Diploma Construction (WA) Pty Ltd v Best Bar Pty Ltd [No 2]
[2015] WASC 230
•30 JUNE 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: DIPLOMA CONSTRUCTION (WA) PTY LTD -v- BEST BAR PTY LTD [No 2] [2015] WASC 230
CORAM: ALLANSON J
HEARD: 12-16 MAY, 9 & 10 JUNE 2014
DELIVERED : 30 JUNE 2015
FILE NO/S: CIV 1270 of 2009
BETWEEN: DIPLOMA CONSTRUCTION (WA) PTY LTD
Plaintiff
AND
BEST BAR PTY LTD
Defendant
Catchwords:
Contract Law - Offer and acceptance - Competing conditions on forms - Whether parties entered into agreement - Goods supplied on credit - Turns on own facts
Legislation:
Nil
Result:
Plaintiff's claim dismissed
Counterclaim allowed
Category: B
Representation:
Counsel:
Plaintiff: Mr G R Ritter QC & Ms S P J Tan
Defendant: Dr P Vout
Solicitors:
Plaintiff: HopgoodGanim
Defendant: Gadens Lawyers
Case(s) referred to in judgment(s):
Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Beerens v Bluescope Distribution Pty Ltd [2012] VSCA 209
British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504
Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551
Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; [1932] All ER Rep 494
Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303
Mushroom Composters Pty Ltd v I S & D E Robertson Pty Ltd [2015] NSWCA 1
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
P'Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42
Ralph McKay Ltd v International Harvester Australia Ltd (Receivers and Managers Appointed) [1999] 3 VR 675
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
ALLANSON J: Diploma Construction (WA) Pty Ltd (Diploma) is a registered builder. During 2007 and 2008, Diploma obtained steel reinforcing bar (rebar) and other materials for several of its projects from Best Bar Pty Ltd (Best Bar).
On three occasions during 2008 Best Bar gave notice to its customers, including Diploma, that it was increasing the price of rebar. Each increase was substantial, and was applied to existing and new projects. Diploma paid the increased prices, at least in part, until about November 2008. In December 2008, it gave notice to Best Bar of termination of two of the contracts on the ground that Best Bar had breached the contracts. The third project was then complete.
In 2009, Diploma began these proceedings for relief including:
(1)declarations to the effect that the contracts were for a fixed price for each project;
(2) declarations that it validly terminated each contract by reason of Best Bar's repudiation;
(3) damages upon rescission and/or avoidance of the contracts;
(4)damages for duress; and
(5)orders for restitution of overpayments.
Best Bar contends that the contracts were on its terms and conditions and included a provision for price escalation, permitting Best Bar to increase the price for rebar when steel prices increased. Best Bar counterclaims for amounts not paid under the contracts that are the subject of the claim by Diploma, and for amounts owing under three other contracts.
The threshold issue in the claim by Diploma is whether the parties had contracted on the terms and conditions advanced by Diploma, which precluded any increase in price during the term of the contract. Diploma further claims that, to the extent that it paid increased prices, it did so under duress and gave notice of termination at first reasonable opportunity.
The principal witnesses
It is convenient, at this stage, to identify the witnesses called by the parties.
Diploma called the following who were employees of Diploma at material times:
1.Natalina De Felice - Financial Controller. Ms De Felice was also company secretary of Diploma in 2007 - 2008;
2.Lolita Filomena Carbone - Accounts Manager;
3.John Norup - Managing Director during 2007 and 2008;
4.Domenico Di Latte - Construction Director;
5.Philip Schober - Contracts Manager;
6.Simon Oaten - Company Secretary and Chief Financial Officer; and
7.Zenith Mouchemore - Project Manager
Diploma also called Michael Robert Franco - the Managing Director of Fero Group Pty Ltd, another supplier of rebar.
Best Bar called (all employees of Best Bar at material times):
1.Grant Johnston - Chief Executive Officer
2.Gavin Futcher - Regional Manager until September 2008
3.Daryl Robert Brooks - Sales Manager and later WA State Manager.
The claim
Diploma's claim is in relation to three building projects. The projects are conveniently identified by the name of the building: Sky Apartments, Rise Apartments, and the Durack Centre. Diploma pleads that each project was the subject of a separate contract.
For each project, Diploma ordered rebar and other materials by presenting a written purchase order, in a standard form.
The Purchase Order
The Purchase Order states on the front page of the document:
Please supply the following goods and/or services in accordance with the Terms and Conditions of this Purchase order (including those overleaf) and annexed documentation.
The front page of the document includes a box containing the order number, date, creditor phone and fax, and 'Creditor Code' - BES04. The project is identified by its name and a Project Code. Delivery instructions include the address of the project and a delivery date. For the Sky Apartments order, the date is 'as called'.
The same form was not used in all purchase orders. In the purchase order for the Sky Apartments project, the Terms and Conditions printed on the back of the form provide, in relevant parts:
1.CONTRACT
This Order when signed by an authorised signatory and bearing an order number is the only form which will be recognised by the Purchaser as authority for charging Merchandise and/or Works to its account and supersedes all previous communications and negotiations. No terms stated by the Vendors in making a quotation or accepting or acknowledging this Order and which differ from the terms of this Order shall be binding upon the Purchaser or shall be deemed to form any part of the agreement between Vendor and Purchaser. … The Vendor, by commencing manufacture of the Merchandise or commencing delivery of the Merchandise or undertaking Works on the premises is deemed to have accepted the Terms and Conditions of this Order.
4.CANCELLATION
The Purchaser may at its option cancel any unshipped Merchandise if this order covers any standard stock Merchandise. The Purchaser's only obligation shall be to pay for the Merchandise shipped prior to cancellation. If this Order covers Merchandise manufactured or fabricated to the Purchasers' specifications, or specifications prepared by the Vendor and approved by the Purchaser, then upon receipt of a notice of cancellation the Vendor shall cease manufacture, supply or Work in accordance with and to the extent specified in the notice, and shall immediately do everything possible to mitigate any costs after such cancellation. Then, provided that the Vendor is not in default, the Purchaser shall pay to the Vendor the cost incurred by the Vendor in connection with this Order prior to the date of cancellation and upon such payments, title to and property in and Material or complete merchandise shall be passed to the Purchaser.
5.TERMINATION FOR DEFAULT
In the event of a breach by the Vendor of any of the terms, conditions or warranties contained in this Order or if the Vendor becomes insolvent, or a receiver of its business or assets is appointed or makes any assignment or arrangement for the benefit of its credits then in any one or more of such cases, the Purchaser, without prejudice to any other rights may cancel any undelivered Merchandise or Incomplete Works, and shall not be obliged to make any payment thereafter or in respect of such cancellation.
12.TIME
(a)In accepting this order or performing any Work under this agreement, the Vendor agrees to all of the terms and conditions stated in the agreement and agrees to complete its obligations within the time stated thereon.
(b)If the Vendor fails to delivery [sic] Merchandise or in the opinion of the Purchaser maintain adequate resources to complete the Works within the time stated then the Purchaser may issue notice to the Vendor to remedy the breach.
15.PAYMENT
(a)Payment of all invoices for Merchandise and/or Works will be made Forty Five (45) days from the submission date.
(b)The submission date for all invoices is the 20th day of each month.
(c)Payments otherwise due may be withheld by the Purchaser on account of defective Work not remedied, claims filed or reasonable evidence of probable filing of claims or failure of the Vendor to make payment to its sub‑contractors or suppliers for materials or labour.
(d)All rates are fixed for the duration of the Project and not subject to rise and fall.
I will refer to this form as the 'fixed rates' version. It was used again for an order to Best Bar in 2008 (not the subject of the action). The two projects where the 'fixed rates' version was used bookend the other five purchase orders that were put into evidence.
The other version of the form was used in the Rise Apartments and Durack Centre orders, and also for the three orders the subject of the counterclaim. The provision regarding 'deemed acceptance' in cl 1 is omitted. The clause dealing with time is simplified, and provides:
Time is of the essence hereof. In accepting this order or performing any work under this agreement, Vendor agrees to all of the terms and conditions stated in the Agreement and agrees to perform within the time stated therein.
The clause for payment is also simplified providing:
Payment of all invoices for hire, rental, supply of equipment, materials and/or services will be made nett forty five (45) days following end of the month in which invoice is received by Purchaser from Vendor.
Payments otherwise due may be withheld by purchaser on account of defective work, not remedied, claims filed or reasonable evidence of probable filing of claims or failure of vendor to make payments to his sub-contractors for materials or labour.
No reference is made to fixing rates or rise and fall, but the general exclusion of the vendor's terms remains.
Mr Schober, Diploma's Contracts Manager, was unaware there were two forms, but suggested some staff may have used an archived version from a projects directory, rather than the current computer generated form. He could not say which was which (ts 216). Mr Norup said that at some time during this period, Diploma's standard conditions changed, but did not know which was the earlier and which the later version of the form. He said the form was generated by computer, and described it as strange that the use of the forms was not consistent (ts 239 - 240). No one else from Diploma shed any light on the inconsistent use of the forms.
There were also variations in how each form was completed to state the amount of material required, and rate and total price for the order. I deal with those variations below.
The estimate
Best Bar also expressed its intention to contract on its own terms and conditions. Best Bar provided quotations or estimates (the form is headed 'Estimate') for each project. The estimate is stated to be 'subject to Best Bar Pty Ltd terms and conditions'. The estimate form contains a section headed comments. The estimates for the three projects that are the subject of Diploma's claim were given in 2007. The comments section on the form include:
4:This quotation remains valid for thirty days (30) from date of estimate.
5:This quotation is subject to Best Bar terms and conditions.
In 2008, in the estimates for the three projects that are the subject of the counterclaim, the comments section on the form includes a clause:
Price Escalation will apply to this project. This gives Bestbar the right to increase accepted price if extra costs are incurred to either product, processing or delivery (V2/24).
The Estimate does not itself contain Best Bar's terms and conditions. These had, however, already been provided to Diploma in an Application for Credit form. This is the central document relied upon by Best Bar. It was provided to Diploma in March 2007, at the latest by 15 March 2007.
The application for credit
Before Diploma placed its first order, Best Bar provided an estimate dated 15 March 2007, addressed to Gary Day of Diploma (V1/3). The application for credit form must have been provided then, or earlier, because on 15 March 2007 Ms De Felice sent an internal email to three directors of Diploma, Domenico Di Latte (Nick Di Latte) and Mr Norup, advising that Mr Day had 'given Walters Drive and Sky Apartments to Best Bar Reinforcing' and that 'a credit application needs to be completed and they have requested Directors Guarantees' (V1/4).
The first part of the Application for Credit provides for information to be filled in by 'the Customer' in support of an application for the extension of credit. It includes a statement to be signed on behalf of the Customer, in which the Customer warrants to Best Bar:
(a)The above information is true and correct in all respects and the Customer acknowledges and agrees that if credit is extended to it, it will be bound by all the standard terms and conditions of the Company as set out in the attached Trading Terms and Conditions, which standard terms and conditions have been read and understood by the Customer; and
(b)Where the Customer is a company, the person signing the Credit Application is duly authorised by the Board of Directors of the Customer to sign the Credit Application on behalf of the Customer and to bind the credit of the Customer (V1/7).
Ms De Felice dealt with the form at Diploma. She filled in part of the requested information regarding Diploma, including the credit required ($250,000, estimated $100,000 per month), details of directors, professional references, and trade references. She then referred the form to Diploma's directors.
Other parts of the form have been completed in handwriting that Ms De Felice did not recognise (ts 113). Those parts include incorrect email contact details (ts 127). It is likely that the parts not completed by Ms De Felice were not completed at Diploma.
One section is headed Personal Guarantee Indemnity and provides, in effect, for personal guarantees by the directors of the company applying for credit.
The final section of the form is headed 'Terms and Conditions * Reinforcing * General Sales'. In these terms and conditions, Best Bar is referred to as the Supplier, and the Customer as the Purchaser. Best Bar relies upon these terms and conditions as the terms of a Credit Agreement entered between Diploma and Best Bar, and governing their commercial arrangement.
Relevant terms are:
1)General
All the goods supplied to Purchaser by BEST BAR Pty Ltd … (Supplier) shall be supplied upon the following Terms and Conditions.
No subsequent correspondence or document including any order by the Purchaser will modify or vary these Terms and Conditions unless such variation is expressly accepted or acknowledged in writing by Supplier or otherwise permitted pursuant to the Terms and Conditions.
…
3)Orders
a)Subject to sub-clause 3.2, a contract will be deemed to have been created upon receipt by Supplier of an oral or written order from the Purchaser for the supply of goods and acceptance of that order by Supplier either by:
b)Supplier may in its absolute discretion refuse to supply goods where -
c)Goods are unavailable for any reason whatsoever;
d)An order has not be[en] received by Supplier;
e)Credit limits cannot been [sic] agreed upon;
f)Agreed credit limits have been exceeded; or
g)Where Supplier has not agreed to extend credit to Purchaser and payment for the goods has not been received by Supplier.
4)Any order by Purchaser for the supply of goods shall - if in writing, be signed by an authorised representative of the Purchaser;
a) Identify goods ordered; be subject to these Terms and Conditions and such additional Terms and Conditions as Supplier may in its absolute discretion require; and specify the required date of delivery.
b)Any variation of contract must be in writing and signed by Supplier.
c)No cancellation of any order for the supply of goods may be made unless agreed to in writing by Supplier.
d)It is the responsibility of Purchaser to deliver all Working Documentation without charge to Supplier to enable scheduling of reinforcement, unless reinforcement schedules are provided by Purchaser.
e)No responsibility is accepted by the Supplier for the correctness of the Working Documentation.
5.Price/Payment
a)Unless otherwise agreed in writing all goods and services are sold at Supplier's ruling price at the time of placement of an order for the supply of goods and services.
b)Where in the period between acceptance of a quote and delivery of the relevant Goods, the Supplier incurs an increase in the cost of producing and/or delivering the Goods, the Supplier reserves the right to increase the quoted price of those Goods at any time prior to delivery (a 'price escalation'). The Purchaser shall accept any such price escalation.
c)Unless otherwise agreed in writing, Purchaser shall pay Supplier for goods and services in full either upon placement of any order for the supply of goods and services or at any time prior to delivery.
d)When Supplier agrees to extend credit to Purchaser, Supplier shall submit to Purchaser an invoice the goods and services or any part thereof delivered to Purchaser and the full amount of each invoice together with any additional charges (if any) will be paid by Purchaser to Supplier no later than the date for payment as specified by the agreed credit terms.
The dispute between the parties has been strongly focused on whether the contract was subject to price escalation. But there are other significant terms and conditions in the Credit Agreement, some of them quite onerous.
By cl 13, where the purchaser makes new objects from the goods, ownership of the 'new goods' passes to the supplier until payment of all sums owing to the supplier 'whether under this or any other contract'.
By cl 14, all express or implied terms, conditions, warranties statements, assurances and representations are negatived save those necessarily implied under law, and any terms and conditions to which the supplier agrees in writing to be bound.
By cl 15, interest on overdue invoices accrues at the rate of 2.5% per calendar month (similar provision is made by cl 5(g)). By cl 15(d), an amount of the greater of $20.00 or 10% of the amount overdue 'shall be levied for administrations fees' on any account unpaid after two months.
Clause 17 provides for the Purchaser and/or the Guarantor to charge any land or any other asset capable of being charged to secure all amounts payable under the terms and conditions.
Clause 18 is headed General. Under cl 18(e), in the event of any breach of the contract by the supplier, the remedies of the purchaser are limited to damages, with the liability of the supplier not to exceed the price of the goods. The Purchaser may not set off against the price of the goods any amounts due from the Supplier: cl 18(f). And the supplier has the right to review the terms and conditions at any time and to change them to take effect from the date upon which the supplier notifies the purchaser of such change: cl 18(h).
Clause 19 purports to give the status of prima facie evidence to a certificate of the Supplier that states any matter arising out of a contract, including any amount due or owing.
Ms De Felice crossed out and initialled the section containing the directors' personal guarantee, and cl 17 of the terms and conditions (granting security).
The uncontroverted evidence is that the form was returned on about 21 March 2007 ‑ it is stamped by Best Bar with that date. The form was not signed, although Ms De Felice put her initials adjacent to or below those parts that she had struck out. Although Ms De Felice was company secretary, it was not proved that she had express or implied authority to sign on the company's behalf. Even if she had that authority, the initialling of deleted clauses is not a signed acceptance of the terms and conditions.
There was some controversy about the circumstances in which the form was returned to Best Bar. Ms De Felice recalled being contacted by Best Bar on several occasions requesting the return of the form (ts 124 - 125).
Mr Norup was the Managing Director of Diploma from about June 2006 to July 2012. He has been a consultant of Diploma Group Ltd since July 2012. Mr Norup said that in about March 2007, he instructed Ms Carbone to give the Credit Application back to Best Bar and tell them 'we would not be signing it because we did not agree with the terms' (exhibit 10 [18]). He gave that instruction after Ms Carbone and Ms De Felice complained to him that someone from Best Bar had been calling and demanding the return of the application.
Ms Carbone said she returned the form to a man from Best Bar. She said that someone from Best Bar had repeatedly requested that it be returned. Mr Norup instructed her to return it to Best Bar and to 'tell [the] person that the application was not signed because of the terms and conditions they did not agree to' (ts 147). Ms Carbone said that is what she did (ts 147, 148). She did not know to whom she returned the document, and did not know his position in Best Bar. There was no other evidence about who received it.
It was suggested to Ms Carbone that the form was returned by email, but no email attaching it was proved by either party.
The evidence about what Mr Norup said to Ms De Felice and Ms Carbone was one of several instances where the parties led evidence of subjective intention, or internal communications, without objection. It must be considered in the context that the law is concerned not with 'the real intentions of the parties, but with the outward manifestations of those intentions': Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422, 428. Even where evidence has been admitted without objection, its use depends upon the rational persuasive power it may have: see, for example, Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 [103] (Campbell JA, Sackar J agreeing). In my view this evidence is of no probative value to the critical question of whether Diploma accepted Best Bar's terms.
The objective fact is the form was returned unsigned, and with significant parts deleted. I also accept the evidence of Ms Carbone that, at the time of returning the form, she advised someone from Best Bar that the terms and conditions were not accepted. Her evidence was challenged in cross examination, but not contradicted by other evidence. Diploma did not advise Best Bar in writing that it rejected the proposed terms and conditions in the Application for Credit. But the return of the form, unsigned, must be considered together with Diploma's later conduct in proffering its own terms and conditions.
There was no evidence that Best Bar ever advised Diploma that the application for credit had been accepted, or advised Diploma about its credit limit.
Mr Norup also said that, at some time after he instructed Ms De Felice to return the form, he received a telephone call from Grant Johnston. Mr Norup said that, during this telephone conversation, he advised Mr Johnston that the application was not signed by anyone at Diploma who had authority to accept such an agreement and accused Mr Johnston of 'trying to trick my accounts department into signing this'. Mr Norup said, that following this conversation, Mr Johnston came to his office at Diploma for an unscheduled meeting, in the course of which Mr Norup told him that he would not sign the credit agreement and that nobody from Diploma would. Specifically, he said that he told Mr Johnston that the price escalation clause in the Best Bar terms and conditions was 'ridiculous'. In his oral evidence, Mr Norup put the date of this meeting in about September or October 2007.
Mr Johnston denied that there was any such telephone conversation or meeting. I am satisfied that Mr Johnston's evidence should be accepted. First, as I will later outline, there were other difficulties in the evidence given by Mr Norup about these and later events, and I am generally satisfied that his recollection is not reliable and should not be accepted. Second, I believed Mr Johnston when he said that it was only much later, after these proceedings had been instituted, that he became aware that Diploma had not signed the credit application (exhibit 23b [25]). Third, I accept Mr Johnston's evidence that he had not met Mr Norup at any time before a meeting on 3 June 2008. Mr Johnston had been living in Melbourne until about August 2008, when he moved to Perth. He did not know Mr Norup. Mr Johnston, at the time, was the Chief Executive Officer of Best Bar. He had no reason to be involved in such a day to day matter, and there is no evidence of anything in October 2007 which called for the resolution of disputed issues between Diploma and Best Bar at the level of Managing Director and CEO. No issues had arisen regarding price, delivery, or payment that required involvement of people at a senior level. Issues that needed to be dealt with at that level arose when Best Bar announced price increases, and Diploma and other customers complained. The first of those announcements was in April 2008. Fourth, Diploma produced no record of such a meeting - a diary entry, email, or any other record of it. There is no record, either then or later, of any dispute between the parties in 2007. And there was no record of any later reference to this meeting, including at the time when Best Bar was asserting its right to increase prices on the terms contained in the Credit Agreement.
The agreed trial documents also included an Application for Credit, made in June 2002, between Best Bar and Diploma Constructions Pty Ltd. Diploma Constructions Pty Ltd is a different entity from the plaintiff. It ceased business in about 2005 when Domenico Di Latte took on a business partner and changed the company (ts 153 - 154). I do not believe that anything can be inferred in terms of a 'course of dealings', when the corporate entity which is alleged to be the contracting party has changed, and when the relevant events are five years after that agreement. There is no evidence about dealings pursuant to the 2002 Application which might constitute any pattern of trade or otherwise evidence the acceptance of the terms in the application. Although the document was tendered without objection, in the factual circumstances of this matter, it has no probative value.
While each party gave to the other a document purporting to impose its conditions of contract, there is no document signed by both parties. And, apart from the delivery dockets, no document produced by one party and signed by the other. Correspondence between the parties is very limited before mid-2008. Little of the correspondence precedes the placing of the orders which are the subject of this action.
The three projects
Sky Apartments
On 21 March, Mr Day (Operations Manager, Diploma) advised Mr Mouchemore that an order needed to be placed ASAP to secure the rates offered by Best Bar (V1/6). Mr Mouchemore and Mr Brooks had been the employees primarily engaged in negotiating on behalf of Diploma and Best Bar around this time. They gave evidence of further conversations in March 2007.
Best Bar pleads (defence [3(b)]) that its Credit Agreement was accepted by Mr Mouchemore placing an oral order on behalf of Diploma on or about 30 March 2007. The evidence does not support that plea.
By 21 March 2007, the Application for Credit had been provided to Diploma and returned unsigned.
Mr Mouchemore said he rang Mr Brooks, around the end of March, to try to negotiate a price (exhibit 7 [14]). On 3 April 2007, Mr Mouchemore sent an email to Best Bar in which he referred to an earlier conversation and said 'we confirm our intention to enter into a supply agreement with Best Bar. We confirm the agreed rate of $1,285 / tonne for scheduled reinforcement' (V1/8).
Mr Brooks (exhibit 13 [15]) said that he discussed the supply of rebar with Mr Mouchemore, and Mr Mouchemore said, in effect, that the rate of $1,285 per tonne would be acceptable, subject to a formal quote, and asked Best Bar to provide a written quote to supply for the Sky Apartments.
On that evidence, no oral order was placed.
Best Bar sent an estimate, dated 31 May 2007, that specifies $1,285 per tonne for rebar, and that mesh and fixing accessories 'will be supplied for the published list rates at the time of supply' less discount.
The Diploma purchase order (V1/12) was for 1,200 tonne, with the rate ($1,285) and the total amount ($1,542,000) stated.
The quantity required for the Sky Apartments project was later increased. Diploma pleads this was by a revised purchase order. Best Bar denies receiving a revised purchase order. The only document showing a revised order is an internal Diploma document marked 'file copy', and bearing the date of the original order (V1/13), with a new quantity (1,678 tonne) and total amount ($2,238,304.96).
Mr Mouchemore described the document as possibly 'an internal document or a balancing document' (ts 175).
Mr Schober gave evidence that the revised estimate of the amount of steel required would have been issued to Best Bar once the structural drawings were updated, but he could not say when that was done (ts 193). Mr Schober could find no record of it being issued to Best Bar.
There must have been some communication to Best Bar of an increase in quantity to be supplied, because more rebar was delivered than the original order. The evidence does not show that the increase in the amount required was communicated by sending a revised purchase order.
The first steel delivery was on or about 19 June 2007.
By reason of these matters, Diploma pleads that it and Best Bar entered into a contract that was partly written and partly 'implied' by conduct on or about 19 June 2007. To the extent the contract was written, it comprised the purchase order and terms and conditions attached to it. To the extent it was implied by conduct, Diploma relies on the fact that Best Bar first delivered rebar to the project on or about that date. In relation to the Sky Apartments only, Diploma also pleads the agreement is implied from the fact that Best Bar did not reject the terms of Diploma's offer.
Rise Apartments
Diploma pleads that Best Bar gave a quote of $1,285 per tonne in or about March 2007 (statement of claim [35]). No estimate from around this time has been proved. Clause 5(e) of the Application for Credit, and the estimate forms in evidence, provide that a quote is valid for 30 days from the date of estimate. It unlikely that a quote would have been given that remained valid for seven months.
The Rise Apartments purchase order is dated 23 October 2007. Mr Mouchemore testified that it was sent by email around that date, and possibly also by mail (ts 165). The purchase order specified the quantity of rebar required by Diploma (1,002 tonne), the rate ($1,285), and the amount ($1,287,570) (V1/19).
By an email dated 13 November 2007, Mr Mouchemore advised that Diploma could require rebar for the Rise Apartments 'as early as 2 weeks'. He continued, 'I assume no scheduling has occurred as we did not envisage the raft to come to fruition this early. Can you please confirm if any documentation required and book the raft reo manufacture in as a matter of urgency' (v1/20). On 14 November, Mr Brooks responded that the job could not be started before Christmas. Mr Mouchemore asked Best Bar to schedule 'for first thing in the new year'. Mr Mouchemore's email is dated 11 December 2007. On 17 December, Mr Brooks asked Ms Wilson (a Best Bar employee) to ring Diploma for a purchase order. There is a copy of the purchase order in evidence that has a fax stamp showing it was sent on 17 December 2007.
Best Bar provided an estimate for this order, dated 21 December 2007, after the purchase order. Best Bar quoted a rate of $1,385 per tonne (V1/21). Neither party has proved an earlier written estimate for this order.
Diploma pleads that it and Best Bar entered into a contract for the Rise Apartments project that was partly written and partly 'implied' by conduct on or about 16 February 2008, when Best Bar first delivered steel. To the extent the contract was written, it comprised the purchase order and terms and conditions attached to it. To the extent it was implied by conduct, Diploma relies on the delivery of rebar to the project.
Durack Centre
The estimate for the Durack Centre is dated 4 October 2007 and is for $1,385 tonne, again with mesh at list rates less discount (V1/15). A second copy of this estimate, stamped as received by Diploma on 16 October 2007 was also included in the trial bundle (V1/16).
The Diploma purchase order is dated 18 October 2007 (V1/17). This is the only purchase order that specifies an estimate by its number. It describes the order as:
Supply and deliver to site as per Quote7642Rev001-R dated 04-10-2007
1) Rebar N12 to N36 at $1385 per tonne including cutting and bending as per drawings
2)Mesh at 40% discount and surcharge cost for cutting and bending the mesh
3)Fixing accessories at 10% discount.
The order does not specify any quantity.
As for the other projects, Diploma pleads a contract that comprised the purchase order and terms and conditions attached to it, accepted by delivering steel on or about 6 November 2007.
Diploma pleads delivery to the three projects at various times up to 15 December 2008, but it pleads that each contract was formed on the date of the first delivery pursuant to the particular contract.
In each case, Diploma alleges that the contract was for all material for the life of the project and not for any specified amount of rebar.
For each delivery there would be other documents created. Internally, Best Bar would produce a manifest and an internal record that shows the materials were delivered to site (none of which were in evidence) (Johnston ts 603). There were also delivery dockets (some of which were in evidence), and invoices (all of which were in evidence, although Diploma disputed receiving five of them). The invoices included many stamped by Diploma at the time of payment.
Each invoice identified the job by name and number, and stated the date of delivery. Invoices included a column for 'list price', setting out the price per tonne or per kilogram. The invoice recorded payment as due 30 days after the end of the month. Each bore the statement, 'This invoice will be regarded as correct if no dispute is made within 10 days from the invoice date'.
The delivery docket did not include a statement of the price.
Neither party pleaded the substance of any conversations said to have contractual significance, except for:
1.Best Bar's plea that Diploma placed an oral order on 30 March 2007, by which it accepted Best Bar's terms and conditions.
2.Diploma, by its reply and defence to counterclaim, pleads that on returning the unsigned Application for Credit it 'informed the Defendant that it did not agree with the terms and conditions thereof' (reply and defence to counterclaim [1(c)]).
The counterclaim
In 2008, Best Bar provided quotations for three projects: the Churchill Avenue project (dated 23 April 2008), the Newcastle Street project (dated 2 May 2008), and the Tully Road project (dated 12 May 2008). Diploma ordered rebar and sundry products for each of these projects.
Diploma did not pay the full amount invoiced by Best Bar for the products supplied on these projects, or on the three earlier projects.
Best Bar counterclaims, pleading that it supplied rebar and other products to Diploma pursuant to a contract incorporating the terms and conditions of its Credit Agreement. Best Bar further pleads, in both its defence and counterclaim, that Diploma voluntarily paid the price increases, chose not to purchase from another supplier, and paid without objection or protest.
Best Bar claims in contract for a debt of $1,657,636.04.
Events in 2008
The disputes between the parties arose on Best Bar giving notice of increases in its prices in 2008.
In April 2008, Diploma gave purchase orders to Best Bar for two further projects, Churchill Avenue and Newcastle Street (Qubis) (V2/25 and 26).
Best Bar gave the estimate for Churchill Avenue on 23 April 2008, with the price for rebar at $1,630 per tonne. The purchase order is also dated 23 April, and is for that amount.
The estimate provided by Best Bar for each of the Churchill Avenue projects (and later estimates in 2008) includes, in the comments section on the estimate form, a clause:
Price Escalation will apply to this project. This gives Bestbar the right to increase accepted price if extra costs are incurred to either product, processing or delivery (V2/24).
On the estimate for the Churchill Avenue project, the form also states immediately below the price: 'Please see comments below regarding price escalation and delivery lead-times'.
For the Newcastle Street project, the purchase order is dated 29 April, but the estimate is dated 2 May 2008 (V2/34). Both are for the same rate of $1,850 per tonne.
On 28 April, Mr Brooks advised Mr Hill and Mr King of Diploma, in relation to Altus (a project that was not the subject of this action), Newcastle Street, and Tully projects, that local capacity was tied up for some six weeks. The jobs could be serviced 'ex Darwin', but the price would be a premium, and there would be four weeks lead time (V2/39).
The first notice increasing prices was given in April 2008. On 30 April, Best Bar advised Diploma of the increased price of rebar and mesh for all deliveries after 12 May. Separate letters were sent in relation to each of the three projects then current (V2/28, 29, 30). In each letter, Best Bar specifically referred to using 'our escalation clause in our terms and conditions'.
On 1 May 2008, Diploma wrote to Best Bar, with a schedule of the steel required to service its current projects over the next 16 month period, and proposed that the two companies 'enter into an exclusive arrangement for the supply and delivery of all the steel reinforcement required to service the Diploma Projects detailed on the attached schedule'. The schedule did not include current tenders and existing orders, including the Sky Apartment, Rise Apartment and Churchill Avenue (one of the projects subject of the counterclaim) (V2/32).
On 12 May, Best Bar quoted for the supply of rebar and other material to a project at Tully Road, East Perth (V2/37).
In early May, there were emails exchanged within Diploma regarding whether the contracts they had with Best Bar were fixed price (V2/38). In an internal email dated 14 May 2008, Vincent Busuttil, a Project Manager, expressed his belief, on the basis of the contract that 'we have no argument as to their price increases'. The evidence of these internal emails was included in the agreed trial bundle.
Other evidence was led about occasions when employees of each party expressed an opinion on whether the contract was for a fixed price or permitted price escalation. In particular, I outline below the evidence about meetings between the parties in May and June of 2008.
Because it is an issue that recurs in discussing the evidence, I will briefly consider the use that can be made of this evidence. What Mr Busuttil, or other employees of Diploma or Best Bar, believed about the effect of the agreement does not assist in determining the intention expressed in the formation of the contract. The expression of that belief is not an admission on behalf of the party to which I can give any weight. A party to an alleged contract may make an assertion against interest that is admissible insofar as it relates to facts in dispute. But an expression of opinion, in an internal email, regarding the legal effect of the documents is irrelevant and of no evidentiary value in determining what is the true legal effect of those documents: see Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 [121]; Mushroom Composters Pty Ltd v I S & D E Robertson Pty Ltd [2015] NSWCA 1 [66] - [69]. Even though the evidence was admitted without objection, it does not assist in deciding whether the contract was for a fixed price.
On 12 May, Mr Brooks again emailed Diploma regarding some of the new projects, requesting a revised order at the new rates. On 15 May 2008, Mr Brooks advised Diploma that Best Bar required a purchase order in order to supply, referring to the Altus, Newcastle Street, and Tully projects (V2/39).
On 19 May 2008, Diploma provided a purchase order for the Tully Road project, at the rate of $1850 (V2/40).
On 20 May 2008, Mr Ryan, the Diploma Project Manager for the Sky Apartments project, sent a revised delivery schedule to Best Bar. Ms Perkins, Project Logistics Coordinator for Best Bar, advised Diploma that Best Bar was unable to bring forward deliveries scheduled for 4 June to 27 and 28 May as requested by Diploma. Mr Ryan responded and included a request for a meeting to resolve delays with deliveries. Although Diploma relies upon delays to delivery at about this time as evidence of illegitimate pressure, the tenor of this exchange is that Diploma wanted to bring the delivery schedule forward (V2/41).
A meeting was arranged for 22 May 2008 (V2/42). Best Bar also offered to see if anything was possible about bringing deliveries forward.
On 22 May 2008, Mr Brooks advised Diploma by letter of 'a likely steel increase effective for all deliveries after and including 1st July 2008', with a predicted increase in steel selling price for all existing and new projects by approximately $300 per tonne (V2/43). Within a day or so, Mr Gillespie phoned on behalf of Diploma and said he was 'unhappy' with the price increase and did not accept it (exhibit 13 [52]).
On 22 May 2008, representatives of the parties met at the Sky Apartments site. It appears that no one recorded the date of the meeting in a site diary or otherwise, but I believe that it was the meeting arranged by Mr Futcher and Mr Busuttil for 22 May to discuss delays in deliveries to the Sky Apartments site (exhibit 20a [11]).
Mr Busuttil, Mr Ryan, and Mr Schober attended for Diploma. They were later joined by Mr Domenico Di Latte, who was there for the purpose of inspecting the site. Mr Gillespie was also there - the evidence is inconsistent about whether he joined the meeting with Mr Di Latte. Best Bar were represented by Gavin Futcher and his brother Anthony.
Evidence about the meeting was given by Mr Di Latte, Mr Schober and Gavin Futcher. None of the other attendees were called.
There witnesses generally agree that the meeting initially discussed delivery issues. Mr Futcher said that the problem was caused by Diploma changing its delivery schedules (exhibit 20a and exhibit 20b). His account of the reason for the meeting, and the problem with deliveries, is consistent with the email exchange with Mr Ryan, set out above.
Diploma raised the recent notices of price increases, and Gavin Futcher told the meeting about a rise in the price of steel worldwide.
It is common ground that Mr Di Latte told Mr Futcher that Diploma had a fixed price contract, and did not want to pay the price increases. The parties dispute what Mr Futcher said in response.
In summary, the Diploma witnesses allege that Mr Futcher said, in effect, that unless Diploma paid the increased price, it would not get any rebar, and that Best Bar could not supply steel at the same price (Mr Schober, exhibit 9a). Mr Di Latte said the meeting was heated (exhibit 5).
Mr Futcher said that he told the Diploma representatives to take the price issue up with management, and suggested that Mr Gillespie contact him to arrange a meeting. Mr Futcher said Mr Gillespie rang him later that day, as a result of which he arranged a meeting with Best Bar's CEO and Company Director, Mr Johnston.
Mr Futcher denied any threat to stop supply. He said that was not how things were done in the industry, and was not the way Best Bar did business, unless there were other issues with credit (ts 527). I accept the evidence of Mr Futcher that Diploma was a big and valuable client. When Diploma complained about price increases, it was something that he raised at the CEO level (ts 528).
If it were necessary to decide whether Mr Futcher did threaten to stop supply, I prefer his account of the meeting on that issue, and believe it is unlikely that he made that threat. There is no evidence of Best Bar stopping supply at any time except when Diploma ceased payments. I also take into account that the meeting was called for a different purpose, not to discuss price increases. It was not between directors of the two companies - Mr Di Latte says he only attended because he was on site for another reason and saw a meeting was in progress. I find it more probable that, in that situation, Mr Futcher would suggest that the price issues be taken up at the management level and offer to arrange a meeting for that purpose.
A meeting at senior level was arranged, and took place on 3 June 2008, in the board room at Diploma.
Mr Norup (who was not present on 22 May) said that there was another meeting around this time, before the meeting on 3 June. His witness statement is presumably the basis of the Diploma's statement of claim on these matters.
Mr Norup said that he met with Mr Johnson, around the end of May, as a result of a telephone call he had made to Mr Johnston to discuss the price increases and Best Bar's ability to deliver and schedule Diploma's programme. He said Mr Johnston and another Best Bar representative - either the scheduler Grant, or Gavin Futcher - attended, and Mr Gillespie also attended (exhibit 10 [28]).
Mr Norup said that, at this meeting, Mr Gillespie complained about slow deliveries, and that Diploma was being treated as a second-rate customer. He said that Mr Johnston responded, in substance, that Best Bar would prioritise customers who were paying the higher prices and that Best Bar could not commit resources to customers on the lower price structure. And later in the meeting, Mr Johnston said that Best Bar would only supply customers who were paying the higher prices. Mr Norup told Mr Johnston that Diploma were not going to accept the increase, and its orders would stay at the same price.
Mr Norup said that, following this meeting, Best Bar held up the delivery of steel to Diploma on the Sky Apartments site, resulting in a number of heated telephone calls with Mr Johnston. Mr Johnston told him, in effect, that the deliveries were being held up because Diploma would not sign the Credit Application (exhibit 10 [33]). Mr Norup complained that was extortion, and that Best Bar would not get another order from Diploma 'for the rest of my life'.
There are several reasons why I do not accept the evidence of Mr Norup. No other witness said the meeting took place. Mr Johnston and Mr Futcher denied it - not just the content of what was said but that there was a meeting at all. Mr Johnston denied the telephone calls occurred. Best Bar did not have a scheduler named Grant. There is no record in any diary, or email, or any other document of this meeting occurring, either at the time it is alleged to have occurred or later. More generally, I found the evidence of Mr Norup was unreliable. Rather than repeat matters, I deal with those reservations in the context of the meeting of 3 June.
This is not simply a matter of not accepting that he accurately recalls what was said on a particular occasion, or that he has confused or misremembered with whom he met on a particular day or the sequence of meetings. I do not believe those phone conversations and meetings occurred.
Diploma did not call Mr Gillespie. It is not, however, necessary to rely on reasoning based on Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. Mr Norup is the only witness to say the meeting and telephone calls occurred. His recollection of events was not reliable and I did not believe his evidence. I deal with issues relating to his credibility in more detail below.
Mr Norup said that, after the meeting, Best Bar held up the delivery of steel to the Sky Apartments site, and a further meeting was then called because no steel was being supplied to Diploma's projects (exhibit 10 [32], [35]). No other witness makes that claim, and the documents do not support it. Invoices show that deliveries were made to the Sky Apartment site on 22, 24, 26, 27 and 31 May; to the Rise Apartment site on 24 and 28 May; and the Durack Centre on 26, 28, 29 and 30 May, and 3 June (with 1 June 2008 a Sunday, and the Monday a public holiday). In some cases, more than one delivery was made on a day (V3/346 ‑ 367). Diploma made no attempt to prove that there was a delay between scheduled and actual deliveries.
At the meeting on 3 June, Best Bar were represented by Mr Johnston, Mr Futcher, Mr Salomons (Operations Manager), and Mr Brooks. Mr Gillespie attended for Diploma with Mr Norup (who arrived late). None of the other directors of Diploma attended. The meeting was in the Diploma boardroom.
The court has to deal with the not unusual situation where witnesses were attempting to recall the substance of what had been said six or more years earlier. Although the conversations were about business matters, and took place at a pre-arranged meeting to discuss problems between the contracting parties, neither party produced any record of what was said (in the form of minutes, a letter or email confirming what had been said or agreed, or an internal record made by the attendees). For the reasons which follow, it is difficult to be completely satisfied with either parties' account of what was said.
Mr Norup said that, on this occasion, he chose his words carefully to say that 'under duress Diploma had no option but to start paying the higher price in order to keep the projects going' (exhibit 10 [38]). He said he did so because he knew
we would end up in the situation that we were in. I could foresee it. And I knew without the words 'duress' that I wouldn't have a leg to stand on. So we had to be paying under duress (ts 330).
Mr Norup further said that he accused Best Bar of extortion and holding Diploma to ransom. Mr Norup could not explain why, having chosen words carefully to insist that payment was under duress, and having made such strong allegations, Diploma did not formally record any protest. It was not until 5 November 2008, that any written complaint was made about pricing. That complaint was not at a senior level, but was an email from a contract administrator, advising that Diploma 'cannot accept any additional price increasing' (V2/61). I find it improbable, if it were true that Mr Norup carefully chose his words, and made such an allegation, that neither Mr Norup nor anyone else at Diploma made any record of this objection, or any record of the meeting at all. Diploma made no attempt to record a protest with Best Bar until five months later, in November 2008, when it had secured an alternative supplier (and had incurred a debt to Best Bar of more than $1 million).
Following the 3 June meeting the attendees had a beer. Around this time, Diploma entered into further supply agreements with Best Bar. That conduct is consistent with a meeting where difficulties had been discussed and explained. I can understand Diploma adopting a 'grin and bear it' approach to existing contracts, where there might be disruption in finding a new supplier. But I find the offering of new contracts to Best Bar is unlikely where Diploma were alleging extortion. One would at least expect Diploma to take some additional steps to try to fix prices on the new contracts, or to record its objection to any price increases. And Mr Norup's evidence is that he had earlier said that Best Bar would never get another contract from Diploma.
Within two weeks of this meeting, the parties were discussing an increase in Diploma's credit limit in order for Best Bar to take on more of Diploma's projects in the future. That also, in my opinion, is inconsistent with a meeting of the temper described by Mr Norup.
Diploma called no other evidence about the meeting.
In making findings about what was said, I must also deal with the situation (which unfortunately is not unique) where the witness statements of two or more witnesses had sections of them in very similar words. This is apparent in the witness statements of Mr Brooks (exhibit [55] ‑ [63]) and Mr Futcher (exhibit 20a [22] ‑ [31]) and, to a lesser extent, Mr Johnston (exhibit 23a [4] ‑ [9]). The importance of proper practice in taking witness statements, if they are for use as evidence in chief at trial, cannot be over‑emphasised.
Mr Brooks appeared in cross‑examination to have a reasonable recollection of at least parts of the meeting of 3 June 2008. He responded with apparent confidence to questions from counsel for Diploma about whether particular things had been said. But many of the things he could not recall being said were taken straight from his own witness statement - a statement that, minutes earlier, he had confirmed to be true and correct (see ts 482 - 483). The result, in this case, is that I cannot rely on Mr Brooks' recollection of the meeting, as given in either in his statement or in his oral testimony.
Mr Futcher and Mr Johnston both gave an account of the meeting in their witness statements, and gave consistent oral evidence. In effect, Mr Futcher said the meeting was about how to manage and limit price increases, and that Diploma's concern was to ensure that its competitors would not be treated more favourably (exhibit 20a [27] - [29]). Mr Johnston said that Mr Gillespie, on behalf of Diploma, said he was unhappy with the price increases and raised various proposals to peg increases (exhibit 23a [5]). Otherwise, his evidence was consistent with Mr Futcher - in particular, that Diploma wanted to ensure that it got the same price as its competitors [8].
Neither party recorded what was said at the meeting, either at the time or afterwards. In particular, there was no correspondence setting out the terms of the discussion, although on 20 June 2008, Mr Johnston wrote to Mr Norup about various matters regarding credit, and included the comment 'in terms of our conversation you can be assured you will not be paying more than any major competitor' (V2/50). That email is consistent with his recollection of the meeting.
The only other correspondence that appears to have flowed out of the meeting was that Diploma asked Best Bar to quote on other projects. On 16 June, 13 August, and 17 September, Best Bar sent estimates for three other projects.
On 16 June 2008, Mr Brooks sent letters in relation to the Diploma projects advising of further price increases, including a $445 per tonne price increase for rebar, effective on deliveries from 14 July 2008 (V2/45).
On 18 June, Mr Futcher advised Mr Gillespie (Diploma) that Diploma needed to increase its credit limit for Best Bar to take on more of Diploma's projects in the future. It also now required security and for Diploma to come 'back in terms asap'. Mr Futcher concluded his email, 'when you get your Credit sorted, get the individual orders to Daryl, so he can book it in officially….' (V2/48).
Mr Gillespie responded, saying 'we also discuss that we needed to agree a starting price' (V2/48).
On 19 June, Mr Norup emailed Mr Johnston regarding 'current events'. Mr Johnston scheduled a meeting, but advised that Diploma needed a $1 million credit limit, with guarantees, and needed to get its account 'in some order' with a payment of $200,000 (V2/50, and exhibit 23b [11]).
On 23 June, Mr Johnston and Mr Pember (Best Bar, Chief Financial Officer) met with Mr Norup to discuss credit issues, including an amount over 50 days outstanding. Although Diploma agreed to give a corporate guarantee (from the publicly listed company), it was not followed up by either party and Diploma's indebtedness to Best Bar remained unsecured.
In July 2008, Diploma was negotiating with Fero Group Pty Ltd as an alternative supplier of steel. Fero Group was not in a position to immediately supply steel in the volumes then required by Diploma for its projects. The evidence of Mr Franco about when it reached that capacity was very vague. I can only find that it was likely that Fero Group began supply around November 2008 (ts 347). I cannot determine whether it was then in a position to supply all of the steel required by Diploma.
On 30 July, Best Bar advised of a further price increase for steel for the Churchill Avenue project, for deliveries from 1 August 2008 (V2/53). The evidence does not disclose whether similar letters were sent for other projects, except that, in November 2008, Diploma referred to a letter of this date but referring to the Newcastle Street project.
On 4 August, in a letter addressed to valued customers, Best Bar foreshadowed further increases from 1 September 2008. The letter includes the statement that, from 15 August, 'all customer accounts without a legally binding contract, fixed and firm in place, will increase to the current market rate' (V2/54). Mr Johnston said that Best Bar would from time to time enter into contracts fixing price for a specified amount of product for a particular project, and would calculate a price to cover the risk of price increases during the course of that supply (exhibit 23b [6]).
On 5 November 2008, by fax, Diploma advised Best Bar that specified invoices for the Newcastle Street project would not be processed as they had incorrect tonnage rate '$2040 Ton as per your letter 31-July-2008' (V2/60). I assume this refers to the letter of 30 July, regarding the Churchill Avenue project, which was attached to an email dated 31 July 2008. Best Bar responded, asking for Diploma to reconsider its decision, or provide a signed agreement that the project was exempt from price escalation, or face the prospect of being placed on stop supply for that and other projects (V2/59). This is the first time that Best Bar threatened to stop supply. Even then, deliveries continued into December on at least three of the projects.
On 17 December 2008, by a document headed 'Notice of Termination', Diploma gave notice that it terminated the contracts for the Rise Apartments and the Sky Apartments, on the grounds that, by increasing the price per tonne for reinforcement bar and insisting that the price increase be paid otherwise supply would cease, Best Bar breached both supply contracts entitling Diploma to terminate them pursuant to cl 5 of each contract (based on cl 5 of the Diploma purchase order) (V2/65). At the time, Diploma recognised that there were over $1 million of Best Bar invoices outstanding.
Was there an enforceable agreement
Formation of agreement ‑ legal principles
The first question for each of the party's cases is whether the parties intended to enter into an enforceable agreement. In the contractual context, intention is used to describe 'what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened'. The objective theory applies not only to the construction of the terms of the contract, but to the intention to create contractual relations: Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [25]. And see Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] ‑ [41].
Even in a case like this, the traditional rules of offer and acceptance may still be the most appropriate way of analysing the particular facts, and each party pleaded its case (at least in part) in terms of 'acceptance'. In particular, the traditional rules direct attention to whether one of the parties, objectively, has communicated in some way its acceptance of the terms on which the other has offered to contract. Neither Diploma nor Best Bar can rely on an express consent to the terms on which it proposed to contract. Neither signed any document purporting to record an agreement. Neither party pleaded an explicit oral acceptance.
In some cases of competing standard forms, courts have been able to identify a communication or some conduct which can be characterised as an acceptance of the last counteroffer. Essentially, Diploma relies upon the delivery of rebar to each project as an acceptance of the terms and conditions set out in its purchase order. Best Bar pleads five acts which, in the alternative, constitute acceptance of its Credit Agreement.
It may not be possible, and it is not necessary, to identify an express acceptance. A contract may be inferred from conduct. However, the parties must indicate unambiguously their intention to contract on the particular terms sought to be established: see Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 [5] ‑ [9]. In Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 [39], Sundberg J said:
[The] existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained: see Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-50 (Gleeson CJ) and his Honour's reference to Gissing v Gissing [1970] UKHL 3; [1971] AC 886; see also Cheshire & Fifoot's Law of Contract (9th ed, LexisNexis, 2008) at [3.5] and [3.9] Where mutual promises are sought to be inferred, the conduct relied upon must, on an objective assessment, evince a tacit agreement with sufficiently clear terms. It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement: Industrial Rollformers [2001] NSWCA 111; (2001) Aust Contract R 90-129 at [137]- [138] and [142]; Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 (Pacific Brands) at [47].
The courts strive to uphold bargains, and I proceed on the basis that 'courts should be the upholders of bargains and not their destroyers': Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551, 14570; and see Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; [1932] All ER Rep 494; Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191 [6] - [8]. And I take into account that both parties in this case proceeded for many months, with goods supplied, credit extended, and payments made, even after the price increases. But that admits of other explanations. As Giles JA said in Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 [117], 'businessmen not uncommonly act upon an anticipated contractual relationship prior to the contract'. In the context of 'battle of the forms' cases, business people may be content to leave the discrepancies unresolved through a reluctance to push things too far with the possibility of loss of business: see Cheshire & Fifoot Law of Contract (10th ed, Aust) [3.28], cited by Le Miere J in Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 [73]. In the present case, Diploma was a major client, recently attracted from a competitor. Best Bar was one of a small number potential suppliers of an essential product. The incentive to maintain the relationship may have been strong.
If the parties have not agreed on the essential terms of the contract, there will be no binding contract, even if one of them has done something (for example, commenced work) referable to the agreement: British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, 510; Mushroom Composters [63]. Whatever framework is applied to the analysis, traditional offer and acceptance or inferring an agreement from the whole of the conduct of the parties, the party asserting the existence of the contract must prove a concluded bargain in the terms it alleges that settles everything that is necessary for an enforceable contract.
Neither party considered the position that no contract had been formed, or made submissions on the result should that be the finding.
Diploma's case
Diploma's case is that delivery of the steel, without an express rejection of Diploma's terms, constitutes an acceptance of Diploma's offer (or counteroffer, if the Application for Credit is regarded as a prior offer by Best Bar). Diploma contends that there is, for each of the three projects, a contract that is party written, and partly implied by conduct. It comprises, and is on the terms and conditions of, the purchase order form and the terms and conditions attached to it.
In its defence, Best Bar pleads that Diploma did not, at any material time, draw to its attention Diploma's terms and conditions or otherwise give notice that it wished to override or supplant Best Bar's terms. The terms are, however, set out on Diploma's purchase form. They are in small print, but not unreadable. The front page of the purchase order refers to those terms and conditions in requesting the supply. I do not regard any failure to draw Best Bar's attention to those terms as decisive.
While Diploma generally relies upon delivery as an implied acceptance, in the Sky Apartments contract it also pleads the failure by Best Bar to expressly reject its proposed terms.
There are circumstances where a party's failure to expressly reject an offer, in combination with other factors, may objectively indicate that the party has accepted that offer: see P'Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42 [8] - [10], where Whelan JA said:
The relevant starting point in a case of this kind is the principle that a contractual obligation cannot be imposed by an offeror upon an offeree merely by reason of a failure to reject an offer made. Silence, in itself, cannot constitute acceptance.
Nevertheless, leaving to one side cases of estoppel, cases where there is an historic relevant course of dealing, and cases where the events are so obscure or so far in the past that direct evidence is not available, there are circumstances where acceptance of an offer can be inferred in the absence of express consent. This will be the case if an objective bystander would conclude from the offeree's conduct, including his silence, that the offeree has accepted the offer and has signalled that acceptance to the offeror.
Best Bar's conduct must be viewed in the context of the facts known to both parties. In context, Best Bar's conduct in not expressly rejecting Diploma's terms, and in supplying steel ordered by Diploma, is not conduct from which one would reasonably infer acceptance of Diploma's offer.
First, Diploma cannot rely upon any antecedent course of trade between the parties.
Second, Best Bar set out its terms and conditions in its Application for Credit, provided to Diploma, and clearly stated its intention to contract only on those terms. It repeated its intention to supply on its own terms and condition in each estimate form.
Third, by cl 1 of its terms and conditions, Best Bar stated its intention to exclude any modification or variation to its terms and conditions by subsequent correspondence or documents 'including any order by the Purchaser', unless that variation was accepted in writing or otherwise permitted pursuant to the terms and conditions. That is, the documents it provided to the other party explicitly dealt with the possibility of a competing form. Best Bar's terms and conditions, including the exclusion of any modification or variation, had been provided to Diploma, and Diploma must be taken to have been aware of them, and of Best Bar's intention to contract only on that basis.
Fourth, the dealings between Diploma and Best Bar extend beyond the supply of steel, and included the provision by Best Bar of a substantial credit facility.
In those circumstances, Best Bar's conduct in not rejecting Diploma's order and in supplying steel cannot be properly construed as an acceptance of the terms and conditions stated on Diploma's purchase order. Objectively, there was no agreement on those terms.
There was some question at trial about whether a 'first shot' or 'last shot' approach to the exchange of terms might provide the answer to which party's terms had been accepted. In considering Diploma's case, it make no difference, in my opinion, whether for any particular contract the document containing Diploma's terms and conditions was the first exchanged between the parties, or the last document before the claimed bargain concluded. What is important is that, by the time of the purchase order for each project, and any alleged acceptance of those terms, Diploma was aware of Best Bar's terms and its intention to contract only on the terms contained in its Application for Credit. Nothing was done by Best Bar to objectively indicate a departure from that position.
For these reasons, I am satisfied that Diploma has not proved that it contracted in the terms it alleges.
The claims for declarations regarding the terms and valid termination of the three contracts fail. The claim for rescission and avoidance of the contracts, and for refund of overpayments under the contracts, also fail.
The case for duress depends upon the allegation that illegitimate pressure was applied to obtain prices above those contracted, and depends upon a contract in the terms pleaded. The claim for duress also fails.
Best Bar's case
Best Bar's case, both in the defence and the counterclaim, relies on a contract formed by Diploma accepting the Best Bar Credit Agreement. Best Bar pleads five ways in which the agreement was formed by that acceptance (defence [3(a) - (e)]).
First, Best Bar relies on the return of the Application for Credit document, with the initialling of deletions, as an objective sign of acceptance. If that is accepted, it would result in an overarching credit agreement, formed in about March 2007, within which all other dealings were conducted. In all of the circumstances, however, I am satisfied that is not what would be reasonably conveyed by Diploma's conduct.
I have set out the evidence and my factual findings above. Diploma did not sign the Application for Credit and did not, in that way, demonstrate that it accepted the terms and conditions proposed by Best Bar. Diploma did not simply return the form unsigned, but deleted significant terms relating to guarantees and security for the credit to be extended.
Diploma did not otherwise delete Best Bar's conditions. In some circumstances, the return of the form with part only deleted might be held to demonstrate an intention to contract on the terms and conditions in that form, except for those deleted. And it is a possible reading of Diploma's conduct that it was not rejecting the terms offered by Best Bar outright. In traditional analysis, that might be characterised as a counter offer. It is not an acceptance.
I also find that Ms Carbone told whoever collected the form that Diploma did not accept the terms proposed. Even without that statement, I would find the return of the form, incomplete, unsigned, and with substantial deletions, was not an acceptance.
Second, Best Bar pleads an acceptance of its terms by Diploma, through Mr Mouchemore, when he placed an oral order for rebar on or about 30 March 2007. I have set out the evidence above, and why it does not establish that there was an oral order as pleaded. It is not necessary to determine whether an oral order would have been an acceptance of Best Bar's Credit Agreement, despite the Application for Credit having already been returned unsigned.
Third, Best Bar relies upon the placing of a written purchase order as an acceptance pursuant to cl 3(a) of its terms and conditions, set out in the Credit Agreement. The argument is, to a degree, circular. Unless the parties have agreed on cl 3(a), it does not govern whether a contract has been formed. The return of the Application for Credit, and the purchase order which offered competing terms, is a rejection of cl 3(a).
In any event, the standard form used by Diploma stated its intention not to be bound by any terms stated by the vendor. In the version of the purchase order form used for the Sky Apartments order, Diploma expressly rejected any rise and fall in the price. The form Diploma used for the orders for the Rise Apartments and the Durack Centre did not expressly exclude rise and fall, but retained the general exclusion of the supplier's terms. That, in my opinion, and in combination with the return of the Application for Credit, is a sufficient indication that Diploma did not then agree to be contracted on Best Bar's terms. When the orders were first placed for the Sky Apartment, Rise Apartment and Durack Centre projects, I am not satisfied the placing of each order can, in itself, be properly characterised as an acceptance of Best Bar's terms.
Fourth, Best Bar relies upon Diploma applying for credit, and obtaining and using that credit as an acceptance of the Credit Agreement. In par 3(e) of its defence, it refers also to the payments made by Diploma, on credit terms, following the increases in price in 2008.
In the counterclaim relating to the three agreements made in 2008, for Churchill Avenue, Newcastle Street and Tully Road, Best Bar relies on its supply on the terms of the Credit Agreement.
There is no doubt that credit was extended to Diploma. Normally one would look for an agreement setting out the terms on which payment is deferred. At least at the start of their dealings, the credit arrangements operated consistently with the terms pleaded by both parties. The conduct of the parties in 2007 is not, unambiguously, referrable to either of the competing agreements. Diploma's own terms and conditions provided for when it was required to pay the supplier. A finding that there was some agreed extension of credit would not be sufficient to enable a finding regarding the terms of the agreement between the parties more generally.
In April 2008, Best Bar gave the first of the estimates that not only provided the quotation was on Best Bar's terms and conditions, but directly referred to price escalation. Diploma proceeded to place orders for Churchill Avenue and Newcastle Street on these estimates. The later order for Tully Road was on the same terms.
In May and June 2008, Diploma complained about the price increases, but accepted the reasons given for the increase in price. It continued to schedule deliveries of steel, to take the benefit of the credit provided by Best Bar. Diploma paid for deliveries according to the price prevailing at the time of the delivery, to the extent of making lump sum payments apportionable in part to invoices for the supply of goods at the higher price.
In these circumstances, Best Bar submits that the contract on its terms and conditions, arising from or in connection with the Application for Credit, should be inferred because of the invariable practice followed by the parties. In particular, Best Bar relies on Beerens v Bluescope Distribution Pty Ltd [2012] VSCA 209, where the court found proof of an agreement for the invoicing of goods at the price prevailing at the time of delivery from a pattern of trade over many years. The court described an invariable practice over a decade-long course of dealings: [75] ‑ [78]. Similarly, Best Bar refers to Ralph McKay Ltd v International Harvester Australia Ltd (Receivers and Managers Appointed) [1999] 3 VR 675, where Tadgell J was dealing with a supply arrangement that had been standing over many years.
In the present case, the period during which the arrangement continued is comparatively short, and the period following the price increases is a matter of months. It is not factually comparable to the cases on which Best Bar relied. Despite that, I am satisfied that when Diploma's conduct is viewed as a whole over the period from March 2007 to the purported termination in December 2008, it may be inferred that it had accepted an underlying agreement pursuant to which the product was supplied and credit given on the terms advanced by Best Bar.
First, Diploma continued to schedule deliveries and receive rebar and other products on credit. Just considering the invoices on which Best Bar relied in the period from June 2008: 76 invoices relate to the Sky Apartment project, 55 to the Rise Apartment project, and 48 to the Durack Centre project. All of the invoices for the Tully Road and Churchill Avenue projects are from this period, and all but four of the invoices for the Newcastle Street project. Each invoice identifies a delivery to a particular site.
Diploma admits in the defence to counterclaim that:
1.Best Bar supplied 197.837 tonne of rebar to the Newcastle Street site and that it has not paid Best Bar's invoices which total $226,397.24 (including GST), despite the fact it claims an overcharge of only $58,546.08.
2.Best Bar supplied 159.384 tonne of rebar to the Tully Road site, and that it has not paid invoices which total $213,390.98 (including GST), but claims an overcharge of only $23,218.62 (including GST).
3.Best Bar supplied rebar (the quantity is not specified) to the Churchill Avenue site, and that it has not paid invoices which total $11,342.56 (including GST), and claims an overcharge of $2,290.
4.For rebar supplied to the Sky Apartments, Rise Apartments, and Durack Centre projects, between June 2007 and 15 December 2008, Best Bar invoiced Diploma for $5,002,130.82 (including GST) and Diploma paid $3,876,340.63 (including GST).
Best Bar alleges that greater quantities of rebar were supplied, at least at Newcastle Street, and the amount invoiced was higher. Even on Diploma's case, it continued to schedule and receive rebar and other products on credit.
During this period, Diploma also invited Best Bar to quote on other projects.
Second, Diploma agreed to an increase in its credit limit, and to the giving of a Diploma Group guarantee (V2/51). These measures did not proceed, it is not clear why. But there is no suggestion that they were not agreed.
In its reply and defence to counterclaim, Diploma pleads that cl 5(b) of the Best Bar terms is void for uncertainty. The argument is that the clause purports to give Best Bar a right to make a binding decision as to the price payable, with no formula or mechanism by which to calculate the price increase. By cl 5(b), Best Bar not only reserves the right to increase the quoted price, but the purchaser 'shall accept any such price escalation'.
Even if that argument is sound, cl 18(b) provides that any clause or part of a clause that is invalid shall be capable of severance. If cl 5(b) is invalid, in whole or in part, Diploma accepted each of the price increases until it rejected some invoices. The first notice of rejection was in November 2008.
As I have found, there was some general complaint about price increases and, on the occasion of the site meeting on 22 May 2008, Mr Di Latte expressed his opinion that Diploma had a 'fixed price' contract. I am not satisfied that Best Bar made any threat to withhold supply at that meeting, or on any later occasion except in relation to Diploma seeking to trade outside the terms of credit. The allegations by Diploma that supplies of steel were stopped or delayed, as a means of imposing pressure to accept price increases, have not been established. Even if there were some delays, there was other evidence, including evidence by Mr Schober, that the worldwide situation of steel supply was creating delay (ts 188, 189). Mr Futcher said Best Bar was moving factories at the time (ts 532). And there is evidence that some supplies had to be obtained from Darwin, with a four week lead time.
The allegation in the evidence of Mr Norup that Best Bar ceased delivery at any time is inconsistent with the evidence of continued delivery. The first occasion on which Best Bar has been proved to stop supply of rebar to Diploma's projects was after receipt of the purported notice of termination, when Diploma already owed it more than $1 million and had manifested its intention to not pay.
Diploma also relies upon the assertion that it was unable to secure an alternative supplier until Fero Group had sufficient capacity in November or December 2008. The evidence supporting that allegation was weak. As Mr Schober conceded, a change in supplier could possibly have been effected in two to three weeks (ts 206). Although it was not expanded on, perhaps being an unexpected answer in cross‑examination, Mr Futcher said that he had many times seen projects where suppliers were changed mid-way. He described the process as easy (ts 559, 560).
On the whole, I agree with counsel for Best Bar that the inference to be drawn from the evidence is that Diploma paid the higher prices voluntarily while, at the same time, seeking to secure an alternative supplier. And while it was seeking that alternative, its debt to Best Bar was progressively increasing outside the terms of its trade. The timing of the notice of termination and the switch to Fero Group was based upon the convenience of making the change during the Christmas/January break (ts 207).
Even if the price escalation clause was void, at least to the extent of requiring Diploma to accept the increase, I am satisfied that Diploma did accept each increase.
If I am wrong in that conclusion, the consequence is that Diploma is liable to Best Bar for the quoted price of the goods. On Diploma's best case, it is indebted to Best Bar.
The amount owing
Best Bar made no real attempt to prove the amount it claimed, simply identifying the invoices on which it relied but not establishing the extent to which Diploma had paid them in part.
In its reply and defence to counterclaim, at [14], [22], [29], and [37], Diploma admits that:
1.between June 2007 and 15 December 2008, Best Bar supplied 2,777.49508 tonne of rebar to Diploma for the Sky Apartments, Rise Apartments and Durack Centre projects;
2.between June 2007 and 15 December 2008, Best Bar invoiced Diploma $5,002,130.82 (including GST) for rebar for those projects;
3.Diploma paid Best Bar $3,876,340.63 (GST included) for rebar supplied to it for those projects;
4.that it has not paid Best Bar's invoices which total $226,397.24 (including GST) for products delivered to the Newcastle Street project ($58,546.08 of which it claims is an overcharge);
5.that it has not paid Best Bars invoices which total $213,390.98 (including GST) for products delivered to Tully Road ($23,218.62 of which it claims is an overcharge);
6.that it is not paid Best Bar's invoices which total $11,342.56 (including GST) for products delivered to the Churchill Avenue Project ($2,290 of which it claims is an overcharge).
That is, on its pleaded case, it admits $1,576,902.97 is owing on the invoices rendered by Best Bar. Save for the allegation of overcharge, resulting from the price increases, there is no other challenge to the invoices and that product was delivered as recorded in them. I allow Best Bar's case to the extent of those admissions.
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