Graham Evans Pty Ltd v Stencraft Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 1670

CONTRACT LAW – offer capable of acceptance – conduct of parties – whether agreement as to price – whether agreement as to terms – whether primary oral agreement to be replaced by later written agreement

Masters v Cameron (1954) 91 CLR 355
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622
G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
Pagnan SpA v Feed Products Ltd [1987] 2 Lloyds Rep 601

GRAHAM EVANS PTY LTD v STENCRAFT PTY LTD
Q 109 OF 1999

FRENCH, WHITLAM & DOWSETT JJ
30 NOVEMBER 1999
BRISBANE


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

Q 109 OF 1999

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

GRAHAM EVANS PTY LTD
Applicant

AND:

STENCRAFT PTY LTD
Respondent

JUDGE:

FRENCH, WHITLAM & DOWSETT JJ

DATE OF ORDER:

30 NOVEMBER 1999

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.        The appeal be allowed.

2.        The judgment below be set aside.

3.Judgment be entered for the appellant against the respondent in the sum of $800,000 with interest at 8% per annum from 1 January 1995 to the date of judgment.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

Q 109 OF 1999

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

GRAHAM EVANS PTY LTD
Applicant

AND:

STENCRAFT PTY LTD
Respondent

JUDGE:

FRENCH, WHITLAM & DOWSETT JJ

DATE:

30 NOVEMBER 1999

PLACE:

BRISBANE

REASONS FOR JUDGMENT

FRENCH J

  1. I agree, for the reasons published by Dowsett J, that the appeal should be allowed with costs.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Associate:

Dated:             30 November 1999


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

Q 109 OF 1999

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

GRAHAM EVANS PTY LTD
Applicant

AND:

STENCRAFT PTY LTD
Respondent

JUDGE:

FRENCH, WHITLAM & DOWSETT JJ

DATE:

30 NOVEMBER 1999

PLACE:

BRISBANE

REASONS FOR JUDGMENT

WHITLAM J:

  1. I agree with the reasons for judgment of Dowsett J and with the orders proposed by his Honour.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam.

Associate:

Dated:             30 November 1999


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

Q 109 OF 1999

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

GRAHAM EVANS PTY LTD
Applicant

AND:

STENCRAFT PTY LTD
Respondent

JUDGE:

FRENCH, WHITLAM & DOWSETT JJ

DATE:

30 NOVEMBER 1999

PLACE:

BRISBANE

REASONS FOR JUDGMENT

DOWSETT J

THE APPEAL

  1. This is an appeal from a judgment dismissing a claim for damages…

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Details
Case
[1999] FCA 1670
Decision Date

CaseChat Overview and Summary

The case of Graham Evans Pty Ltd v Stencraft Pty Ltd involves a dispute between a building company, Graham Evans Pty Ltd, and a property developer, Stencraft Pty Ltd, over a contract for the construction of a block of home units. The dispute arose after the developer engaged another builder for the project, leading to a claim for damages by Graham Evans Pty Ltd for breach of contract. The primary legal issue was whether the parties had entered into a binding agreement for the construction project, despite the absence of a formal written contract. The court had to determine whether the oral agreement and subsequent communications constituted a binding contract and if there were sufficient terms agreed upon to enforce the agreement.

The court found that the parties had indeed entered into a binding agreement. It determined that the negotiations and communications between the parties, including the offer and acceptance process, led to a clear understanding and intention to be bound by an agreement. The court dismissed the respondent’s argument that certain essential terms had not been agreed upon, stating that it was within the parties' discretion to agree to be bound immediately while deferring other details to be agreed later. The court also held that the parties intended for the oral agreement to be superseded by a written contract, but this did not affect the validity of the initial agreement.

The appeal was allowed, the lower court's judgment was set aside, and judgment was entered for the appellant against the respondent. The appellant was awarded damages in the sum of $800,000 with interest at 8% per annum from 1 January 1995 to the date of judgment.

Orders

Orders of the court

1. The appeal be allowed.

2. The judgment below be set aside.

3. Judgment be entered for the appellant against the respondent in the sum of $800,000 with interest at 8% per annum from 1 January 1995 to the date of judgment.

Background

Background to the litigation

This is an appeal from a judgment dismissing a claim for damages for breach of contract. Other relief was claimed, but that is not presently relevant. The appellant is a building company. The respondent is a property developer. The appellant claims that the parties entered into a contract for the construction by the appellant of a block of home units on land owned by the respondent. BACKGROUND In the early part of 1994 the appellant was completing work on a building project described as “Goodwin Towers” which was in close proximity to land on the Brisbane river upon which the respondent proposed to erect a building unit complex described as “Dockside Stage III” or “Stradbroke Tower and Villas”. The appellant believed that the performance by its key personnel on the Goodwin Towers project had acquired for it a particular reputation for competence in the eyes of potential customers. The appellant and its witnesses regularly referred to them as the “A Team”. The respondent apparently also shared this view to some extent. At an early stage, Stephen Nicholas Girdis, a director of the respondent, made it clear that he wanted “your A Team” to build Dockside Stage III. At about the same time as the respondent was looking for an appropriate builder for that development, another developer (Seymour) was looking for a builder for a project known as “Admiralty Towers”. Girdis knew that tenders for the Admiralty Towers project closed on 13 May (AB 131 ll 17-20). Presumably, the appellant also knew this. The appellant claims that because it reached a binding agreement with the respondent on 12 May, it submitted an uncompetitive tender for Admiralty Towers and did not win that project.NEGOTIATIONS In early 1994, Ian Harrington was the General Manager of the appellant. He and Girdis were neighbours. In about March 1994, in the course of a social conversation, Harrington and Girdis discussed informally the possibility of the appellant building Dockside Stage III. As a result Harrington and Murray Osbaldiston (another officer of the appellant), attended a meeting at the offices of F A Pidgeon and Sons Pty Ltd (“Pidgeon”), which was also attended by Girdis and Fred Brands, the General Manager of Pidgeon. The respondent is a joint-venture company, the shareholders of which are Pidgeon and Girdis Investments Pty Ltd, a company with which Girdis is presumably associated. Pidgeon is itself a builder. When relations between the appellant and the respondent ultimately broke down, it undertook the construction of Dockside Stage III. According to Harrington, at the meeting on 25 March 1994, Brands indicated that Pidgeon was too busy acting as a developer to become involved in building. Following the meeting, the appellant prepared a tender which was submitted on 22 April 1994. The tender price was $29,196,873. On 26 April 1994 Harrington and Osbaldiston attended a further meeting with Girdis and Brands. They were told that the appellant’s tender was not the lowest. Aspects of the tender were discussed. On 29 April 1994, the appellant submitted a revised tender, the price being $28,344,000, open for twenty-eight days. There was another meeting on 4 May 1994, attended by Girdis, Brands and Osbaldiston. As a result, the appellant submitted a further revised tender dated 6 May 1994. The contract price was $28,434,439, open for twenty-eight days. There was another meeting on 6 May 1994, attended by Harrington, Osbaldiston and Gregory McLean on behalf of the appellant, and Brands and Girdis on behalf of the respondent. Although the actual details of the conversation are to some extent in dispute, it is common ground that the respondent indicated that the price was to be $28,000,000. Either Girdis or Brands said that another builder, Watpac, was still being considered for the job. The appellant’s witnesses said that Brands indicated that the respondent was concerned about “Watpac’s tender load”, a reference to an expectation that Watpac would be awarded the Admiralty Towers contract.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I have already pointed out that the request was for confirmation, implying something already in existence. The request had no relevance to the creation of contractual relations.CONCLUSION I find it impossible to avoid the conclusion that the parties entered into a binding agreement in the telephone conversation on 12 May upon the terms contained in the offer of 9 May, the memorandum of 10 May and as specified in that conversation. They intended that such agreement, in due course, be superseded by a written agreement to be negotiated, based upon the form prescribed in AS 2124, but with amendments. It was possible that no such agreement would ever be reached, but that would not have been critical to the existence of legal relations between the parties. The letter of 12 May discloses Girdis’s probable intention at the time of the earlier conversation. It also reflects his understanding of that conversation. Implicit in much of the respondent’s argument is the assertion that the letter constituted a counter-offer to the effect that the appellant do the work described in the Schedule and the Appendix for the price of $28,261,000. I cannot so construe it. I have already discussed its terms in detail and offered my interpretation of them. Were the case to be decided by reference to Harrington’s version, the result would be the same, especially when one takes into account the admissions in the defence to which I have referred.CERTAINTY OF TERMS Although there appears to have been an agreement, it is still technically possible, as the respondent asserts, that the parties may have failed to agree upon some essential term. The basis for such assertion is not entirely clear. As I have said, in the respondent’s outline of argument there is a schedule identifying “differences between communications of 9, 10 and 12 May and letter of 12 May”. On the view which I have taken of the contract, such differences are of no relevance because a contract had been made on the basis of the first three “communications” before the letter of 12 May was written or delivered The learned trial Judge appears to have concluded that there was no concluded agreement, largely because there was no agreement as to the variations to be made to AS 2124, including the completion of blank spaces. In my view that was also irrelevant because the parties had agreed to be immediately bound, subject to the expectation that such agreement would be superseded by the written agreement when executed. There was always the possibility that such an agreement would not be executed, but that would not have affected the agreement already made. It is of the nature of a contract of the “fourth class” that terms of the proposed ultimate agreement remain to be negotiated. Similarly, it does not matter that, as his Honour observed, the parties “each proposed their own version of the contract.” This was merely an element of the negotiation process. His Honour also concluded that there had been no agreement as to the scope of the work. As I have pointed out, and as appears from his Honour’s reasons, both parties thought to the contrary on 12 May. His Honour refers to three particular examples of this absence of agreement. The first concerns display units. It seems that in negotiations prior to 9 May, the respondent had suggested that display units should be available by week forty-five of the building period. His Honour observed that the offer of 9 May was silent on this question, but the respondent’s Appendix to the letter of 12 May again required access in week forty-five. His Honour concluded that this meant that the parties were not agreed on this issue. The mere fact that the parties had raised this issue prior to the offer of 9 May did not mean that any contract into which they might subsequently enter would necessarily deal with it. No doubt, if the respondent had been sufficiently determined on the point, it would have continued to press it. In that case, it would not have been willing to accept the offer contained in the final offer documents. The parties may not have agreed upon this issue, but there was no reason why they should have done so. It was not in any sense a condition which was essential to the contract. It is convenient to refer to the decision of the English Court of Appeal in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyds Rep 601 at 619:It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true; the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by ‘essential’ one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge ‘the masters of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘Heads of Agreement’.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.