Topic- Intentional Infliction of Economics Loss
PayDay Ltd is a company which designs payroll systems. Two years ago PayDay tendered for a contract to design a payroll system for NoseULike, a company which operates a chain of private cosmetic surgery clinics throughout Australia. 'Three other organisations also tendered for the contract. In the tender submission, a director of PayDay, Gavin Puffdragon, represented to NoseULike that
(a) PayDay is one of West Australia's most respected payroll system providers;
(b) PayDay has carried out a proper analysis of the resources, cost, time, technology and methodology required to complete the initial delivery and go-live with the new payroll system within 6 months of the contract start date;
(c) PayDay believes that the project can be completed for a total of $7 million.
All the other companies tendering for the contract stated that the system would not be up and running for 12-18 months after the contract start date and would cost between $8-9.5 million to complete.
PayDay Ltd was awarded the contract to design and install the new payroll system. However, 18 months after the contract start date the system is still nowhere close to being ready. In addition, the costs of designing and installing the system have already exceeded $8 million and look set to increase even further.
NoseULike instructs its solicitors to write to PayDay threatening to sue them for deceit. In response PayDay admits that it has limited experience in designing payroll systems and that the contract with NoseULike is the first contract it has ever had to design a system to run across multiple locations and time zones. However, PayDay believes that the statement that it is one of WA's most respected payroll system providers was just 'puff', designed to attract NoseULike to the company. In addition, PayDay states that NoseU Like could easily have checked the accuracy of this statement. When questioned about the timeframe and cost estimates given in the tender document, Gavin Puffdragon admits that they were "optimistic".
Using the four step process, advise NoseULike whether there are any grounds on which they may be able to sue PayDay for deceit arising from statements made in the tender document.