Medical Device Technologies Pty Ltd v Health Administration Corporation

1. [1]

   On 11 March 2020, the World Health Organization declared COVID-19 to be a worldwide pandemic.

2. [2]

   In April 2020, as part of the New South Wales Government’s response to the pandemic, the defendant, Health Administration Corporation, entered into two agreements (“the Agreements”) with the plaintiff, Medical Device Technologies Pty Ltd (“MDT”) to purchase a total of 348 “Shangrila 510S Integrated Respirator” ventilators (“the Shangrila Ventilators”) for a total of $20.79 million: around $60,000 each. The Shangrila Ventilators were manufactured in China by Beijing Aeonmed Co., Limited (“Aeonmed”), and to be imported into Australia by MDT.

3. [3]

   Health Administration Corporation is a corporation established pursuant to the Health Administration Act 1982 (NSW). [1] The relevant dealings were between MDT and representatives of an administrative unit of Health Administration Corporation known as HealthShare NSW. The parties referred to Health Administration Corporation as “HealthShare”. I shall do the same.

4. [4]

   HealthShare paid MDT $10.395 million of the $20.79 million purchase price, that is, half the purchase price, by two instalments on 27 and 30 April 2020.

5. [5]

   MDT caused the Shangrila Ventilators to be delivered to HealthShare between 16 June 2020 and 15 July 2020: 48 on 16 June 2020, 2 on 1 July 2020, 100 on 15 July 2020 and 198 between 15 and 20 July 2020.

6. [6]

   HealthShare then conducted several rounds of technical and clinical testing.

7. [7]

   HealthShare contends that the testing revealed the Shangrila Ventilators did not meet basic performance parameters, rendering them unfit for use in any clinical setting.

8. [8]

   On 7 September 2020, HealthShare, by its solicitors, purported to reject the Shangrila Ventilators, terminate the Agreements and demand that MDT refund the $10.395 million paid on 27 and 30 April 2020.

9. [9]

   The questions in these proceedings are whether:

10. [10]

    The Shangrila Ventilators have never been used and remain in storage.

The claims in the proceedings

1. [11]

   MDT seeks to recover the unpaid $10.395 million it contends is due under the Agreements.

2. [12]

   HealthShare contends that it was entitled to terminate the Agreements and is entitled to a refund of the $10.395 million deposit on three bases:

Decision

1. [13]

   HealthShare has not established that the Purchase Order Terms and Conditions were incorporated into the Agreements.

2. [14]

   HealthShare has not established that the transaction recorded in the Agreements was a sale by description within the meaning of s 18 of the Sale of Goods Act.

3. [15]

   HealthShare has established that the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act.

4. [16]

   HealthShare has established that, to an extent, MDT engaged in misleading or deceptive conduct within the meaning of s 18 of the ACL.

5. [17]

   I understand that it is common ground that it follows, from those conclusions, that MDT should now repay the $10.395 million it received from HealthShare in April 2020, but I will invite submissions about this, and such other matters as now require resolution.

Ventilators

1. [18]

   A ventilator is a piece of equipment which delivers positive air pressure to a patient who is unable to breathe or is breathing insufficiently. The main functions of a ventilator are to facilitate oxygenation, that is, the delivery of oxygen to a patient, and ventilation, that is, removal of carbon dioxide from the patient’s lungs.

2. [19]

   A ventilator works as follows:

3. [20]

   Ventilators function in different “modes” depending on the needs of the patient and the complexity of the ventilator. “Volume control mode” enables the operator to set the volume of air that is delivered to the patient. “Pressure control mode” enables the operator to set a certain air pressure as the target variable. When a ventilator is in volume control mode, the pressure will vary, whereas when a ventilator is in pressure control mode, the volume will vary. [3]

The Shangrila Ventilator and the VG70 Ventilator

1. [21]

   Aeonmed manufactured two different ventilators: the Shangrila Ventilator and the VG70 Ventilator.

2. [22]

   MDT understood that it was the exclusive supplier in Australia of both types of ventilator. As I set out below, at the outset of the COVID-19 pandemic, MDT sought to market both types of ventilator to HealthShare. Ultimately, HealthShare acquired Shangrila Ventilators from MDT and acquired VG70 Ventilators from another supplier, RAPP Australia Pty Limited (“RAPP”). I return to this below.

3. [23]

   There is no dispute that the Shangrila Ventilator has less functionality than the VG70 Ventilator. MDT accepts that the Shangrila Ventilator has “lesser functionality than a typical ICU ventilator”. [4]

4. [24]

   MDT contends that the Shangrila Ventilator was properly characterised as an “emergency transport” ventilator. As I set out below, MDT made clear to HealthShare that this was how MDT characterised the Shangrila Ventilator.

5. [25]

   MDT’s position is that:

6. [26]

   MDT’s position is that:

7. [27]

   On the other hand, HealthShare contends that, whether or not the Shangrila Ventilators can be characterised as “emergency transport ventilators”:

Events leading up to the Agreements

1. [28]

   Following the outbreak of the COVID-19 pandemic, there was a significant increase in the global demand for ventilators. HealthShare was unable to procure ventilators under its existing supply arrangements and began sourcing ventilators outside its normal tender based supply channels.

2. [29]

   HealthShare later described the circumstances as follows:

3. [30]

   A number of potential suppliers of ventilators approached HealthShare in late March 2020.

4. [31]

   MDT first contacted HealthShare on 26 March 2020. MDT had not previously dealt with HealthShare. HealthShare had not previously purchased ventilators manufactured by Aeonmed and had not previously dealt with MDT concerning the supply of ventilators.

5. [32]

   On 26 March 2020, MDT’s Sales and Marketing Manager, Mr James Bellas, wrote to Mr Rod Treadwell, then Executive Director, Procurement, at HealthShare, stating that MDT had “access to” 600 “CE accredited patient ventilators from our supplier”.

6. [33]

   Mr Bellas’ reference to the ventilators being “CE accredited” was a reference to the fact that the Shangrila Ventilators had been certified by the International Electrotechnical Commission as complying with a number of international standards including standard EN 794-3 which is the European standard for emergency and transport lung ventilators.

7. [34]

   Mr Bellas attached two brochures to his email.

8. [35]

   The first referred to the Shangrila Ventilator. I will refer to this as the “MDT Shangrila Brochure”.

9. [36]

   The MDT Shangrila Brochure was entitled “Fighting against COVID-19”. It was in the nature of a promotional brochure and did not contain any detailed technical specifications. It stated on its cover:

10. [37]

    The MDT Shangrila Brochure depicted the Shangrila Ventilator on a stand. Under the heading “Working Scenarios”, the MDT Shangrila Brochure stated “Ward, Emergency Department, Sub–acute Care Unit”. The brochure made various other statements to which I will return.

11. [38]

    A copy of the MDT Shangrila Brochure is attached to these reasons.

12. [39]

    The second brochure attached to Mr Bellas’ email related to the VG70 Ventilator and, unlike the MDT Shangrila Brochure, contained detailed technical specifications. It described the VG70 Ventilator as a “Superior Mobile ICU ventilator” and a “Comprehensive ICU ventilator”. A copy of this brochure, to which I will refer as the “VG70 Brochure”, is attached to these reasons.

13. [40]

    Mr Treadwell referred Mr Bellas’ email to Ms Akua Addai-Aboagye, who was then a Category Manager, Strategic Procurement Services, at HealthShare.

14. [41]

    At that time, Ms Addai-Aboagye was also dealing with approaches from other potential suppliers of the Shangrila and VG70 Ventilators.

15. [42]

    One of those potential suppliers was RAPP. [6]

16. [43]

    On 26 March 2020, several hours after Mr Bellas’ email to Mr Treadwell, Mr Simon Lloyd from RAPP wrote to Ms Addai-Aboagye stating that RAPP had been “working closely” with the Government of Victoria and had “been able to secure production of 4,450 ventilators for” the Government of Victoria. Mr Lloyd continued:

17. [44]

    Mr Lloyd’s email thus drew a distinction between “portable transport ventilators” and “ICU ventilators”. Mr Lloyd attached hyperlinks to “information relating to types of ventilators we have already secure[d] for the Government of Victoria”. Those hyperlinks were to the VG70 Brochure and to a brochure concerning the Shangrila Ventilator that was different to the MDT Shangrila Brochure sent by Mr Bellas to Mr Treadwell. This brochure was entitled “Shangrila 510S Emergency Transport Ventilator” and showed the ventilator in a bag attached to a gurney alongside two “emergency” personnel. This brochure contained technical specifications of the Shangrila Ventilator and described it as a “Multi-functional Emergency Transport Ventilator”. To distinguish this brochure from the one sent by Mr Bellas to Mr Treadwell, I will refer to this brochure as the “RAPP Shangrila Brochure”, although each of these brochures bears Aeonmed’s logo and each appears to have been published by Aeonmed.

18. [45]

    A copy of the RAPP Shangrila Brochure is attached to these reasons.

19. [46]

    Mr Lloyd also provided hyperlinks to brochures relating to ventilators not manufactured by Aeonmed. These have no relevance here.

20. [47]

    The following day, 27 March 2020, Mr Lloyd send a further email to Ms Addai-Aboagye with quotations for the supply of ventilators, including the Shangrila Ventilator, which Mr Lloyd described as an “Emergency Transport Ventilator” and the VG70 Ventilators, which Mr Lloyd described as “Mobile ICU Ventilators”.

21. [48]

    RAPP’s quotation for the Shangrila “Emergency Transport Ventilator” was at a unit price of $15,615 (excl. GST) and for the VG70 “Mobile ICU Ventilator” at a unit of price of $35,785 (excl. GST); more than double the Shangrila price.

22. [49]

    As I set out below, the price that HealthShare ultimately agreed to pay MDT for the Shangrila Ventilators was considerably more than either of these prices: $67,500 per unit for the first 148 units and $54,000 per unit for the second 200 units; an indication that demand outstripped supply.

23. [50]

    Ms Addai-Aboagye’s responsibility was to locate possible sources for ventilators. It was not her responsibility to decide what ventilators should be purchased.

24. [51]

    On 30 March 2020, Ms Addai-Aboagye sent copies of Mr Lloyd’s emails to Mr Rodney Zanetic, an engineer in the Medical Equipment Unit of the Strategic Procurement Unit Services unit of HealthShare.

25. [52]

    As I set out below, unlike Ms Addai-Aboagye, Mr Zanetic was involved in the decision as to what ventilators were to be purchased. He participated in a “Desktop Review” of the Shangrila Ventilator which ultimately led to HealthShare’s decision to enter the Agreements.

26. [53]

    Mr Zanetic thereby received a copy of the VG70 Brochure and the RAPP Shangrila Brochure. He did not receive any brochure from MDT concerning the Shangrila Ventilator.

27. [54]

    A short time later on 30 March 2020, Ms Addai-Aboagye replied to Mr Bellas’ 26 March 2020 email to Mr Treadwell referring to “your notification of 300 potential units of ventilators available” and requesting a “brochure” and “technical specification sheet”.

28. [55]

    Mr Bellas replied the same day:

29. [56]

    Mr Bellas attached to his email a copy of the MDT Shangrila Brochure; that is the same document he had sent Mr Treadwell on 26 March 2020.

30. [57]

    Mr Bellas also attached a Shangrila “Technical Data” sheet that set out such data and also stated:

31. [58]

    I will refer to this document as the “MDT Shangrila Technical Data Brochure”. A copy is attached to these reasons.

32. [59]

    Mr Bellas also attached to his email a document entitled “EC Certificate” dated 16 July 2016 which stated, of Aeonmed:

33. [60]

    Ms Addai-Aboagye replied on the same day, saying that she would “review with the team here and get back to you”.

34. [61]

    Ms Addai-Aboagye replied to Mr Bellas, later on 30 March 2020:

35. [62]

    One of the “3 vendors” to whom Ms Addai-Aboagye referred was RAPP.

36. [63]

    Another was Taleb Medical Pty Limited. Also on 30 March 2020, Mr Taleb Taleb, from Taleb Medical wrote to Mr Zanetic with a quotation to supply 200 VG70 Ventilators, which his brochure described as a “full critical care ventilator” at a unit price of $39,992. Mr Taleb stated that he had “been completely swamped with calls and proposals for more ventilators” and that he had “a price and availability as it stands an hour ago”.

37. [64]

    Also on 30 March 2020, Ms Addai-Aboagye wrote to Mr Bellas:

38. [65]

    Ms Addai-Aboagye was obviously referring to the VG70 Ventilator. As I have said, she had received quotations from RAPP concerning both the Shangrila and the VG70 Ventilators and from Taleb Medical concerning the VG70 Ventilators.

39. [66]

    Later on 30 March 2020, Mr Lee Gannon, the Managing Director of MDT, wrote to Ms Addai-Aboagye:

40. [67]

    Mr Gannon attached “brochures for each” to his email. These were the MDT Shangrila Brochure and the VG70 Brochure that Mr Bellas had sent Mr Treadwell on 26 March 2020.

41. [68]

    Thus, although Ms Addai-Aboagye had made an enquiry about the VG70 Ventilator as a “Bedside ICU Ventilator”, Mr Gannon described the Shangrila Ventilator as being “bedside” and described the VG70 Ventilator as being an “ICU” ventilator.

42. [69]

    Finally, on 30 March 2020, Ms Addai-Aboagye wrote to Mr Treadwell and to Ms Susie Giddey, the Associate Director of Strategic Procurement at HealthShare, stating:

43. [70]

    In that email. Ms Addai-Aboagye described the three proposals as follows:

44. [71]

    In her email to Mr Treadwell and Ms Giddey, Ms Addai-Aboagye described the Shangrila Ventilator as being “mid acuity” and the VG70 Ventilator as being “high acuity”. She also used the initialism “ICU” in relation to each of the Shangrila and VG70 Ventilators although she had received no communication from MDT describing the Shangrila Ventilator as an “ICU” ventilator. Nor had she received any such communication from RAPP. RAPP had described the Shangrila Ventilator as an “emergency transport ventilator” as opposed to the VG70 Ventilator which RAPP described as a “mobile ICU ventilator”.

45. [72]

    Pausing the narrative for a moment, it can be seen that by the time Ms Addai-Aboagye sent her email of 30 March 2020 to Mr Treadwell and Ms Giddey, HealthShare had received two brochures from MDT concerning the Shangrila Ventilator, being the MDT Shangrila Brochure and the Shangrila Technical Data Brochure.

46. [73]

    HealthShare had also received from MDT, and also from RAPP, the VG70 Brochure.

47. [74]

    HealthShare had also received, from RAPP, the RAPP Shangrila Brochure.

48. [75]

    On 31 March 2020, Mr Lloyd from RAPP sent Ms Addai-Aboagye a “revised quote of 100 units only of the VG70 and related items” at a unit price of $38,035, a little more than the $35,785 unit price quoted on 27 March 2020.

49. [76]

    Ms Addai-Aboagye replied several minutes later, stating that “ETA June 30th (or earlier) on site in Sydney is the condition of this potential purchase to help us bridge potential gaps” [7] and sought confirmation that the “manufacturer has authorised RAPP Australia to distribute”, that the VG70 “is as per specification attached” (being the VG70 Brochure), and “100 units confirmed for 30th June delivery or earlier”.

50. [77]

    Mr Lloyd replied a short time later, confirming that RAPP was authorised to distribute the VG70 Ventilators, stating that “we currently have 2,000 units ordered and scheduled for the Government of Victoria”, confirming that the VG70 would be in accordance with the VG70 Brochure and, as for 30 June 2020 delivery said:

51. [78]

    A short time later, and also on 31 March 2020, Mr Lloyd wrote to Ms Addai-Aboagye:

52. [79]

    These communications give insight into the urgent situation HealthShare faced. Each of MDT, RAPP and Taleb Medical was emphasising that, because of the pandemic, ventilators were in short supply globally and that urgent decisions were required to secure supply of stock.

53. [80]

    At around this time, Dr Richard Morris AM, then a Staff Specialist in Anaesthesia at St George Hospital and Visiting Medical Officer in Intensive Care at Shoalhaven District Memorial Hospital, joined a Technical Advisory Group established to develop an initial testing and simulation testing regime for ventilators that had not previously been used in NSW hospitals.

54. [81]

    By 1 April 2020, Dr Morris had reviewed the VG70 Brochure. On that date, he wrote to Ms Giddey and to Mr Zanetic:

55. [82]

    Later on 1 April 2020, Mr Zanetic wrote to Ms Addai-Aboagye:

56. [83]

    Mr Zanetic’s reference to “Nhi’s team” was a reference to Dr Nhi Nguyen, an Intensive Care Specialist at Nepean Hospital, who in March 2020 joined the State Health Emergency Operations Centre (“SHEOC”) as an intensive care adviser. SHEOC was a body established to manage and oversee clinical operations in New South Wales hospitals and health facilities, to support the healthcare workforce and to facilitate procurement of medical equipment in New South Wales during the COVID-19 pandemic.

57. [84]

    I will return below to Dr Nguyen who worked closely with Dr Morris at this time. Mr Zanetic’s reference to “Nhi’s team” having reviewed and approved the VG70 Ventilator may have been a reference to Dr Morris’ review of the VG70 Brochure.

58. [85]

    On 2 April 2020, Ms Giddey wrote to Mr Lloyd at RAPP:

59. [86]

    Later on 2 April 2020, HealthShare placed a purchase order with RAPP for 100 VG70 ventilators at a unit price of $38,035.

60. [87]

    HealthShare delivered that purchase order to RAPP early on 3 April 2020.

61. [88]

    Mr Lloyd responded within minutes in an email that gives some impression of the urgency of the situation with which HealthShare was faced:

62. [89]

    In the meantime, on 3 April 2020, the Therapeutic Goods Administration approved the Shangrila Ventilator and stated that its intended purpose was to be:

63. [90]

    Ms Rachel Hanigan was the Chief Procurement Officer of the NSW Rural Fire Service, but had joined HealthShare’s COVID-19 taskforce to manage and coordinate the response of NSW Government agencies to the pandemic.

64. [91]

    On 7 April 2020, Mr Zanetic wrote to Ms Giddey and to Ms Hanigan referring to HealthShare’s order of 100 VG70 Ventilators from RAPP and said:

65. [92]

    Having secured an order for 100 VG70 Ventilators from RAPP, HealthShare’s position so far as concerns MDT was that it preferred to acquire the VG70 Ventilators, rather than the Shangrila Ventilators.

66. [93]

    Thus, Ms Addai-Aboagye gave this evidence:

67. [94]

    And later:

68. [95]

    From 8 April 2020, Mr Gannon and Ms Hanigan exchanged emails concerning the possible supply by MDT to HealthShare of VG70 Ventilators. Ms Hanigan said “let’s be ambitious and say 500”. Nothing came of this as MDT was not able to source VG70 Ventilators.

69. [96]

    Ultimately, on 20 April 2020 Mr Gannon wrote to Ms Hanigan, Mr Zanetic and others:

70. [97]

    Ms Hanigan called Mr Gannon and they had this conversation:

71. [98]

    HealthShare relies on the passages in this conversation that I have emphasised as the occasion on which it made known to MDT the “particular purpose” for which it required the Shangrila Ventilators so as to enliven s 19 of the Sale of Goods Act.

72. [99]

    The “particular purpose” that HealthShare contends it thus made known was “that it required the ventilators for use in a clinical setting for treating patients with COVID-19”. I return to this below.

73. [100]

    Mr Gannon gave evidence that, at about this time, he had this conversation with Ms Hanigan:

74. [101]

    Ms Hanigan denied that Mr Gannon told her the Shangrila Ventilators were “not intended for ICU”. Responding to a statement made by Mr Gannon in an earlier affidavit to the same effect, [9] Ms Hanigan said:

75. [102]

    However, notwithstanding Ms Hanigan’s denial, I think it likely that the conversation to which Mr Gannon deposed did take place. That is because, several weeks later, on 1 May 2020, after the Agreements were entered, Mr Gannon wrote to Ms Hanigan:

76. [103]

    I return to this communication below. [11]

77. [104]

    HealthShare then conducted what the parties described as a “Desktop Review” of the Shangrila Ventilator.

78. [105]

    Because of MDT’s contention that HealthShare did not rely on MDT’s skill or judgment when deciding to purchase the Shangrila Ventilators, it is necessary to examine this process in detail, and to understand the compressed time that HealthShare understood was available, by reason of the exigencies of the pandemic, to make decisions as to what ventilators were to be purchased.

79. [106]

    On 15 April 2020, Dr Morris suggested to Mr Zanetic that a standard be adopted to assess ventilators to be used during the pandemic. Dr Morris suggested the TGA guidelines as the standard for locally made ventilators.

80. [107]

    Mr Zanetic replied saying that he agreed that a guideline should be adopted “to base our decisions on” and that he had been using “the ICU mid and high acuity technical requirement HealthShare published in 2018 for the ventilation tender”.

81. [108]

    Dr Morris replied, agreeing with Mr Zanetic’s suggestion and saying that Mr Zanetic’s proposal looked “more detailed than the TGA and could be combined with the TGA minimum standards nicely”.

82. [109]

    As I have said, [12] on 20 April 2020 Mr Gannon wrote to Ms Hanigan, Mr Zanetic and others stating that MDT had “just been contacted” by Aeonmed “and they have confirmed they can obtain 48 Shangrila 510S Ventilator[s] in May from a local distributor who is willing to sell his product”. Mr Gannon said “these are available in May 2020” and “we need a quick response to obtain these units” because “these units will go quickly due to the delivery time of May”.

83. [110]

    A short time later, Mr Zanetic wrote to Dr Morris and Dr Nguyen:

84. [111]

    The “product brochure” to which Mr Zanetic referred was the RAPP Shangrila Brochure, a link to which Mr Lloyd from RAPP had sent Ms Addai-Aboagye on 26 March 2020 [13] and which Ms Addai-Aboagye had sent Mr Zanetic on 30 March 2020. As I have said, this brochure was different in form to the MDT Shangrila Brochure and the MDT Shangrila Technical Data Brochure that MDT had hitherto sent HealthShare, although the RAPP Shangrila Brochure contained the same technical specifications as were set out in the MDT Shangrila Technical Data Brochure. The RAPP Shangrila Brochure that Mr Zanetic provided Dr Morris did not state that the Shangrila Ventilator had “conventional volume control”. This point is relevant to HealthShare’s misleading or deceptive conduct claim, to which I return below. [14]

85. [112]

    The “evaluation summary” to which Mr Zanetic referred was a document created by Mr Zanetic to analyse whether the Shangrila Ventilator complied with a number of “minimum requirements”.

86. [113]

    Mr Zanetic used a format usually adopted to assess tenders made to HealthShare for the possible supply of products. Mr Zanetic completed the document as if assessing such a tender from MDT. The “minimum requirements” adopted by Mr Zanetic for this purpose were for an ICU mid-acuity ventilator. Mr Zanetic noted, using an “x”, that the Shangrila Ventilator did not comply with many of these “minimum requirements”.

87. [114]

    The following day, 21 April 2020, Dr Morris replied:

88. [115]

    Mr Zanetic replied:

89. [116]

    The “other document” to which Mr Zanetic referred was the further brochure that Mr Zanetic had evidently located on an online search. A copy of this brochure is attached. Because this brochure depicted the Shangrila Ventilator in a bag, the parties referred to it as the “Shangrila in a Bag Brochure”. I shall do the same.

90. [117]

    The Shangrila in a Bag Brochure stated, amongst other things:

91. [118]

    This brochure contained technical specifications similar to those in the RAPP Shangrila Brochure and the MDT Shangrila Brochure. It did not contain any statement to the effect that the Shangrila Ventilator had conventional volume control.

92. [119]

    Dr Morris replied:

93. [120]

    At this point, Dr Morris was saying, in effect, “so far, so good”. [16]

94. [121]

    At around this time, Mr Zanetic “searched online for publicly available information” about the Shangrila Ventilator and, in addition to locating the Shangrila in a Bag Brochure, located a document that was in the same form as the MDT Shangrila Brochure but, unlike that brochure, did not bear Aeonmed’s logo at the bottom right hand corner of the front page. Rather, it bore the logo of “Allied Scientific Pro”; evidently another purported distributor of Aeonmed products. To distinguish this version of the brochure from the MDT Shangrila Brochure, I will call this version of the brochure the “Allied Scientific Shangrila Brochure”. A copy of that brochure is attached to these reasons.

95. [122]

    Several hours later, Mr Garth Worboys, an Incident Controller in the COVID-19 Procurement & Supply Chain, representing the Ministry of Health, wrote to Dr Morris, copying in Mr Zanetic, Dr Nguyen and others:

96. [123]

    Mr Worboys was thus enquiring, on behalf of the Ministry of Health, and evidently also on behalf of the Premier, as to whether any of the nominated “nine ventilator categories” would “be appropriate for use on patients in the ICU and could support them for up to a month”. Those “categories” ranged from an “ICU High Acuity” invasive ventilator at one end of the spectrum to a non-invasive “Homecare” ventilator of the other, and included three categories of “Transport/Ward Use” and “External and Intra-Hospital Transport” ventilators. As I have set out above, in his email to Dr Morris the previous day, Mr Zanetic had described the Shangrila Ventilator as an “emergency transport ventilator”. [17] This appears to reflect the urgent need that the Ministry of Health saw to source a wide range of ventilators for use in an ICU setting in the short-term, including ventilators that were not designed for ICU use.

97. [124]

    Dr Morris replied:

98. [125]

    Dr Morris’ reply appears to show that his view was that, at least for the next “month or more”, ICU patients could be supported by any one of the nine classes of ventilator the subject of Mr Worboys’ enquiry. This no doubt reflected the urgency of the situation with which HealthShare was faced in these early days of the pandemic, and was consistent with Mr Zanetic’s earlier observation that consideration of “lower performance options” may be worthwhile. [18]

99. [126]

    In that regard, Dr Morris gave this evidence in cross-examination:

100. [127]

     Dr Morris’ reference to “discussions with the policeman” was evidently referenced to his exchange with Mr Worboys. Dr Morris agreed that he understood that HealthShare was seeking to compile a reserve stockpile of ventilators to deal with the pandemic. However, he emphasised that he was not meaning to endorse the use of any specific ventilator.

101. [128]

     On the question of HealthShare’s consideration of “lower performance ventilators” Dr Morris said:

102. [129]

     In the meantime, Ms Hanigan wrote to Mr Gannon, also on 21 April 2020:

103. [130]

     Ms Hanigan’s statement that HealthShare wished to “proceed” with the Shangrila Ventilators was evidently prompted by Dr Morris’ statement, made several hours earlier, that “I think it is fine”. [19]

104. [131]

     Mr Gannon replied a few minutes later, providing the User Manual and stating:

105. [132]

     Mr Gannon was thus telling Ms Hanigan that MDT was able to make available 150 Shangrila Ventilators.

106. [133]

     Ms Hanigan wrote to Mr Gannon:

107. [134]

     Ms Hanigan then wrote to Mr Zanetic:

108. [135]

     I will return to the detail of the User Manual below. For present purposes it is sufficient to say that, under the heading “Intended Use”, the User Manual stated:

109. [136]

     Mr Zanetic replied to Ms Hanigan stating “I will send through for clinical assessment”.

110. [137]

     Mr Zanetic then wrote to Dr Morris:

111. [138]

     Again, Mr Zanetic’s email bespoke the urgency with which HealthShare saw a decision needed to be made.

112. [139]

     A short time later on 21 April 2020, Mr Zanetic wrote to Dr Morris:

113. [140]

     The words I have emphasised show that Mr Zanetic did not rely on anything in the User Manual to change his “initial assessment” of the Shangrila Ventilator.

114. [141]

     Several hours later, Mr Zanetic sent Dr Morris a further update of his “technical assessment”. He said:

115. [142]

     This shows that Mr Zanetic still placed no reliance on the User Manual, and now also not on the “brochures” concerning his updated assessment of the Shangrila Ventilator. That updated assessment still showed an “X”, denoting non-compliance, in relation to numerous of the ICU mid acuity “Technical Specification Requirements” in Mr Zanetic’s spreadsheet.

116. [143]

     Dr Morris then made an assessment of the Shangrila Ventilator based on the User Manual and the technical data provided by Mr Zanetic.

117. [144]

     Several hours later, Dr Morris replied:

118. [145]

     Although Dr Morris referred to having looked at the “brochure”, he said in cross-examination that he should have referred to the “attachments”, including the User Manual. He agreed he was speculating about this, but it seems likely to be correct, as by now Mr Zanetic had sent him the User Manual.

119. [146]

     The email in which Dr Morris made this statement was sent a little under two hours after Mr Zanetic had sent his first update of his technical assessment, [20] albeit only two minutes after Mr Zanetic sent his second update. [21] In his email Dr Morris did not, as Mr Zanetic had requested, in terms confirm Mr Zanetic’s opinion that nothing in the User Manual or the “brochures” changed the assessment represented by Mr Zanetic’s spreadsheet. Nor did Dr Morris express any disagreement with that opinion.

120. [147]

     However, I am satisfied that, prior to concluding that the Shangrila Ventilator “satisfies all the requirements”, Dr Morris gave careful attention to both the User Manual and the brochures [22] that Mr Zanetic had forwarded to him.

121. [148]

     Thus, in his affidavit evidence, Dr Morris described the process he undertook as follows:

122. [149]

     Further, in cross-examination, Dr Morris said that he was not “working in a clinical role” in the several hours he considered the question on this day and that he had “ample time to review the documents, and [he] wouldn’t have responded until [he] had reviewed them”.

123. [150]

     I find that Dr Morris reached the conclusion that the Shangrila Ventilator satisfied “all the requirements” based in part on what was said in the User Manual, as well as in the brochures to which his attention was directed, and on the basis of his assessment that although the Shangrila Ventilator did not have all of the features of an intensive care ventilator that it would be “nice to have”, it had the features that “[he] regarded as must have”. [23]

124. [151]

     Mr Zanetic then wrote to Ms Hanigan:

125. [152]

     It is not clear which particular person at or on behalf of HealthShare made the decision to purchase the Shangrila Ventilators.

126. [153]

     As described by Ms Giddey in cross-examination, following the clinical approval by Dr Morris, the process was that this clinical approval was sent:

127. [154]

     However, the communications between Ms Hanigan and MDT from 21 April 2020, which I consider in detail below, show that by then, a decision had been made to purchase the Shangrila Ventilators.

128. [155]

     There is no suggestion in the evidence of the intervention of any other clinical advice, following that of Dr Morris. I am satisfied that the decision to purchase was based on Dr Morris’ conclusion that the Shangrila Ventilator “now satisfies all the requirements”. [24]

The Agreements

1. [156]

   What followed were communications leading to the formation of the Agreements.

2. [157]

   As I have set out above, HealthShare contends that HealthShare’s standard “Purchase Orders Terms and Conditions” were incorporated into the Agreements. The reason for this is that those Terms and Conditions were referred to in a hyperlink in the two purchase orders that HealthShare sent to MDT during the negotiations to which I will now turn.

3. [158]

   Determination of whether HealthShare’s contentions are correct requires a careful analysis of the communications between the parties between 21 April 2020 and 1 May 2020.

4. [159]

   The question of whether a contract has been formed is often considered in terms of whether an offer has been made and that offer has been accepted. It has been said that the “offer and acceptance analysis is a useful tool in most circumstances and indeed is ‘normal’ and ‘conventional’”. [25]

5. [160]

   However, as has been said:

6. [161]

   It has been recognised that some “parties may drift into a contractual relationship” in commercial circumstances, [27] and, as a result:

7. [162]

   When this occurs:

8. [163]

   To determine mutual assent, the court must look to “the whole of the parties’ interactions (written and spoken) and their conduct, to determine whether, viewed objectively, the parties mutually assented to the essential elements of a bargain and intended to be bound.” [30]

9. [164]

   Ultimately, the question is whether:

10. [165]

    For the reasons that follow, my conclusion is that the Purchase Order Terms and Conditions were not incorporated into the Agreements and that a reasonable person in the position of the parties would have concluded that there was a concluded bargain before HealthShare delivered the purchase orders containing the hyperlink to the Terms and Conditions.

11. [166]

    On 21 April 2020, Ms Hanigan wrote to Mr Gannon:

12. [167]

    A short time later, Ms Hanigan spoke to Mr Gannon on the telephone. Ms Hanigan asked Mr Gannon to “provide a written quote including delivery dates”. Mr Gannon said he would.

13. [168]

    A short time later, Ms Hanigan wrote to Mr Gannon:

14. [169]

    Mr Gannon replied, a minute later:

15. [170]

    Ms Hanigan immediately replied:

16. [171]

    At exactly the same time, Mr Zanetic wrote to Ms Hanigan:

17. [172]

    Mr Gannon replied to Ms Hanigan:

18. [173]

    Mr Gannon’s reference to confirming “payment terms” appears to be a reference to MDT confirming payment terms of the supply of the Shangrila Ventilators from Aeonmed to MDT. The matter was not explored in cross-examination.

19. [174]

    Several hours later, and also on 21 April 2020, Mr Gannon wrote to Ms Hanigan:

20. [175]

    The quotation attached to Mr Gannon’s email specified that the total amount due was $9.99 million for 148 Shangrila Ventilators. The quotation read:

21. [176]

    The quotation then set out details of MDT’s bank account.

22. [177]

    The provision by MDT of its quotation constituted an offer by it to sell the 148 Shangrila Ventilators to HealthShare.

23. [178]

    On the following day, 22 April 2020, HealthShare sent MDT an email that MDT contends constituted an acceptance by HealthShare of the offer made by MDT in its 21 April 2020 quotation.

24. [179]

    The email was sent by Ms Teresa Kusnadi, Category Officer, Strategic Procurement Services at HealthShare. The heading to that email read, in bold:

25. [180]

    The email read:

26. [181]

    MDT placed emphasis on the fact that the heading to this email recited the Purchase Order number in the context of the statement “to secure” the 148 ventilators. That does suggest that HealthShare had created a purchase order number with a view, ultimately, to secure the 148 ventilators.

27. [182]

    However, in the passage I have emphasised in this email, HealthShare also sought MDT’s “advice about payment arrangements needed as per your email below”, a reference to Mr Gannon’s email attaching the quotation.

28. [183]

    In fact, MDT had specified in its quotation its proposed “payment arrangements” under the heading “Payment Terms”. The enquiry made by HealthShare in its 22 April 2020 email shows that, inconsistently with there being the necessary “mutual assent” at this stage, HealthShare had not understood this.

29. [184]

    What this email does show is that, at this stage, HealthShare contemplated that it would be MDT, not HealthShare, that would be proposing payment terms: an unsurprising position in the circumstance of a global shortage of ventilators and strong competition for the supply of ventilators.

30. [185]

    MDT replied a few minutes later:

31. [186]

    That email shows that there was still no “mutual assent” as MDT was reiterating its requirement, stated in the quotation, that HealthShare pay half the purchase price by 27 April 2020; a matter not yet agreed.

32. [187]

    The email also shows that, at this stage, MDT contemplated it would receive a purchase order (“the PO”) before it sent its invoice. That is not what happened.

33. [188]

    Thus, about an hour later, Ms Kusnadi sent Mr Gannon an email:

34. [189]

    Several hours later, and also on 22 April 2020, Mr Gannon replied:

35. [190]

    Mr Gannon attached MDT’s invoice directed to HealthShare for $9.9 million.

36. [191]

    The invoice stated:

37. [192]

    Details of MDT’s bank account followed.

38. [193]

    Mr Gannon’s statement in the passage I have emphasised in his email that “if you need any changes please advise” shows that “mutual assent” had still not been achieved. Mr Gannon was evidently referring to when payment of the balance of the purchase price would be made. The invoice proposed that such payment be made within seven days of the three proposed delivery dates. Mr Gannon was saying that MDT was “flexible”, that is amenable to further negotiation, about that matter. Thus, there was still no final agreement on terms.

39. [194]

    Several minutes later, Ms Donna Bonser, Site Supervisor, Purchasing | Supply Chain Operations for HealthShare sent Mr Gannon at MDT an email:

40. [195]

    Ms Bonser made no reference to Mr Gannon’s statement about MDT being “flexible” about when the second half of the purchase price would be paid. On the face of it, Ms Bonser’s note bespoke HealthShare’s acceptance of the offer made in MDT’s invoice.

41. [196]

    A copy of the Purchase Order is attached to these reasons.

42. [197]

    As can be seen at the foot of the Purchase Order, in font slightly smaller than used in the balance of the Purchase Order, are the words:

43. [198]

    The hyperlink in those words provided access to the Purchase Order Terms and Conditions.

44. [199]

    On 27 April 2020, HealthShare paid MDT $4.995 million, being half the amount in the 21 April 2020 tax invoice.

45. [200]

    The critical question is whether the Purchase Order Terms and Conditions were thereby incorporated into the First Agreement.

46. [201]

    If they were, Ms Bonser’s email delivering the Purchase Order constituted a counteroffer by HealthShare, as the Purchase Order Terms and Conditions contained terms inconsistent with those proposed by MDT in its invoice. In particular, cl 7 of the Purchase Order Terms and Conditions provided:

47. [202]

    In closing submissions, HealthShare contended that “the purchase order constituted a counteroffer the terms of which included the Purchase Order Terms and Conditions”.

48. [203]

    In closing oral submissions, this was how the matter was put by senior counsel for HealthShare:

49. [204]

    Thus, HealthShare’s case is that Ms Bonser’s 23 April 2020 email was a counteroffer to the offer made by MDT in its invoice, which counteroffer was accepted by MDT by delivery of the ventilators. The invoice estimated the ventilators would be delivered in stages: 48 on 30 May 2020, 50 on 30 June 2020 and the final 50 on 31 July 2020. As I have said, the ventilators were in fact delivered between 16 June 2020 and 15 July 2020. [34] Thus, HealthShare’s case is that there was no contract until then.

50. [205]

    This would be a surprising result.

51. [206]

    It would mean that, as no contract was formed until, at the earliest, delivery of the first batch of ventilators on 16 June 2020, and perhaps not until final delivery on 31 July 2020, HealthShare would have no legally enforceable commitment from MDT to deliver any ventilators.

52. [207]

    And yet on 27 April 2020, it paid MDT $4.995 million for those ventilators.

53. [208]

    It would also mean that had MDT been unable to supply any ventilators, HealthShare, not having a contract on which to sue, would have been obliged to pursue MDT to seek restitutionary relief to recover the $4.995 million.

54. [209]

    That cannot have been what HealthShare intended.

55. [210]

    In closing submissions, senior counsel for HealthShare submitted that the explanation might have been that those at HealthShare who authorised the payment of the $4.995 million believed, albeit on HealthShare’s case, mistakenly, that there was a binding agreement with MDT at the time of the payment. But there is no evidence that that was so. HealthShare did not call evidence from whoever it was that authorised the payment.

56. [211]

    It would also follow from HealthShare’s case that, despite the fact that the Purchase Order Terms and Conditions provided for payment by “the Agency”, here HealthShare, “by the end of the month following the month in which a Correctly Rendered Invoice … is received” [35] HealthShare agreed to pay the $4.995 million, half the purchase price, on the date specified by MDT in its invoice, 22 April 2020.

57. [212]

    A further difficulty that I see with HealthShare’s submission is that, during the negotiations leading to the Purchase Order, HealthShare made no suggestion that the purchase would be on its terms. On the contrary, it asked MDT to state the “payment arrangement needed”, [36] and asked MDT to issue a tax invoice (not a proforma document) “to arrange for the payment”. [37]

58. [213]

    Further, as I set out below, [38] on the day after Ms Bonser sent Mr Gannon the Purchase Order in respect of the 148 Shangrila Ventilators, when Ms Hanigan enquired of Mr Gannon concerning the provision of further Shangrila Ventilators, she asked him to “request pricing & terms”.

59. [214]

    It is true, as HealthShare has pointed out, in his 30 March 2020 email [39] Mr Bellas said that “a purchase order and payment for 60% of the order value” would be needed to secure supply. It is also true that Mr Gannon agreed in cross-examination that throughout his dealings with HealthShare, he understood that it was necessary for HealthShare to deliver a purchase order to commit to the purchase of ventilators.

60. [215]

    But in the communications leading up to the delivery by HealthShare to MDT of its 23 April 2020 Purchase Order, there was no suggestion that the agreement between MDT and HealthShare would be otherwise than on the terms that had been consistently proposed by MDT.

61. [216]

    The question for me is whether, looking at the matter objectively, reasonable people in the positions of MDT and HealthShare would have understood that the parties intended that the Purchase Order Terms and Conditions, referred to at the foot of the Purchase Order, and accessible by hyperlink, were to be incorporated into the contract.

62. [217]

    In my opinion, the answer is that reasonable people in the position of the parties would not have thought MDT and HealthShare intended this result. It is obvious from the parties’ communications leading up to 23 April 2020, from the overall circumstances of a global shortage of ventilators during the pandemic, and from the urgent need for HealthShare to secure a supply of ventilators, that HealthShare intended on 23 April 2020 to close the deal in relation to the 148 Shangrila Ventilators; and obtain a commitment from MDT with binding contractual force that MDT would supply the 148 Shangrila Ventilators. And to do this before it paid the $4.995 million.

63. [218]

    MDT was correct to submit that:

64. [219]

    Further, as MDT submitted:

65. [220]

    I do not see resolution of this issue as requiring consideration of whether or not MDT had a reasonable opportunity to access the hyperlink in the Purchase Order and consider the Purchase Order Terms and Conditions. [40]

66. [221]

    Rather, the question is whether, looking at the matter objectively, it can be concluded that the parties, and HealthShare in particular, intended that the Purchase Order Terms and Conditions be included in the agreement with MDT, and intended that the delivery of the Purchase Order constitute a counteroffer. In my opinion, despite the reference in the Purchase Order to the Purchase Order Terms and Conditions, this was not the intention of the parties.

67. [222]

    Late on 23 April 2020, several hours after Ms Bonser’s email sending Mr Gannon the Purchase Order under the First Agreement, Mr Gannon wrote to Ms Hanigan, stating that a Mr David Mellick, whose role was not identified in the evidence, had:

68. [223]

    Ms Hanigan replied the following day, 24 April 2020:

69. [224]

    Ms Hanigan was thus inviting Mr Gannon to let HealthShare know the “terms” on which Aeonmed would supply the further Shangrila Ventilators to MDT and thus, the terms on which MDT would supply those further Shangrila Ventilators to HealthShare. There is no suggestion in Ms Hanigan’s enquiry that HealthShare itself was proposing the terms of any such supply, let alone that any such supply would be on the basis of HealthShare’s Purchase Order Terms and Conditions.

70. [225]

    Post contractual conduct is relevant to, and thus admissible to prove, the terms of a contract. [41] Ms Hanigan’s enquiry would have been unnecessary had she thought that the Purchase Order Terms and Conditions governed the First Agreement. Of course, Ms Hanigan’s subjective state of mind is not relevant to nor determinative of the question of what the terms of the First Agreement were. But I see this enquiry as being confirmatory of the conclusion that, looking at the matter objectively, the Purchase Order Terms and Conditions were not incorporated into the First Agreement.

71. [226]

    Whether or not that is so, it is plain, as I explain below, that the Purchase Order Terms and Conditions were not incorporated into the Second Agreement: a further factor confirmatory of the conclusion that they were not incorporated into the First Agreement.

72. [227]

    Five days later, on 29 April 2020, Mr Bellas from MDT wrote to Ms Hanigan at HealthShare:

73. [228]

    Ms Hanigan replied, saying that she was “seeking urgent feedback/approval”.

74. [229]

    Mr Bellas replied:

75. [230]

    On the following day, 30 April 2020, Ms Hanigan wrote to Mr Bellas:

76. [231]

    Mr Bellas replied that the invoice was “on its way”.

77. [232]

    A short time later, at 10.42am, Mr Gannon wrote to Ms Hanigan:

78. [233]

    The attached invoice was for 200 Shangrila Ventilators for an amount of $10.8 million.

79. [234]

    The invoice read:

80. [235]

    It is common ground that the provision by MDT to HealthShare of this invoice constituted an offer by MDT.

81. [236]

    Several hours later, at 2.25pm, Ms Kusnadi from HealthShare wrote to Mr Gannon and Mr Bellas from MDT, under the heading “PO 37879498 from NSW Health to secure 200 ventilator”:

82. [237]

    Like Ms Kusnadi’s email of 22 April 2020, [42] this email was headed with the Purchase Order number followed by the words “to secure” the relevant number of Shangrila Ventilators. However, Ms Kusnadi made no enquiry on this occasion about the “payment arrangement needed”, doubtless because consistently with its 22 April 2020 invoice, MDT had clearly stated its “Payment Terms” in its invoice delivered several hours earlier: 50% payment by close of business that day and the remaining balance within seven days from the delivery date.

83. [238]

    I see this email as HealthShare’s acceptance of the offer made by MDT in its invoice sent earlier that day. No doubt MDT expected that a purchase order would follow. But Ms Kusnadi’s email made clear that it was only necessary for MDT to use the Purchase Order number “for confirmation” of the order made by HealthShare in the correspondence between Mr Gannon and Ms Hanigan: the “correspondence between you and Rachel”.

84. [239]

    HealthShare needed to close the deal immediately. MDT’s stated payment terms meant that payment of 50% of the purchase price, that is, $5.4 million, would need to be received by close of business that day: in less than three hours, assuming close of business at 5pm.

85. [240]

    At some time on 30 April 2020, I would infer after the delivery of that email, and before close of business, HealthShare paid MDT $5.4 million “pursuant to the terms of invoice #000211”. It must have made the payment with the intent of closing the deal and securing a contractually enforceable promise from MDT to deliver the 200 further ventilators.

86. [241]

    The following day, 1 May 2020, Ms Bonser sent MDT Purchase Order 37879498. This purchase order was in the same terms as the purchase order delivered by HealthShare on 23 April 2020 and, in the same way, referred by hyperlink to the Purchase Order Terms and Conditions.

87. [242]

    But, by the time the Purchase Order was delivered, the Second Agreement had been formed, and HealthShare had paid MDT the 50% payment of $5.4 million. As Ms Hanigan anticipated in her 24 April 2020 email, [43] the sale was on the terms proposed by MDT in its invoice.

The article in The Guardian

1. [243]

   On or about 1 May 2020 an article was published in The Guardian online about Aeonmed Shangrila ventilators. The article stated the United Kingdom National Health Service had purchased a quantity of “Shangrila 510 ventilators”, but that testing of those ventilators had found that they were “badly built, unsuitable for use in hospitals and potentially dangerous for patients”.

2. [244]

   Ms Hanigan read The Guardian article and telephoned Mr Gannon. They had this conversation:

3. [245]

   Later, on 1 May 2020, Mr Gannon wrote to Ms Hanigan:

4. [246]

   The last paragraph of that email is the passage I referred to at [102] above.

5. [247]

   In this email, Mr Gannon drew a distinction between the “510” Shangrila ventilators that were criticised in The Guardian article on the one hand, and the “510S” Shangrila Ventilators that MDT were supplying to HealthShare. The former were, as Mr Gannon described in his email, “ambulance based units”, whereas the latter were “respirator workstations”.

6. [248]

   When Mr Gannon said in his email “the units acquired were not fit for purpose” it is clear that he was referring to the “ambulance based units” the subject of The Guardian article.

7. [249]

   But, in the last two paragraphs of the email, Mr Gannon was obviously referring to the 510S Shangrila Ventilators to be supplied to HealthShare pursuant to the Agreements. That is made clear by his reference to MDT inspecting 10% of those units “on arrival”.

8. [250]

   Thus, Mr Gannon’s reference, in the final paragraph, to having “been very clear” about ventilators being “not full ICU ventilators”, was a reference to the 510S Shangrila Ventilators the subject of the Agreements.

9. [251]

   Mr Gannon confirmed this in answer to questions from me:

10. [252]

    Mr Gannon also rejected the proposition put to him by senior counsel for HealthShare that his earlier reference to “units acquired” not being fit for purpose was a reference to the same 510S Shangrila Ventilators to be supplied by MDT. I think it obvious from a fair reading of Mr Gannon’s email that this is not what he meant.

11. [253]

    Mr Gannon said that Ms Hanigan did not reply to his email nor otherwise dispute his statement that “we have been very clear [the Shangrila Ventilators] are not full ICU ventilators”.

12. [254]

    Although Ms Hanigan did not say so, it may be that she misunderstood Mr Gannon’s email and thought that his reference to having being “very clear” that the ventilators of which he was speaking were “not full ICU ventilators” was a reference to the 510 ventilators criticised in The Guardian email.

13. [255]

    However, I am satisfied that this is not what Mr Gannon intended to say, indeed clearly not what he in fact did say.

14. [256]

    This provides objective evidence that, contrary to Ms Hanigan’s denial, Mr Gannon had earlier stated that the 510S Shangrila Ventilators were “not full ICU ventilators”. I find that he did so and that he did have the conversation with Ms Hanigan to which I have referred at [101] above.

15. [257]

    There was no reason for Mr Gannon to misstate the position in this email. If it is a fact that Ms Hanigan misunderstood to what ventilators Mr Gannon was referring in the last passage of the email, there is no reason why Mr Gannon, at the time, would have anticipated any such misunderstanding. There was also no reason why Mr Gannon would have made an untruthful statement to Ms Hanigan in these circumstances. The Agreements had just been concluded. There was no reason for Mr Gannon to think that there would be any controversy about the parties’ dealings at this time. I find that this email provides a contemporaneous confirmation of the accuracy of Mr Gannon’s recollection of having told Ms Hanigan that the Shangrila Ventilator was not a “full ICU ventilator”. Ms Hanigan’s recollection that Mr Gannon did not say this may well be her current genuine recollection of the matter; but it cannot be correct.

16. [258]

    Ms Hanigan forwarded Mr Gannon’s email to the COVID-19 Taskforce stating that MDT “have addressed the main points” and that the 510S Shangrila Ventilator was “a different model to what the UK purchased” and that “they purchased the 510 which is an ambulance/portable model”.

Delivery of the Shangrila Ventilators

1. [259]

   As I have said, [44] MDT caused the Shangrila Ventilators to be delivered to HealthShare between 16 June 2020 and 15 July 2020.

The technical tests – Dr Cook

1. [260]

   As the Shangrila Ventilators were delivered, HealthShare arranged for them to be the subject of what the parties described as “technical testing” by Dr Andrew Cook.

2. [261]

   Dr Cook is a Projects Engineer and Technical Specialist in Clinical Engineering employed by the South Eastern Sydney Local Health District. He is a biomedical engineer.

3. [262]

   The purpose of the testing was to identify the functionalities of the Shangrila Ventilators with a view to the ventilators then being referred to a team of expert clinicians for consideration of whether those functionalities were acceptable for use in hospitals in New South Wales during the COVID-19 pandemic.

4. [263]

   Dr Cook explained that he saw his role as to “provide a recommendation” to the “Technical Advisory Group of clinical staff”.

5. [264]

   Dr Cook conducted technical testing on two ventilators on 1 July 2020. With the assistance of Mr Zanetic, Dr Cook conducted a second round of technical testing on two different ventilators on 30 July 2020. Dr Cook conducted a further round of technical testing on 14 August 2020.

6. [265]

   I will deal with the difficulties Dr Cook said he encountered with the Shangrila Ventilators when considering the contested functions of the Shangrila Ventilators below.

The “Cancellation of Ordered Ventilators” brief

1. [266]

   On 24 July 2020, an Executive Director at HealthShare, Mr Alex Araujo, and a Director of HealthShare, Ms Susan Connelly, prepared a “Brief for the SHEOC Controller” called “Cancellation of Ordered Ventilators”.

2. [267]

   Under the heading “Topic”, the document stated:

3. [268]

   The document sought approval for one of the following three options:

4. [269]

   At one point, MDT submitted that HealthShare was motivated to terminate the Agreements by reason of the matters recorded in this document. The point was not developed in closing submissions. In any event, I do not accept it. The 24 July 2020 document is focused on undelivered ventilators. By 24 July 2020, all the Shangrila Ventilators had been delivered. I am satisfied that HealthShare’s decision to terminate the Agreements was based on its own analysis and assessment of the Shangrila Ventilators.

The clinical tests – Dr Gatward

1. [270]

   On 10 August 2020, Dr Jonathon Gatward, an Intensive Care Specialist at Royal North Shore Hospital, supervised clinical testing of the Shangrila Ventilators. This testing was designed to assess the “usability” of the ventilators.

2. [271]

   A number of assessors, being nurses, doctors and equipment officers at Royal North Shore Hospital, were selected to participate in a clinical testing of the Shangrila Ventilators.

3. [272]

   The clinical testing was developed by Dr Morris in consultation with Dr Gatward. The assessors were given a number of tasks to perform on the ventilators, simulating clinical situations. In those simulations, the role of the “patient” was represented by a device known as the Ingmar ASL 5000 Breathing Simulator, a sophisticated breathing simulator often used in clinical testing.

4. [273]

   The experience of the assessors was recorded in questionnaires they completed at the time. I admitted those questionnaires as evidence of the experience the assessors had with the ventilators.

5. [274]

   As with Dr Cook’s technical testing, I will return to the results of the clinical testing when considering the contested functionality of the Shangrila Ventilator.

The decision

1. [275]

   By 21 August 2020, HealthShare had produced a report to which the parties referred as the “CPG Report”.

2. [276]

   That report reviewed the technical and clinical testing and concluded:

3. [277]

   On 21 August 2020, Ms Giddey sent a copy of the CPG Report to Mr Gannon, stating:

4. [278]

   On 1 September 2020, HealthShare prepared a “Brief for the SHEOC Controller” which sought approval to “cancel” the purchase orders for the Shangrila Ventilators.

5. [279]

   That document then described the main issues as being:

6. [280]

   On 7 September 2020, HealthShare, by its solicitors, wrote to MDT formally rejecting the Shangrila Ventilators, purporting to terminate the Agreements and demanding the return of the $10.395 million paid by HealthShare to MDT on 27 and 30 April 2020.

7. [281]

   MDT commenced these proceedings on 6 October 2020.

The expert evidence

1. [282]

   HealthShare adduced expert evidence from a biomedical engineer, Mr Matthew Jones. Mr Jones has over 20 years’ experience in biomedical engineering and has a particular familiarity with how ventilators work and how they are tested prior to clinical use. Mr Jones has developed protocols to test up to 50 different models of ventilators, and has personally tested or supervised the testing of between 1,000 and 2,000 ventilators.

2. [283]

   Mr Jones developed testing protocols for the Shangrila Ventilators and arranged for two members of his staff, Mr Sam De Soysa and Mr Yasiru Don, to conduct tests of the Shangrila Ventilators, based on those protocols. Mr De Soysa conducted testing on 23 and 26 July 2021, and Mr Don conducted testing on 30 July and 2 August 2021.

3. [284]

   Mr Jones said that the testing performed by Mr De Soysa and Mr Don took approximately 20 hours and that he was present for between half an hour and an hour during that testing.

4. [285]

   On behalf of MDT it was submitted that this meant that “little weight can be given to much of Mr Jones’ evidence” and that “his evidence in significant part rises no higher than the worksheets prepared by the persons who actually performed the testing”, being Mr De Soysa and Mr Don.

5. [286]

   However, Mr Jones said he carefully supervised the work of Mr De Soysa and Mr Don. He gave evidence before me concurrently with MDT’s expert witness, Dr Bruce Barkalow. Mr Jones impressed me as a thoughtful and careful witness who, as I discuss below, was prepared to make concession where appropriate. I gained the strong impression that he was endeavouring to express his opinions honestly and with care.

6. [287]

   MDT’s expert witness was Dr Bruce Barkalow. Dr Barkalow is also a biomedical engineer. He has over 40 years’ experience in biomedical engineering and regularly provides consulting services to hospitals, medical device companies, legal firms and insurance companies in the United States. Dr Barkalow conducted his testing of the ventilators in January 2022.

7. [288]

   Dr Barkalow gave his evidence remotely from Michigan.

8. [289]

   HealthShare made a global objection to Dr Barkalow’s evidence on the basis that, as he accepted, he had been provided live training from Aeonmed concerning certain aspects of the operation of the Shangrila Ventilators. HealthShare also suggested that the ventilators tested by Dr Barkalow appeared to have been “calibrated” by an organisation known as Chemtronics Biomedical Engineering, an organisation engaged by MDT to conduct maintenance testing of ventilators other than those supplied to HealthShare.

9. [290]

   I do not see either of these matters as warranting a global rejection of Dr Barkalow’s evidence.

10. [291]

    Dr Barkalow disclosed the training that had been provided to him by Aeonmed and said that it assisted him with calibration of the Shangrila Ventilators.

11. [292]

    Having observed Dr Barkalow over the several days in which he gave concurrent evidence with Mr Jones, I formed the same conclusion about him as I did with Mr Jones, namely that he was a thoughtful and careful witness doing his best to give me his honest opinions based upon his analysis of the functionality of the Shangrila Ventilators.

12. [293]

    As emerges from my discussion concerning the contested functions of the Shangrila Ventilator, there were points of disagreement between Mr Jones and Dr Barkalow. I have come to conclusions concerning those points of difference as is set out below.

13. [294]

    I do not see this as a case that turns on any difference between the comparative expertise, competence or objectivity of the experts engaged by the parties.

The contested functions of the Shangrila Ventilator

1. [295]

   A patient’s “tidal volume” is the amount of gas, measured in millilitres, that moves in or out of the lungs with each respiratory cycle.

2. [296]

   Clause 3.3.2 of the User Manual provided:

3. [297]

   I discuss this clause further below in the context of the “volume control” function of the Shangrila Ventilator. For present purposes, the point is that cl 3.3.2 states that the “tidal volume” of air delivered by the Shangrila Ventilator to a patient can be “pre-set”.

4. [298]

   It is HealthShare’s case that, in fact, the Shangrila Ventilator “did not have pre-set tidal volume settings”. [46]

5. [299]

   Dr Gatward said that he encountered significant difficulties pre-setting the tidal volume on the Shangrila Ventilator. HealthShare summarised these difficulties as follows:

6. [300]

   It appears to me to follow from this evidence, particularly the passage I have emphasised, that tidal volume on the Shangrila Ventilator can be pre-set, albeit not with the press of just one button, and less easily and quickly than if a “one step button” function was available.

7. [301]

   It may be, as Dr Gatward opined, that an inability to set tidal volume quickly and accurately was a “serious deficiency” in the Shangrila Ventilator. This may also be, as Dr Cook opined, a “design limitation” in the ventilator.

8. [302]

   But HealthShare’s complaint is that the Shangrila Ventilator “did not have pre-set tidal volume settings” at all. This has not been established.

9. [303]

   “Volume control” refers to the ability of a ventilator to control the volume of air delivered to a patient with each breath.

10. [304]

    I have set out above the distinction between a ventilator operating in “volume control mode” and in “pressure control mode”. [47] To repeat, “volume control mode” enables the operator to set the volume of air that is delivered to the patient. “Pressure control mode” enables the operator to pre-program a certain air pressure as the target variable. When a ventilator is in volume control mode, the pressure will vary, whereas when a ventilator is in pressure control mode, the volume will vary.

11. [305]

    In its Cross Claim List Statement, HealthShare contended that the Shangrila Ventilator’s “volume control mode was not functional”. [48]

12. [306]

    As the case developed, it emerged that HealthShare’s position was more nuanced than this and more accurately captured in a contention made later in the Cross Claim List Statement that:

13. [307]

    The alleged shortcoming concerning the Shangrila Ventilator’s volume control mode arises from the fact that patients have varying “lung compliance” and “lung resistance”. “Lung compliance” refers to the ability of the lung to stretch and expand, calculated as a change in lung volume produced by change in pressure. When a patient has poorly compliant lungs, this is referred to as having “stiff lungs”. “Lung resistance” refers to the level of pressure pushing against inspiration, that is, an intake of breath. Lung compliance and lung resistance, together, are referred to as a patient’s “pulmonary impedance”.

14. [308]

    Some ventilators will automatically deliver a constant pre-set volume of air to a patient, even if the patient’s pulmonary impedance changes.

15. [309]

    It is common ground that the Shangrila Ventilator does not do this. As MDT accepted in its closing submissions, “there has never been any issue between the parties that the volume control function on the Shangrila Ventilators does not automatically adjust, if patient compliance and resistance changes”. (Emphasis in original.)

16. [310]

    Dr Barkalow and Mr Jones thus agreed:

17. [311]

    In their joint report, Dr Barkalow and Mr Jones set out their respective positions as follows.

18. [312]

    Dr Barkalow said that the Shangrila Ventilator did have volume control ventilation because:

19. [313]

    On the other hand, Mr Jones said:

20. [314]

    The point was developed in this passage from the cross-examination of Dr Morris:

21. [315]

    The passages in Dr Morris’ evidence that I have emphasised show that the Shangrila Ventilator does have a functional volume control mode, but not one which automatically responds to a change in a patient’s pulmonary impedance so as to maintain a set volume of air, or tidal volume being delivered to the patient. As Dr Morris said, the volume of air to the patient can be altered in these circumstances, and thus controlled, by changing the “two knobs” referred to, and to which I will return. However, as Dr Morris also said, this causes the difficulty referred to in the last emphasised passage: identifying the patient’s precise problem. This meant that the Shangrila Ventilator was, as Dr Morris said, “harder to use in volume control mode”: not impossible to use.

22. [316]

    Dr Barkalow described a ventilator operating automatically to maintain tidal volume in the face of a change in a patient’s pulmonary impedance as operating in “closed loop” mode, that is, without the necessity of clinical intervention. This was in contrast to a ventilator operating in “open loop” mode, and requiring a clinician, within the “loop” as it were, to monitor for any change in a patient’s pulmonary impedance. Dr Barkalow said that the Shangrila Ventilator operates in “open loop” mode.

23. [317]

    Ultimately, Mr Jones also accepted this.

24. [318]

    Mr Jones, in concurrent evidence, was taken to an international standard, ISO Standard 19223. ISO Standard 19223 is referred to in an appendix to the TGA Domestic Manufacturer Guidelines concerning ventilators. ISO Standard 19223 is published by the International Organization for Standardization, a worldwide federation of national standards bodies.

25. [319]

    Thus, Mr Jones gave this evidence:

26. [320]

    Mr Jones thus accepted that a ventilator, such as the Shangrila Ventilator, which operates in what Dr Barkalow, and the ISO standard, referred to as “open loop mode” (that is, without an ability to maintain, automatically, tidal volume regardless of a change in a patient’s pulmonary impedance) nonetheless can be said to have a volume control function.

27. [321]

    Mr Jones concluded by saying that an issue nonetheless arose from the User Manual, a point to which I return below.

28. [322]

    Despite HealthShare’s submissions to the contrary, I did not see that the evidence given on behalf of MDT by Dr Joseph Varon, a medical physician practising in the United States, as expressing a different conclusion.

29. [323]

    That is made clear from the following passage which occurred at the conclusion of his cross-examination by senior counsel for HealthShare:

30. [324]

    Overall, this evidence persuades me that the Shangrila Ventilator did have a volume control function, albeit one that would only operate in “open loop” mode, that is, without making automatic adjustments to ensure constant tidal flow in the face of a change in a patient’s pulmonary impedance.

31. [325]

    As I have set out in the context of discussing the pre-setting of tidal volume, cl 3.3.2 of the User Manual provided:

32. [326]

    Earlier in the User Manual, at page 2-5, there is a description of the “Front Panel” of the Shangrila Ventilator and the identification of a knob on the panel with this description:

33. [327]

    This is one of the knobs to which Dr Morris referred.

34. [328]

    Dr Barkalow opined that, as he read the User Manual, the reference in cl 3.3.2 of the User Manual to “the above settings” was a reference to “peak flow setting” that I have set out in the preceding paragraph.

35. [329]

    Dr Barkalow agreed that this was not expressly stated in the User Manual, whether at cl 3.3.2 or at all, but said that he read the User Manual this way. Thus, he gave this evidence:

36. [330]

    Dr Barkalow agreed that the User Manual did not make any “overt statement” to this effect.

37. [331]

    Mr Jones’ opinion was that there was “insufficient explanation” in the User Manual of how volume control was to be maintained. This was the caveat to which Mr Jones referred in the passage from his evidence that I have set out at [321] above. Mr Jones agreed however that, in his report, he had not referred to the earlier passage on page 2-5 of the User Manual to which Dr Barkalow referred.

38. [332]

    The User Manual says nothing about whether the Shangrila Ventilator would automatically adjust volume control in response to a patient’s pulmonary impedance. The User Manual does not assert that the Shangrila Ventilator has this functionality; nor does it state that it does not. As Dr Morris said, “the manual was not clear”.

39. [333]

    However, there is no suggestion in the evidence that the Shangrila Ventilator could not be operated to control the volume of air delivered to a patient in the face of that patient’s changed pulmonary impedance, provided that a clinician was on hand to make the necessary manual adjustments to the flow rate. As Dr Morris said, this would make the decision making process more difficult and would mean that the Shangrila Ventilator was harder to use in volume control mode than a ventilator that automatically adjusted to ensure delivery of a constant volume of air regardless of changes in a patient’s lung compliance.

40. [334]

    In these circumstances, my conclusion is that the Shangrila Ventilator does have volume control functionality.

41. [335]

    Whether or not the Shangrila Ventilator could, in these circumstances, be described as having “conventional volume control ventilation” is a different question to which I will now turn.

42. [336]

    As I have described above, HealthShare received copies of brochures concerning the Shangrila Ventilator from MDT, from RAPP, and from publicly available sources. I have described these as the MDT Shangrila Brochure, the RAPP Shangrila Brochure, the Shangrila in a Bag Brochure and the Allied Scientific Shangrila Brochure.

43. [337]

    The MDT Shangrila Brochure and the Allied Scientific Shangrila Brochure were in the same form. Each stated, under the heading “Complete Ventilation Modes” that the Shangrila Ventilator “hosts six ventilation modes”, one of which was:

44. [338]

    The other brochures made no statements about “conventional” volume control.

45. [339]

    In closing submissions, it was suggested on behalf of MDT that HealthShare had not pleaded its case concerning the issue of “conventional” volume control by reference to the statements in the Brochures. The relevant allegation is contained in par C41(b) of the Cross Claim List Statement. It is there alleged that the allegations made in, amongst other things, the brochures, were false, and misleading or deceptive for the purpose of s 18 of the ACL because the Shangrila Ventilators:

46. [340]

    In par C41 that allegation is said to be misleading or deceptive “by reason of” the matters alleged in par C28, which deals with the results of the third technical test conducted by Dr Cook, and in par C28A, which contains allegations as to what is stated in the User Manual.

47. [341]

    As I have set out, one of the allegations made in par C28 of the Cross Claim List Statement is that setting the volume control mode of the Shangrila Ventilators required “excessive training and supervision by experienced staff”. [51]

48. [342]

    In my opinion, that allegation was sufficient to place squarely in contention in the proceedings the question of whether or not the Shangrila Ventilators had, as the Brochures asserted, a “conventional” volume control function.

49. [343]

    In any event, the proceedings were conducted on the basis that this was a live issue.

50. [344]

    Dr Barkalow agreed that he understood that “conventional volume-controlled ventilation” meant ventilation which operated in what he called “closed-loop operation” and which made automatic adjustment for volume and pressure; as opposed to operating in “open loop operation” requiring the intervention of a clinician to make adjustments in the face of changes in a patient’s pulmonary impedance.

51. [345]

    Thus, Dr Barkalow gave this evidence concerning the statements made in the MDT Shangrila Brochure (which Dr Barkalow evidently had not seen before) about “conventional” volume control:

52. [346]

    On behalf of MDT it was submitted that, because of an answer Dr Barkalow had given to questions asked shortly earlier in concurrent evidence, Dr Barkalow was not intending to say that a ventilator could only have “conventional” volume control if operating in what Dr Barkalow described as “closed loop ventilation”. However, the evidence I have set out, given a short time later, makes clear that Dr Barkalow accepted that “conventional” volume control required maintenance of volume pressure, automatically, in the face of a change in a patient’s pulmonary impedance.

53. [347]

    This was, in any event, the overwhelming conclusion to be drawn from the evidence of the clinicians called by HealthShare whose evidence, in this respect, was not challenged.

54. [348]

    Each of Drs Cook, Gatward, Morris and Nguyen gave evidence that, in their opinion, a ventilator that did not automatically deliver the pre-set volume of air regardless of a change in a patient’s pulmonary impedance could not be regarded as having a volume control function.

55. [349]

    As was submitted on behalf of MDT, it may be that these views were born of the experience that those clinicians had in an ICU context and, for that reason, reflected their experience with ventilators.

56. [350]

    However that may be, the evidence of those clinicians persuades me that “conventional” volume control requires such automatic adjustments.

57. [351]

    For example, Dr Gatward gave this evidence:

58. [352]

    Similarly, Dr Morris gave this evidence:

59. [353]

    Similarly, Dr Nguyen gave evidence that:

60. [354]

    Dr Cook also gave evidence to the effect that if a ventilator could not maintain a constant volume in the face of changing lung compliance, this meant it was not operating in volume control mode. Dr Cook said that, based on his testing of the Shangrila Ventilators, they did not maintain a constant volume and thus did not operate in volume control mode.

61. [355]

    None of this evidence was challenged. Although these doctors did not express their opinions in terms of whether the Shangrila Ventilator had a “conventional” volume control mode, their evidence is consistent with the proposition that the Shangrila Ventilators did not have a volume control mode as that expression is “conventionally” understood.

62. [356]

    What role the statements in the brochure that MDT supplied to HealthShare, that is the MDT Shangrila Brochure, played in HealthShare’s decision to purchase the Shangrila Ventilators, is a separate question to which I will return. [52]

63. [357]

    I have mentioned above the distinction between a ventilator operating in volume control mode and in pressure control mode.

64. [358]

    The matter was explained this way by Dr Morris:

65. [359]

    Mr Jones gave evidence that:

66. [360]

    The User Manual stated:

67. [361]

    The wording used in the User Manual to describe “Pressure Control Ventilation” was similar to that used to describe “Volume Control Ventilation”. The only difference is that the words “and tidal volume” in the latter are substituted with the words “and pressure limit” in the former.

68. [362]

    Like the provision in the User Manual referring to Volume Control Ventilation, the provision concerning Pressure Control Ventilation concluded by stating “it will work according to the above settings”.

69. [363]

    I was not directed to any evidence dealing with what, in this context, “the above settings” were, nor to any opinion expressed by Dr Barkalow, Mr Jones or any other witness about that matter.

70. [364]

    The MDT Shangrila Brochure stated, immediately after the statement to which I have referred concerning “conventional Volume-Controlled ventilation mode” that the Shangrila Ventilator:

71. [365]

    Mr Jones said:

72. [366]

    Dr Barkalow appeared to come to the same conclusion and said:

73. [367]

    In concurrent evidence, Dr Barkalow gave this evidence:

74. [368]

    On the third day of the expert conclave evidence, Dr Barkalow produced a note suggesting that the Shangrila Ventilators had “volume targeted pressure control”. But this is not what is described in cl 3.3.3 of the User Manual nor in the MDT Shangrila Brochure. Those documents assert that the Shangrila Ventilator had pressure controlled ventilation.

75. [369]

    I am persuaded that the evidence shows that the Shangrila Ventilators did not in fact operate in pressure control mode as set out in the User Manual or in the MDT Shangrila Brochure.

76. [370]

    The “fraction of inspired oxygen”, or FiO2, means the percentage of oxygen that a person inhales.

77. [371]

    The Earth’s atmosphere is made up of approximately 21% oxygen. Thus, the fraction of inspired oxygen in normal breathing circumstances is 21%.

78. [372]

    The User Manual stated, under the heading “Setting Ventilating Parameters”, that the Shangrila Ventilator could deliver a fraction of inspired oxygen in the range of 40% to 100% with an accuracy of ±20%.

79. [373]

    The questions are whether the Shangrila Ventilator was able to deliver a fraction of inspired oxygen within that range of tolerance and whether the fraction of inspired oxygen actually being delivered was as set by the operator.

80. [374]

    There was no dispute that oxygen concentration is a key input for clinicians in determining appropriate treatment and that the lack of accurate and timely oxygen concentration measurement could have serious adverse clinical consequences.

81. [375]

    For example, Dr Gatward gave the following evidence about the importance of oxygen concentration measurement:

82. [376]

    Dr Morris and Dr Nguyen gave evidence to a similar effect.

83. [377]

    In his first round of technical testing, to measure the concentration of oxygen being delivered by the Shangrila Ventilator, Dr Cook connected it to a device used to test mechanical ventilators known as a “Fluke Analyser”. Dr Cook spent approximately an hour testing the readings by incrementally adjusting the FiO2 knob. Dr Cook found that whenever the FiO2 knob was set to anything other than 100%, there would be a significant divergence between the reading on the ventilator display screen and the reading on the Fluke Analyser. Dr Cook found that the ventilator display never showed an oxygen concentration of below 80%, even when the Fluke Analyser recorded the actual oxygen concentration as being between 40% and 45%.

84. [378]

    In the second round of technical testing, Dr Cook encountered the same problems. He found that the ventilator screen did not accurately display the oxygen concentration being delivered, and that there was a significantly delayed response time when the FiO2 knob was turned.

85. [379]

    In his third round of technical testing, Dr Cook found that when the Shangrila Ventilator was set to 100% oxygen concentration, it in fact delivered an oxygen concentration of 37%. Further, when the ventilator was exposed to room air, where the oxygen concentration is 21%, the ventilator display screen did not display 21%.

86. [380]

    These results were well outside the “±20%” accuracy range stated in the User Manual.

87. [381]

    Clause 9.7.1 of the User Manual, under the heading “System Performance”, stated that the FiO2 “response time” was less than or equal to 15 seconds. Dr Cook found that the time taken for the ventilator to adjust to turns of the FiO2 knob took, on average, 45 seconds.

88. [382]

    Dr Gatward’s clinical testing revealed the same problems. The results of the tests that he oversaw showed that when the FiO2 knob was turned all the way to the right to line up with the 100% marker, it took approximately one minute for the screen to display a reading of 100%; whereas the User Manual stated that the response time was 15 seconds. Further, when the FiO2 knob was turned to the left to line up with the 40% marker, the ventilator took approximately one minute to display a reduced reading of approximately 50%. At no point did the display reach 40%. Further, when the FiO2 knob was turned to the position to the right of the middle of the gap between the 40% and 100% markings, in an attempt to achieve 80%, the ventilator did not display a change in the oxygen concentration for approximately one minute. Dr Gatward found that he had to adjust incrementally the knob to achieve the desired FiO2 concentrations, the process took approximately three minutes, and that the ventilator’s delayed response to the changes contributed to the tendency significantly to overshoot or undershoot the required oxygen concentration.

89. [383]

    Dr Barkalow was provided four Shangrila Ventilators to test. [53] He found that:

90. [384]

    Dr Barkalow continued:

91. [385]

    As to ventilator 5966, Dr Barkalow found this ventilator delivered significantly inaccurate oxygen measurements.

92. [386]

    Dr Barkalow said:

93. [387]

    Ventilator 5966 was one of the ventilators Dr Cook tested during the second round of technical testing, during which Dr Cook reported inaccurate FiO2 readings.

94. [388]

    In relation to ventilator 13208, Dr Barkalow found that the ventilator did not display oxygen concentration at all.

95. [389]

    Dr Barkalow stated:

96. [390]

    My attention was not drawn to any particular test result which would support the hypothesis stated by Dr Barkalow in the second sentence of this part of his report.

97. [391]

    MDT sought to explain the inaccurate oxygen concentration readings that Dr Cook and Dr Gatward experienced, and that Dr Barkalow reported in relation to ventilator 5966 on the basis that the ventilators may have had an expired oxygen sensor or an internal malfunction in its air/oxygen internal blender. This submission was presumably based on the hypothesis offered by Dr Barkalow for the failure of two of the ventilators he tested to show oxygen concentration accurately, or at all.

98. [392]

    Mr Jones and Dr Barkalow tested the ventilators a considerable time after they were delivered by MDT to HealthShare. The ventilators the subject of Mr Jones’ opinion were tested in late July and early August 2021. Dr Barkalow conducted his tests in January 2022. The ventilators those experts tested had thus been in storage for some time after delivery.

99. [393]

    However, the ventilators tested by Dr Cook were delivered to him directly by Chemtronics [55] on behalf of MDT, and were not delivered to or stored by HealthShare prior to testing. Thus, the ventilators Dr Cook tested were essentially brand new. I see no reason to infer, in those circumstances, that the results Dr Cook reported concerning oxygen concentration, in the three rounds of technical testing he undertook, should be attributed to an undetected expired or faulty oxygen cell in the ventilators that he tested, as was submitted by MDT.

100. [394]

     Many of MDT’s submissions on the topic of oxygen concentration readings were directed to the question of calibration of the oxygen sensors in the Shangrila Ventilator.

101. [395]

     The instructions for calibration of the oxygen sensor were contained in cl 3.6.5.2 of the User Manual.

102. [396]

     HealthShare’s pleaded case is that it was not possible to calibrate the oxygen sensor using the instructions in the March 2020 version of the User Manual, being the one supplied by MDT to HealthShare on 21 April 2020.

103. [397]

     MDT accepts that it was not possible to calibrate the oxygen sensor using those instructions.

104. [398]

     In August 2022, MDT provided an updated version of the User Manual which revised cl 3.6.5.2 to provide far more comprehensive instructions concerning calibration of the oxygen sensor.

105. [399]

     MDT submitted that, by the time Dr Cook conducted his second round of technical testing “he had the proper calibration instructions at the time of the testing, but it is plain from the contemporaneous material that he was still struggling with calibration”.

106. [400]

     However, in his evidence, Dr Cook drew a distinction between the concept of correct calibration, in the sense of following the steps in the User Manual, on the one hand, and accurate calibration, that is, using the oxygen sensors in the ventilator so as to accurately measure oxygen concentration.

107. [401]

     Thus, Dr Cook gave this evidence:

108. [402]

     I think HealthShare was correct to submit that Dr Cook’s evidence was not that he was “struggling” with the calibration of the oxygen sensor. He gave clear evidence that during the second and third technical tests he followed the updated calibration instructions in the further version of the User Manual, attempted calibration multiple times, and still observed that there were practical difficulties with the measured oxygen concentration.

109. [403]

     Thus, Dr Cook gave this evidence:

110. [404]

     MDT has not established that there was any issue with the steps performed by Dr Cook during calibration of the oxygen sensors in the second and third technical tests.

111. [405]

     I see the difficulties that Dr Cook and Dr Gatward had with the Shangrila Ventilators so far as concerns oxygen concentration measurement to bespeak a serious shortcoming in the Shangrila Ventilators. Dr Cook’s test results are particularly striking. Dr Cook tested the ventilators almost immediately after they were delivered by MDT to HealthShare. He found that the times it took to set the ventilators to the desired FiO2 level were far slower than showed in the User Manual. More importantly, the ventilators were shown to be delivering the FiO2 at levels different, indeed strikingly different, to the FiO2 levels that the ventilators stated were being delivered.

112. [406]

     It is true that Dr Barkalow said he had a different experience with two of the four ventilators he tested. But one of those ventilators, number 8369, was also tested by Dr Cook in his second round of technical testing and was tested in Dr Gatward’s clinical testing. Another of the ventilators tested by Dr Barkalow, number 5966, had also been the subject of Dr Cook’s second round of technical testing and Dr Gatward’s clinical testing. Consistently with the results reported by Drs Cook and Gatward, Dr Barkalow found Ventilator 5966 to be inaccurate. One of the ventilators tested by Dr Barkalow, number 13208, did not work at all.

113. [407]

     These results appear to me to bespeak a serious shortcoming in the Shangrila Ventilators.

114. [408]

     The importance of alarms on a ventilator was emphasised in the evidence of Drs Morris, Nguyen and Gatward. Dr Morris said:

115. [409]

     HealthShare’s pleaded case was directed to three types of alarm.

116. [410]

     The only reference in the User Manual to a high pressure alarm was in cl 4.2 which provided:

117. [411]

     HealthShare’s pleaded case was that the Shangrila Ventilator:

118. [412]

     HealthShare did not address this issue in its written closing submissions in chief.

119. [413]

     In its closing reply submissions, HealthShare submitted:

120. [414]

     In support of that submission, HealthShare relied on this evidence from Dr Cook:

121. [415]

     Dr Cook’s conclusions are inconsistent with those reached by the biomedical engineers who ran alarm tests for the purposes of Mr Jones’ report; Mr De Soysa and Mr Don.

122. [416]

     Mr De Soysa and Mr Don ran alarm tests in accordance with testing protocols that had been prepared by Mr Jones.

123. [417]

     Mr Jones’ protocol was:

124. [418]

     Mr De Soysa and Mr Don found that in respect of every test, the alarm was working in all respects set out in Mr Jones’ protocol. Both Mr De Soysa and Mr Don gave the alarm functionality for every ventilator a “pass” mark.

125. [419]

     In his report to HealthShare’s solicitors of 6 October 2021, Mr Jones stated:

126. [420]

     HealthShare did not engage with this evidence in its closing submissions.

127. [421]

     In those circumstances, I am not persuaded I should conclude from Dr Cook’s experience that there was an issue with the “consistent triggering”’ of the high pressure alarm. I do not doubt this was Dr Cook’s experience with the two ventilators he examined. But it is inconsistent with the experience of Mr De Soysa and Mr Don, and with Mr Jones’ conclusions.

128. [422]

     Dr Gatward gave evidence that a “disconnect” alarm is a universal alarm and one of the most important alarms on modern ICU ventilators. He said:

129. [423]

     The User Manual provided:

130. [424]

     It is common ground that when the circuit of the Shangrila Ventilator is disconnected, the message that is displayed does not use the words “circuit disconnect”. Rather, there appears, on the top line, a blinking red message “No VT!!!”: ie no tidal volume.

131. [425]

     At cl 8.2 of the User Manual, under the heading “Alarm Message List”, the “No VT!!!” message is described as:

132. [426]

     Thus, when the Shangrila Ventilator is disconnected, an urgent message is displayed, showing that there is no tidal volume.

133. [427]

     In that regard, Mr Jones said:

134. [428]

     In concurrent evidence, Dr Barkalow accepted that a display of a “No VT!!!” display rather than a “circuit disconnect alarm”, that is, an alarm using those words, showed that the Shangrila Ventilator was not performing in accordance with the User Manual.

135. [429]

     However, Dr Barkalow said in one of his reports:

136. [430]

     In that context, I think MDT was correct to submit:

137. [431]

     In closing submissions, HealthShare drew attention to Dr Nguyen’s evidence that “some alarms are more important than others” and that it is “very important for the ventilator alarms to correctly indicate to me what the problem is, and prioritise by most urgent alarm first”. In that regard, Dr Nguyen said:

138. [432]

     But in this evidence, Dr Nguyen was drawing a distinction between a “disconnection” alarm and a “low tidal volume” alarm.

139. [433]

     The evidence here is that when the Shangrila Ventilator is disconnected it shows a “no” tidal volume alarm message indicating, in effect, that the patient has been disconnected from the ventilator and is receiving “no” tidal volume.

140. [434]

     Such disconformity as this shows between the statement in the User Manual and the actual performance of the Shangrila Ventilator is not, in my opinion, significant.

141. [435]

     In closing submissions, HealthShare also referred to the alleged absence in the Shangrila Ventilator of a tidal volume alarm, a leak alarm and an apnoea alarm.

142. [436]

     However, HealthShare did not develop any submissions in relation to those matters.

143. [437]

     HealthShare’s case is that the oxygen hoses attached to the Shangrila Ventilator did not comply with Australian standards because they:

144. [438]

     What was said to flow from these matters was not developed.

145. [439]

     There is also a debate as to whether the oxygen hoses were the correct colour, HealthShare’s position being that in Australia hoses are colour-coded to correspond with the colour of the medical gas outlet in question. Again, what was said to flow from this alleged shortcoming was not developed in submissions.

146. [440]

     Clause 5.2 of the User Manual sets out instructions to “connect oxygen supply and patient circuit”.

147. [441]

     Mr Jones expressed the opinion that the clause “did not provide adequate instructions for the connection of the patient circuit and expiratory valve”.

148. [442]

     However, my attention was not drawn to any evidence showing that the biomedical engineers working under Mr Jones’ supervision, Mr De Soysa and Mr Don, had any difficulty connecting the patient circuit and expiratory valve.

149. [443]

     Although Dr Barkalow said that initially he “encountered some difficulty” in this regard, he said that he was ultimately able to connect the patient circuit and expiratory valve and said:

150. [444]

     Again, what was said to flow from these matters was not developed by HealthShare.

151. [445]

     Clause 3.3.5 of the User Manual described how the Shangrila Ventilator operated in “synchronised intermittent mandatory ventilation” mode, being a mode that, according to the User Manual, “allows both mandatory and spontaneous breaths”.

152. [446]

     Mr Jones said, of cl 3.3.5:

153. [447]

     On the other hand, Dr Barkalow said that his experience was that the “SIMV” mode worked as described in cl 3.3.5 of the User Manual.

154. [448]

     In closing submissions, it was submitted for HealthShare:

155. [449]

     That is not a fair characterisation of what Dr Barkalow said and, in the passage of evidence given by Dr Barkalow immediately before the question that this submission references, Dr Barkalow said that “I agree that Mr Jones and I experienced different observations in the SIMV mode”.

156. [450]

     In those circumstances, I am unable to come to any conclusion as to whether the User Manual accurately described how to operate the Shangrila Ventilator in SIMV mode.

157. [451]

     In any event, the significance of any shortcoming in the User Manual in this regard was not developed.

158. [452]

     Clause 3.3.6 of the User Manual provided:

159. [453]

     Mr Jones said, based on the testing carried out by Mr De Soysa and Mr Don, that the “CPAP mode did not operate at a low setting and did not operate in accordance with the specifications” in the User Manual.

160. [454]

     In Mr De Soysa’s test results, he recorded that the “lowest value of CPAP is 7.5cm H2O. Mr De Soysa recorded that the “lowest pressure is around 6.0 when set to 0”.

161. [455]

     On the other hand, Dr Barkalow reported that he had no issues with the CPAP mode at low setting. He said:

162. [456]

     HealthShare pointed out that Dr Barkalow had made no contemporaneous notes of any test results for CPAP testing at a low setting. But I do not see this as a reason to doubt Dr Barkalow’s testimony as to the results he achieved.

163. [457]

     On this state of the evidence, I am not able to reach a conclusion that the Shangrila Ventilator did not operate in CPAP mode.

164. [458]

     In any event, once again, the question of where this particular alleged issue took HealthShare’s case was not developed.

Claim in contract – Sale of Goods Act

1. [459]

   Section 37(1) of the Sale of Goods Act provides:

2. [460]

   Section 38(1) provides:

3. [461]

   HealthShare examined the Shangrila Ventilators in the manner I have described, namely, by Dr Cook conducting his three rounds of technical testing and by Dr Gatward and his assessors conducting the clinical testing.

4. [462]

   Mr Gannon was aware that HealthShare would conduct tests in relation to the Shangrila Ventilators; an unsurprising proposition bearing in mind that HealthShare had paid half the purchase price, $10.395 million, without having actually seen a Shangrila Ventilator.

5. [463]

   The first 48 ventilators were delivered on 16 June 2020. On that date, Mr Zanetic wrote to Mr Gannon:

6. [464]

   When asked about that email, Mr Gannon gave this evidence:

7. [465]

   Mr Bellas also accepted that he knew testing was to be undertaken to see if the ventilators worked and functioned in accordance with the User Manual and were fit for the purpose for which they had been acquired. MDT sent its representatives, being personnel from Chemtronics, to Dr Cook’s first round of technical testing on 30 July 2020.

8. [466]

   MDT was also notified in advance of the clinical testing conducted by Dr Gatward. Mr Gannon agreed in cross-examination that he was aware of the scheduled clinical testing.

9. [467]

   I accept HealthShare’s submissions that it tested the ventilators within a reasonable period following delivery. MDT raised no objection at the time to the conduct or timing of the acceptance testing.

10. [468]

    I find that HealthShare had not accepted the goods prior to it notifying MDT of its rejection of them.

11. [469]

    Section 19(1) of the Sale of Goods Act provides that:

12. [470]

    Thus, in order for HealthShare to show that it was an implied condition of the Agreements that the Shangrila Ventilators would be fit for purpose, HealthShare must establish:

13. [471]

    If those elements are established, there was an implied condition of the Agreements that the Shangrila Ventilators would be reasonably fit for the particular purpose made known by HealthShare to MDT.

14. [472]

    It is HealthShare’s case that it made known the particular purpose for which it required the Shangrila Ventilators in the conversation that Ms Hanigan had with Mr Gannon in April 2020, [60] where Ms Hanigan asked Mr Gannon:

15. [473]

    Mr Gannon did not dispute having had this conversation with Ms Hanigan although, as I have set out, [61] Mr Gannon said that on a different occasion he told Ms Hanigan that:

16. [474]

    HealthShare knew that the Shangrila Ventilators were emergency transport ventilators. Mr Zanetic said as much in his email to Drs Morris and Nguyen on 20 April 2020. [62]

17. [475]

    Ms Hanigan did dispute that Mr Gannon had told her that the ventilators were not “intended for ICU” but I have found that he did so. [63]

18. [476]

    HealthShare contends that, arising from Ms Hanigan’s conversation with Mr Gannon, the particular purpose that it made known to MDT for which the Shangrila Ventilators were required was:

19. [477]

    Mr Gannon agreed in cross-examination that he understood that the Shangrila Ventilators were to be used in “multiple clinical settings” and that this included use in hospitals.

20. [478]

    Mr Gannon also agreed that he told Ms Hanigan that:

21. [479]

    MDT submitted that the purpose posited by HealthShare was not a “particular purpose” for the purposes of s 19 of the Sale of Goods Act because it did not convey a particular clinical purpose or setting and because HealthShare did not make known to MDT its actual intended clinical purpose for the Shangrila Ventilators. Alternatively, MDT submitted that the Shangrila Ventilators were purchased for the purpose of a “reserve stockpile”, as was submitted to Dr Morris in cross-examination. [65]

22. [480]

    No doubt the general purpose of any ventilator is to be used in a clinical setting; that is in the course of treating patients.

23. [481]

    It is true that HealthShare, and Ms Hanigan in particular, did not specify precisely how and in precisely what clinical settings the Shangrila Ventilators would be used.

24. [482]

    But Ms Hanigan told Mr Gannon, as was obvious in the circumstances, that the ventilators were to be used at some stage to treat patients with COVID-19, whether or not the Shangrila Ventilators were to be held in a reserve stockpile.

25. [483]

    That was sufficient to identify a “particular purpose” for the purposes of s 19 of the Sale of Goods Act. The general purpose identified by Ms Hanigan was the use of the ventilators by HealthShare in a clinical setting: “suitable for NSW Health”. The particular purpose identified was the use in a clinical setting to treat patients with COVID-19: “meet our needs for Covid”.

26. [484]

    It was not necessary for HealthShare to identify, at the time of entering into the Agreements, “how these lower performing ventilators were actually intended to be used in a world where the preferable functionality [as a specialised ICU ventilator] were simply not available”, to adopt the language of MDT’s closing submissions.

27. [485]

    I am satisfied that, in her exchange with Mr Gannon, Ms Hanigan identified the “particular purpose” for which HealthShare required the Shangrila Ventilators.

28. [486]

    In closing oral submissions, it was submitted on behalf of MDT, for the first time, that MDT provided HealthShare with the User Manual merely as an intermediary and without itself making any representations as to its contents.

29. [487]

    It was submitted, with reference being made to the observations made by the High Court in very different circumstances to those here, in Google Inc v Australian Competition and Consumer Commission: [66]

30. [488]

    I do not accept that submission.

31. [489]

    MDT was acting as a principal in its dealings with HealthShare. It was aiming to conclude a contractual relationship with HealthShare, not as the agent for Aeonmed, but on its own account. MDT did not pass on to HealthShare the User Manual on a “for what it’s worth” basis. MDT was no “mere conduit”. [67] A reasonable person in HealthShare’s position would have understood that MDT had “adopted or endorsed” [68] the accuracy of the User Manual.

32. [490]

    It must have been obvious to Mr Gannon and Mr Bellas that HealthShare would rely on the contents of the User Manual as accurately and comprehensively explaining how the Shangrila Ventilator was to be used and what its functionality was.

33. [491]

    To enliven the implied condition as to fitness for purpose in s 19 of the Sale of Goods Act, it is necessary for HealthShare to show that it relied on MDT’s “skill or judgment”.

34. [492]

    In closing submissions, HealthShare’s case that it relied on MDT’s skill or judgment when deciding to buy the Shangrila Ventilators was stated to be based on identified paragraphs of two of Ms Hanigan’s affidavits.

35. [493]

    In the first affidavit, Ms Hanigan set out extracts from the emails that Mr Gannon sent her on 1 May 2020 following her enquiry concerning the article in The Guardian to which I have referred above. [69]

36. [494]

    Those extracts were:

37. [495]

    I have set out the third and fourth of those extracts above. [70] The first and second extracts were from an earlier email sent by Mr Gannon on 1 May 2020.

38. [496]

    The final extract, commencing with the words “once again” is the passage from Mr Gannon’s 1 May 2020 email that I have found points to the probability that, despite Ms Hanigan’s denial, MDT had been “very clear” that the Shangrila Ventilators were not “full ICU ventilators”.

39. [497]

    The affidavit then set out the following passages to which HealthShare points as showing its reliance on MDT’s skill or judgment:

40. [498]

    In the first of those paragraphs, Ms Hanigan is stating her understanding that the issues identified in The Guardian were only relevant to the Shangrila 510 ventilator and not to the 510S Shangrila Ventilator.

41. [499]

    What is here stated by Ms Hanigan appears to confirm that she misunderstood Mr Gannon’s email. She saw the reference to having been “very clear” that ventilators were “not full ICU ventilators” as being a reference to “the older model purchased in the United Kingdom”, being the Shangrila 510 model. It is in that context that she made the statement at the end of the passage that I have emphasised above.

42. [500]

    In any event, Ms Hanigan is speaking here of events that occurred on 1 May 2020; after the Agreements have been entered.

43. [501]

    The second passages relied on by HealthShare are from Ms Hanigan’s second affidavit.

44. [502]

    In the first of those identified passages, Ms Hanigan stated that she “understood that [she] could trust MDT and Mr Gannon to provide reliable advice and information through the ventilator procurement process”.

45. [503]

    In the remaining passages on which HealthShare relies, Ms Hanigan said that:

46. [504]

    The latter evidence relates to events which occurred on 1 May 2020, after the Agreements were entered.

47. [505]

    The effect of the former evidence is that Ms Hanigan continued with the “procurement” of the Shangrila Ventilators, relying on Mr Gannon’s agreement that the Shangrila Ventilator would be “suitable for NSW Health and meet our needs for COVID” and his statement that “I only deal with the best”. [71]

48. [506]

    However, as MDT submitted, Ms Hanigan played no role in deciding whether to approve the purchase of the Shangrila Ventilators.

49. [507]

    As MDT submitted:

50. [508]

    Thus, Ms Hanigan gave this evidence in cross-examination:

51. [509]

    It must follow from this evidence that HealthShare, through Ms Hanigan, did not rely on MDT’s skill or judgment when deciding to purchase the Shangrila Ventilators.

52. [510]

    However, as I have set out above in my description of the Desktop Review by Mr Zanetic and, more particularly, by Dr Morris, HealthShare did place reliance on the brochures that Dr Morris reviewed and on the User Manual.

53. [511]

    Although HealthShare did not, in its closing submissions, in terms rely on the evidence of Dr Morris in relation to the question of whether or not, for the purpose of s 19 of the Sale of Goods Act, it relied on MDT’s skill or judgment, the proceedings were conducted upon the basis that this was HealthShare’s position.

54. [512]

    Thus, in relation to the allied question of whether HealthShare relied on the representations that it contends MDT made, and that it contends were misleading or deceptive, HealthShare referred in its submissions to the detail of Dr Morris’ evidence; and MDT engaged with the detail of those submissions. Indeed, one of the representations that HealthShare alleges that MDT made is that the Shangrila Ventilators were not fit for the purpose of treating COVID-19 patients. Thus, in substance, the proceedings were conducted by both sides on the basis that HealthShare’s case on reliance was based on Dr Morris’ role in the Desktop Review.

55. [513]

    There was, ultimately, no dispute about the following matters in HealthShare’s closing submissions:

56. [514]

    It was on the basis of Dr Morris’ statement on 21 April 2020 that, having reviewed all of the material, including the User Manual, he was “happy that it now satisfies all the requirements”, [72] that HealthShare entered the Agreements.

57. [515]

    It is true that Mr Zanetic said in the emails he sent Dr Morris on 21 April 2020 that he did not think that “anything in the manual … would change the initial assessment” that he had made about the Shangrila Ventilators. But Dr Morris was the person whose opinion was critical to the decision made by HealthShare to purchase the Shangrila Ventilators. It is clear that Dr Morris relied on what was said in the User Manual.

58. [516]

    In those circumstances, my conclusion is that HealthShare did, through Dr Morris and for the purposes of s 19 of the Sale of Goods Act, rely on MDT’s skill or judgment when deciding to purchase the Shangrila Ventilators.

59. [517]

    This question is to be answered as at the date the Agreements were entered and must be considered in light of the following matters, that I have discussed in detail above.

60. [518]

    First, HealthShare understood that the Shangrila Ventilators were emergency transport ventilators. [73]

61. [519]

    Second, Mr Gannon had told Ms Hanigan, and HealthShare thus knew, that the Shangrila Ventilators were not “full ICU ventilators”.

62. [520]

    Third, and as I have set out above, [74] the User Manual stated that the “Intended Use” of the Shangrila Ventilators was:

63. [521]

    Fourth, HealthShare knew, from Mr Zanetic’s analysis, that the Shangrila Ventilators did not meet many of the ICU Mid-Acuity specifications that Mr Zanetic had incorporated into his technical assessment process, as part of the Desktop Review. [75]

64. [522]

    Fifth, HealthShare knew, because of the exigencies of the pandemic, that it needed urgently to source as many ventilators as it could, including “lower performance options”. [76]

65. [523]

    I have discussed, at length above, HealthShare’s case as to the shortcomings of the Shangrila Ventilator.

66. [524]

    Critically, I have come to the following conclusions:

67. [525]

    The conclusion to which I have come is that these four factors combine to compel the conclusion that, notwithstanding the matters that I have set out at [518] to [522], the Shangrila Ventilators were not reasonably fit for the purpose of being used in any clinical setting for the treatment of patients with COVID-19.

68. [526]

    In particular, I find that the fact that the Shangrila Ventilator cannot accurately deliver the fraction of inspired oxygen [81] shows it is not reasonably fit for this purpose. As I have said, the evidence is that the accurate and timely display of oxygen concentration is core to the functionality of a ventilator. [82] That must particularly be so in the treatment of a respiratory disease such as COVID-19.

69. [527]

    It may be, as MDT submitted, that there is some use to which the Shangrila Ventilator could be put. An example given was as a transport ventilator taking a patient away from ICU for investigations to other areas of the hospital. Another example given was the weaning of a patient off ventilation, that is, when a patient is returning to spontaneous breathing and the ventilator is being used as a part of an assisted breathing process. It may be that having the Shangrila Ventilators is better than having nothing or, as MDT somewhat brutally put it in closing submissions, better than “using a bag to try to ventilate sick patients”.

70. [528]

    But assuming all those matters in favour of MDT, I am persuaded that the Shangrila Ventilator was not reasonably fit for the particular purpose for which it was purchased: treating patients with COVID-19. I find that the Shangrila Ventilator was not fit for the purpose, in any clinical setting, of treating patients with COVID-19.

71. [529]

    Section 18 of the Sale of Goods Act provides:

72. [530]

    HealthShare contended that the Agreements comprised a sale of goods by description and that the relevant description was that the Shangrila Ventilators:

73. [531]

    But these matters do not comprise a “description” of the goods for the purposes of s 18 of the Sale of Goods Act. Rather, these are representations as to the nature and quality of the goods. A sale by description is a sale of goods in which the sale is predicated on the description of the goods: for example, “woollen under-garments, a hot water bottle, a secondhand reaping machine”. [83] The relevant “description” of the goods was in the quotation and invoice for the First Agreement and in the invoice for the Second Agreement, namely:

74. [532]

    The goods supplied were as described, albeit not, as I have found, reasonably fit for the purpose for which they were purchased.

75. [533]

    There was no sale by description.

Misleading or deceptive conduct

1. [534]

   HealthShare contends that MDT made a number of representations which are said to have been false and thus misleading or deceptive for the purposes of s 18 of the ACL.

2. [535]

   In view of the conclusion to which I have come concerning the Shangrila Ventilators not being fit for purpose, I will deal with this aspect of HealthShare’s case relatively briefly.

3. [536]

   There was no dispute about the relevant principles.

4. [537]

   They were summarised this way in Australian Competition and Consumer Commission v TPG Internet Pty Ltd: [84]

5. [538]

   As I have found that, in fact, the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act, the question of whether or not MDT made a representation to this effect is something of a moot point.

6. [539]

   In any event, in HealthShare’s Cross Claim List Statement, this representation is said to arise from “the conduct pleaded at paragraph 4A”, which comprised:

7. [540]

   Whether or not these statements, taken together, amount to a representation that the Shangrila Ventilators were fit for purpose, the wider point is that HealthShare has not established that the decision to purchase the Shangrila Ventilators, which was made on the basis of Dr Morris’ conclusions, had any connection with any of these matters. In particular, as I have said, Dr Morris did not see the MDT Shangrila Brochure.

8. [541]

   The statement the subject of this alleged representation was made in the MDT Shangrila Brochure, and thus also in the Allied Scientific Shangrila Brochure. I have found that the Shangrila Ventilators did not have conventional volume control. Thus, the statements in these brochures were not correct, and thus misleading or deceptive.

9. [542]

   But Dr Morris did not rely on any document provided to HealthShare by MDT which stated that the Shangrila Ventilator had conventional volume control. He did not have the MDT Shangrila Brochure. And MDT did not provide HealthShare with the Allied Scientific Shangrila Brochure. Mr Zanetic found it online. [94] When making his decision concerning the ventilators, Dr Morris had the RAPP Shangrila Brochure and the Shangrila in a Bag Brochure. There were no statements in those brochures that the Shangrila Ventilators had “conventional volume controlled ventilation mode” or that they could reliably provide “precise tidal volume”.

10. [543]

    In closing written submissions, MDT accepted that the making of this representation was implicit from its provision to HealthShare of the User Manual.

11. [544]

    As I have set out above, in closing oral submissions it was submitted on behalf of MDT that it provided the User Manual to HealthShare as an intermediary and without itself making any representations as to its contents. For the reasons I have set out above, I do not accept that submission.

12. [545]

    As I have explained, the Shangrila Ventilators did not function in accordance with all of the specifications in the User Manual, particularly in relation to the oxygen concentration function.

13. [546]

    This representation was false and thus misleading or deceptive.

14. [547]

    HealthShare relied on this representation to enter the Agreements.

15. [548]

    HealthShare also submitted that this representation arose because of the statement made by Mr Gannon to Ms Hanigan in his email of 1 May 2020 that the “specifications provide detail of functionality”. [95] That may be so, but that email was sent after the Agreements had been entered.

16. [549]

    This representation arose by reason of the statement in the User Manual as to the “Intended Use” of the Shangrila Ventilators.

17. [550]

    I have set out above the complete statement made in the User Manual under this heading. [96] It included that the Shangrila Ventilator is “intended to be used in the common ward, ICU, outside the hospital and intra-hospital transport”.

18. [551]

    I have found that, as Mr Gannon said in his 1 May 2020 email to Ms Hannigan, the Shangrila Ventilator was not a “full ICU ventilator”.

19. [552]

    I do not see that statement as qualifying what was stated in the User Manual.

20. [553]

    But I cannot see how this representation was false. The Shangrila Ventilators were intended to be used “in common wards and ICU”.

21. [554]

    The problem is, as I have found, they were not fit for that purpose.

22. [555]

    I have found that the Shangrila Ventilators were not fit for the purpose and thus not suitable for use in any clinical setting.

23. [556]

    However, like the alleged representation that the Shangrila Ventilators were “fit for purpose”, this representation is stated by HealthShare to arise from the matters referred to at par 4A of the Cross Claim List Statement and thus has the causation difficulties to which I have referred in respect of that representation.

24. [557]

    As I have discussed above, this representation was expressly made in the User Manual. [97]

25. [558]

    I have found that the Shangrila Ventilators are not capable of reliably performing in this way. For that reason, my conclusion is that the statement made in the User Manual to this effect was misleading or deceptive.

26. [559]

    I think it likely that Dr Morris relied upon this statement in the User Manual as part of his consideration during the Desktop Review.

27. [560]

    This alleged representation is also said to arise from statements made in the User Manual.

28. [561]

    For the reasons I have set out above, my conclusion is that the Shangrila Ventilators did have a volume control function and that tidal volume on the Ventilators could be pre-set.

29. [562]

    Again, this representation is said to arise from statements made in the User Manual.

30. [563]

    For the reasons I have set out above, I am unable to conclude that the high-pressure alarm on the Shangrila Ventilators did not operate when a patient airway pressure exceeded a set limit.

Conclusion

1. [564]

   I understand that MDT accepts that it will follow from my conclusion that the Shangrila Ventilators were not fit for purpose within the meaning of s 19 of the Sale of Goods Act that it must now return the $10.395 million paid to it in April 2020.

2. [565]

   However, I will now invite submissions from the parties about that, and as to what orders should be made to reflect these reasons and what, if any, further matters require determination.