Ground and Foundation Supports Pty Ltd v Aintree Holdings Pty Ltd t/as Beaumonde Homes - [2007] WADC 36

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: GROUND & FOUNDATION SUPPORTS PTY LTD -v- AINTREE HOLDINGS PTY LTD t/as BEAUMONDE HOMES [2007] WADC 36

CORAM: COMMISSIONER SCHOOMBEE

HEARD: 20-24 NOVEMBER 2007

DELIVERED : 30 MARCH 2007

FILE NO/S: CIV 2483 of 2003

BETWEEN: GROUND & FOUNDATION SUPPORTS PTY LTD (ABN 009 432 964)
Plaintiff
AND
AINTREE HOLDINGS PTY LTD t/as BEAUMONDE HOMES (ACN 009 166 661)
Defendant

Catchwords:

Contract - Formation of contract - Whether sketches part of contract - Whether implied term to allow for "adequate footings" necessary for business efficacy - Whether implied term to allow for "sufficient" retaining wall too uncertain

Legislation:

Nil

Result:

Plaintiff's claim allowed
Defendant's counterclaim dismissed

Representation:

Counsel:

Plaintiff: Mr P J Patterson
Defendant: Mr M D Cuerden

Solicitors:

Plaintiff: Taylor Smart
Defendant: Griffiths & Godeke

Case(s) referred to in judgment(s):

Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
D.T.R. Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Davies v Smith (1938) 12 ALJ 258
Farrell v Royal King's Park Tennis Club (Inc) [2006] WASC 51
Godecke v Kirwan (1973) 129 CLR 629
Hawkins v Clayton (1988) 164 CLR 539
Heimann v The Commonwealth (1938) 38 SR (NSW) 691
Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41
Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516
Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498
Wilton v Farnworth (1948) 76 CLR 646

Case(s) also cited:

Nil

COMMISSIONER SCHOOMBEE: Ground & Foundation Supports Pty Ltd ("the plaintiff") is a company providing geotechnical engineering services, predominantly in respect of retaining works and lightweight sheet piling. Aintree Holdings Pty Ltd t/as Beaumonde Homes ("the defendant") is a company whose principal activity is building and construction in Western Australia. In about March/April 2003 the parties entered into a contract pursuant to which the plaintiff was to, amongst other services, supply and erect lightweight sheet piling on the western and northern boundaries of a property at 45 The Esplanade, Mt Pleasant, Perth. A multi-level residence was to be constructed by the defendant on this block and retaining works had to be provided on three levels by reason of the steepness of the block. The sheet piling was a temporary measure, but was required to retain the earth on the adjoining blocks so that the land at 45 The Esplanade could be excavated to the required ground level for the construction of the residence and for a permanent retaining wall to be built on the western and northern boundaries. The lightweight sheet piling consists of thin sheets of corrugated iron which are driven into the ground by a piece of equipment attached to an excavator. The temporary sheet piling is left in the ground, but its purpose is only temporary and the permanent retention is provided by a retaining wall or other structure.

The correspondence between the parties and the agreement

Mr Brenton Black is a director of the plaintiff and a civil engineer who has been involved in geotechnical engineering since 1989. He gave evidence that the plaintiff had previously, in 1999, supplied and erected sheet piling on the adjoining property belonging to a director of the defendant, Mr Julio Galante. Mr Giovanni Nici (who is known by the name John Nici) is the construction manager of the defendant. He has an advanced certificate in architectural draftmanship. On 18 November 2002 Mr Nici asked Mr Black by letter (Exhibit 1) to quote for sheet piling to be installed at 45 The Esplanade. Mr Nici gave evidence that he provided Mr Black with architectural drawings 2C, 3C, 4C and 5C (Exhibit 2) of the proposed residence together with the letter. These drawings indicate that the "finished ground level" for the upper level which was to house a gazebo and the first story of the proposed residence would be at AHD 7.700. AHD refers to "Australian Height Datum" which is a standard measurement to determine a particular height above sea level. A finished ground level at AHD 4.790 was indicated for the mid level which was intended to accommodate the ground floor of the residence, and an under croft floor level was indicated at AHD 1.960. The architectural drawings also showed a line behind the gazebo which Mr Nici had marked on the right hand side of the line with "rear boundary" and on the left hand side of the line with "sheet piling". Drawing 4C indicated a "retaining wall to Engineer's details". This notation was written next to a line approximately 15 millimetres on the inside of another line which was marked "Existing flat limestone retaining wall".
A further set of architectural drawings provided by Mr Nici to Mr Black, drawings 2C, 5C and 5E (Exhibit 4) contained, in so far as relevant, similar information and in addition showed that the existing ground level was, prior to any excavation, above the roof line of the proposed gazebo. The indication of the existing ground level made it clear that the permanent retaining wall would have to be approximately 5.5 metres high, a fact which was acknowledged by Mr Black.
In late November 2002, Mr Black and Mr Nici attended a site meeting together with Mr Ron Thorpe, the structural engineer engaged by the defendant in respect of the proposed residence, the neighbour, a senior estimator from the defendant and a representative of the company which was to do the earthworks. Mr Nici gave evidence that at this meeting he asked Mr Black that he install the sheet piling at 45 The Esplanade "similar to Mr Galante's next door". The plaintiff tendered an architectural drawing of Mr Galante's residence (Exhibit 37) which showed a "high rendered screen wall with sheet piling behind" on what appears to be the boundary of the property and a "stepped cavity fill retaining wall" some distance off-set from the boundary. No further evidence with regard to this drawing or the manner in which the sheet piling was installed on Mr Galante's property was led. This may be because I refused an application by the plaintiff to amend its statement of claim in order to plead that the contract between the parties did not only consist of the correspondence and drawings exchanged, but also of oral instructions given at this meeting. I accepted the argument by counsel for the defendant that it would be prejudicial to the defendant to allow such an amendment as the plaintiff had not provided discovery in respect of the work carried out on Mr Galante's property and the defendant did not have the opportunity of obtaining expert advice with regard to any information in the documents that might have been discovered.
On 2 December 2002, the plaintiff sent a letter to the defendant (Exhibit 5) submitting a "budget price" for the installation of temporary sheet piling with ground anchors for a total amount of $100,000 plus GST. Mr Black gave evidence that after receipt of the budget price, Mr Galante telephoned him and expressed concerned that the price was more than what he had paid in respect of his own property. Mr Black explained the reasons for this, including that more sheet piling was required and that the site at 45 The Esplanade was more difficult to work on. Mr Galante accepted Mr Black's explanation.
On 13 February 2003, Mr Nici sent a facsimile to Mr Black (Exhibit 6) asking him to prepare all necessary work for the installation of the sheet piling as the estimated starting date was early March.
In early March 2003, the plaintiff asked Soil & Rock Engineering Pty Ltd, consulting geotechnical engineers and geologists, to check and approve its preliminary design of the sheet piling for the northern and western boundaries of the property at 45 The Esplanade. The plaintiff's preliminary design consisted of a set of spreadsheets prepared on a computer with the printing date shown as 11 March 2003. The parties referred to the spreadsheets as "sketches". On 27 March 2003 Soil & Rock Engineering Pty Ltd sent a facsimile to Mr Black (Exhibit 43) attaching the plaintiff's sketches with notations to indicate that some of the individual sheets of 6.5 metres length should be increased to 7 metres length. The facsimile also stated that Soil & Rock Engineering Pty Ltd was in the process of finalising the design.
On 11 March 2003 the plaintiff submitted, by letter to the defendant (Exhibit 7), a final tender price of $119,493 plus GST. The letter said that the price was based on a preliminary design and remained subject to confirmation after final engineering. On 17 March 2003, Mr Nici replied by facsimile (Exhibit 8) stating that the defendant accepted the tender for the amount of $119,493 "subject to clarification of methods to be used as described in your tender". This facsimile also contained the following statement:
"Note: All details to be sent to Ron Thorpe (Engineer) to enable him to complete structural plans".
Mr Black gave evidence that he repeatedly asked Mr Nici and Mr Thorpe for structural plans for the permanent retaining wall, but was told that no structural plans would be available prior to installation. Mr Black said that in his experience it was unusual that structural plans were not prepared and provided to the designer of the temporary sheet piling and he thought this to be "highly irregular" as the retaining works on the site were reasonably complex.
The sketches prepared by Mr Black and forwarded to Soil & Rock Engineering Pty Ltd show the individual number of sheet piling sheets, their length and how far they are to be driven into the ground. The sketches also indicate the "existing ground line" at approximately AHD 1150 and the "excavation level" at AHD 7.60. The excavation level at AHD 7.60 is indicated by a dotted line marked in bold as "RL 7.60", which Mr Black said stands for "reduced level". The sketches further show that temporary anchors were to be employed to stabilise the sheet piling.
Mr Black gave evidence that the architectural drawings supplied to him did not indicate the level of the foundations required for the permanent retaining wall on the upper level. It was possible to glean from the drawings at which level the foundations for the middle level and the under croft level had been designed, but not for the upper level. He said that he had allowed only for excavation to AHD 7.60, even though the "finished ground level" was indicated to be at AHD 7.70, as the style of sheet piling together with the nature of the site dictated that the excavation should be as high (shallow) as possible. It was also a question of costs, and this was the cheapest possible option. Mr Black explained that he never intended that the 100 millimetres between the "finished ground level" of AHD 7.70 and the excavation level of AHD 7.60 would allow for foundations for a permanent retaining wall to be built on the boundary line. He understood that the retaining works would be offset from the boundary by a sufficient amount to enable the excavation at the boundary to be kept as high as possible.
Mr Black gave evidence that he had personally delivered a copy of the sketches of the temporary sheet piling to Mr Thorpe. He said that he had done so because he had been requested by Mr Nici to provide all details to Mr Thorpe. Mr Black was not certain on what date he had delivered the sketches to Mr Thorpe but thought that it was likely to have been shortly after 11 March 2003, as this was the date appearing on the sketches.
Mr Thorpe gave evidence on behalf of the defendant. He said that he could not recall the sketches being hand delivered to him, but accepted that he had received them from the plaintiff. Mr Thorpe said in evidence that he had been asked by Mr Nici to explain the sketches of the temporary sheet piling to him and that he had sent a copy of the plaintiff's sketches with his own notations to Mr Nici by facsimile on 3 April 2003. The copy of the sketches faxed to Mr Nici (Exhibit 12) also shows that the sketches which were in Mr Thorpe's possession were printed on 11 March 2003. Accordingly, Mr Black must have delivered the sketches to Mr Thorpe sometime between 11 March 2003 and 3 April 2003.
Mr Black gave evidence that he did not hear from Mr Thorpe in response to him delivering the sketches and also did not receive any structural plans.
On 26 March 2003 the defendant sent another letter to the plaintiff (Exhibit 9) stating: "As discussed, we accept your tender for the above site, being $119,493.00. T & G Earthmoving will commence excavation on the site this afternoon. Please liaise (sic) with Tom to discuss work schedule."
On 11 April 2003 the defendant sent a letter to the plaintiff (Exhibit 44) which advised that the sheet piling was to commence on 14 April 2003. The letter confirmed a number of issues "raised during our many telephone conversations", which issues were essentially additional instructions from the defendant to the plaintiff on how to complete the works. For example, the plaintiff was told to install the sheet piling as close as possible to some existing limestone retaining wall, to not disturb the neighbour's screen wall, to install the sheet piling at 90 degrees to the side boundary and to ensure that (temporary) anchors installed did not interfere with the pool being built by the rear neighbour. Mr Black gave evidence that he started work on the temporary sheet piling on about 14 April 2003, as requested by the defendant.
On 17 April 2003 the plaintiff sent a facsimile letter to the defendant (Exhibit 13) enclosing a timeline for the earthworks and the sketches for the temporary sheet piling.
On 20 May 2003, Soil & Rock Engineering Pty Ltd forwarded their analysis of the plaintiff's design together with the supporting calculations and their approval of the design to the plaintiff.
On 24 June 2003, the defendant sent a letter to the plaintiff (Exhibit 10) stating that the sheet piling had been completed and that concrete footings to the under croft were scheduled to start shortly. The letter contained a last paragraph as follows:
"Note: A 900 millimetre deep footing below the RL7.700 is required by the engineer to be installed hard up against the West boundary piling for a brick concrete cavity wall to be built. Please confirm in writing that the piling has allowed for this 900 millimetre deep footing to be installed".
Mr Black said in evidence that this was the first time that he was told that there was a requirement for the permanent retaining wall to be built immediately adjacent to the temporary sheet piling installed on the boundary. Mr Black replied to the defendant's letter on 5 July 2003 (Exhibit 11) and relevantly stated the following:
"The sheetpiling to the western boundary has been designed and installed to accommodate excavation to a level at or above RL7.600. This is the level shown on sketches supplied to both you and your engineer prior to installation. Your correspondence would seem to suggest that you wish to excavate to RL6.800. Excavation to this level should not be undertaken without an assessment to determine the resultant factor of safety. We would be pleased to instruct our consultant design engineer to analyse the installation "as constructed" if required. The cost is likely to be in the vicinity of $800 to $1,000".
In response, Mr Nici sent a facsimile letter to Mr Black, dated 8 July 2003 (Exhibit 14). This letter stated that Mr Nici was concerned that the sheet piling to the Western boundary had only been designed for excavation to be at RL7.600. Mr Nici pointed out that all plans and faxes sent to Mr Black had clearly indicated "the rear yard to be at ADH7.700". The letter further said the following:
"We employed your services as Professionals and Engineers to ensure that the work is done correctly and as per plan, it is not up to me to check if you are doing your job correctly. The sketches were only fax (sic) through to me by Peter on the 17th April 2003, after Stages 1-3 were completed, also the sketches were not addressed to Beaumonde Homes and I was not asked at any time to check if the sketches were correct.
I believe the excavation level of 7.600 is an oversight by yourselves. Being experienced and well knowledged (sic) in this field of work, you must have expected a footing of substantial size would be required to construct a retaining wall up against the sheet piling. All other sheet piling, at this stage, has been installed to accept a reasonable size footing".
On 18 July 2003, Mr Nici sent a facsimile to Mr Black (Exhibit 15) advising that he had spoken to the rear neighbour who was reluctant to give him a copy of the plans for his residence. All that the neighbour had told him was that his residence had a set back of 6 metres from the rear boundary and that a pool was to be built in the northeast corner. The facsimile letter further said the following:
"With the vague information received from the rear neighbour and the time estimate that we can give you at this stage, I suggest you allow for full load/impact to be placed on the sheet piling. As agreed, please organise your design engineer to determine the safety concerns in installing a 900 millimetre deep footing below the rear level RL 7.600.
I have spoken to Ron Thorpe and he is happy to meet with you, to go through the designs of the retaining walls to rear (West) and North boundaries with you. You can contact him on 9317 3781".
Mr Black gave evidence that whereas he initially felt that the defendant should pay for the additional work required by Soil & Rock Engineering Pty Ltd, he eventually agreed to meet the costs himself, as the defendant had not paid some of his outstanding invoices, which were for substantial amounts. Accordingly, Mr Black instructed Soil & Rock Engineering Pty Ltd to establish whether the sheet piling installed would allow for excavation to RL6.800.
On 1 September 2003, Mr Black sent a facsimile to Mr Nici referring to 2 invoices which remained unpaid (Exhibit 16). The facsimile also stated that Mr Black had spoken to Mr Thorpe and that the latter was of the view that it was "premature to enter into discussions with respect to the northern retaining wall". Mr Black stated that Mr Thorpe had agreed to contact him at a later, more suitable time.
On 6 September 2003, Mr Nici wrote to Mr Black (Exhibit 17) stating that he had not received a response to his facsimile letter of 8 July 2003. This letter also stated the following:
"You have already indicated verbally that the excavation level for the footings was an oversight by your company and with the information on my fax you were to speak to your design engineer to confirm if the excavation to RL 6.800 can be achieved".
Mr Black replied to this facsimile on 8 September 2003 (Exhibit 18) attaching advice received from Soil & Rock Engineering Pty Ltd. This advice was confined to the Western boundary and stated: "We understand that the excavation on the Western boundary is now to be carried out to RL 6.80 rather than to RL 7.60 as originally detailed". The advice by Soil and Rock Engineering Pty Ltd said that the excavation could be carried out to RL 6.80 as long as the sheets had been driven down to RL 5.50. Mr Black's facsimile of 8 September 2003 further noted the following:
"For the record, we did not indicate verbally that the excavation level for the footings was "an oversight". We acknowledged your requirement for that excavation level, suggested that it could probably be accommodated by the sheetpiles "as installed" and undertook to request our consultant geotechnical engineer to re-analyse it accordingly".

Mr Nici gave evidence that there had been a meeting in mid July 2003 at which Mr Black admitted that the RL level of 7.60 was an oversight by the plaintiff. Mr Black said that he did not recall any such admission.
On 11 September 2003, Mr Black wrote to Mr Nici (Exhibit 19) saying that he had not had the curtsey of a reply to his facsimiles of 1 and 8 September and attached an invoice for interest to date in accordance with clause 25 of the plaintiff's terms and conditions.
Between 15 September and 24 October 2003, there was further correspondence between the parties in which Mr Nici requested immediate confirmation in writing that excavation could occur on the Western boundary to RL 6.80 "no matter what the situation occurs to the rear property" (sic). Mr Black replied that it was impossible to give an assurance that excavation could proceed on the Western boundary "no matter what situation occurs to the rear property". Mr Nici also repeated his assertion that the oversight was due to an error on the part of the plaintiff, and Mr Black denied this.
Mr Nici gave evidence that the communications between the parties broke down and that the defendant turned to another company, Drilling & Grouting Services Pty Ltd t/as DGS ("DGS") to resolve the problem. DGS suggested that permanent anchors at a cost of $2,500 per anchor be installed to the permanent retaining wall. The defendant then obtained advice from Mr Thorpe on how many anchors were required and in what position.

Mr Thorpe's Evidence

Mr Thorpe gave evidence that he is a civil engineer who specialises in structural aspects. He was engaged by the defendant as the structural engineer for the proposed residence at 45 The Esplanade in approximately October/November 2002. However, he was only asked to prepare engineering drawings for the retaining walls (Exhibit 40) in about November 2003. He did not recall the exact date, but said that the invoice issued for the work was dated 23 December 2003. Accordingly, he was likely to have started the work a couple of months earlier.
When Mr Thorpe was told by the defendant that the excavation level could only be taken to RL 6.80, which only allowed 800 millimetres for the foundations and 100 millimetres for the brickwork in the rear yard, he designed a permanent retaining wall with a foundation that did not require a key. A key is a structure which is attached at a perpendicular angle to the horizontal foundation and therefore penetrates deeper into the ground. The function of the key is to stop the permanent retaining wall from sliding. As the temporary sheet piling installed did not allow for excavation below AHD 6.80 in the immediate vicinity of the temporary sheet piling on the boundary, Mr Thorpe designed the permanent retaining wall with a 600 millimetre foundation and permanent anchors to stop the retaining wall from sliding. The ground anchors consist of strong cables that are drilled into the ground and anchored. The disadvantage of the ground anchors is that they are more expensive than a key and also require permission from the neighbours, as they protrude underground into the neighbours' property.
Mr Thorpe also prepared, on instructions from the defendant, a drawing of the permanent retaining wall that he would have designed if he had not been restricted by the excavation level of RL 6.80 (drawing S30, Exhibit 40). In that event he would have designed a foundation of 600 millimetres with a key reaching 1300 millimetres into the ground below the foundation. This type of design is called a "cantilever" retaining wall and would have required an excavation level to RL 5.628, as the total depth of the foundation and key together with two courses of brickwork (172 millimetres) would have been 2072 millimetres.
The damages claimed by the defendant in this matter are the difference between the costs of constructing a retaining wall pursuant to drawing S 30 with a key and a retaining wall with permanent ground anchors as finally constructed by the defendant on advice from DGS and Mr Thorpe.
Mr Thorpe said that at the time when he received the plaintiff's sketches of the sheet piling he had not yet been asked by the defendant to design the permanent retaining wall. Although he had received "basic instruction" on the principles of sheet piling when he was at university, he did not check the design of the sheet piling, because he had not been asked by Mr Nici to do so. Mr Nici had only asked him to explain the sketches to him as Mr Nici did not understand them. The notations written by Mr Thorpe on the sketches of the sheet piling indicate the positioning of the sheet piling and the length of each sheet. No notation was made by Mr Thorpe with regard to the indicated excavation level of RL 7.60.
Mr Thorpe's view was that the plaintiff or its design engineer (Soil & Rick Engineering Pty Ltd) should have had enough experience to provide a basic design for the permanent retaining wall and to work out how much excavation was required for the foundations. He said this would have taken a geotechnical engineer only "a couple of hours" to do. Mr Thorpe said that if the plaintiff was not able to produce a basic design for the permanent retaining wall, it should have asked the defendant for a design.
Mr Thorpe conceded that there was no degree of uniformity about how permanent retaining walls are designed and that there were a number of options. He said in this case the specific requirement was for the permanent retaining wall to be as close to the boundary as possible and this required excavation of approximately 2000 millimetres below the ground level, if a key was to be used. He acknowledged that if the permanent retaining wall could be brought further into the property, a different design would have been possible. Mr Thorpe also agreed that the further the key was moved away from the temporary sheet piling, the more the depth of the temporary sheet piling, and therefore the excavation level could be reduced. By way of example, he explained that if the key was moved to the road out the front, it would not have any effect on the temporary sheet piling. However, with regard to the property at 45 The Esplanade, there was no reasonably practical manner in which a key could have been used, if there was only a 100 millimetre allowance for footings (at an excavation level of RL 7.60). Mr Thorpe agreed that if the allowable excavation level was RL 6.80, solutions other than the ground anchors could have been used. He said that at the end of the day it was a compromise between the designer of the sheet piling, who would aim for minimum excavation, and the designer of the permanent retaining wall, who would aim for maximum excavation.

Mr Woodward's Evidence

Mr Marc Woodward gave evidence on behalf of the plaintiff. He is a senior principal and the regional manager of Coffey Geotechnics. Coffey Geotechnics purchased Soil & Rock Engineering Pty Ltd as a going concern in October 2003. Mr Woodward has a degree in civil engineering and has specialised in geotechnical contracting and consultancy work.
Mr Woodward gave evidence that there were many solutions for any permanent retaining problem. The solution was determined by factors such as time, money, access, aesthetics, architectural requirements and engineering factors. He said that in order to reduce the excavation requirement the permanent retaining wall could be located forward of the temporary sheet piling. He agreed that a cantilever-type retaining wall was the most common method of building a retaining wall in the residential and small commercial sectors. Mr Woodward gave evidence that he had done some calculations as to whether a permanent retaining wall of a cantilever-type with a key at the furthest end of the foundations, rather than in the middle, could have been built on the basis of an excavation level of RL 6.80. However, he was not asked by either counsel to disclose the result of these calculations to the court.
Mr Woodward said that he had not prepared the reports by Soil & Rock Engineering Pty Ltd, but had checked them. The report of 20 May 2003 forwarded to the plaintiff indicated (on p 11 of the faxed sheets) that an excavation level at AHD 7.3 had been allowed rather than at AHD 7.6 as indicated on the plaintiff's sketches of the temporary sheet piling. Mr Black said that it was usual to ensure that there was an additional safety factor in order to allow for the "idiot factor", that is people digging deeper than instructed. Mr Woodward explained that when his company did the re-calculations to see whether an excavation to RL 6.80 was possible, it was determined that this was quite safe on the Western boundary. However, because there was uncertainty about what the neighbour planned on the property to the north, it was deemed necessary to put additional temporary anchors on the sheet piling on the Northern boundary. It was then also decided to put temporary anchors on the Western sheet piling wall because of the "three-dimensional complexity" at the north/west corner and it would have been cheaper to put in temporary anchors than to do a three-dimensional analysis.

The pleadings

The plaintiff's case was that it had agreed to supply and install temporary sheet piling for a particular price, had done so, and was entitled to be paid the outstanding amount of $21,069. The plaintiff amended its statement of claim during the trial to plead that the sketches of the sheet piling provided by the plaintiff to Mr Thorpe and the defendant formed part of the agreement between the parties. Counsel for the plaintiff argued that the defendant's facsimile letter of 17 March 2003 required that "all details" be sent to Mr Thorpe to enable him to complete the structural plans, and that the sketches subsequently provided to Mr Thorpe formed part of the agreement.
The defendant pleaded an express, alternatively, implied term of the agreement that the installation of the sheet piling would allow for "an adequate footing to be installed by the Defendant below the finished ground level of AHD 7.700 to allow for the construction of a sufficient permanent retaining wall". The plaintiff denied that any such term had been expressly agreed or that there was scope for such an implied term.

Formation of agreement and express terms

The correspondence exchanged between the parties is not easy to classify into an offer and an acceptance. However, there did not appear to be any major disagreement between the parties as to the express terms of the contract apart from the question whether the sketches formed part of the contract or not.
In my view the plaintiff's letter of 11 March 2003 submitting a tender price of $119,493 plus GST is to be regarded as the offer. The letter stated that the tender price was based on the information contained in drawings #1E and #5E. In fact no drawing 1E was tendered. Drawing 5E was tendered (as part of Exhibit 4) and this indicates that the ground level on the upper level was to be at AHD 7.70. The letter of 11 March 2003 does not refer to the drawings marked issue C. Mr Nici gave evidence that he had sent drawings 2C, 3C, 4C and 5C to the plaintiff. Mr Black accepted that he had received issue C drawings, as drawings 2C and 5C contain notes made by him. Further, the plaintiff discovered drawings 2C and 5C and 5E as having been in its possession. A smaller version of drawing 4C which contains the words "retaining wall to engineer's details" was sent to Mr Black by Mr Nici on 26 November 2002 (Exhibit 3) in response to Mr Black requesting additional floor plans. Mr Black accepted that he had been provided with the various ground levels for the upper level, mid level and under croft. Mr Black also said that he could see from the drawings what footings were required for the retaining structure in respect of the mid level and under croft level. This does not appear to have been disputed by the defendant.
In my view the architectural drawings provided to the plaintiff show that it was an express term of the contract between the parties that the finished ground level at the upper level of the property was to be at AHD 7.70 and that the temporary sheet piling was to be placed as close as possible to the Western boundary.
The plaintiff's letter of 11 March 2003 stated that the price was based on a preliminary design and subject to confirmation after final engineering. Neither party attached any importance to this condition, as Soil & Rock Engineering Pty Ltd approved the design and the price was not adjusted. The first approval from Soil & Rock Engineering Pty Ltd was provided on 27 March 2003, but this stated that the final design was still to be completed. Confirmation of the design together with the supporting calculations was only sent by Soil & Rock Engineering Pty Ltd to the plaintiff on 20 May 2003. In my view, the fact that the final approval from Soil & Rock Engineering Pty Ltd was only obtained in May 2003 does not mean that the parties did not enter into a binding contact in March 2003. In Godecke v Kirwan (1973) 129 CLR 629 at 642 Walsh J held the following:
"It is clearly established that a binding agreement may be made which leaves some important matter, e.g. the price, to be settled by the decision of a third party".
The defendant accepted the plaintiff's offer of 11 March 2003 in its facsimile letter of 17 March 2003. However, the acceptance was conditional, as it was "subject to clarification of methods to be used as described in your tender". Further, the letter required the plaintiff to send all details to Ron Thorpe to enable him to complete the structural plans. In my view this was a further condition of the acceptance. It is unlikely that the defendant intended to accept a tender for temporary sheet piling without having been shown the design or been provided with any detail of it.
On 26 March 2003 the defendant sent another facsimile letter to the plaintiff saying "as discussed, we accept you're tender for the above site, being $119,493". It is likely that Mr Nici sent this repeated acceptance of the tender in order to confirm that he was now satisfied with the methods to be used by the plaintiff. Mr Black gave evidence that Mr Nici had required further information with regard to the grouting to be used.
It is also possible that the repeated acceptance of the tender was prompted by the receipt by Mr Nici of the plaintiff's sketches of the sheet piling. Mr Black gave evidence that it was likely that he provided the sketches to the plaintiff soon after they were printed and the date on the sketches indicates that they were printed on 11 March 2003. Mr Nici referred in his letter of 8 July 2003 to the fact that the sketches were only faxed through to him on 17 April 2003. The facsimile letter from the plaintiff to John Nici of Beaumont Homes, dated 17 April 2003, attached a timeline as well as the sketches for the sheet piling. However, Mr Nici must have been mistaken about the date when he first received the sketches, because the facsimile imprint on the copies of the sketches faxed by Mr Thorpe to Mr Nici indicates that the sketches with Mr Thorpe's hand written notations were faxed to Mr Nici on 3 April 2003 (Exhibit 12). Accordingly, Mr Nici was in possession of the plaintiff's sketches at least by 3 April 2003.
I am not satisfied that the plaintiff has proven that the sketches were provided to the defendant prior to 26 March 2003. They may only have been provided to the defendant after the plaintiff received the first approval by Soil & Rock Engineering Pty Ltd on 27 March 2003. Although the parties' respective counsel attached some importance to the date on which the sketches were received by Mr Thorpe, in my view not much turns on whether Mr Nici or Mr Thorpe received the sketches of the temporary sheet piling before 26 March 2003. The defendant's acceptance of the tender was conditional on details of the sheet piling being supplied to Mr Thorpe. Until Mr Thorpe had received the sketches, no binding contract came into being.
Another way of analysing the correspondence into offer and acceptance is to say that the defendant's letter of 17 March 2003 was in fact a counter-offer and not an acceptance, as it contained an additional essential term, namely the requirement that the details of the sheet piling had to be supplied to Mr Thorpe. A letter of acceptance containing an additional essential term is usually regarded as a counter-offer: Davies v Smith (1938) 12 ALJ 258 at 258 and Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498 at 503. If this construction is adopted, the counter-offer was accepted by the plaintiff when Mr Black delivered the sketches to Mr Thorpe. It is a well-established principle that a party may accept an offer, particularly a counter-offer, by conduct: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 686.
The plaintiff delivered the sketches to Mr Thorpe sometime between 11 March 2003 (when they were printed) and 3 April 2003 (when they were faxed by Mr Thorpe to Mr Nici). The letter requesting the detail of the sheet piling to be provided to Mr Thorpe was only sent on 17 March 2003. Accordingly, in my view, the contract became binding sometime between 17 March 2003 and 3 April 2003.
It could be said that the defendant's facsimile letter to the plaintiff of 11 April 2003 in which Mr Nici confirmed a "number of issues" dealing with how the work was to be performed and instructed the plaintiff that the sheet piling was to commence on 14 April 2003 constituted a further counter-offer by the defendant containing additional essential terms. However, in my view, the further requirements stated in the letter of 11 April 2003 were not essential terms, but just a clarification of the manner in which the work was to be done by the plaintiff.
Having established when the contract came into being, the next question is whether the parties intended that the sketches form part of the terms of the contract. In Hospital Products Limited v United States Surgical Corporation(1984) 156 CLR 41 at 120, Deane J held the following:
"The test for determining whether any, and if so which, of those statements in fact constituted an express term of the contract is whether the proper inference is that the relevant statement or representation was, when viewed objectively and in context, offered and accepted as, or as part of, a contractual promise".
In my view the letter of 17 March 2003 which contained the request that all details be sent to Mr Thorpe indicates that the parties regarded the details of the design of the sheet piling to be an essential term of the contract. The request was preceded by the word "NOTE" (in capital letters) and it would be surprising if the defendant was prepared to pay a sum of $119,493 plus GST for work in respect of which he had been given no detail. Further, the fact that Mr Nici asked Mr Thorpe for an explanation of the sketches means that he clearly attached some importance to this information. If the roles had been reversed and the defendant would have wanted to rely on the information in these sketches, it would have been evident that the parties intended the sketches to form part of the agreement as the sketches contained such important information in the form of the whole design of the sheet piling.
In my view it does not matter that the defendant did not expressly acknowledge that it had received details of the design of the sheet piling or that it was satisfied with such design. Acceptance of the design was in any event indicated by conduct when the defendant, having received the sketches, instructed the plaintiff to commence work on 14 April 2003. If the defendant had not been satisfied with the design, it could have contacted the plaintiff and requested a variation to the existing contract.
It is also irrelevant for purposes of deciding what constituted the terms of the agreement between the parties that Mr Nici did not fully understand the sketches or that neither he nor Mr Thorpe picked up that the design of the sheet piling did not accord with the type of permanent retaining wall that they had in mind. In Wilton v Farnworth (1948) 76 CLR 646 at 649 Lathan CJ held the following:
"In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he is prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions."

In my view the above statement is applicable even though Mr Nici did not sign the sketches. The information contained in the sketches formed part of the essential terms of the contract and it was up to the defendant to make sure that it fully understood the significance of the information in the sketches. The sketches indicated very clearly that the excavation level was at RL 7.60. The fact that Mr Nici did not appreciate the impact of this information and that Mr Thorpe did not sufficiently put his mind to it to realise that with the proposed finished ground level at AHD 7.70 the design of a permanent retaining wall immediately in front of the sheet piling was restricted, is of no import as far as the formation of the contract is concerned.
If the excavation level at RL 7.60 was a term of the contract, this does not leave any room for an implied term that the sheet piling would allow for "an adequate footing to be installed by the Defendant below the finished ground level of AHD 7.700", as the defendant's case was that such an "adequate footing" would have required at least 2000 millimetres excavation below the finished ground level of AHD 7.70 which is clearly contradictory to the express term. However, I propose to deal with the implied term pleaded by the defendant in case I am wrong in my finding that the excavation level at RL 7.60 was an express term of the contract.

Implied Term

The defendant's case was based on an express, alternatively, implied term that "the installation of the sheet piling would allow for an adequate footing to be installed by the Defendant below the finished ground level of AHD 7.70 to allow for the construction of a sufficient permanent retaining wall". Whereas the architectural drawings provided made it clear that the finished ground level on the upper level was to be at AHD 7.70, there is no evidence in the drawings or correspondence to support the remainder of the pleaded term as an express term.
On the alternative basis, counsel for the defendant argued that the parties must have intended such a term to be part of their agreement as the plaintiff knew that a permanent retaining wall was to be installed, that the finished ground level at the upper level was to be at AHD 7.70 and that the permanent retaining wall would require a footing of more than 100 millimetres depth. The defendant's case was further that the plaintiff knew that the permanent retaining wall was to be built as close to the sheet piling as possible so as to allow the maximum space in the rear yard and that a cantilever-type retaining wall was the most common structure in the residential sector. Counsel for the defendant submitted that an implied term which referred to "adequate footings" was not too vague and that once the court had decided that such a term could be implied, expert evidence could be relied upon to determine what was "adequate".
62 It is well-established law since BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 that a term can only be implied into a contract if it meets the following criteria:
(a)it must be reasonable and equitable;
(b)it must be necessary to give business efficacy to the contract;
(c)it must be so obvious that "it goes without saying";
(d)it must be capable of clear expression;
(e) it must not contradict any express term of the contract.
In Hawkins v Clayton (1988) 164 CLR 539 at 571-573, Deane J pointed out that the above criteria were laid down in respect of a formal, written contract which was complete upon its face. Where a contract is oral or partly in writing and partly oral the parties have usually not attempted to spell out all the terms of their contract and have left some to be implied. In a contract which is not recorded in a document it will not be necessary to prove that all of the criteria laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (supra) have been satisfied. Some degree of flexibility should be allowed, as long as it can be said that the implied term was necessary for the reasonable or effective operation of the contract in the circumstances of the case. The more flexible approach proposed by Deane J in Hawkins v Clayton (supra) was endorsed by the majority in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422.
It has often been pointed out that the courts are slow to imply a term. This is because the parties have made an agreement and "each may be prepared to take his chance in relation to an eventuality for which no provision is made": Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346. It is also trite law that the implication of a term in a contract is designed to give effect to the parties' presumed intention. Further, it is generally accepted that apart from relying on the express terms of the contract, a court is also entitled to look at the surrounding circumstances, the objective set of facts, which were present at the time the parties entered into the contract in order to assess whether the parties intended the implied term to be part of their agreement: Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) at 351-352. The party alleging that a term should be implied carries the onus of proving this: Heimann v The Commonwealth (1938) 38 SR (NSW) 691 at 695.
In my view, the main problem with the implied term as formulated by the defendant is that it is too vague and uncertain to be implied. The fourth criterion laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings is that the proposed term must be capable of clear expression. That does not only mean that the proposed term can be clearly formulated, it also requires that the parties would have understood what they had agreed to if they had put their minds to it. In Farrell v Royal King's Park Tennis Club (Inc) [2006] WASC 51 Johnson J summarised this concept as follows:
"For a term to be implied it must be capable of clear expression and reasonably certain in its operation: Terkol Rederierne v Petroleo Brasileiro SA (The Badagry) [1985] 1 Lloyd's Rep 395 (at 401)."
Although the proposed term in the present case has been clearly formulated, it is too vague to be applied, as it requires one indeterminate concept, the "adequate footings", to be assessed on the basis of another indeterminate concept, the "sufficient permanent retaining wall". Without there being agreement on what a "sufficient permanent retaining wall" encompassed, it was impossible to assess what "adequate footings" should be.
Counsel for the defendant referred to a number of cases in which the court implied a term describing some object or service to be provided as "reasonable". In Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 at 521, the majority (per Barwick CJ, McTiernan J and Menzies J) allowed an implied a term that a door to be supplied and fitted by a company providing burglar-proof protection would provide reasonable protection against persons seeking to break in when the locking devices in the door were in operation. The majority held that the term was to be implied because it was the business of the defendant to provide burglar proof protection and the plaintiff relied upon the defendant's skill and ability to supply, fit and hang a door which would provide reasonable protection against persons seeking to break in. Although the express terms of the contract only provided for a door "to suit opening" with a steel sheet on the outside and a certain locking system, the defendant had breached the implied term when it supplied a door, with steel sheet and locking system as agreed, but did not put strips of steel on the door jambs which allowed the burglars to splinter the wooden jambs with a jemmy and lever open the door despite the locking devices.
In my view the present case differs from the facts in Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (supra). The High Court case confirms that, given certain background facts, an obligation to provide materials or services to a reasonable standard may be implied. I accept that this is correct. This is also borne out by some of the other cases cited by counsel for the defendant. However, in the circumstances of this particular case, I am of the view that a term allowing for "adequate (or reasonable) footings" cannot be implied, because the assessment of what was reasonable depended on another indeterminate concept, that is, the "sufficiency" of the retaining wall.
Further, it is not only that the proposed implied term requires one indeterminate concept to be assessed on the basis of another indeterminate concept, the second concept, a "sufficient retaining wall", lacks an objective external standard against which it can be measured. In Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 137, the majority in the NSW Court of Appeal held that a promise in an employment contract which offered the employee the option to participate in the employer's senior staff equity sharing scheme, where no such scheme was in existence, was too uncertain to be enforced. Kirby P (as he then was) held that the term was too uncertain of content because, on the assumption that the parties intended that participation in an "appropriate" or "reasonable" equity participation scheme was promised, such a term depended for fulfilment upon the decision of one party, namely the employer. There was no external standard by which it could be determined what an "appropriate" or "reasonable" equity participation scheme was.
In this case there was also no external standard to determine what a "sufficient permanent retaining wall" entailed and the nature and position of the retaining wall depended on a choice to be made by the defendant, its consulting engineer (Mr Thorpe) and/or the owner of the property. Both Mr Woodward and Mr Thorpe said that there were numerous ways in which a retaining structure could be built and that the necessary level of excavation depended on the type of foundation used. If a key was to be employed as part of the foundation, the excavation level would have to allow for that key, but the further away the key was situated from the temporary sheet piling, the less the excavation level immediately adjacent to the sheet piling had to be. Further, if a cantilever-type retaining wall was used, the distance between this and the temporary sheet piling determined the excavation level required immediately adjacent to the sheet piling. Mr Thorpe and Mr Woodward did not disagree on these engineering principles. It is also apparent from the solution used to resolve the problem in this case that a permanent retaining wall could be built immediately adjacent to the sheet piling as long as it had permanent anchors. Accordingly, there was no objective standard by which a "sufficient retaining wall" could be assessed.
In my view a term that allowance would be made for "adequate footings" for a permanent retaining wall could only be implied if it was also an express or implied term of the contract that the permanent retaining wall would be as close to the temporary sheet piling and the Western and Northern boundaries as possible and that it was to be of the cantilever type. If that information had been available to the plaintiff, the submission by counsel for the defendant that Mr Black should have known that a substantial excavation level, ie more than 100 millimetres, below the finished ground level of AHD 7.700 was required, would have had some merit. However, there is no evidence to support an express term that the retaining wall was to be placed as close to the boundary as possible or that it was to be of the cantilever-type.
The defendant could have formulated the proposed implied term on a slightly different basis, namely that the sheet piling was to allow an "adequate footing for a cantilever-type retaining wall to be built as close as possible to the temporary sheet piling on the boundaries". However, even if I accept that the defendant intended such a formulation of the implied term, I am not persuaded that the express terms of the contract or the surrounding circumstances support an implied term that the retaining wall was to be of a cantilever type and to be built as close as possible to the temporary sheet piling on the boundaries.
There was no indication on the architectural drawings provided to the plaintiff that the permanent retaining wall would be of a cantilever type and as close to the Western and Northern boundaries as possible. Drawing C5 contained Mr Nici's handwritten notations which indicated that the sheet piling should be on the rear (Western) boundary. However, there was no indication of where the permanent retaining wall would be built. Drawing C4 shows a line marked "retaining wall to Engineer's details" which is placed on the drawing approximately 15 millimetres to the inside of another line marked "Existing flat limestone retaining wall". If anything, this notation indicated that the permanent retaining wall was not intended to be right on the boundary. Counsel for the defendant argued that the plaintiff should have realised that the retaining wall was to be positioned as close to the boundary as possible, as this would be the only sensible approach to allowing as much space for the rear yard as possible. However, in determining whether an implied term applies, the question is not what the plaintiff should have realised, but whether it can be said that objectively assessed, it was definitely the intention of both parties that the permanent retaining wall be on the outer boundary.
I do not take into account Mr Black's evidence that he thought that the permanent retaining solution was intended to be offset from the boundary, as this reflects his subjective intention of what he thought the terms of the agreement were with regard to the positioning of the permanent retaining wall. Mason J held the following in Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) at 352:
"It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations, they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself".
It could be said that both parties knew that the sheet piling was to be installed in the same manner as on Mr Galante's property, as Mr Nici gave evidence that he asked Mr Black to do this. In addition, an architectural drawing of Mr Galante's property was tendered which shows a "high rendered screen wall with sheet piling behind" on what appears to be the boundary of the property and a "stepped cavity fill retaining wall" some distance off-set from the boundary. The information contained on this drawing seems to indicate that the retaining structure on Mr Galante's property was not built on the boundary or as close to the sheet piling as possible. This information could be regarded as a further objective fact which is contrary to the term sought to be implied by the defendant. However, there was no evidence that Mr Nici had seen the drawing of Mr Galante's property at the time of the negotiations preceding the parties' agreement or that he knew what form the permanent retaining structure on Mr Galante's property took. In D.T.R. Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429 the majority (by Stephen, Mason and Jacobs JJ) made it clear that it was only surrounding circumstances in the form of "mutually known facts" which may be admitted as evidence in construing a contract.
Accordingly, I have not taken into account any evidence concerning Mr Galante's property in deciding whether the surrounding circumstances establish the implication of the term pleaded by the defendant or a term that the retaining wall would be of the cantilever type and as close to the boundary as possible. However, even without this evidence, I am not persuaded that the defendant has proven that either the express terms of the agreement or the surrounding circumstances establish that the plaintiff knew that the permanent retaining wall was to be built as close as possible to the temporary sheet piling on the Western and Northern boundaries.
There is also no indication on the architectural drawings or in the correspondence between the parties that the plaintiff knew that the defendant intended to build a cantilever-type retaining wall. The mere fact that this is the most common solution in the domestic market, does not mean that this is necessarily what the parties intended.
For the reasons set out above I am of the view that the evidence does not support an implied term as pleaded by the defendant and also not an implied term that the sheet piling would allow for an "adequate footing for a cantilever-type retaining wall to be built as close as possible to the temporary sheet piling on the boundaries".

Demeanour

This case turns essentially on the evidence presented in the correspondence between the parties and the architectural drawings and not the oral evidence of the parties. Accordingly, I am of the view that the credibility of the parties does not have a major role to play. In so far as this may be relevant, I did not have a concern about the credibility of any of the witnesses. In my view all the witnesses presented their case in a straightforward and forthright manner.
It was apparent that Mr Nici and Mr Thorpe both tried to justify their own oversights by blaming Mr Black and saying that he should have done a basic design of the permanent retaining wall and should have asked for the information which the defendant did not provide. However, this does not mean that Mr Nici and Mr Thorpe did not present their evidence in a truthful manner.
Counsel for the defendant submitted that Mr Black did not present his evidence in a straightforward manner, but counsel did not provide any examples of this. In my view Mr Black gave his evidence in a careful manner but was not evasive or contradictory in any way. He was prepared to make concessions such as that he did not know the exact date on which the sketches were delivered by him to Mr Thorpe. I have no reason to doubt Mr Black's evidence.
Counsel for the defendant also submitted that Mr Black had made an admission at the meeting with Mr Nici in July 2003 that the excavation level for the footings of the permanent retaining wall was an oversight by him. The fact that Mr Black had made an admission in this regard was first raised by Mr Nici in his letter to the plaintiff of 6 September 2003. However, it was immediately refuted by Mr Black in his letter in reply of 8 September 2003. I am not satisfied that such an admission had been made. Mr Black explained in his letter that he had acknowledged the defendant's requirement for a lower excavation level and suggested that it could probably be accommodated subject to confirmation by the geo-technical engineer (Soil & Rock Engineering Pty Ltd). Mr Nici may have deducted from this explanation that the plaintiff took responsibility for the misunderstanding between the parties.
The essential problem in this case is that insufficient information was exchanged between the parties. There is not much dispute between the parties with regard to what happened and what the relevant engineering principles are for the building of a permanent retaining wall and the excavation level near the temporary sheet piling. The case turns, not on credibility, but on the legal principles applicable to a case of inadequate communication between the parties. I have come to the conclusion that the information exchanged between the parties made it clear what excavation level the plaintiff had allowed for in its design of the sheet piling and that the express terms and surrounding circumstances do not allow the implication of a term as pleaded by the defendant.

Result

I accordingly find that the plaintiff performed the contract in accordance with the express terms of the agreement and that there is no term to be implied as pleaded by the defendant. This means that the plaintiff succeeds in its claim for $21,069 and the defendant's counterclaim is dismissed.