Icon Construction Australia Pty Ltd v Lysaght Building
[2010] VCC 1285
•24 September 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-09-04126
| ICON CONSTRUCTION AUSTRALIA PTY LTD | Plaintiff |
| v | |
| LYSAGHT BUILDING SOLUTIONS PTY LTD and | Defendants |
| BLUESCOPE STEEL LTD |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 23-27, 30 & 31 August and 1 & 7 September 2010 |
| DATE OF JUDGMENT: | 24 September 2010 |
| CASE MAY BE CITED AS: | Icon Construction Australia Pty Ltd v Lysaght Building Solutions Pty Ltd & Anor. |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1285 |
REASONS FOR JUDGMENT
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| Catchwords: | Building contract – Whether binding contract entered into – Contract alleged to have been partly writing, partly oral and partly to be implied – Effect of subsequent conduct by the parties – Alternative claim based on estoppel and unconscionable conduct. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr F. J. Tiernan SC | Middletons |
| For the Defendants | Mr B. A. Schnookel | Baker & McKenzie |
| HIS HONOUR: |
1 In December 2008, the plaintiff (Icon) was awarded the contract to build a 33 storey apartment tower at 19-37 A’Beckett Street, Melbourne. The contract price was $55,031,812. The apartment tower contained an unusual design feature – metal sunshades on the north face of the building.
2 On 28 November 2008, the defendants (Bluescope Lysaght) had submitted a tender price to Icon for three elements of the project – the sunshades, façade cladding and car park screens. Icon claims that on 5 December 2008 Bluescope Lysaght entered into a building contract with it to design, supply and install the sunshades for the
project for the total cost of $469,920. This price was a significant cost saving to Icon.
Icon’s original estimate for the sunshades was said to be about $1.4 million.3 During the preparation of its tender, Icon obtained tender prices from two sub- contractors for the sunshades – Frontier Façade for $2.1 million and Tafkon Engineering for $4.2 million. As a result of receiving Bluescope Lysaght’s offer, Icon was able to offer a cost reduction to the principal during the tender review process and was thereby assisted in its bid to be awarded the contract for the project.
4 Icon alleged that the contract between it and Bluescope Lysaght was “partly written, partly oral and partly to be implied”. Apart from Bluescope Lysaght’s written tender submission dated 28 November 2008, Icon relied upon discussions between the parties on 28 November and 1, 4 and 5 December 2008. Bluescope Lysaght denied that any concluded agreement had been reached and said that it never intended to reach agreement with Icon except for a total package of the three items of work, including the façade cladding and car park screens, as well as the sunshades.
5 Between 5 January and 14 May 2009, representatives of Icon and Bluescope Lysaght conducted telephone conversations, had two face-to-face meetings and extensive email correspondence in relation to the apartment towers project. It appears, however, that during this period Bluescope Lysaght were deliberately neglecting to execute formal contract documents and were misleading Icon about its commitment to the sunshade project, unless the price were renegotiated.
6 On 14 May 2009, Bluescope Lysaght notified Icon that it had underestimated the cost of the sunshades and its revised price to complete the work was $1,15 million. After a further meeting on 15 May 2009 and correspondence between the parties, Icon
Bluescope Lysaght. After a further tendering process, Icon engaged T & L Group at a
price of $1.1 million to perform the sunshade works. A later variation added $70,000
to the price. In the proceeding, Icon claimed the sum of $713,110, which is
essentially the difference between the sum of $469,920 to which Icon sayspurported to terminate the contractual arrangement it said was in place with increased sum it was obliged to pay T & L Group together with costs associated with obtaining further tenders for those works.
7 In the alternative, Icon makes a claim based upon estoppel and unconscionable conduct alleging that statements in the tender document by Bluescope Lysaght on 28 November 2008 and in discussions before 1 or 2 December 2008 constituted a representation that Bluescope Lysaght would design, supply and install the sunshade works for the sum of $469,920. As a consequence, Icon alleged, it acted to its detriment by entering into the head contract and proceeding with the project on the basis that Bluescope Lysaght would perform the sunshade works for its tender price. Icon claimed it had suffered loss and damage when Bluescope Lysaght advised Icon that it would only carry out the works for a price of $1,15 million.
8 In the circumstances, the proceeding raises the following issues for determination:
a.
Did the parties enter into a binding contract on about 5 December 2008 whereby Bluescope Lysaght agreed to perform the sunshade works on the project for the price of $469,920?
b.
Was Bluescope Lysaght’s offer conditional upon it performing the sunshade works only if they were part of a sub-contract package which included the façade cladding and car park screens?
c.
Was the existence of any agreement confirmed by the conduct of the parties between December 2008 and early May 2009?
d.
In the alternative, if no binding contract came into existence did Bluescope Lysaght make an actionable representation prior to 1 or 2 December 2008?
e.
If Icon is entitled to succeed on the breach of contract claim or the alternative claim, to what relief is it entitled?
The tender process
9 In October 2008, Icon was requested to tender for the construction of the A’Beckett tower. Four other builders were also asked to tender, including Contexx Pty Ltd. Icon identified the sunshades on the northern face of the building as an unusual feature of the design. At that time, architectural drawings of the sunshades were available but there was little detail of the structural requirements. In order to obtain an indication of the likely cost of the sunshades for the project, Icon’s chief estimator, Mr Robert Menelle, prepared calculations and obtained quotations from steal fabricators, Fabkon Engineering and Frontier Facades. Fabkon Engineering’s price for the sunshades was $4.2 million and Frontier Facades’ was $2.1 million. Mr Menelle’s estimate was apparently about $1.4 million.
10 There are two defendants to the proceeding. They are associated companies with a very large share of the steel market in Australia. There is no issue in the case that one or both of the defendants are appropriately joined in the proceeding. The first written communication between the defendants and Icon was under the letterhead of “Bluescope Lysaght”. The letter made reference to Lysaght Building Solutions Pty Ltd and the fact that Bluescope was a trademark of Bluescope Steel Limited. I shall refer in the judgment in the defendants collectively as “Bluescope Lysaght”.
11 In November 2008, Bluescope Lysaght submitted a price to Contexx. However, after the tenders had closed Bluescope Lysaght determined to approach other tendering builders, including Icon. On 28 November, Mr Andrew Ritchie, Bluescope Lysaght’s Facades Business Manager for Victoria and South Australia, telephoned Mr Andrew Pettenon, Icon’s design manager, and told him that he was interested in submitting a price for certain elements of the project. Later that day, Mr Ritchie emailed a quotation (wrongly dated 28 October 2008) through to Icon.
12 Icon alleges in the proceeding that seven days later, on 5 December 2008, Icon orally for it to carry out the sunshade works for the price quoted in the letter of offer for those works of $469,920.
13 email from Mr Ritchie. In the email, Mr Ritchie stated that Bluescope Lysaght’s “offer”
was for the façade, sunshades and the car park screen. Two alternative prices were
submitted for the car park screen, one of which conformed to the tender requirementsThe letter dated 28 October 2008 was sent on 28 November as an attachment to an conforming bids, in the case of the sunshades, using a Bluescope Lysaght proprietary product as the painted cladding material.
14 priced quite high this
part of the offer was not a good fit for us [but] having said that we are very keen for
the other two aspects”. The attached letter was stated to be Bluescope Lysaght’s
“tender price” for the façade, car park screen and sunshades. Separate prices were
submitted for the “conforming tender” for the car park screen ($669,000), for theMr Ritchie conceded in his email that the façade element is “[as] sunshades ($469,920). Two alternative total prices were submitted; each included the three elements. The first price included the conforming car park screen price (a total of $1,880,920) and the second included the non-conforming car park screen price (a total of $1,871,425).
15 The letter from Bluescope Lysaght to Icon dated 28 November 2008 suggested certain consequences “should our proposal receive assent” and referred to inclusions and exclusions in “our quotation tender”. The tender letter provided under the heading, “Terms and Condition of Sub-Contract”, that “This submission is subject to
suitable terms and conditions of subcontract being agreed between the main
contractor and Bluescope Lysaght”. Under the heading “Validity”, the letter provided
that, “This tender shall remain valid for a period of 30 days from the date ofsubmission. This quotation is based on the prior stated activities and exclusions, any
variance from these activities will require a retender”.
16 When Icon received the tender letter from Bluescope Lysaght, it was involved in a process of negotiation with the principal’s representative, PDS Group, to review its own tender price to “seek efficiencies” and to “look for savings”. Mr Pettenon became
involved in the project for this purpose. In this context, the proposal of Bluescope façade and car park screen were not competitive, the sunshades quotation of $469,920 represented a substantial saving to Icon and the opportunity to reduce its total price for the project. Reducing its price would give Icon a better chance of being awarded the contract for the project.
17 The fact that Bluescope Lysaght’s tender price for the sunshades was for an alternative product, required Icon to obtain the principal’s agreement to Bluescope Lysaght’s suggestion of its own proprietary product as the painted cladding material to be used in the construction of the sunshades.
Mr Andrew Ritchie’s authority
18 Mr Ritchie reported directly to Ms Catherine Jacob, the General Manager of Bluescope Lysaght. In November/December 2008, as the Façades Business Manager, Mr Ritchie had submitted a tender price to Contexx. During late November and early December 2008, he had email communication with both Ms Jacob and Mr Steven Halpin, the operations manager at Bluescope Lysaght, in relation to the formulation of both the Contexx and the Icon tender prices. Mr Halpin gave evidence that Mr Ritchie had no authority to bind the companies and that ordinarily, during the tender process, Mr Halpin would negotiate the scope and terms of any arrangement and make a decision as to whether to recommend to Ms Jacobs that a contract should be entered into. The final decision was usually only made after legal counsel had reviewed the contract documentation.
19 In the present case, after considering the steps taken by Mr Ritchie, and particularly his dealings with Mr Pettenon of Icon, I consider that Mr Ritchie had actual authority to make the offer he did. The question of whether that offer was, without further
negotiations, capable of acceptance by Icon or whether the parties were required to
execute a formal contract before a binding agreement was reached are matters
which, in my view, are separate to the question of Mr Ritchie’s authority.20 I consider that the steps taken by Mr Ritchie, throughout the course of dealings with Icon, were made with the knowledge of Bluescope Lysaght’s management and were not outside the authority given to him. From Icon’s viewpoint, there was no reason for it to doubt that Mr Ritchie had the appropriate authority to deal with Icon in relation to Bluescope Lysaght’s tender offer for the three elements of the project.
Events prior to 5 December 2008
21 After Bluescope Lysaght submitted its tender to Icon, Mr Pettenon invited Mr Ritchie to a meeting with Icon representatives on 1 December 2008 at 2pm. Other meetings in relation to the sunshades were also arranged at about this time, including:
(a)
on 1 December 2010 at 10am, a meeting between Mr Nicholas Brown of Icon and Marijan of Tafkon Engineering;
(b)
on 2 December at 10am, a meeting between Mr Brown and Mr Danny Pegorin of Frontier Façade System;
(c)
on 4 December 2010 at 9.30am, a meeting with Mr Peter Smithson of BGE Façades, a façade consultant.
22 During this period, Icon also met with the principal and the principal’s representative, PDS Group, to discuss savings and efficiencies in the context of the value management process. This included a meeting with PDS on 1 December 2008 at 3.30pm and a formal tender interview with the principal’s representatives and PDS on 2 December 2008 at 2pm. Mr Brown gave evidence of matters discussed at the meeting with Tafkom Engineering and Frontier Façades which caused him to have reservations about the capacity of either contractor to complete works on the project. Mr Pettenon said that he could not recall any discussion of the Bluescope Lysaght proposal for the sunshades in the meeting with Frontier Façades.
23 On 1 December 2008, Mr Ritchie met with Andrew Pettenon, Robert Menelle and Lou Raunik of Icon. Notes at the meeting were taken by Mr Pettenon and Mr Raunik of Icon. Mr Ritchie also took notes. Mr Pettenon’s notes confirm that they discussed the technical details of Bluescope Lysaght’s offer, including the cladding and framing material, the requirement for Bluescope Lysaght to provide a sample, the fixing method, the engagement of a particular sub-contractor to do the installation, the involvement of Mr Halpin and the fact that the price was based on the tender bill of quantities.
24 In evidence, Mr Pettenon said that he had specifically asked Mr Ritchie to confirm the tender price for the sunshades which Mr Ritchie had done. This matter is not recorded in Mr Pettenon’s notes of the meeting. Mr Pettenon said that he also told Mr Ritchie that the subcontract would be a “D and C arrangement”.
25 sunshades. He recorded that Icon had a price for the car park screens that was
Mr Ritchie’s notes confirm that the primary focus of the discussion was the included detail about the materials, the provision of a sample and the method of installation, as well as various elements which made up the price. Mr Ritchie recorded that Icon was involved in the “VM [value management] process” with the principal’s representative.
26 In evidence, Mr Ritchie said that the Icon representatives had asked him to confirm Bluescope Lysaght’s prices. He said that he responded by saying, “What you've got
on paper is current at the moment and any more discussion about the pricing needs
to be taken up with Steven
the sunshades, Mr Ritchie said he gained the impression that Icon regarded”. In the discussion about the calculation of the price for costs for installing the sunshades he became “alarmed” with what appeared to be a significant underquoting of that item and determined that it was a matter he would need to raise with Mr Halpin. On 5 December, Mr Ritchie sent an email to Halpin drawing his attention to certain matters in the detail of the price for the sunshades contained in a spreadsheet, stating, “I think these areas may be underquoted”.
27 Mr Menelle said that the meeting was called as Icon were “keen to find out what was included in the offer” with the emphasis on the sunshades, to ensure that the quoted price was “all inclusive”. Mr Raunik said in evidence that his intention at the meeting was “to make an assessment of whether or not BlueScope's submission for the
sunshades for the A'Beckett project was a viable option for that project from a
technical and logistics point of view”. In his evidence, Mr Menelle described the
Bluescope Lysaght price for the sunshade work as a “fantastic price”.28 On the evening of 1 December, Icon forwarded to the principal’s representative, a tender clarification letter, including Schedule 27 containing “further Icon suggested savings”. Item 7 was a suggestion, to “rationalise the existing sunshade design with
‘Bluescope Lysaght’ and adopt 1.2mm galvanised sheet post painted with a
fluropolymer paint system fixed to a steel substructure and installed to the north face
of the building. Note exposed fixings to be further confirmed and developed withBluescope Lysaght”, which, it was said, would result in a saving of “circa - $500,000”. In the letter, Icon had confirmed that its tender price had included, for the relevant items in the Bill of Quantities for the sunshades, a total allowance of $2,114,312. This allowance was based on the tender price obtained from Frontier Façade.
29 Early on 2 December, Icon requested the principal’s representative to “not send our tender clarifications out until we have had a chance to amend”, following the meeting with Frontier Façades at 10am that morning.
32 1 December 2008 about Bluescope Lysaght’s price. I consider it probable that
30 A spreadsheet headed, “Detailed Vetting Sheet A’Beckett Street Melbourne” and dated 2 December 2008 was prepared by Mr Menelle in respect of the “façades”. The spreadsheet tabulated various estimates and prices received by Icon. The sunshades were covered by three coded items and included the following figures: “Original budget” $4,264,158, “Frontier Façades” $2,018,192 (with a second item of $96,120), Tafkom $4,260,700 (with a second item of $96,120), and “Bluescope” $469,920. A further entry, beside the heading “Alternate Sunshade/Louvre Material”, included a price from Tafkom of $2,658,760. In respect of the latter entry, Mr Menelle said he could not recall if this price had been given by Tafkom.
31 It seems apparent from the evidence that Mr Ritchie had convinced the Icon representatives at the meeting on 1 December that Bluescope Lysaght’s non- conforming sunshade proposal was viable and could be delivered by Bluescope Lysaght for the quoted price. On that basis, Icon included the Bluescope Lysaght option for the sunshades with a cost saving of about $500,000 in the value management document submitted to the principal’s representative on 1 December. Although that document was put on hold early the following morning, it was never changed and became the basis for the negotiations leading to the award of the building contract to Icon.
There are differences in the evidence as to what was said at the meeting on am not persuaded that Mr Ritchie referred to the need for further discussion with Mr Halpin. Generally, I had little confidence in the reliability of Mr Ritchie’s evidence. He had little memory of meetings beyond what was contained in contemporaneous notes, although at times he volunteered recollections of some specificity which were convenient to Bluescope Lysaght’s case. Unless his oral evidence were confirmed by another witness or a document, I would be reluctant to rely upon him on any disputed matter.
33 Mr Pettenon’s evidence was that on the afternoon of 3 December 2008, Mr Ritchie delivered samples to the Icon offices of the paint covered steel and the suggested fixing. Mr Pettenon gave some detail about the circumstances of Mr Ritchie’s
attendance and how the samples were soon given to the principal’s representative,
whose offices were only a few doors away. Mr Nicholas Brown, a director of Icon,
said that during the afternoon of 3 December he was at the estimating table in an
open area of the office discussing the A’Beckett Street bid when Mr Ritchie came in
and delivered a sample. Mr Brown could not recall the discussion with Mr Ritchie but
did recall that the principal’s representative was informed that Icon had the sample
and it was later collected by Mr Fortey of PDS. It was indicated by PDS Group that
the sample would be provided to the principal and was likely to be accepted.34 I was informed that there were some difficulties in calling the Mr Fortey of PDS Group to give evidence in relation to the delivery of the sample and that he may need to be interposed during the defendants’ evidence. He was not called and when I raised the matter in final submissions, plaintiff’s counsel, Mr Tiernan SC, gave the explanation that he had determined not to call Mr Fortey because his evidence would not have identified the date of delivery of the samples.
35 Mr Pettenon said that Nick Brown had taken the sample to PDS and that it had been well received and would be accepted by the principal. Pettenon phoned Ritchie to advise him that the “sample was received well and it was accepted by PDS”. They arranged to meet on 4 December at 12 noon at Icon. On 3 December at 6.16pm, Mr Pettenon sent an email to other persons at Icon with a further draft of the value management schedule. Beside the sunshade offer was included the following comment: “ICA to provide sample, await sample with proposed fixings. BGE Façade Consulting also to comment”.
36 Mr Ritchie said that, whilst he agreed that the matters described by Mr Pettenon as having occurred when Mr Ritchie delivered the sample, were generally what had happened, he nevertheless believed that the sample had been delivered at the meeting at Icon’s offices the following day, 4 December. I consider that Mr Pettenon’s and Mr Brown’s recollections of this matter are likely to be more reliable than Mr Ritchie’s evidence. However, in the absence of independent evidence (for example from Mr Fortey) and because of the reference to the sample in Mr Pettenon’s 6:16pm email, I am reluctant to make a specific finding on this matter. In any event, it is probably unnecessary for me to do so.
37 A meeting took place on 4 December 2008 at 9.30am with Peter Smithson of BGE Façades. Mr Brown said that he had asked Mr Pettenon to organise the meeting. A significant issue discussed related to the particular type of glass that was to be used
in the building. Although the agenda for the meeting also included the following item:
“Balcony louvers/sunshades –
1.
alternate Bluescope option – should we be wary of any issues including paint coating/durability and maintenance;
2. alternate options other than above and Alucabond”, no evidence was given of any relevant discussion concerning this item.
Meeting between Icon and Bluescope Lysaght on December 4 at 12 noon
38 The meeting on 4 December was attended by Mr Ritchie on behalf of Bluescope Lysaght. Mr Ritchie had hoped that Mr Halpin would also attend the meeting but Halpin had been unable to do so. The Icon representatives were Pettenon, Brown
and Menelle. It is possible that Mr Raunik also participated in the meeting as other
witnesses thought he was present, although Mr Raunik’s recollection was that he was
not at the meeting. Brief notes of the meeting were prepared by Mr Pettenon and
separately by Mr Ritchie. Mr Pettenon’s notes record, as “ticked”, the items “price
includes installation” and “price includes supply”. Otherwise the notes appear to refer
to technical matters relating to the performance of the work.39 Mr Pettenon said that at the meeting he confirmed the sample had been approved and went through the scope of work. Mr Ritchie informed the meeting that Mr Halpin’s role would be to manage the design process. Mr Pettenon said that they discussed Bluescope Lysaght’s prices. He told Mr Ritchie the prices for the components other than the sunshades were “too high” and Icon would only proceed with the sunshades at the offered price. He said that Mr Ritchie “confirmed that this was acceptable”. Pettenon then said that the Bluescope Lysaght offer “would be included as part of Icon’s final offer” to the principal. He confirmed with Mr Ritchie that the Bluescope Lysaght price for the sunshades included design, supply and installation.
40 Mr Pettenon gave evidence that he thought that a contract had been entered into at the meeting for Bluescope Lysaght to perform the sunshade work for the price of $469,920. This, however, was not the position Icon relied upon in the proceeding, and it is very difficult to see how they might have done so. Icon did not, for example, assert that Bluescope Lysaght’s tender price for the sunshades had been accepted on 4 December, conditional upon Icon being awarded the Head Contract. This would have involved a verbal amendment of the Bluescope Lysaght tender offer at the meeting to limit its scope to the performance of only the sunshade work for the quoted price for that item of work.
41 The evidence of the discussions at the meeting does not support this conclusion. Whilst there was mention of both the sunshades scope of work and price, this was not in the context of the parties binding themselves in a contractual relationship. Rather, it appeared to be no more than a discussion during which the Icon representatives sought to reassure themselves that Bluescope Lysaght’s offer for the sunshades included all elements of the work in the quoted price and that the price saving of $500,000 it had offered to the principal on 1 December was achievable.
42 observerwanted to make sure discussed
that Bluescope were offering a complete design, supply and installation” and he couldMr Menelle said that at the meeting he was an “”. He “”. He said he was particularly interested in the price for the sunshades work. Mr Brown also said that it was necessary for Icon to understand Bluescope Lysaght’s product because it did not conform with the tender. Both he and Mr Raunik had determined that the sunshades were critical for the programming of the works
43 Mr Brown said that at the end of the meeting, he advised that Bluescope Lysaght’s proposal for the sunshades would be part of Icon’s overall bid for the project. He said that Mr Ritchie was “comfortable” with this. Mr Brown agreed with the suggestion that Icon would “give the [sunshades] contract to Bluescope” if Icon were awarded the Head Contract. This is consistent with the fact that Bluescope Lysaght’s proposal for the sunshades did not conform with the Head Contract tender requirement and would require formal acceptance by the principal. Mr Pettenon said in evidence that although he told Mr Ritchie at the meeting on 4 December “that the sample had been approved”, he also advised Mr Ritchie “that I would be using that offer [for the sunshades] as part of the head contract”.
44 December to “talk about the project and pricing issues”. He said that he brought the
sample to the meeting and asked for information about wind loads and other matters
as part of an information gathering exercise for Mr Halpin. He said that before the
meeting, Mr Halpin had told him that he was not to talk about price or to “pull apart”
the cost estimate. Mr Ritchie had only a vague recollection of the meeting, essentiallyMr Ritchie said that it had been intended that Mr Halpin attend the meeting on 4 that he was “not allowed to negotiate on what we would or wouldn’t do”. He said that at the meeting, “I do not remember that we discussed price at all”. He said that if it had been, he would have repeated his “line” that this was Mr Halpin’s responsibility. He said that he did not confirm at the meeting that Bluescope Lysaght would carry out work on the basis that it was only the sunshades.
45 It is difficult on the basis of this evidence and, particularly, the paucity of contemporaneous documentation to be certain what was said at the meeting. There was obviously some discussion as to the price for the sunshade work and the fact that both installation and supply were included in Bluescope Lysaght’s price, as these matters form part of Mr Pettenon’s notes of the meeting. It is probable, also, that at the conclusion of the meeting Mr Brown informed Mr Ritchie that it was Icon’s intention to include the Bluescope Lysaght proposal in relation to the sunshades as part of Icon’s bid.
46 Three days earlier, Icon had submitted the value management schedule which included this proposal. It is likely, however, that at some stage during the meeting Mr Ritchie was asked to confirm his price for the sunshades. There is certainly no suggestion that at the meeting he resiled from the price contained in the tender offer. Mr Ritchie must have realised in the meetings on 1 and 4 December that the façade cladding price was unacceptable and that the primary interest of Icon was in having Bluescope Lysaght carry out the sunshades work for the project. Beyond those matters, I do not consider that I can made definitive findings. Specifically, I do not consider that the evidence justifies a conclusion that Bluescope Lysaght was modifying its tender offer to limit the proposal to the sunshades or that the sunshades offer had been accepted by Icon conditional only upon it being awarded the Head Contract.
Telephone conversation on 5 December between Pettenon and Ritchie
47 On 5 December 2008, Mr Brown said that he met with the principal and the principal’s representative. They nominated a total price for the project and informed Mr Brown that Icon could have the contract for the project at that figure. Mr Brown was given time to assess the price and, later that morning, indicated he agreed with it. As a consequence, a letter was forwarded by the principal to Mr Brown later that day informing Icon that it had “preferred contractor status” on the basis of certain terms including agreement to a contract price of $53,5 million excluding consultants and GST and “including all value management initiatives” contained in an annexure. This document, by reference, included the sunshades proposal by Bluescope Lysaght.
48 Mr Pettenon said that, on 5 December, when he found out that Icon was the preferred contractor, he called Mr Ritchie and told him that Icon had won the job and that its offer included the Bluescope Lysaght option for the sunshades. Mr Pettenon said that he could not recall what Mr Ritchie had said, although Ritchie was pleased and happy. The formal head contract between Icon and the principal was signed on 12 December 2008. Mr Ritchie said it was possible that there was some communication with Mr Pettenon on 5 December. He said that at some time Mr Pettenon had spoken to him and told him Icon had been successful in obtaining the contract for that project.
49 Icon contends in the proceeding that an agreement was reached between itself and Bluescope Lysaght on 5 December 2008. The agreement was partly in writing, comprised by the tender offer dated 28 October 2008 sent with Mr Ritchie’s email dated 28 November, the conversations between Mr Pettenon and Mr Ritchie (including the conversation on 5 December and the meetings between the parties on 1 and 4 December), and to be implied by the need to give business efficacy to the dealings between the parties.
50 In deciding whether an agreement was reached between the parties, it is necessary to determine whether it was the parties’ intention “to have bound themselves to an identifiable, perhaps not complete contract” (see Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at paragraph 493). During the period prior to the submission by Bluescope Lysaght to Contexx of the cost estimate for the three elements of the project, there had been internal communication between various people within Bluescope Lysaght including Ms Jacobs, Mr Halpin and Mr Ritchie. On 26 November, Mr Halpin sent an email to Mr Ritchie adding some prices to a draft Excel spreadsheet prepared by Mr Ritchie and noting that Halpin was unable to open a copy of the actual tender letter. Halpin concluded, “I am very keen for this project
but believe it needs a fair bit of logistical work…submit the price and while they are digesting it, we can work up a very tight price so we know exactly where we are at
and what would be involved…”. This was consistently the approach of Mr Halpin right
through to May 2009 when he submitted a revised price to Icon of $1.15 million for
the sunshades.51 Mr Ritchie said that the tender letter to Icon (which was in substantially the same terms as the original tender letter dated 26 October 2008 to Contexx) contained a number of passages from the standard tender letter of Bluescope Lysaght including
the paragraphs I have earlier referred to under the headings “Terms and conditions of
subcontracts” and “Validity”.52 conversation between Mr Pettenon and Mr Ritchie on 5 December 2008 was
sufficient, either separately or together, to constitute an acceptance of the tender
price by Bluescope Lysaght of $469,920 for the sunshade works or an agreement to
limit the Bluescope Lysaght tender to the performance of the sunshade work. The
tender letter dated 28 October 2008 contained four priced items, two of which were
alternatives. The tender was to perform the three items of work for either of two
prices comprising the total of the individual prices for the three items. The quotation
was said to be based on “the prior stated activities and exclusions” and that “any
variance from these activities will require a re-tender”. Paragraph 2 provided that the
“quotation tender includes the following items…”. It was apparent that thoseI do not consider that the discussion in the meetings on 1 or 4 December or in the elements of the contract work.
53 The later discussions between Mr Pettenon and Mr Ritchie, particularly at the meetings on 1 and 4 December, made it apparent that Bluescope Lysaght’s price for the façade cladding was not competitive. It appears, however, that although the main emphasis was on the sunshades, the carpark screen was not excluded from the consideration of the parties. In those circumstances, there was not an offer by Bluescope Lysaght in respect of the sunshades which, without further negotiation, was capable of being accepted by Icon.
54 suitable terms and
conditions of sub-contract being agreed”. This did not occur before 5 December.
Ordinarily, where it is contemplated that a substantial written document would
evidence the agreement between the parties, no final agreement is reached until
such a document has been executed. It is apparent that this was what was envisagedFurther, the offer contemplated that it would be subject to “Bluescope Lysaght could not simply be accepted by Icon without further discussion and agreement and the execution of a formal contract as contemplated by the third class of case outlined in Masters v Cameron (1954) 91 CLR 353 at 360. See also Geebung Investments Pty Ltd v Varga Group Investments No.8 Pty Ltd (1995) 7 BPR 14,551 at 14,5693.70 where Kirby P sets out a number of general principles which are apposite to this case.
Effect of post-contract dealings between the parties
55 The circumstances in which the law permits the consideration of post-contract dealings between the parties are limited. In certain instances, “subsequent
communications will often form part of the context in which particular exchanges
between the parties are to be evaluatedAustralian Broadcasting Corporation v ”. See One important use of such post-contract dealings is in considering whether the circumstances are inconsistent with the submission of a party that a binding contract had earlier been concluded.
56 In the present case, I heard extensive evidence relating to the dealings between the parties after December 2008, and at least two folders of documents are in evidence relating to this period. I consider that generally the evidence is inconsistent with a
contract having been reached between the parties on or about 5 December 2008,
although between January and May 2009, Bluescope Lysaght performed work on the
design development of the sunshades. Without traversing the evidence in exhaustive
detail, I consider that the most relevant matters are as follows:
a.
On 7 December 2008, in anticipation of the Icon start-up meeting for the project the following day, Mr Raunik prepared an agenda for the meeting which included as item 3.7, “Design and detailing of façade sunshade system
to be advanced to point where Bluescope can be formally engaged on design,
supply, install contract”. Mr Pettenon was noted as the person to action that matter. Item 6 on the agenda related to “early trade package tendering and letting”. This item was to be actioned by Mr James Ellisdon, the contracts
manager, Mr Raunik and Mr Zafer Tillem, the project manager, and read as
follows:
“6.1 The form of sub-contract agreement to be finalised, including incorporation of Special Conditions from Head Contract, warranty obligations, etc...
6.2 Packages to be let pre-Christmas break: demolition, piling,
excavation, structure”.Although there is no direct evidence of the discussion at the start-up meeting, it is unlikely that any conclusions were reached, otherwise than as set out in the agenda. Mr Ellisdon’s notes of the meeting record, “sunshades, letter of comfort, LOI” which he stated would mean that he was “to prepare a letter of intent or a letter of comfort” for Bluescope Lysaght in relation to the sunshades. After a further meeting on 10 December, Mr Ellisdon noted in his diary, “Bluescope letter of intent 470k contract, email letter of intent”. A letter of intent was not sent to Bluescope Lysaght until after the meeting on 29 January 2009.
b. about the value management schedule, including in relation to the sunshades.
Icon continued to have discussions with the principal and its consultants to “investigate Planex option. Further development of Lysaght option required”.
c.
At meetings on 29 January and 30 March between Icon and Bluescope Lysaght and in communications between them during the period January to May 2009, clarification of the design parameters, the installation and fixing procedures and requirements, and the program for the performance of the works were discussed. Whilst Icon submitted that this was simply illustrative of the usual conduct expected of a sub-contractor under a design and construct contract, those responsibilities were never set out in a document passing between the parties, although such a document would likely have been prepared and agreed if Bluescope Lysaght and Icon had entered into a sub-contract for the sunshade works.
d.
At the meeting on 29 January 2009, attended by Pettenon, Ellisdon and Raunik on behalf of Icon, and Ritchie, Halpin and Mr Matthew Simonis on behalf of Bluescope Lysaght, the minutes recorded as item 1 under the heading, “Tender offer and contract”, as follows: “ICA confirmed that contract
to be engaged under AS4901 design and construct contract for the tender
sum of $469,920. ICA advised and confirmed that a full ‘contract package’ to
be issued to Bluescope ASAP for review including contract (AS4901 withamendment) scope of works construction program”. Whilst there was some
dispute in the evidence of both Mr Ritchie and Mr Halpin that the matters were
discussed in those terms, Mr Simonis was satisfied that the minutes reflected
the discussion at the meeting. He went further and said that he recalled that
at the start of the meeting the contract was “thrown on the table” by an Icon
representative although he could not recall the response. He remembered this
because he said it was “unusual at a tender interview”.Mr Halpin gave evidence that early in the meeting, Mr Pettenon said, “I’m
pretty keen to sign you guys up for the sunshades”. He said, however, that no
agreement had been reached at the meeting and that he had told Mr
Pettenon, “I’m interested in negotiating all aspects of our price”. Mr Halpin’s
evidence was inconsistent with the contemporaneous notes of the discussion
at the meeting concerning the contract, including the minutes of the meeting
and Mr Ritchie’s notes on the minutes. Mr Halpin’s evidence on this, and
other mattes, was generally unsatisfactory and unreliable.Mr Ritchie’s notes of the meeting record “D and C contract – get to us for
review”. When Mr Ritchie received the minutes of the meeting on 30 January,
he made notes which he sent to Mr Halpin. In relation to item 1, he recorded,
“also noted that a letter of intent would be issued as well – per Andrew
Pettenon”. On 2 February 2009, Mr Ellisdon, the contract commercial
manager, sent an email to Mr Halpin and Mr Ritchie which read as follows:
“Please find attached a letter of intent and sub-contract document for
A’Beckett Street as discussed. If you could please review and comment as soon as possible, so that we may execute a formal agreement. I will post a copy of the principal’s project requirements, drawings and specifications
today. The files are too large to send via email (can you please let me know where they should be sent?) Should you have any questions please do not
hesitate to contact me directly on the numbers provided below or via email”.
The letter of intent commenced as follows: “We hereby confirm that it is our
intention to enter into a formal contract (‘sub-contract’) with Bluescope Pty Ltd
(‘sub-contractor’) to undertake the sunshade works package at the A’Becketttower project (‘project’). Icon intends to engage the sub-contractor using a
modified form of AS4901 – 1998 General conditions of sub-contract
(amended to incorporate design). This letter of intent is intended to create a
legally binding agreement between the parties. It is agreed that the parties will
use their best endeavours to execute the sub-contract as soon aspracticable”. The letter of intent also provided that, “If no formal contract is
entered into by the parties then this letter of intent and the attached subcontract (formal instrument of agreement, special conditions of
subcontract, general conditions of subcontract, drawing[s] and specifications)
excluding and [any] disputed clauses, shall govern the whole of the works”.It should also be noted that the contract documents sent with the letter of intent on 2 February 2009 introduced a number of significant new matters that had not been canvassed in Bluescope Lysaght’s tender offer or the later discussions on 1 and 4 December with Icon. These included responsibility for the completeness of the preliminary design and therefore any cost increases, exclusion of the Bills of Quantities from any contractual operation, a program for the performance of the works and the imposition of liquidated damages of $11,000 per calendar day if Bluescope Lysaght were unable to meet the program.
The letter of intent concluded in paragraph 10, under the heading
“Acknowledgment”, and read as follows: “We would appreciate youracknowledgment that the conditions and accuracy of the content set out in
this letter, by signing the enclosed copy of this letter and returning it to us”.
This was never done by Bluescope Lysaght. If it had, it is likely that the
parties would have been regarded as having entered into a legally binding
contract. See Reark Group Pty Ltd v Data Connection Pty Ltd Supreme Court
of Victoria (Hayne J) Case No. 2031 of 1995. The only documentary evidence
of requests by Icon for Bluescope Lysaght to execute and return the letter of
intent or the contract documents were in the minutes of the meeting on 30
March 2009 and in emails from Pettenon to Halpin on 4 March and 9 April
2009. Mr Tillem, who chaired the meeting on 30 March 2009, gave evidence
that the Bluescope Lysaght representatives at the meeting had said they
“wanted to finalise their design before they signed their sub-contract”.In relation to the letter of intent, Icon’s counsel, Mr Tiernan SC conceded in opening that the terms of the letter of intent were inconsistent with the claim by Icon that a prior agreement had been entered into in December 2008.
e. principal’s representatives that it had entered into a sub-contract with
Bluescope Lysaght until late March 2009. The Head Contract required the
principal’s approval of sub-contractors. Formal approval was not sought by
Icon until 23 March 2009 in respect of the sunshade contract and the approvalSite meeting minutes for the project record that Icon did not assert to the documents including a tender letting schedule, minutes of project meetings and internal correspondence generated by Icon which appeared to confirm that it was generally accepted that Icon did not have a formal sub-contract with Bluescope Lysaght.
g. with the original tender, Icon’s head contract provided that in respect of the
sunshades the principal could, until the passing of a “notification date”, require
the contractor to perform the original tender works and, in that event, the
saving of $500,000 included in the value management schedule would be
required to be paid by the principal. The notification date was finally agreed
between the principal and Icon as 23 April 2009. It was not until that date had
passed that Icon could be certain it would be required to perform the
sunshades work in accordance with the alternative Bluescope Lysaght tender.f. Following the breakdown of relations between Icon and Bluescope Lysaght in May 2009, when Bluescope Lysaght submitted a revised price for the sunshades, Icon served a formal notice to show cause on 5 June 2009 which stated that: “1. Icon Construction Australia Pty Ltd (ACN 104099238)(the main contractor) entered in a sub-contract with Bluescope Steel Limited (ACN
000011058)(the sub-contractor) dated 2 February 2009 for the sub-contractor
to undertake the sunshade works package at the A’Beckett tower project at
A’Beckett Street, Melbourne (the sub-contract works) for the sum of $469,920(exclusive of GST)(the sub-contract)”.
Because the Bluescope Lysaght proposal for the sunshades did not conform (prior to the execution of the head contract) to have contractually bound itself to Bluescope Lysaght to pay for works which might never be required to be performed.
57 I referred earlier to an email from Mr Halpin to Mr Ritchie dated 26 November 2008 in which Mr Halpin stated, “I am very keen for this project but believe it needs a fair bit
of logistical work…Submit the price, and while they are digesting it, we can work up a
very tight price so we know exactly where we are at and what would be involved…” Mr Halpin appeared to follow through this strategy in Bluescope Lysaght’s dealings with Icon until 14 May 2009 when he submitted a revised price of $1.15 million for the
sunshades.
58 From internal emails between Mr Halpin and Mr Ritchie, it is apparent that their approach was to appear to be co-operating in the design development of the sunshades by engaging in communication about the buildability of the project. At the same time, all requests for the execution of a contractual documents were ignored or deflected. It is not clear what the objective of the strategy was; whether Mr Halpin believed that by May 2009 it would be difficult for Icon to obtain a competitive tender for the work and, by default, Bluescope Lysaght would have their revised tender price accepted.
59 These matters are, in my view, of little consequence as the principal claim of the plaintiff is that a binding contract was concluded by 5 December 2008. The alternative claim, which I will come to shortly, is based upon a representation. The representation was alleged to have been made in the dealings between the parties in late November and early December 2008. Unless these specific allegations can be made out there is, in my view, little scope for Icon to rely upon Bluescope Lysaght’s conduct during the early months of 2009.
60 It is also apparent that Icon must have known that the Bluescope Lysaght tender was substantially underpriced in respect of the sunshades. It was a fraction of the prices obtained from Frontier Facades and Tafkon Engineering, and of the internal estimate by Mr Menelle. In fact, Mr Menelle’s response to Mr Pettenon after Icon received a copy of the revised tender price by Bluescope Lysaght in May 2009 was as follows:
“These bastards…have done us over by (- $355,252!!!).
My budget for the sunscreen and framing $918,192 Bluescope now $1,150,000. Perforated carpark screen $456,556 Bluescope now $ 580,000. Net total $1,374,748 $1,730,000 Mongrels!!!”
61 In fact Icon was able to let a sub-contract for the sunshades and carpark screens for a sub-contract sum of $1.1 million to T & L Group on 1 July 2009. From the meeting on 29 January until 14 May 2009, when the revised tender was submitted by
Bluescope Lysaght, Icon had only made very limited attempts to follow up the letter of intent and contract documents it had sent to Bluescope Lysaght on 2 February 2009. Mr Halpin said he simply ignored those documents. If Icon had applied more
pressure, it is likely to have become apparent much earlier that Bluescope Lysaght
had no intention of performing the sunshade works for the original tender price.
Alternative claim
62 Icon makes an alternative claim based upon the principles of estoppel and unconscionable conduct. The matters relied upon are essentially the same matters pleaded in relation to the alleged agreement. It is said that there was a representation that, “if Icon submitted a revised tender to the principal proposing the design and
construction of the sunshade works based upon use of Lysaght and/or Bluescope’s
Galvabond sheet, Lysaght and/or Bluescope would carry out those works for the sumof $469,920”. Icon alleges that in reliance upon the representation it revised its tender
for the Head Contract which it was awarded on the basis of the reduced price to
complete the sunshade works in accordance with Bluescope Lysaght’s non-
conforming tender.63 Icon relies upon Bluescope Lysaght’s conduct between December 2008 and 13 May 2009 as having “caused Icon to act to its detriment”. Icon alleges that from early January 2009 it “worked with Lysaght and/or Bluescope to progress design development, buildability and programming issues” and that this was done “on the
basis that Lysaght and/or Bluescope was designing and constructing the sunshade
works”. As a result of Bluescope Lysaght’s refusal to carry out the sunshade works
“unless the price was approximately $1,150,000”, Icon suffered loss and damage for
which it seeks equitable damages.64 The plaintiff’s pleading is not particularly satisfactory. It bundles up Bluescope Lysaght’s conduct between 28 November and 1 December 2008 as constituting the representation alleged. In my view, if that conduct were insufficient to constitute an agreement for the reasons I have previously discussed, it would be unlikely that the conduct would nevertheless constitute an actionable representation. As pleaded, Bluescope Lysaght’s alleged representation was to do something in the future (carry out the sunshade works for the sum of $469,920), if Icon submitted to the principal a revised tender based on the Bluescope Lysaght proposal for the sunshades and Icon’s revised tender were accepted.
65 Apart from the fact that this was a promise to do something in the future, in my view, the conduct of Bluescope Lysaght amounted to no more than a preparedness to consider entering into an appropriate contract for the three elements at work included in the tender offer. I am not satisfied that any representation was made in relation to the completion of work for only the sunshades.
66 Further, I consider that even if there were an actionable representation, the plaintiff would have difficulty establishing that there was appropriate reliance by 1 December 2008 when the plaintiff submitted the value management schedule to the principal’s representative. At that stage, Icon personnel had met Mr Ritchie and discussed the matters included in the tender price. It is likely that, by that time, Icon must have considered the tender price for the sunshades to be significantly underquoted. The indications from other subcontractors were that the cost would be at least $2 million and the estimate by Mr Menelle was said to be about $1.4 million.
67 Icon needed to find significant cost savings to win the contract. In order to do so, Icon’s overall tender price was reduced from $57,990,380 to $55,031,812. The anticipated savings from pursuing the non-conforming tender of Bluescope Lysaght were said to be about $500,000. On 1 December 2008, when that figure was submitted to the principal’s representative, Icon had not spoken again to the other subcontractors or to the Façade consultant and had not, it appears, carried out more than a superficial analysis of the viability of the Bluescope Lysaght tender.
68 In my view, Icon was prepared to take a chance, if that course of action were likely to assist Icon obtain the contract for the project. I consider that there is considerable force in Bluescope Lysaght’s contention that the pleaded reliance is unsustainable as it amounts to little more than the resulting relationship between the parties following the failure by Icon to ensure that Bluescope Lysaght became contractually bound to perform the sunshade works for its tender price.
69 Further, I consider that the losses claimed by Icon in the alternative claim may also be illusory having regard to the estimates it had obtained from other contractors for the tender works, and from its own estimate of the cost of those works. When the
non-conforming works were repriced by Bluescope Lysaght, they were for a
substantially increased sum and the revised price was close to the figure for which
the works were ultimately let in July 2009. In the circumstances, equitable
compensation would be inappropriate.70 The order of the Court will be that the plaintiff’s proceeding be dismissed.
- - -
Certificate
I certify that these 27 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 24 September 2010.
Dated: 24 September 2010
Caroline Dawes
Associate to His Honour Judge Anderson
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