A1 Quality Concrete Tanks Pty Ltd v Civil & Allied Technical Constructions Pty Ltd
[2014] VCC 1239
•14 August 2014
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL EXPEDITED DIVISION
Case No. CI-10-05652
| A1 QUALITY CONCRETE TANKS PTY LTD | Plaintiff |
| V | |
| CIVIL & ALLIED TECHNICAL CONSTRUCTIONS PTY LTD | Defendant |
---
JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28, 29, 30, 31 July, 1 August 2014 | |
DATE OF JUDGMENT: | 14 August 2014 | |
CASE MAY BE CITED AS: | A1 Quality Concrete Tanks Pty Ltd v Civil & Allied Technical Constructions Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 1239 | |
REASONS FOR JUDGMENT
---
Subject: CONTRACT
Catchwords: Alleged sub-contract for construction of sewerage clarifiers; whether sub-contract concluded; sub-contract alleged to fall within class 1 or 4 of Masters v Cameron analysis albeit in contemplation of subsequent formal agreement; final agreement reached; Plaintiff entitled to damages for breach.
Legislation Cited: s52 Trade Practices Act 1974; s18 Australian Consumer Law; ss3 & 6 Building Work Contractors Act 1995 (SA); ss1 & 32 Partnership Act 1891 (SA);
Cases Cited:Pioneer Concrete Services Ltd v Galli [1985] VR 675; Hope v The Council of the City of Bathurst (1980) 144 CLR 1; Smith v Anderson (1880) 15 Ch D 247; Re Jackson & Co Ltd [1899] 1 Ch 348; Re Dudley Engineering Pty Ltd (1967) 87 WN (Pt1) (NSW) 326; Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liquidation) (1990) 2 ACSR 692; Nichol v Fearby [1923] 1 KB 480; Hamilton v Property Investments Ltd [1983] WAR 317; Dumoine Holdings Pty Ltd v United & Commercial Holdings Ltd (1985) 13 ACLR 448; Hann v Barker [2012] SADC 122; W Cook Builders Pty Ltd v Lumbers & Ors [2005] SADC 153; Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd [1998] SASC 6840; Holman v Johnson (1775) 1 COWP 341; 98 ER 1120; Waugh v Morris (1873) LR 8 QB 202, 208; Russo v Buck [2007] SASC 423; Nelson v Nelson (1995) 184 CLR 538; Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215; Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; Masters v Cameron (1954) 91 CLR 353; Baulkham Hills Private Hospital Pty Ltd v GR Securities’ case (1986) 40 NSWLR 631; MacDonald v Australian Wool Innovation Ltd [2005] FCA 105; Thompson v White [2006] NSWCA 350 [99]-[100]; Ormwave Pty Ltd v Smith [2007] NSWCA 2010; Gangemi v Osborne [2009] VSCA 297; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Built Environs Pty Ltd v SaundersInternational Ltd [2012] SASC 111; Factory 5 v State of Victoria [2012] FCAFC 150
Judgment: Judgment for the plaintiff for damages to be assessed
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M. Clarke | M.P. Lanza Lawyers |
| For the Defendant | Mr R. F. Elliott | McKean Park Lawyers (Agent for Sykes Bidstrup Barristers & Solicitors, SA) |
HIS HONOUR:
Background
1 Mr Peter Geaboc is the principal of A1 Quality Concrete Tanks Pty Ltd (“A1”), the plaintiff in this proceeding. Mr Geaboc’s company specialises in the construction of concrete tanks. It is a relatively small concern. Mr Geaboc’s sons, Mr Ben Geaboc and Mr Daniel Geaboc, have been employed by A1. One of them, Mr Ben Geaboc, features in the narrative in this case, though he has since ceased to be an employee of A1.
2 Amongst the species of concrete tanks which A1 has, over the years, constructed, are tanks described as “clarifiers”, a special type of concrete tank used as part of a sewage treatment plant. A1 has constructed a number of tanks of this description at various locations in Victoria, including Sunbury, Gisborne and Leongatha, and Tathra in New South Wales.
3 The defendant is a larger concern, carrying out civil engineering projects across Australia. It is colloquially described as “CATCON”.
4 In 2010, Mr Geaboc was working on one of A1’s projects in Bateman’s Bay in New South Wales when he received a telephone call from Mr Jacob Berenson of CATCON. Mr Berenson asked Mr Geaboc if his company built concrete tanks and, in particular, clarifiers. Mr Geaboc replied that his company had done “quite a few”. Mr Geaboc says he was invited to travel to Adelaide to have discussions with CATCON, for whom Mr Berenson worked, relative to the construction of two clarifiers to be built as part of a wastewater plant upgrade at Aldinga to the south of Adelaide.
5 This telephone conversation took place in late June. On 23 June 2010, Mr Matti Tuokko, an engineer employed by CATCON, sent an email to Mr Geaboc apparently following up Mr Geaboc’s discussion with Mr Berenson. The email covered a set of plans for the clarifier tanks to be constructed at Aldinga. It asked A1 to submit prices for the following scope of works:
Earthworks/pipeworks by CATCON
Reo supply to site only by CATCON
Concrete supply by CATCON
Site amenities by CATCON.
6 The email asked for the submission of at least three references and photographs of similar projects. The email continued, “Other things to discuss are craneage and concrete pumping, we will have a concrete pump on-site (option).”
7 The email explained that CATCON was undertaking an upgrade of the wastewater treatment plant for United Water in South Australia and was the head contractor in consortium with the Leighton Group for the construction of civil and structural works, with CATCON’s role limited to concrete structures. The email continued, “The works for the tanks are planned to start late July.”
8 The plans, which were forwarded under cover of the email, depicted a concrete tank for construction with a central sump and two channels running around the edge of the tank immediately below the top of the tank wall.
9 Mr Geaboc attended a site meeting on 28 June. He was collected from the Adelaide Airport by Mr Berenson and attended the site meeting with Mr Berenson and Mr Damen. Mr Damen, as the evidence showed, was, at that stage, the Project Manager for CATCON.
10 As the events developed, Mr Damen’s role was assumed by Mr Ian McNee. Mr Damen was appointed Project Manager initially, I was told, because he had a good relationship with the Superintendent appointed under the head building contract.
11 Mr Geaboc said that the site meeting lasted for approximately two hours and he was asked if his company had worked with a former system known as “RND” or “PERI”. He said that he told the CATCON representatives that his company had worked with these systems. He said that PERI was “the best there is, and it’s cheaper than RND”. (T59, L27-8)
12 Mr Geaboc said that he took a portfolio of photographs of this company’s previous projects at the various locations already referred to. As a result of this meeting, Mr Geaboc made an enquiry of the suppliers of the PERI system. He said they quoted a price of $17,000, “$17,000 and something a week to supply the entire formwork per week for the project.” (T62, L17-18)
13 Immediately following the 23 June email from Mr Tuokko, Mr Ben Geaboc, Mr Peter Geaboc’s son who was then employed by A1, emailed a document relative to A1 described as its “profile” in PDF form. This depicted a number of the projects referred to earlier identifying head contract laws and the organisations for whom the construction work was carried out.
14 Following the meeting on-site on 28 June, Mr Ben Geaboc sent an email to Mr Tuokko as follows:
“Thank you for the opportunity to quote for the works in Adelaide.
The price for the Project is $450,000 + GST. This includes PERI formwork, crane supply, pump supply, scaffold etc.
Reinforcement and concrete is to be supplied by you.
If you have any further queries please do not hesitate to call regards,”
15 Mr Peter Geaboc explained that he did not operate computers himself and so he relied on his son to carry out the email communications for him. At a further on-site meeting attended by Mr Peter Geaboc occurred on 5 July. Again, Mr Geaboc says that Mr Berenson collected him from the Adelaide Airport and Mr Tuokko and Mr Damen attended the meeting on-site. The upshot was that the price quoted, “was initially being (sic) expensive with PERI”.
16 According to Mr Geaboc, “They [presumably Messrs Tuokko and Damen] said that it’s far too high, is there any other opportunity to lower the price”. (T63, L6-8). Mr Geaboc said he told the CATCON representatives that his company had used its own formwork on the previous clarifiers that it had constructed, “so that’s the cheapest option. Eliminating the hiring of the formwork and eliminating the use of the crane, it’s very expensive for a crane to reach that level to the excavation,…”. (T63, L11-15)
17 Mr Geaboc said the CATCON representatives also suggested that CATCON could do part of the job itself, specifically the bases of the two tanks, but Mr Geaboc was not enthusiastic about this proposal.
18 Meanwhile, revisions of the plans for the clarifiers were underway. An email chain originated with Mr Staniford, whose precise relationship with the head contract was not explained. The email with the revised plans was directed to Mr Peter Sinickas, who was the Superintendent under the head contract. These revised plans were emailed by Mr Sinickas to Mr Mark Vince, who emailed them to Mr Damen and Mr Tuokko of CATCON. At 2.19pm on 7 July, these revised plans were dispatched to Mr Ben Geaboc at A1.
19 Mr Ben Geaboc then sent a further email on 9 July 2010 to Mr Tuokko under the heading “Final Price for Aldinga WWTP Upgrade”. He said that the final price was $382,000 plus GST for each tank. The email stated:
“The price includes the following:
- Supply of labour
- Formwork (being our own not PERI or any other)
- Accommodation
- Four more men than allowed for in previous quotation so as to meet time constraint.
CATCON to supply the following:
- Cranes as required by A1 Quality Tanks
- Concrete Pumps as required by A1 Quality Tanks
- Scaffolding
- Supply of Reinforcement
- Supply of Concrete.
Please note that in order to begin quickly … a purchase order must be provided ASAP so that the inside cone forms can be ordered.
Also, with the purchase order we will require a deposit of $130,000 + GST and all payments must be prompt if we are to keep to our schedule.”
20 At 2.07pm on 12 July, Mr Ben Geaboc emailed to Mr Tuokko a further, “Final Price for the Construction of the two clarifiers”, putting it at $370,000 plus GST per tank. The email stated, “All other conditions remain as in previous quotation”.
21 Mr Tuokko responded with an email that is a central importance in this proceeding. It was copied to Mr Ian McNee and also to Mr David Baker, a Director of CATCON, who features later in the narrative and was CATCON’s principal witness at trial. The email transmitted at 3.33pm (eastern time) was as follows:
“We accept your price for this project. Please proceed with details given below:
·Proceed with formwork manufacturing/modification and mobilisation to site;
·Commencement date on site is 26/7/10;
·Provide details for all personnel as follows –
oName/address and DOB
oCopy of white card (or equivalent)
oCopy of all licences
·Construction period is 12 weeks in total from 26/7/10;
·Delays to completion date upon inclement weather are applicable. Costs associated with inclement weather are not claimable;
·Draft contract will be sent for your review during this week;
·No deposit is applicable;
·Meeting is to be set up as soon as possible to discuss mutually beneficial payment terms.
Please call myself to discuss any of the above items.”
22 Three minutes after the critical email, Mr Tuokko sent a further email at 3.36pm, which included updated drawings. These had been forwarded to him by Harrison Prestwood of Leighton Contractors Pty Ltd. These included modifications to the formwork which would be required for the sump portion of the clarifiers. Previous plans had required a conical metal piece of formwork at the centre of the tank structure in its sump area. The revised plan provided for this metal formwork to be in the form of a cylinder without the tapering features of the cone.
23 One matter which had been the subject of continuing debate between A1 and CATCON were payment terms under the arrangement or proposed arrangement. CATCON had maintained the position that it would pay 30 days after submission of an invoice covering the work done in any particular month. According to Mr Geaboc, this was an industry standard. He pressed for an arrangement whereby upon arrival on-site, A1 could issue an immediate invoice representing its costs of site establishment and an estimate of the work which it would do in the ensuing 14 days in the expectation that this invoice would be paid within 14 days of the parties, accepting that thereafter the industry standard of 30 days would operate.
24 The “white cards” referred to in the email were credentials for individual workers demonstrating their completion of an occupational health and safety introductory course. The issue of payment terms was the matter referred to in the email as “mutually beneficial payment terms”.
25 On 23 July 2010, Mr Tuokko emailed the promised draft contract to Mr Ben Geaboc. He said the delay in forwarding the draft was because of pressure of business. (T202, L18 & 19) By this time, the proposed on-site start date was very close. The 23rd was a Friday, the 26th was a Monday. Presumably, there was an element of “slippage” in this proposed start date. Mr Tuokko arranged for Mr Peter Geaboc to attend a further on-site meeting on 26 July 2010. (T202, L1 & 2)
26 In the meantime, Mr Peter Geaboc said he had been taking action to prepare A1 to commence on-site work. He had instructed a company known as Smithweld Pty Ltd, which gave its trade as “section benders”, to prepare the metal formwork for the project. Smithweld issued a tax invoice to A1 (number 10137) dated 13 July 2010 for “65 x 50 x 50 x 3 SHS 7500 Arc Lngth 15000 I/Dia” formwork, that is, square sided metal pipes to constitute part of the formwork for the job, charging this at $6,045. The other item on the invoice was “1 x 3mm Plate 1,000 High, 7540 Arc Lngth 2400 dia, Cylinder supplied in five sections, including Key” which was charged at $5,015. This made a total of $11,060 which, with GST, totalled $12,166.
27 This tax invoice must have been in the nature of a quotation rather than an actual demand for money. No one suggested that these items had been fabricated or bent so as to be ready for delivery or collection on 13 July. This would have been within 24 hours of Mr Peter Geaboc’s attendance at Smithweld to arrange the materials. The key element, according to all parties at this stage, was what is described as a `cylinder’ in the invoice. This cylinder constitutes the formwork for the sump area in the tanks. As the invoice indicated, it was to be in five sections which were held together around a linear piece of steel described as the “key”.
28 Mr Geaboc said that whilst he had, at his company’s premises, large amounts of square tube already, a clarifier required fine tolerances and pipe that was re-bent would not achieve those tolerances. (T73, L12-21)
29 He said he also bought plywood chip for formwork from a friend for $3,200. (T73, L30-T74, L5). He said he also rang a Mr Daryl Willoughby, who organises a crew of men who work for A1, to arrange for labour. (T74)
30 Mr Geaboc said that when he arrived on-site on 26 July for a meeting, an excavator was still operating. In his view, the site was not ready for A1. (T74, L8-11)
31 Mr Geaboc said that work at his company’s premises had to be put in hand to clean the formwork which it was using. The formwork consisted of metal plates 2.2 metres high and 900 metres wide. They had to be cleaned with a steel grinder and oil and packed. (T74, L26-29)
32 As well as the draft contract, Mr Tuokko sent another email to Mr Ben Geaboc on 23 July stating, “See attached Aldinga reo schedules for your approval”. The “reo” referred to was reinforcement bars to be inserted in the concrete structures. These were to be manufactured by Best Bar Reinforcements and provided by CATCON.
33 Mr Geaboc had a meeting with Mr Charlie Vella of Best Bar, the proposed supplier. All of the dimensions submitted by Mr Tuokko on behalf of CATCON were satisfactory except the reinforcement for the vertical bars of the tank wall, which were proposed to be 5.2 metres long. These would be satisfactory for a tank wall which was constructed with a single concrete pour. This could have been done with the PERI formwork, which was initially considered but rejected on cost grounds. A1’s own formwork panels were 2.2 metres tall and, therefore, multiple concrete pours would be required. In particular, it would be necessary for there to be a construction joint at the 2.2 metre level in the tank wall. Therefore, full length vertical reinforcement would not be appropriate.
34 Mr Geaboc approved the proposed “reo” in all respects except this.
35 According to Mr Geaboc, the site meeting of 26 July was satisfactorily concluded. All relevant matters were agreed on, including the arrangement for an early payment of the first invoice.
36 Mr Geaboc said that those attending the meeting were Mr Berenson and Mr Tuokko, as well as Mr David Baker. Mr Baker is a Director of CATCON. He was in charge of the Aldinga project for CATCON and as a Director was authorised to approve sub-contract arrangements and execute sub-contract documents.
37 Mr Geaboc said that the meeting approved the early invoice payment at the time of site establishment. Mr Geaboc said that he had been informed by telephone before the meeting that the commencement of work had been put back to 9 August or, possibly, 4 August. (T83, L8-10)
38 Mr Geaboc said that a contract in the form of the draft which had been emailed to him on 23 June by Mr Tuokko was signed at the meeting. The document offered for execution was then duplicated but both copies were retained by CATCON at the end of the meeting because Mr Geaboc was told, according to his recollection, that it was required they be initialled by the Chief Executive. Mr Geaboc said that this procedure was in accordance with experience that he had had with bodies such as Coliban Water, North East Water, Mid Coast Water and South Gippsland Water. (T83)
39 According to Mr Geaboc, the process using his formwork, which required multiple concrete pours for the tank walls, and a construction joint at the 2.2 metre level, was approved by CATCON’s representatives.
40 CATCON’s witnesses, namely, Mr Tuokko and Mr Baker, gave a significantly different account of the meeting and it will be necessary to turn to those accounts in detail presently. At this stage, it is sufficient to note that Mr Baker denied any agreement to make an early invoice payment at the time of site establishment and also denied that any contract was signed or initialled. Mr Baker said that the meeting ended on a tense note with Mr Geaboc stating angrily, “We have a contract”, and Mr Baker denying this, followed by a pregnant pause.
41 Mr Geaboc says that his transport back to Adelaide Airport was provided, on this occasion, by Mr Baker. During the drive back, he said Mr Baker suggested to him that A1’s price be cut from $740,000 by $60,000 to $680,000. He says he demurred but indicated that he would think about it.
42 Mr Tuokko said that, “A day or so later or two days later he called me to ask if I thought about it and lowering the price by $60,000”. (T88, L24-26)
43 Mr Geaboc says he declined and Mr Baker said, “They intend not to go ahead with it if I don’t lower the price” (T88,L31 - T89,L2). Mr Geaboc said he then took advice from a Melbourne solicitor, Mr Tony Zucco.
44 As a result of that, he had his son, Ben, send an email to Mr Baker on the morning of 29 July in the following terms:
“Costs incurred for not proceeding with works as written by email on 12/07/2010 and sub-contract draft 23/07/2010 are as follows (nb those e-mails have been attached for your perusal):
Order of materials so that we can mobilize on the job:
·Formwork
·Conic sump formwork
·Radius angle line
·Radius RHS tube
·Plywood
Cost $43,170 + GST
Loss of income due to knocking back other work and loss of income for not proceeding with this contract:
Cost $137,000 + GST
Total $180,170 + GST
Please note that these claims are being made after very careful advice from our lawyers on this matter.”
45 Mr Geaboc’s evidence did not give details of the calculation of these figures.
46 On the morning of Monday, 2 August 2010, Mr Baker sent an email to Ben Geaboc as follows:
“Peter,
Further to our recent meeting and telephone discussions regarding the Aldinga Clarifier tank works we formally notify you that we are unable to agree contract conditions between us and accordingly we withdraw our acceptance of your price.
Consequently we hereby end negotiations with you in regards to these works.
Thank you for your participation to date.
Regard
David Baker”
47 Mr Geaboc was, it seems, enraged. He bombarded Mr Baker, Mr Tuokko and Mr Berenson with telephone calls. He does not seem to have been able to get through to Mr Baker. He claims that Mr Berenson and Mr Tuokko agreed with him, that CATCON was in breach of contract. Mr Tuokko, who gave evidence for CATCON, denied having said such a thing.
48 Mr Zucco of Davis Zucco Lawyers, sent a letter of demand to CATCON marked for the attention of Mr Baker. That letter stated as follows:
“We act on behalf of A1 Quality Tanks Pty Ltd (“A1”).
We are instructed that an agreement was Reached between Civil & Allied Technical Constructions Pty Ltd (“CATCON”) with regards to the Aldinga Clarifier/Waste Water Treatment Plant.
An email dated 28 July 2010 from CATCON’s Matti Tuokko (copied to you and Ian McNee) accepted our clients (sic) price for the project and authorised A1 to proceed with interalia (sic), formwork manufacturing/modification and mobilisation to site.
We are instructed that upon reliance of this authorisation and verbal statements that our client proceeded to prepare for the project. This has resulted in our client incurring substantial costs and expenditure of monies (exceeding $50,000).
Subsequent to this, you informed our client that you did not wish to proceed and our client rejects the proposition put forward in your email dated 2 August 2010 as being factually incorrect.
We now provide notice to you that in reliance with your representations and communications our client seeks to be compensated for the loss of profit, damages, and costs incurred due to your unilateral decision, we are instructed that our client’s losses exceed $200,000, but is willing to compromise it as this amount if you agree to the payment by 20 August 2010. If such agreement is not reached then our client reserves its rights to seek full payment and to issue legal proceedings with out (sic) further notice.”
49 Mr Baker agreed that this letter came to his attention. No reply was sent to it on behalf of CATCON. Mr Baker said, “It’s not my role to respond to legal letters”. (T485, L4-5) He did not suggest, however, what his role was or why, as the director responsible for the project which had given rise to the letter of demand, he did not bear the responsibility. (T485, L10-11)
50 Mr Tuokko returned to his native Finland at the end of 2010 and gave evidence in this proceeding by videolink.
The present proceeding
51 The solicitors acting for A1 issued the Writ commencing this proceeding on 6 December 2010. At some stage, the proceeding was struck out and only reinstated over the objections of CATCON, hence the lengthy delay between issue and trial, which occurred in July 2014, that is, four full years since the key events. This trial deals only with questions of liability. Issues of quantum, if they need to be determined, have been deferred.
(i) Plaintiff’s Statement of Claim
52 The plaintiff’s Statement of Claim reached, leave to file a Second Further Amended Statement of Claim was given during the course of the trial. The claim was in three parts. First, a claim based on an alleged contract for A1 to carry out the work of construction of the two clarifiers for $740,000 plus GST which CATCON is alleged to have repudiated; with A1 accepting their repudiation, it sought damages for breach of contract.
53 Alternatively, there was a claim in restitution, “in an amount equal to the value of the works performed at the request of the defendant for the defendant’s benefit”.
54 Finally, there was a third head of claim added during the course of the trial for alleged misleading and deceptive conduct. This claim could, as a matter of logic, succeed only if the primary claim for breach of contract were dismissed. In substance, it is alleged that by the words deed and omission, representatives of CATCON gave A1 to understand that CATCON had entered into an enforceable agreement, whereas no binding contractual arrangements existed. A1, it was said, had acted to its disadvantage and suffered loss and damage by reason of being misled and deceived, and claimed damages for the alleged contravention of s52 of the Trade Practices Act 1974 or, alternatively, s18 of the Australian Consumer Law.
(ii) Defendant’s defence
55 In its Second Further Amended Defence to the Further Amended Statement of Claim, CATCON admitted that it had entered into negotiations with A1 relative to the construction of two clarifiers at Aldinga and that it had “agreed with [A1] that the price for such construction would be $740,000 plus GST”. These discussions or proposed agreements were said to be “subject to further agreement by the parties as to the duration of the works to be performed and the terms and conditions of a written contract to be negotiated”.
56 It said that the email of 12 July 2010, upon which reliance was placed, evinced “no intention to actually enter into legal relations by way of contract for the whole of the proposed work”. If a contract were entered into, which was denied, the stipulation for provision of all licences required a building licence under s6 of the Building Work Contractors Act 1995 (SA) in the State of South Australia, with details of that licence never having been provided.
57 It further said that no commencement date had been agreed on for the work and that the meeting on 26 July 2010 ended without agreement being reached on key terms and conditions. Mr Baker had called off negotiations by his email of 2 August. Any contract would, it was said, have been illegal and unenforceable by reason of A1’s not holding a licence under the Building Work Contractors Act in the State of South Australia.
58 There was also an allegation of failure to mitigate loss and an allegation that the matters relied on as founding a restitutional claim, did not make out any cause of action known to law.
59 Following the addition of the claim by A1 to misleading and deceptive conduct, Mr Elliott (on behalf of CATCON), secured agreement by Mr Clarke and I that, without delivering any further pleading, CATCON should be deemed to deny those matters.
(iii) Reply
60 By way of reply, A1 asserted that there was an intention to create legal relations by reason of the email of 12 July 2010 and that an enforceable agreement was reached on that day. As to the South Australian statute and the plaintiff’s lack of a registered licence under s6 of the statute, it said, “The plaintiff was a Victorian company and was not aware of the existence of s6 of the Act”.
61 It said that the email of 29 July 2010 from A1 was sent to Mr Baker in response to a statement by him the previous day, “evincing an intention to no longer to be bound by the contract”. Its failure to hold a licence under the Building Work Contractors Act in the State of South Australia was inadvertent and would be excused under s6(2) of the Act. Also, “It would have obtained a licence as a matter of procedure”.
62 Moreover, it was said that, by reason of A1’s detrimental reliance on the conduct of CATCON, CATCON was estopped from relying on s6 of the Building Work Contractors Act.
Some factual matters
63 It is convenient at this stage to deal with a couple of disputed factual matters where the conclusions are relatively clear. The resolution of these matters will shed light on the credibility of the witnesses involved.
64 First, Mr Geaboc on behalf of A1 asserts, and Mr Baker on behalf of CATCON and Mr Tuokko deny, that a form of sub-contract was executed at the meeting on 26 July.
65 I reject Mr Geaboc’s evidence on this point as inherently improbable. First, the draft sub-contract forwarded by email on 23 July was prepared by Mr Tuokko, himself. That is, the preparation of an execution engrossment did not have to be farmed out, for instance, to a solicitor. If the contract were to be executed, there is no reason why it would not have been amended from the 23 July draft so as to be as current as possible.
66 Mr Geaboc’s evidence is that what was executed was in the same form as the draft, including a site commencement date of 26 July, which had plainly been superseded by the time of the meeting on 26 July.
67 Secondly, Mr Geaboc had not provided a schedule of rates to deal with the issue of variations and, again, this was blank. If a document were to be executed, the revised commencement date would have been included and Mr Geaboc would have been pressed to provide a schedule of rates.
68 More pertinently, the allegation that a form of sub-contract had been executed at the meeting of 26 July was not mentioned at all in the initial version of the Statement of Claim attached to the Writ as issued in December 2010. It appeared for the first time in a revised version of the Statement of Claim in 2010. It was not mentioned, either, in the letter of demand from Mr Zucco or in the email of demand from Mr Ben Geaboc of 29 July.
69 Mr Peter Geaboc’s evidence was that his son, Ben, prepared the emails because he was computer illiterate, but that the text of the emails was prepared by them in consultation. Mr Peter Geaboc approved them. If a form of sub-contract had been executed at the meeting of 26 July, that would have been mentioned in Mr Zucco’s letter of demand and in the email of demand of 29 July.
70 The second issue relates to the metal formwork ordered by Smithweld. A1’s case is that, whilst the original Smithweld invoice of 13 July was never paid, some $10,488.50 was paid by cheque by A1 to Smithweld dated 28 July 2010. This represented part-payment of the original invoice. The cheque stub was produced at trial, as was a letter from Smithweld dated 8 July 2014, which stated inter alia as follows:
“Payment of 10488.5 refers to invoices listed below.
Invoice no
GST
30309
75 x 50 angle
$390
$39
$429
30315
50 x 3 SHS
$1,935
$193.5
$2,128.50
30315
3mm strips
$180
$18
$198
30319
Cone
$7,030
$703
$7,733
$9,535
$953.5
$10,488.50
71 There was no explanation as to how the figures came to be modified in this way from the original invoice of 14 July. The evidence showed that the initial plans submitted to A1 by CATCON provided for metal formwork in the sump area in the form of a cone. The revised plan submitted late on the afternoon of 12 July removed the conical feature and required metal formwork in the form of a cylinder. The 13 July invoice refers to a charge for a cylinder. The payment on 28 July 2010, both according to the cheque butt itself and the explanatory note of 8 July 2014 from Smithweld, refers to a cone. Moreover, the charge for the cone has increased from the charge which was made on invoice of 13 July.
72 Mr Geaboc said that his company was a long-term customer of Smithweld and uses its services exclusively for these metal formwork matters. It would be readily understandable if, when the transaction with CATCON “fell through”, Smithweld would give a discount for the metal formwork to a good customer. An increase in the price for a cone/cylinder would be incomprehensible. Again, when Smithweld was precise enough to describe what it invoiced for on 13 July as a cylinder, why would it describe the same item as a “cone” in its letter of 8 July 2014, and why would Mr Geaboc (or a member of his staff) use the word “cone” on the cheque butt on 28 July 2010, if the item was a cylinder.
73 The other items on the bill of 13 July are not replicated on the substitute invoices which led to the payment of $10,488.50, namely 30309, 30315 and 30319. In short, therefore, nothing at all in the payment made on 28 July 2010 corresponds with the invoice of 13 July. The thought that the two are identical or derived from one another is therefore difficult to credit.
74 There is the further consideration that, as Mr Elliott observed, the numbers do not appear to correspond with one another. The 13 July invoice had a number in the 1,000s, whereas the invoices relative to the $10,488.50 have numbers in the 3,000s.
75 Mr Geaboc was asked, if he had paid for the metal formwork, what had happened to it. As to the cone/cylinder, he said that after some years he had scrapped it, sending it to Sims Metal, a well-known scrap metal recycler. He said, however, that he retained “the key”. He produced a photograph of this key in the examination.
76 A Mr King had attended A1’s yard to investigate these matters shortly before trial. Initially, he was not to be called as a witness but, ultimately, he was. The “key” which was depicted in the photograph was viewed by Mr King and he said he did not think it was part of the Aldinga project. He said, “Well, I didn’t think it did [represent part of the Aldinga project] and I also asked Peter whether it was part of it”. (T379, L11-12)
77 Mr Elliott, counsel for CATCON, asked, “If we can just be categorically clear about this, you asked Peter Geaboc whether this was anything to do with the Aldinga project and his reply was? …It wasn’t part of the project.” (T379, L14-17)
78 Before Mr Clarke, for A1, cross-examined Mr King, he secured a stand down to take instructions from Mr Geaboc. On the resumption, he asked a few brief questions in cross-examination but did not put it to Mr King that Mr Geaboc had not made the statement that he attributed to him, namely, that the key was not part of the Aldinga project. The key in question, as depicted in the photograph, was a relatively long piece of metal. It was not measured, but even with the imprecision of the photographs, it seemed to me clear that it was longer than the key portion for the Aldinga project would have been, namely, 1-1.2 metres. What was depicted in the photograph looked more like 1.8-2 metres long.
79 In addition, a key made as part of a cylinder assembly would have a straight edge, whereas the edge on the key depicted in the photographs and retained by A1 has a raked edge, which would be appropriate to a conical piece of formwork.
80 Mr Geaboc appeared to suggest, faintly, that maybe he had failed to note that the plans for Aldinga had been altered so as to call for a cylinder rather than a cone. This seemed to me to be lacking in credibility, particularly when one considers that the Smithweld invoice of 13 July referred to a cylinder rather than a cone.
81 Mr Elliott submitted, “The key is the key”. He referred to most of the matters which I have just recited and invited me to find that Mr Geaboc’s evidence on these points should be rejected. I accept that submission.
82 It follows from these preliminary factual findings that I must treat Mr Geaboc’s evidence with some caution. Mr Elliott submitted that in the circumstances I should find that Mr Geaboc’s evidence conflicted with the evidence of Mr Tuokko or Mr Baker and prefer the latter.
83 As I will explain presently, whilst I accepted Mr Baker, generally, as a witness of truth and a good historian, his interpretation of where matters were left after the meeting of 27 July 2010, and the subsequent discussions on the way back to the airport, has a measure of implausibility and I treat that, likewise, with caution. Regrettably, therefore, the process of making findings on the key disputed issues will be a difficult one.
Illegality
84 Considering the substance of the plaintiff’s claim in contract, it is convenient to deal first with the defendant’s defence based on illegality. Should the defence be successful, the contractual claim must necessarily fail, independently of any more general issues of contract law which may prove problematic for it.
85 Mr Elliott, in putting the defendant’s illegality defence, relied on the Building Work Contractors Act of the State of South Australia. Section 6 provides as follows:
“Obligation of building work contractors to be licensed
(1) A person must not—
(a)carry on business as a building work contractor except as authorised by a licence under this Part; or
(b)advertise or otherwise hold himself or herself out as being entitled to carry on business as a building work contractor unless authorised to carry on business as such a contractor by a licence under this Part.
Maximum penalty: $20 000.
(2)A person required by this Act to be licensed as a building work contractor is not entitled to any fee, other consideration or compensation under or in relation to a contract with another on whose behalf the person performed work as a building work contractor unless—
(a)the person was authorised to perform the work under a licence; or
(b)a court hearing proceedings for recovery of the fee, other consideration or compensation is satisfied that the person's failure to be so authorised resulted from inadvertence only.”
86 Section 3 defines building work contractor as follows:
“(a)a person who carries on the business of performing building work for others; or
(b)a person who carries on the business of performing building work with a view to the sale or letting (whether by lease, licence or other agreement) of land or buildings improved as a result of the building work;”
87 The same section defines building work as follows:
“(a)the whole or part of the work of constructing, erecting, underpinning, altering, repairing, improving, adding to or demolishing a building; or
(b)the whole or part of the work of excavating or filling a site for work referred to in paragraph (a); or
(c)work of a class prescribed by regulation;”
88 Building is defined to include, “A structure and part of a building or structure”. It seemed to be common ground between the parties that the work, which A1 says it was contracted to carry out by CATCON, constituted building work.
89 Mr Elliott submitted that, what A1 says it was contracted to do, here, would violate s6(1) and so would be illegal, subject, perhaps, only to sub-s(2) of the Act.
90 Mr Clarke, however, submitted that, even accepting that the subject matter of this alleged contractor’s building work would be within the statutory definition of building work, it did not demonstrate that A1 was carrying on business as a building work contractor within the meaning of s6(1). This was a single transaction and therefore lacked the necessary repetitive character which the process of carrying on business required.
91 Mr Clarke conceded that, if there were a contract as alleged between A1 and CATCON, its proper law would be the law of South Australia. Accordingly, there could be no choice of law reason why s6 of the South Australian statute would not apply.
92 Mr Clarke referred to the decision of the Full Court of the Supreme Court of Victoria in Pioneer Concrete Services Ltd v Galli [1985] VR 675, 707 where Crockett, Murphy and Ormiston JJ said that the concept of carrying on business connoted “some element of repetition”. He referred to a passage earlier in the Court’s judgment at page 705, where their Honours referred to the concept of business as being, “a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purposes of profit on a continuous and repetitive basis”.
93 In Galli’s case, the court was considering a covenant against carrying on or conducting or being engaged in a business of a particular description. To similar effect was a determination of the High Court of Australia in Hope v The Council of the City of Bathurst (1980) 144 CLR 1, where the Court was considering the entitlement of a ratepayer to a concessional rate applicable to “rural land” used wholly or mainly by the occupier for carrying on the business or industry of grazing.
94 Mason J (as he then was) with whom Gibbs, Stephen and Murphy JJ concurred said:
“I accept, then, that ‘business’ in the sub-section of the ordinary or popular meaning which it would be given in the expression ‘carrying on the business of grazing’. It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis.” (1980) 144 CLR 1, 8-9
95 These authorities are based on a judgment of Brett LJ (as he then was) in Smith v Anderson (1880) 15 Ch D 247, where the court was concerned with whether a unit trust was an illegal partnership, that is, one consisting of more than 20 persons. The court held that the unit holders were not carrying on a business. His Lordship said, “The expression ‘carrying on’ implies a repetition of acts, and excludes the case for an association formed for doing one particular act which is never to be repeated.” (At pages 277-8)
96 In response, Mr Elliott referred to the Partnership Act 1891 (SA), which defined partnership as, “the relation which subsists between persons carrying on business in common with a view of profit…”. (s1) He then drew attention to s32, which provides for dissolution of partnerships and provides inter alia, subject to any agreement between the partners, a partnership is dissolved –
“(b)if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking;”
97 He submitted this demonstrated that South Australian statute law was proposed to regard a person as carrying on a business where they were involved in a single “adventure”.
98 Mr Elliott asked rhetorically, “Could a major corporation contracted to build, say, a large power station in South Australia treat itself as not obliged to be registered, on the basis that it was involved in a single, one-off transaction rather than the repetitive process which, on Mr Clarke’s submission, would require registration?”
99 Mr Clarke’s submissions on this point should be accepted. We may leave for another day whether the major construction corporation erecting a large power station in South Australia as a one-off would be obliged to register under the statute. I am inclined to think that that situation is clearly distinguishable from the present.
100 First, the complexity of such work would require, not merely the execution of a single head contract, but entry into a multiplicity of appurtenant contract with sub-contractors and various local suppliers, for instance, for the provision of labour and material, rights to occupy land, etc.
101 The erection of the clarifier no doubt would require some additional appurtenant contracts - but relatively few in comparison to the hypothetical power station contract.
102 As to the references in the Partnership Act, these provisions appear to be in common with the English model of 1889 and the corresponding Victorian legislation in the Partnership Act 1958, ss3 and 36. Without having been taken to the authorities on partnership, I am inclined to think that the single venture which could form the basis for persons being regarded as carrying on business and partnership would be of a greater complexity, like the erection of the power station, rather than the construction of two concrete clarifiers which it was envisaged would be completed in 10-12 weeks.
103 If I were wrong as to the application of sub-s(1) of s6 of the statute, I would find that A1’s failure to be registered resulted from inadvertence only.
104 Mr Geaboc said he was simply unaware of the Building Work Contractors Act and any obligation which his company might have had to register. He said that if he could have registered within time he would have sought to do so. (T108, L9-16) Can this ignorance be regarded as inadvertence and causative of the failure to register?
105 Mr Elliott submitted that, since ignorance of the law is no excuse, an error or ignorance of the law should not be admitted as a ground of inadvertence so as to enable A1 to recover under s6(2) of the statute.
106 The authorities on what constitutes inadvertence are surprisingly unclear. In Re Jackson & Co Ltd [1899] 1 Ch 348, a company promoter sought relief from the terms of the Companies Act 1898 on the ground of inadvertence where he was obliged to register a contract with the Registrar of Companies where he sold a business or undertaking to a company in exchange for the placement of shares. Kekewich J accepted that the promoter was ignorant of the law and that this ignorance constituted inadvertence so as to entitle him to relief under the statute.
107 Again, in Re Dudley Engineering Pty Ltd (1967) 87 WN (Pt1) (NSW) 326, 329, Street J (as he then was) was dealing with an application under s106 of the Companies Act 1961 (NSW) to extend the time for registration of a company charged. The court’s discretion to grant the extension depended, amongst other things, on proof that the failure to register within time was caused by inadvertence.
108 His Honour said, “Ignorance in other cases has been accepted as sufficient to constitute inadvertence within a provision of this nature”. He referred to a number of earlier English cases to this effect.
109 Similarly, in Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liquidation) (1990) 2 ACSR 692, which was once again an application to enlarge the time within which a company charged could be registered, amongst the causes for the failure to register the charge within time was ignorance on the part of the officers of the applicant company of any legal need to register the charge to make it fully effective.
110 Kelly SPJ with whom Macrossan CJ and Connolly concurred, referred to Re Dudley Engineering and also to the decision of Nichol v Fearby [1923] 1 KB 480, which was concerned with a failure to furnish a return under the provision of the Municipal Elections (Corrupt & Illegal Practices) Act 1884 (UK), where McCardie J at 466-9, after reviewing the authorities, considered that ignorance of the law could fall within the concept of “inadvertence”. He also referred to Re Jackson & Co Ltd. The Full Court ordered that the time for registration be enlarged.
111 In contrast, in Hamilton v Property Investments Ltd [1983] WAR 317, 320, Burt CJ accepted that inadvertent meant, “not properly attentive”. The applicant for relief had been in breach of the Companies (Acquisition of Shares) (WA) Code and said that the inadvertence consisted in his ignorance of the requirements of the Code. The Full Court determined that relief should be given, being of the view that inadvertence extended to errors of fact, only, and not errors of law. The applicant for relief knew what he was doing and did it deliberately. His problem was that he was ignorant of the relevant law.
112 To similar effect, although perhaps with a slight variation, is a decision of Young J in Dumoine Holdings Pty Ltd v United & Commercial Holdings Ltd (1985) 13 ACLR 448. The applicant for relief there had mounted a takeover bid but failed to carry out the steps required by the Companies (Acquisition of Shares) Code. Young J (as he then was) denied him any relief based on inadvertence. His Honour accepted that inadvertence could extend to some errors of law or, in some circumstances, of ignorance of the law, but he said of the concept of inadvertence that:
“It does not seem to me that it covers the situation where the actor in the act which he is performing ought to have a full knowledge of the relevant law….In the instant case, it was imperative for the protection of the public that whoever was performing the administrative work was fully aware of the provisions of the Code. It is almost impossible to successfully carry out a take-over without employing a solicitor. It would appear that because a solicitor was not employed the section was breached. I do not think that it can be called inadvertent to breach a section of the Code merely because one does not know about it when if one had retained a solicitor the matter would have been quite clear.”
113 There seems, therefore, to be a substantial body of authority supportive of the view that the defence of inadvertence so as to excuse a party from a contravention of a statute may be available if what is not adverted to is a rule of law because of ignorance on the part of the actor of the existence of the rule. This approach seems to have been adopted in a number of circumstances where the inadvertence has led to a failure to register what should have been registered. Where, however, the inadvertence has led to a positive illegal act, there seems to have been a reluctance to treat ignorance of the law as providing a proper basis for defence of inadvertence.
114 Here, for the purposes of the exercise, if A1 is deemed to have been carrying on the business of a building work contract merely by purporting to accept and execute a one-off contract where it was approached in Victoria by a South Australian resident, without, so far as the evidence disclosed, advertising its business in South Australia at all, where it is unaware of the Building Work Contractors Act, that unawareness could constitute inadvertence. It may be objected that the illegal act here would be the acceptance and execution of the contract; but in my view, the essence of the alleged illegality would be the failure to register, and the authorities to which I have referred indicate that failure to register due to ignorance of the legal obligation to register can constitute inadvertence.
115 For completeness, I should refer to two decisions of the South Australian District Court referred to and relied on by Mr Elliott. Hann v Barker [2012] SADC 122 and W Cook Builders Pty Ltd v Lumbers & Ors [2005] SADC 153, a matter which proceeded to the High Court on other issues. In Hann, the District Court upheld the determination of a magistrate at first instance that the inadvertence defence was not available to a contractor who deliberately never obtained a licence to carry out gyprock flushing work as he did not deem it necessary to do so. This deliberate decision could only have been on the basis that the contractor was aware of the statutory regime requiring registration but concluded that, for some reason, it did not apply. See paragraph [15] of the District Court judgment.
116 Again, in the Cook case, the District Court noted that, “Builders knew that it had no licence. [Mr Cook] asserted that Mr McAdam had told him to continue to use the Son’s licence”.[35] This indicates that the contractor in question was aware of the licensing regime and it was on this basis that the Court rejected the inadvertence defence.
117 Mr Elliott also referred to a decision of the South Australian Supreme Court in Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd [1998] SASC 6840, where the Court raised, but did not determine, the application of the inadvertence defence.
118 Mr Elliott submitted that Mr Geaboc should simply have checked whether a licence was needed. No doubt this was correct. The existence of an inadvertence defence appears to recognise and, to some extent, indulge human weakness and a failure to achieve perfection in administrative matters. It is not so plainly obvious that the sub-contractor considering undertaking work such as this should obtain legal advice as it is that someone launching a company takeover should do. The Companies (Acquisition of Shares) Code cases are distinguishable on this ground.
119 Mr Elliott relied on a more general common law principle of illegality, though in his oral submissions he seemed to refrain from placing any very heavy reliance upon it.
120 Mr Elliott relied on the judgment of Lord Mansfield in Holman v Johnson (1775) 1 COWP 341; 98 ER 1120, stating the principal that a court would not lend its aid to a plaintiff founding its cause of action on an immoral or illegal act. Where a contract is to do a thing which cannot be performed without a violation of the law or the contract is void, whether the parties knew it or not, he submitted. He referred to Waugh v Morris (1873) LR 8 QB 202, 208 and Russo v Buck [2007] SASC 423. He also referred to Nelson v Nelson (1995) 184 CLR 538 and Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215.
121 Whatever the current standing of Lord Mansfield in Holman, it is well-established that carrying on a business which requires a statutory licence which has not been obtained is not regarded as immoral or illegal in the relevant sense.
122 As Mr Clarke submitted, in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, the High Court of Australia assumed for the purposes of its determination that the respondent, First Chicago Australia Ltd, was, as a merchant bank, carrying on an illegal banking business which required a licence under the Banking Act 1959, but did not hold one. The Court said, however, that such a statutory contravention, if it was occurring, did not render all of the contracts made in the course of the business illegal.
123 The court reached a similar conclusion in Fitzgerald, where the illegality was a failure to obtain a drilling permit.
124 Even if the general principle is applied in the present case, the specific provisions of sub-s(2) allowing recovery despite non-registration where the breach was due to inadvertence, would exclude the common law rule from applying in the case of the present statute.
125 The defence of illegality does not avail CATCON.
Was a contract entered into between the parties?
(i) Was there a contract?
126 Mr Clarke noted that the High Court of Australia in Masters v Cameron (1954) 91 CLR 353 had provided the seminal analysis of the situation where parties enter into negotiation and reach some form of understanding accompanied by a contemplation that there will thereafter be a formal contract entered into. He noted that the Court in a celebrated passage identified three separate situations. Dixon CJ, McTiernan and Kitto JJ said:
“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller (1878) 3 App Cas 1124 when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: “ . . . as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed” (1878) 3 App Cas, at p1151: see also Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, at p 317. A case of the second class came before this Court in Niesmann v Collingridge (1921) 29 CLR 177 where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made “on the signing of the contract”. Rich and Starke JJ observed (1921) 29 CLR, at pp 184, 185 that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, “and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion” (1921) 29 CLR, at p 185: see also O'Brien v Dawson (1942) 66 CLR 18, at p 31.
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor & c of the Poor of Kingston-upon-Hull v Petch (1854) 10 Exch 610 (156 ER 583). The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker (1950) 80 CLR 304 or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller (1878) 3 App Cas 1124. Lord O'Hagan said: “Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made” (1878) 3 App Cas, at p 1149. And Lord Blackburn said:
‘Parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement (1878) 3 App Cas, at p 1152.’
So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander (1912) 1 Ch 284, at p 289 in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.
The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: Farmer v Honan (1919) 26 CLR 183. Nor is any formula, such as “subject to contract”, so intractable as always and necessarily to produce that result: cf Filby v Hounsell (1896) 2 Ch 737. But the natural sense of such words was shown by the language of Lord Westbury when he said in Chinnock v Marchioness of Ely (1865) 4 De GJ & S 638 (46 ER 1066): “if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation” (1865) 4 De GJ & S 638, at p 646 (46 ER, at p 1069). Again, Sir George Jessel MR said in Crossley v Maycock (1874) LR 18 Eq 180:
‘If the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce (1874) LR 18 Eq, at pp 181, 182.’
This being the natural meaning of “subject to contract”, “subject to the preparation of a formal contract”, and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract. Indeed, Lord Greene MR remarked during the argument in Eccles v Bryant and Pollock (1948) Ch 93, at p 94 that when the expression “subject to contract” was used he had never known a case in which it had been suggested, much less held, that this did not import that there was nothing binding till the exchange of parts of the formal contract was made. The effect of the early cases on the subject was stated by Sir George Jessel MR in Winn v Bull (1877) 7 Ch D 29 when he said in a passage which has become well-known:
It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail (1877) 7 Ch D, at p 32.
The subsequent cases on the point have been numerous, and it will suffice to refer to two only in addition to those already cited. A case very like the present is Santa Fe Land Co Ltd v Forestal Land etc Ltd (1910) 26 TLR 534 in which an offer was made “subject to a formal contract to be approved by your solicitors and ourselves on acceptance of the offer, when any minor details can be settled”. The acceptance of this offer was held by Neville J not to constitute a concluded contract. The learned judge, following Winn v Bull (1877) 7 Ch D 29 said:
Now it is important not only in cases of the sale of land, but in all cases where letters pass with regard to the sale of any property which is being negotiated, that the parties should be able to protect themselves by some suitable words from being bound by the negotiation they are conducting. In the present case I think the words in question do impose the condition that if the offer is accepted a more formal contract is to be prepared by the solicitors which is to embody all the details (1910) 26 TLR, at pp 534–535.
The other case is Spottiswoode Ballantyne & Co Ltd v Doreen Appliances Ltd (1942) 2 KB 32. The Court of Appeal there had to consider an agreement for the letting of premises, expressed to be “subject to the terms of a formal agreement to be prepared by their (the owners') solicitors”. The court construed this phrase as meaning that the formal agreement had to be not only prepared by the solicitors but executed by the parties. Lord Greene concluded that the language used was equivalent to the common and more concise phrase “subject to contract”, and added that “it is well settled that that phrase makes it clear that the intention of the parties is that neither of them is to be contractually bound until a contract is signed in the usual way” (1942) 2 KB, at p 35. Goddard LJ repeated the observation of Bankes LJ in Keppel v Wheeler (1927) 1 KB 577: “I pause here to state plainly what is now well established, that where a person accepts an offer subject to contract, it means that the matter remains in negotiation until a formal contract is settled and the formal contracts are exchanged” (1927) 1 KB, at p 584.”
Submissions of the Parties
127 Mr Clarke submitted that the events here led to an arrangement falling within the first class whereby the parties were immediately bound by contract. He noted that a fourth category, which might be thought to be a variation of Category 1, had now been recognised where “the parties may intend to be bound immediately by the terms they have agreed upon, whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms (see Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2001] NSWSC 886 (Barrett J) at [38] and on appeal [2003] NSWCA 74.)”.
128 He said that the plaintiff’s case was that the arrangements fell into Class 1 or Class 4, but the defendant’s defence indicated a contention that it fell into Class 3. He submitted that the intention of the parties had to be objectively ascertained. He referred to Masters v Cameron (1954) 91 CLR 353, 362, and the Baulkham Hills Private Hospital Pty Ltd v GR Securities’ case (1986) 40 NSWLR 631, 634. He submitted that the GR Securities’ case was an example where the Court found a binding contract despite further matters remaining to be resolved between the parties. Likewise MacDonald v Australian Wool Innovation Ltd [2005] FCA 105, Thompson v White [2006] NSWCA 350 [99]-[100] and Ormwave Pty Ltd v Smith [2007] NSWCA 2010.
129 Mr Clarke submitted that it was proper to consider the parties’ post-contractual conduct. He referred to Gangemi v Osborne [2009] VSCA 297 at [23] per Nettle JA and Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 163-4 [25] and [26], per Heydon JA (as he then was).
130 Mr Clarke submitted that as at 12 July, the following matters had been agreed between the parties:
(i) the price;
(ii) the starting time (albeit the starting time was varied by delays such as those which regularly occur on building sites);
(iii) the construction period and therefore the conclusion date;
(iv) the payment terms (30 days from the end of the month), although the plaintiff asked to vary the timing of the first payment by bringing it forward);
(v) the methodology.
131 He referred to the email stating, “We accept your price for this project. Please proceed. Proceed with formwork, commencement date, etc”. The surrounding circumstances also pointed, he said, to a concluded agreement, including extensive discussion and debate over the means of saving costs and the provision of responsibility and the discussions on-site about methodology. He referred to the transcript at page 69. He noted that drawings had been made available to permit pricing. The time pressure and the proximity of the starting date were also relevant, he submitted.
132 As to post-contractual conduct, which Mr Clarke submitted supported the view that there was a concluded contract, he referred to the following:
(i) the arrangement by the plaintiff for formwork;
(ii) the arrangement by the plaintiff of steelwork with Smithweld;
(iii) the arrangement by the plaintiff of labour for 12 weeks/3 month period;
(iv) the time spent arranging for materials to be organised in readiness for transportation;
(v) the sending by the defendant of an email enclosing detailed reinforcement particulars to the plaintiff seeking the plaintiff’s “approval”;
(vi) the signing of the draft contract on 26 July 2010 (even though they were not exchanged and not countersigned by the CEO of the defendant). [This alleged consideration may be put to one side in light of the finding that I have already made.];
(vii) Peter Geaboc (according to Mr Baker) said, on 26 July 2010, that the plaintiff had a contract; that he accused Mr Baker of lacking ethics [Mr Baker gave evidence of these statements during the drive back to the Adelaide Airport on 26 July];
(viii) he (Mr Geaboc) saw a solicitor on 28 July 2010; that a solicitor wrote a letter of demand asserting the contract existed and that it had been breached (on 11 August 2010) and taking issue with the defendant’s email dated 2 August 2010;
(ix) on 29 July 2010 (only 3 days after the meeting of 26 July 2010), the plaintiff sent an email to David Baker setting out a claim for costs flowing from the alleged breach of the alleged contract, which is highly likely to have been sent at the request of David Baker;
(x) no response was sent in reply to the defendant’s letter of demand.
133 Mr Clarke said that insofar as the defendant had identified unresolved matters, such as:
(i) liquidated damages;
(ii) methodology;
(iii) timing of payments;
(iv) the starting date.
these matters did not, upon analysis, negate the existence of a contract.
134 Mr Clarke said the issue of liquidated damages was dealt with in the draft contract by being marked “N/A” and the email of 12 July 2010 dealt with issues of delays due to bad weather.
135 He said that the methodology was the subject of discussion between Mr Geaboc and Mr Tuokko. The issue of times for payment should not, even though the parties may not have agreed, be regarded as a `deal breaker’. The date for starting was established in the email of 12 July, and Mr Geaboc’s evidence that at the meeting the starting date was set at 9 August but, perhaps, 4 August, was insignificant.
136 Mr Clarke noted that Mr Baker met Mr Geaboc for the first time on 26 July. What caused matters to come undone was the last minute demand by Mr Baker for a discount.
137 Mr Clarke submitted that I should not find that there were significant unresolved issues because CATCON had asked A1 to proceed in its email of 12 July. There was no statement of concern by CATCON between 12 and 26 July. No CATCON officers kept any file notes, even though they all seem to have made notes.
138 Mr Clarke commented upon no evidence having been heard from Mr Berenson, Mr Damen or Mr McNee as to what happened at the relevant times and, in particular, at the meeting on 26 July 2010.
139 He submitted that concessions were made by Mr Tuokko.
140 Mr Elliott, on behalf of the defendant, submitted, first, that Mr Geaboc’s evidence should not be accepted where it conflicted with the evidence of CATCON witnesses. He referred to the issue of the Smithweld invoice and the cone or cylinder. He submitted that “the key is the key”.
141 He accepted that Mr Ben Geaboc should be regarded as a witness of truth. Mr Willoughby’s evidence, he said, was of “little moment”. He said, however, that Mr Willoughby was not an employee of A1 and the person that Mr Geaboc referred to as his boys, “Were not his employees at all, but a sub-contractor organisation with attendant additional risks as to safety compliance etc”. He said this organisation had lax safety standards. He referred to a photograph on one of A1’s previous jobs depicting Mr Willoughby and his men without fluorescent vests or hard hats as they spread concrete.
142 Mr King’s evidence, he submitted, should be accepted, as should Mr Tuokko’s, who now had a new life in Finland and therefore had no axe to grind.
143 As previously noted, Mr Elliott submitted that Mr Baker’s evidence should be accepted where it conflicted with Mr Geaboc’s.
144 According to Mr Elliott, the email of 12 July could not be an acceptance of an offer made by A1 because it was a counter offer. He said it modified provisions as to time, provisions as to extension of time, and deposit. The stipulation about bad weather was a new one. The time period was 12 weeks rather than three months (which would be 13 weeks), and the email specifically excluded the deposit of $130,000, which had been proposed by A1.
145 In any event, he submitted, there was no agreement between the parties as to all important terms. He said A1 had in mind multiple pours which would have led to construction joints in the tanks of 2.4 metres and 4.4 metres as a result of the use of its own formwork, whereas CATCON envisaged a single pour “that would have avoided the need for potentially weak construction joints in the walls, and consistent with the head contract requirement”. He said the parties were `like ships passing in the night’, rather than persons who had agreed upon the assumptions of a contract.
146 The A1 methodology with multiple pours would not have been in compliance with the minimum joints clause in the head contract and would never have been approved as these arrangements would have to be by the Superintendent’s representative.
147 He noted that rates for variations had been sought by CATCON but not provided by A1. There were no provisions as to retention. The timing of the first payment was under debate. Since there had been a number of revisions in the drawings, the cost of complying with change was self-evidently an issue but the schedule of rates was never sent. He said a typical retention percentage in a contract would be five per cent or $37,500. He noted that Mr Geaboc agreed that all contracts had retentions but that issue was never resolved.
148 A1 had stipulated for a deposit of $130,000 plus GST but the email from CATCON specifically provided no deposit. Again, the proposed early payment at the time of site establishment was asserted by Mr Geaboc and denied by Mr Tuokko and Mr Baker. That issue was left unresolved. The terms of the sub-contract document, which was specifically mentioned, were not properly resolved.
149 In those circumstances, Mr Elliott submitted that there was no intention on the part of the parties to enter into a contract. The terms of the deal would be in sub-contract. The claim made in this proceeding was for a contract for the entirety of the work, not merely some preliminary arrangement for preliminary work. He said the following were indicators of a lack of an intention to contract:
· very limited instruction to proceed;
· authority of Tuokko;
· Superintendent approval to sub-contract;
· InSkill registration;
· draft contract yet to come;
· meeting to be set up.
150 He said that all that A1 was requested to do was to manufacture and modify the formwork and to mobilise the site. He said:
“This very limited initial scope is quite different from the whole of envisaged sub-contract work. An intention to commit for a very limited scope is inconsistent with an intention to commit for the whole work.”
151 Mr Elliott said that CATCON did not disavow Mr Tuokko’s actions or submit that what he appeared to have done was invalid for lack of authority. The fact that the negotiations were between Mr Tuokko, an engineer (described in Mr Elliott’s submissions as a “mere engineer”), indicated that there was no intention to contract. He also noted that the head contract required the Superintendent, Mr Sinickas to approve the sub-contractor. Nothing along these lines had been done. Mr Elliott said, the plaintiff may have been unaware of this, since it had not bothered to enquire about the head contract to him. Objectively, this was a pre-requisite for an intention to sub-contract. There was a requirement in the head contract, Clause 9.2 that sub-contractors register with “InSkill SA”, a training organisation. This had not been dealt with at all. He also noted that as at 12 July there was a draft contract to come and a meeting to be set up relative to payment terms.
152 He said, “Payment terms are not by any means de minimis in the construction industry”.
153 Mr Elliott quoted a lengthy slab from Keating on Building Contracts, 9th edition, a CD edition, making the point that a response to an offer which does not agree with it on all points must be regarded as a counter offer rather than an acceptance. Whilst agreement on every point is not necessary for concluded contract, the Editors stated, “What is required is that when objectively viewed it can be said that the parties have undoubtedly reached a point whereby a binding contract has been concluded.
154 Next, he referred to the judgment of White J in the Supreme Court of South Australia in Built Environs Pty Ltd v SaundersInternational Ltd [2012] SASC 111, where His Honour expressed some scepticism as to the so-called fourth category of the Masters v Cameron analysis. At paragraph [129], in declining to make a finding of an enforceable contract, His Honour, speaking of the matter before him, said:
“It did not include agreement on the many terms and conditions of contract to be expected for a project of this scale. An agreement on some terms is not the same thing as reaching a concluded agreement. As has been often observed, it is one thing for two parties to settle the terms, or some of the terms, of agreement: it is quite another to make an agreement.”
155 At [137], His Honour found that the reservation by one of the parties of an intention to propose terms and conditions which had never previously been suggested told against their being a concluded agreement. Insofar as that party had forwarded proposed terms and conditions, His Honour found this to be an acknowledgment of the lack of a binding agreement.
156 Mr Elliott submitted that the existence of a so-called fourth category in the Masters v Cameron analysis should not be a licence to disregard the fundamental requirement of all but the third class that there be an actual agreement between the parties to be bound. He referred to the remarks of White J to similar effect at [121] in the Built Environs’ case.
157 Next, he referred to a decision of the Full Federal Court in Factory 5 v State of Victoria [2012] FCAFC 150 at [58]-[66], where the Court stressed that a court would not enforce a mere agreement to agree.
158 Mr Elliott submitted that no contract had been signed on 26 July. The finding that I have already made indicates I accept this.
159 Mr Elliott submitted that Mr Baker’s evidence in re-examination should be given careful attention. He noted that in a construction industry negotiation process, it was proper to take back some of what had already been agreed, so where circumstances change, a previously agreed price could be revisited. Nothing was set in concrete until the entire aspect of a contract was settled and agreed. Therefore, to the extent that Mr Baker sought a revision in price, there was, “nothing unusual or reprehensible” about it.
160 Mr Elliott said that Mr Clarke had not embraced an analysis that the email of 12 July 2010 was a counter offer which was accepted by conduct. In any event, if there had been an acceptance by conduct, it had not been communicated to A1.
Conclusions on Contract Claim
161 Before reaching a conclusion on these difficult matters, it is appropriate to say something further about what transpired at the meeting on 26 July 2010 and to make some findings of fact in that respect. It is now time to say something as to the evidence of Mr Baker and why I have some reservations about it, as I indicated earlier in this Judgment.
162 Mr Baker stressed that the meeting of 26 July was the first opportunity that he had to come to grips with A1 and make a critical assessment of Mr Geaboc and his company’s operations. He said he liked to do these things face-to-face and this was his opportunity to do so. As he described it, he probed Mr Geaboc on a variety of matters and the more he probed, the more cause for unease he had. He said he accepted Mr Geaboc’s company as one well-experienced in the construction of concrete tanks. In this instance, however, he feared that more exacting standards may have to be applied. He expressed concerns about construction joints, which had been spoken of on a number of occasions, and the fact that A1 was going to operate with sub-contractor workforce rather than with its own employees.
163 He referred to the terms of the head contract and the necessity to obtain consent to the sub-contract and any divergence from what was shown on the head contract plans from the contract Superintendent. He said that CATCON’s joint venturer, Leighton, had, at that time, been involved in some industrial fatalities and was, as a result, in a mode of zero tolerance from any departure from the utmost rigour in occupational health and safety issues.
164 So, for instance, if A1 envisaged that it would move its own individual pieces of formwork, thereby relieving CATCON of the trouble and expense of providing cranage, Leighton might object to this process if the formwork pieces were heavier than 20 kilograms.
165 Having mentioned these multitudes of concerns which were afflicting him in the course of the meeting, Mr Baker did not, as I understood his evidence, appear to give much away by a “blow by blow” account. One could easily envisage a situation where Mr Baker, afflicted by all these concerns, simply sat in the meeting feeling increasingly uncomfortable with a proposal for the actuality of CATCON using A1 as its sub-contractor without saying much to Mr Geaboc as to his concerns.
166 I put the following proposition to Mr Baker (T461-62):
“But it wasn’t the situation where you said look, we obviously haven’t been on the same wavelength, I now realise that your company doesn’t have the resources to do the job that we want, I’m terribly sorry about that but look, I can’t be satisfied that I can place my company’s reliance in your company so we should just wrap all this up and thank you very much for coming over [to] Adelaide and we’ll consider any application that you might have for expenses. That would seem to be the logical close to the meeting, having regard to what you say was playing on your mind but you did not actually say that. I’m wondering why you didn’t?”
167 He replied, inter alia:
“I just wanted to go and explore in my own mind now [scil how] I understood more of what A1’s sort of submission was about, what it did and didn’t include and what I ultimately would have to look at. It was going to take a little bit of work in terms of sitting down and discussing them and like I say, I use a whiteboard a lot.”
168 At page 463, in answer to Mr Clarke putting to Mr Baker that he would not have the level of comfort that he wanted to, he replied at lines 8-12:
“Well, no. It was a real monumental shift in the whole thing. On 26 July it was really a monumental shift. Like I explained, there were so many aspects that just simply weren’t, you know, detailed, that I could just see no gap in terms of the cost of $740,000.”
169 He said on a number of occasions, “The devil is in the detail”.
170 At pages 460-461 of the transcript, Mr Clarke put to him that he saw the allegedly agreed price as just a bargaining stage with CATCON having every right to keep going. Mr Baker said:
“No, that’s not correct. If Mr Geaboc had have come to that meeting and been able to demonstrate to me clearly that I was going to end up a safe, quality, timely, no issue with my head contract (sic), from every other aspect of the job, he wasn’t going to be using sub-contractors, he was going to be using his own people and all the rest of it, I would have walked away from that project – that particular meeting, like I do hundreds of time in my working life, that I’ve got a contractor there that is going to be able to meet the requirements of everything we do to deliver the works in question.”
171 I asked, “So the matter would have proceeded?” At lines 7 and 8 of page 461 he said, “Quite possibly”. At page 469 I asked Mr Baker, if Mr Geaboc had agreed to reduce the price by $60,000, would he have simply embraced the proposed sub-contract arrangements? He said, at line 31 on page 469 to page 470:
“Your Honour, to be – I don’t know which way it would have necessary folded. If Mr Geaboc in that instance hypothetically had have said righty-o, we’ll give you a credit, I would still have some concerns, most definitely I would still have some concerns, and I don’t think it would be reasonable for me, within the moment of that meeting or certainly within the car that I’ve just made a decision. I think it needs a little bit more consideration. The formula that we came to of coming up with $60,000 was on the back of a shoestring [presumably he meant the back of an envelope], it just wasn’t, it wasn’t anything formal, it was just a discussion.”
172 At line 17, he said he probably still would not have embraced the transaction, even with the $60,000 cut in price.
173 At page 477, I asked how matters were left when Mr Geaboc boarded his flight back to Melbourne. Mr Baker replied, “I can’t remember what was actually discussed and agreed at the end if anything other than I knew I had to go away and start working through my own mind what was…”. I put to him that he meant that he had to come to grips with matters to a greater degree than he had already.
174 Mr Clarke, at page 478, asked about the telephone conversation Mr Geaboc said occurred on 28 July. Mr Baker said that that conversation did not occur, “Not that I recall” (T478, L3). “I guess I’d have to say it definitely didn’t happen, I don’t recall it”. (L13 & 14)
175 Mr Geaboc’s account of the meeting on 26 July was, in comparison to Mr Baker’s, relatively straightforward. He said that matters were generally agreed, and the only uncertainty was created by Mr Baker’s request or demand for a $60,000 cut in A1’s price made during the trip back to the airport. This was the note on which the meeting closed when he boarded his aircraft to return to Melbourne. Mr Baker was waiting for a response to his request or demand for a cut in price. I have already explained why I cannot uncritically accept the evidence of Mr Geaboc. The findings that I have made on certain contentious matters explain why this should be. Nevertheless, as to the upshot of the meeting I find his account intelligible and plausible, in contrast to the account given by Mr Baker, which is neither.
176 At the beginning of his evidence Mr Baker recited his career in the construction industry. He presented himself, and I accept accurately, as a seasoned businessman and operator in the construction industry with extensive experience throughout Australia and internationally. This persona simply does not accord with the account of his performance at the meeting on 26 July. On Mr Baker’s account he approached the entire exercise in an angst-ridden manner, prey to a host of concerns and worries. The meeting closed on an entirely ambiguous note, with no clarity as to what was to happen next or in whose court the ball was; that is, who had the responsibility of taking the next step. A1 had neither been confirmed as sub-contractor nor rebuffed - all this in the face of a looming deadline where it was essential that immediate and urgent action be taken.
177 Mr Baker could not tell me whether, if Mr Geaboc had agreed to the $60,000 cut which he requested or demanded, the sub-contract would have been confirmed for A1. Again, hypothetically, even if every box had been ticked by A1, and every one of the multitude of concerns and uncertainties arising out of “the devil” which, as Mr Baker said on a number of occasions, “is in the detail”, he could not tell me that the contract would certainly have been awarded to A1. Nor could Mr Baker make the decision on the spot that A1 simply did not measure up, based on all of the concerns that he had. Precisely what further deliberations or consultations he required before announcing this to Mr Geaboc was not made clear. It is one thing, as Mr Baker explained, for him to require the advantage of a face-to-face meeting with the ability to work through issues on a whiteboard and so on before he could effectively come to grips with important issues. It is another thing, altogether, to say that, even after this process was completed, this seasoned businessman and experienced operator in the construction industry could not simply make a decision there and then.
178 Accordingly, despite the misgivings that I have as to the reliability of his evidence generally, I prefer Mr Geaboc’s account as to the upshot of the meeting of 26 July to the one given by Mr Baker.
179 Accepting that success for the plaintiff in its contractual claim depends on showing that the parties had reached a firm understanding and intended to be immediately bound, I turn to consider the various matters which were urged against such a conclusion by Mr Elliott on behalf of CATCON.
180 Mr Elliott, both in submissions and cross-examination, laid significant emphasis on the issue of construction joints. The plans under the head contract showed a construction joint at the base of the walls of each of the two tanks at their intersection with the floor. They also depicted two construction joints in the channel running around the inside rim of the tanks near their top. Mr Elliott drew attention to a provision in the head contract which obliged the head contractor to minimise construction joints. Mr Geaboc’s evidence was that his technique, which included shorter formwork than the PERI system and therefore required multiple pours, would entail an extra construction joint at the 2.2 metre level in the tank wall, and there was also a suggestion that there might be yet a further construction joint at the 4.4 metre level, though the evidence left me unclear as to whether this was necessary or not. Mr Geaboc said that the technique he was going to use for the channel at the top of the tank with the use of ferrules, would dispense with the two construction joints at the channel level. In fact, when CATCON constructed the tanks, itself, this was the technique that it used. Mr Geaboc contended, and Mr Clarke on behalf of A1 submitted, that what A1 wished to do was in conformity with the head contract for this region. Mr Elliott stressed that there would be greater pressure and therefore a greater risk of a leak at one or more mid-level construction joints than would be encountered at the channel level, which is far higher up and subject to much lesser fluid pressure.
181 There are a number of things that must be said. First, whilst Mr Baker said that Mr Tuokko, perhaps even after the meeting on 26 July, was not fully acquainted with the techniques to be used by A1 in construction, I believe that the discussions between Mr Tuokko and Mr Geaboc must have made clear to Mr Tuokko that there would be multiple pours and at least one intermediate construction joint. Mr Tuokko said the issue of construction joints was not agreed at the meeting on 26 July; however, it is wrong to put too much emphasis upon it, because according to Mr Baker’s evidence in cross-examination, the issue of construction joints was “not a deal breaker”. (T473, L9-14) In those circumstances, even if the issue of construction joints remained a matter of debate at the meeting, that debate was not of sufficient significance to prevent the parties having reached a contractual commitment in accordance with either the first or the fourth category of Masters v Cameron if other important matters were resolved.
182 Next, it is necessary to say something as to the significance of the head contract, generally.
183 The evidence does not disclose that the head contract was shown to Mr Geaboc at all. Mr Elliott cross-examined him on the provisions of the head contract, including the provision relative to construction joints. He did so on the basis of the draft sub-contract agreement which was forwarded on 23 June. On the findings that I have made, this document was not executed by the parties and it was forwarded after the crucial email of 12 July. It should not be assumed, therefore, that it has any contractual effect between these parties, even if there is a finding that there was a contract between the parties for the construction of the clarifier tanks. Mr Baker said, in his opinion, it was incumbent on Mr Geaboc to familiarise himself with the head contract. Given that this was a contract to which A1 was not party, this seems more than a little unreasonable. The contracting party under the head contract relevantly, for the purposes of this proceeding, was CATCON. It would be reasonable for Mr Geaboc to take the view that it was for CATCON to ensure that any arrangements which it entered into with A1 were in conformity with the head contract. Again, it could not be assumed, for instance, that Mr Geaboc or A1 should directly approach the Superintendent under the head contract or the Superintendent’s Representative. From both A1’s and CATCON’s standpoints, the proper protocol would be for all of these matters to be controlled by CATCON. The effect, then, would appear to be that, if CATCON committed itself to a sub-contract with A1 which could not be conformed to the head contract for whatever reason – for instance, lack of consent from the Superintendent or the Superintendent’s representative or some disconformity between the terms of the sub-contract and the head contract – then this would be CATCON’s risk. As between CATCON and A1, if there were a sub-contract in force to show that it was inconsistent with the head contract, in itself and without more would not demonstrate either that the whole sub-contract was invalid or non-operative, or that any clause in it was invalid or inoperative. Rather, it would show that CATCON had placed itself in a position of embarrassment owing competing contractual duties, both of which could not be performed. CATCON would therefore be in breach of contract either under the head contract or under the sub-contract or perhaps both.
184 Turning, then, to the matters of uncertainty, which Mr Elliott submitted necessarily excluded the existence of an enforceable sub-contract, whilst it would be highly desirable for there to be a schedule of rates included in the sub-contract arrangement, I am unaware of any rule of law that a construction contract with a lump sum for the completion of the works would be invalid or ineffective merely because it did not include a schedule of rates for variations.
185 Retentions are important. As Mr Elliott, however, was disposed to concede, there are industry-wide practices and industry customs. Or the need to give business efficacy to a sub-contract arrangement could supply that deficiency.
186 As to the timing of the first payment, if a sub-contract had proceeded to performance, it might be a matter of dispute as to precisely what the parties did or did not agree. The competing positions would be that nothing particular was agreed as to the timing of the first payment and the standard industry practice of payment on 30 day terms after a monthly invoice applied, or that, as Mr Geaboc contended, CATCON had agreed to the early payment at the time of site establishment. This would be a matter of making a determination as to what the parties did or did not agree. In the events that have occurred, even if a contract was brought into existence, events have overtaken this issue and so it is unnecessary to make a finding; but the mere fact that there is dispute as to this matter does not in itself exclude the possibility of there being a sub-contract.
187 As to the sub-contract conditions themselves, the mere fact that the parties envisaged that there would be a detailed contract executed in due course, or in the near future, does not, as the classic Masters v Cameron analysis demonstrates, exclude the possibility of the parties being immediately committed to an agreement.
188 I turn now to the various issues which Mr Elliott submitted indicated that there was no intention on the part of A1 and CATCON to commit to a contractual arrangement on or about 12 July 2010. First, he said that the only direction to proceed was as to the construction of formwork and mobilisation. On the other hand, there was a stipulated commencement date within 14 days. Given that A1 is located in a different State, to meet this commencement date would have required immediate action by A1. The evidence of Mr Geaboc and Mr Willoughby was that Mr Geaboc took that action by approaching Mr Willoughby to engage his crew for the work. Mr Elliott’s submission was that all that was suggested was that there should be appropriation of formwork and some preliminary readiness. It is unrealistic, in my view, to think that formwork could be prepared and a crew put on-site to begin on some entirely preliminary basis. The only logic of stipulating a commencement date of 26 July was that it was envisaged that on that day A1 would be on-site with its labour and materials ready to commence. Why would they be there, other than to execute the works in their totality?
189 Mr Elliott also drew attention to the lack of authority of Mr Tuokko. Mr Tuokko was, in 2010, an engineer in the employ of CATCON. He had been tasked with the role of engaging a sub-contractor by Mr Baker, as Mr Baker himself conceded. Mr Tuokko was not a mere day labourer on-site. He was a person of some seniority in the CATCON organisation. It is not self-evident that he was of too junior a standing to be involved in contractual arrangements. Mr Elliott also drew attention to the need for a Superintendent’s approval under the head contract, in accordance with the views I have expressed already. Realistically, CATCON must have taken upon itself to obtain Superintendent approval. It could, as a matter of contract between it and A1, commit to A1 taking the risk as to whether it would ultimately receive Superintendent approval or not.
190 The head contract provided for registration of sub-contractors with InSkill. This would require payment of a subscription fee to this South Australian institution. It was not suggested that there would be anything complex involved, other than the outlay of the subscription. I have already explained why I do not believe that provisions in the head contract were automatically binding as between CATCON and A1. At any rate, I think the InSkill registration could easily be regarded as a detail to be wrapped up of very limited significance in comparison to issues such as obtaining formwork on time, being on-site on time and agreeing a price. Finally, Mr Elliott referred to the holding of the meeting which occurred, as it would seem, later than was contemplated at the time of the email of 12 July, on 26 July which was initially contemplated as the time for commencement of work on-site. He submitted that the holding of this meeting was for the purpose of determining vital matters which remained undetermined and, therefore, in their undetermined state precluded the formation of a contract. The purpose of the meeting was to discuss payment terms. The logic of this would seem to be that the default position was the industry norm and the meeting might come up with some favourable adjustment of that for A1. Given that there was a default position available, namely the industry norm, I do not believe the fact that this meeting was to be held precludes a conclusion that there was a final contract agreed.
191 I deal finally with the contention by Mr Elliott that the email of 12 July 2010 could not constitute an acceptance of an offer by A1 because it stipulated different terms in some respects; for instance, with the dispensation of the deposit of $130,000 plus GST, which had been sought by A1. The result, it would seem, is that the email in terms of offer and acceptance analysis must be regarded as a counter offer rather than an acceptance. I agree with Mr Elliott’s submission.
192 He moved from this proposition to the further proposition that there was nothing which could constitute an acceptance of this counter offer by A1 or, at any rate, no communication of any acceptance. In a reply submission, Mr Clarke contended that, if the email of 12 July were to be regarded as a counter offer, it should be regarded as having been accepted by A1’s conduct. A1 fell in with the proposal put by CATCON in the 12 July email. Mr Geaboc made arrangements with Mr Tuokko to attend the meeting to discuss payment terms in the evidence of Mr Tuokko. (T202, L1–2) Even in the absence of direct evidence to this effect, the occurrence of the on-site meeting on 26 July would lead one to infer that there had been a communication between Mr Geaboc and Mr Tuokko for the parties to have met on-site, as they did. In my view, the steps which Mr Geaboc took in preparing formwork, approaching Smithweld and so forth, and in arranging the meeting, constituted acceptance of the offer. The communication of acceptance was entailed in making the appointment for the on-site meeting.
193 In my view, what has occurred here should be regarded as an enforceable contract falling within the fourth Masters v Cameron category. The key features of the arrangement were to be found in the email of 12 July, including the work to be done, the price, the commencement date and so on. Mr Elliott drew attention to the contrast between three months to do the work, which was the period mentioned by A1, and the 12 weeks stipulated by CATCON. This is a distinction without a difference. Rules of Court and interpretation legislation customarily state that a month means a calendar month, but in normal speech a month can also mean four weeks. Three four-week or lunar months equals 12 weeks. In attending the meeting on-site and preparing to perform, if there were a distinction between three months and 12 weeks, A1 was accepting the counter offer of a 12 week construction period.
194 The need to take urgent action to meet the very tight deadlines is the actual context in which all of these events took place. That factual context leads me to the conclusion that, whilst in other circumstances the parties may have been settling in for an extended period of negotiation and discussion in the context of which they were then operating, it was necessary to make an immediate commitment, subject, of course, to the intention to embody it in a formal sub-contract document, including perhaps additional and different terms if they were negotiated.
195 In cross-examination and in final submissions, Mr Elliott made reference to arrangements which he described as “letters of intent”. These were interim arrangements whereby parties agreed that a contractor would take preliminary and preparatory action relative to a principal contract in the hope and expectation that the principal contract would be awarded to it but without a final commitment, with the assurance, however, that it would be compensated and remunerated for the preliminary performance and expenses incurred. Mr Elliott submitted that a claim along these lines would have been an appropriate one for A1 to pursue. Instead, he described A1 pejoratively as having “gone for gold”, seeking an award of damages relative to the loss of the entire principal contract.
196 I agree there would have been much to be said commercially for an arrangement whereby a preliminary and interim arrangement were reached, with A1 acting before receiving assurance of the principal contract but with a promise of recoupment for expense and remuneration for the interim steps taken. This was not, however, the arrangement which, as I construe the evidence and the documents, the parties entered into. The language of the “letter of intent” type of arrangement described by Mr Elliott simply was not employed. CATCON was looking at a very short deadline and dispensed with this type of elaboration. A1 was, as far as I can see, happy enough to go forward without the complication of some sort of preliminary “letter of intent”- type arrangement, as was described by Mr Elliott. To use the sort of language employed by the High Court of Australia in these sorts of circumstances, the “letter of intent” arrangement and structure finds no foothold in the evidence and documents in this transaction.
197 I find, therefore, that the parties did enter into the contract alleged by A1. It must necessarily follow that the actions of CATCON constituted a repudiation of that contract, which repudiation was accepted by A1. A1 is entitled to damages for repudiation to be assessed.
Restitutionary claim
198 The restitutionary claim included in the final version of A1’s Statement of Claim arises only if the parties did not enter into an enforceable contract, as alleged by A1 in the principal part of its claim. The existence of such a contract, which I have found was made, necessarily excludes the law of restitution from involvement in working out the parties’ entitlements in the events that have occurred. Had there been a trial of all issues, including damages, it might be appropriate for me to make some findings as to the restitutionary elements, lest my conclusion on the contractual claim were set aside if the matter were to go further. Given that any findings that I would make as to a restitutionary claim would focus on the issue of damages which were not the subject of the trial that has been completed, I think it inappropriate for me to say anything further as to the restitutionary claim.
Claim for damages for misleading and deceptive conduct
199 The claim for damages for misleading and deceptive conduct was a second fall-back by A1. It necessarily required a finding that A1 was led to believe it had a contract, but that no such contract in fact came into existence. The findings that I have already made negate the basis for the claim for misleading and deceptive conduct. Moreover, the damages to which a party may be entitled for misleading and deceptive conduct are radically different from those which a party might recover for breach of contract. A large number of decisions of the High Court of Australia indicate that the difference between the two may be difficult to draw and may not be regarded at this stage as settled law. Again, since this was a trial not including the issue of damages, the appropriate course is to say no more about the misleading and deceptive conduct claim.
Disposition
200 There should be a judgment for the plaintiff for damages to be assessed. The question of damages should be reserved to enable the parties to make submissions or conduct a further trial.
201 It will be necessary to hear the parties as to whether, in the circumstances, it is appropriate to appoint a trial to determine the damages.
5
26
0