Abigroup Contractors Pty Ltd v ABB Service Pty Ltd

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NEW SOUTH WALES COURT OF APPEAL

CITATION:      Abigroup Contractors Pty Ltd v ABB Service Pty Ltd (formerly ABB Engineering Construction Pty Ltd) [2004]  NSWCA 181

FILE NUMBER(S):
CA  40970/03

HEARING DATE(S):               10,11,12,13 May 2004

JUDGMENT DATE: 15/06/2004

PARTIES:
Abigroup Contractors Pty Ltd - Appellant
ABB Service Pty Ltd (formerly ABB Engineering Construction Pty Ltd) - Respondent

JUDGMENT OF:       Giles JA Tobias JA Cripps AJA   

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):          ED 55033/98

LOWER COURT JUDICIAL OFFICER:     Einstein J

COUNSEL:
R Macfarlan QC & P Durack - Appellant
B Collins QC & M Orlov - Respondent

SOLICITORS:
Clayton Utz - Appellant
Abbott Tout - Respondent

CATCHWORDS:
CONTRACT - tender for construction works - letter of intent issued - formal contract to be entered into - letter of intent envisaged commencement of work prior to formal contract - work commenced and carried on while negotiations continued - whether on construction of letter of intent and with regard to the parties' prior and subsequent conduct a fourth class Masters v Cameron contract had come into existence upon commencement of work - whether party's case in a reference had included that the contract had come into existence - PROCEDURE - contractual claims abandoned in submissions in favour of quantum meruit claim - abandonment conditional on leave to amend - leave opposed - in the event, not necessary to decide question of leave or quantum meruit claim - whether judgment should have been given on contractual claims against abandoning party - COSTS - whether evidence relevant to abandoned claims remained relevant for other purposes - whether error in failing to give other party a costs benefit referable to the abandonment of claims.  D.

LEGISLATION CITED:

DECISION:
In the proceedings below, dismiss the cross-claim.  In the appeal, appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA  40970/03
ED  55033/98

GILES JA
TOBIAS JA
CRIPPS AJA

Tuesday 15 June 2004

ABIGROUP CONTRACTORS PTY LTD v ABB SERVICES PTY LTD

Judgment

  1. GILES JA:  Judgment was given for the respondent for $4,773,962.47 on a quantum meruit claim and the appellant was ordered to pay the respondent’s costs.  The first issue in the appeal was whether a contract between the appellant and the respondent had come into existence;  a sub-issue was whether it was open to the appellant to contend for the particular contract on which it relied.  The second issue was whether the appellant was entitled to judgment on other claims which it said the respondent had abandoned.  The third issue was whether the order for costs should have been moderated to reflect that abandonment. 

    Background

  2. The appellant, a substantial construction company, was engaged to design and construct the Multi Use Arena (“the MUA”) within the Sydney Olympic Park precinct at Homebush Bay in Sydney.  The MUA was to be the major indoor venue used for the Sydney 2000 Olympic Games, and is now known as the Superdome.  It is a bowl shaped concrete…

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Details
Case
[2004] NSWCA 181
Decision Date

CaseChat Overview and Summary

Abigroup Contractors Pty Ltd (the appellant) and ABB Service Pty Ltd (the respondent) were involved in a dispute arising from a construction project. The appellant issued a letter of intent to the respondent, anticipating the commencement of work before a formal contract was finalised. The respondent commenced work while negotiations continued. The core of the dispute concerned whether a binding contract, specifically a "fourth class" Masters v Cameron contract, had come into existence upon the commencement of work.

The court was required to determine whether, on the construction of the letter of intent and considering the parties' conduct, a contract had been formed at the time work commenced. A further issue arose regarding the appellant's case in a reference, specifically whether it had included the existence of such a contract. The appellant had, in submissions, abandoned contractual claims in favour of a quantum meruit claim, but this abandonment was conditional on leave to amend. The court also considered whether judgment should have been given on the contractual claims against the abandoning party and whether the evidence relevant to the abandoned claims remained relevant for other purposes, impacting costs.

The court's reasoning focused on the appellant's pleadings and submissions concerning the formation of a contract. The appellant's initial case alleged that the letter of intent was an offer accepted by the commencement of work. However, the referee noted that the appellant's submissions evolved, with the final position appearing to rely on the letter of intent as formalising an agreement already reached, and commencement of work evincing acceptance of terms of a contract already made, rather than concluding an offer and acceptance process. This shift meant the clause stating commencement was deemed acceptance no longer functioned to conclude a contract but rather as evidence of acceptance of an existing agreement.

The appeal was dismissed with costs. The cross-claim in the proceedings below was also dismissed.

Orders

Orders of the court

In the proceedings below, dismiss the cross-claim. In the appeal, appeal dismissed with costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

It submitted that the contract was of the kind described in Sinclair Scott & Co v Naughton (1929) 43 CLR 310 at 317 as -“ … one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”`In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 and many later cases this has been called a fourth class contract, additional to the three classes described in Masters v Cameron (1954) 91 CLR 355 at 361.The decisions of the referee and the judge The appellant’s pleading of a commencement contract, in para 5 of its defence and para CIAA of its cross-claim, alleged that the letter of intent was an offer to the respondent to carry out the roof works “on the terms and conditions of [the letter of intent]” and that the respondent accepted the offer by commencing the works. No further particulars were given of commencement of the works or of the terms of the contract. The referee doubted whether in the end the appellant put a case of a commencement contract. He noted that the appellant’s submissions in chief had included that the letter of intent “constituted an offer to ABB to carry out the roof works on the terms and conditions contained in that letter which ABB accepted by commencing the roof works”, but said that this was not further explained. He said that the submissions then focussed on acceptance, and that the appellant had not “articulated the way in which the letter of intent was capable of constituting an offer which could be accepted by ABB by commencing work” or “articulated what were the terms of the agreement said thus to have been made, other than to point in the pleadings to the terms and conditions of the letter and in the submissions to the terms discussed at the meeting”. Referring to the appellant’s submissions in reply, the referee said that they “intermixed” a contract alleged to have come into existence on 19 February 1998 with a commencement contract, and -“In fact, Abigroup’s reply to reply submissions seem to abandon the case that the letter of intent was an offer which was accepted by commencement. In paragraphs 73-77 of Abigroup’s reply to reply submissions, the letter of intent is relied upon as something provided to formalise and reflect an agreement reached between the parties set out in the minutes. What seems to have happened is that the clause -‘Commencement by the subcontractor is deemed to be full acceptance of the terms of this subcontract agreement and confirms the existence of a subcontract between our two companies.’no longer is relied upon as making commencement the conclusion of an offer and acceptance process, which concludes a contract. Rather, commencement evinces full acceptance of terms of a contract already made, ie evidentiary in effect. This does not seem properly to reflect the use of the word ‘deemed’ but in any event it seems to be Abigroup’s the [sic] final case.”

Ratio Decidendi

Legal Principle Established

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