Sykes & Ors v Reserve Bank of Australia151 ALR 579
(Judgment by: Tamberlin J)
Sykes & Ors
v.Reserve Bank of Australia
Judgment date: 5 December 1997
During the period July 1992 through May 1996, the Reserve Bank of Australia (the bank) issued polymer bank notes in denominations of $5, $10, $20, $50 and $100 in substitution for the previously circulating paper notes. In so doing, Australia became the first country in the world to have its complete range of bank notes in the form of polymer notes.
The bank, which is a financial corporation, has a division known as Note Printing Australia (NPA) which manufactures currency notes for Australia and other countries, as well as a range of other products. NPA designs, manufactures and produces polymer bank notes. While it is a division of the bank, it operates as a separate business enterprise with its own board.
One effect of the substitution of polymer notes has been a decline in domestic bank note production, reflecting the greater durability and security of polymer notes compared with paper notes. There has been, through the years, considerable overseas interest in polymer notes with improving technology.
The instant case, in substance, concerns the circumstances leading up to the timing of the initial issue of polymer bank notes in the denomination of $5 and the subsequent issue of other denominations. The applicants, as manufacturers and sellers of devices for handling the new notes, claim damages under the Trade Practices Act 1974 (Cth) (the Act), for allegedly misleading conduct by the bank, arising from representations and omissions concerning the anticipated release date of the $5 note and the timing of subsequent releases. They also raise claims in negligence arising from misleading representations, from a failure to qualify those representations and from failure to warn the applicants of problems and delays in the production of the polymer notes.
NPA commenced its research and development of polymer note technology in about 1968 in order to find a more secure bank note production technology so to reduce the risk of counterfeiting. The first release of a polymer bank note was the $10 Commemorative Bicentennial note issued in 1988. The evidence indicates that this was a world first for polymer note technology. Only a limited volume of the Bicentennial notes was released. In the course of production of that note difficulties were encountered which led to a high spoilage rate. However, due to the time constraints for release of this note, the bank issued the note notwithstanding the cost of dealing with the production problems it encountered.
By early 1990 the design of the new $5 note, which was the first in what is known as the "new note series", was at an advanced stage. On 22 May 1990, the bank issued a press release which relevantly stated: New series of currency notes
A new series of currency notes, commencing with the $5 note, is to be launched later this year.
It is nearly 25 years since the first denominations in the present series of notes were introduced. Two of these notes -- the $1 and $2 -- have been replaced by coins in recent years. The new series also provides the opportunity to incorporate recent technological advances and state-of-the-art security features. These will assist in minimising the risk of serious counterfeiting in Australia.
A panel of expert consultants has been considering possible new note designs, which are intended to be uniquely Australian in character.
The new $5 note will be printed on polymer (plastic) similar to that used for the Bicentennial $10 note which was issued in 1988.
Other notes in the new series will be issued progressively over the ensuing two to three years. Details of individual notes will be provided closer to their release dates.
Reserve Bank of Australia
In June 1990 NPA commenced production of a polymer note for a foreign country. This was limited to five million notes but was technically demanding in that it included an optically variable device. This device appeared on the Bicentennial note but was not incorporated into the design of the $5 note.
Following the project for the foreign country the production program for the $5 note commenced in July 1990. However, production was delayed until the end of August as a result of technical problems. These problems were mainly in relation to the processing of the plastic material from which the notes were made. Further delays were encountered because the bank expressed some concerns to NPA as to the design of the note. These concerns continued until October 1990 when most of the design details were determined by the bank.
On 6 November 1990 the bank issued a further press release which relevantly stated: New currency note series
In May 1990 the bank announced that a new series of currency notes, commencing with the $5 note, would start to issue around this time. Final design work and production delays, however, mean that the new series will not now begin to issue until after Easter next year.
The new $5 note will be ... printed on plastic similar to that used for the $10 Bicentennial note issued in 1988.
Notes of the $10, $20, $50 and $100 denominations in the new series will carry portraits of further prominent Australian men and women ... Further details will be announced when final decisions are made on the names of the Australians to be recognised in this way [emphasis added].
The art work and printing plates for the revised design of the $5 notes were completed by late January 1991 and commercial production then commenced. Quality control checks on the production run indicated that the spoilage rates would be high due to printing problems. However, it was felt by NPA that these problems would be overcome. The production process was allowed to proceed through to March 1991, notwithstanding that the problems continued. Temporary measures were undertaken to minimise the difficulties, but the spoilage rate increased to a stage where it was about 35% by mid April 1991. In addition, in mid April a new problem, namely poor ink adhesion, first became evident. It was soon apparent that this new problem was extensive. No solution could be readily identified by the technical staff at NPA. The bank endeavoured to meet the "after-Easter issue" estimate referred to in the press release of 6 November 1990, but was unsuccessful. Towards the end of April production continued to fall short of planned targets and from about 26 April 1991 the bank decided to abandon the "after-Easter" release date.
Production of the $5 note ceased on 30 April 1991 and new arrangements were put in place to investigate and solve the manufacturing problems. On 16 May 1991 the Governor of the bank, Mr Fraser, issued a press release announcing the deferral of the issue of the new $5 note. The release stated: New $5 note deferred
The issue of the new $5 note has been deferred. This note, the first in a new series of Australian bank notes, was expected to be released this month.
The delay has been occasioned mainly by a number of technical problems which have been encountered in the production of this new note. Rather than adhere to the May release date and attempt to solve these problems on the run, it was judged more prudent to defer the issue and suspend production until all the technical problems could be resolved satisfactorily.
A new issue date for the $5 note will be announced later in the year. At that time, details of the other notes in the series will also be released.
Reserve Bank of Australia
16 May 1991
A test production run was carried out in November 1991 and this resulted in further refinement of the production process. In late January 1992, a production run was begun through to the end of May 1992 with a successful completion in accordance with the revised production processes.
On 9 June 1992, Mr Fraser issued a press release which stated that the bank would issue the new $5 note on 7 July 1992. It was stated to be the first in the new series of currency notes to be printed in plastic. It was said that the other notes in the series would be issued progressively over the next three to four years. The release went on to state:
Long lead times are normally involved in the production of new currency notes. The innovative move to print the new series of notes on plastic, rather than paper, has lengthened those lead times somewhat. The Bicentennial $10 note released in January 1988 was printed on plastic but it was a "one-off" commemorative note issued in relatively small volumes and in parallel with the existing paper $10 note. The new $5 note is the first plastic note to be issued in volume and it will replace its paper counterpart.
Design work for the new series started in the mid 1980's ...
In November 1990 and May 1991 the bank announced that the release of the new $5 note had been deferred to allow more time to resolve some technical problems that had emerged in moving towards large-scale production runs of the new plastic notes. The bank judged it prudent to defer the issue and suspend production until all the technical problems had been resolved satisfactorily. Note Printing Australia, the division of the Reserve bank ... which is responsible for printing the notes, progressively overcame those problems and production of the $5 note recommenced in January 1992. Stocks of the new note have been built up over the past six months preparatory to its release throughout the country.
Reserve Bank of Australia
9 June 1992
The bank released the new $5 note on 7 July 1992. The $10 note was issued in November 1993 and thereafter notes in other denominations were issued progressively through to May 1996.
The applicants' case
The applicants allege that during the relevant period the bank was a trading or financial corporation engaged in trade or commerce. During 1990 to 1994 the bank was involved in the development of polymer notes which it planned to release into the Australian financial system in a serial fashion, beginning with a new $5 note and followed by other denominations ($10, $20, $50 and $100) at approximately six monthly intervals. The bank intended that the new notes would gradually replace the existing paper bank notes in circulation.
Mr Peter Sykes (Sykes), the first applicant, during the period 1990 to 1994 was engaged in the development, promotion, and manufacture of products designed to assist banks, clubs and other cash handlers in handling the new polymer bank notes. Sykes first approached the bank in relation to the products he was developing in mid 1990. With some encouragement from the bank he further developed a holding device to handle the notes in a flat form which was the bank's preferred method of handling the polymer notes. He also developed paper bands to hold the notes in groups of either 10 or 100, again in the flat mode, together with dispensers to hold and dispense the paper bands. These cash handling products are referred to as "the devices".
Soon after his initial meeting with the bank, Sykes asked the bank for financial assistance to enable him to develop and manufacture the devices. The bank rejected the request. Later in 1990 the bank offered Sykes a consultancy agreement which provided him with some small financial assistance. Under the consultancy agreement Sykes visited cash handling institutions, sometimes accompanied by a bank officer, to promote polymer notes and to encourage cash handlers to change their cash handling practices. He was also permitted to market the devices, although the bank would not specifically endorse them. This consultancy lasted for approximately one month.
The second applicant, Mrs Beverly Sykes, is the wife of Sykes.
The third applicant, Polybank Pty Ltd (Polybank), is a company incorporated by Sykes and his wife to manufacture, market and sell the devices. It commenced trading on 1 July 1991. It ceased trading in May 1994 as a result of the collapse of the business.
The applicants allege that unqualified misrepresentations were made by the bank, without reasonable grounds for making them as required by s 51A of the Act. These are that:
- the $5 polymer note would be released after Easter 1991;
- the $5 polymer note would be released in April/May 1991; and
- following the release of the $5 polymer note the other denominations of the $10, $20, $50 and $100 would be released at approximately six monthly intervals.
The representations were said to have been made on various occasions from 10 August 1990 through to early March 1991. They are said to have been made on behalf of the bank, both in writing and orally, by Mr John Taylor (Taylor), who was the deputy manager, Policy and Research, in the Currency and Banking Department and Mr Peter Carlin (Carlin), who was the manager of Currency Special Projects. During the relevant period Sykes had a number of meetings and telephone conversations with bank employees, including Taylor and, from November 1990, Carlin. In addition, during the consultancy Carlin accompanied Sykes to meetings with cash handlers.
The representations are alleged to constitute misleading and deceptive conduct in that the $5 notes were not released shortly after Easter 1991 and the new notes for the remaining denominations were not released at approximately six month intervals after that date. What in fact happened was that the new $5 notes were released in July 1992 and the other notes were issued at substantially greater intervals than six months, with the $10 note being released in November 1993.
The applicants allege that, in reliance on the representations, they spent moneys and incurred liabilities in developing, planning, and promoting the devices and thereby suffered loss and damage.
In addition, a cause of action in negligence is alleged on the basis that the bank had a duty of care to take reasonable steps to ensure that the representations made were accurate in all material respects and that in breach of its duty the bank failed to take such steps. It is further alleged that the bank failed, within a reasonable time, to advise the first and second applicants that the representations had ceased to be accurate in all material respects.
There are some differences as to the precise wording of the statements but there is substantial agreement between the parties as to the terms of the representations made by the bank. The substance of the representations in question is set out in the press release of 6 November 1990, which stated that a new series of currency notes, commencing with the $5 note, would not begin to issue until after Easter 1991.
The delay in the release of the notes from the dates indicated in the May 1990 press release was said, in the November press release, to be due to final design work and production delays. The representation in substance was that the date of commencement of issue would be sometime in late April-early May 1991.
Although the terms of conversations between Taylor and Sykes were disputed in some respects, I accept that Taylor told Sykes in about August 1990 that, after the $5 note, notes would be issued progressively over a two to three year period, and that there would be in the order of six months between the release of successive notes.
I further accept that in about late October 1990, prior to the 6 November press release, Taylor informed Sykes that the bank's "best guess" was that the new $5 would be released after Easter 1991, possibly some time in April, and that in order to achieve that date everything would need to go well. I am also satisfied that he said that if any problems were encountered the release could be delayed a little. In addition, I accept that Taylor expressed the opinion that there could be "hiccups" or problems. These statements are likely to have been made given the postponement of the release in November 1990 and the fact that a forecast was being made in general terms as to a future occurrence.
There are two further matters as to which there were significant differences between the parties.
The first was whether in the latter half of 1990 Taylor, on behalf of the bank, "encouraged" Sykes in the development of the devices. Taylor denies that he told Sykes that the bank approved the first device and that he should pursue the development of the device. However, in a memorandum dated 19 September 1990, Taylor said:
However, Peter was encouraged to develop his second device and if he needed financial support to do so he should put a proposal to the bank. Mr Bush [a bank officer] indicated that he would support such a proposal.
A proposal for finance was put forward by Sykes but it was refused by the bank as a matter of policy.
On 22 November 1990, the bank entered into a consultancy arrangement with Sykes, for a period of up to six weeks, to educate and explain to cash handlers that a change in their practices was warranted with respect to the introduction of plastic notes. This required him to visit other banks and cash handlers involved in depositing large volumes of notes with banks in New South Wales and Victoria in order to encourage them to handle and store notes in "flats" of ten rather than the current practice of "folds" of 10. He was to promote the significant advantages for cash handlers in making the change. In conjunction with his work he was given permission to market the Polybank teller cash drawer container and the note band dispenser. The bank made it clear that it did not endorse particular devices but agreed that such products would appear to provide a convenient means for cash handlers to make the change away from folding notes. The bank agreed to pay him at the rate of $35 per hour and reserved the right to terminate upon notice expiring at any time. In fact the agreement was in force for approximately four weeks. During this time Sykes, together with Carlin, visited and promoted polymer notes to cash handlers.
When referred to his memorandum in cross-examination Taylor sought to explain away the reference to "encouragement" by saying that he meant to convey only that the bank would consider an application for financial assistance.
I find the explanation unsatisfactory and prefer the written note which, on its ordinary meaning, indicates encouragement to produce a device and not simply a willingness to consider financial assistance. I accept that Sykes was
"encouraged" by the bank to further develop the devices. This is first, because there is express reference to encouragement in the contemporary note; and secondly, because in view of the later consultancy agreement, it is clear that the bank considered the devices and the services of Sykes to be useful for its purposes.
The second factual dispute concerns an assertion by Taylor that during the period June 1991 through to January 1992, Taylor informed Sykes that as a result of calls from disgruntled customers of Sykes he had informed them that the bank's "best guess" at that time was that the new issue date would not be announced until towards the end of 1991, with the note not actually coming out until well into 1992. He says that he informed Sykes that he told the customers that the bank could not be sure of the time between the release of other notes in the series. These conversations are denied by Sykes.
During the period June 1991 to January 1992 when these conversations were said to have taken place, there was in force a bank policy, settled in consultation with the Governor of the bank, that officers should not mention any 1992 release. Taylor said, however, that the bank considered that Sykes was in a special relationship with the bank and that this was the reason he disclosed the 1992 date to other parties and to Sykes.
Taylor agreed that his statements to the customers and to Sykes were in breach of bank policy, but says that he had later reported the breach to his superior, Mr John Colditz (Colditz), senior manager of the Currency and Banking Department. Colditz gave no evidence as to any such reported breach. Taylor could produce no note of the reported breach or of the conversations with the customers and Sykes. He relied purely on his recollection of events which had taken place four years previously.
I am not satisfied that any such statements were made to Sykes during the period June 1991 to January 1992 in relation to a contemplated 1992 release.
I should add that the recollections of both Sykes and Taylor were far from perfect. In cases of conflict I have preferred to rely on the surrounding circumstances at the time and the documentary material. The evidence indicated that the evidence of both witnesses should be approached with caution, but I am not satisfied that either of them had any intent to mislead the court.
The first question is whether the representations as to the timing of the release of the notes were made with respect to a future matter.
Section 51A of the Act provides:
- For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
- For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. [emphasis added].
The bank submits that the representations were only statements of the respondent's present "expectations" and "intentions" at the time they were made as to what might happen and were not representations as to what would happen.
Sykes accepts that during the period September to early November 1990 Carlin said to him words to the effect that it was expected that the new $5 note would be released after Easter 1991, but he denies that Carlin referred to the program as a "best estimate".
The effect of the characterisation of the statements as only reflecting present expectations is said to be that they are simply an expression of the representor's state of mind at the time they were made. If this is accepted, then it is submitted that s 51A of the Act does not apply because it is not concerned with representations as to an existing state of mind. As a result the only question is whether, when made, the statements in fact reflected the bank's view. If they did there was no misrepresentation. It was therefore not incumbent on the bank to prove that it had reasonable grounds for making the representations.
This submission is further developed by reference to amendments made by Carlin to a draft editorial prepared by Sykes for a publication of the Registered Clubs' Association known as "Club Life". On 7 December 1990, Carlin sent to Sykes a copy of amendments which Carlin had made to a draft editorial drawn up by Sykes. Carlin had requested a copy of the article so he could make sure it was accurate and that the bank approved of it.
In its original form this editorial relevantly reads:
New money handling procedures in clubs jim dec 7
The introduction of plastic currency during 1991 will mean that many clubs will have to learn new ways of handling money.
The plastic bank notes will be introduced from next April with the new $5 note. Between 60 to 80 million $5 notes are expected to be in circulation within three to five weeks.
In that same period of time, the paper notes will be taken out of circulation.
This will be followed at approximately six month intervals with the introduction of the new plastic $10, $50, and $100 notes.
This was amended by Carlin to read (with the alterations highlighted):
New money handling procedures in clubs jim dec 7.
The introduction of plastic currency notes during 1991 will mean that many clubs will have to learn new ways of handling money.
The plastic bank notes are expected to be introduced starting with the new $5 note from sometime after Easter 1991 . Between 40 to 50 million new $5 notes are expected to be in circulation within three to five weeks.
Paper notes will be taken out of circulation as quickly as possible after issue date.
This will be followed at approximately six month intervals with the introduction of the new plastic $10, $20, $50 and $100 notes.
It is evident that the bank in this document made it clear to Sykes that its predictions were expectations. The document reinforces the earlier references to expectations by Carlin in September through November 1990.
The bank submits that the reference to "expectations" in the amendments made by Carlin must have conveyed to Sykes that the bank's proposal was simply an expression of a present reference to a target date. It is said that the amendment serves to disabuse Sykes of any understanding he may have previously entertained that the representation was more than a simple statement of the bank's actual expectation. It is submitted that, since there is no dispute that the bank in fact held the expectation, there can be no misrepresentation and therefore there is no necessity for the bank to prove that it had reasonable grounds for making the statement.
By way of illustration of its submission the bank refers to the difference between a representation to the effect: "It will rain on Friday" and a later representation to the effect: "I expect it will rain on Friday". It is said that the operative effect of these two representations when combined is that the initial representation becomes simply a representation as to the representor's existing state of mind when the representation was made.
In my view, such an approach as to what constitutes a future matter is to say the least somewhat over subtle in the circumstances of the present case. The bank is in a unique position to know the circumstances and factors which bear upon release of the notes. It is the governmental authority charged with the manufacture, promotion and marketing of the notes. In these circumstances, it seems to me, that in determining whether the bank's conduct is likely to be misleading or deceptive, there is in substance no real distinction to be drawn between a statement of an "expectation" that an event would take place and a statement that the event would take place, especially where the act in question is one which is to be implemented by the representor.
In Ting v Blanche (1993) 118 ALR 543 at 552-3 Hill J considered the relationship between s 51A and representations as to the representor's present state of mind. His Honour said:
It will be readily apparent that a representation as to future conduct or a future event will generally imply (and sometimes explicitly state) that the maker of the representation was of a particular state of mind as to the future conduct or event as at the time the representation was made.
Whatever may be the case where there is an express representation as to the maker's state of mind concerning a future matter, it is not, in my opinion, correct to treat a representation as to an event or conduct in the future, be that in the form of a prediction or otherwise, as not being a representation with respect to a future matter merely because it implies a representation as to the maker's present state of mind. The language of s 51A is very wide and the words "with respect to" are ... "words of the widest possible scope".
The future release of the series of bank notes as at November-December 1990 related to an event to take place at a future time. It did not, in substance, purport to be a statement of an existing fact as to the state of mind of the bank. Rather it was a present statement by the bank in relation to a future occurrence. The representations made were such that, in my view, a reasonable person would consider them to relate to a future matter. After all, a future matter is simply another way of referring to an event or occurrence which is or may occur in the future. There is no technical or special language used in the section.
When the Reserve Bank states that it "expects" to release a series of bank notes at a future time, this is a representation of its expectation as to a future matter. There is no reason, in my view, why the requirements of s 51A should not apply to a statement of an expectation that something would occur at a future date so as to require the bank to have reasonable grounds for making an announcement as to its expectation. If the statements of expectations were made without reasonable grounds then there is nothing illogical or inappropriate about the bank being exposed to liability arising from a breach of s 52 of the Act. It is consistent with the purpose of the behavioural standard imposed by s 52 that
s 51A should extend to statements of expectation where made by a body such as the Reserve Bank. I therefore reject this submission.
Trade and commerce
The second question is whether the representations or conduct of the bank were "in trade or commerce".
The bank submits that the statements and conduct in question were not in trade or commerce because the bank was not involved in the supply of goods or services within the meaning of the Act.
The meaning of "in trade or commerce" as used in s 52 of the Act was considered by the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ; 92 ALR 193. The court there decided that a statement by a foreman to a fellow employee that a grate was secure, when it was in fact insecure, was not a representation made in trade or commerce within the meaning of s 52.
At CLR 604; ALR 197 Mason CJ, Deane, Dawson and Gaudron JJ said:
What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public.
This statement of principle was applied by Hill J in Unilan Holdings Pty Ltd v Kerin (1992) 35 FCR 272 ; 107 ALR 709, where the Minister for Primary Industry and Energy was unsuccessfully sued on the ground of a breach of s 52 arising from a speech made to the International Wool Textile Organisation. The statement was said to amount to a representation that a recent drop in the reserve price of wool would not be repeated as a matter of government policy. His Honour's decision was that the statement was not made in trade or commerce although it related to trade or commerce. At FCR 277; ALR 714 his Honour said:
The giving of a speech to an international wool conference by a Minister of State is not an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. A fortiori, if the minister attends that conference in his personal capacity. It does not form part of the central conception of trade or commerce of which the majority of the High Court speaks, and is not made so merely because the speech concerns matters of trade or commerce. The giving of the speech is a matter that can be said to be in relation to trade or commerce, but not conduct which is actually in trade or commerce.
The principles in Concrete Constructions were recently applied by Sackville J in Fasold v Roberts (1997) 145 ALR 548 where the application was dismissed because there was no commercial or trading relationship between the respondent, Roberts, and an unincorporated association known as "Noahs Ark Research Foundation", a body staffed by volunteers who sought to encourage investigations at a site near Mount Ararat in eastern Turkey. His Honour held that lectures given by Roberts were not designed to promote any business activities of the Foundation, but were directed to disseminate the views of Roberts and assist the Foundation in raising funds for its objectives. The relevant principles are discussed at 584 through 596. The conclusion which his Honour reached was that the Foundation did not conduct a "business" within the meaning of the Fair
Trading Acts at the relevant times and, alternatively, that there were no representations made in trade or commerce.
The starting point for consideration of the question to the present case is the Reserve Bank Act 1959 (Cth) (the Bank Act).
Under the Bank Act the Commonwealth Bank of Australia is continued in existence as a body corporate under the name the Reserve Bank of Australia: s 7.
The bank is constituted by a board, including the Governor, Deputy-Governor and the Secretary of the Department of the Treasury: s 14(1).
The Reserve Bank Board is charged under s 10(2) to ensure that the monetary and banking policy of the bank is directed to the greatest advantage of the people of Australia and that the powers of the bank under the Bank Act, the Banking Act 1959 (Cth) and the regulations under that Act are exercised so as to best contribute to the stability of the currency of Australia, the maintenance of full employment in Australia and the economic prosperity and welfare of the people of Australia.
Under s 26 the bank is constituted as the central bank of Australia. It is required to carry on business as a central bank and also to act as banker and financial agent to the Commonwealth: ss 26, 27. It is prohibited, subject to the Bank Act and the Banking Act, from carrying on business otherwise than as a central bank: s 26(c). This latter limitation is subject to Pt V of the Bank Act which deals with the issue of bank notes.
Section 30 of the Bank Act provides that the net profits of the bank in each year shall be placed to the credit of the Reserve Bank Reserve Fund as directed by the Treasurer and the remainder is to be paid to the Commonwealth. The Bank Act clearly contemplates that the bank is to operate as a profit making entity.
Under s 31 the bank is required to publish at least weekly its telegraphic transfer rates of exchange for sterling expressed in terms of Australian currency.
By s 34 the bank is empowered to issue, reissue or cancel Australian notes. Australian notes may only be printed by, or under the authority of, the bank: s 34. The notes can be issued in certain denominations and by s 36 they are to be legal tender throughout Australia. The bank is enjoined from issuing notes, other than Australian notes, intended for circulation as money: s 43. There is a prohibition on any person issuing a note for payment of money payable to the bearer on demand and intended for circulation: s 44. Section 44 also prohibits a State from issuing a note for the payment of money payable to the bearer on demand and intended for circulation.
Notwithstanding that in a number of respects the bank is charged with public functions and duties, the Act in my view contemplates that the bank will be a profit making entity. In order to fully appreciate the way in which the bank in fact operates in relation to the printing and issue of bank notes it is necessary to look beyond the statutory provisions.
I note, at this point, that neither in the pleadings nor in the submissions in this matter does the bank raise or submit that the Act does not apply to it by reason of s 2A of the Act. In particular it is not submitted that the bank did not carry on business at the relevant times: cf JS McMillan Pty Ltd v Commonwealth (1997) 147 ALR 419.
In evidence was a letter from the bank to the solicitors for the applicants, dated 8 January 1996, which stated that:
... the bank accepts:
- the bank sells polymer notes and makes profits doing so;
- the bank makes or intends to make profits from the sale or licensing to persons outside Australia of the intellectual property rights in the technology by which polymer notes are manufactured;
and that these circumstances prevailed at the times that the representations specified in the amended statement of claim were alleged to have been made.
There are also in evidence a number of NPA board reports which include monthly profit and loss statements. For example, the April 1991 statement shows a net profit for the year to date of $1.202 million. This material supports the conclusion that the printing and issue of the bank notes is a trading or commercial venture on the part of the bank which is intended to be conducted in order to generate profits.
The commercial context in which the bank, and NPA in particular, operates can be seen in the bank's annual reports. The 1993 Report and Financial Statements includes the following (at p 46): Note Printing Australia
Note Printing Australia (NPA) manufactures Australia's currency notes and competes in domestic and overseas markets for a range of other security products. NPA is a division of the Reserve Bank, but operates as a separate business enterprise, with a board of directors established under charter from the bank's board.
NPA moved closer during the year to its goal of becoming a fully commercial-type operation and a leader in innovative currency note technology. Major activities included:
- the launch of a quality assurance program to ensure continuous review of, and improvement in, systems of control;
- a review of systems and procedures aimed at more effective production planning;
- development of advanced technology underlying inks, which will reduce waste and, potentially, provide a product for licensing to other note printers;
- further refinement of the technology underlying polymer notes, focusing on the security and handling characteristics of such notes; and
- conclusion of a second enterprise agreement in December 1992 which provides for productivity-related wage increases over its three-year term.
NPA's efforts in promoting its technologies and capabilities to bankers and note issuers around the world have led to its inclusion, for the first time, on the tender lists of several countries and aroused interest in licensing NPA's polymer technology. During the year NPA successfully tendered for, and completed, three overseas contracts. These contacts, which generated over 10% of NPA's total sales revenue, included the manufacture of polymer currency notes for Kuwait and Indonesia, as well as paper notes for Papua New Guinea. Domestically, NPA secured contracts to redesign and print travellers' cheques for the Commonwealth Bank of Australia, and to print passports in a partnership arrangement with the Australian Government Printing Service.
While its commercialisation activities are expanding, the greater part of NPA's activities remains the production of Australian currency notes, and the design, planning and production of further denominations in the new Australian series. During 1992-93 NPA delivered 360 million notes to the bank for issue; this was substantially lower than in the previous year when stocks of the new $5 note were accumulated prior to issue.
The report also includes the bank's financial statements for the financial year ending 30 June 1993. Note 1(a) to the financial statements provides:
The operations of Note Printing Australia (NPA) are conducted as a separate business enterprise following an extensive reorganisation of its operations in 1989-90. NPA is not, however, a separate legal entity and most of its output continues to be for bank use; its assets, liabilities and profit and loss account are included in the bank's financial statements, after elimination of transactions between NPA and the rest of the bank.
The profits made by the bank from the issuing of notes are sometimes referred to as "seigniorage". The profit arises from the fact that the actual cost of producing the notes is substantially less than the value of the assets received by the bank from other banks in exchange for the notes: see the discussion in "Measuring Profits from the Currency Issue", Reserve Bank of Australia Bulletin , July 1997, 1-3. The polymer technology developed by the bank and the experience gained in producing polymer notes has enabled it to earn additional profits from contracts with overseas banks for the manufacture of polymer notes. The profits the bank makes from currency issues are substantial.
In the present case the announcement of the expected release "after Easter 1991" and other statements and press releases can, in my view, properly be described as marketing or promotional activities in relation to the supply of services to actual or potential consumers. The bank had a clear commercial interest in release of the polymer notes. A further consideration is that bank notes, being a medium of exchange, are central to the operations of trade and commerce. Indeed, it is difficult to think of any facility or service which is more fundamental to trade and commerce than the printing, supply and circulation of bank notes. Therefore, in my view, the promotion and provision of polymer notes can properly be described as an activity in trade or commerce for the purposes of s 52.
Information provider: s 65A
The next question is whether the bank is exempt from the provisions of s 52 of the Act because the representations were prescribed publications by a prescribed information provider within the meaning of s 65A of the Act.
The bank submits that it is a prescribed information provider within that section, and therefore it is not subject to the provisions of s 52.
Section 65A provides:
(1) Nothing in section 52, 53, 53A, 55, 55A or 59 applies to a prescribed publication of matter by a prescribed information provider, other than:
- a publication of matter in connection with:
- the supply or possible supply of goods or services;
- the promotion by any means of the supply or use of goods or services;
- the goods or services were relevant goods or services,
(2) For the purposes of this section, a publication by a prescribed information provider is a prescribed publication if:
- in any case -- the publication was made by the prescribed information provider in the course of carrying on a business of providing information;
(3) In this section:
"prescribed information provider" means a person who carries on a business of providing information ...
"relevant goods or services" , in relation to a prescribed information provider, means goods or services of a kind supplied by the prescribed information provider or, where the prescribed information provider is a body corporate, by a body corporate that is related to the prescribed information provider;
... [emphases added].
Section 4 of the Act defines "goods" and "services" as follows:
- ships, aircraft and other vehicles;
- animals, including fish;
- minerals, trees and crops, whether on, under or attached to land or not; and
- gas and electricity
"services" includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are , or are to be, provided , granted or conferred in trade or commerce ;
... [emphasis added].
The bank submits that s 65A should be considered against the background of evidence from the Deputy-Governor of the bank and the manager of the bank's Information Service which supports the argument that it is exempt because it is an information provider. The manager of the bank's Information Service, in his affidavit, refers in some detail to a series of bank publications and press releases. He annexes copies to his affidavit. Among these is a "Publications' Order Form" which refers to numerous publications and which also indicates charges for those publications. In addition, there are a number of publications for which no charge is made.
The bank argues that in giving notice of the introduction of a new series of notes the bank is providing information in the course of complying with its statutory duty. This information is said to assist in encouraging use of the new notes. The bank refers to an obligation to give information and in particular, refers to s 31 of the Bank Act which obliges the bank to publish its rates of exchange for sterling in terms of Australian currency.
I am satisfied that the bank can accurately be described, in some respects, as a person carrying on a business of providing information. I note that s 4 of the Act no longer defines the expression "person" but s 22(1) of the Acts Interpretation Act 1901 (Cth) defines "person" to include a body corporate as well as an individual. "Individual" is defined in s 22(1)(aa) to mean a "natural person".
The question then is whether the publication is within the exemption provided by s 65A. As stated by Wilcox J in Horwitz Grahame Books Pty Ltd v Performance Publications Pty Ltd (1987) 8 IPR 25 at 29:
... the section does not exclude s 52 in a case where the relevant matter relates to the supply, or possible supply, of goods or of services, being goods or services put out by the information provider itself.
The purpose of this limitation to the exemption provided by s 65A was described by the Minister for Communications in the second reading speech on the Statute Law (Miscellaneous Provisions) Bill (No 2) 1984 in Australia, House of Representatives, Debates , 13 September 1984, pp 1296-7:
These provisions ensure that information providers are not exempt from the consumer protection provisions of the Trade Practices Act in respect of the provision of information where they have what might be regarded as a commercial interest in the content of the information . In such cases, information providers must take the same responsibility for the accuracy of information as any other person who publishes information in trade or commerce. This can occur, for example, where a newspaper has agreed to publish a "news" item about a product in exchange for the product supplier taking out paid advertising in that publication [emphasis added].
In the present case it is not necessary to define in any philosophical sense the nature of money. However, it is necessary to decide whether the manufacture, issue and distribution of bank notes and sale of bank notes by the central bank can be said to be in connection with the supply of goods or services, as those terms are defined in s 4 of the Act.
In his work The Legal Aspect of Money , 1992, 5th ed, p 24, Dr F A Mann points out that the fundamental function of money is that of being a medium of exchange. Being a medium of exchange leads him to the view that it is not an object of exchange, or in other words, is not a commodity. He draws the distinction between goods and money. At p 28, Dr Mann adds that economic theory indicates that money is "wealth power or purchasing power in terms of wealth in general". He refers to the statement by Savigny to the effect that:
... money appears in the function of a mere instrument for measuring the value of individual parts of wealth ... money stands on the same basis as other instruments of measurement ... But money also appears in a second and higher function, viz it embraces the value itself which is measured by it, and thus it represents the value of all other items of wealth.
A similar approach was taken by Lord Macmillan in Banco de Portugal v Waterlow & Sons Ltd  AC 452 when he said at 508:
... the cardinal fact [is] that a note when issued by the Bank of Portugal becomes by the mere fact of its issue legal tender for the sum which it bears on its face. The issued note represents so much purchasing power in terms of commodities. It can be used by the holder of it to purchase at current prices any commodity in the market, including gold and securities. It can equally be used by the bank to purchase commodities, including gold and securities, or to discharge debts due by it. It must be accepted by the bank in discharge of debts due to it.
Dr Mann considers that these remarks allow a general conclusion to be reached that the essential function of money is to represent purchasing power.
The concept of money as a medium of exchange and measure of wealth does not mean that bank notes are co-extensive with money. They are only one form of money, often referred to as "cash". In the late twentieth century money is transferred by other media such as credit cards or electronic transfer. Indeed, in the not too distant future bank notes may become extinct: see James A Dorn, The Future of Money in the Information Age .
I do not consider that bank notes come within the description of "goods" in the context of the Act. Bank notes entitle or enable the bearer to satisfy a debt or obtain a discharge from a debt. This is because they are made legal tender under the Bank Act; cf McKenna v Dent  VLR 150 at 151 where a'Beckett J held that the term "goods" was "large enough" to include money under s 58 of the Police Regulation Act 1890 (Vic). That case was in quite a different context to the present. It concerned an issue as to the jurisdiction of a magistrate to give directions to whom certain moneys were required to be paid.
It seems to me that the issue, distribution and sale of bank notes by the bank comprise the provision of a facility which is in trade and commercial dealings. Accordingly, the issue of the bank notes in the present case can properly be described as the provision of a service. That service is clearly one of a kind supplied by the bank and therefore, it is the provision of a relevant service within s 65A(3) of the Act. For this reason the bank is not exempt under s 65A from the operation of s 52.
Delays and problems -- November 1990 to May 1991
It is now necessary to consider whether the bank had reasonable grounds for making the representations as to the issue dates of the polymer notes.
On 24 January 1991 Mr Robert Larkin (Larkin), the general manager of NPA, wrote to Colditz, senior manager of the Currency and Banking Department, reporting as to progress in the production of the new $5 note. He noted that there were three problems with production but that lost time could be made up. There was no indication of any serious problem in this letter. There is in evidence a "Production Schedule" as of 23 January 1991 setting out a proposed timetable and this indicated no undue delays.
At an inter-bank meeting of the Working Group on the Introduction of Plastic Notes on 7 March 1991 (which included representatives of the major banks), the bank confirmed that the $5 note was planned for release on 30 April 1991 and that tentative releases of other denominations remained as being $10 in early 1992, $20 in mid 1992, $50 in early 1993 and $100 in mid 1993. This information was "confidential" and was "not to be made public".
On 11 February 1991 Taylor visited NPA to report on the new note series. A memorandum of 12 February does not identify any significant production problems. There is no suggestion in this memorandum that the release could not be made on or after Easter of that year.
A subsequent memorandum of 5 March 1991 by Taylor records that he expressed concern with evidence of "set-off" from the first intaglio print run and with smudge marks and streaks from inadequate wiping of the printing plate before printing. He also records expressing concern as to the amount of material involved and the apparent lack of quality controls. He discussed these matters with NPA and they were well aware of the extent of the concern. There is no suggestion of any possibility of delay of the release in this memorandum.
A later memorandum of Taylor dated 27 March 1991, records a high but variable spoilage rate, possibly averaging 20%. He was concerned that this spoilage rate might underestimate the actual rates which would ultimately apply because of low standards being applied in the examination area. He records that he did not have a good feel for the extent of any possible underestimation. He expressed the view that, with hindsight, NPA should have allowed for higher spoilage rates when planning the initial production run. The fact that spoilage looked like being well above the allowed for rate of 10% was said to be the major reason for the "current predicament". He then raised the question whether the bank should stay with the current planned issue date of 6 May. He canvasses the alternatives and recommends confirmation of the issue date as 6 May. Under a handwritten note "Deputy-Governor", on that memorandum, there is a statement to the effect that while there are some risks it is agreed that 6 May be confirmed as the issue date.
On 4 April, Taylor records in a memorandum a further visit to NPA on 26 March 1991 concerning acceptance testing of the new $5 note and other matters. He refers to a number of problems, particularly a question of "stickiness" manifested by a section of the notes which, when held under pressure, had stuck together as a block. He refers to a large number of production problems and expresses some doubt as to whether the production problems were going to be resolved quickly. He remained concerned about the spoilage rates and the fact that it was substantially above the predicted rate of about 61/2%. He refers to the possibility of making up lost time by shift work and overtime. He also refers to problems with respect to the ink transfer from one sheet to another, and faults in the plates. He does not mention any need to delay the release date. He noted that, by the end of March, 17 million pieces were expected to be delivered but that it looked as if only 2 million pieces would be delivered. He considered that out of the originally budgeted production run of 70 million pieces, the figure of 40-50 million pieces appeared more realistic.
On 4 April 1991, Mr Nobel, the senior manager in the Currency and Banking Department, wrote to the manager for South Australia of the bank and confirmed that the issue date for the new plastic $5 note had been firmed up as Monday 20 May 1991.
On 10 April 1991 Larkin wrote to Mr Phillips (Phillips) the chairman of the NPA board stating that the major problem had been controlled to some extent by way of interleaving. He indicated that the spoilage problem had been compounded by the inability of NPA to accurately estimate the losses, in spite of daily assessments by technical and manufacturing teams. He suggested additional labour and hours of operation in an attempt to meet commitments as to production.
On 10 April 1991 Taylor visited NPA, recording his observations in a memorandum of 11 April. He refers to a "production schedule", which if achieved could fit in "reasonably well" with an issue date of 20 May. However, he saw a number of significant risks that could put that schedule in jeopardy. This included possible worsening in deterioration of intaglio plates; problems with set-off and its alleviation by interleaving; a bottle neck in the production process on a critical machine, and an underestimation of spoilage rates. The memorandum indicates that every effort was being made by NPA to resolve the problems. He refers to problems with the quality of the inks and the expense of interleaving. He records that approximately two-thirds of the faults were on the front of the note. Ninety per cent of these were said to be "wiping" and set-off problems. Other problems with spoilage related to faults on the back, which were also due to set-off and wiping problems. Further difficulties concerned over-coating. However, set-off was considered to be the biggest problem. In addition, new problems were progressively emerging as others were dealt with. One of these was a colour variation on the back of the note.
Taylor again visited the production area of NPA on 19 April 1991. He noted that the likelihood of NPA producing sufficient good quality notes by the predicted issue date of 20 May 1991 had "decreased considerably". He referred to a number of major problems, including a high incidence of ink adhesion/abrasion failures which affected one-third of the reams; a high incidence of set-off; ink smudging; plate deterioration problems, and spotting of the ink. Taylor attributed the need for delay to a number of the problems which had arisen and to the conflicting signals about what caused the problems, together with an underestimation of the scale and significance of the problems under the pressure to maintain volumes in order to achieve a tight deadline. For the first time it was stated that the issue date of 20 May 1991 would no longer be viable due to the uncertainty about the quantity of notes that would be available. He then recommended that the bank advise the other banks and cash handlers, who had previously been told of the May issue date, that it had been delayed.
A memorandum from Larkin, concerning a review meeting of 17 April 1991, referred to priority projects to improve the operational effectiveness which included quality control of inks for the printing operation; coordination of ink research and development efforts to achieve more effective ink formulations, and improving the printing plate technology.
In a note dated 26 April 1991 Taylor referred to a meeting on 24 April 1991 to discuss progress with the $5 note, at which the Governor and Deputy-Governor of the bank were present. It was decided at this meeting that the issue date was to be deferred from 20 May 1991.
In a memorandum for the board of NPA, dated 10 May 1991, the problems giving rise to the need for deferral were identified as poor ink drying leading to high spoilage rates and reduced overall output. The memorandum referred to technical efforts to identify and eliminate the causes of the problems. There is reference to interleaving (insertion of blotting paper between each sheet of notes, out of the presses), which had the disadvantage of requiring employment of additional labour and extensions of overtime. It stated that a new major problem, which was only detected for the first time in mid April 1991, was poor ink adhesion, which demanded a massive program of testing and investigation in order to find a solution. It was decided to abort the production of the note on 30 April. As at 10 May 1991 the exact causes and remedies for the major problems had not been identified.
On 16 May 1991 a press release was issued stating that the issue of the $5 note had been deferred and that production would be suspended until all technical problems could be resolved satisfactorily. It stated that a new issue date would be announced later in the year, when details of other notes in the series would also be released.
In oral evidence Mr Ronald Gration (Gration), who was the research and development manager of NPA, referred to remedial steps taken to solve the problems, but pointed out that by April 1991 there was seen to be a particular difficulty that caused NPA to recognise that it could not meet the delivery date. That was an ink adhesion problem which was only discovered during the testing of the finished notes in mid April 1991. Gration's evidence was that when the estimate of Easter 1991 was first given in 1990 it was, in his view, attainable. Larkin gave evidence that in 1991 production was stopped because further problems had arisen in the process which were unexpected and because, despite the efforts of technical staff, no assurance could thereafter be given as to the ability to identify the cause of the problems or the predictability of the problems. The final consideration was that NPA could not guarantee to Larkin that they could produce an acceptable product at that point of time.
In the light of the history, and, having regard to the documentary and oral evidence referred to above, I have reached the following conclusions:
- That as at November-December 1990 when the estimate of a release period for the $5 polymer note and subsequent release of the other denominations was given the bank had no intention that its statements would mislead or deceive, nor were such statements made recklessly.
- Before publication of the press release of 6 November 1990 the bank had given comprehensive and proper consideration to the timing and feasibility of the issue of the bank notes in the period late April-early May 1991. The post-Easter date was not selected in an arbitrary or random way. The proposed release date was deferred several times before the post-Easter date was published. The evidence indicates that the date was eventually fixed as 20 May after the Currency and Banking Department had taken into account the considerations advanced by NPA as to production and quality.
- One of the main circumstances which caused postponement of the late 1990 date, predicted in the May 1990 press release, arose from alterations to the design and not as a result of production problems of the type or magnitude which necessitated the subsequent deferral in May 1991.
- The main problems which led to the deferral in May 1991 were far more numerous, extensive and serious than the production difficulties which had been encountered up to December 1990. They could not have reasonably been anticipated by the bank.
- One major problem which led to the deferral of the May 1991 date was the ink adhesion problem. This was a new problem which had not been predicted prior to mid April 1991 and was of an order of magnitude and difficulty far greater than earlier problems encountered in 1990.
- Reasonable efforts were made by the bank both in the Currency Section and NPA to meet the production problems which accrued from November through April 1991.
- With the benefit of hindsight some of the problems which were encountered in January-April 1991, but not including the ink adhesion problem, might possibly have been foreseen and dealt with differently.
- Having regard to the experience and expertise of NPA and its officers which were available to the bank, as at November-December 1990, there were reasonable grounds on which it could publish its expectation that the release of the $5 note would take place after Easter 1991 and that other denominations would be released at intervals of six monthly periods.
- As at April-May 1991 the bank did not have grounds to anticipate that the $5 notes would not be released until late 1992. The May 1991 press release indicated that the bank would not be in a position to make an announcement of a release date until later in 1991. This was known to Sykes. There was no misleading or deceptive silence by the bank either during 1991 or at any time.
In view of these conclusions, I find that the representations made and the conduct of the bank in relation to its ability to meet those representations cannot properly be characterised as deceptive or misleading. The bank, in my view, acted on reasonable grounds in making its predictions and in issuing the press releases over the period 1990 to 1993 and did not engage in misleading or deceptive conduct, either by representation or silence.
Accordingly, the claim based on ss 51A and 52 of the Act has not been made out.
The applicants submit, in the alternative, that they are entitled to damages in negligence under the common law.
They submit that before communicating any estimate as to the release of the polymer notes, the bank owed them a duty to investigate the probability of any such estimate being achievable, or, alternatively owed a duty to adequately warn the applicants of the dangers inherent in making predictions of this type when new and untried technology was involved. The events relied on in submissions as breaches of the common law duty of care are as follows:
- On 31 October 1990, Mr Bush, the head of Central Bank Services, wrote to Larkin, the general manager of NPA, requesting his confirmation that the proposed release dates could be achieved.
- Without awaiting for confirmation from NPA the bank released information about the intended release date after Easter 1991 to the public.
- On 16 November 1990 Larkin advised the bank that he could not give any such assurance, given the new technology involved.
- Despite this advice, and the fact that the bank had not carried out any production trials to determine whether the problems encountered with the $10 Bicentennial note had been rectified, the bank informed the applicants that the notes would be released after Easter 1991 and failed to warn them of the full nature of the risks involved with predicting the production date of the polymer notes.
- When the full nature of the delay of the release of the polymer notes became apparent to the respondents in March 1991, the bank failed to advise the applicant of the true nature of the delay.
It is said that the requirement of "proximity", necessary to ground an action in negligence for economic loss arising from a misrepresentation is satisfied by virtue of the fact that the respondent was aware that the applicants would rely on the information from the respondent in relation to the marketing and sales of the devices. The bank contends that there is no duty of care owed and, alternatively, no negligent breach.
In San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 ; 68 ALR 161, the High Court held that certain representations made in documents concerning a draft planning scheme did not give rise to a duty of care on the part of the State Planning Authority, the Minister for Local Government or the City Council. This was because the developers had not established that the statement amounted to an actionable representation.
At CLR 355; ALR 169 in the joint judgment of Gibbs CJ, Mason, Wilson and Dawson JJ, their Honours explained the need for proximity as follows:
The relationship of proximity is an integral constituent of the duty of care concept ... because it limits the loss that would otherwise be recoverable if foreseeability were used as an exclusive criterion of the duty of care ... when the plaintiff's claim is for pure economic loss.
At CLR 358; ALR 171 the judgment continues:
... if the appellants' case is to succeed they must establish at least, ... (1) that the alleged representation was made, and (2) that the Authority and the council made the representation with the intention of inducing members of the class of developers to act in reliance on the representation.
The court determined, later in its reasoning, that an alleged misrepresentation to the effect that transportation details concerning the planning area were feasible was not actionable. Their Honours considered that, in the absence of any assurance or representation to the effect that transportation arrangements foreshadowed were feasible, the study documents did not amount to an invitation to developers to rely on their contents as a solid and unalterable basis for their actions in acquiring and developing properties in the area. At CLR 359; ALR 172 the court said:
In the absence of some such assurance or representation it is not easy to see why the publication of plans or proposals intended to serve as a guide for future development should be held to impose an obligation on a planning or local authority to take care in making statements in those plans or proposals.
In the nature of things, being creatures of an administrative and political process, proposals of this kind are subject to alteration, variation and revocation [emphasis added].
In an earlier decision in L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 ; 36 ALR 385 the court held the Parramatta City Council liable for failing to inform an applicant who had made a written request for a formal zoning certificate, as to road widening proposals. Provision was made in the standard application form for such details to be provided. The court held that a duty of care was owed to a person who made a formal application in writing for information of this kind. This duty was to take reasonable care that the information given, either affirmatively or by omission, was accurate.
The present case, unlike Shaddock's case, is concerned with a forecast as to a future event. In Shaddock's case the information sought was in respect of an existing proposal and there was an omission to supply information concerning the specific existing proposal which had been requested in the application. The court held that the omission to furnish the information amounted to a breach of the duty of care because it indicated that there was no existing road widening proposal.
In the present case there is a greater degree of proximity between the bank and Sykes than existed between the parties in San Sebastian , where the relevant documents formed part of a general proposed planning scheme and the statements were not directed to a particular individual.
In my view, sufficient proximity arises from the circumstances of the discussions between Sykes and Taylor; the consultancy agreement; the cooperative promotion efforts made by Sykes and Carlin, and the nature of the proposed devices which were designed to facilitate handling of notes to be produced by the bank. The bank had a substantial commercial interest in ensuring the successful launch of the new note series. The bank was well aware of the nature of the devices developed by Sykes and was conscious of the importance of the timing of the release of the notes and of the lack of credibility, if not scepticism, which could arise if the release of the notes was unduly delayed.
While I form the view that there is sufficient proximity between Sykes and the bank to have generated a duty of care in the present case, I am not satisfied that the applicants have established any breach of the duty to take care.
In considering this alternative count, the nature of the representations must be borne in mind. Although the press release of 6 November 1990 did not state that the dates were in the nature of an expectation or a best guess, these qualifications were made clear to Sykes by early December 1990 after he had seen the suggested amendments made by Carlin to the proposed publication in Club Life magazine. The statements by the bank were not in the nature of an unqualified statement. Further, in relation to the trade practices claim I have reached the conclusion that it has been established that the bank had reasonable grounds on which to make the forecasts announced in November 1990.
In so far as reliance is placed on the response of Larkin, in his letter of 16 November 1990, my view is as follows. The letter conveys that the program proposed, while tight, was realistic and achievable. It was confirmatory of the date but it did not commit to a complete assurance. It was a carefully measured and responsible response to the request made by Mr Bush. It did not identify any specific problem but merely sounded a generalised caution as to possible problems inherent in fixing a tight schedule for production of any articles. The response of Larkin does not support any claim of negligence on the part of NPA in failing to inform or caution Sykes.
It was argued on behalf of the applicants that the bank was negligent in making the representations without having carried out any test production run. The evidence of Gration, the Research and Development Officer of NPA, was that so far as he was aware there was no reason why a production run could not have been undertaken in the latter half of 1990. If this had been done then, so it is submitted for Sykes, the bank would have been made aware of the problems which later emerged in the first half of 1991. The consequence of a test production run in 1990 could or would have been that the bank would not have reasonable grounds to make a statement that the note would be issued after Easter 1991 and that the other denominations would be issued at approximately six monthly intervals. Because the bank omitted to undertake a test production run, it is said that it could not have reasonable grounds for making the representations as to release after Easter 1991.
I do not agree with this contention for several reasons.
First, the submission is largely based on hindsight. It is necessary to look at the circumstances prevailing as at November-December 1990 and project forward in the light of those circumstances. It is not sufficient to use the awareness derived from hindsight several years later to evaluate the earlier determination.
Secondly, as at November-December 1990, it is not apparent that a test production run was appropriate. The design of the notes had just been determined and there had been some production problems which were unrelated to the important ink adhesion problem. These were not of a major nature. The ink adhesion problem which manifested itself in 1991 was one of the main reasons for deferral in May 1991. It had only become apparent in mid April 1991. It had only arisen two months after the actual 1991 production run had begun. The specific evidence on the ink adhesion problem, which I accept, is that a test production run prior to November 1991 would not necessarily have enabled the bank to solve the ink adhesion problem which emerged in 1990 because it was a unique and random problem assuming different forms and depending on varied circumstances.
Thirdly, there is no evidence from any duly qualified person that a test production run was appropriate or ought to have been carried out prior to the November 1990 press release. It was not the function of Gration to organise a production run as he made clear in his evidence. He was not in charge of the production process. The feasibility and effect of a production run before November 1990 was largely left in the realm of speculation. I was asked to accept or infer that a test production run was obviously appropriate. I am not prepared to do this. There is no evidence that such a run would be feasible or appropriate or that it was appropriate to have taken it into consideration as at November 1990 before making the press release.
The evidence of Gration as to a production run was to the effect that he personally was not aware of any reason why there was no production run. There is no suggestion that it was ever raised, canvassed or considered appropriate by anyone in Currency and Banking or in NPA.
Counsel for Sykes, in the course of submissions, referred to the decision of Wood J in Drennan v Central Coast Hospitals and Area Health Service (SC(NSW), 5 October 1990, unreported). The proposition sought to be derived from that decision is that it is not necessary to call expert evidence in relation to an obvious fact. That case, however, has no relevance to the present circumstances. It concerned an employee injured by slipping on wet steps. His Honour considered that it was a matter of common sense or common experience of life that a wet surface will have a lower coefficient of friction than a dry surface. That does not assist on the question whether a test production run ought to have been carried out on the printing of new technology bank notes on a large scale by NPA. Such a question is not a matter of common sense or common experience of life.
The "full nature" of the difficulties encountered after January 1991 was not known to or appreciated by the bank as at November-December 1990. The deferral of the post-Easter date in May 1991 was due to a multitude of problems. The question of the possible need for or extent of a deferral did not arise until about the end of March 1991 at the very earliest. It could not be said in November 1990 that the bank ought to have informed Sykes of the possibility of a 1992 release date.
During and after this time the bank made strenuous efforts to resolve the problems. Production was not aborted until 30 April 1991. No final decision had been reached to abort the release until the board meeting on 24 April 1991. The press release, announcing the further deferral to a date which would be announced later in the year, was issued on 16 May 1991. There can be no reasonable suggestion that this release was misleading. It fairly indicated that it was only an announcement of an issue or release date that would not be made until later in the year and it was not itself a statement of a release date.
In relation to the claim that there was a failure to warn I do not consider that the bank failed to warn or disillusion the applicant as to the nature and extent of the production problem. The press releases made the bank's intentions clear. In particularly the 16 May 1991 press release made no misleading statements. It stated that production of the $5 note was suspended until "all the technical problems could be resolved satisfactorily". The May 1991 release made it apparent that there would be a significant delay such that there would not be an announcement of the release date until later in the year. In particular, the notice did not state that there would be a release of the $5 notes later in the year. Further, it was not incumbent on the bank to ensure that Sykes was privy to the progress and problems encountered in its production schedule in relation to the $5 note and the release of the subsequent denominations.
As mentioned earlier, I consider that the bank acted on reasonable grounds and made reasonable and strenuous efforts to achieve the release date after Easter 1991 but that this target was not achieved largely because of major problems which were either new or did not fully emerge until towards the end of the production process. These problems were not in my view reasonably foreseeable.
In view of the conclusions which I have reached as to the representations and negligence it is not necessary for me to consider the issues of reliance or damages and I refrain from doing so.
For the reasons given above I do not accept that the plaintiff has made out a claim for damages under either the Trade Practices Act or negligence.
I therefore dismiss the application with costs.