation to our conversation I do understand the frustration surrounding the terms but we are not working in a normal global environment at the moment. The manufacturers we are dealing with globally are requesting payment in full on order or they won't even schedule. I will be entering this order into our system and issuing a PO [8] but I am required to make payment to secure the production slot until such payment is made its [sic] not locked. The deadlines that I have been communicating are absolute, given we are competing globally for these products, missing these deadlines can have substantial impacts on the previously secured schedules. In some instances customers are actually outbidding other customers to secure ventilators, it's that competitive. Please advise once payment is made [and] I will have our accounts confirm receipt." Therapeutic Goods Administration approvals 1. In the meantime, on 3 April 2020, the Therapeutic Goods Administration approved the Shangrila Ventilator and stated that its intended purpose was to be: "… mainly used in the emergency rooms of hospitals, transfer after operations, field and occasions where first-aid or transfer is needed for care of adult, paediatric, infant patients weighing at least 3.5kg." Consideration of "lower performance options" 1. Ms Rachel Hanigan was the Chief Procurement Officer of the NSW Rural Fire Service, but had joined HealthShare's COVID-19 taskforce to manage and coordinate the response of NSW Government agencies to the pandemic. 2. On 7 April 2020, Mr Zanetic wrote to Ms Giddey and to Ms Hanigan referring to HealthShare's order of 100 VG70 Ventilators from RAPP and said: " … I'm wondering if it is worthwhile to seek feedback from the SHEOC team to, given the chance of securing ICU capable ventilators is diminishing, consider including the lower performance options" (Emphasis added.) Further discussions between HealthShare and MDT 1. Having secured an order for 100 VG70 Ventilators from RAPP, HealthShare's position so far as concerns MDT was that it preferred to acquire the VG70 Ventilators, rather than the Shangrila Ventilators. 2. Thus, Ms Addai-Aboagye gave this evidence: "Q. At the time, the position that NSW Health was taking, to your knowledge, was that it was trying to acquire the VG70 in front of the Shangrila. Correct? A. I can recall that, yes. Q. That's because it was a higher specification? A. Correct." 1. And later: "Q. As at April 2020 NSW Health was willing to acquire either the VG70 or the Shangrila ventilator, correct? A. If - yes according to what they've written in the emails, yes. Q. Was it your understanding that they wanted the VG70 before the Shangrila if they could get it, correct? A. Correct." 1. From 8 April 2020, Mr Gannon and Ms Hanigan exchanged emails concerning the possible supply by MDT to HealthShare of VG70 Ventilators. Ms Hanigan said "let's be ambitious and say 500". Nothing came of this as MDT was not able to source VG70 Ventilators. 2. Ultimately, on 20 April 2020 Mr Gannon wrote to Ms Hanigan, Mr Zanetic and others: "We have just been contacted by our AEONMED manufacturer and they have confirmed they can obtain 48 Shangrila 510S Ventilator[s] in May from a local distributor who is willing to sell his product. The acquisition will be through AEONMED and all factory warranties and insurances hono[u]red. The amount would be higher than standard factory pricing. AEONMED want this to be very clear, this is not standard practice and preferences is through normal order processes. These are available in May 2020. $67500 (1 Yr Warranty) - Confirmed $90,000 (5 Yr Warranty) - Just awaiting confirmation on warranty amount and whether AEONMED will also allow for us to purchase an additional warranty. This price should be very close. Once again, we need a quick response to obtain these units. These units will go quickly due to the delivery time of May." (Emphasis in original.) 1. Ms Hanigan called Mr Gannon and they had this conversation: "[Ms Hanigan] said: HealthShare is interested in purchasing the ventilators, are they still available? [Mr Gannon] said: Yes they are available. [Ms Hanigan] said: Will the Shangrila 510s be suitable for NSW Health and meet our needs for COVID? [Mr Gannon] said: I only deal with the best. I have run a large global corporation since 2008 so I understand the global market. Also my wife is an emergency doctor in Queensland. I would never recommend anything but the best ventilators for NSW or she'd be up me. [Ms Hanigan] said: Can you send me the final quote and expected delivery dates? [Mr Gannon] said: Yes, I'll email it over as soon as I can." (Emphasis added.) 1. HealthShare relies on the passages in this conversation that I have emphasised as the occasion on which it made known to MDT the "particular purpose" for which it required the Shangrila Ventilators so as to enliven s 19 of the Sale of Goods Act. 2. The "particular purpose" that HealthShare contends it thus made known was "that it required the ventilators for use in a clinical setting for treating patients with COVID-19". I return to this below. 3. Mr Gannon gave evidence that, at about this time, he had this conversation with Ms Hanigan: "[Mr Gannon] said: The Shangrila units are an emergency ventilator. They are not intended for ICU. If NSW Health wants to acquire ventilators suitable for the ICU, the VG70 ventilator would be suitable. MDT has 200 Shangrila units which it can obtain from our AEONMED distributor and its distributors. [Ms Hanigan] said: We are trying to source ICU ventilators like the VG70, but I will put this forward." (Emphasis added.) 1. Ms Hanigan denied that Mr Gannon told her the Shangrila Ventilators were "not intended for ICU". Responding to a statement made by Mr Gannon in an earlier affidavit to the same effect, [9] Ms Hanigan said: "That statement is incorrect. Mr Gannon did not state that the Shangrila ventilators were not suitable for the ICU at any time. … I would have never put the ventilators to HealthShare for desktop review if Mr Gannon or Mr Bellas had told me the ventilators were not suitable for treating COVID-19 patients, including in ICUs. My involvement in the procurement was as a member of the COVID-19 taskforce, so my entire focus in procuring ventilators was to procure ventilators that could be used to treat COVID-19 patients. If Mr Gannon or Mr Bellas had told me that the ventilators were "not ICU" ventilators at any time, I would have ended the conversation and not proceeded with the procurement." 1. However, notwithstanding Ms Hanigan's denial, I think it likely that the conversation to which Mr Gannon deposed did take place. That is because, several weeks later, on 1 May 2020, after the Agreements were entered, Mr Gannon wrote to Ms Hanigan: "Once again, we have been very clear [the Shangrila Ventilators] [10] are not full ICU ventilators, the specifications provide detail [of] the clear functionality of these units." 1. I return to this communication below. [11] HealthShare's "Desktop Review" 1. HealthShare then conducted what the parties described as a "Desktop Review" of the Shangrila Ventilator. 2. Because of MDT's contention that HealthShare did not rely on MDT's skill or judgment when deciding to purchase the Shangrila Ventilators, it is necessary to examine this process in detail, and to understand the compressed time that HealthShare understood was available, by reason of the exigencies of the pandemic, to make decisions as to what ventilators were to be purchased. 15 April 2020 1. On 15 April 2020, Dr Morris suggested to Mr Zanetic that a standard be adopted to assess ventilators to be used during the pandemic. Dr Morris suggested the TGA guidelines as the standard for locally made ventilators. 2. Mr Zanetic replied saying that he agreed that a guideline should be adopted "to base our decisions on" and that he had been using "the ICU mid and high acuity technical requirement HealthShare published in 2018 for the ventilation tender". 3. Dr Morris replied, agreeing with Mr Zanetic's suggestion and saying that Mr Zanetic's proposal looked "more detailed than the TGA and could be combined with the TGA minimum standards nicely". 20 April 2020 1. As I have said, [12] on 20 April 2020 Mr Gannon wrote to Ms Hanigan, Mr Zanetic and others stating that MDT had "just been contacted" by Aeonmed "and they have confirmed they can obtain 48 Shangrila 510S Ventilator[s] in May from a local distributor who is willing to sell his product". Mr Gannon said "these are available in May 2020" and "we need a quick response to obtain these units" because "these units will go quickly due to the delivery time of May". 2. A short time later, Mr Zanetic wrote to Dr Morris and Dr Nguyen: "Please find attached a ventilator for review. Product brochure, TGA submission and technical assessment. This appears to be a purpose built emergency transport ventilator pending TGA approval. I have copied the evaluation summary below." (Emphasis added.) 1. The "product brochure" to which Mr Zanetic referred was the RAPP Shangrila Brochure, a link to which Mr Lloyd from RAPP had sent Ms Addai-Aboagye on 26 March 2020 [13] and which Ms Addai-Aboagye had sent Mr Zanetic on 30 March 2020. As I have said, this brochure was different in form to the MDT Shangrila Brochure and the MDT Shangrila Technical Data Brochure that MDT had hitherto sent HealthShare, although the RAPP Shangrila Brochure contained the same technical specifications as were set out in the MDT Shangrila Technical Data Brochure. The RAPP Shangrila Brochure that Mr Zanetic provided Dr Morris did not state that the Shangrila Ventilator had "conventional volume control". This point is relevant to HealthShare's misleading or deceptive conduct claim, to which I return below. [14] 2. The "evaluation summary" to which Mr Zanetic referred was a document created by Mr Zanetic to analyse whether the Shangrila Ventilator complied with a number of "minimum requirements". 3. Mr Zanetic used a format usually adopted to assess tenders made to HealthShare for the possible supply of products. Mr Zanetic completed the document as if assessing such a tender from MDT. The "minimum requirements" adopted by Mr Zanetic for this purpose were for an ICU mid-acuity ventilator. Mr Zanetic noted, using an "x", that the Shangrila Ventilator did not comply with many of these "minimum requirements". 21 April 2020 1. The following day, 21 April 2020, Dr Morris replied: "I can't find a user manual or more specs on the web to clarify these queries. Otherwise it looks like it has the modes we are interested in. You might ask for the manual if you want to take this one further." (Emphasis added.) 1. Mr Zanetic replied: "Attached is the only other document that I can find. I will reach out and request a user manual." 1. The "other document" to which Mr Zanetic referred was the further brochure that Mr Zanetic had evidently located on an online search. A copy of this brochure is attached. Because this brochure depicted the Shangrila Ventilator in a bag, the parties referred to it as the "Shangrila in a Bag Brochure". I shall do the same. 2. The Shangrila in a Bag Brochure stated, amongst other things: "Shangrila 510S is a universally used model. Not only for emergency ventilation, but also it is suitable for ideal transport ventilation. The circumstances include on-site emergency treatment, pre-hospital transport, inter-hospital transport, and even intra-hospital transport." 1. This brochure contained technical specifications similar to those in the RAPP Shangrila Brochure and the MDT Shangrila Brochure. It did not contain any statement to the effect that the Shangrila Ventilator had conventional volume control. 2. Dr Morris replied: "Based on this document. The airway pressure alarms are covered. The inspiratory times will also be okay because the rate and I:E ratios [15] available mean you would cover that range. The [minute volume] monitor would give you an alarm if the tidal volume was not achieved or overachieved. So I think it is fine." (Emphasis added.) 1. At this point, Dr Morris was saying, in effect, "so far, so good". [16] 2. At around this time, Mr Zanetic "searched online for publicly available information" about the Shangrila Ventilator and, in addition to locating the Shangrila in a Bag Brochure, located a document that was in the same form as the MDT Shangrila Brochure but, unlike that brochure, did not bear Aeonmed's logo at the bottom right hand corner of the front page. Rather, it bore the logo of "Allied Scientific Pro"; evidently another purported distributor of Aeonmed products. To distinguish this version of the brochure from the MDT Shangrila Brochure, I will call this version of the brochure the "Allied Scientific Shangrila Brochure". A copy of that brochure is attached to these reasons. 3. Several hours later, Mr Garth Worboys, an Incident Controller in the COVID-19 Procurement & Supply Chain, representing the Ministry of Health, wrote to Dr Morris, copying in Mr Zanetic, Dr Nguyen and others: "Thank you for your time on the phone just now and for providing clarity on our ventilator reporting. This report is being provided to the [Premier] on a regular basis and is helping to inform decision making on our ICU capacity, so your support in clarifying this is much appreciated. As discussed, can you please confirm via return email that each of the below nine ventilator categories (including both homecare single circuit and transport single circuit) would be appropriate for use on patients in the ICU and could support them for up to a month. Ventilator Category Ventilators - Homecare - Non Invasive and Invasive Ventilators - Homecare - Non Invasive and Invasive - Air supply only, Single circuit, locked user interface and programming capabilities Ventilators - ICU High Acuity - Non Invasive and Invasive Ventilators - ICU Mid Acuity - Non Invasive and Invasive Ventilators - ICU Neonatal/Paediatric - Non Invasive and Invasive Ventilators - MRI Compatible - Non Invasive and Invasive Ventilators - Transport / Ward Use - Non Invasive and Invasive - External and Intra-Hospital Transport Ventilators - Transport / Ward Use - Non Invasive and Invasive - External and Intra-Hospital Transport, High-Flow, Neonatal configuration option Ventilators - Transport / Ward Use - Non Invasive and Invasive - Single circuit, Intra-Hospital Transport Team – can you please re-prepare last night's PowerPoint slide and Excel spread sheet incorporating detail from all nine of the above ventilators, with commentary on what has changed and documented note re this clinical advice. Please send through by 12pm." 1. Mr Worboys was thus enquiring, on behalf of the Ministry of Health, and evidently also on behalf of the Premier, as to whether any of the nominated "nine ventilator categories" would "be appropriate for use on patients in the ICU and could support them for up to a month". Those "categories" ranged from an "ICU High Acuity" invasive ventilator at one end of the spectrum to a non-invasive "Homecare" ventilator of the other, and included three categories of "Transport/Ward Use" and "External and Intra-Hospital Transport" ventilators. As I have set out above, in his email to Dr Morris the previous day, Mr Zanetic had described the Shangrila Ventilator as an "emergency transport ventilator". [17] This appears to reflect the urgent need that the Ministry of Health saw to source a wide range of ventilators for use in an ICU setting in the short-term, including ventilators that were not designed for ICU use. 2. Dr Morris replied: "I am happy that all the classes of ventilator listed below could be used for a month or more for supporting an ICU patient during this COVID outbreak. Therefore I believe that they should all be included in the numbers of ventilators available at this time." 1. Dr Morris' reply appears to show that his view was that, at least for the next "month or more", ICU patients could be supported by any one of the nine classes of ventilator the subject of Mr Worboys' enquiry. This no doubt reflected the urgency of the situation with which HealthShare was faced in these early days of the pandemic, and was consistent with Mr Zanetic's earlier observation that consideration of "lower performance options" may be worthwhile. [18] 2. In that regard, Dr Morris gave this evidence in cross-examination: "Q. What you were saying is that it is the case that transport or ward ventilators can be used for a month or more for supporting an ICU patient during this COVID outbreak; correct? A. So, I was saying this in the context of discussions with a policeman about advice for the Premier. I wasn't saying it in the context of deciding which ventilators we should use for caring for patients. Q. I understand. It wasn't specific to any particular ventilator as to whether it was suitable or not; correct? A. Yep. Q. It was a recognition that transport ventilators were going to be included in the reserve stockpile that New South Wales Health was counting as to whether it had enough ventilators; correct? You nodded but you have to say for the transcript? A. Yes. Q. What you were really being asked was, is there a general reason why transport ventilators can't be used, because they can only be used for up to 14 days, or is it in fact appropriate for transport ventilators to be used for a month or more, and you were saying that that was correct; they can be? A. My recollection of this email was I was being asked whether we could provide the Premier with some surety that we were going to have enough ventilators. I wasn't, in fact, discussing with my peers what the capacity of those ventilators or how long you could use them. It was simply a statement to the Premier to give them confidence in our acquiring ventilators. Q. It was working out what ventilators could be included in New South Wales Health's stockpile of useable ventilators? A. No. What I'm saying is that my recollection of this was that this was information we were providing to the Premier via the police about whether we had adequate stockpiles. I wasn't making a statement about whether we'd be able to use these ventilators on the patients. Q. Because that might depend upon their functionality; is that right? A. True. Q. A ventilator might be included in the stockpile for valid reasons, that you might want to have access to that ventilator; correct? A. No, the - what I'm saying is that this email was all about what we were saying to the Premier, not about what we were using as criteria for our stockpile for ventilators we'd use. Q. I understand that. I'm not suggesting otherwise. I understand it was information for the Premier, but you weren't saying something that was untrue to be passed to the Premier; correct? A. Correct. But I wasn't saying something that perhaps fully explained the situation. Q. The position was, as you understood it, that New South Wales Health wanted to know how many ventilators it had in its reserve stockpile, right? You've just nodded; you've got to say yes? A. Yes. Q. It was important to know how many ventilators New South Wales Health could have access to during the COVID pandemic; correct? A. Yes. Q. Some of the ones that were being included in the reserve stockpile included the much lower performing options like the transport/ward ventilators, or even single circuit home care ventilators; correct? A. Yes. Q. The reason they were being included in the information to be provided to the Premier is that those ventilators were to be counted as possible ventilators that might be used if needed during the COVID pandemic crisis; correct? A. No. I'd just go back to my previous comment - sorry. Q. I was going to add on after I said, "correct", but subject to an assessment of whether a particular ventilator you considered to be appropriate? A. I'm uncertain. Q. You say what you were going to previously say? A. Well, what I was going to say is that this doesn't include the use of anaesthesia machines from existing operating theatres in this list. So, these numbers were, in fact, distinct from the numbers that we were using for our calculations for the available ventilators. So, this is a - this was a specific request by the police as to what they could tell the Premier was happening, rather than a discussion of clinical decision making around what were suitable ventilators for us to use. Q. What was being conveyed to the Premier is that the possible stockpile of ventilators that might be used included all of these categories? A. Yep. Q. You weren't saying, without looking at a specific ventilator, that you would approve it for use in a particular situation unless you knew what the situation was? A. Yes." 1. Dr Morris' reference to "discussions with the policeman" was evidently referenced to his exchange with Mr Worboys. Dr Morris agreed that he understood that HealthShare was seeking to compile a reserve stockpile of ventilators to deal with the pandemic. However, he emphasised that he was not meaning to endorse the use of any specific ventilator. 2. On the question of HealthShare's consideration of "lower performance ventilators" Dr Morris said: "Q. What did you understand by the phrase, lower performance ventilators? A. So, my understanding was that there's a range of features in intensive care ventilators, from some of which are nice to have, and some of which are must have, and so we were aiming initially to have all of those nice to have features, but we were progressively narrowing down what we regarded as must have." (Emphasis added.) 1. In the meantime, Ms Hanigan wrote to Mr Gannon, also on 21 April 2020: "Health[Share] do wish to proceed with the S510s & have requested the user manual. Can you please provide?" 1. Ms Hanigan's statement that HealthShare wished to "proceed" with the Shangrila Ventilators was evidently prompted by Dr Morris' statement, made several hours earlier, that "I think it is fine". [19] 2. Mr Gannon replied a few minutes later, providing the User Manual and stating: "As requested, please find attached the User Manual and TGA approval for the Shangrila 510S Ventilator. Please noted [sic] MDT will be developing a User Video and app on the arrival of the units and putting in place a training program is required by owners/user of the equipment. This morning AEONMED has also advised that: 1. 50 units are available in June (Shangrila 510S) 2. 50 units are available in July (510S) These are in addition to the first 50 we have offered in May and are through the same supplier which has agreed to sell. Additional Information of Interest We are also bringing in another 300 units for the Federal Government in June. … Timings are tight and the market is still moving quickly, a little slower than last week though. Once NSW has indicated they are fully committed we will provide a formal quote and guarantee of supply for all units." (Emphasis in original.) 1. Mr Gannon was thus telling Ms Hanigan that MDT was able to make available 150 Shangrila Ventilators. 2. Ms Hanigan wrote to Mr Gannon: "Thanks very much. Can we talk about pricing and delivery for the further units?" 1. Ms Hanigan then wrote to Mr Zanetic: "Attached are the user manuals. Can you please request [sic; review] manuals ASAP so I can potentially secure further units below if we're quick." 1. I will return to the detail of the User Manual below. For present purposes it is sufficient to say that, under the heading "Intended Use", the User Manual stated: "Shangrila510S ventilator is mainly used in the emergency rooms of hospitals, transfer after operations, field and occasions where first-aid or transfer is needed, for care of adult, paediatric, infant patients weighing at least 3.5kg. The Shangrila510S Ventilator is intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport. The ventilator conforms to the principle of simple and easy operation requested for emergency equipment. It can be used by many medical units and clinical offices at all levels to perform emergency treatment for accident affairs, such as first-aid center, ambulance, anesthesia unit, chest surgery, cranial surgery, respiratory unit, various large mines, factories, swimming places. The Ventilator is applicable for the patient weighing at least 3.5kg infant, children and adult patients." 1. Mr Zanetic replied to Ms Hanigan stating "I will send through for clinical assessment". 2. Mr Zanetic then wrote to Dr Morris: "We have managed to source the user manual for the 510S and there is the possibility to secure 100 of these units so the team would like to move fairly quickly on this one. Are you able to perform a review and let me know if there is anything that changes your assessment?" 1. Again, Mr Zanetic's email bespoke the urgency with which HealthShare saw a decision needed to be made. 2. A short time later on 21 April 2020, Mr Zanetic wrote to Dr Morris: "I have updated the technical assessment based on the additional information available in the user manuals. I don't see anything in the manual that would change the initial assessment." (Emphasis added.) 1. The words I have emphasised show that Mr Zanetic did not rely on anything in the User Manual to change his "initial assessment" of the Shangrila Ventilator. 2. Several hours later, Mr Zanetic sent Dr Morris a further update of his "technical assessment". He said: "I've reviewed the spreadsheet once again based on the new brochure I had sent through earlier today [the Shangrila in a Bag brochure]. I don't see anything in the user manual or brochures [plural: Mr Zanetic was referring to both the Shangrila in a Bag Brochure and the RAPP Shangrila Brochure] that would change the initial assessment. Please confirm." (Emphasis added.) 1. This shows that Mr Zanetic still placed no reliance on the User Manual, and now also not on the "brochures" concerning his updated assessment of the Shangrila Ventilator. That updated assessment still showed an "X", denoting non-compliance, in relation to numerous of the ICU mid acuity "Technical Specification Requirements" in Mr Zanetic's spreadsheet. 2. Dr Morris then made an assessment of the Shangrila Ventilator based on the User Manual and the technical data provided by Mr Zanetic. 3. Several hours later, Dr Morris replied: "Having looked at the brochure I am happy that it now satisfies all the requirements." (Emphasis added.) 1. Although Dr Morris referred to having looked at the "brochure", he said in cross-examination that he should have referred to the "attachments", including the User Manual. He agreed he was speculating about this, but it seems likely to be correct, as by now Mr Zanetic had sent him the User Manual. 2. The email in which Dr Morris made this statement was sent a little under two hours after Mr Zanetic had sent his first update of his technical assessment, [20] albeit only two minutes after Mr Zanetic sent his second update. [21] In his email Dr Morris did not, as Mr Zanetic had requested, in terms confirm Mr Zanetic's opinion that nothing in the User Manual or the "brochures" changed the assessment represented by Mr Zanetic's spreadsheet. Nor did Dr Morris express any disagreement with that opinion. 3. However, I am satisfied that, prior to concluding that the Shangrila Ventilator "satisfies all the requirements", Dr Morris gave careful attention to both the User Manual and the brochures [22] that Mr Zanetic had forwarded to him. 4. Thus, in his affidavit evidence, Dr Morris described the process he undertook as follows: "I read the User Manual and the [RAPP Shangrila Brochure] in full during the desktop review. The most important elements in the documentation for the purpose of my review were the modes of ventilation, the displays, the technical specifications, the types of peripheral and consumable equipment required and the troubleshooting section. I also reviewed the diagrams and images of the ventilators which are contained in the User Manual and the [RAPP Shangrila Brochure]." 1. Further, in cross-examination, Dr Morris said that he was not "working in a clinical role" in the several hours he considered the question on this day and that he had "ample time to review the documents, and [he] wouldn't have responded until [he] had reviewed them". 2. I find that Dr Morris reached the conclusion that the Shangrila Ventilator satisfied "all the requirements" based in part on what was said in the User Manual, as well as in the brochures to which his attention was directed, and on the basis of his assessment that although the Shangrila Ventilator did not have all of the features of an intensive care ventilator that it would be "nice to have", it had the features that "[he] regarded as must have". [23] 3. Mr Zanetic then wrote to Ms Hanigan: "I've had feedback from the clinical team that they are satisfied with the 510S to proceed further." Who made the decision to purchase? 1. It is not clear which particular person at or on behalf of HealthShare made the decision to purchase the Shangrila Ventilators. 2. As described by Ms Giddey in cross-examination, following the clinical approval by Dr Morris, the process was that this clinical approval was sent: 1. out through HealthShare; 2. across to SHEOC; and 3. across to the Premier's procurement group, who reported to the Premier. 1. However, the communications between Ms Hanigan and MDT from 21 April 2020, which I consider in detail below, show that by then, a decision had been made to purchase the Shangrila Ventilators. 2. There is no suggestion in the evidence of the intervention of any other clinical advice, following that of Dr Morris. I am satisfied that the decision to purchase was based on Dr Morris' conclusion that the Shangrila Ventilator "now satisfies all the requirements". [24] The Agreements 1. What followed were communications leading to the formation of the Agreements. 2. As I have set out above, HealthShare contends that HealthShare's standard "Purchase Orders Terms and Conditions" were incorporated into the Agreements. The reason for this is that those Terms and Conditions were referred to in a hyperlink in the two purchase orders that HealthShare sent to MDT during the negotiations to which I will now turn. 3. Determination of whether HealthShare's contentions are correct requires a careful analysis of the communications between the parties between 21 April 2020 and 1 May 2020. 4. The question of whether a contract has been formed is often considered in terms of whether an offer has been made and that offer has been accepted. It has been said that the "offer and acceptance analysis is a useful tool in most circumstances and indeed is 'normal' and 'conventional'". [25] 5. However, as has been said: "It is often difficult to fit a commercial arrangement into the common lawyers' analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of 'offer', 'acceptance', 'consideration' and 'intention to create a legal relationship' which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship … Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled". [26] 1. It has been recognised that some "parties may drift into a contractual relationship" in commercial circumstances, [27] and, as a result: "… having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation." [28] 1. When this occurs: "The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract". [29] (Emphasis added.) 1. To determine mutual assent, the court must look to "the whole of the parties' interactions (written and spoken) and their conduct, to determine whether, viewed objectively, the parties mutually assented to the essential elements of a bargain and intended to be bound." [30] 2. Ultimately, the question is whether: "… in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of [the parties] think as to whether there was a concluded bargain?" [31] 1. For the reasons that follow, my conclusion is that the Purchase Order Terms and Conditions were not incorporated into the Agreements and that a reasonable person in the position of the parties would have concluded that there was a concluded bargain before HealthShare delivered the purchase orders containing the hyperlink to the Terms and Conditions. The First Agreement 1. On 21 April 2020, Ms Hanigan wrote to Mr Gannon: " … can we talk about pricing and delivery for the further units?" 1. A short time later, Ms Hanigan spoke to Mr Gannon on the telephone. Ms Hanigan asked Mr Gannon to "provide a written quote including delivery dates". Mr Gannon said he would. 2. A short time later, Ms Hanigan wrote to Mr Gannon: "Could you kindly send me a formal quote so I can have it approved and raise a PO [32] to you." 1. Mr Gannon replied, a minute later: "Can you confirm if just the 50 units or the additional 100?" 1. Ms Hanigan immediately replied: "Apologies it's for the 48 in May and the subsequent 100." 1. At exactly the same time, Mr Zanetic wrote to Ms Hanigan: "I've had feedback from the clinical team that they are satisfied with the 510S to proceed further." 1. Mr Gannon replied to Ms Hanigan: "Thank you. We will now [33] confirm units still available and payment terms to ensure we can meet deadlines. Once this is completed, we will provide our formal quote for action. You will have it by COB." 1. Mr Gannon's reference to confirming "payment terms" appears to be a reference to MDT confirming payment terms of the supply of the Shangrila Ventilators from Aeonmed to MDT. The matter was not explored in cross-examination. 2. Several hours later, and also on 21 April 2020, Mr Gannon wrote to Ms Hanigan: "As requested, please find the attached quote for 148 Units. We await your PO, this arrangement is in place and we need to ensure timings and payment approvals are quick." 1. The quotation attached to Mr Gannon's email specified that the total amount due was $9.99 million for 148 Shangrila Ventilators. The quotation read: "Shangrila 510S Integrated Respiratory Workstation (1 Year Warranty) (Units available in late May 48 Units, late June 50 Units, and late July 50 Units) Payment Terms: Payment of 50% by COB Monday 27 April 2020 Payment of the balance of unit prices on delivery of units payable with[in] 7 days (This would be three payments)" (Emphasis in original.) 1. The quotation then set out details of MDT's bank account. 2. The provision by MDT of its quotation constituted an offer by it to sell the 148 Shangrila Ventilators to HealthShare. 3. On the following day, 22 April 2020, HealthShare sent MDT an email that MDT contends constituted an acceptance by HealthShare of the offer made by MDT in its 21 April 2020 quotation. 4. The email was sent by Ms Teresa Kusnadi, Category Officer, Strategic Procurement Services at HealthShare. The heading to that email read, in bold: "PO 37879543 from NSW Health to secure stock of 148 units ventilator" (Emphasis added.) 1. The email read: "My colleague, Rachel [Hanigan] has been in contact with you in regards to purchase of 148 Ventilator unit[s]. Please kindly use PO 37879543 for this, a copy of the PO will follow later today or tomorrow. Can you please kindly advice [sic] about payment arrangement needed as per your email below? Susie Giddey (from HealthShare) cc'd on this email will advise where the delivery of the units will need to be delivered to." (Emphasis added.) 1. MDT placed emphasis on the fact that the heading to this email recited the Purchase Order number in the context of the statement "to secure" the 148 ventilators. That does suggest that HealthShare had created a purchase order number with a view, ultimately, to secure the 148 ventilators. 2. However, in the passage I have emphasised in this email, HealthShare also sought MDT's "advice about payment arrangements needed as per your email below", a reference to Mr Gannon's email attaching the quotation. 3. In fact, MDT had specified in its quotation its proposed "payment arrangements" under the heading "Payment Terms". The enquiry made by HealthShare in its 22 April 2020 email shows that, inconsistently with there being the necessary "mutual assent" at this stage, HealthShare had not understood this. 4. What this email does show is that, at this stage, HealthShare contemplated that it would be MDT, not HealthShare, that would be proposing payment terms: an unsurprising position in the circumstance of a global shortage of ventilators and strong competition for the supply of ventilators. 5. MDT replied a few minutes later: "Payment is as per terms on the quote provided. We require 50% payment by the latest Monday 27 April 2020, sooner would be great if possible. Once we receive formal PO we will submit a corresponding invoice." 1. That email shows that there was still no "mutual assent" as MDT was reiterating its requirement, stated in the quotation, that HealthShare pay half the purchase price by 27 April 2020; a matter not yet agreed. 2. The email also shows that, at this stage, MDT contemplated it would receive a purchase order ("the PO") before it sent its invoice. That is not what happened. 3. Thus, about an hour later, Ms Kusnadi sent Mr Gannon an email: "To arrange for the payment – can you please kindly issue me [a] tax invoice (not proforma) and have the following so I can pass to our accounts 1. Bill to: HealthShare NSW Acc Payable, c/o Parramatta 2. Please include the ETA on the tax invoice (for rolling delivery) 3. Make a reference of the PO number i.e. 37879543." 1. Several hours later, and also on 22 April 2020, Mr Gannon replied: "As requested, if you need any changes please advise. The critical date is the first payment by Monday 27 [April] 2020. We are a little more flexible with others." (Emphasis added.) 1. Mr Gannon attached MDT's invoice directed to HealthShare for $9.9 million. 2. The invoice stated: "Payment of 50% by COB Monday 27 April 2020 Payment of the balance of unit prices on delivery of units payable with[in] 7 days (This would be three payments). ETA for each delivery 30 May - 48 Units, 30 June - 50 Units and 30 July - 50 Units. NSW Purchase Order: 37879543" (Emphasis in original.) 1. Details of MDT's bank account followed. 2. Mr Gannon's statement in the passage I have emphasised in his email that "if you need any changes please advise" shows that "mutual assent" had still not been achieved. Mr Gannon was evidently referring to when payment of the balance of the purchase price would be made. The invoice proposed that such payment be made within seven days of the three proposed delivery dates. Mr Gannon was saying that MDT was "flexible", that is amenable to further negotiation, about that matter. Thus, there was still no final agreement on terms. 3. Several minutes later, Ms Donna Bonser, Site Supervisor, Purchasing | Supply Chain Operations for HealthShare sent Mr Gannon at MDT an email: "Please see attached PO: 37879543." 1. Ms Bonser made no reference to Mr Gannon's statement about MDT being "flexible" about when the second half of the purchase price would be paid. On the face of it, Ms Bonser's note bespoke HealthShare's acceptance of the offer made in MDT's invoice. 2. A copy of the Purchase Order is attached to these reasons. 3. As can be seen at the foot of the Purchase Order, in font slightly smaller than used in the balance of the Purchase Order, are the words: "All goods or services are to be supplied in accordance with our terms and conditions, which can be viewed under 'Purchase Order Terms and Conditions' at http://www.healthshare.nsw.gov.au/services/procurement" 1. The hyperlink in those words provided access to the Purchase Order Terms and Conditions. 2. On 27 April 2020, HealthShare paid MDT $4.995 million, being half the amount in the 21 April 2020 tax invoice. Were the Purchase Order Terms and Conditions thereby incorporated into the First Agreement? 1. The critical question is whether the Purchase Order Terms and Conditions were thereby incorporated into the First Agreement. 2. If they were, Ms Bonser's email delivering the Purchase Order constituted a counteroffer by HealthShare, as the Purchase Order Terms and Conditions contained terms inconsistent with those proposed by MDT in its invoice. In particular, cl 7 of the Purchase Order Terms and Conditions provided: "7. Price and payment 7.1 Price for the Goods and/or Services set out in the purchase order is fixed and includes all costs and charges, including for taxes, labelling, packing, delivery, freight and unloading, unless otherwise stated in the Agreement. 7.2 The Supplier must invoice the Agency within 30 days after delivery of the Goods or on completion of all Services, unless otherwise stated. 7.3 The Agency must pay the Supplier for the Goods and/or Services by the end of the month following the month in which a Correctly Rendered Invoice or Statement is received …" 1. In closing submissions, HealthShare contended that "the purchase order constituted a counteroffer the terms of which included the Purchase Order Terms and Conditions". 2. In closing oral submissions, this was how the matter was put by senior counsel for HealthShare: "STUDDY: … We say this is an offer or probably more particularly a counteroffer by HealthShare, saying here are our terms and conditions. HIS HONOUR: A counteroffer to what? STUDDY: To what had been put by way of the invoice sent at 4.26pm at 2682 to 2684, being the invoice and with the statement 'If you need any changes please advise.' HIS HONOUR: What is your position? This is a counteroffer? STUDDY: Yes. HIS HONOUR: To? STUDDY: To the invoice we've got. HIS HONOUR: To the offer in the invoice. … HIS HONOUR: Just to repeat what I said before; that means you'd have to show, wouldn't you, an acceptance of that counteroffer. STUDDY: What we say in our written submissions is that the acceptance of what was attached to her email was the supply by MDT of the ventilators." 1. Thus, HealthShare's case is that Ms Bonser's 23 April 2020 email was a counteroffer to the offer made by MDT in its invoice, which counteroffer was accepted by MDT by delivery of the ventilators. The invoice estimated the ventilators would be delivered in stages: 48 on 30 May 2020, 50 on 30 June 2020 and the final 50 on 31 July 2020. As I have said, the ventilators were in fact delivered between 16 June 2020 and 15 July 2020. [34] Thus, HealthShare's case is that there was no contract until then. 2. This would be a surprising result. 3. It would mean that, as no contract was formed until, at the earliest, delivery of the first batch of ventilators on 16 June 2020, and perhaps not until final delivery on 31 July 2020, HealthShare would have no legally enforceable commitment from MDT to deliver any ventilators. 4. And yet on 27 April 2020, it paid MDT $4.995 million for those ventilators. 5. It would also mean that had MDT been unable to supply any ventilators, HealthShare, not having a contract on which to sue, would have been obliged to pursue MDT to seek restitutionary relief to recover the $4.995 million. 6. That cannot have been what HealthShare intended. 7. In closing submissions, senior counsel for HealthShare submitted that the explanation might have been that those at HealthShare who authorised the payment of the $4.995 million believed, albeit on HealthShare's case, mistakenly, that there was a binding agreement with MDT at the time of the payment. But there is no evidence that that was so. HealthShare did not call evidence from whoever it was that authorised the payment. 8. It would also follow from HealthShare's case that, despite the fact that the Purchase Order Terms and Conditions provided for payment by "the Agency", here HealthShare, "by the end of the month following the month in which a Correctly Rendered Invoice … is received" [35] HealthShare agreed to pay the $4.995 million, half the purchase price, on the date specified by MDT in its invoice, 22 April 2020. 9. A further difficulty that I see with HealthShare's submission is that, during the negotiations leading to the Purchase Order, HealthShare made no suggestion that the purchase would be on its terms. On the contrary, it asked MDT to state the "payment arrangement needed", [36] and asked MDT to issue a tax invoice (not a proforma document) "to arrange for the payment". [37] 10. Further, as I set out below, [38] on the day after Ms Bonser sent Mr Gannon the Purchase Order in respect of the 148 Shangrila Ventilators, when Ms Hanigan enquired of Mr Gannon concerning the provision of further Shangrila Ventilators, she asked him to "request pricing & terms". 11. It is true, as HealthShare has pointed out, in his 30 March 2020 email [39] Mr Bellas said that "a purchase order and payment for 60% of the order value" would be needed to secure supply. It is also true that Mr Gannon agreed in cross-examination that throughout his dealings with HealthShare, he understood that it was necessary for HealthShare to deliver a purchase order to commit to the purchase of ventilators. 12. But in the communications leading up to the delivery by HealthShare to MDT of its 23 April 2020 Purchase Order, there was no suggestion that the agreement between MDT and HealthShare would be otherwise than on the terms that had been consistently proposed by MDT. 13. The question for me is whether, looking at the matter objectively, reasonable people in the positions of MDT and HealthShare would have understood that the parties intended that the Purchase Order Terms and Conditions, referred to at the foot of the Purchase Order, and accessible by hyperlink, were to be incorporated into the contract. 14. In my opinion, the answer is that reasonable people in the position of the parties would not have thought MDT and HealthShare intended this result. It is obvious from the parties' communications leading up to 23 April 2020, from the overall circumstances of a global shortage of ventilators during the pandemic, and from the urgent need for HealthShare to secure a supply of ventilators, that HealthShare intended on 23 April 2020 to close the deal in relation to the 148 Shangrila Ventilators; and obtain a commitment from MDT with binding contractual force that MDT would supply the 148 Shangrila Ventilators. And to do this before it paid the $4.995 million. 15. MDT was correct to submit that: " … the commercial reality of what was happening at the time [was] that [HealthShare] wanted confirmation that it had secured the order, that it provided the purchase order number for that very purpose, and by doing so did secure the order, on the terms that had been subject of the dealings between the parties at that time." 1. Further, as MDT submitted: "If [the Purchase Order] was a 'counter-offer', [HealthShare] would have been chasing a formal response from MDT that there was an agreement, as it was desperate to know it had secured the stock. But [HealthShare] did not do so, because it had already had such confirmation, having accepted the terms offered by MDT." 1. I do not see resolution of this issue as requiring consideration of whether or not MDT had a reasonable opportunity to access the hyperlink in the Purchase Order and consider the Purchase Order Terms and Conditions. [40] 2. Rather, the question is whether, looking at the matter objectively, it can be concluded that the parties, and HealthShare in particular, intended that the Purchase Order Terms and Conditions be included in the agreement with MDT, and intended that the delivery of the Purchase Order constitute a counteroffer. In my opinion, despite the reference in the Purchase Order to the Purchase Order Terms and Conditions, this was not the intention of the parties. The Second Agreement 1. Late on 23 April 2020, several hours after Ms Bonser's email sending Mr Gannon the Purchase Order under the First Agreement, Mr Gannon wrote to Ms Hanigan, stating that a Mr David Mellick, whose role was not identified in the evidence, had: "… advised another deal[er] is looking to sell an order which is due to August 2020 for Shangrila 510S. The amount will be between 100 to 300 units, not yet confirmed. The Netherlands is looking to take 100-200 units of the amount and is in front of me. AEONMED believes that 100 to 200 units could be available. They have asked whether we would like to make a formal request of the seller. Can you advise whether you wish to acquire more units and whether you wish for us to proceed with a request? Timing's a little tight." 1. Ms Hanigan replied the following day, 24 April 2020: "Thanks so much for the update. We are interested in the 510s, are you able to request pricing & terms?" (Emphasis added.) 1. Ms Hanigan was thus inviting Mr Gannon to let HealthShare know the "terms" on which Aeonmed would supply the further Shangrila Ventilators to MDT and thus, the terms on which MDT would supply those further Shangrila Ventilators to HealthShare. There is no suggestion in Ms Hanigan's enquiry that HealthShare itself was proposing the terms of any such supply, let alone that any such supply would be on the basis of HealthShare's Purchase Order Terms and Conditions. 2. Post contractual conduct is relevant to, and thus admissible to prove, the terms of a contract. [41] Ms Hanigan's enquiry would have been unnecessary had she thought that the Purchase Order Terms and Conditions governed the First Agreement. Of course, Ms Hanigan's subjective state of mind is not relevant to nor determinative of the question of what the terms of the First Agreement were. But I see this enquiry as being confirmatory of the conclusion that, looking at the matter objectively, the Purchase Order Terms and Conditions were not incorporated into the First Agreement. 3. Whether or not that is so, it is plain, as I explain below, that the Purchase Order Terms and Conditions were not incorporated into the Second Agreement: a further factor confirmatory of the conclusion that they were not incorporated into the First Agreement. 4. Five days later, on 29 April 2020, Mr Bellas from MDT wrote to Ms Hanigan at HealthShare: "We have had AEONMED advise they could have a dealers stock of 200 units, deliverable 100 July 100 August. The 200 cannot be separated and need to be ordered as combined lot. If this is of interest we will request pricing, as AEONMED has asked us to put all offers to our clients. David Mellick offered 400 VGs for August that we will not be taking as they are unlikely to be real and AEONMED will not support 3rd Party purchases not through them." 1. Ms Hanigan replied, saying that she was "seeking urgent feedback/approval". 2. Mr Bellas replied: "The delivery schedules would be 65 [in] June 65 [in] July 70 in August at a price of $54,000 Aus each, due to volumes purchased and timing. Approval and payment of the 50% would be required by noon tomorrow. Our representative in AEONMED has worked hard to get this pricing." 1. On the following day, 30 April 2020, Ms Hanigan wrote to Mr Bellas: "Can we please have a tax invoice for these, I am waiting on the final decision any minute but want to be able to move swiftly if it's a yes." 1. Mr Bellas replied that the invoice was "on its way". 2. A short time later, at 10.42am, Mr Gannon wrote to Ms Hanigan: "Please find attached invoice for your consideration. We understand you are still in approval process for these units, but if approved this will assist with the speed of processing." 1. The attached invoice was for 200 Shangrila Ventilators for an amount of $10.8 million. 2. The invoice read: "Shangrila 510S Integrated Respiratory Workstation (1 Year Warranty) (Units available in June 66, July 66 and August 68) Payment Terms: Payment of 50% by COB Monday 30 April 2020 Payment of the balance of unit prices on delivery of group units payable with[in] 7 days (This would be three payments)" (Emphasis in original.) 1. It is common ground that the provision by MDT to HealthShare of this invoice constituted an offer by MDT. 2. Several hours later, at 2.25pm, Ms Kusnadi from HealthShare wrote to Mr Gannon and Mr Bellas from MDT, under the heading "PO 37879498 from NSW Health to secure 200 ventilator": "Please use PO 37879498 for confirmation of order of 200 ventilator as per correspondence between you and Rachel [Hanigan]. A copy of the PO will follow tomorrow Susie Giddey will advise the location where it needs to be delivered to" 1. Like Ms Kusnadi's email of 22 April 2020, [42] this email was headed with the Purchase Order number followed by the words "to secure" the relevant number of Shangrila Ventilators. However, Ms Kusnadi made no enquiry on this occasion about the "payment arrangement needed", doubtless because consistently with its 22 April 2020 invoice, MDT had clearly stated its "Payment Terms" in its invoice delivered several hours earlier: 50% payment by close of business that day and the remaining balance within seven days from the delivery date. 2. I see this email as HealthShare's acceptance of the offer made by MDT in its invoice sent earlier that day. No doubt MDT expected that a purchase order would follow. But Ms Kusnadi's email made clear that it was only necessary for MDT to use the Purchase Order number "for confirmation" of the order made by HealthShare in the correspondence between Mr Gannon and Ms Hanigan: the "correspondence between you and Rachel". 3. HealthShare needed to close the deal immediately. MDT's stated payment terms meant that payment of 50% of the purchase price, that is, $5.4 million, would need to be received by close of business that day: in less than three hours, assuming close of business at 5pm. 4. At some time on 30 April 2020, I would infer after the delivery of that email, and before close of business, HealthShare paid MDT $5.4 million "pursuant to the terms of invoice #000211". It must have made the payment with the intent of closing the deal and securing a contractually enforceable promise from MDT to deliver the 200 further ventilators. 5. The following day, 1 May 2020, Ms Bonser sent MDT Purchase Order 37879498. This purchase order was in the same terms as the purchase order delivered by HealthShare on 23 April 2020 and, in the same way, referred by hyperlink to the Purchase Order Terms and Conditions. 6. But, by the time the Purchase Order was delivered, the Second Agreement had been formed, and HealthShare had paid MDT the 50% payment of $5.4 million. As Ms Hanigan anticipated in her 24 April 2020 email, [43] the sale was on the terms proposed by MDT in its invoice. The article in The Guardian 1. On or about 1 May 2020 an article was published in The Guardian online about Aeonmed Shangrila ventilators. The article stated the United Kingdom National Health Service had purchased a quantity of "Shangrila 510 ventilators", but that testing of those ventilators had found that they were "badly built, unsuitable for use in hospitals and potentially dangerous for patients". 2. Ms Hanigan read The Guardian article and telephoned Mr Gannon. They had this conversation: "[Ms Hanigan]: This article is concerning. What does this mean? Is it the same ventilator as ours? [Mr Gannon]: No it's not, it's not the same model as yours. That's the 510, yours is the 510s. The 510 is designed for use in ambulances. It can also be that doctor's opinion as they all have ventilators that they prefer over others. Just because a doctor doesn't like it doesn't mean it is no good. I will contact AEONMED and seek a formal response from them to give you surety." 1. Later, on 1 May 2020, Mr Gannon wrote to Ms Hanigan: "AEONMED have made the following points very clear: 1. The units acquired by the UK were not Shangrila 510S Respirator Workstations as being supplied to Australia, through MDT [as] a dealer. 2. The units acquired by the UK were ambulance based units. … The expectation that the units were a full ICU ventilator should never happen. … It is clear that units acquired were not fit for purpose nor supported and the Dr reservations when all issues added together are real. Rachel MDT will inspect 10% of units [on] arrival and we will also be undertaking 6 months full services and yearly full services of units as part of the warranty. If we have any concerns at our first quality check, we would pull forward our first Preventative Maintenance check. Once again, we have been very clear are not full ICU ventilators, the specifications provide detail [of] the clear functionality of these units." (Emphasis added.) 1. The last paragraph of that email is the passage I referred to at [102] above. 2. In this email, Mr Gannon drew a distinction between the "510" Shangrila ventilators that were criticised in The Guardian article on the one hand, and the "510S" Shangrila Ventilators that MDT were supplying to HealthShare. The former were, as Mr Gannon described in his email, "ambulance based units", whereas the latter were "respirator workstations". 3. When Mr Gannon said in his email "the units acquired were not fit for purpose" it is clear that he was referring to the "ambulance based units" the subject of The Guardian article. 4. But, in the last two paragraphs of the email, Mr Gannon was obviously referring to the 510S Shangrila Ventilators to be supplied to HealthShare pursuant to the Agreements. That is made clear by his reference to MDT inspecting 10% of those units "on arrival". 5. Thus, Mr Gannon's reference, in the final paragraph, to having "been very clear" about ventilators being "not full ICU ventilators", was a reference to the 510S Shangrila Ventilators the subject of the Agreements. 6. Mr Gannon confirmed this in answer to questions from me: "HIS HONOUR Q: Looking at the last line in that email, starting, "Once again"? A: Yep. Q. What ventilators were you referring to there? A. I'm referring to numerous conversations on the phone with Rachel [Hanigan] that what we were selling were not-- Q. Remember, listen to the question. A. Sorry. Q. Listen to the question. What ventilators were you referring to there? A. I was referring to the 510S. Q. Not the ventilators referred to in the articles but to the ones-- A. The article is a 510S ventilator, your Honour." 1. Mr Gannon also rejected the proposition put to him by senior counsel for HealthShare that his earlier reference to "units acquired" not being fit for purpose was a reference to the same 510S Shangrila Ventilators to be supplied by MDT. I think it obvious from a fair reading of Mr Gannon's email that this is not what he meant. 2. Mr Gannon said that Ms Hanigan did not reply to his email nor otherwise dispute his statement that "we have been very clear [the Shangrila Ventilators] are not full ICU ventilators". 3. Although Ms Hanigan did not say so, it may be that she misunderstood Mr Gannon's email and thought that his reference to having being "very clear" that the ventilators of which he was speaking were "not full ICU ventilators" was a reference to the 510 ventilators criticised in The Guardian email. 4. However, I am satisfied that this is not what Mr Gannon intended to say, indeed clearly not what he in fact did say. 5. This provides objective evidence that, contrary to Ms Hanigan's denial, Mr Gannon had earlier stated that the 510S Shangrila Ventilators were "not full ICU ventilators". I find that he did so and that he did have the conversation with Ms Hanigan to which I have referred at [101] above. 6. There was no reason for Mr Gannon to misstate the position in this email. If it is a fact that Ms Hanigan misunderstood to what ventilators Mr Gannon was referring in the last passage of the email, there is no reason why Mr Gannon, at the time, would have anticipated any such misunderstanding. There was also no reason why Mr Gannon would have made an untruthful statement to Ms Hanigan in these circumstances. The Agreements had just been concluded. There was no reason for Mr Gannon to think that there would be any controversy about the parties' dealings at this time. I find that this email provides a contemporaneous confirmation of the accuracy of Mr Gannon's recollection of having told Ms Hanigan that the Shangrila Ventilator was not a "full ICU ventilator". Ms Hanigan's recollection that Mr Gannon did not say this may well be her current genuine recollection of the matter; but it cannot be correct. 7. Ms Hanigan forwarded Mr Gannon's email to the COVID-19 Taskforce stating that MDT "have addressed the main points" and that the 510S Shangrila Ventilator was "a different model to what the UK purchased" and that "they purchased the 510 which is an ambulance/portable model". Delivery of the Shangrila Ventilators 1. As I have said, [44] MDT caused the Shangrila Ventilators to be delivered to HealthShare between 16 June 2020 and 15 July 2020. The technical tests – Dr Cook 1. As the Shangrila Ventilators were delivered, HealthShare arranged for them to be the subject of what the parties described as "technical testing" by Dr Andrew Cook. 2. Dr Cook is a Projects Engineer and Technical Specialist in Clinical Engineering employed by the South Eastern Sydney Local Health District. He is a biomedical engineer. 3. The purpose of the testing was to identify the functionalities of the Shangrila Ventilators with a view to the ventilators then being referred to a team of expert clinicians for consideration of whether those functionalities were acceptable for use in hospitals in New South Wales during the COVID-19 pandemic. 4. Dr Cook explained that he saw his role as to "provide a recommendation" to the "Technical Advisory Group of clinical staff". 5. Dr Cook conducted technical testing on two ventilators on 1 July 2020. With the assistance of Mr Zanetic, Dr Cook conducted a second round of technical testing on two different ventilators on 30 July 2020. Dr Cook conducted a further round of technical testing on 14 August 2020. 6. I will deal with the difficulties Dr Cook said he encountered with the Shangrila Ventilators when considering the contested functions of the Shangrila Ventilators below. The "Cancellation of Ordered Ventilators" brief 1. On 24 July 2020, an Executive Director at HealthShare, Mr Alex Araujo, and a Director of HealthShare, Ms Susan Connelly, prepared a "Brief for the SHEOC Controller" called "Cancellation of Ordered Ventilators". 2. Under the heading "Topic", the document stated: "NSW Health has ordered 1,873 additional ventilators since March 2020 in order to meet the target of 2,000 ventilated ICU beds. NSW Health has identified an opportunity to cancel a number of these orders due to deliveries received to date and confirmed ETD's from suppliers." 1. The document sought approval for one of the following three options: "a. Seek to cancel all 494 ventilators with delivery dates post 31 August 2020; or b. Seek to cancel 534 ventilators not specifically selected by LHDs; [45] or c. Seek to cancel all remaining ventilator orders noting it will not be possible to cancel all as many will already be in production or in the process of being delivered." 1. At one point, MDT submitted that HealthShare was motivated to terminate the Agreements by reason of the matters recorded in this document. The point was not developed in closing submissions. In any event, I do not accept it. The 24 July 2020 document is focused on undelivered ventilators. By 24 July 2020, all the Shangrila Ventilators had been delivered. I am satisfied that HealthShare's decision to terminate the Agreements was based on its own analysis and assessment of the Shangrila Ventilators. The clinical tests – Dr Gatward 1. On 10 August 2020, Dr Jonathon Gatward, an Intensive Care Specialist at Royal North Shore Hospital, supervised clinical testing of the Shangrila Ventilators. This testing was designed to assess the "usability" of the ventilators. 2. A number of assessors, being nurses, doctors and equipment officers at Royal North Shore Hospital, were selected to participate in a clinical testing of the Shangrila Ventilators. 3. The clinical testing was developed by Dr Morris in consultation with Dr Gatward. The assessors were given a number of tasks to perform on the ventilators, simulating clinical situations. In those simulations, the role of the "patient" was represented by a device known as the Ingmar ASL 5000 Breathing Simulator, a sophisticated breathing simulator often used in clinical testing. 4. The experience of the assessors was recorded in questionnaires they completed at the time. I admitted those questionnaires as evidence of the experience the assessors had with the ventilators. 5. As with Dr Cook's technical testing, I will return to the results of the clinical testing when considering the contested functionality of the Shangrila Ventilator. The decision 1. By 21 August 2020, HealthShare had produced a report to which the parties referred as the "CPG Report". 2. That report reviewed the technical and clinical testing and concluded: "The Shangrila 510S ventilator does not perform adequately according to the modes of ventilation described in the specifications in the User Manual. The usability of the device and the delays in alarms leads to a risk of confusion in operating the device and safely responding to emergencies. The problems in setting basic Volume Control ventilation will require excessive training and supervision by experienced staff to enable safe use to manage critically ill patients. The User Manual is poorly written and not adequate for safe use of the device. Overall, the performance of this ventilator is not adequate for use in the contemporary ICU setting or in potential surge wards during the COVID pandemic response." 1. On 21 August 2020, Ms Giddey sent a copy of the CPG Report to Mr Gannon, stating: "The Shangrila 510S ventilator has failed to operate in accordance with the operations manual. The results of the ventilator testing are currently being reviewed by senior staff within NSW Health and we will come back to you shortly." 1. On 1 September 2020, HealthShare prepared a "Brief for the SHEOC Controller" which sought approval to "cancel" the purchase orders for the Shangrila Ventilators. 2. That document then described the main issues as being: "1) Tidal volume in Volume Controlled mode is inconsistent depending on lung compliance, i.e. ventilator cannot maintain a consistent tidal volume during lung compliance changes. This is inconsistent with typical ventilator operation. This is not consistent with the supplier's operation manual. 2) Ventilator triggering appeared to be inconsistent, i.e. at some points the ventilator was spontaneously triggered [and] at other times the ventilator could not be triggered by the lung simulator. 3) FiO2 measured values inconsistent with O2 set values. Differs by up to 40%. 4) The clinical test team were unable to complete the Pre-Use check as the manual lacks clarity." 1. On 7 September 2020, HealthShare, by its solicitors, wrote to MDT formally rejecting the Shangrila Ventilators, purporting to terminate the Agreements and demanding the return of the $10.395 million paid by HealthShare to MDT on 27 and 30 April 2020. 2. MDT commenced these proceedings on 6 October 2020. The expert evidence 1. HealthShare adduced expert evidence from a biomedical engineer, Mr Matthew Jones. Mr Jones has over 20 years' experience in biomedical engineering and has a particular familiarity with how ventilators work and how they are tested prior to clinical use. Mr Jones has developed protocols to test up to 50 different models of ventilators, and has personally tested or supervised the testing of between 1,000 and 2,000 ventilators. 2. Mr Jones developed testing protocols for the Shangrila Ventilators and arranged for two members of his staff, Mr Sam De Soysa and Mr Yasiru Don, to conduct tests of the Shangrila Ventilators, based on those protocols. Mr De Soysa conducted testing on 23 and 26 July 2021, and Mr Don conducted testing on 30 July and 2 August 2021. 3. Mr Jones said that the testing performed by Mr De Soysa and Mr Don took approximately 20 hours and that he was present for between half an hour and an hour during that testing. 4. On behalf of MDT it was submitted that this meant that "little weight can be given to much of Mr Jones' evidence" and that "his evidence in significant part rises no higher than the worksheets prepared by the persons who actually performed the testing", being Mr De Soysa and Mr Don. 5. However, Mr Jones said he carefully supervised the work of Mr De Soysa and Mr Don. He gave evidence before me concurrently with MDT's expert witness, Dr Bruce Barkalow. Mr Jones impressed me as a thoughtful and careful witness who, as I discuss below, was prepared to make concession where appropriate. I gained the strong impression that he was endeavouring to express his opinions honestly and with care. 6. MDT's expert witness was Dr Bruce Barkalow. Dr Barkalow is also a biomedical engineer. He has over 40 years' experience in biomedical engineering and regularly provides consulting services to hospitals, medical device companies, legal firms and insurance companies in the United States. Dr Barkalow conducted his testing of the ventilators in January 2022. 7. Dr Barkalow gave his evidence remotely from Michigan. 8. HealthShare made a global objection to Dr Barkalow's evidence on the basis that, as he accepted, he had been provided live training from Aeonmed concerning certain aspects of the operation of the Shangrila Ventilators. HealthShare also suggested that the ventilators tested by Dr Barkalow appeared to have been "calibrated" by an organisation known as Chemtronics Biomedical Engineering, an organisation engaged by MDT to conduct maintenance testing of ventilators other than those supplied to HealthShare. 9. I do not see either of these matters as warranting a global rejection of Dr Barkalow's evidence. 10. Dr Barkalow disclosed the training that had been provided to him by Aeonmed and said that it assisted him with calibration of the Shangrila Ventilators. 11. Having observed Dr Barkalow over the several days in which he gave concurrent evidence with Mr Jones, I formed the same conclusion about him as I did with Mr Jones, namely that he was a thoughtful and careful witness doing his best to give me his honest opinions based upon his analysis of the functionality of the Shangrila Ventilators. 12. As emerges from my discussion concerning the contested functions of the Shangrila Ventilator, there were points of disagreement between Mr Jones and Dr Barkalow. I have come to conclusions concerning those points of difference as is set out below. 13. I do not see this as a case that turns on any difference between the comparative expertise, competence or objectivity of the experts engaged by the parties. The contested functions of the Shangrila Ventilator Pre-setting tidal volume 1. A patient's "tidal volume" is the amount of gas, measured in millilitres, that moves in or out of the lungs with each respiratory cycle. 2. Clause 3.3.2 of the User Manual provided: "3.3.2 A/C-V A/C-V (Volume Control Ventilation) is mandatory ventilation with preset respiratory frequency and tidal volume. When ventilator detects patient's spontaneous breath, it will work according to the above settings." 1. I discuss this clause further below in the context of the "volume control" function of the Shangrila Ventilator. For present purposes, the point is that cl 3.3.2 states that the "tidal volume" of air delivered by the Shangrila Ventilator to a patient can be "pre-set". 2. It is HealthShare's case that, in fact, the Shangrila Ventilator "did not have pre-set tidal volume settings". [46] 3. Dr Gatward said that he encountered significant difficulties pre-setting the tidal volume on the Shangrila Ventilator. HealthShare summarised these difficulties as follows: "[T]he Shangrila 510S did not have a tidal volume setting on the 'home screen' of the control panel when in volume control mode. … It did not have a button or knob that enabled the setting of tidal volume in one step. Instead, to set the volume, it was necessary to adjust three different settings (respiratory rate, peak flow and I:E ratio) to manually achieve the desired outcome. This involved significant trial and error. Dr Gatward explained that during the process of obtaining the required tidal volume by turning the flow knob, he overshot and undershot the desired volume approximately five times. He needed to make multiple incremental adjustments before the desired tidal volume was achieved. The process took one minute, compared to the 3-4 seconds it typically took Dr Gatward to set tidal volume, and was significantly slower and less accurate than it would usually be … Dr Gatward concluded it was not possible to pre-set tidal volume quickly and accurately due to the absence of a single tidal volume setting that would enable tidal volume to be pre-set and the need to manually adjust the three different settings." (Emphasis added.) 1. It appears to me to follow from this evidence, particularly the passage I have emphasised, that tidal volume on the Shangrila Ventilator can be pre-set, albeit not with the press of just one button, and less easily and quickly than if a "one step button" function was available. 2. It may be, as Dr Gatward opined, that an inability to set tidal volume quickly and accurately was a "serious deficiency" in the Shangrila Ventilator. This may also be, as Dr Cook opined, a "design limitation" in the ventilator. 3. But HealthShare's complaint is that the Shangrila Ventilator "did not have pre-set tidal volume settings" at all. This has not been established. Volume control 1. "Volume control" refers to the ability of a ventilator to control the volume of air delivered to a patient with each breath. 2. I have set out above the distinction between a ventilator operating in "volume control mode" and in "pressure control mode". [47] To repeat, "volume control mode" enables the operator to set the volume of air that is delivered to the patient. "Pressure control mode" enables the operator to pre-program a certain air pressure as the target variable. When a ventilator is in volume control mode, the pressure will vary, whereas when a ventilator is in pressure control mode, the volume will vary. 3. In its Cross Claim List Statement, HealthShare contended that the Shangrila Ventilator's "volume control mode was not functional". [48] 4. As the case developed, it emerged that HealthShare's position was more nuanced than this and more accurately captured in a contention made later in the Cross Claim List Statement that: "The problems in setting based Volume Control ventilation would require excessive training and supervision by experienced staff to enable safe use to manage critically ill patients". [49] 1. The alleged shortcoming concerning the Shangrila Ventilator's volume control mode arises from the fact that patients have varying "lung compliance" and "lung resistance". "Lung compliance" refers to the ability of the lung to stretch and expand, calculated as a change in lung volume produced by change in pressure. When a patient has poorly compliant lungs, this is referred to as having "stiff lungs". "Lung resistance" refers to the level of pressure pushing against inspiration, that is, an intake of breath. Lung compliance and lung resistance, together, are referred to as a patient's "pulmonary impedance". 2. Some ventilators will automatically deliver a constant pre-set volume of air to a patient, even if the patient's pulmonary impedance changes. 3. It is common ground that the Shangrila Ventilator does not do this. As MDT accepted in its closing submissions, "there has never been any issue between the parties that the volume control function on the Shangrila Ventilators does not automatically adjust, if patient compliance and resistance changes". (Emphasis in original.) 4. Dr Barkalow and Mr Jones thus agreed: "Ventilator does not include feedback and control of volume, rather the volume needs to be set by operator adjusting the peak flow knob. As patient condition may change, the operator must adjust the peak flow knob to achieve the desired pressure or volume level." 1. In their joint report, Dr Barkalow and Mr Jones set out their respective positions as follows. 2. Dr Barkalow said that the Shangrila Ventilator did have volume control ventilation because: "Volume or pressure could be set by the peak flow knob and controlled by the operator." 1. On the other hand, Mr Jones said: "All devices failed to provide volume control ventilation due to not maintaining volume when there is a change in patient airway / lung conditions." 1. The point was developed in this passage from the cross-examination of Dr Morris: "Q. And when you say that you can't control it with the Shangrila, implicit in your answer is the assumption that you mean control automatically, correct? A. So, I mean two things. One is that once I've set the volume, it will remain the same and be delivered with each breath in spite of the changes. Q. And pausing there, the Shangrila does that unless there is a change in lung compliance or resistance, correct? A. As far as I know, yes. Q. And the second? A. But what I said was that the Shangrila - I anticipate that the ventilator would provide the same volume in spite of changes of compliance or resistance. Q. And the difference with the Shangrila? A. The Shangrila doesn't do that. Q. Well, the difference with the Shangrila is that if there's a change in lung compliance or resistance, you have to adjust the volume control, correct - you have to adjust the knobs which affect the [tidal] volume, correct? A. You have to - I think you put it well. You have to change the knobs on the ventilator. I would expect to be able to change the volume setting on the ventilator, which is the second issue with the Shangrila, you can't set the volume directly, you have to set other numbers. Q. Just to explain for the benefit of everybody, the difference is that the volume is controlled on the Shangrila, if there is no change in lung compliance or resistance, automatically once you've set it, correct? A. Yes. Q. And the difference is that if there's a change in lung compliance or resistance, you were expecting, you're saying, that it would change automatically, that the-- A. It would stay the same. The volume would stay the same. Q. Yes, the ventilator would automatically adjust to maintain the same [tidal] volume? A. Okay, yep. Q. Adjust to the change in lung compliance and resistance, I mean? A. Yep. Q. But on the Shangrila, you control it by doing it manually rather than automatically, that's the difference, isn't it? A. Yes, but - the but is that you can't change the volume on the Shangrila. You have to change two other knobs, the flow rate, and the inspiratory time in order to change the volume. Q. Yes, but when you do change those two knobs, you change the volume? A. You can change the volume, yes. CLARKE: And you can-- HIS HONOUR Q. And you'd have to also know, wouldn't you, whether there had been a change in the patient's lung compliance and resistance? A. That's right. Q. How would you know that? A. So, you know that - well, that's what the trick is with the Shangrila. When you know the volume's constant, because of that equation, any change in compliance is reflected in a change in the pressure. So, the pressure goes up for the same volume. The confusing feature that the people testing it found was that the - with a change in compliance, the pressure and the volume both change, which is not what you expect when you're in volume control mode. Q. And what's the problem with that? A. The problem is not being able to understand where the problem is when you're ventilating the patient. Basically, the problem can be with the ventilator, with the tubes, or in the patient's body, the lungs and the rest of their body, and so you have to make a decision as to which one is causing the problem. The challenge with the Shangrila is that that decision-making process was more difficult, and so clinicians found the ventilator harder to use in volume control mode than they expected. CLARKE Q. … The answer to his Honour's question was how would you know - the answer is that you set alarms to tell you, correct? A. Yes. Q. But that's what his Honour was asking you, how would you know if there's been a change in lung compliance or resistance. The answer is that either of those will change the pressure or the volume, correct? A. Well, if you're in volume control mode, it shouldn't change the volume. Q. I understand that's what you want to say, to go back to the meaning of volume control, but I'm just trying to go to the point that you were asked about. In the circumstance where there's a change in lung compliance and resistance, that leads to a change in either pressure or volume that can be measured on the ventilator and an alarm set to tell you, correct? A. That's right." (Emphasis added.) 1. The passages in Dr Morris' evidence that I have emphasised show that the Shangrila Ventilator does have a functional volume control mode, but not one which automatically responds to a change in a patient's pulmonary impedance so as to maintain a set volume of air, or tidal volume being delivered to the patient. As Dr Morris said, the volume of air to the patient can be altered in these circumstances, and thus controlled, by changing the "two knobs" referred to, and to which I will return. However, as Dr Morris also said, this causes the difficulty referred to in the last emphasised passage: identifying the patient's precise problem. This meant that the Shangrila Ventilator was, as Dr Morris said, "harder to use in volume control mode": not impossible to use. 2. Dr Barkalow described a ventilator operating automatically to maintain tidal volume in the face of a change in a patient's pulmonary impedance as operating in "closed loop" mode, that is, without the necessity of clinical intervention. This was in contrast to a ventilator operating in "open loop" mode, and requiring a clinician, within the "loop" as it were, to monitor for any change in a patient's pulmonary impedance. Dr Barkalow said that the Shangrila Ventilator operates in "open loop" mode. 3. Ultimately, Mr Jones also accepted this. 4. Mr Jones, in concurrent evidence, was taken to an international standard, ISO Standard 19223. ISO Standard 19223 is referred to in an appendix to the TGA Domestic Manufacturer Guidelines concerning ventilators. ISO Standard 19223 is published by the International Organization for Standardization, a worldwide federation of national standards bodies. 5. Thus, Mr Jones gave this evidence: "CLARKE: What I want to suggest to you is that the effect of this is to, first of all, accept that ventilators do not necessarily operate in a physiologically closed loop control system. Do you agree with that? WITNESS JONES: I agree with that. CLARKE: I want to suggest to you that what this means is that these paragraphs are indicating that Dr Barkalow's distinction between open and closed loop systems is a valid and proper way to consider the status of a ventilator; do you agree with that? STUDDY: I object. He's been cross-examined about a standard and then been asked to comment or apply that standard in evidence of another witness. That's not permissible, your Honour. HIS HONOUR: The standard appears to recognise a distinction between a closed loop and an open loop. WITNESS JONES: Yeah, I don't think I disagree with Mr Clarke on this point. HIS HONOUR: You don't think you do disagree? WITNESS JONES: No, I don't disagree with him about volume control being either open or closed. I think it can be both, and I think I've agreed to that. HIS HONOUR: I think he's overruled the objection. Just state clearly what you think you're agreeing to - sorry, what you are agreeing to. First, this standard - and others, perhaps - recognise a distinction between an open and a closed loop category of ventilators; that's the first thing? WITNESS JONES: In this standard, I understand what they're saying - just in the very brief time that we looked at it - is that it doesn't necessarily require it to be a closed loop control system, and I agreed to that, and I think I agreed to that when we looked at the other ISO standard. HIS HONOUR: You think ventilators don't have to be closed loop? WITNESS JONES: For volume control, no. That's - I agree with that. But there are conditions that flow from that, your Honour, that I think need to be discussed. HIS HONOUR: The user manual, for example? WITNESS JONES: Correct. HIS HONOUR: And what it says about-- WITNESS JONES: And what it says. HIS HONOUR: --how to operate the machine? WITNESS JONES: That's right." 1. Mr Jones thus accepted that a ventilator, such as the Shangrila Ventilator, which operates in what Dr Barkalow, and the ISO standard, referred to as "open loop mode" (that is, without an ability to maintain, automatically, tidal volume regardless of a change in a patient's pulmonary impedance) nonetheless can be said to have a volume control function. 2. Mr Jones concluded by saying that an issue nonetheless arose from the User Manual, a point to which I return below. 3. Despite HealthShare's submissions to the contrary, I did not see that the evidence given on behalf of MDT by Dr Joseph Varon, a medical physician practising in the United States, as expressing a different conclusion. 4. That is made clear from the following passage which occurred at the conclusion of his cross-examination by senior counsel for HealthShare: "Q. Now, you have experience of using volume control ventilators that automatically adjust the volume due to a change in the patient's lung compliance? A. Yes, sir. Q. You also have experience of using volume control ventilators that deliver a predetermined volume of gas to the patient regardless of the patient's lung compliance, correct? A. That is correct, sir. Q. And this second kind of ventilator that does not automatically adjust is operating in a basic or standard volume control mode, correct? A. That's a true statement, sir." (Emphasis added.) 1. Overall, this evidence persuades me that the Shangrila Ventilator did have a volume control function, albeit one that would only operate in "open loop" mode, that is, without making automatic adjustments to ensure constant tidal flow in the face of a change in a patient's pulmonary impedance. The User Manual 1. As I have set out in the context of discussing the pre-setting of tidal volume, cl 3.3.2 of the User Manual provided: "3.3.2 A/C-V A/C-V (Volume Control Ventilation) is mandatory ventilation with preset respiratory frequency and tidal volume. When ventilator detects patient's spontaneous breath, it will work according to the above settings." 1. Earlier in the User Manual, at page 2-5, there is a description of the "Front Panel" of the Shangrila Ventilator and the identification of a knob on the panel with this description: Peak Flow setting: Adjust the flow rate to control the tidal volume of the machine 1. This is one of the knobs to which Dr Morris referred. 2. Dr Barkalow opined that, as he read the User Manual, the reference in cl 3.3.2 of the User Manual to "the above settings" was a reference to "peak flow setting" that I have set out in the preceding paragraph. 3. Dr Barkalow agreed that this was not expressly stated in the User Manual, whether at cl 3.3.2 or at all, but said that he read the User Manual this way. Thus, he gave this evidence: "HIS HONOUR: What is it about your reading of this manual that has indicated to you that I should read 3.3.2 in the light of what is at page 2-5? WITNESS BARKALOW: The reason is in the first sentence that says, 'volume control ventilation is mandatory ventilation with pre-set respiratory frequency and tidal volume'. And so one would need to know how to set tidal volume. And that information is located on page 2-5. And then following that you could successfully pre-set a tidal volume. HIS HONOUR: And you're saying what the reader of this manual would so understand it? WITNESS BARKALOW: I believe so, because the reader needs to know how to set a tidal volume and the answer is on page 2-5." 1. Dr Barkalow agreed that the User Manual did not make any "overt statement" to this effect. 2. Mr Jones' opinion was that there was "insufficient explanation" in the User Manual of how volume control was to be maintained. This was the caveat to which Mr Jones referred in the passage from his evidence that I have set out at [321] above. Mr Jones agreed however that, in his report, he had not referred to the earlier passage on page 2-5 of the User Manual to which Dr Barkalow referred. 3. The User Manual says nothing about whether the Shangrila Ventilator would automatically adjust volume control in response to a patient's pulmonary impedance. The User Manual does not assert that the Shangrila Ventilator has this functionality; nor does it state that it does not. As Dr Morris said, "the manual was not clear". 4. However, there is no suggestion in the evidence that the Shangrila Ventilator could not be operated to control the volume of air delivered to a patient in the face of that patient's changed pulmonary impedance, provided that a clinician was on hand to make the necessary manual adjustments to the flow rate. As Dr Morris said, this would make the decision making process more difficult and would mean that the Shangrila Ventilator was harder to use in volume control mode than a ventilator that automatically adjusted to ensure delivery of a constant volume of air regardless of changes in a patient's lung compliance. 5. In these circumstances, my conclusion is that the Shangrila Ventilator does have volume control functionality. 6. Whether or not the Shangrila Ventilator could, in these circumstances, be described as having "conventional volume control ventilation" is a different question to which I will now turn. Did the Shangrila Ventilators have "conventional" Volume Control? The brochures 1. As I have described above, HealthShare received copies of brochures concerning the Shangrila Ventilator from MDT, from RAPP, and from publicly available sources. I have described these as the MDT Shangrila Brochure, the RAPP Shangrila Brochure, the Shangrila in a Bag Brochure and the Allied Scientific Shangrila Brochure. 2. The MDT Shangrila Brochure and the Allied Scientific Shangrila Brochure were in the same form. Each stated, under the heading "Complete Ventilation Modes" that the Shangrila Ventilator "hosts six ventilation modes", one of which was: "… the conventional Volume-Controlled Ventilation Mode." 1. The other brochures made no statements about "conventional" volume control. HealthShare's pleaded [50] case 1. In closing submissions, it was suggested on behalf of MDT that HealthShare had not pleaded its case concerning the issue of "conventional" volume control by reference to the statements in the Brochures. The relevant allegation is contained in par C41(b) of the Cross Claim List Statement. It is there alleged that the allegations made in, amongst other things, the brochures, were false, and misleading or deceptive for the purpose of s 18 of the ACL because the Shangrila Ventilators: "did not have conventional volume-controlled ventilation mode and could not reliably provide precise tidal volume." 1. In par C41 that allegation is said to be misleading or deceptive "by reason of" the matters alleged in par C28, which deals with the results of the third technical test conducted by Dr Cook, and in par C28A, which contains allegations as to what is stated in the User Manual. 2. As I have set out, one of the allegations made in par C28 of the Cross Claim List Statement is that setting the volume control mode of the Shangrila Ventilators required "excessive training and supervision by experienced staff". [51] 3. In my opinion, that allegation was sufficient to place squarely in contention in the proceedings the question of whether or not the Shangrila Ventilators had, as the Brochures asserted, a "conventional" volume control function. 4. In any event, the proceedings were conducted on the basis that this was a live issue. Dr Barkalow's evidence 1. Dr Barkalow agreed that he understood that "conventional volume-controlled ventilation" meant ventilation which operated in what he called "closed-loop operation" and which made automatic adjustment for volume and pressure; as opposed to operating in "open loop operation" requiring the intervention of a clinician to make adjustments in the face of changes in a patient's pulmonary impedance. 2. Thus, Dr Barkalow gave this evidence concerning the statements made in the MDT Shangrila Brochure (which Dr Barkalow evidently had not seen before) about "conventional" volume control: "STUDDY: You understand the term 'conventional volume controlled ventilation' to mean automatic adjustment for volume and pressure? WITNESS BARKALOW: Closed-loop operation. STUDDY: Could the witness be shown the brochure, which is at 2554 of the Court Book 'Fighting against COVID-19, We are together'. Dr Barkalow, have you seen this brochure before? WITNESS BARKALOW: I don't believe so; it does not look familiar to me. STUDDY: First of all, when I was asking you questions a few moments ago, about being on a trolley, do you think you have seen images of 510S set up on a trolley as depicted on the page in front of you? WITNESS BARKALOW: If I remember correctly, it's in the operator's manual. STUDDY: You think that's where you saw it? WITNESS BARKALOW: I think so. STUDDY: And when you say, 'the operator's manual', you mean the user manual? WITNESS BARKALOW: I do. STUDDY: That would mean that it was not as so configured to be used in the back of an ambulance; correct? WITNESS BARKALOW: That is correct. STUDDY: Then if you could go to the second page of the document, and you see on the right-hand side, where it says, 'complete ventilation modes', and if we could just scroll down slightly to there, and you see where it says, it's the second dot point 'besides the conventional volume control ventilation mode it also has pressure control ventilation mode' and then it refers to other things, you see that? WITNESS BARKALOW: I do. STUDDY: As you said a few minutes ago, you understand the reference to conventional volume control ventilation' to mean automatic adjustment for volume and pressure? WITNESS BARKALOW: I did." 1. On behalf of MDT it was submitted that, because of an answer Dr Barkalow had given to questions asked shortly earlier in concurrent evidence, Dr Barkalow was not intending to say that a ventilator could only have "conventional" volume control if operating in what Dr Barkalow described as "closed loop ventilation". However, the evidence I have set out, given a short time later, makes clear that Dr Barkalow accepted that "conventional" volume control required maintenance of volume pressure, automatically, in the face of a change in a patient's pulmonary impedance. 2. This was, in any event, the overwhelming conclusion to be drawn from the evidence of the clinicians called by HealthShare whose evidence, in this respect, was not challenged. 3. Each of Drs Cook, Gatward, Morris and Nguyen gave evidence that, in their opinion, a ventilator that did not automatically deliver the pre-set volume of air regardless of a change in a patient's pulmonary impedance could not be regarded as having a volume control function. 4. As was submitted on behalf of MDT, it may be that these views were born of the experience that those clinicians had in an ICU context and, for that reason, reflected their experience with ventilators. 5. However that may be, the evidence of those clinicians persuades me that "conventional" volume control requires such automatic adjustments. 6. For example, Dr Gatward gave this evidence: "A. … This is a separate issue; this is the issue of changes in patient's lung compliance causing a decrease in tidal volume which is not compensated for by the ventilator, and the meaning of volume control is just that: that the volume delivered to the patient is controlled by the ventilator. HIS HONOUR Q. And it should be controlled automatically? A. And that should be controlled automatically; that's what 'volume-controlled' means. CLARKE Q. That's what it means, you say-- HIS HONOUR Q. No, no. No matter what change in the patient's lung compliance and resistance; is that right? A. If the patient's lung compliance and resistance changes, then the ventilator should compensate for that, your Honour, but we don't allow the ventilator to give unbridled and, you know, pressures that are unsafe, so we set these limits with the peak airway pressure alarm that we've - the peak airway pressure setting that we've just talked about. So within certain pressure limits, the ventilator makes adjustments to deliver and guarantee that volume, and that is the case on every ICU ventilator I've ever used and every transport ventilator I've ever used, so even much simpler ventilators than we use in ICU have a volume-controlled mode that makes automatic compensations for changes in lung compliance and lung resistance. I would regard that as so essential to caring for patients who are on ventilators, that was one of my main concerns with this ventilator is that it did not do that. Q. Within the limits of safety to which you've referred, the ventilator should, in your view, maintain volume control? A. Volume control, yes. And to my understanding, this ventilator was marketed as a machine that provides volume control; it's in the manual that it has volume-controlled ventilation modes. CLARKE: I object to that answer on the fact that it - as long as it's limited by his statement that it's his understanding only. It wasn't responsive to anything your Honour or I asked. [DR GATWARD]: Apologies. HIS HONOUR: I'm not going to make any ruling about that. The user manual says what it says. CLARKE: The Shangrila volume control: just to be clear, it controls the volume without further reference to the machine, except when there is a change in lung compliance or resistance; correct? A. That's what the machine does. I would not regard that as volume control." (Emphasis added.) 1. Similarly, Dr Morris gave this evidence: "HIS HONOUR Q. I think you've told me that you regard the expression 'volume control' as having a particular meaning? A. Yes. Q. What is that meaning, can you tell me, in relation to how you operate a ventilator? If a ventilator has volume control, what do you say that means? A. So, to me it means that I can control the volume that is being delivered to the patient by setting on the front of the ventilator a particular volume which the ventilator will then deliver to the patient. CLARKE Q. When that volume is set and stays the same, subject to lung resistance or compliance changing, it's being controlled; correct? A. And it stays the same, yes, so the - it's independent of changes in compliance. Q. If it's set and it remains at the same level, unless there's a change in lung compliance or resistance, it's still all controlled at that point; correct? A. Perhaps I'm just - I'm not trying to be confused here, but if you mean that the volume remains the same with the same compliance and resistance, that is volume control, but I take volume control to mean that it remains the same in spite of changes in compliance or resistance." (Emphasis added.) 1. Similarly, Dr Nguyen gave evidence that: "When I am treating a ventilated patient I calculate their ideal tidal volume (based on body weight and my clinical assessment of their condition) and I set the ventilator to automatically deliver the appropriate tidal volume for that patient, using tidal volume mode." 1. Dr Cook also gave evidence to the effect that if a ventilator could not maintain a constant volume in the face of changing lung compliance, this meant it was not operating in volume control mode. Dr Cook said that, based on his testing of the Shangrila Ventilators, they did not maintain a constant volume and thus did not operate in volume control mode. 2. None of this evidence was challenged. Although these doctors did not express their opinions in terms of whether the Shangrila Ventilator had a "conventional" volume control mode, their evidence is consistent with the proposition that the Shangrila Ventilators did not have a volume control mode as that expression is "conventionally" understood. Reliance 1. What role the statements in the brochure that MDT supplied to HealthShare, that is the MDT Shangrila Brochure, played in HealthShare's decision to purchase the Shangrila Ventilators, is a separate question to which I will return. [52] Pressure control mode 1. I have mentioned above the distinction between a ventilator operating in volume control mode and in pressure control mode. 2. The matter was explained this way by Dr Morris: "Ventilators function in various different 'modes' depending on the needs of the patient and the complexity of the ventilator. At a base level, a clinician will set a 'mode' on a ventilator by controlling either the volume or the pressure as a target variable. In volume-controlled mode, the volume will be set whilst the pressure varies with changes in lung characteristics. Conversely, in pressure-controlled mode, the pressure is set whilst the volume varies." (Emphasis added.) 1. Mr Jones gave evidence that: "Pressure control mode is a mode of ventilation where the user sets a desired pressure, and the ventilator delivers the set pressure, regardless of changes to any other parameters." The User Manual 1. The User Manual stated: "3.3.3 A/C-P PCV (Pressure Control Ventilation) is mandatory ventilation with preset respiratory frequency and pressure limit. When ventilator detects patient's spontaneous breath, it will work according to the above settings." 1. The wording used in the User Manual to describe "Pressure Control Ventilation" was similar to that used to describe "Volume Control Ventilation". The only difference is that the words "and tidal volume" in the latter are substituted with the words "and pressure limit" in the former. 2. Like the provision in the User Manual referring to Volume Control Ventilation, the provision concerning Pressure Control Ventilation concluded by stating "it will work according to the above settings". 3. I was not directed to any evidence dealing with what, in this context, "the above settings" were, nor to any opinion expressed by Dr Barkalow, Mr Jones or any other witness about that matter. The MDT Shangrila Brochure 1. The MDT Shangrila Brochure stated, immediately after the statement to which I have referred concerning "conventional Volume-Controlled ventilation mode" that the Shangrila Ventilator: "… also has Pressure-Controlled ventilation mode." 1. Mr Jones said: "… when testing the flow-triggering settings in pressure control mode, it was found that while in pressure control mode, pressure was not maintained at the level which had been set by the user. Instead, the pressure appeared to change when the peak flow knob was adjusted. Effectively, the Test Results show that the Shangrila Ventilators do not reliably offer pressure controlled ventilation as described in the User Manual (as to do so, pressure would need to remain constant despite changes to other parameters such as flow settings)." 1. Dr Barkalow appeared to come to the same conclusion and said: "… and this is how this ventilator works as it is not a pressure-controlled ventilator except for setting a peak pressure limit." 1. In concurrent evidence, Dr Barkalow gave this evidence: "STUDDY: Pressure control mode is a mode of ventilation where the user sets a desired pressure and the ventilator delivers that set pressure regardless of changes to any parameters; correct? WITNESS BARKALOW: Initially that's correct because the peak flow control is used so that the inspiratory time is sufficient for the pressure to rise to the target value. STUDDY: In paragraph 10.29 of your first report, you stated that the ventilator is not a pressure control ventilator except for setting the pressure control limit. Do you recall saying that? WITNESS BARKALOW: Yes. STUDDY: And you stated that the user adjusts the peak flow to achieve the desired tidal volume; correct? WITNESS BARKALOW: That is correct. STUDDY: In paragraph 9.2 of your second report, you stated that the pressure delivered to a patient is controlled by adjusting the flow control knob; correct? WITNESS BARKALOW: That is correct. STUDDY: And the clinician has to reset the pressure to maintain the level if there were changes to other parameters that cause the pressure to change; correct? WITNESS BARKALOW: Not exactly. The clinician will adjust the peak flow control to set the desired pressure. STUDDY: But it has to be done manually, it's not done automatically by the ventilator; correct? WITNESS BARKALOW: That is correct. STUDDY: That's because the ventilators do not maintain a constant pressure given a change in other settings such as flow; correct? WITNESS BARKALOW: Yes. Essentially that's correct." (Emphasis added.) 1. On the third day of the expert conclave evidence, Dr Barkalow produced a note suggesting that the Shangrila Ventilators had "volume targeted pressure control". But this is not what is described in cl 3.3.3 of the User Manual nor in the MDT Shangrila Brochure. Those documents assert that the Shangrila Ventilator had pressure controlled ventilation. 2. I am persuaded that the evidence shows that the Shangrila Ventilators did not in fact operate in pressure control mode as set out in the User Manual or in the MDT Shangrila Brochure. Accuracy of oxygen concentration 1. The "fraction of inspired oxygen", or FiO2, means the percentage of oxygen that a person inhales. 2. The Earth's atmosphere is made up of approximately 21% oxygen. Thus, the fraction of inspired oxygen in normal breathing circumstances is 21%. 3. The User Manual stated, under the heading "Setting Ventilating Parameters", that the Shangrila Ventilator could deliver a fraction of inspired oxygen in the range of 40% to 100% with an accuracy of ±20%. 4. The questions are whether the Shangrila Ventilator was able to deliver a fraction of inspired oxygen within that range of tolerance and whether the fraction of inspired oxygen actually being delivered was as set by the operator. 5. There was no dispute that oxygen concentration is a key input for clinicians in determining appropriate treatment and that the lack of accurate and timely oxygen concentration measurement could have serious adverse clinical consequences. 6. For example, Dr Gatward gave the following evidence about the importance of oxygen concentration measurement: "Accurate and timely display of oxygen concentration is core to the functionality of a ventilator. A main purpose of a ventilator is to deliver oxygen to the body. It is important for a clinician to know the level of oxygen concentration in the gas being delivered by a ventilator because giving too much or too little can be harmful … All patients on ventilators have continuous oxygen monitoring via oxygen saturation monitors (which are placed on patients' fingers). Clinicians adjust the level of oxygen concentration being delivered to patients via a ventilator to maintain the level of oxygen in a patient's blood within certain parameters. If a ventilator does not deliver the concentration of oxygen that it is set to deliver, there are clinical consequences for patients. … In clinical practice, if a ventilator displays that it is delivering an oxygen concentration that is different from the oxygen concentration that is actually being delivered, this can cause issues for the clinical treatment of patients." 1. Dr Morris and Dr Nguyen gave evidence to a similar effect. 2. In his first round of technical testing, to measure the concentration of oxygen being delivered by the Shangrila Ventilator, Dr Cook connected it to a device used to test mechanical ventilators known as a "Fluke Analyser". Dr Cook spent approximately an hour testing the readings by incrementally adjusting the FiO2 knob. Dr Cook found that whenever the FiO2 knob was set to anything other than 100%, there would be a significant divergence between the reading on the ventilator display screen and the reading on the Fluke Analyser. Dr Cook found that the ventilator display never showed an oxygen concentration of below 80%, even when the Fluke Analyser recorded the actual oxygen concentration as being between 40% and 45%. 3. In the second round of technical testing, Dr Cook encountered the same problems. He found that the ventilator screen did not accurately display the oxygen concentration being delivered, and that there was a significantly delayed response time when the FiO2 knob was turned. 4. In his third round of technical testing, Dr Cook found that when the Shangrila Ventilator was set to 100% oxygen concentration, it in fact delivered an oxygen concentration of 37%. Further, when the ventilator was exposed to room air, where the oxygen concentration is 21%, the ventilator display screen did not display 21%. 5. These results were well outside the "±20%" accuracy range stated in the User Manual. 6. Clause 9.7.1 of the User Manual, under the heading "System Performance", stated that the FiO2 "response time" was less than or equal to 15 seconds. Dr Cook found that the time taken for the ventilator to adjust to turns of the FiO2 knob took, on average, 45 seconds. 7. Dr Gatward's clinical testing revealed the same problems. The results of the tests that he oversaw showed that when the FiO2 knob was turned all the way to the right to line up with the 100% marker, it took approximately one minute for the screen to display a reading of 100%; whereas the User Manual stated that the response time was 15 seconds. Further, when the FiO2 knob was turned to the left to line up with the 40% marker, the ventilator took approximately one minute to display a reduced reading of approximately 50%. At no point did the display reach 40%. Further, when the FiO2 knob was turned to the position to the right of the middle of the gap between the 40% and 100% markings, in an attempt to achieve 80%, the ventilator did not display a change in the oxygen concentration for approximately one minute. Dr Gatward found that he had to adjust incrementally the knob to achieve the desired FiO2 concentrations, the process took approximately three minutes, and that the ventilator's delayed response to the changes contributed to the tendency significantly to overshoot or undershoot the required oxygen concentration. 8. Dr Barkalow was provided four Shangrila Ventilators to test. [53] He found that: "The set and delivered oxygen percentages were found by me to be in range and acceptable for two of the ventilators I tested. [54] At a setting of 40%, ventilators [1]7047 and 8369 delivered 44%." 1. Dr Barkalow continued: "Maintenance issues were identified in ventilators [1]3208 and 5966 during the initial setup and these ventilators could not be tested." 1. As to ventilator 5966, Dr Barkalow found this ventilator delivered significantly inaccurate oxygen measurements. 2. Dr Barkalow said: "9.13 I used 5966 to become familiar with hands-on operation of the 510S ventilator. In the process, I had trouble with the oxygen calibration but otherwise no notable issues with the ventilator and test equipment function. 9.14 It was found that 5966, which had a KE2F-3 model sensor, passed the oxygen calibration for 21% and 100% but this ventilator produced higher than set oxygen levels starting with the minimum setting of 40% where the display showed values were significantly higher than what was delivered. At 40% the ventilator display showed an FiO2 of 65% and the oxygen meter showed a delivered 54%. 9.15 I retested 5966 a second time, again recalibrating the oxygen sensor to 21% and 100%. Then, at a setting of 40% the ventilator displayed 55% but this time the flow meter agreed – a delivered 56%. 9.16 This examination suggests that, although the oxygen sensor passed the 21% and 100% calibration, the ventilator is inaccurate by not delivering the expected minimal 40% FiO2 values on the ventilator display when in use. 9.17 Further, in the second test, a setting of 40% (minimum setting) resulted in the FiO2 on the ventilator display and the external calibrated oxygen sensor both in agreement at a delivered FiO2 of 55%. I believe this ventilator has an incoming, as arrived, internal malfunction, probably in the air/oxygen internal blender but possibly in the internal oxygen sensor calibration process as well. To be properly tested, it would need to be serviced." 1. Ventilator 5966 was one of the ventilators Dr Cook tested during the second round of technical testing, during which Dr Cook reported inaccurate FiO2 readings. 2. In relation to ventilator 13208, Dr Barkalow found that the ventilator did not display oxygen concentration at all. 3. Dr Barkalow stated: "10.13 My opinion: (a) Ventilator [1]3208 did not display FiO2 presumably because it had malfunctioning oxygen sensor. Also, ventilator [1]3208 did have a different oxygen cell connector as well. In my opinion, if [1]3208 had a correctly functioning oxygen cell such as the Aeonmed recommended MOX-4 oxygen cell, it would likely calibrate and function properly." (Emphasis in original.) 1. My attention was not drawn to any particular test result which would support the hypothesis stated by Dr Barkalow in the second sentence of this part of his report. Expiry of oxygen sensors 1. MDT sought to explain the inaccurate oxygen concentration readings that Dr Cook and Dr Gatward experienced, and that Dr Barkalow reported in relation to ventilator 5966 on the basis that the ventilators may have had an expired oxygen sensor or an internal malfunction in its air/oxygen internal blender. This submission was presumably based on the hypothesis offered by Dr Barkalow for the failure of two of the ventilators he tested to show oxygen concentration accurately, or at all. 2. Mr Jones and Dr Barkalow tested the ventilators a considerable time after they were delivered by MDT to HealthShare. The ventilators the subject of Mr Jones' opinion were tested in late July and early August 2021. Dr Barkalow conducted his tests in January 2022. The ventilators those experts tested had thus been in storage for some time after delivery. 3. However, the ventilators tested by Dr Cook were delivered to him directly by Chemtronics [55] on behalf of MDT, and were not delivered to or stored by HealthShare prior to testing. Thus, the ventilators Dr Cook tested were essentially brand new. I see no reason to infer, in those circumstances, that the results Dr Cook reported concerning oxygen concentration, in the three rounds of technical testing he undertook, should be attributed to an undetected expired or faulty oxygen cell in the ventilators that he tested, as was submitted by MDT. Oxygen sensor calibration 1. Many of MDT's submissions on the topic of oxygen concentration readings were directed to the question of calibration of the oxygen sensors in the Shangrila Ventilator. 2. The instructions for calibration of the oxygen sensor were contained in cl 3.6.5.2 of the User Manual. 3. HealthShare's pleaded case is that it was not possible to calibrate the oxygen sensor using the instructions in the March 2020 version of the User Manual, being the one supplied by MDT to HealthShare on 21 April 2020. 4. MDT accepts that it was not possible to calibrate the oxygen sensor using those instructions. 5. In August 2022, MDT provided an updated version of the User Manual which revised cl 3.6.5.2 to provide far more comprehensive instructions concerning calibration of the oxygen sensor. 6. MDT submitted that, by the time Dr Cook conducted his second round of technical testing "he had the proper calibration instructions at the time of the testing, but it is plain from the contemporaneous material that he was still struggling with calibration". 7. However, in his evidence, Dr Cook drew a distinction between the concept of correct calibration, in the sense of following the steps in the User Manual, on the one hand, and accurate calibration, that is, using the oxygen sensors in the ventilator so as to accurately measure oxygen concentration. 8. Thus, Dr Cook gave this evidence: "STUDDY Q. So you were referred to the difficulty of the distinction between calibration versus or and [sic] performance. My first question is what did you mean by 'the difficulty'? A. You can calibrate a device - any device - correctly, you can follow its calibration sequence. It can be calibrated, but then when you actually put it into use it doesn't perform as expected. HIS HONOUR Q. When you say calibrate correctly, you mean as per [the User Manual]? [56] A. As per the instructions. For example, this oxygen cell, if we had used it in an external arrangement and in other environment, the cell was performing correctly, the calibration was likely performing correctly, but within its functionality of how it was used, as a device as a whole the performance - I was unable to verify the performance because it didn't match what we were measuring externally." (Emphasis added.) 1. I think HealthShare was correct to submit that Dr Cook's evidence was not that he was "struggling" with the calibration of the oxygen sensor. He gave clear evidence that during the second and third technical tests he followed the updated calibration instructions in the further version of the User Manual, attempted calibration multiple times, and still observed that there were practical difficulties with the measured oxygen concentration. 2. Thus, Dr Cook gave this evidence: "CLARKE Q. The results you got previously were in respect of a ventilator that you accepted had not been calibrated correctly, isn't that right? Isn't that right? A. Calibrated-- Q. No, no, isn't that right? A. No, because they're calibrated correctly but the calibration's inaccurate. Q. All right. The results you had previously were in respect of a ventilator that you accept had been inaccurately calibrated; correct? A. Correct. Q. So, to the extent that the results of [the] third test are consistent with the second test, it would suggest that the machine has not been calibrated correctly; correct? A. No. The suggestion that the calibration is not accurate. Q. Right. That's right. You're drawing a distinction between calibrating correctly and calibrating accurately? A. Correct. Q. In answering those questions? A. Yes. HIS HONOUR Q. By calibrating correctly do you mean in accordance with the user manual? A. Yes, in accordance with the user manual and/or the other details provided, and to the point where the device said calibration completed. Q. Do at some point the words calibration come up on the screen of the machine? A. Yes. CLARKE Q. Those words came up on the screen in the second test, didn't they? A. Yes. Q. You knew right then and there that because of the results that it hadn't calibrated accurately; correct? A. It's not-- Q. Could you just answer the question? HIS HONOUR: Well he is. I think he is trying to answer. Q. Is that right, Dr Cook? A. It's the aspect that calibration doesn't mean that it's functioning correctly. So you may have calibrated it, it may - the cell may be accurately calibrated but in the design and function of the ventilator it's not happening correctly." (Emphasis added.) 1. MDT has not established that there was any issue with the steps performed by Dr Cook during calibration of the oxygen sensors in the second and third technical tests. Conclusion 1. I see the difficulties that Dr Cook and Dr Gatward had with the Shangrila Ventilators so far as concerns oxygen concentration measurement to bespeak a serious shortcoming in the Shangrila Ventilators. Dr Cook's test results are particularly striking. Dr Cook tested the ventilators almost immediately after they were delivered by MDT to HealthShare. He found that the times it took to set the ventilators to the desired FiO2 level were far slower than showed in the User Manual. More importantly, the ventilators were shown to be delivering the FiO2 at levels different, indeed strikingly different, to the FiO2 levels that the ventilators stated were being delivered. 2. It is true that Dr Barkalow said he had a different experience with two of the four ventilators he tested. But one of those ventilators, number 8369, was also tested by Dr Cook in his second round of technical testing and was tested in Dr Gatward's clinical testing. Another of the ventilators tested by Dr Barkalow, number 5966, had also been the subject of Dr Cook's second round of technical testing and Dr Gatward's clinical testing. Consistently with the results reported by Drs Cook and Gatward, Dr Barkalow found Ventilator 5966 to be inaccurate. One of the ventilators tested by Dr Barkalow, number 13208, did not work at all. 3. These results appear to me to bespeak a serious shortcoming in the Shangrila Ventilators. Alarms 1. The importance of alarms on a ventilator was emphasised in the evidence of Drs Morris, Nguyen and Gatward. Dr Morris said: "[I]t is important that ventilators have accurate and readily interpretable alarms because it is critical that a clinician is notified about an issue with the patient or the ventilator. In an ICU or hospital setting an alarm can attract the attention of medical staff and signify the need to adjust patient treatment. In an operating theatre, the alarm alerts the operating staff to a problem or a change to the ventilation which may require adjustment. In a pre-hospital setting, the alarm is an additional input to the treating medical professional, and (if the situation is an emergency) can draw the professional's attention to an issue which they may not be aware of." 1. HealthShare's pleaded case was directed to three types of alarm. High Pressure Alarm 1. The only reference in the User Manual to a high pressure alarm was in cl 4.2 which provided: "2. Continuous high pressure alarm test After high pressure alarm occurs, continue to press the reservoir bag, when high pressure alarm lasting more than 15 seconds, the continuous high pressure alarm occurs." 1. HealthShare's pleaded case was that the Shangrila Ventilator: 1. "did not meet published specifications as it was not possible to consistently trigger a continuous high pressure alarm"; [57] and 2. "did not trigger a continuous high-pressure alarm when patient airway pressure exceeded a set limit". [58] 1. HealthShare did not address this issue in its written closing submissions in chief. 2. In its closing reply submissions, HealthShare submitted: "Dr Cook's testing of the Shangrila 510S Ventilators revealed that the ventilators he tested were not capable of triggering a continuous high-pressure alarm. Dr Cook explains that this is because he observed the Shangrila 510S Ventilators did not have the ability to prioritise or log alarms." (Footnote omitted.) 1. In support of that submission, HealthShare relied on this evidence from Dr Cook: "The Shangrila Test Checklist records that the Shangrila Ventilators failed the requirement 'Set alarms to test' as I was unable to reliably test the alarms, as there was no alarm priority, or log. As a consequence, the Shangrila Ventilators would alarm with a different alarm to that I intended and was trying to test. As a consequence, I conclude that the Shangrila Ventilators were not capable of triggering a continuous high-pressure alarm." 1. Dr Cook's conclusions are inconsistent with those reached by the biomedical engineers who ran alarm tests for the purposes of Mr Jones' report; Mr De Soysa and Mr Don. 2. Mr De Soysa and Mr Don ran alarm tests in accordance with testing protocols that had been prepared by Mr Jones. 3. Mr Jones' protocol was: "Activate high/low alarms for each parameter and check acoustic and visual alarms, along with alarm silence function." 1. Mr De Soysa and Mr Don found that in respect of every test, the alarm was working in all respects set out in Mr Jones' protocol. Both Mr De Soysa and Mr Don gave the alarm functionality for every ventilator a "pass" mark. 2. In his report to HealthShare's solicitors of 6 October 2021, Mr Jones stated: "The audible and visual alarms described in part were activating and sounding as expected during ventilation, including the 'Alarm Silence' button. 1. HealthShare did not engage with this evidence in its closing submissions. 2. In those circumstances, I am not persuaded I should conclude from Dr Cook's experience that there was an issue with the "consistent triggering"' of the high pressure alarm. I do not doubt this was Dr Cook's experience with the two ventilators he examined. But it is inconsistent with the experience of Mr De Soysa and Mr Don, and with Mr Jones' conclusions. Circuit Disconnect Alarm 1. Dr Gatward gave evidence that a "disconnect" alarm is a universal alarm and one of the most important alarms on modern ICU ventilators. He said: "Disconnection is another emergency event which can lead to patient injury or death. If a patient is disconnected from oxygen and no alarm sounds, there can be adverse consequences such as injury or death. If the wrong alarm sounds, there will be a difference in reaction time … and the incorrect display message may lead clinical staff to overlook the disconnection and to explore other clinical avenues with the patient and ventilator, which is also likely to expose the patient to injury or death." 1. The User Manual provided: "5. circuit disconnect alarm test Take out the reservoir bag in ventilating process, the circuit disconnect alarm occurs after 3 cycles." 1. It is common ground that when the circuit of the Shangrila Ventilator is disconnected, the message that is displayed does not use the words "circuit disconnect". Rather, there appears, on the top line, a blinking red message "No VT!!!": ie no tidal volume. 2. At cl 8.2 of the User Manual, under the heading "Alarm Message List", the "No VT!!!" message is described as: Message Priority Type Alarm definition Operator action No VT!!! High Physiological No tidal volume Check patient and settings 1. Thus, when the Shangrila Ventilator is disconnected, an urgent message is displayed, showing that there is no tidal volume. 2. In that regard, Mr Jones said: "I note that while all the Shangrila Ventilators passed the alarm testing because an alarm sounded upon activation in each parameter, at least one of the Shangrila Ventilators displayed inaccurate information in relation to the nature of the alarm that was sounded. For example, in respect [of] the first ventilator, when the circuit was disconnected, an alarm sounded but the alarm message displayed was 'No Vt' (no tidal volume) rather than 'circuit disconnect' as I would have expected as this was the parameter being tested." 1. In concurrent evidence, Dr Barkalow accepted that a display of a "No VT!!!" display rather than a "circuit disconnect alarm", that is, an alarm using those words, showed that the Shangrila Ventilator was not performing in accordance with the User Manual. 2. However, Dr Barkalow said in one of his reports: "Alarm Message was displayed in the top line of the ventilator display was a blinking red 'No VT!!!' … A blinking red alarm means it is high priority. In my opinion, this is an adequate alarm that would alert staff to first check the breathing circuit for the most likely cause – a patient disconnect." 1. In that context, I think MDT was correct to submit: "That the alarm message would indicate no tidal volume at all is hardly surprising. Tidal volume for a mechanical ventilator is the volume of air delivered to the lungs with each breath. It follows that if there is no tidal volume at all (as opposed to an alarm which might indicate low or high tidal volume), then there is no air being delivered to the lungs with each breath at all. That would be consistent with a circuit disconnection." (Emphasis in original.) 1. In closing submissions, HealthShare drew attention to Dr Nguyen's evidence that "some alarms are more important than others" and that it is "very important for the ventilator alarms to correctly indicate to me what the problem is, and prioritise by most urgent alarm first". In that regard, Dr Nguyen said: "I am aware that some alarms indicate a … more urgent problem than others. For example, a 'disconnection' alarm indicates that a patient is disconnected from the ventilator, meaning the ventilator is no longer delivering air to that patient at all. … a patient being deprived of sufficient oxygen even for a very short time, is a very serious emergency that needs to be resolved within 1 or 2 minutes to avoid serious patient harm or death. Conversely, a 'low tidal volume' alarm indicates to me that for some reason, the ventilator is no longer able to deliver the minimum volume of gas per breath that I have set on the ventilator. This indicates a less urgent problem to me, because I understand that the ventilator is still delivering some air to the patient. In my experience, there are many reasons why a 'low tidal volume' might sound. For example, the oxygen hose may have a kink in it or the patient may be biting down on the breathing tube, constricting airflow." 1. But in this evidence, Dr Nguyen was drawing a distinction between a "disconnection" alarm and a "low tidal volume" alarm. 2. The evidence here is that when the Shangrila Ventilator is disconnected it shows a "no" tidal volume alarm message indicating, in effect, that the patient has been disconnected from the ventilator and is receiving "no" tidal volume. 3. Such disconformity as this shows between the statement in the User Manual and the actual performance of the Shangrila Ventilator is not, in my opinion, significant. Other Alarms 1. In closing submissions, HealthShare also referred to the alleged absence in the Shangrila Ventilator of a tidal volume alarm, a leak alarm and an apnoea alarm. 2. However, HealthShare did not develop any submissions in relation to those matters. Oxygen hoses 1. HealthShare's case is that the oxygen hoses attached to the Shangrila Ventilator did not comply with Australian standards because they: 1. did not have a stamp with a lot number and manufacturer; and 2. had been hand-crimped, that is, manually attached and not attached using a hydraulic machine crimper and were not fitted with an Australian standard "handwheel connection" to allow connection to a medical oxygen supply. 1. What was said to flow from these matters was not developed. 2. There is also a debate as to whether the oxygen hoses were the correct colour, HealthShare's position being that in Australia hoses are colour-coded to correspond with the colour of the medical gas outlet in question. Again, what was said to flow from this alleged shortcoming was not developed in submissions. Patient circuit and expiratory valve calibration 1. Clause 5.2 of the User Manual sets out instructions to "connect oxygen supply and patient circuit". 2. Mr Jones expressed the opinion that the clause "did not provide adequate instructions for the connection of the patient circuit and expiratory valve". 3. However, my attention was not drawn to any evidence showing that the biomedical engineers working under Mr Jones' supervision, Mr De Soysa and Mr Don, had any difficulty connecting the patient circuit and expiratory valve. 4. Although Dr Barkalow said that initially he "encountered some difficulty" in this regard, he said that he was ultimately able to connect the patient circuit and expiratory valve and said: "Clause 5.2 provides enough information and guidance such that an operator familiar with ventilators and breathing circuits can set up the patient circuit correctly." 1. Again, what was said to flow from these matters was not developed by HealthShare. Synchronised Intermittent Mandatory Ventilation 1. Clause 3.3.5 of the User Manual described how the Shangrila Ventilator operated in "synchronised intermittent mandatory ventilation" mode, being a mode that, according to the User Manual, "allows both mandatory and spontaneous breaths". 2. Mr Jones said, of cl 3.3.5: "That clause of the User Manual states that the Shangrila Ventilator will trigger a mandatory breath followed by supported breath when the ventilator is operating in synchronized intermittent mandatory ventilation (SIMV) mode. However, during testing I observed that the Shangrila Ventilator operated in reverse to what is described in the User Manual, that is the Shangrila Ventilator delivered triggered supported breath in the first phase and then triggered mandatory breath in the second phase of the breathing cycle." 1. On the other hand, Dr Barkalow said that his experience was that the "SIMV" mode worked as described in cl 3.3.5 of the User Manual. 2. In closing submissions, it was submitted for HealthShare: "During cross-examination, Dr Barkalow agreed that if this is what Mr Jones observed, 'the user manual's description of how the ventilator works is reverse of what actually occurs'." 1. That is not a fair characterisation of what Dr Barkalow said and, in the passage of evidence given by Dr Barkalow immediately before the question that this submission references, Dr Barkalow said that "I agree that Mr Jones and I experienced different observations in the SIMV mode". 2. In those circumstances, I am unable to come to any conclusion as to whether the User Manual accurately described how to operate the Shangrila Ventilator in SIMV mode. 3. In any event, the significance of any shortcoming in the User Manual in this regard was not developed. CPAP mode 1. Clause 3.3.6 of the User Manual provided: "3.3.6 CPAP CPAP (Continuous Positive Airway Pressure), the ventilator put out a continuous flow that always maintains positive pressure flow, when patient has inspiration and easily inhale gas." 1. Mr Jones said, based on the testing carried out by Mr De Soysa and Mr Don, that the "CPAP mode did not operate at a low setting and did not operate in accordance with the specifications" in the User Manual. 2. In Mr De Soysa's test results, he recorded that the "lowest value of CPAP is 7.5cm H2O. Mr De Soysa recorded that the "lowest pressure is around 6.0 when set to 0". 3. On the other hand, Dr Barkalow reported that he had no issues with the CPAP mode at low setting. He said: "As documented in my reports, I found the CPAP mode to work correctly from settings of 0 cmH2O to 30 cmH2O." 1. HealthShare pointed out that Dr Barkalow had made no contemporaneous notes of any test results for CPAP testing at a low setting. But I do not see this as a reason to doubt Dr Barkalow's testimony as to the results he achieved. 2. On this state of the evidence, I am not able to reach a conclusion that the Shangrila Ventilator did not operate in CPAP mode. 3. In any event, once again, the question of where this particular alleged issue took HealthShare's case was not developed. Claim in contract – Sale of Goods Act Did HealthShare accept the Shangrila Ventilators for the purposes of section 37 of the Sale of Goods Act? 1. Section 37(1) of the Sale of Goods Act provides: "Where goods are delivered to the buyer which the buyer has not previously examined, the buyer is not deemed to have accepted them unless and until the buyer has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract." 1. Section 38(1) provides: "The buyer is deemed to have accepted the goods when the buyer intimates to the seller that the buyer has accepted them, or, subject to section 37, when the goods have been delivered to the buyer and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time the buyer retains the goods without intimating to the seller that the buyer has rejected them." 1. HealthShare examined the Shangrila Ventilators in the manner I have described, namely, by Dr Cook conducting his three rounds of technical testing and by Dr Gatward and his assessors conducting the clinical testing. 2. Mr Gannon was aware that HealthShare would conduct tests in relation to the Shangrila Ventilators; an unsurprising proposition bearing in mind that HealthShare had paid half the purchase price, $10.395 million, without having actually seen a Shangrila Ventilator. 3. The first 48 ventilators were delivered on 16 June 2020. On that date, Mr Zanetic wrote to Mr Gannon: "We are planning to have the two sample ventilators tested within the next few weeks. I will be providing confirmation of the testing location shortly … once we have completed the acceptance we will notify you regarding successful completion, invoicing and payment …" 1. When asked about that email, Mr Gannon gave this evidence: "Q. When you were informed of the proposed testing, you didn't query Mr Zanetic, did you? A. No. Q. You didn't query his statement regarding payment upon successful completion? A. No. Q. You understood that HealthShare had to test them; to make sure that they would work? A. Yes. … Q. You knew at this time that two sample ventilators would be tested and you knew - yes? A. Yes. Q. You well knew that once the testing had been completed you'd be notified regarding successful completion; correct? A. Yes. Q. I'm suggesting to you that if the testing did not occur successfully you understood that HealthShare could get their money back? A. Yes." 1. Mr Bellas also accepted that he knew testing was to be undertaken to see if the ventilators worked and functioned in accordance with the User Manual and were fit for the purpose for which they had been acquired. MDT sent its representatives, being personnel from Chemtronics, to Dr Cook's first round of technical testing on 30 July 2020. 2. MDT was also notified in advance of the clinical testing conducted by Dr Gatward. Mr Gannon agreed in cross-examination that he was aware of the scheduled clinical testing. 3. I accept HealthShare's submissions that it tested the ventilators within a reasonable period following delivery. MDT raised no objection at the time to the conduct or timing of the acceptance testing. 4. I find that HealthShare had not accepted the goods prior to it notifying MDT of its rejection of them. Were the Shangrila Ventilators fit for purpose? 1. Section 19(1) of the Sale of Goods Act provides that: "(1) Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether the seller be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose." 1. Thus, in order for HealthShare to show that it was an implied condition of the Agreements that the Shangrila Ventilators would be fit for purpose, HealthShare must establish: 1. that it expressly or by implication made known to MDT the particular purpose for which the Shangrila Ventilators were required; 2. so as to show that HealthShare relied on MDT's skill or judgment; and 3. that the Shangrila Ventilators were of a description which it was in the course of MDT's business to supply. [59] 1. If those elements are established, there was an implied condition of the Agreements that the Shangrila Ventilators would be reasonably fit for the particular purpose made known by HealthShare to MDT. Particular purpose 1. It is HealthShare's case that it made known the particular purpose for which it required the Shangrila Ventilators in the conversation that Ms Hanigan had with Mr Gannon in April 2020, [60] where Ms Hanigan asked Mr Gannon: "Will the Shangrila 510s be suitable for NSW Health and meet our needs for COVID?" 1. Mr Gannon did not dispute having had this conversation with Ms Hanigan although, as I have set out, [61] Mr Gannon said that on a different occasion he told Ms Hanigan that: "The Shangrila units are an emergency ventilator. They are not intended for ICU." 1. HealthShare knew that the Shangrila Ventilators were emergency transport ventilators. Mr Zanetic said as much in his email to Drs Morris and Nguyen on 20 April 2020. [62] 2. Ms Hanigan did dispute that Mr Gannon had told her that the ventilators were not "intended for ICU" but I have found that he did so. [63] 3. HealthShare contends that, arising from Ms Hanigan's conversation with Mr Gannon, the particular purpose that it made known to MDT for which the Shangrila Ventilators were required was: "… for use in a clinical setting for treating patients with COVID-19." [64] 1. Mr Gannon agreed in cross-examination that he understood that the Shangrila Ventilators were to be used in "multiple clinical settings" and that this included use in hospitals. 2. Mr Gannon also agreed that he told Ms Hanigan that: 1. the Shangrila Ventilators were specifically designed for use in the COVID-19 pandemic; and 2. the Shangrila Ventilators would be effective and suitable for treating patients with COVID-19 in New South Wales hospitals. 1. MDT submitted that the purpose posited by HealthShare was not a "particular purpose" for the purposes of s 19 of the Sale of Goods Act because it did not convey a particular clinical purpose or setting and because HealthShare did not make known to MDT its actual intended clinical purpose for the Shangrila Ventilators. Alternatively, MDT submitted that the Shangrila Ventilators were purchased for the purpose of a "reserve stockpile", as was submitted to Dr Morris in cross-examination. [65] 2. No doubt the general purpose of any ventilator is to be used in a clinical setting; that is in the course of treating patients. 3. It is true that HealthShare, and Ms Hanigan in particular, did not specify precisely how and in precisely what clinical settings the Shangrila Ventilators would be used. 4. But Ms Hanigan told Mr Gannon, as was obvious in the circumstances, that the ventilators were to be used at some stage to treat patients with COVID-19, whether or not the Shangrila Ventilators were to be held in a reserve stockpile. 5. That was sufficient to identify a "particular purpose" for the purposes of s 19 of the Sale of Goods Act. The general purpose identified by Ms Hanigan was the use of the ventilators by HealthShare in a clinical setting: "suitable for NSW Health". The particular purpose identified was the use in a clinical setting to treat patients with COVID-19: "meet our needs for Covid". 6. It was not necessary for HealthShare to identify, at the time of entering into the Agreements, "how these lower performing ventilators were actually intended to be used in a world where the preferable functionality [as a specialised ICU ventilator] were simply not available", to adopt the language of MDT's closing submissions. 7. I am satisfied that, in her exchange with Mr Gannon, Ms Hanigan identified the "particular purpose" for which HealthShare required the Shangrila Ventilators. Did MDT provide HealthShare with the MDT Shangrila Brochure and the User Manual merely as an intermediary? 1. In closing oral submissions, it was submitted on behalf of MDT, for the first time, that MDT provided HealthShare with the User Manual merely as an intermediary and without itself making any representations as to its contents. 2. It was submitted, with reference being made to the observations made by the High Court in very different circumstances to those here, in Google Inc v Australian Competition and Consumer Commission: [66] "The provision of [the User Manual] does not constitute representations of what is in the user manual. So intermediaries who pass things on and don't otherwise say they're warranting the correctness of it are not making the representation themselves." 1. I do not accept that submission. 2. MDT was acting as a principal in its dealings with HealthShare. It was aiming to conclude a contractual relationship with HealthShare, not as the agent for Aeonmed, but on its own account. MDT did not pass on to HealthShare the User Manual on a "for what it's worth" basis. MDT was no "mere conduit". [67] A reasonable person in HealthShare's position would have understood that MDT had "adopted or endorsed" [68] the accuracy of the User Manual. 3. It must have been obvious to Mr Gannon and Mr Bellas that HealthShare would rely on the contents of the User Manual as accurately and comprehensively explaining how the Shangrila Ventilator was to be used and what its functionality was. Did HealthShare rely on MDT's skill or judgment – Ms Hanigan 1. To enliven the implied condition as to fitness for purpose in s 19 of the Sale of Goods Act, it is necessary for HealthShare to show that it relied on MDT's "skill or judgment". 2. In closing submissions, HealthShare's case that it relied on MDT's skill or judgment when deciding to buy the Shangrila Ventilators was stated to be based on identified paragraphs of two of Ms Hanigan's affidavits. 3. In the first affidavit, Ms Hanigan set out extracts from the emails that Mr Gannon sent her on 1 May 2020 following her enquiry concerning the article in The Guardian to which I have referred above. [69] 4. Those extracts were: "I have requested a response from AEONMED. Please note AEONMED did sell an older model which is a 510. http://www.aeonmed.com/en/product4_d.html?id=395. These units are now a very old unit, if sitting on shelves for a long while and not checked, certainly, you would have problems. The units acquired by the UK were not Shangrila 510S Respirator Workstations as being supplied to Australia, through MDT [as] a dealer. Oxygen supply – AEONMED has assured no issues with Shangrila 510S Respirator Workstations. All units test before export. Once again, we have been very clear are not full ICU ventilators, the specifications provide detail [of] the clear functionality of these units." 1. I have set out the third and fourth of those extracts above. [70] The first and second extracts were from an earlier email sent by Mr Gannon on 1 May 2020. 2. The final extract, commencing with the words "once again" is the passage from Mr Gannon's 1 May 2020 email that I have found points to the probability that, despite Ms Hanigan's denial, MDT had been "very clear" that the Shangrila Ventilators were not "full ICU ventilators". 3. The affidavit then set out the following passages to which HealthShare points as showing its reliance on MDT's skill or judgment: "Based on the statements by Mr Gannon recorded above, I understood that the issues with the [AEONMED] Shangrila Ventilators were only applicable to the older model purchased in the United Kingdom (the 510 model) and not the AEONMED Shangrila Ventilators which MDT was supplying to HealthShare (the 510s model). I understood Mr Gannon's reference to "specifications" which detail the functionality of these units to be a reference to the AEONMED Shangrila Ventilators user manual. I recall that I was comfortable with Mr Gannon's explanation because HealthShare's clinical team had done a desktop review and deemed it was suitable based on the functionality stated in the user manual (as set out in paragraph 17 above). Had I not been comfortable with that explanation, I would have immediately escalated the issue to the COVID-19 taskforce and to HealthShare." (Emphasis added.) 1. In the first of those paragraphs, Ms Hanigan is stating her understanding that the issues identified in The Guardian were only relevant to the Shangrila 510 ventilator and not to the 510S Shangrila Ventilator. 2. What is here stated by Ms Hanigan appears to confirm that she misunderstood Mr Gannon's email. She saw the reference to having been "very clear" that ventilators were "not full ICU ventilators" as being a reference to "the older model purchased in the United Kingdom", being the Shangrila 510 model. It is in that context that she made the statement at the end of the passage that I have emphasised above. 3. In any event, Ms Hanigan is speaking here of events that occurred on 1 May 2020; after the Agreements have been entered. 4. The second passages relied on by HealthShare are from Ms Hanigan's second affidavit. 5. In the first of those identified passages, Ms Hanigan stated that she "understood that [she] could trust MDT and Mr Gannon to provide reliable advice and information through the ventilator procurement process". 6. In the remaining passages on which HealthShare relies, Ms Hanigan said that: 1. she was "reassured" that Mr Gannon had direct connections from Aeonmed and was therefore a reliable source of information about Aeonmed products; 2. she had developed a trust in Mr Gannon and Mr Bellas and MDT as a reliable authorised source of information; 3. she relied on Mr Gannon's statement, set out above, that the Shangrila Ventilators would be "suitable for NSW Health and meet our needs for COVID" by "continuing with the procurement of Shangrila Ventilators"; 4. she relied on Mr Gannon's assurance in his 1 May 2020 email that the ventilators referred to in The Guardian article were not the same model as those being supplied by MDT and said that she would not have continued with procurement of the Shangrila Ventilators in the absence of the "assurances" in that email; and 5. in reliance on "Mr Gannon's representations" in his 1 May 2020 email, she forwarded his "advice" to the COVID-19 Taskforce under the cover of the email that I have referred to above, confirming that The Guardian was referring to a ventilator other than that being supplied by MDT. 1. The latter evidence relates to events which occurred on 1 May 2020, after the Agreements were entered. 2. The effect of the former evidence is that Ms Hanigan continued with the "procurement" of the Shangrila Ventilators, relying on Mr Gannon's agreement that the Shangrila Ventilator would be "suitable for NSW Health and meet our needs for COVID" and his statement that "I only deal with the best". [71] 3. However, as MDT submitted, Ms Hanigan played no role in deciding whether to approve the purchase of the Shangrila Ventilators. 4. As MDT submitted: "Ms Hanigan had nothing to do with assessing whether the ventilators were required or suitable for use in a clinical setting for treating patients with COVID-19. Her role was not to know which category a ventilator was in or what the potential uses of a ventilator were, but rather she was just trying to obtain leads to provide them to Mr Zanetic, for him to liaise with others within NSW Health." 1. Thus, Ms Hanigan gave this evidence in cross-examination: "Q. It wasn't your job to know whether a ventilator was in one category or another; correct? A. Correct. Q. You were just trying to get the lead and provide it onto Mr Zanetic; correct? A. Correct. … Q. You didn't read the TGA certificate suitability for use reference? A. No. Q. It's because it wasn't your job, and you weren't taking any interest in whether it was specifically suitable for one thing or other, other than if it was an appropriate one, as you understood, to pass to Mr Zanetic? A. Correct. … Q. That's what you would usually do with all of this material, isn't it? A. Correct. Q. You would send it to Mr Zanetic because it was for Mr Zanetic to make that decision, correct? A. It was someone in Health. I don't know if he was on his own making those decisions but people within the Health team. Q. As far as you understood it was for Mr Zanetic or others he may speak to? A. Yes. Q. To make the decision on behalf of NSW Health as to what to do next? A. Correct. Q. It wasn't for you? A. No. Q. He would tell you what the answer was one way or the other, correct? A. Correct. Q. You would continue to act as the liaison with on this occasion MDT, correct? A. Correct." 1. It must follow from this evidence that HealthShare, through Ms Hanigan, did not rely on MDT's skill or judgment when deciding to purchase the Shangrila Ventilators. Did HealthShare rely on MDT's skill or judgment – Dr Morris 1. However, as I have set out above in my description of the Desktop Review by Mr Zanetic and, more particularly, by Dr Morris, HealthShare did place reliance on the brochures that Dr Morris reviewed and on the User Manual. 2. Although HealthShare did not, in its closing submissions, in terms rely on the evidence of Dr Morris in relation to the question of whether or not, for the purpose of s 19 of the Sale of Goods Act, it relied on MDT's skill or judgment, the proceedings were conducted upon the basis that this was HealthShare's position. 3. Thus, in relation to the allied question of whether HealthShare relied on the representations that it contends MDT made, and that it contends were misleading or deceptive, HealthShare referred in its submissions to the detail of Dr Morris' evidence; and MDT engaged with the detail of those submissions. Indeed, one of the representations that HealthShare alleges that MDT made is that the Shangrila Ventilators were not fit for the purpose of treating COVID-19 patients. Thus, in substance, the proceedings were conducted by both sides on the basis that HealthShare's case on reliance was based on Dr Morris' role in the Desktop Review. 4. There was, ultimately, no dispute about the following matters in HealthShare's closing submissions: "The [U]ser [M]anual was also reviewed by Dr Morris, who had earlier reviewed the COVID-19 Brochure. Following his review of the [U]ser [M]anual, Dr Morris formed the view that the Shangrila 510S would be suitable for use in NSW during the COVID-19 pandemic. Dr Morris reviewed the modes listed in the [U]ser [M]anual and the COVID-19 Brochure and relied on those documents as an accurate description of the functionality of the ventilators, which he had not used before. Dr Morris gave evidence that the most important elements in the documentation for the purposes of his review were: the modes of ventilation; the displays; the technical specifications; the types of peripheral and consumable equipment required; and the troubleshooting features. He reviewed the [U]ser [M]anual and the COVID-19 Brochure in full as part of his desktop review, including the diagrams and images contained in those documents. Dr Morris gave the following evidence about particular features of the COVID-19 Brochure and [U]ser [M]anual: a) Dr Morris reviewed the intended purpose stated in cl 1.1.1, the working scenarios identified in the brochure, and the images that depicted the ventilator assembled on a stand. b) As to volume control ventilation, Dr Morris reviewed cl 3.3.2 and the statement in the brochure that the Shangrila 510S has 'conventional volume-controlled ventilation mode' and 'can provide a precise tidal volume'. Based on these statements, Dr Morris understood that the tidal volume could be pre-set on the Shangrila 510S and that the ventilators could provide a precise and accurate tidal volume in functioning in volume control mode. His evidence is that, if those documents had not stated that the tidal volume could be pre-set, he would not have recommended that HealthShare NSW proceed with the transaction. c) As to the oxygen concentration delivery, Dr Morris reviewed cl 9.7.3 which stated that the Shangrila 510S could deliver fraction of inspired oxygen (FiO2) of between 40-100% with a ±20% accuracy. While that accuracy range was not as precise as he would normally expect for a ventilator used in the NSW Health system, he decided that this range would be sufficient given the difficulty in sourcing ventilators during the pandemic. Dr Morris' evidence is that if the [U]ser [M]anual had indicated the accuracy was in fact ±50%, he would not have recommended that HealthShare NSW proceed with the transaction." (References omitted.) 1. It was on the basis of Dr Morris' statement on 21 April 2020 that, having reviewed all of the material, including the User Manual, he was "happy that it now satisfies all the requirements", [72] that HealthShare entered the Agreements. 2. It is true that Mr Zanetic said in the emails he sent Dr Morris on 21 April 2020 that he did not think that "anything in the manual … would change the initial assessment" that he had made about the Shangrila Ventilators. But Dr Morris was the person whose opinion was critical to the decision made by HealthShare to purchase the Shangrila Ventilators. It is clear that Dr Morris relied on what was said in the User Manual. 3. In those circumstances, my conclusion is that HealthShare did, through Dr Morris and for the purposes of s 19 of the Sale of Goods Act, rely on MDT's skill or judgment when deciding to purchase the Shangrila Ventilators. Were the Shangrila Ventilators reasonably fit for the purpose of being used in a clinical setting for treating patients with COVID-19? 1. This question is to be answered as at the date the Agreements were entered and must be considered in light of the following matters, that I have discussed in detail above. 2. First, HealthShare understood that the Shangrila Ventilators were emergency transport ventilators. [73] 3. Second, Mr Gannon had told Ms Hanigan, and HealthShare thus knew, that the Shangrila Ventilators were not "full ICU ventilators". 4. Third, and as I have set out above, [74] the User Manual stated that the "Intended Use" of the Shangrila Ventilators was: "Shangrila510S ventilator is mainly used in the emergency rooms of hospitals, transfer after operations, field and occasions where first-aid or transfer is needed, for care of adult, pediatric, infant patients weighing at least 3.5 kg. The Shangrila510S Ventilator is intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport. The ventilator conforms to the principle of simple and easy operation requested for emergency equipment. It can be used by many medical units and clinical offices at all levels to perform emergency treatment for accident affairs, such as first-aid center, ambulance, anesthesia unit, chest surgery, cranial surgery, respiratory unit, various large mines, factories, swimming places." 1. Fourth, HealthShare knew, from Mr Zanetic's analysis, that the Shangrila Ventilators did not meet many of the ICU Mid-Acuity specifications that Mr Zanetic had incorporated into his technical assessment process, as part of the Desktop Review. [75] 2. Fifth, HealthShare knew, because of the exigencies of the pandemic, that it needed urgently to source as many ventilators as it could, including "lower performance options". [76] 3. I have discussed, at length above, HealthShare's case as to the shortcomings of the Shangrila Ventilator. 4. Critically, I have come to the following conclusions: 1. it is possible to pre-set tidal volume on the Shangrila Ventilator, although not at the press of a button, and only with some difficulty; [77] 2. the Shangrila Ventilator does have volume control, but not conventional volume control, that is, volume control which maintains volume in the face of changes in a patient's pulmonary impedance; [78] 3. the Shangrila Ventilator does not operate in pressure control mode as stated in the User Manual; [79] 4. the Shangrila Ventilator does not reliably, accurately or efficiently deliver the fraction of inspired oxygen in accordance with the ranges specified in the User Manual, or at all. [80] 1. The conclusion to which I have come is that these four factors combine to compel the conclusion that, notwithstanding the matters that I have set out at [518] to [522], the Shangrila Ventilators were not reasonably fit for the purpose of being used in any clinical setting for the treatment of patients with COVID-19. 2. In particular, I find that the fact that the Shangrila Ventilator cannot accurately deliver the fraction of inspired oxygen [81] shows it is not reasonably fit for this purpose. As I have said, the evidence is that the accurate and timely display of oxygen concentration is core to the functionality of a ventilator. [82] That must particularly be so in the treatment of a respiratory disease such as COVID-19. 3. It may be, as MDT submitted, that there is some use to which the Shangrila Ventilator could be put. An example given was as a transport ventilator taking a patient away from ICU for investigations to other areas of the hospital. Another example given was the weaning of a patient off ventilation, that is, when a patient is returning to spontaneous breathing and the ventilator is being used as a part of an assisted breathing process. It may be that having the Shangrila Ventilators is better than having nothing or, as MDT somewhat brutally put it in closing submissions, better than "using a bag to try to ventilate sick patients". 4. But assuming all those matters in favour of MDT, I am persuaded that the Shangrila Ventilator was not reasonably fit for the particular purpose for which it was purchased: treating patients with COVID-19. I find that the Shangrila Ventilator was not fit for the purpose, in any clinical setting, of treating patients with COVID-19. Was there a sale by description? 1. Section 18 of the Sale of Goods Act provides: "Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and if the sale be by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description." 1. HealthShare contended that the Agreements comprised a sale of goods by description and that the relevant description was that the Shangrila Ventilators: "a) had 'been specifically designed for the Coronavirus Pandemic and used in Wuhan'; b) were 'customized …to save more lives according to the clinical requirements' during the COVID-19 pandemic; c) could be used by a patient diagnosed with COVID-19; d) were of suitable quality for use by NSW Health and would meet its needs during the COVID-19 pandemic because MDT 'only deal with the best' and 'would never recommend anything but the best ventilators for NSW'; e) had 'conventional Volume-Controlled ventilation mode' and 'can provide a precise tidal volume'; f) had working scenarios which included 'Ward', 'Emergency Department' and 'sub-acute Care Unit'; g) were assured by AEONMED not to have issues as to oxygen supply; and h) functioned in accordance with their specifications." (References omitted.) 1. But these matters do not comprise a "description" of the goods for the purposes of s 18 of the Sale of Goods Act. Rather, these are representations as to the nature and quality of the goods. A sale by description is a sale of goods in which the sale is predicated on the description of the goods: for example, "woollen under-garments, a hot water bottle, a secondhand reaping machine". [83] The relevant "description" of the goods was in the quotation and invoice for the First Agreement and in the invoice for the Second Agreement, namely: "Shangrila 510S Integrated Respiratory Workstation" 1. The goods supplied were as described, albeit not, as I have found, reasonably fit for the purpose for which they were purchased. 2. There was no sale by description. Misleading or deceptive conduct 1. HealthShare contends that MDT made a number of representations which are said to have been false and thus misleading or deceptive for the purposes of s 18 of the ACL. 2. In view of the conclusion to which I have come concerning the Shangrila Ventilators not being fit for purpose, I will deal with this aspect of HealthShare's case relatively briefly. Principles 1. There was no dispute about the relevant principles. 2. They were summarised this way in Australian Competition and Consumer Commission v TPG Internet Pty Ltd: [84] "The applicable principles concerning the statutory prohibition of misleading or deceptive conduct (and closely related prohibitions) in the ACL are well known and there was no dispute between the parties concerning those principles. The central question is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error (that is, to form an erroneous assumption or conclusion about some fact or matter. [85] A number of subsidiary principles, directed to the central question, have been developed: (a) First, conduct is likely to mislead or deceive if there is a real or not remote chance or possibility of it doing so. [86] (b) Second, it is not necessary to prove an intention to mislead or deceive. [87] (c) Third, it is unnecessary to prove that the conduct in question actually deceived or misled anyone. [88] Evidence that a person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential. Such evidence does not itself establish that conduct is misleading or deceptive within the meaning of the statute. The question whether conduct is misleading or deceptive is objective and the Court must determine the question for itself. [89] (d) Fourth, it is not sufficient if the conduct merely causes confusion. [90] (e) Fifth, where the impugned conduct is directed to the public generally or a section of the public, the question whether the conduct is likely to mislead or deceive has to be approached at a level of abstraction where the Court must consider the likely characteristics of the persons who comprise the relevant class to whom the conduct is directed and consider the likely effect of the conduct on ordinary or reasonable members of the class, disregarding reactions that might be regarded as extreme or fanciful." [91] The representations relied on 1. The ventilators were fit for the purpose of use by NSW Health in treating COVID-19 patients 1. As I have found that, in fact, the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act, the question of whether or not MDT made a representation to this effect is something of a moot point. 2. In any event, in HealthShare's Cross Claim List Statement, this representation is said to arise from "the conduct pleaded at paragraph 4A", which comprised: 1. statements made by Mr Gannon in his email to Ms Addai-Aboagye on 30 March 2020; [92] 2. a statement that Mr Gannon made to Ms Addai-Aboagye on or about 30 March 2020 that the Shangrila Ventilators operated in CPAP mode; 3. the statements made by Mr Gannon to Ms Hanigan on 20 April 2020 to which I have referred; [93] and 4. statements made in the MDT Shangrila Brochure. 1. Whether or not these statements, taken together, amount to a representation that the Shangrila Ventilators were fit for purpose, the wider point is that HealthShare has not established that the decision to purchase the Shangrila Ventilators, which was made on the basis of Dr Morris' conclusions, had any connection with any of these matters. In particular, as I have said, Dr Morris did not see the MDT Shangrila Brochure. 2. The ventilators have a conventional volume-controlled ventilation mode and can reliably provide precise tidal volume 1. The statement the subject of this alleged representation was made in the MDT Shangrila Brochure, and thus also in the Allied Scientific Shangrila Brochure. I have found that the Shangrila Ventilators did not have conventional volume control. Thus, the statements in these brochures were not correct, and thus misleading or deceptive. 2. But Dr Morris did not rely on any document provided to HealthShare by MDT which stated that the Shangrila Ventilator had conventional volume control. He did not have the MDT Shangrila Brochure. And MDT did not provide HealthShare with the Allied Scientific Shangrila Brochure. Mr Zanetic found it online. [94] When making his decision concerning the ventilators, Dr Morris had the RAPP Shangrila Brochure and the Shangrila in a Bag Brochure. There were no statements in those brochures that the Shangrila Ventilators had "conventional volume controlled ventilation mode" or that they could reliably provide "precise tidal volume". 3. The ventilators would function in accordance with the specifications in the User Manual 1. In closing written submissions, MDT accepted that the making of this representation was implicit from its provision to HealthShare of the User Manual. 2. As I have set out above, in closing oral submissions it was submitted on behalf of MDT that it provided the User Manual to HealthShare as an intermediary and without itself making any representations as to its contents. For the reasons I have set out above, I do not accept that submission. 3. As I have explained, the Shangrila Ventilators did not function in accordance with all of the specifications in the User Manual, particularly in relation to the oxygen concentration function. 4. This representation was false and thus misleading or deceptive. 5. HealthShare relied on this representation to enter the Agreements. 6. HealthShare also submitted that this representation arose because of the statement made by Mr Gannon to Ms Hanigan in his email of 1 May 2020 that the "specifications provide detail of functionality". [95] That may be so, but that email was sent after the Agreements had been entered. 4. The ventilators are intended to be used in common wards and ICUs 1. This representation arose by reason of the statement in the User Manual as to the "Intended Use" of the Shangrila Ventilators. 2. I have set out above the complete statement made in the User Manual under this heading. [96] It included that the Shangrila Ventilator is "intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport". 3. I have found that, as Mr Gannon said in his 1 May 2020 email to Ms Hannigan, the Shangrila Ventilator was not a "full ICU ventilator". 4. I do not see that statement as qualifying what was stated in the User Manual. 5. But I cannot see how this representation was false. The Shangrila Ventilators were intended to be used "in common wards and ICU". 6. The problem is, as I have found, they were not fit for that purpose. 5. The ventilators are suitable for use in wards, emergency departments, ICUs or sub-acute care departments 1. I have found that the Shangrila Ventilators were not fit for the purpose and thus not suitable for use in any clinical setting. 2. However, like the alleged representation that the Shangrila Ventilators were "fit for purpose", this representation is stated by HealthShare to arise from the matters referred to at par 4A of the Cross Claim List Statement and thus has the causation difficulties to which I have referred in respect of that representation. 6. The ventilators are capable of delivering FiO2 of between 40%-100% with ±20% accuracy 1. As I have discussed above, this representation was expressly made in the User Manual. [97] 2. I have found that the Shangrila Ventilators are not capable of reliably performing in this way. For that reason, my conclusion is that the statement made in the User Manual to this effect was misleading or deceptive. 3. I think it likely that Dr Morris relied upon this statement in the User Manual as part of his consideration during the Desktop Review. 7. The ventilators can deliver volume control ventilation and the tidal volume on the ventilators can be pre-set 1. This alleged representation is also said to arise from statements made in the User Manual. 2. For the reasons I have set out above, my conclusion is that the Shangrila Ventilators did have a volume control function and that tidal volume on the Ventilators could be pre-set. 8. The ventilators trigger a continuous high-pressure alarm when the patient airway pressure exceeds a set limit 1. Again, this representation is said to arise from statements made in the User Manual. 2. For the reasons I have set out above, I am unable to conclude that the high-pressure alarm on the Shangrila Ventilators did not operate when a patient airway pressure exceeded a set limit. Conclusion 1. I understand that MDT accepts that it will follow from my conclusion that the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act that it must now return the $10.395 million paid to it in April 2020. 2. However, I will now invite submissions from the parties about that, and as to what orders should be made to reflect these reasons and what, if any, further matters require determination. ********** MDT Shangrila Brochure VG70 Brochure RAPP Shangrila Brochure MDT Shangrila Technical Data Brochure Shangrila in a Bag Brochure Allied Scientific Shangrila Brochure Purchase Order 37879543 Endnotes 1. Section 9. 2. Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law. 3. This summary is taken with gratitude from HealthShare's opening submissions and is based on the evidence of Dr Richard Morris AM which, in this respect, was uncontroversial. 4. Plaintiff's closing submissions at par 25. 5. Document dated 24 July 2020 entitled "Cancellation of Ordered Ventilators": see [266]-[269] below. 6. See [22] above. 7. Ms Addai-Aboagye stated "bridge potential caps", but this appears to be an error. In any event, the facts do not turn on this. 8. Purchase Order. 9. Which was not in proper form, was objected to, rejected and replaced with the evidence at [101]. 10. These words do not appear in Mr Gannon's email, but it is what he meant. I discuss this below at [243]ff. 11. Ibid. 12. See [96] above. 13. See [44] above. 14. See [534]ff. 15. The proportion of each breath cycle in either the "inspiratory" (breath in) or "expiratory" (breath out) phases. 16. As he agreed at T869.1. 17. See [110] above. 18. See [91] above. 19. See [119] above. 20. See [139] above. 21. See [141] above. 22. That is the RAPP Shangrila Brochure, see [45] above; the Shangrila in a Bag Brochure, see [116] above; and, perhaps, the Allied Scientific Shangrila Brochure, see [121] above. 23. See Dr Morris' evidence at [128] above. 24. See [144] above. 25. Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [74] (Heydon JA, with whom Mason P and Ipp AJA relevantly agreed), quoting Gibson v Manchester City Council [1979] 1 All ER 972 at 974 (Lord Diplock). 26. Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 (McHugh JA, Hope and Mahoney JJA agreeing), cited with approval in Brambles Holdings Limited v Bathurst City Council (supra) at [74]. 27. Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269 at [51] (Nettle JA, with whom Chernov and Ashley JJA agreed). 28. Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369] (Allsop J, as his Honour then was, with whom Drummond and Mansfield JJ agreed). 29. Ibid and the cases cited therein (including Brambles Holdings Limited v Bathurst City Council (supra)). 30. Re Australian Organic Eggs Pty Ltd [2022] VSC 747 at [99] (Button J). 31. Brambles Holdings Limited v Bathurst City Council (supra) at [81] (Heydon JA). 32. Purchase Order. 33. The email read "not" but this is clearly a typographical error. 34. See [5] above. 35. See cl 7.3 set out at [201] above. 36. Ms Kusnadi's email on 22 April 2020 referred to at [180] above. 37. Ms Kusnadi's second email on 22 April 2020 referred to at [188] above. 38. See [223]. 39. See [55] above. 40. See for example, Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149, especially at [222] and [223] (Derrington J, with whom Allsop CJ agreed); Gonzalez v Agoda Company Pte Ltd [2017] NSWSC 1133 at [123]-[125] (Button J); Dialogue Consulting Pty Ltd v Instagram, Inc (2020) 291 FCR 155; [2020] FCA 1846 at [217]-[220] (Beach J). 41. See for example, County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 at [162] (McColl JA; Spigelman CJ and Beazley JA (as Her Excellency then was) relevantly agreeing); BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086 at [59] (Leeming JA). 42. See [180] above. 43. See [223] above. 44. See [5] above. 45. Local Health Districts. 46. Cross Claim List Statement at C41(c). 47. See [20] above. 48. At C28(c). 49. At C28(h). 50. I appreciate that HealthShare's Cross Claim List Statement is not, strictly, a "pleading"; nonetheless, that expression was used in submissions and is convenient to be used here. 51. See [276] above. 52. See [534]ff below. 53. Numbers 5966, 8369, 13208 and 17047. 54. These were numbers 8369 and 17047. 55. See [289] above. 56. The transcript records that I said "its unit" but my recollection is that I was enquiring about the User Manual; in view of Dr Cook's reply, nothing turns on this. 57. Cross Claim List Statement at C28(d). 58. Cross Claim List Statement at C41(g). 59. There was no contest about this last element. 60. See [97] above. 61. See [100] above. 62. See [110] above. 63. See [102] above. 64. Cross Claim List Statement at C12A. 65. See [126] above. 66. (2013) 249 CLR 435; [2013] HCA 1 at [69] (French CJ, Crennan and Kiefel JJ (as her Honour then was)). 67. Gardam v George Wills & Co Limited [1988] FCA 289 at [42] (French J). 68. Google v Australian Competition and Consumer Commission (supra) at [15] (French CJ, Crennan and Kiefel JJ (as her Honour then was)). 69. See [243]ff above. 70. Ibid. 71. The conversation on 28 April 2020 referred to at [97] above. 72. See [144] above. 73. See Mr Zanetic's email to Dr Morris on 20 April 2020: [110] above. 74. See [135] above. 75. See [104]-[155] above. 76. See [91] above. 77. See [295]-[302] above. 78. See [303]-[356] above. 79. See [357]-[369] above. 80. See [370]-[407] above. 81. See [370]-[407] above. 82. See Dr Gatward's evidence at [375] above. 83. The examples given by Lord Wright in Grant v Australian Knitting Mills Limited (1935) 54 CLR 49; [1936] AC 85 at 61. 84. (2020) 278 FCR 450; [2020] FCAFC 130 at [22] (Wigney, O'Brien and Jackson JJ). 85. Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 at 198 (Gibbs CJ); Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 at [98] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [25] (French CJ). 86. Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 180 at [8] (Toohey J), referred to with apparent approval in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] (Gleeson CJ, Hayne and Heydon JJ); Noone (Director of Consumer Affairs Victoria) v Operation Smile (Australia) Inc (2012) 38 VR 569; [2012] VSCA 91 at [69] (Nettle JA, with whom Warren CJ and Cavanough AJA agreed at [33]). 87. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; [1978] HCA 11 at 228 (Stephen J, with whom Barwick CJ and Jacobs J agreed) and 234 (Murphy J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 197 (Gibbs CJ); Google Inc v Australian Competition and Consumer Commission (supra) at [6] (French CJ, Crennan and Kiefel JJ (as her Honour then was)). 88. Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at 202 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 198 (Gibbs CJ); Google Inc v Australian Competition and Consumer Commission (supra) at [6] (French CJ, Crennan and Kiefel JJ (as her Honour then was)). 89. Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at 202 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 198 (Gibbs CJ). 90. Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at 202 (Deane and Fitzgerald JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (supra) at 198 (Gibbs CJ) and 209-210 (Mason J); Campomar Sociedad, Limitada v Nike International Limited (supra) at [106] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Google Inc v Australian Competition and Consumer Commission (supra) at [8] (French CJ, Crennan and Kiefel JJ (as her Honour then was)). 91. Campomar Sociedad, Limitada v Nike International Limited (supra) at [101]-[105] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Google Inc v Australian Competition and Consumer Commission (supra) at [7] (French CJ, Crennan and Kiefel JJ (as her Honour then was)). 92. See [66] above. 93. See [97] above. 94. See [121] above. 95. See [102] above. 96. See [135] and [520]. 97. See [372]-[380] above. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 June 2023