Court of Appeal Supreme Court New South Wales Medium Neutral Citation: White v Philips Electronics Australia Ltd t/as Philips Healthcare [2019] NSWCA 115 Hearing dates: 14 May 2019 Date of orders: 17 May 2019 Decision date: 17 May 2019 Before: Bell P at [1]; Basten JA at [72]; Gleeson JA at [73] Decision: 1. Appeal dismissed with costs. 2. Costs awarded on a solicitor/client basis. Catchwords: CONTRACT – alleged oral variation of contract –contractual clause providing for no variation other than in writing – factual finding of no oral variation APPEAL – challenge to finding of fact in relation to disputed conversation – principles applicable to such a challenge Cases Cited: Australian Securities and Investments Commission v Geary [2018] VSCA 103; 126 ACSR 310 Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154; 361 ALR 642 Browne v Dunn (1893) 6 R 67 Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 Melbourne City Investments Pty Ltd v UGL Ltd [2017] VSCA 128 Pickham v Binary Engineering Pty Ltd [2018] NSWCA 105 Robinson Helicopter Company Inc v McDermott [2016] HCA 22; 331 ALR 550 Springfield v Duncombe [2017] NSWCA 137 Szeto v Situ [2017] NSWCA 136 Thomas v Hollier (1984) 156 CLR 152; [1984] HCA 35 Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9 Category: Principal judgment Parties: Bevyn White (Appellant) Philips Electronics Australia Ltd t/as Philips Healthcare (Respondent) Representation: Counsel: H Woods (Appellant) C Alexander (Respondent) Solicitors: Malouf Solicitors (Appellant) CCSG Legal Pty Ltd (Respondent) File Number(s): 2018/266860 Decision under appeal Court or tribunal: District Court Jurisdiction: Civil Date of Decision: 20 July 2018 Before: Olsson DCJ File Number(s): 2016/293254 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. BELL P: Introduction 1. Mr Bevyn White (Mr White) brings this appeal from a decision of Olsson DCJ delivered on 20 July 2018. 2. Mr White was the second of three defendants in proceedings brought by Philips Electronics Australia Ltd trading as Philips Healthcare (Philips). Philips sought damages from the first defendant, Victorian XRay Group (Balwyn) Pty Ltd (Balwyn), which was party to a written agreement (the Contract) with Philips entered into on 14 May 2013, pursuant to which Philips agreed to provide services for certain computed tomography (CT) equipment. Mr White and the third defendant, Mr Richard Mensink (Mr Mensink), guaranteed the obligations of Balwyn to Philips. 3. Balwyn was one of a number of companies in the Victorian XRay group of companies, which conducted its business in various suburbs of Melbourne and other parts of Victoria, including Dandenong, Frankston and Boronia. The group's head office was in Carlton. Each individual company in the group (whose name reflected its physical location) appears to have had separate service agreements with Philips. 4. The primary judge gave judgment in favour of Philips against Messrs White and Mensink in the sum of $263,994.10 together with an award of costs on an indemnity basis pursuant to cl 6 of the Contract. Balwyn had gone into liquidation by the time of the hearing, although it filed a defence which Mr White verified in his capacity as a director the company. Of the two guarantors, only Mr White brings this appeal. 5. The appeal is of very narrow compass. As was submitted on behalf of Mr White, "[t]he proceedings largely turned on whether the Court accepted [Mr White's] version of what occurred at a meeting on 19 November 2014 between [Mr White] on behalf of Balwyn and Mr John Damen on behalf of [Philips]" (the 19 November Meeting). Mr John Damen (Mr Damen) was employed by Philips as a customer support and operations manager responsible for Victoria, South Australia and Tasmania. He had been in that role for approximately 25 years at the time of the trial. 6. The appeal centres upon whether the primary judge erred in her assessment of the evidence at trial in relation to the 19 November Meeting, both in terms of what was said and the effect of what was said. 7. It is necessary to identify the background to and context in which the 19 November Meeting took place, and her Honour's findings in relation to it, before turning to consider the principles applicable to a challenge to a factual finding of the kind made by the primary judge and Mr White's specific criticisms of the primary judge's decision. Background 1. The following statement of background is taken from the primary judge's reasons for judgment and is not in dispute: "Philips is in the business of the provision of medical equipment to medical practices and laboratories. Victorian Xray Group conducts medical imaging and radiology businesses in the State of Victoria. One company in the group (Victorian XRay (Balwyn) Pty Ltd ('Balwyn')) conducted such a business in the suburb of Balwyn and is the first defendant in these proceedings. The Balwyn business used a computed tomography machine (known as a CT or CAT scan machine) which required regular servicing and maintenance. On or about 13 May 2013 Balwyn made an application for commercial credit with Philips. The second and third defendants ('White' and 'Mensink' respectively) entered into a written guarantee to perform Balwyn's liability to Philips." 1. Philips' contract manager at the time the Contact was entered into was Mr Simon Tomek (Mr Tomek). He left the business in about April 2014 and Mr Damen assumed his responsibilities thereafter. 2. The Contract was entered into by Balwyn and Philips on 14 May 2013, for a term running from 23 May 2013 to 9 December 2015. The annual charge under the Contract was $82,000 plus GST, amounting to a total contract value of $203,872.22. The contract price was to be invoiced at monthly intervals. The services provided by Philips pursuant to the Contract included a telephone response service, service attendances, labour and software for both planned maintenance and priority responses, and two annual quality assurance visits. 3. Clause 6 of the Contract provided that interest at the rate of 3 per cent above the Westpac indicator lending rate would be charged, calculated on a daily basis on any overdue payment commencing the day after the due date of the overdue payment up to and including the date of payment of the overdue amount. This clause also required Balwyn to reimburse Philips for all collection costs, including legal costs and disbursements calculated on a solicitor and own client basis, incurred by Philips in connection with any default in payment. 4. Clause 8 of the Contract dealing with termination provided that except as otherwise provided in the clause, the Contract was "non-cancelable by Customer" and would remain in effect for the specified term. Clause 8 provided two circumstances in which the Contract was "cancelable", neither of which applied in the instant case. 5. The Contract also contained an "entire agreement" clause, cl 18, as follows: "This Agreement constitutes the entire understanding of the parties and supersedes all other agreements, written or oral, regarding its subject matter. No additional terms, conditions, consent, waiver, alteration, or modification will be binding unless in writing and signed by Philips' authorized representative and Customer. Additional or different terms and conditions, whether stated in a purchase order or other document issued by Customer, are specifically rejected and will not apply to the transactions contemplated by this Agreement. No prior proposals, statements, course of dealing, course of performance, usage of trade or industry standard will be part of this Agreement." 1. The key terms of the written guarantee were as follows: "In consideration of Philips Healthcare entering into this agreement for Commercial Credit with the Applicant, the guarantor guarantees to Philips Healthcare payment of all monies and performance of all other obligations by the Applicant under any agreement for purchase and sale made by the Applicant with Philips Healthcare and on terms and conditions set out in the Application for Commercial Credit. The guarantor indemnifies Philips Healthcare against all loss resulting from Philips Healthcare having entered into an agreement for purchase and sale with the Applicant whether from the Applicant's failure to perform its obligations under any such agreement or from the agreement being unenforceable against the Applicant. The liability of the guarantor will continue until the Applicant has paid all monies and has performed all the Applicant's other obligations under the agreement for purchase and sale and if Philips Healthcare assigns its interest in the agreement it may also assign the benefit of the guarantors' obligations under this clause." 1. Following commencement of the Contract, monthly invoices for $7,516.66 inclusive of GST were sent up to and including November 2014. There was then an invoicing hiatus and, in June 2015, seven invoices for each of the months from December 2014 to June 2015 were issued. Monthly invoices continued to be issued until the end of the Contract's term. 2. As the primary judge recorded: "Each invoice was for the amount of $7,516.66 with the exception of two invoices – one which appeared to cover more than one month and the last invoice which was for only part of a month. The total value of the invoices that the plaintiff rendered to the defendant amounts to $214,976.50 inclusive of GST. Of this two invoices have been paid and a third partly paid. The outstanding difference is $192,426.68 and that is the amount for which the plaintiff sues." 1. There is no contest that "preventative maintenance" services to the CT equipment at Balwyn's premises were provided throughout the life of the Contract together with what were styled "corrective maintenance services". The 19 November Meeting 1. This meeting occurred almost 18 months into the Contract's life. By that time, only two of some 18 invoices which had been issued had been paid, and it appears that one had been partly paid. The amount owing at that time was approximately $100,000. 2. The background to the 19 November Meeting was set out by the primary judge at [41]–[42]. Mr Damen had contacted Mr Vincent O'Rourke (Mr O'Rourke) (chief radiographer for Balwyn) regarding renewing the contract for Balwyn and another company in the group. He said that he had not been able to contact Mr White, so took the opportunity to discuss the outstanding invoices with Mr O'Rourke. Mr O'Rourke said that that was Mr White's business and not his but he agreed to, and did, organise a meeting between Mr White and Mr Damen. Mr O'Rourke sent the following confirmatory email on 13 November 2014: "John/Bevyn Just confirming phone conversation today. Meeting at … Carlton on Wednesday 19th @ 10am regarding service contracts and some discrepancies. Also just confirming John was going to talk to his front end staff to let them know the meeting was happening so they weren't chasing. Regards Vinnie" 1. The reference to the "front end staff" in this email was to Mr Damen's apparent agreement to request Philips' Accounts Receivable department temporarily to cease following up on the outstanding invoices until after he and Mr White had met. 2. Mr Damen's affidavit evidence in relation to the 19 November Meeting was to the following effect: "I said: 'Bevyn, there are a number of overdue invoices that need to be paid.' Mr White said: 'The reason why the invoices have not been paid is because the invoice address for all the sites are no longer correct. Philips needs to have the address for each site corrected. Once corrected, I will pay them.' I said: 'I will get the site details corrected and the invoices reissued for you. This will however take some time. I will make sure our accounts team does not follow you up in the meantime for these outstanding invoices until the site details are corrected.' Mr White said: 'The correct address for the Balwyn site on the invoice is …' Mr White said: 'Can we do anything about the price of the Balwyn CT contract? It only does 4 or 5 patients per day and that doesn't even cover the cost of the contract.' I said: 'The price is already at the lowest level and we cannot lower it any further.' Mr White said: 'I'm not happy with that.' I said: 'I'm afraid that is the best we can do.'" 1. Mr Damen said that, as Mr White listed the correct addresses for each of the sites, he wrote them down on various invoices which had been issued to companies in the Victorian XRay group. 2. Mr Damen made a file note of the meeting which was not referred to in either his affidavit in chief nor his reply affidavit. He said he only located it shortly before the hearing. It contained one reference to Balwyn which was "Balwyn CT = change contract level??". In this context, it should be noted that Philips evidently offered customers different levels of service according to their needs and commercial desires. The service level provided under the Contract the subject of the current proceedings was that offered under a "Gold Agreement". 3. Mr White's account of the 19 November Meeting was very different from Mr Damen's. He said that a number of matters were discussed relating to the various service agreements which companies in the Victorian XRay group had with Philips, and continued as follows: "I said: 'Balwyn can't support the current service agreement. I told Simon Tomek that we needed to change the contract at Balwyn as we only did 5 CTs a week at the most and the site could not afford a gold contract. It needs to be cancelled as of the date I approached Simon about this [April 2014] and an alternative time and parts contract put in place.' [Mr Damen] said: 'I agree Balwyn hasn't had much work done. I will stop the account from when you contacted Simon on his last day and there will be no further billing, and adjust the invoices from the past.' I said: 'Thanks, this needs to be done ASAP and an alternative lower price solution put in place.' [Mr Damen] said: 'I will get it done.'" 1. Like Mr Damen, Mr White also produced a handwritten note in relation to the meeting. It was in the following terms: "1. Told Simon Tomek & John Damen we only want a cheaper alternative. Practice only does 5 CTs a week. 2. Agreed with John Balwyn should be reversed to nil as not a lot of work done. 3. Asked for a cheaper alternative on Dandenong. 4. Querie u/sound contracts." 1. Mr Damen denied making the statements attributed to him by Mr White in the 19 November Meeting. 2. Both Mr Damen and Mr White were challenged in relation to their respective accounts. Mr White's evidence under cross-examination fell out somewhat differently from his affidavit evidence, as evidenced by the following exchange: "Q. You did ask him to lower the level, did you not? A. No, I didn't. Q. Your evidence is you just say, 'It needs to be cancelled,' and he said, 'Yes,' correct? A. 'We can't afford it. We're not going to run this contract.'" 1. Counsel for Philips also put the following series of questions to Mr White: "Q. So it would be very important to tell Mr O'Rourke as the chief radiographer that there has been an agreement to cancel Balwyn, correct? A. He could still make phone calls on corrective maintenance. Q. It was very important. Answer my question, it was very important? A. Yes, he was told. Q. You told him and you say you told him around November 2014? A. November, December. Q. You say you also told Ms Cole? A. Yes." 1. Mr O'Rourke, as noted earlier, was the chief radiographer for Balwyn and Ms Nicole Cole (Ms Cole) was Mr White's personal assistant. 2. Mr O'Rourke and Ms Cole gave evidence in the proceedings although neither of them referred to having been told that the Contract had been cancelled. Mr O'Rourke's evidence was that, whilst he had not been told that the Contract had been cancelled, he said he was told that "we were going to parts and… labour". This appeared to be a reference to a more ad hoc relationship whereby there would not be any regular servicing of the CT machine at Balwyn. 3. Mr White's affidavit and oral account of the 19 November Meeting were in turn inconsistent with para 4 of Balwyn's defence which had been verified by Mr White and which in turn was adopted and relied upon by him in his own defence. Paragraph 4 of Balwyn's defence was that the Contract was varied: "a. in early April 2014 to provide that some of the invoices that had been issued by the Plaintiff prior to that date were to be cancelled and reissued on the basis of time and parts under a lower cost contract for work, support or maintenance actually performed, and that any invoices issued by the Plaintiff subsequently would only be issued on the same basis; b. on 19th November 2014 to provide that from December 2014 the Plaintiff would not issue further invoices or charge the Defendant for further services under the Agreement." 1. There were at least two key differences between this version of events and Mr White's evidence. First, that a variation had been effected in a conversation between Mr White and Mr Tomek in April 2014. No such case was advanced at the hearing, and indeed the account in Mr White's affidavit was inconsistent with it. Secondly, that the 19 November Meeting concerned an agreement not to charge by way of variation of the Contract as opposed to the cancellation forthwith of the Contract. The primary judge's judgment 1. The primary judge recorded her reasons for rejecting Balwyn's and therefore Mr White's defence in relation to the alleged variation of agreement reached at the 19 November Meeting at [81]–[82]. Referring to a passage in the judgment of Hammerschlag J in John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] she continued: "[81] To adopt his Honour's language, I do not feel an actual persuasion of the occurrence of the conversation propounded by the defendants. I do not accept Mr White's evidence on this critical conversation. My reasons are these: (i) It is inherently implausible that Philips would agree to terminate a valuable contract for no reason other than Balwyn had erred in its calculation of the number of procedures it would perform. (ii) Mr White's evidence in the witness box as to the terms of the conversation was less than satisfactory. He seemed to be unable to recall any more than a series of propositions that advanced his case rather than recalling the words of the conversation itself. (iii) It is inherently improbable that even if that conversation had occurred, that Mr Damen would not have forthwith presented Balwyn with another contract and had it executed before further work was done. It is not credible that he would cancel all earlier invoices and agree to receive nothing or a significantly lesser amount in the future without either recording it in writing or ensuring an alternative contract was in place. (iv) It is inherently improbable that Mr Damen would not have insisted that the variation to the contract be in writing (per clause 18 of the contract) and satisfied himself that he was an authorized representative of Philips, capable of making that alteration. (v) Mr White's file note is inconclusive and is not consistent with his affidavit evidence. His evidence was that during the conversation, he said 'It needs to be cancelled as of the date I approached Simon..…' but the file note records that the invoices would be 'reversed to nil'. When taken with Mr Damen's note, in my view Mr White's evidence is inconclusive. (vi) The Balwyn version of events does not sit conformably with the fact that Balwyn had not paid any of Philips' invoices from the commencement of the contact in August 2013 up to April 2014. (vii) Moreover, Mr White's evidence is inconsistent with his pleaded case. (viii) Mr Damen was unshaken in cross examination about the conversation. He said he did not agree to cancel the contract or reduce Balwyn's liability. It is implausible that he would exceed what he well knew to be the limit of his authority to negotiate invoices. (ix) Mr White's evidence is not supported by subsequent events. Neither Philips nor Mr Damen reissued invoices and there is no suggestion in the correspondence about a termination or cancellation of the contract. In cross examination Mr O'Rourke initially denied that he had been told that the contract had been terminated but later changed his answer and said that there had been some mention of a time and parts contract. The time and parts contract was the version of the conversation that Mr White had initially advanced, but he changed his evidence during cross examination to the effect that the invoices were to be cancelled and no further invoices were to be issued. This shift leaves Mr O'Rourke's evidence behind and I have difficulty in accepting it for that reason. [82] I do not feel an actual persuasion of reasonable satisfaction of the occurrence or existence of the conversation as contended by Mr White in his affidavit or his oral evidence." 1. Her Honour went on to observe (at [83]) that she was not persuaded that any consensus was reached that was capable of forming a binding contract or that was intended by the parties to be legally binding. At best, she said, it was an agreement to agree. Relevant principles on appeal 1. It was accepted on behalf of Mr White that he needed to displace the primary judge's critical finding of fact in relation to the 19 November Meeting and that he needed to do so by reference to incontrovertible facts or uncontested testimony, or to show that her Honour's findings were "glaringly improbable" or contrary to "compelling inferences". The heavy burden which falls on an appellant met with adverse findings of fact flows from the decisions of the High Court in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 and Robinson Helicopter Company Inc v McDermott [2016] HCA 22; 331 ALR 550 (Robinson Helicopter). 2. Robinson Helicopter was considered by Basten JA in Springfield v Duncombe [2017] NSWCA 137 (Springfield) where his Honour drew attention to the danger in reading Robinson Helicopter in a manner that might be thought to have undermined the long established approach to appellate review in relation to the drawing of inferences from undisputed facts associated with decisions such as Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9. Basten JA's criticism in this respect of the decision in Melbourne City Investments Pty Ltd v UGL Ltd [2017] VSCA 128 was endorsed by a differently constituted Victorian Court of Appeal in Australian Securities and Investments Commission v Geary [2018] VSCA 103; 126 ACSR 310 at [208]ff (Geary) and the position now seems to be settled in Victoria in line with Basten JA's consideration of the question in Springfield: see Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154; 361 ALR 642 at [269]–[287]. 3. In Geary at [223], the Court offered the following useful summary, in line with Basten JA's analysis in Springfield: "The better view seems to be that Robinson Helicopter governs the approach that should be taken to appeals on questions of fact that involve challenges to findings of fact based substantially upon the credibility of witnesses who have testified during the trial. Once the primary facts have been established, however, the question whether particular inferences should be drawn from those established facts is a matter as to which an appellate court is generally in as good a position as a trial court to consider for itself. The strictness with which Robinson Helicopter approaches findings of primary fact is not applicable to purely inferential reasoning." 1. Reference should also be made to the observations of Bathurst CJ in Szeto v Situ [2017] NSWCA 136 at [25]–[26] which are germane to the present case: "As was pointed out in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, within the constraints marked out by the nature of the appellate process, the appellate court is required to conduct a real review of the trial and of the judge's reasons whilst observing the 'natural limitation' that exists in proceeding on the record which include the disadvantage an appellate court has compared to the trial judge in the assessment of a witness' credibility: Fox v Percy supra at [23]-[25]. That disadvantage particularly arises in a case such as the present where the judge based his conclusion, to a significant extent, on the credibility of the principal witnesses. However, if a conclusion based on credit is shown by uncontroversial facts or uncontested testimony to be erroneous, the appellate court is obliged to intervene: Fox v Percy supra at [28]. One instance where this may occur is where contemporaneous and apparently reliable documentary evidence is contrary to the credibility based finding of the trial judge: State Rail Authority of NSW v Earthline Constructions Pty Ltd (in liq)(1999) 73 ALJR 306; [1999] HCA 3 at [62]-[63], [93]." Grounds of appeal 1. Eight grounds of appeal were advanced on behalf of Mr White. Ground of appeal 1 1. The first ground related to the primary judge's observation in [84] that: "Further, the contract is in clear and specific terms. Clause 18 makes it plain that the parties agreed that no variation or modification to the terms would be operative unless in writing and signed by an authorized representative of Philips. This did not occur. On the face of it, the defendants cannot succeed." 1. Counsel for Mr White accepted in the course of argument that this ground would not be reached if Mr White's challenge to the findings of fact was not upheld. For the reasons given later in this judgment, the challenge to the central finding of fact fails so that it is not necessary to consider the first appeal ground, nor the issue noted by Gleeson JA in this Court's recent decision in Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87 at [122], namely whether a "no-oral modification" clause will or can preclude parties to a contract agreeing orally to vary it. 2. The point can conveniently be made in this context, however, that "no-oral modification" clauses, even if not necessarily preclusive of oral modifications, provide important context in considering whether the requisite contractual intention to modify or vary a written contract, objectively ascertained, exists. It may also be observed, parenthetically, that one of the virtues of such clauses might be thought to be the avoidance of disputes of the very kind that arose in the present case as to whether there had in fact been a variation of the contract and, if so, what the terms of that variation were. Variations in writing leave no room for dispute as to what was actually agreed, subject to any ambiguity in the agreed form of written words. 3. Many of the other grounds of appeal were expressed in terms of the primary judge "failing to have regard to or place sufficient or proper weight on" certain matters. These familiar formulations are not suggestive of the existence of "incontrovertible facts" inconsistent with the primary judge's conclusions or matters which made her central findings "glaringly improbable". Indeed, towards the end of his oral submissions, counsel for Mr White conceded that the critical findings reached by the primary judge were "open to her". This concession, rightly made, was in my opinion all but fatal to the case sought to be brought on appeal. 4. Out of deference to the appellant's arguments, however, I will address each of the remaining grounds of appeal in turn with the exception of ground 8, which was in effect an omnibus challenge to the ultimate decision in the case and in substance was subsumed by the other grounds of appeal. Ground of appeal 2 1. Ground 2 was in these terms (noting that part of this ground was abandoned in the course of argument): "The learned trial judge erred at paragraphs [77], [78], [81] and [83] in finding, that the terms of the variation (contended for by [Balwyn] and the Appellant) are vague and uncertain; that there was no agreement as to what a [lower price] solution might be, and, at best, any consensus reached was an agreement to agree and not capable of giving rise to a binding agreement and, that it was inherently implausible that Mr Damen would not have forthwith presented [Balwyn] with another contract and had it executed before further work was done, by failing to have regard to or place sufficient weight on: (a) the Appellant's evidence that an alternative time and parts arrangement was to be put in place; … (c) the Respondent's Terms and Conditions for the supply of Time and Materials Service referred to at paragraph [6] of the Statement of Claim and paragraph [7] of the affidavit of the Respondent's National Credit Manager, Zana Tannous, which provided inter alia, that a customer would be invoiced in accordance with the Respondent's then current schedule or charges." 1. This ground combines a number of her Honour's findings all of which, in my opinion, were not only open to her but entirely correct. The vagueness and uncertainty of the terms of the alleged agreement (putting aside the basal fact that her Honour did not accept that any such agreement had been made) are sufficiently reflected in the various accounts of the disputed conversation contained in the defence and Mr White's affidavit and oral evidence (see [25]–[33] above). As to a "lower price solution", this, on Mr White's affidavit evidence, was referred to in terms of "an alternative lower price solution" needing to be put in place. The use of the indefinite article really makes good her Honour's observations as to uncertainty. There could be any number of alternative contractual arrangements which effected such a result but none was specified in the 19 November Meeting, or Mr White's own account of it. That an "alternative time and parts" contract may have been mentioned to Mr Tomek in April 2014 is not to the point. On Mr White's own evidence, which "lower priced solution" and what its terms might be were left wholly unspecified. Further, Mr White's handwritten note reproduced at [26] above referred to a "cheaper alternative" for Dandenong and not Balwyn. 2. As to the challenge to the primary judge's finding that it was "inherently implausible that Mr Damen would not have forthwith presented [Balwyn] with another contract and had it executed before further work was done", again her Honour's findings were not only open to her but entirely correct. Balwyn and Mr White's case was wholly implausible from a commercial perspective. It entailed the propositions that a company (Philips) that had carefully constructed commercial documentation, both in terms of written credit applications, formal contractual documentation (including entire agreement and no oral-variation clauses), together with other bespoke terms and conditions would, in effect, walk away from that documentation and its contractual entitlement, waive on the spot a $100,000 accrued debt and continue to supply services without any contractual documentation in place. 3. The implausibility of the case and Mr White's varying accounts of the 19 November Meeting is further reinforced, in my opinion, by the fact that neither Balwyn nor Mr White sought to confirm what, on their account, was the very significant outcome of the 19 November Meeting in writing. Nor, and perhaps even more significantly, was any correspondence sent by Balwyn following receipt of a letter of demand from Philips dated 12 August 2016 in which Balwyn referred to the alleged variation or cancellation of the Contract and waiver of payment of invoices. It defies credulity, in my opinion, that a strong response to Philips' letter of demand would not have been made on its receipt had a conversation of the kind and in the terms on which Balwyn's defence was built occurred. It would be expected that such a response would make explicit reference to the alleged "variation" or "cancellation" of the Contract: cf Thomas v Hollier (1984) 156 CLR 152 at 157; [1984] HCA 35 per Gibbs CJ. Ground of appeal 3 1. This ground was expressed in the following terms: "The learned trial judge erred at paragraphs [76] and [81(i)] in finding that there was no credible explanation for the Respondent to reverse its invoices for work performed and that it was inherently implausible that the Respondent would agree to terminate a valuable contract for no reason other than [Balwyn] had erred in its calculation of the number of procedures it would perform by: (a) misunderstanding that amounts invoiced by the Respondent were for work it had actually performed rather than, as was the case, being for fixed amounts invoiced monthly in advance regardless of the amount of preventive or corrective maintenance work (if any) performed by the Respondent; (b) failing to have regard to or to place proper weight on the Appellant's evidence that an alternative time and parts arrangement was to be put in place…; (c) failing to have regard to or place proper weight on the evidence as to the wider contractual association and relationship between [Balwyn] and its related entities and the Respondent and that [Balwyn] could not afford the contract; and (d) failing to have regard to the evidence that as at April 2014, the amount owing by [Balwyn] to the Respondent was only $45,100.13". 1. This ground is more than adequately answered by the various matters I have referred to in [48]–[49]. The finding in relation to "inherent implausibility" was as far from being "glaringly improbable" as is imaginable. 2. The matters raised in subparagraphs (a)–(d) of ground of appeal 3 do not supply any basis for undermining her Honour's finding in this regard. As to (a), what is of significance is what Philips had bargained for, not how much work it may or may not have had to do to earn its contractual fee. As to (b), even if there were some suggestion that an alternative time and parts arrangement was to be put in place, this would still have entailed the implausible writing off on the spot of significant moneys then owing, and an agreement to do this with no replacement agreement in place. As to (c), this is a point of utter speculation. Any wider association with the corporate group may have in the circumstances been a source of greater disquiet to Philips rather than a reason to waive a significant debt, and there was no evidence that the wider commercial relationship was of such value to Philips that it would willingly and casually write off a significant sum owing. As to (d), the state of indebtedness of Balwyn to Philips as at April 2014 was and is wholly irrelevant to the plausibility of an alleged agreement having been reached between the parties more than six months later. Ground of appeal 4 1. This ground is expressed in the following terms: "The learned trial judge erred in paragraph [79] by finding that the Appellant had appeared to adopt a different position in his oral evidence because that was the only way [Balwyn] could justify having paid (almost) none of the invoices, when that proposition was never put to the Appellant at trial." 1. This submission was variously described in oral argument as a procedural fairness ground or as founded on the principle in Browne v Dunn (1893) 6 R 67. The criticism was not that her Honour found that there was a variance in Mr White's written and oral evidence (for there undoubtedly was), but rather in her Honour's attribution to Mr White of a reason for that variance. 2. It is true that no particular motivation for the variance was put to the witness. Whatever Mr White's motivation or explanation may have been, however, formed no part of Philips' case. The observation to which objection is taken was no more than an aside by the primary judge in the context of her consideration and assessment of Mr White's evidence. The case and, in particular, the observation which is the focal point of this ground of appeal was far removed from that which attracted the criticism of the High Court in Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [67] upon which counsel for Mr White relied. There is no substance in this ground of appeal. Ground of appeal 5 1. This ground is expressed in the following terms: "The learned trial judge erred at paragraph [81] (ix)] in finding that the Appellant's evidence was not supported by subsequent events (following the 19 November 2014 meeting]) by failing to have regard to or place proper weight on the evidence of subsequent events that supported the Appellant's evidence, being: (a) that the Respondent did not chase [Balwyn] for payment of any outstanding invoices until June 2015; (b) the Respondent did not issue any invoices following the 19 November 2014 meeting until June 2015". 1. The two matters referred to in this ground of appeal were taken into account by the primary judge. Whilst it may be accepted that there was a conspicuously long gap in time between the meeting and the issuing of invoices for the first half of 2015, her Honour accepted the explanation given by witnesses called on behalf of Philips as to why there was a hiatus in both billing and chasing up payment for outstanding invoices. 2. Furthermore, it may be noted that a very important subsequent event which was wholly inconsistent with Balwyn and Mr White's case, and which reinforces her Honour's observation at [81(ix)] of the judgment, was Balwyn's receipt of services from Philips consistent with the Contract remaining on foot and not having been cancelled in the course of 2015 or following the 19 November Meeting. Ground of appeal 6 1. This ground of appeal related and involved a challenge to [45], [49] and [50] of the primary judge's reasons, which were in the following terms: "[45] [Mr Damen] said that Mr White had a number of overdue invoices with him at the meeting. Referring to them Mr White said: 'the invoice address now on these invoices is what is to be listed on the invoices moving forward. Each of the Victorian XRay sites are separate businesses and each invoices needs to go to a different address.' … [49] Mr Damen was not shaken in cross examination when asked about the conversation. He frankly acknowledged that he had the authority to waive invoices up to a certain percentage threshold which was about 15%. His evidence was persuasive on this point. He had no authority to waive 100% of the value of invoices, nor anything approaching it. [50] He gave evidence in a straightforward and pleasant manner. He did not prevaricate nor seek to advance the case for his employer. In my assessment he was candid and credible." 1. The primary judge had the advantage of assessing Mr Damen's evidence through seeing him in the witness box but her Honour's finding as to his credibility went further than a simple assessment based on demeanour. In noting that Mr Damen had only very limited authority to waive invoices, her Honour was adverting to the commercial implausibility of Balwyn's case and Mr White's evidence which, had it been accepted, would have meant that Mr Damen acted significantly in excess of his authority for no apparent reason other than that he had been asked to do so. This is not conduct one would expect from an employee of Mr Damen's experience. 2. The Court was taken in argument to various handwritten entries on invoices made by Mr Damen in the course of the 19 November Meeting. These recorded addresses of various companies in the Victorian XRay group. Forensic attempts to analyse these entries with a view to discrediting the whole of Mr Damen's account were a long bow to draw, and also overlooked the fact that it was for Balwyn positively to satisfy the court that a contractual variation had occurred. 3. Moreover, the manner in which Mr Damen annotated various invoices at the 19 November Meeting formed no part of and was not critical to the primary judge's central reasoning in [81] and [82] of her judgment which I have set out above. Her Honour was entitled to accept Mr Damen's evidence, and her conclusion that he was unshaken in cross-examination is supported by a review of the transcript. Ground of appeal 7 1. This ground of appeal was as follows: "The learned trial judge erred at paragraphs [70] and [71] by failing to have regard to the whole of the evidence given by Ms Nicole Cole in her affidavit sworn 9 June 2017 and by placing importance on the lack of corroboration by Ms Cole 'of Mr White's claim that he told her about the April and November meeting' when there was no evidence that Ms Cole was asked about whether Mr White told her about the meetings, and it was common ground that there was no April meeting, that there was a November meeting and that Ms Cole was not at the November meeting." 1. This ground arises from the fact that, in cross-examination, Mr White said that he had told Ms Cole of the "cancellation" of the Contract shortly after the 19 November Meeting. One might well have expected to see a reference to this fact in her affidavit, which was the point being made by the primary judge in [71]. 2. Although her Honour did not refer to this Court's judgment in Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418–419, the observation challenged in this ground of appeal was consistent with the following well-known passage in the judgment of Handley JA in that case: "However I can see no reason why those principles should not apply when a party by failing to examine a witness in chief on some topic, indicates 'as the most natural inference that the party fears to do so'. This fear is then 'some evidence' that such examination in chief 'would have exposed facts unfavourable to the party': see Jones v Dunkel (at 320-321) per Windeyer J." 1. The observations in respect of Ms Cole were certainly open to her Honour. 2. In any event, as counsel for Philips pointed out in oral argument, these observations did not form any critical part of her Honour's reasoning as set out in [81] extracted at [34] above. 3. Her Honour's erroneous reference to the April meeting was, in my opinion, of no consequence. Conclusion 1. The following observations of Barrett AJA in Pickham v Binary Engineering Pty Ltd [2018] NSWCA 105 at [42], coincidentally also an appeal from the primary judge in the present case, are equally applicable to this appeal: "The judge's assessment and conclusion on credit have not been shown to be wrong by incontrovertible facts or uncontested testimony, or to be glaringly improbable or contrary to compelling inferences. To the contrary, the compelling inferences made available by the evidence are those adverse to the appellant that the primary judge drew after a careful review of all matters before her and after having enjoyed the advantage (not shared by this Court) of observing the protagonists in the witness box." 1. It follows from the foregoing reasons that, in my opinion, the appeal should be dismissed with costs. 2. As with the award of costs at first instance, costs should be awarded on a solicitor/client basis, consistent with cl 6 of the Contract, the terms of which have been referred to at [12] above. 3. BASTEN JA: I agree with Bell P. 4. GLEESON JA: I agree with Bell P. ********** 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: 17 May 2019