BP Australia Ltd v Ampol Limited
[1991] TASSC 160
•26 August 1991
Serial No B46/1991
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION: BP Australia Ltd v Ampol Limited [1991] TASSC 160; B46/1991
PARTIES: BP AUSTRALIA LTD
v
AMPOL LIMITED
FILE NO/S: 259/1989
DELIVERED ON: 26 August 1991
JUDGMENT OF: Crawford J
Judgment Number: B46/1991
Number of paragraphs: 29
Serial No B46/1991
List "B"
File No 259/1989
BP AUSTRALIA LIMITED v AMPOL LIMITED
REASONS FOR JUDGMENT CRAWFORD J
26 August 1991
The plaintiff sues the defendant for $14,147.80 for the price of four underground petrol tanks which were at a service station at Brighton. The defendant maintains that it did not enter into a contract to purchase the tanks.
Mr and Mrs D W O'Brien were the proprietors of the BP Service Station at Brighton. The plaintiff supplied petrol to them from 1984 until 1987. They purchased three underground tanks, pumps and associated equipment from the previous owner but in 1985 sold them to the plaintiff for $12,000. In 1986 the plaintiff installed a new 12,000 litre tank and replaced all pipework to the older tanks. On 8 July 1986 the O'Briens entered into a written contract with the plaintiff whereby they took the tanks and pumps on loan and agreed not to use them for the storage and dispensing of petroleum products other than those marketed by the plaintiff. The agreement was terminable on one month's notice by either party whereupon the plaintiff was entitled to remove the items from the premises.
In about September 1987 the O'Briens ceased obtaining supplies of petroleum products from the plaintiff and obtained them instead from the defendant. Mr O'Brien informed the defendant that the plaintiff owned the tanks and pumps. The defendant arranged to replace the plaintiff's pumps with its own but the four tanks remained. Mr O'Brien's recollection is that he told the defendant's representative, Mr Cameron, that the plaintiff wanted payment for the tanks and he left the matter for the defendant to arrange. He said that about a year later he and his wife sold the freehold of the service station site and vacated possession.
Mr R A Street was the territory manager for the plaintiff. The service station was within his area of responsibility. When the O'Briens decided to change to the defendant for supplies he said his company wanted to be paid for the tanks and associated pipework if it was not to remove them. On 28 September 1987 the plaintiff sent a letter to the defendant's Tasmanian sales manager, Mr E H Cameron, "offering the four Underground Storage Tanks for a sale price of $21,099.80" and requesting payment within 14 days of receipt of the letter. A debit note was also sent to the defendant and it contained a breakdown of the price sought as follows:
"1 X TYPE 25 UG TANK 3347 80
Installation & Pipework 8800 00
1 X TYPE 25 and
2 x TYPE 10 UG TANKS 4000 00
Installation & Pipework 4952 00
21099 80"
Mr Cameron replied on behalf of the defendant by letter dated 12 October 1987 saying:
"We accept the price quoted for 1 x Type 25 underground tank ($3347.80) together with associated installation and pipework cost ($8800.00). However, we have some difficulty in reconciling the sale price of the 1 x Type 25 and 2 x Type 10 tanks ($4000.00) and installation and pipework ($4952.00). It is our understanding that these three tanks were purchased by BP in situ from Mr O'Brien for the sum of $2000.00.
We would appreciate it if you could re–check your calculations and substantiate the cost related to these three tanks so that we may resolve this matter as soon as possible."
The plaintiff replied by letter dated 22 October 1987 in the following terms:
"We note that you dispute our sale price for the second Type 25 tank and the two Type 10 tanks, as well as disputing our installation and pipework calculations.
We believe that your $2,000.00 figure for the three tanks is the result of a misunderstanding of the circumstances under which the tanks were sold to BP. Originally Mr O'Brien offered the four pumps on site to BP for $10,000.00. However, BP felt that this figure was more than the pumps were actually worth and when Mr O'Brien increased his price to $12,000.00, and included the three underground tanks as part of the offer, BP saw this as a justifiable figure for both pumps and tanks. This therefore explains our current price of $4,000.00.
The figure for the cost of installation and pipework is the actual cost of installation and pipework BP incurred during a recent replacement of tank and pipework at this site.
We trust that the above substantiates our costs and will await your remittance of $21,099.80 for the above sale."
The defendant counter–offered by letter dated 9 November 1987 in the following terms:
"We accept the price quoted for the Type 25 tank ($3347.80) together with the associated installation costs ($8800.00). In addition, we are prepared to pay the sum of two thousand dollars ($2000.00) for the three tanks purchased from Mr O'Brien.
However, we do not accept the charge for installation and pipework in respect of these old tanks ($4952.00) which we would regard as routine R & M expenditure.
We therefore intend to raise a cheque in sum of $14,147.80 in final settlement of this claim."
The cheque for $14,147.80 was never raised. Some of what happened thereafter is in dispute. Mr Street's evidence was that soon after he telephoned Mr Cameron and in a brief conversation told him that he thought Mr Cameron was being unreasonable, but rather than drag the matter on the plaintiff would reluctantly accept the offer of $14,147.80. Mr Cameron responded that he would get the necessary paperwork organised and forward a cheque. Nothing else was said. Mr Street's evidence was that he told Mr Lumb, the plaintiff's Tasmanian manager, and Mr Read, the plaintiff's administration manager in Hobart. He said that in April or May 1988 he asked Mr Read whether the cheque had arrived, which it had not.
It is an admitted fact that a letter dated 18 May 1988 was written by Rowena Schmidt of the plaintiff's Melbourne office. It was addressed to the defendant but the defendant denies receiving it. I will return to this aspect later. The letter was in the following terms:
"I refer to your letter of 9th November 1987 (copy attached) in which you state your intention to raise a cheque for $14,147.80 in settlement of BP's claim for equipment.
BP is prepared to accept this amount as final settlement for payment for the equipment and asks that the cheque be forwarded to BP within 21 days from the date of this letter.
Please mark all correspondence to:
Rowena Schmidt
BP Australia Ltd
31–33 Albert Road
SOUTH MELBOURNE VIC 3205
Your earliest attention to this matter would be appreciated.
Yours faithfully
(R Schmidt)
Retail Development Assistant
Retail – Vic/Tas/SA"
I find significance in the fact that the letter made no reference to the claimed oral acceptance of the offer, but itself purported to accept the amount of $14,147.80 proposed in the defendant's letter of 9 November.
There were no further communications between the parties until a letter was sent by the plaintiff's Tasmanian manager, Mr Read, to the defendant on about 7 October 1988 as follows:
"In previous correspondence you advised, and we accepted your commitment to pay us an amount of $14,147.80 in full settlement for the purchase of tanks at the above site. Our records indicate that we have not received your cheque, and if this is so we ask that you forward your payment within 14 days from the date of this letter.
If you have sent us your cheque, we would appreciate details to allow us to make it through our system. If payment has not been made we ask that you address it as a matter of urgency to:
Rowena Schmidt
BP Australia Ltd
31–33 Albert Road
SOUTH MELBOURNE VIC 3205
Rowena Schmidt
VICTORIA"
Mr Cameron replied for the defendant on 7 November 1988. After referring to the fact that he had been on leave when the letter of 7 October was received, he wrote:
"As you are aware, our two companies placed different values on the equipment involved, and our offer of $14,147.80 made on the 9th November, was never accepted by Mr James or indeed anyone else from BP.
Consequently, Ampol regards this offer as having lapsed.
Furthermore, circumstances have now altered somewhat, in that ownership of the premises has changed twice in recent months, and Ampol is no longer in direct supply."
Mr Street's evidence was that when a change of supplier occurred it was normal practice of wholesalers that anything moveable and above ground was returned to the previous supplier and underground tanks and other equipment would be recovered if some other arrangement could not be entered into. He had authority to make oral agreements but correspondence would be written by the company's legal officers in Melbourne. It was not however normal practice to confirm in writing a conversation, such as the one he said he had with Mr Cameron, who had said that the cheque would be sent to the plaintiff's Melbourne office, and he saw no need for a confirming letter to be sent. He had not told the Melbourne office of the oral agreement but believed Mr Read had done so. He maintained that he had a perfect memory of the conversation constituting the oral agreement. However he accepted that there may have been earlier discussions between him and Mr Cameron between 28 September and 9 November 1987 which he could not recall, and he explained his possible loss of memory in this regard because the conversations would have been insignificant.
Evidence for the defendant was given by Mr Cameron. He was the senior employee of the defendant in Tasmania responsible for all marketing and reported to the Victorian and Tasmanian branch manager in Melbourne. He was responsible for the buying and selling of equipment including underground tanks. He maintained that there was no clear cut industry practice as to what would happen with underground tanks when a service station changed its supplier. If no agreement was reached between the wholesalers they remained in the ground unless the previous supplier, who owned the tanks, dug them up.
Mr Cameron said that the first contact he had with Mr Street was on about 14 or 15 September 1987 when Mr Street telephoned him to say that he had heard from Mr O'Brien that the defendant was to take over the supply of petroleum. He informed Mr Cameron of the equipment owned by the plaintiff including pumps, an identification sign, a small above ground kerosene tank and four underground tanks of which was one was about a year old. It was the practice of Mr Cameron to keep notes of any conversations he wished to record in a series of exercise books. The books, covering the period from 12 August 1987 to 9 January 1989, were tendered in evidence. I find them important and will refer to them. He pointed to the note of the conversation to which I have just referred.
The next conversation related by Mr Cameron was on about 25 September 1987 when Mr Street said that he wished the BP sign to be returned to the plaintiff's depot at Selfs Point and the pumps to the BP pump contractor, Gilbarco. Mr Cameron pointed to his brief note of that conversation in one of his note books. He said that the next thing to occur was receipt by him of the plaintiff's letter of 28 September 1987 offering to sell the tanks for $21,099.80. He replied with the letter of 12 October 1987. In about mid–October they had two very brief telephone conversations in which Mr Street expanded on how the plaintiff had arrived at the asking price of $21,099.80. Mr Cameron pointed to what he said were brief notes of those conversations in one of his note books. The plaintiff's letter dated 22 October 1987 followed, to which he replied with the letter of 9 November 1987. He did not regard that letter as an offer but agreed that if the plaintiff had replied agreeing to accept $14,147.80 that would have concluded the matter. He maintained that there were no further communications, either oral or written, until he received the plaintiff's letter of 7 October 1988, eleven months later. His evidence was that he had never seen the plaintiff's claimed letter of 18 May 1988 and that the defendant had no record of it.
Mr Cameron's evidence was that when he sent his letter of 9 November 1987, in which he stated that he intended to raise a cheque for $14,147.80, he expected that negotiations would continue and that the plaintiff would counter–offer with another figure, perhaps $17,000.00. He is almost certain that if there had been a conversation with Mr Street when a final agreement was reached he would recollect it. He would also have expected that he would have asked for confirmation of the agreement to be put in writing for audit purposes. Further, because it was an important matter, he would have expected that he would note it in the note book he was keeping at the relevant time. He maintained that any telephone conversations worthy of note would have been recorded in them. No note of such a conversation was recorded. In fact the only other relevant note made by him during that period was on 12 January 1988 following a conversation he had had with Mr O'Brien. That note reads:
"121 Danny
Wants to sell Brighton. He is not comfortable with his level of indebtedness to the bank. He is in overdraft for much of the time.
Note we haven't agreed BP yet re tanks
" installed K7
but we have put in pump –
recoverable – and fascia work."
(The reference to K7 was to a type of identification sign). I find that note significant. I have no reason to doubt that it was made at the time. Mr Cameron said that its purpose was to record the level of his company's investment in Mr O'Brien's service station at the time. The note reveals that it was his state of mind, within two months of the alleged making of the oral agreement, that no agreement had been made.
In a letter dated 1 December 1988 Mr Cameron advised the plaintiff's solicitors that in his company's opinion the "offer" to pay $14,147.80 "was not accepted within a reasonable period". In evidence he said that well before mid–May 1988 Mr O'Brien had indicated that he was looking at selling the service station. By May Mr Cameron understood that negotiations with a couple of parties were well under way and by July 1988 the service station had been sold to a Mr Walker who immediately onsold. Thereafter his company did not directly supply products to the service station. In his mind the position had dramatically changed by then. In fact by May he would have assumed that the matter was at an end and that the plaintiff was not pursuing the sale. He agreed that that would have been a surprising decision. He said in any event that underground tanks depreciate quite quickly and his company's practice was to depreciate them on its books over a three year period. Accordingly after six months its valuation of the tanks would have reduced by about one sixth. He agreed that the plaintiff could have removed the tanks and that, if it had, the defendant would have replaced them, to keep faith with the O'Briens, he having assured Mr O'Brien that he would negotiate with the plaintiff for the tanks. The O'Briens would have "expected" the defendant to do what it could to buy the tanks from the plaintiff for a reasonable price, although no assurance was given in that regard. The O'Briens had been tied to the defendant for the purchase of the defendant's petroleum products for a period, but only so long as they owned the service station. Once they had sold it in July 1988 the defendant had lost a guaranteed outlet and would no longer have wished to purchase the tanks for the price "offered" the previous November. The site no longer had the value to the defendant it had before.
Was The Defendant's Letter Of 9 November 1987 An Offer Capable Of Acceptance By The Plaintiff?
By the letter of 28 September 1987 the plaintiff expressly offered the tanks for sale at $21,099.80. Further information was then sought by the defendant with advice that $12,147.80 of the asking price was acceptable. (It was not suggested that a binding contract was thereby concluded). That information was provided orally and by the plaintiff's letter of 22 October 1987. By the letter of 9 November 1987 the defendant stated that it accepted the price of $3,347.80 for one tank plus $8,800.00 for associated installation costs and was "prepared to pay" $2,000.00 for the other three tanks, revealing a positive attitude of a preparedness to enter into a contract for the purchase of all items for a total of $14,147.80. In these circumstances I have no doubt that an offer in that sum was made by that letter and that it was reasonably and correctly treated as an offer by the plaintiff. The final sentence stating an intention to raise a cheque in that sum "in final settlement of this claim" does not detract from my interpretation that an offer was being made. Both Mr Street and Mr Cameron considered that if the plaintiff agreed that would conclude the matter. In the context of the correspondence commencing with an express offer to sell and then negotiations, the letter signified a willingness on the part of the defendant to be bound in the sum of $14,147.80, subject to acceptance by the plaintiff. I have applied the following statements of principle:
"It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation. The intention must, of course, be judged in the light of the principle laid down in Freeman v Cooke (1848) 2 Ex 654, at p663 [154 ER 652, at p656], but, in the absence of such an intention, actual or imputed, the alleged 'offer' cannot lead to a contract: there is, indeed, in such a case no true 'offer'." Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at p457 affd. (1955) 93 CLR 546.
"That rule is, 'that, where one, by his words or conduct, wilfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, or to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time'. ... By the term 'wilfully,' however, in that rule, we must understand, if not that the party represents that to be true which he knows to be untrue, at least, that he means his representation to be acted upon, and that it is acted upon accordingly; and if whatever a man's real intention may be, he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it, and did act upon it as true, the party making the representation would be equally precluded from contesting its truth;" Freeman v Cooke (supra at pp663 and 656 respectively).
"In considering whether I am satisfied that a binding agreement was entered into by the parties I am obliged primarily to have regard to the 'outward manifestations of (the) intentions of the parties': per Mason ACJ, Murphy J and Deane J in Taylor v Johnson (1983) 151 CLR 422 at 428 and 429 and to the principle that:
'If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms'.
Per Blackburn J in Smith v Hughes (1871) LR 6 QB 597 at 607".
Booth v Tbvic Pty Ltd, 65/1990 per Green CJ at p10.
On both an objective and subjective test basis I am satisfied that the defendant made an offer which would bind it if accepted.
Was The Offer Orally Accepted?
The onus of proof resting on the plaintiff, I am not persuaded that Mr Street did orally advise Mr Cameron that $14,147.80 would be accepted. If the claimed conversation had occurred I would have expected at least one of the companies to have made a record of it in writing and to have confirmed it in writing shortly thereafter. As I have already said, I find significance in the fact that Mr Cameron made no note of the conversation in the notebook he was keeping at the relevant time and in fact made a note within about two months indicating that the negotiations had not been concluded. Even when the plaintiff's letter of 18 May 1988 was prepared it made no reference to a concluded agreement but instead purported by its terms to accept the offer.
Had The Offer Lapsed By 18 May 1988?
Both counsel agreed that the offer made by Mr Cameron on behalf of the defendant would lapse if it was not accepted within a reasonable time. Reference was made to Ballas v Theophilos (No 2) (1958) 98 CLR 193.
What is a reasonable time in any case depends on its own circumstances. I hold that by 18 May 1988, over six months after the offer had been made, more than a reasonable time had passed and the offer had lapsed. The particular circumstances which cause me to so hold include the following:
1The first letter in the negotiations, that from the plaintiff to the defendant of 28 September 1987, sought payment of the amount claimed within 14 days.
2The correspondence and conversation constituting the negotiations in 1987 extended only over a period of six weeks. The parties had acted promptly. In these circumstances a delay of over six months before purporting to accept the offer was unreasonable and excessive.
3A period of less than one month would have been ample time to enable the defendant to decide whether to accept the offer.
4There were no complicated facts or figures to be considered by the plaintiff.
5The value of the underground tanks would have reduced over a period of six months.
6At any time the defendant might have lost its guaranteed outlet at the service station, or the service station might have changed hands, thereby materially affecting the price the defendant might have been prepared to pay, or even its preparedness to contract at all.
7Involved was a commercial transaction. Each party was entitled to expect reasonable expedition and business efficiency.
If The Offer Had Not Lapsed Would The Letter Of 18 May 1988 Have Concluded A Binding Contract?
It is unnecessary for me to decide this and I do not propose to do so. However I will refer to the evidence and to some misgivings I have concerning whether the plaintiff has discharged its onus of proof and established that the letter was properly addressed, sufficiently stamped and posted to the defendant.
It was conceded by counsel for the defendant that if the defendant's letter of 9 November 1987 legally constituted an offer it was capable of being legally accepted upon the plaintiff posting a letter of acceptance to the defendant.
There was no direct evidence of the posting of it to the defendant, and Mr Cameron's evidence was that he had not seen it and that his company had no record of receiving it. In an endeavour to prove the posting of the letter to the defendant, evidence was called by the plaintiff from Mr M Halliwell, who is its Property Agreement Manager for Victoria, Tasmania and South Australia. He had no personal knowledge of the posting but gave evidence of the plaintiff's system with correspondence. He produced from the plaintiff's file a typed but unsigned copy of the letter, at the top of which appears "ORIGINATOR", apparently applied by a blue inked rubber stamp. His evidence of the system, which I have no reason not to accept, was that the author of a letter would arrange for it to be typed. The typist would produce two copies, one for posting and one stamped "ORIGINATOR" for the file. Ordinarily the author would collect them from the typist and then sign what I will call the original and place it in an envelope, which I infer would be addressed to the addressee. The author would then place the envelope in an "out box" or despatch box and would see no more of it. The system then proceeded with a clerk from the head office next door clearing the despatch box, taking the letter to the head office's mail room and, after franking it, placing it in an Australia Post bag. This occurred every evening. The "ORIGINATOR" copy would be placed on the file. Mr Halliwell had found that copy on the relevant file but not the original, and was therefore of opinion that because of the system the original was posted to the addressee. If for some reason a decision had been made not to send the original, the practice would have been that some note explaining that would have been made on the "ORIGINATOR" copy.
Mr Halliwell also gave evidence that it was the practice that a further copy of such a letter would have been made, usually by the author making a photocopy of the original letter. The author would then have placed it in an inter–office envelope addressed to the sales manager in the area responsible for the transaction which was the subject of the letter. Ordinarily it would also be placed in the despatch box at the same time as the original and a mail clerk would subsequently place it in an overnight bag for inter–office delivery. Mr Street's evidence was that he received a copy of the letter of 18 May 1988 soon after that date. Mr Halliwell's evidence was that if the area sales manager's office received a copy, which I accept it did, that would make it more likely that the original was posted to the addressee. He accepted that it is possible that the original was not posted to the defendant, but considered that only a "small possibility". After 13 years of employment by the plaintiff he could not recall any personal experience of a letter not being received, but he had heard of that happening.
The apparent author of the letter, Rowena Schmidt, was not called to give evidence. Mr Halliwell said that she is no longer employed by the plaintiff. He believed that she had gone back to study at a school in Victoria. He had spoken to her about the "ORIGINATOR" copy. No reason was given why Rowena Schmidt was not called as a witness. It would not have needed a great deal of evidence from her to satisfy me on the balance of probabilities that the letter was properly addressed, sufficiently franked and posted. But in the absence of her evidence I am left in some doubt. However it is not necessary for me to determine this aspect of the case.
For the reasons given there will be judgment for the defendant.
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