John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd - [2002] NSWSC 43

No judgment structure available for this case.

CITATION: John R Keith Pty Limited v Multiplex Constructions (NSW) Pty Limited & Anor [2002] NSWSC 43 revised - 3/12/2002

FILE NUMBER(S): SC 3387/00

HEARING DATE(S): 30/01/02, 31/01/02, 1/02/02, 5/02/02, 6/02/02, 7/02/02, 8/02/02

JUDGMENT DATE: 14 February 2002

PARTIES :

John R Keith Pty Limited (Plaintiff)
Multiplex Constructions (NSW) Pty Limited (First Defendant)
Multiplex Constructions Pty Limited (Second Defendant)

JUDGMENT OF: Einstein J

COUNSEL : Mr V Gray (Plaintiff)
Mr F Corsaro SC, Ms R Rana (Defendants)

SOLICITORS: Gye & Associates Lawyers (Plaintiff)
Minter Ellison (Defendants)

CATCHWORDS: Contract - Formation of contract - Ongoing negotiations - Intention to contract - Masters v Cameron classes - Whether binding and enforceable subcontract formed between the plaintiff and second defendant - If a contract is found, an arbitration clause requires proceedings to be stayed pursuant to s53 (1) of the Commercial Arbitration Act 1984 (NSW) - Invitation made by defendant to plaintiff to tender for the design and construction of hydraulics services for the Stadium Australia project - Request to tender contained documents including standard subcontract agreement - Plaintiff submitted tender proposal based on tender documents - Plaintiff issued series of revised proposals modifying both tender price and scope of work - Plaintiff notified as being preferred tenderer - Plaintiff commenced work - Plaintiff sent letter outlining total tender price and scope of work which letter was negotiated, amended and resent by consensus - Plaintiff sent subsequent letter referring to total contract price - Second subcontract agreement sent to plaintiff in terms different from original standard subcontract agreement - Subsequent negotiations ensued between parties over terms of second subcontract agreement - Whether binding contract was formed at any time during ongoing negotiations between parties - No formal signed agreement entered into by parties - Fourth class of Masters v Cameron - Existence of informal contract with further terms to be negotiated and included in a formal document - Relevance of prior negotiation and subsequent conduct - Objective determination of the intention of the parties - Classical theory of contract formation - Relevance of the subjective intention of the parties - Admissibility of post-contractual conduct - Whether parties arrived at a consensus capable of forming a contract - Whether alternative proposal put forth by plaintiff constituted an abandonment of the terms of the original subcontract - Whether second subcontract negotiations supports or mandates inference that parties did not intend to make concluded bargain

LEGISLATION CITED: Commercial Arbitration Act 1984
Evidence Act 1995 ss60,70
Supreme Court Rules

CASES CITED: Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Allen v Carbone (1975) 132 CLR 528
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647
Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622
Brambles Holdings Ltd v Bathurst City Council (Unreported, 2001, NSWCA, Mason P, Heydon JA and Ipp AJA)
Brunninghausen v Galvanics (1999) 46 NSWLR 538
B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR [97011]
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251
Godecke v Kirwan (1973) 129 CLR 629
Graham Evans Pty Ltd v Stencraft Pty Ltd 16 BCL 335
G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 63
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68
Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145
Inland Revenue Commissioners v Raphael [1935] AC 96
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326
Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988)
Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475
Masters v Cameron 1954 91 CLR 353
Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105
Raguz v Sullivan (2000) 50 NSWLR 236
Reardon -Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989
Revenue Commissioners v Raphael [1935] AC 96 at 142
Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235
Sinclair Scott Co Ltd v Naughton (1929) 43 CLR 310
Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Thompson (1933) 49 CLR

DECISION: Short minutes to be brought in.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Einstein J

Thursday 14 February 2002

3387/00 JOHN R KEITH PTY LIMITED v MULTIPLEX CONSTRUCTIONS (NSW) PTY LIMITED

JUDGMENT

The questions for determination

1 There are before the Court a number of questions for determination following an order made on 30 January 2002 pursuant to Part 31 of the Supreme Court Rules for the determination of these questions before the determination of any other question in the proceedings. The questions for determination are as follows:

“(a) whether a binding and enforceable subcontract between the second defendant and the plaintiff was formed on or about 18 July 1997 when the second defendant accepted the plaintiff’s tender for the hydraulic services design and construction package (‘Works’) for the Stadium Australia Project pursuant to the second defendant’s request for tender dated 5 December 1996;

(b) whether a binding subcontract between Multiplex and JRK in respect of the Works was formed sometime after 18 July 1997 as a result of the conduct of the parties (‘second July subcontract’);

(c) whether a binding subcontract between Multiplex and JRK was formed on or about 27 November 1997 when Multiplex submitted to JRK a form of subcontract which was consistent with the agreement reached on or about 18 July 1997 although containing modifications to the wording of Multiplex’s standard subcontract agreement which was the basis of the July subcontract or the second July subcontract (‘November 1997 Subcontract’);

(d) in the alternative to (a) – (c) above, whether a binding and enforceable subcontract between the second defendant and the plaintiff was formed on or about 18 July 1997 on terms that the parties agreed to be immediately bound for the plaintiff to perform the scope of work which had been agreed for the total price of $12,408,020.00 and otherwise on the terms included in the second defendant’s standard subcontract agreement whilst expecting to make a further contract in substitution for that contract, containing, by consent, additional terms consistent with the agreement reached on or about 18 July 1997;

(e) if the answer to (a), (b), (c) and (d) above is no then in the alternative, whether a binding and enforceable subcontract between the second defendant and the plaintiff was formed on or about 27 November 1997 by the second defendant submitting to the plaintiff for execution a form of subcontract (‘Subcontract’) purporting to record the terms of the tender made by the plaintiff and accepted by the second defendant on or about 18 July 1997, and the terms of the Subcontract being accepted by the plaintiff by its conduct or representations;

(f) in the further alternative, whether a binding subcontract between Multiplex and JRK was formed sometime after 27 November 1997 when JRK by its conduct accepted the terms of the November 1997 Subcontract

;

(g) in the alternative to each of the above, whether a binding and enforceable subcontract between the second defendant and the plaintiff was formed on or before 2 November 1998 by the second defendant submitting to the plaintiff for execution the Subcontract and the terms of the Sub-Contract were varied in a meeting on 2 November 1998, but only to the extent of the amendments to the Subcontract that the second defendant was there and then prepared to accept;

(h) further and in the alternative, whether the plaintiff is estopped from denying that there was a binding and enforceable subcontract on any of the terms referred to in (a) – (g) above between the second defendant and the plaintiff; and

(i) if any of the above questions are answered in the affirmative, what are the terms of the subcontract?”

2 The parties have agreed that if the Court finds that there is a binding and enforceable subcontract between the parties, a term of which is an arbitration clause, then the proceedings must be stayed pursuant to section 53 (1) of the Commercial Arbitration Act.

3 The form of estoppel relied upon although opened as an estoppel by convention is now put in final submissions as alternatively an estoppel by representation.

The Dispute

4 The proceedings involve a dispute between the parties concerning the hydraulics works carried out at the Stadium Australia project which project was the centrepoint of the Olympic Games in Sydney held in September 2000. As the chronology will disclose a considerable degree of urgency surrounded the dealings between the parties during the period covering the years 1997 and 1998. The desired completion date recorded on a tender program in respect of the plaintiff’s works was 3 August 1998 [transcript page 127].

5 Multiplex Constructions Pty Ltd ("Multiplex") which is the first defendant named in the amended summons, was a party to a design and construction agreement dated 31 August 1996 by which Multiplex agreed to plan, design and construct Stadium Australia at Homebush. The Olympic Coordination Authority ["OCA"] had entered into a contract agreement with a trustee to finance, plan, design and commission the Stadium. OCA in turn entered into a construction contract with Obayashi Corporation ["Obayashi”] to plan, design and construct the works. Obayashi entered into a construction agreement with Multiplex and by that agreement Obayashi passed on its procurement and performance requirements to Multiplex which then became concerned to engage subcontractors to perform parts of the principal works in order for it to comply with its own obligations under that series of arrangements.

6 Multiplex Constructions (NSW) Pty Ltd (“Constructions (NSW)”) (which had been the only defendant in the original summons filed on 28 July 2000 and is presently recorded on the Amended Summons as the second defendant) is essentially irrelevant to any issue presently separating the parties. The original invitation to tender made plain that for the purposes of any tender, Multiplex may be represented by Constructions (NSW). As the transcript will record, the parties are agreed that the Multiplex is the relevant entity which dealt with the plaintiff at all material times so that all relevant legal obligations or rights which the dealings and communications between relevant entity's throw up, will be legal obligations or rights held by the plaintiff against Multiplex or by Multiplex against the plaintiff. For those reasons I proceed to disregard Constructions (NSW).

7 In broad overview the chronology involves an initial subcontract agreement entered into during October 1996 between the plaintiff, John R Keith Pty Ltd (“JRK”) and Multiplex for the provision by the plaintiff of temporary plumbing services ("temporary works") at the Stadium Australia site for a contract sum of $250,000. This contract was later replaced by a further written subcontract dated 31 January 1997 in respect of the temporary works.

8 In a letter dated 5 December 1996 Multiplex invited JRK to tender for the hydraulic services and design and construction package ("the works") for the Stadium Australia project. The request for tender letter had enclosed, amongst other documents, a copy of Multiplex's standard subcontract agreement (“the 5 December subcontract version” or “the 5 December version” or “the original subcontract”). There then followed over a considerable period running up to July/August 1997, a series of communications between JRK and Multiplex during the course of which tender proposals and revised tender proposals, and in particular revised tender prices were submitted by JRK to Multiplex. At the same time Multiplex proceeded to a substantial extent with aspects of the works. Through all of this time and notwithstanding such arrangements or understandings or agreements, if any, as may arguably have been reached by dint of these communications, no subcontract was submitted by Multiplex to JRK for execution. The issues litigated raise for decision the question of the status in law of the inter-partes communications. A particularly important letter of 18 July 1997 from JRK to Multiplex was followed by careful discussions between the parties resulting in an annotated copy of the letter reflecting those discussions being sent by JRK. The letter was followed shortly thereafter by a further letter from JRK to Multiplex of 12 August 1997, neither party having addressed submissions suggesting that there were any material differences as between the annotated 18 July 1997 letter and the 12 August 1997 letter. Importantly up to 12 August 1997 JRK had submitted numerous Progress Claims to Multiplex which had specified the "Original Contract Value" as being $250,000 (as per the subcontract agreement for temporary works). Progress Claim No 9 submitted on 15 August 1997 however specified the "Original Contract Value" as being $12,408,020.00 Ultimately on 27 November 1997 Multiplex did forward a form of subcontract to JRK for execution (“the 27 November subcontract version” or “the 27 November version”). However Multiplex concedes that albeit that the 27 November version in fact annexed a copy of the annotated 18 July 1997 letter, the form of subcontract so submitted in fact in some ways departed from the 5 December version. To shortly continue this overview chronology, the evidence discloses that the 27 November version apparently did not receive attention from JRK over a number of months whilst it remained upon the desk of Mr Twiss of JRK. Ultimately on 8 May 1998 JRK returned to Multiplex an executed subcontract in a form (“the 8 May 98 amended version”) which now in some respects departed from even the terms of the 27 November version.

9 Some subsequent meetings took place between representatives of the parties. The significant meeting was on 2 November 1998 when Mr Cooksley met with Mr Twiss and Mr Johnson. A number of clauses were closely examined and the contending positions of both parties the subject of close discussion. Under cross-examination Mr Cooksley agreed that the November 1998 meeting was the only meeting at which there was a detailed consideration of the terms of the proposed subcontract; that at the end of the meeting there were a number of points upon which he and Mr Johnson had failed to agree; that it was common ground that nothing ever transpired after then by which they reached agreement and that as far as he was concerned, at least some of the areas on which he and Mr Johnson were in disagreement were important questions so far as Multiplex was concerned. Mr Cooksley gave evidence to the following effect:

“Q. And the fact that you failed to reach agreement was a reflection of your insistence on behalf of Multiplex that you were not prepared to change the position that you were expressing in relation to those items, is that right?

A. At the end of the meeting, yes, I said I had changed as much as I could.

Q. In other words, you had drawn your line on the sand, or whatever expression you would like to use, and that was as far as you were going?

A. Yes"

10 Mr Cooksley also gave evidence in relation to the standard site subcontract prepared by Multiplex's solicitors for this project that it contained a lot of provisions covering all sorts of things including scope of work, variations, specifications, name, procedure, extension of time, disputes and other things and that, as far as he was concerned as the contract manager for Multiplex, these were important matters. His evidence was that they needed to be resolved in that Multiplex and the subcontractor had to have reached agreement on those things as part of their subcontract dealings. As far as he was concerned "the signing of a subcontract by a subcontractor was an essential part of the subcontract relationship… it was an essential requirement for all Multiplex subcontractors to sign a subcontract agreement….” He accepted that as far as he was concerned it was not overstating the position to say that signing a subcontract agreement was indispensable to subcontractors. [See transcript page 299-300]

The Defendants’ final position litigated

11 During the course of the hearing the court drew counsel for the defendant's attention to the seeming plethora of documents [see defendants narrative, and amended defence and the detailed questions for separate determination] in which the defendants sought to set out their case. A request was made that the produce a firm position on the way in which they put their case. This resulted in the defendants producing a document entitled "statement of defendants position on the existence of a contract" [MFI D5]. This document is in the following terms:

‘

STATEMENT OF DEFENDANT’S POSITION ON THE EXISTENCE OF A CONTRACT

1. Multiplex contends that a binding and enforceable agreement exists between the parties. Insofar as the agreement is in writing it is comprised of the following documents:

(a) Multiplex’s Invitation to Tender dated 5 December 1996, including the documents incorporated by reference [Ex DY, vol 1, tab 3], namely:

(i) The Multiplex Subcontract Deed of Agreement;

(ii) Annexures A to O;

(ii) Hydraulics Specification Revision 0 dated November 1996;

(iv) Documentation Register;

(v) Special Conditions;

(vi) Site Safety Instructions;

(vii) Design Brief;

and

(b) JRK’s 18 July 1997 letter, as amended, incorporating by express or implied reference the plans and documents [Ex DY, vol 2, tab 20], namely:

(i) JRK’s letter dated 10 March 1997, which incorporates other documents and plans by reference [Ex DY, vol 2, tab 7];

(ii) JRK’s letter dated 4 June 1997, which incorporates expressly plans and specifications [Ex DY, vol 2, tab 12];

(iii) JRK’s letter dated 27 June 1997 [Ex DY, vol 2, tab 14]

2. The agreement alleged was formed between the parties in

one

of the following ways, each contention being in the alternative:

(a) on or about 18 July 1997, but before 12 August 1997, when Multiplex accepted JRK's final tender price in the sum of $12,408,020 for the Works contained in JRK’s letter dated 18 July 1997 as amended (Masters v Cameron class 1 or 2 type of agreement);

(b) some time after 18 July 1997 as a result of the conduct of the parties;

(c) on or about 18 July 1997, but before 12 August 1997, when Multiplex accepted JRK's final tender price of $12,408,020 as contained in JRK’s letter dated 18 July as amended in the contemplation that the parties would make a further contract containing additional or other terms in substitution (Masters v Cameron class four type of agreement);

(d) On or about 27 November 1997 by Multiplex submitting to JRK a form of subcontract [Ex DY, vol 2, tab 22], which was consistent with the agreement reached on or about 18 July 1997 although containing modifications to the wording of Multiplex's standard subcontract agreement which was the basis of the subcontract formed in either (a) or (b) or (c) above;

(e) sometime after 27 November 1997 when JRK accepted, by conduct, the terms of the subcontract formed in (d) above;

(f) the subcontract formed in any of the alternatives referred to in (a) –(e) above was varied in the meeting on 2 November 1998, but only to the extent of the amendments that Multiplex was prepared to accept.

2. Each of the forms of the subcontract referred to in sub-paragraphs (a) – (f) above contained an arbitration clause (Clause 16).

3. In the alternative, Multiplex contends that JRK is now estopped from denying the existence of a subcontract.”

12 I proceed upon the basis that the final statement is to be regarded as the defendants’ central stance. The multiplicity of alternative ways of putting the defendants case points up the difficulties in pointing in an ongoing relationship to the precise moment when the legal criteria of a contract may have been fulfilled cf Integrated Computer ServicesPty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 at 11,117 – 11,118 per McHugh JA.

The Arbitration Clause

13 Of particular importance to Multiplex is it’s submission that the arbitration clause comprised an essential term forming part of whatever form of enforceable subcontract or agreement the court upholds as having been entered into between Multiplex and JRK. Multiplex has always reserved its position in relation to these proceedings as it maintains that the issues between the parties require to be adjudicated upon pursuant to the arbitration clause as opposed to by curial process. The clause in question was in the following terms:

“16 DISPUTE RESOLUTION

16.1 In case any dispute or difference shall arise between the Subcontractor and Multiplex, either during the progress of the works or after the determination, abandonment or breach of this Agreement as to the construction of this Agreement or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith then subject to clause 22.1(f), either party shall give to the other notice in writing of such dispute or difference and at the expiration of three (3) days, unless otherwise settled, such dispute or difference shall be submitted to arbitration in accordance with and subject to the Institute of Arbitrators Australia Rules for the Conduct of Commercial Arbitration, expect that Multiplex may require replacement of any arbitrator nominated whom it considers unsuitable for the dispute in question or any aspect thereof. In the event of the Subcontractor submitting a dispute to arbitration it shall, within 14 days of the submission, deposit on trust with a solicitor (nominated by the Subcontractor and approved by Multiplex) a sum of money equal to 10% of the amount in dispute as security for the costs of arbitration proceedings.

Pending resolution of any dispute the Subcontractor will without delay, continue to perform this Agreement and to execute any of the Works (including variations) remaining to be executed and comply with all instructions of Multiplex.”

The confined pleadings

14 Certainly it is to be borne in mind that the Defendants having always approached the proceedings upon the basis that their participation in the proceedings is without prejudice to their alleged entitlement to have the proceedings stayed pursuant to section 53 (1) of the Commercial Arbitration Act 1984, the amended defence only pleads by way of denying paragraph C1 of the amended summons so that the only issues thrown up by the post amended summons pleadings (i.e. by the amended defence filed on 31 January 2002 and by the amended reply filed on 1st February 2002] are the issues concerning determination of the separate questions.

The plaintiff’s case

15 JRK shortly adopts the stance that the series of negotiations between the parties never resulted in a consensus by way of a relevant meeting of minds. The contention is that no concluded enforceable agreement was ever reached between the parties in respect of the work which JRK carried out at Stadium Australia. In particular the contention is that there was never a meeting of minds and therefore never an enforceable agreement incorporating the Multiplex Standard Terms of Contract, which Standard Terms (in whatever form) had included the arbitration clause.

16 JRK accepted that there was no argument but that throughout the history of their relationship both parties assumed or expected that they would have a concluded contract regulating their relationship. JRK’s contention was that both parties approached this transaction on the basis that a formal written instrument regulating their mutual contractual rights and obligations was a fundamental requirement for both of them. JRK accepts that nobody in the industry in 1997 would contemplate having a $12 million contract otherwise than in writing. Problems arose between the assumed industry position that contracts of this nature and magnitude should be in writing on the one hand and the practical aspect of the building works having to be undertaken and completed on the other hand. The negotiation processes were continued throughout. The result on JRK’s case is that the parties succeeded in the building of what was necessary but never succeeded in reducing the terms of the relevant contract to writing.

Dramatis personae

Mr John Keith

17 Mr Keith is a director of JRK Pty Ltd. JRK is a company which carries out plumbing works on large development projects. JRK is one of the largest contracting firms in NSW. [Transcript page186]

Mr Peter Johnson

18 Mr Johnson holds the position of Contracts Manager at JRK, and one of his primary roles is responsibility for documenting subcontracts entered into by JRK for hydraulic plumbing works.

19 Mr Johnson was not involved in the dealings between JRK and Multiplex until he made amendments to the second subcontract (sent to JRK on 27 November 1997), signed it and sent it back to Mr Cooksley on 8 May 1998. He was thereafter involved in meetings with representatives from Multiplex in regard to the terms of the subcontract.

Mr Keith Parslow

20 Mr Parslow is employed as the Services Manager for Multiplex. In March 1996, he commenced work on the Stadium Australia Project; his title being “Design Manager – Services”. [Mr Parslow’s Statement, 12 April 2001, paragraphs 1, 4]

21 Some of his duties in this role included:

(a) managing the design of all the services (including hydraulics) for the project;

(b) the resolution of any technical services issues with subcontractors and Multiplex’s consultants;

(c) ensuring that all tenderers were fully aware of the scope of the works and ensuring that all tenders submitted complied with Multiplex’s scope for any particular service;

(d) ensuring that the scope of works for which Multiplex was responsible was complied with by the subcontractor;

(e) reviewing Design Briefs for each service

(f) ensuring that Mulitplex’s design and construct obligations were passed on to the subcontractor to price;

(g) putting together tender documents to be sent out

(h) Mr Parslow had authority to negotiate the technical requirements of the subcontract and to advise Mr Cooksley on the reasonableness of the costing presented by the subcontractor (it was Mr Cooksley’s role to deal with subcontractors with a view to finalising contractual terms); and

(i) attending meetings with tenderers and reviewing tenders. [Mr Parslow’s Statement, 12 April 2001, paragraphs 4-10]

22 Mr Parslow attended a number of meetings with JRK during which there were various discussions in relation to technical matters, scope, problems with authorities, alternatives and proposals of method and materials. [Mr Parslow’s Statement, 12 April 2001, paragraphs 18-23]

Mr James Twiss

23 Mr Twiss was the site manager employed by JRK on the Stadium Australia site. Mr Twiss was involved in designing drawings and receiving drawings and drawing schedules from Multiplex. [T280]

Mr David Cooksley

24 During the period 1991 to 1999, Mr Cooksley was employed by Multiplex as Contracts Manager, and specifically worked on the Stadium Australia project between February 1996 and July 1999. [Mr Cooksley’s Statement, 12 April 2001, paragraph 4]

25 In this role, Mr Cooksley was responsible for administering all subcontract agreements between Multiplex and its subcontractors. His responsibilities included:

“(a) contract negotiation;

(b) issuing and signing subcontracts on behalf of Multiplex;

(c) managing variations;

(d) dealing with progress payments and final accounts;

(e) general administration of the subcontract once it had been let.”

Mr Leonard Hutton

26 Mr Hutton is an associate in the firm Sinclair Knight Merz Pty Ltd (“SKM”) and holds the position of Senior Hydraulics and Fire Engineer.

27 SKM was engaged by Multiplex as hydraulic design consultants for the Stadium Australia project. SKM’s role was to design a set of tender documentation which Multiplex could use to seek tenders for the hydraulic services design and construct contract. SKM’s ongoing role was design overview. Mr Hutton’s role was to review the design created by the hydraulic subcontractor and provide quality control advice to Multiplex. [Mr Hutton’s Statement, 4 February 2002, paragraphs 1-3]

The facts

28 The convenient course is to set out the facts. In doing so from time to time it may be helpful to set out some aspects of the submissions of the parties in relation to particular documents or events.

The tender process

29 It was Mr Keith’s practice to have meetings with staff from time to time for the purposes of understanding what everyone in the office was doing. Mr Keith, Mr Johnson and Mr Twiss (who worked at the office part-time) worked within close proximity to each other. [T187]

30 It was Mr Keith’s evidence that prior to the commencement of construction on or around 18 March 1997, a substantial part of the hydraulic works to be completed by JRK on the Stadium Australia Project had not been designed. According to Mr Keith, JRK’s brief was for the design, development and installation of the words. [Multiplex submitted numerous architectural drawings to JRK] [Admitted subject to relevance] for the purposes of JRK developing the designs to a stage where they could be submitted to Multiplex for approval prior to being issued for construction. [He says that the works were designed in a “staged” manner because of the urgency of the deadline to be met.] [Admitted subject to relevance] [Mr Keith’s Affidavit, 11 September 2001, paras 40, 41]

31 [According to Mr Keith, when JRK received each set of drawings and where they constituted a variation to the scope of the JRK original works (see below for definition), JRK would submit a Variation Notice claiming payment over and above the sum of $12,408,020 tendered by JRK.] [Admitted subject to relevance] [Mr Keith’s Statement, 11 September 2001, paragraph 43]

32 Mr Keith did recall seeing some of the documents included with the letter of 5 December 1996 (Exhibit DY1, behind tab 3). He gave evidence that he had seen the front page of the “Tender Conditions” but had never read the document. [Transcript page 201]

33 Mr Keith also gave evidence that Mr Twiss had responsibility for administering the payment process and that whilst Progress Claims came into the JRK office, they did not cross Mr Keith’s desk and he did not see all of them. [Transcript page 203]

34 Mr Keith was unaware of Special Condition 2(c) of the original subcontract which required JRK to submit statutory declarations. Despite this, he signed statutory declarations such as those of 14 August 1997 and 20 May 1997 (MFI DX, Volume 1B, PAB.01.644, PAB.01.664). Mr Keith explained that declarations such as these were required on every project. [Transcript page 205 - 207]

35 Mr Keith explained that he had never read the subcontract, and that when he swore the statutory declarations which refer to the “subcontract agreement” he merely considered the declaration to be a standard form which went with each monthly progress claim. The following exchange took place during Mr Keith’s cross examination:

“Q. Now at the time you signed that piece of paper as a statutory declaration did you have in mind any understanding yourself of which subcontract agreement, if any, was being referred to using those words?

A. No, I don't.

Q. You mean no you didn't?

A. I didn't at the time.”

31 August 1996

36 Multiplex became a party to a design and construction agreement by which they agreed to plan, design and construct Stadium Australia for the Sydney 2000 Olympic Games.

October 1996

37 JRK executed a subcontract agreement with Multiplex to provide temporary plumbing services (“the temporary works”) at the Stadium Australia site for a sum of $250,000. The temporary works were primarily associated with transporting water to the site for the purposes of construction.

5 December 1996

38 Multiplex sent JRK a request for tender letter (Exhibit DY1, tab 3, JK02-078). The request invited JRK to tender for the design and construction of the permanent hydraulic services package (“the works”) for the Stadium Australia project.

39 The letter included the following:

“You are invited to submit a tender to Multiplex Constructions Pty Limited (ACN 008 687 063) (“Multiplex”) for the Hydraulic Services Package for the above project (“the Project”), all in accordance with Specifications and Drawings and the following Tender Condition.

The Drawings, Specifications, and copy of the Multiplex Design and Construction Agreement and our Project Standard Form of Subcontract Agreement for the Proposed Works and Standard Form of Project Supply Agreement for the Materials may be examined in our Project office at Level 1, 55 Clarence Street, Sydney, NSW, 2000 (“Project Office”) by prior arrangement.”

40 The tender letter sent to JRK enclosed a number of documents (“the tender documents”), some of which included:

41 The parties were in dispute as to:

(a) The extent to which the question of which documents were sent with the invitation to tender was permissible to be litigated (on the pleadings, particulars and opening addresses); and

42 Mr Gray submitted that Mr Parslow’s original statement was in fact accurate and that the incomplete document was the version actually sent to JRK on 5 December 1996. [Transcript page 262]

43 During cross examination, Mr Parslow gave evidence that he believed that the complete version of the “Design Brief” was sent to JRK (as found in Exhibit D6 (1)), but could not guarantee that it was actually sent as he did not himself put the documents together. He accepted that the incomplete document (as found in Exhibit DY1) could have been sent to JRK and that he had not verified precisely what had been sent to JRK. The basis for his belief was that to send out the brief would have been to send out the complete document, as it was part of Multiplex’s head contract document. [Transcript pages 264 - 265; 269]

44 Mr Cooksley gave evidence that he was involved in putting these tender documents together, signing them and telling the subcontractors to pick them up. He states that he did not personally put the Design Brief in but recalls that one was given to JRK in the tender documents. Mr Cooksley did not claim to be able to contradict the proposition that JRK was not given a complete document of the Design Brief. [Transcript pages 293 - 294] He did however give evidence that all Parts were available for inspection from 5 December 1997. [Transcript page 294.10]

45 During cross examination, Mr Keith gave evidence that he could not recall seeing the letter of 5 December 1996 prior to seeing it in the witness box, as it would have been sent to Mr Twiss. This was despite the fact that Mr Keith referred to this document in his affidavit of 11 September 2001 at paragraph 33. Mr Keith stated that it was likely that Mr Twiss would have brought this letter to his attention when receiving it from Multiplex but he cannot recall either way. [Transcript pages 191 - 197; 201]

The Tender Conditions

46 Clause 2.1 of the Tender Conditions stated:

“Subject to Section 4 below, the successful tenderer for the Proposed Works shall enter into Multiplex’s Project Standard Form of Subcontract Agreement with any applicable special conditions…including applicable Annexures, and be bound by all conditions and restrictions, applying to the Project included in the Head Contract. Copies of the Multiplex Design and Construction Agreement and Multiplex’s Standard Form of Subcontract Agreement are available for inspection by the tenderer in the Project Office.”

47 4.2 of the Tender Conditions stated:

“The tenderer agrees that Multiplex will be entitled to conduct negotiations with any or all tenderers after the date of close of tenders to take account of the state of Multiplex’s then and anticipated contractual obligations under documents forming part of the Stadium Australia project documentation.”

The Standard Subcontract Agreement (“the original subcontract”)

48 A part of clause 1 of the Standard Subcontract Agreement sent to JRK on 5 December 96 (“the original subcontract”) stated:

“…Nothing in this clause shall oblige Multiplex to disclose the contract sum under the Contract Documents or provisions indicating its components or other benefits to the Contract Documents. Notwithstanding this clause and clause 22.1(a), no term of this Agreement shall be interpreted as having more than one meaning. The subcontractor agrees that the limitation period for Multiplex to bring any claim against the Subcontractor under this Agreement shall be determined as if this Agreement was a deed.”

49 Clause 16 of the original subcontract contained an arbitration clause earlier set out.

50 Schedule 5 of the original subcontract required the subcontractor to submit a number of items with each progress claim in respect of the works, one of which was:

“…a statutory declaration by the Subcontractor that no monies are due and payable to its sub-subcontractors and certified copies of claims from subcontractors in order to substantiate the claim.”

51 Part 2 of the Special Conditions of the original subcontract required the subcontractor to provide a detailed description of safety systems and procedures that it intended to apply.

52 Part 10 required the subcontractor to implement a Quality System and perform various tasks in relation to this obligation.

53 The original subcontract form also placed Design Obligations on the subcontractor (see Exhibit DY1, tab 3, JK02-048). Importantly this Part obliges the subcontractor to prepare and submit its Quality Manual for approval by Multiplex.

The Design Brief

54 Mr Parslow originally gave evidence in his affidavit that the document in Exhibit DY1, tab 3 JRK04-083 to JK04-277 entitled “Design Brief” was the document sent out to JRK on this date. Later, in the witness box, Mr Parslow told the Court that he wished to correct this as he subsequently realised that this document had pages missing and that a complete version of this document could be found in Exhibit D6 (1). [Transcript page 239]

55 Mr Cooksley gave the following evidence during cross examination in relation to his reading of the standard site subcontract prepared by Multiplex’s solicitors for this project:

“Q: Can I get to the point, Mr Cooksley? If you need to refer to the document, if you want to, please say so. The document contains a lot of provisions covering all sorts of things, scope of work, variations, specifications, name, procedure, extension of time, disputes, other things, doesn’t it?

A: Yes.

Q: As far as you were concerned, as the Contract Manager for Multiplex, these were important matters, weren’t they?

A: Yes.

Q: And they needed to be resolved, that is to say, the parties, Multiplex and the subcontractors, had to have reached agreement on those things as part of their subcontract dealings, didn’t they?

A: Yes.

Q: As far as you were concerned, the signing of a subcontract by a subcontractor was an essential part of the subcontract relationship, wasn’t it?

A: Yes.

Q: And indeed, as far as you were concerned, you had in fact made it known to subcontractors’ representatives that if they didn’t sign the subcontract, they might not get paid at all?

A: Yes.

56 Mr Cooksley agreed that it was an essential requirement for all Multiplex subcontractors to sign a subcontract agreement in every case and that it was indispensable to subcontractors to do so. Mr Cooksley agreed that it was part of his responsibility to ensure that subcontractors signed their agreements. [T300-T301]

13 December 1996

57 Multiplex sent a letter to JRK on this date entitled, “Stadium Australia Project Documentation Requirements” (MFI DX, volume 5, PAB.05.083).

58 The letter began:

“As part of your contractual obligations you are required to submit the following documentation:

1. Quality Assurance

…”

December 1996

59 JRK commenced work on the temporary works.

28 January 1997

60 Multiplex sent a letter to JRK on this date entitled, “Australia Stadium Project Monthly Reports” (MFI DX, PAB.05.111).

61 The letter reads:

· “As part of your contractual obligations for issuing of your Monthly Progress Claims and associated documentation, we require the attached pro-formas for (Quality Assurance Report and Employee Payment Declaration) to be completed and issued with the Progress Claim. Failure to issue these forms will result in delays in processing your claim.”

62 In relation to this letter, Mr Gray (for JRK) submitted:

“…the point that I'm making is that these requirements are set out in this correspondence referenced to contractual obligations. The parties as I have said, we accept they were going to make a contract and that, in our submission, the fact that it was done in this way is consistent with that assumption. They were going to make a contract; it was required; these procedures are normal.”

31 January 1997

63 A subcontract of this date replaced the previous one entered into in October 1996 in respect of the temporary works (Exhibit DY1, tab 1, JRK0021 0161).

12 February 1997

64 JRK responded to the letter of 5 December 1996 and submitted a price of $8,524,000 for the works (Exhibit DY2, tab 4, JRK0001 0251). This price was expressed to exclude:

“Cash retention.

Performance bond.

Site and/or special allowances.

Builders temporary services.

Removal of surplus spoil off site.

Site accommodation.

Roof, gutters, rainwater heads, external downpipes, overflows, flashing and spitters.

Electrical works.

Cranage of materials and plant.

Fire extinguishers.”

65 The letter also stated:

“Our tender price is based on the tender documents enclosed with your invitation to tender however, only the services, plant and equipment indicated on the tender plans has been included in our price. Those services, plant and equipment that may be specified or inferred but are not indicated on the drawings have not been included in our price.

We cannot at this stage indicate a final price for the design of the hydraulic services for the project until we have been briefed on the overall design extent and intent, together with results of discussions held to date with governing authorities and overall design programming.”

66 The letter was signed, “John R Keith per Twiss”.

67 JRK had filled in the “Form of Tender” document (as previously included in the tender material sent to JRK on 5 December 1996) and attached it to this letter.

68 Mr Parslow gave evidence that when he read the tender of this date, he thought that it did not qualify the scope of work required to be undertaken. Importantly he recognised that the amount of information provided by JRK made it difficult to be confident that it had taken all necessary matters into account. [Mr Parslow’s Statement, 12 April 2001, paragraph 12]

69 For the duration of the Stadium Australia Project, Mr Keith contends that:

(a) Mr Twiss and Mr Johnson would refer to him for determination and/or ratification in relation to management decisions by JRK in relation to the Stadium Australia project;

(b) he discussed the Stadium Australia Project with Mr Twiss and Mr Johnson on a regular basis and at weekly team meetings; and

After 12 February 1997

70 Multiplex arranged for each of the tenderers to meet with its personnel (including Mr Cooksley, Mr Scicluna and Mr Parslow) to discuss the proposed scope of work. Meetings were also arranged between the tenderers and Multiplex’s hydraulic consultants, Sinclair Knight Mertz (SKM) to discuss the design brief.

71 At one of these meetings, Mr Cooksley alleges that he said (to all tenderers including JRK):

“Have you had a chance to go though the subcontract agreement and standard annexures?

“Yes, but we have included a few matters in our tender which we can go through with you.”

72 According to Mr Cooksley, further conversation took place in relation to the matters listed under the heading, “Exclusions” in the 12 February 1997 tender. [Mr Cooksley’s Statement, 12 April 2001, paragraph 14]

73 Mr Keith, whose evidence is accepted in this regard, contended that at at least one of the meetings he attended, Mr Cooksley said:

“Multiplex have a project specific contract produced by solicitors Dunhill Madden Butler for the Stadium Australia Project.”

“We will need to study that document and then get back to you.”

4 March 1997

74 JRK submitted a revised tender price of $7,816,000 (Exhibit DY2, tab 5, JRK0001 0288). The tender contained the same exclusions that were specified in the letter of 12 February 1997.

75 The letter stated:

“We herein submit our price for the amount of Seven Million Eight Hundred and Sixteen Thousand Dollars ($7,816,000.00) for the above project all as detailed below.

Our tender price is based on the tender documents enclosed with your invitation to tender however, only the services, plants and equipment indicated on the tender plans has been included in our price. Those services, plant and equipment that may be specified or inferred but are not indicated on the drawings have not been included in our price.

We cannot at this stage indicate a final price for the design of the hydraulic services for the project until we have been briefed on the overall design extent and intent, together with results of discussions held to date with governing authorities and overall design programming.”

7 March 1997

76 JRK submitted a further revised tender price of $8,139,000 (Exhibit DY2, tab 6, JK01-028). The letter stated:

“As requested we herein submit our revised price for the amount of Eight Million One Hundred and Thirty Nine Thousand Dollars ($8,139,000.00) for the above project all as detailed below.

Our tender price is based on the tender documents enclosed with your invitation to tender however, only the services, plant and equipment indicated on the tender price has been included in our price. Those services, plant and equipment that may be specified or inferred but are not indicated on the drawings have not been included in our price.

We cannot at this stage indicate a final price for the design of the hydraulic services for the project until we have been briefed on the overall design extent and intent, together with results of discussions held to date with governing authorities and overall design programming.”

77 The revised tender now included the following five additional inclusions:

“- Supply and installation of four (4) 700kl irrigation storage tanks (at $428,000.00).

- Level 0 hot water service.

- Garbage room drains.

- Site accommodation.

- Site allowances of $1.80.”

78 The letter was signed “John R Keith per Twiss”.

10 March 1997

79 Mr Keith signed the following letter sent by JRK to Multiplex which was in the following terms (Exhibit DY2, tab 7, JRK0001 0290):

“Further to our hydraulic services tender of the 7th March 1997 we submit an alternative proposal as follows:

1. Hydraulic services price based on the tender plans and specification.

2. Work with Multiplex Constructions, Sub-Contractors, Consultants and Governing Authorities as a preferred subcontractor to complete co-ordinated fully engineered hydraulic services design documented using AUTOCAD or Microstation.

3. Completed design submitted to Governing Authorities for approval together with payment of necessary fees.

4. Submission of final hydraulic services price based on completed design.

5. Ongoing on-site construction assistance including installation of core holes, temporary site services and technical advice.

Our tender price is Seven Million Five Hundred and Sixty Thousand Dollars ($7,560,000.00)

Our tender includes the following:
Preparation of co-ordinated hydraulic services ($72,000.00)
Retention by Bank Guarantee (2x2.5%)
John R Keith Pty Ltd enterprise agreement.
Six day week when required to maintain programme.
Supply and installation of four (4) 700kl irrigation storage tanks (at $428,000.00).
Level 0 hot water service.
Garbage room drains.
Site accommodation.
Site allowances.
HDPE pipework for plumbing and trade waste lines.
Lilac coloured pipework for all recycled water services.
All storage tanks and pumping units specified.

Excluded:-

Cash retention.

Performance bond.

Builders temporary services

Removal of surplus spoil off site.

Roof, gutters, rainwater heads, external downpipes, overflows, flashing and spitters.

Electrical works.

Cranage of materials and plant.

Fire extinguishers.

Painting.

Hand excavation.

Trench gratings and frames.

Bath support frame or base.

Special insurances.

Excavation in rock, shale or concrete.

Dewatering.

Piers, lintels encasement works.

External site services.

Surveying.”

80 Multiplex’s case is that JRK put this proposal forward with a view to submitting a better, final tender price based on the design to be completed. Its case is that the price submitted would remain provisional until the point when the design was completed, with a final price then being put forward. Multiplex contends that JRK later processed the amount of $72,00.00 (to prepare the drawings) as a variation to the temporary works contract (see various Progress Claims submitted by JRK in Exhibit DY1, tab 2) [Transcript page 64.55].

81 Importantly, this letter in contradistinction to the previous letters of 12 February 1997 and 4 and 7 March 1997, did not set out a tender price “based on the tender documents” enclosed with the invitation to tender of 5 December 1996. Multiplex contends that where the earlier letter reserved the final price to a time when the design was complete and further information was available, this proposal involved an alternative plan put forward by JRK as to how the final price would be developed. Multiplex’s submission was that this was not in any way an attempt by JRK to move away from the basis of the tenderer earlier made. See generally at Transcript page 55 where Mr Corsaro (for Multiplex) put the matter as follows:

“So what it envisaged, your Honour, is an arrangement where Keith would work to complete the design for the hydraulic services with a view to submitting a final hydraulic services price based on that design.

…And the letter then put forward a tender price of $7,560,000, so that the obvious arrangement here, your Honour, is a provisional price for the permanent hydraulic services of 7.56 million.

…With Keith working together with Multiplex constructions and its subcontractors to finalise the design and that the price would remain provisional until the point when the design was completed, with a final price then being put forward.

…And on any view we would say that what your Honour would find here is an arrangement proposed whereby Keith would work with Multiplex with a view to putting forward a better tender price, and

in no way is this a step away from the tender documents which were to be the foundation of the arrangement

, in other words the general conditions and so on. It doesn't in any way, shape or form appear to be a move away from Keith's original tender insofar as it acknowledged the tender documentation had been received and certainly by implication accepted that documentation.”

82 And later at Transcript page 71:

“..it is true that when one goes back for example to the earlier letter on 7 March, that those letters set out tenderer prices based on the tender documents enclosed with the invitation to tender and that that no longer appears in this letter, budgets and they don’t appear….is because the earlier letters reserved the final price to a time when the design was complex when further information was available. This letter is an attempt by [the plaintiff] to come to an arrangement as to how the final price would be developed, namely that [the plaintiff] itself would prepare the drawings, and this is important, because this, if as Mr Gray maintains, it was the scope that wasn’t agreed, at the end of the day [the evidence will disclose] that Mr Twiss prepared the drawings out of which they tendered and [see] says he agreed the price.”

83 JRK on the other hand, submits that the critical phrase in this letter is “alternative proposal”, and was used in this letter in contrast with everything else that JRK had written up until that point. JRK emphasises that the previous letters of 12 February 1997 and 4 and 7 March 1997 referred to the tender price being “based on the tender documents”, whereas the 10 March 1997 letter states that the price is based on the plans and specifications. [Transcript page 119]

84 JRK submits that the 10 March 1997 letter constituted a distinct departure from the basis of the previous tenders and did not represent any acceptance of the original subcontract. JRK contends that the 10 March 1997 letter was taken by the parties as the foundation for all their further dealings and that everything discussed prior to that was simply disregarded. It contends that from 10 March 1997 onwards, the original subcontract was considered “out of the picture” in a contractual sense and that the parties were proceeding on the basis that they would determine the details and terms of their contract at a later stage. [Transcript pages 120 and 128]

85 JRK submits that it offered this alternative proposal because Multiplex wanted a lower price and JRK chose to get rid of the original subcontract terms, which terms it considered to be onerous. [Transcript page 121]

86 JRK also submits that the plans that JRK was to prepare for $72,000 were substantially “penetration plans” (to show how services such as pipes and electronic wiring were to go through concrete walls and slabs planned to be built by the architect or engineer) as well as being “coordination drawings” which were intended to ensure that the hydraulic services did not conflict with other services in terms of the location of facilities. JRK submits this was the function of these plans rather than to materially define the hydraulic works. [Transcript pages 124 and 128]

87 Mr Twiss gave evidence that while he prepared the designs (the scope of which was ultimately finalised in June 1997), JRK was already working on the main hydraulic work. [Mr Twiss’ Statement, 24 January 2002, paragraph 11] [Transcript page 67]

17 March 1997

88 Mr Cooksley gave evidence that he arranged for Mr Mark Ainsworth (of Multiplex) to prepare a “Subcontract Comparison” spreadsheet and received it on this date (Exhibit DY2, tab 8). The document indicates that JRK was the “preferred subcontractor” for hydraulics on the Stadium Australia project. It has the signatures of Mr Obiala, Mr Stagg and Mr John Austin (all of Multiplex) to indicate their approval of the recommendation. [Mr Cooksley’s Statement, 12 April 2001, paragraph 18]

89 Following this, Mr Cooksley says that he ceased negotiations with all other tenderers.

On or around 18 March 1997

90 JRK commenced construction of the works. [Mr Keith’s Affidavit, 11 September 2001, paragraph 40]

21 March 1997

91 Mr Cooksley met with Mr Keith and Mr Twiss; handwritten notes were made by Mr Cooksley (Exhibit DY2, tab 9).

92 According to Mr Cooksley, the following conversation took place:

“Mr Cooksley: I want to confirm my understanding of where your latest bid is at. Am I right that your price at the moment for the contract work and additional temporary services is $7,834,273 plus $250,000 for the temporary services let to date? I want to confirm that you have also taken into account the following items:…
…
…

Mr Keith/Mr Twiss: That’s right. The price includes all those items.

Mr Cooksley: We’ll be looking to contract with you subject to David Hicks checking JRK’s financial status, an industrial check and confirmation of the sales tax. We want you to progress the design over the next 2 months by which time we will be in a position to finalise the contract subject to acceptable contract sum. Can you also correct the “Exclusions” to reflect what we’ve agreed? On that basis you can proceed with the design work and any necessary work to keep up with the construction on site. I’d like you to monitor immediate expenditure against the tender price with John Scicluna.”

[Mr Cooksley’s Statement, 12 April 2001, paragraphs 19 and 20]

23 March 1997

93 A meeting took place between Mr Keith, Mr Twiss and Mr Cooksley. JRK was informed that they were the preferred tenderer. JRK performed the works at all material times thereafter.

94 JRK worked with SKM and Multiplex’s technical personnel to develop a hydraulic services design on which JRK could base its final tender price.

17 April 1997

95 Mr Parslow gave evidence that he attended a “tender finalisation meeting” with JRK during which he said words to the following effect:

“The intent of the contract is to meet the design brief and to minimise variations. If possible I want no variations.”

96 According to Mr Keith, he responded to this with:

“There’ll be no variations provided you don’t add anything to the design of the works. If it is extra then you will have to pay for it.”

97 Mr Parslow states that he does not recall Mr Keith saying this and that if he had said it, Mr Parslow would have responded as it was obvious that if the design brief remained unchanged, the scope would remain the same. [Mr Parslow’s Statement, 20 December 2001, paragraph 6]

27 May 1997

98 JRK submitted copies of its Quality Assurance Manual, Occupational Health and Safety Plan and Environmental Policy to Multiplex (Exhibit DY2, tab 11, JRK0002 0342). Mr Twiss signed this letter as “Project Manager”.

99 Multiplex contends that this is significant in demonstrating that JRK was moving forward at this stage on the understanding that the tender documents applied because the tender documents required JRK to submit a quality system, an Occupational Health and Safety Plan and Environmental Policy.

100 Mr Twiss gave evidence that as far as he is aware, Quality Assurance Reports are common in significant construction projects. [Transcript page 282]

101 Mr Cooksley gave evidence that Multiplex requires Quality Assurance Programmes from its various subcontractors and consultants and that this is a standard requirement on every job since Multiplex received its accreditation. As far as Mr Cooksley is aware, this is true of every construction company that has been similarly accredited. [Transcript page 297]

4 June 1997

102 JRK, by letter written by Mr Twiss and signed by Mr Keith, submitted a revised tender price of $12,326,850 to complete the works (Exhibit DY2, tab 12, JRK0003 0017). The price was increased from the previous quote of $7,560,000 (on 10 March 1997) because by this stage, the design work quoted at $72,000 had been carried out and a final (although provisional) price could be quoted.

103 The letter is in the following terms:

“We herein submit our price for the amount of Twelve Million Three Hundred and Twenty Six thousand Eight Hundred and Fifty Dollars ($12,326,850.00) for the above project all as detailed below.

Our tender adjustment is based on the documents as listed in the attached Appendix A.

1.

Our Tender Adjustment Includes The Following:-

(a) Tender price dated 10th March 1997 $7,560,000.00

$7,560,000.00

2.

Authorities Requirements Over And Above Documents

(a) Dual gas metres, regulators and vents to

AGL requirements $57,294.00

(b) Separate gas line to cogen $67,086.00

(c) Boundary traps, overflow of grease arrestors $15,445.00

(d) Reflux valves on outlet of grease arrestors $8,787.00

(e) Additional grease arrestor to achieve gravity

fall & head room $9,686.00

(f) RPZ valve on potable water suction point $7,560.00

(g) Dual RPZ valves on potable water supply

(recommended) $4,508.00

$170,466.00

3.

Kitchens & Concessions

(a) Level 0 kitchen $183,923.00

(b) Level 1 concessions $488,668.00

(c) Level 2 concessions $253,449.00

(d) Level 3 concessions $199,511.00

(e) Level 4 concessions $263,075.00

(f) Level 5 concessions $152,320.00

(g) Level 6 concessions $158,004.00

(h) Deductions for tender allowance ($502,022.00)

$1,195,928.00

4.

Additional Amenities

(a) Level 0 amenities $484,633.00

(b) Level 1 amenities $361,812.00

(c) Level 2 amenities $19,292.00

(d) Level 3 amenities $817,241.00

(e) Level 4 amenities $26,650.00

(f) Level 5 amenities $20,123.00

(g) Level 6 amenities $36,099.00

$1,765,850.00

5.

Additional Works Indicated On Consultants Issue 0 and 1 Drawings, Revised Specification and Latest Architectural Drawings Listed in Our Appendix A

(a) Water filter to recycled water service $39,200.00

(b) Potable water suction point for fire fighting $6,955.00

(c) Water service to gantry including two (2) new

pumps $68,544.00

(d) Fifty three (53) additional fire hydrants & fire

hose $122,815.00

(e) Water wash down for core roofs $1,610.00

(f) Additional twenty-eight (28) drains for

garbage room $42,931.00

(g) Additional forty-eight (48) roof sumps to

ramps $36,600.00

(h) Automatic urinal cistern changed to Zip

sensors $26,676.00

(i) Centralised hot water system including

pipework $521,636.00

(j) Level 0 water and gas ring mains $1,322,130.00

(k) Deduction for irrigation tanks ($428,000.00)

(l) Deduction for hot water service ($103,416.00)

(m) Deduction for Level 0 drainage (North) ($15,225.00)

(n) Deduction for recycled solenoid valves ($7,850.0)

$1,634,606.00

Total Tender Price $12,326,850.00

6. Additional Work Outside Of Hydraulic Services Scope

(a) Irrigation storage tanks $339,300.00

(b) Irrigation pipework including conduits $73,780.00

(c) Automatic filling of irrigation tanks $104,700.00

(d) Stormwater pumps and electrical works $62,650.00

(e) Access panels to in wall cisterns $370,605.00

(f) Drains to photographers moat $26,326.00

________________

Total $977,361.00

Possible Savings

1) Change of toilet seat type;
2) Change in wall cisterns to suites as discussed;
3) Change in wall cisterns to duct cisterns as discussed;
4) Do not interconnect east and west stands in waters services;
5) Take gantry cold water service off main pressure system;
6) Use local hot water heaters for temporary concession & Level 0 maintenance amenities;
7) Maximise lengths of urinals & wall-on urinals to suit sensor flush systems as discussed;
8) Changes to selected sanitary fixtures, faucets and taps;
9) Combined hydrant and potable water storage tanks into one tank.

Our Tender Adjustment Excludes The Following:

1) Painting of services;
2) Sheathing of hot water insulation;
3) Sub-soil drainage;
4) Hose cocks to Level 0 service road;
5) Cash retention;
6) Performance bond;
7) Roof gutters, rainwater heads, external downpipes, overflow, flashing and spitters;
8) Electrical works;
9) Cranage of materials and plant;
10) Fire extinguishers;
11) Trench gratings and frames;
12) Piers, lintels, encasement works;
13) External site services;
14) Trade waste storage tanks;
15) Fit out of kitchens and concessions;
16) Gas service for Olympic flame;
17) No allowance for sales tax;
18) Fire hydrant and fire hose reel cabinets.

We request retention and payment terms be negotiated.

Should you require any additional information please contact the undersigned.”

104 Mr Twiss gave evidence that by this stage, he had finalised the scope of the design brief and that the scope of works was represented by the architectural and hydraulic services drawings listed in Appendix A to the letter of 4 June 1997. [Mr Twiss’ Statement, 24 January 2002, paragraph 11] [Transcript page 67 - 68]

105 Mr Corsaro submitted that this document is to be read as part of a tender process which had by this point in time been finalised to the stage where a preliminary price of $7.56 million as a result of a considerable amount of designing work for which Multiplex had paid, had now become $12,326,850.00 with various savings proposed and a shopping list of items that specified amounts. He submitted that:

“There is nothing here which in some way adjusts the process by saying, "We no longer will abide by the tender conditions and we no longer consider ourselves, if we agree on this, as being bound on terms that include your standard subcontract". It is just totally divorced of that sort of statement and in the circumstances as a chain of correspondence, your Honour, it makes plain that it is intended, we would say, to hark back to that material.”

106 There was some dispute between the parties as to which set of drawings were referred to in this letter. Ie the “JRK set” (Exhibit D12) or the “Multiplex set” (Exhibit D16). [Mr Hutton’s statement, 4 February 2002, paragraphs 4-6].

107 Mr Hutton explained that in his opinion, the Multiplex set of drawings are an amalgam of the JRK set overlaid with architectural background of a later date. The SKM database incorporates revised architectural drawings and deletes or archives the earlier revisions and automatically updates the architectural background onto the existing drawings. [Mr Hutton’s statement, 4 February 2002, paragraph 7].

108 When in December 2001, SKM was asked by Multiplex to print the set of hydraulic drawings referred to in the letter of 4 June 1997, SKM accessed them electronically. When such drawings are printed, the SKM system automatically updated them with the most current architectural details. The drawings provided to Multiplex and thence to JRK’s solicitors, do not therefore necessarily reflect the state of architectural development as at June 1997 and in Mr Hutton’s opinion, are likely to reflect a much later stage in the development. However, the hydraulic details should be the same as the hydraulic drawings referred to in the letter of 4 June 1997 and only the architectural background should differ. [Mr Hutton’s statement, 4 February 2002, paragraph 9].

109 Mr Hutton goes on to say:

“In my opinion, to understand the extent of the architectural design for the project as at June 1997, one must refer to the architectural drawings listed in the schedule to the letter dated 4 June 1997 from JRK to Multiplex.

In my opinion, to the extent that scope of hydraulics work is defined by the drawings, it is necessary to refer in this instance, to the JRK Set for the hydraulics pipework and also to the architectural drawings listed in Appendix A to the JRK letter dated 4 June 1997, for the extent of fixtures and fitting required and whatever incidental work is required to complete the hydraulics system.”

27 June 1997

110 By letter of this date, JRK identified savings in its tender price of 4 June 1997, reducing the total tender price to $11,366,850 (Exhibit DY2, tab 14, JRK0003 0207).

111 This letter in its penultimate paragraph reads:

“Our revised tender price based on our tender letter dated 4 June 1997 is now:

TENDER PRICE $11,366,850.00”

18 July 1997

112 JRK submitted a further revised tender price of $11,411,264 for the works and identified an additional $606,756 worth of work which fell outside the scope of the works (Exhibit DY2, tab 17). The letter of this date is set out below (under the heading, “On or shortly after 18 July 1997”; without the so-called “handwritten additions and deletions”).

113 Mr Corsaro, in drawing attention to the penultimate paragraph where JRK requested retention and payment terms to be negotiated, submitted as follows:

“And even if the retention and payment terms, even if that request were in some way some reservation, it would not preclude the making of a contract on the class 4 for which we contend as an alternative cost to the Masters v Cameron…Because it was obviously intended, your Honour, there would be a formal contract with a final tender price, based on a final scope, prepared by Keith, prepared by Twiss, the author of this letter, to finalise what was only a preliminary price earlier, following a tender price, which had gone for many months, which included a wealth of documentation, and that is what happened forthwith

”

114 Essentially, Multiplex’s case as put by Mr Corsaro (at transcript page 85) is that the original tender conditions set out in the tender documents of 5 December 1996 remained pervasive through all of the negotiations so that JRK ultimately is to be seen as having tendered on 18 July 1997 (following the chain of correspondence leading to the communication from JRK of 18 July 1997) and having so tendered in terms of the price and scope of work formulated in and correspondence up to 18 July 1997.

115 Multiplex’s case is that when JRK submitted the tender it was to be taken to have agreed that it would be required to enter into a contract on the original subcontract terms and that what occurred through the chain of correspondence was simply that the additional matters of significance such as price and scope were agreed to; the original subcontract terms never having been negotiable and no attempt ever having been made to renegotiate them. Those original subcontract terms, together with the request for tender letter are said to have simply remained in the background through the whole of the later chain of correspondence; the parties communications to be regarded as never intended to remove or vary the one given which was that those original subcontract terms would be the terms which would apply when price and scope had been finally tied down as they were by 18 July 1997.

On or shortly after 18 July 1997

116 Mr Twiss gave evidence that following a meeting with Mr Parslow (and possibly Mr Cooksley), he made handwritten annotations onto the letter of 18 July 1997 (Exhibit DY2, tab 20, JRK0004 0060); one of which was to change the total tender price to $12,408,020. [Mr Twiss’ Statement, 24 January 2002, paragraph 17]

117 Following this, JRK sent a copy of the annotated letter dated 18 July 1997 back to Multiplex. Multiplex contends that the total tender price agreed to at this time between itself and JRK on or about 18 July 1997 was $12,408,020 particularised as follows:

Tender price for the Works	$11,086,264
Work outside scope of Works	$606,756
Temporary Works	$715,000
TOTAL	$12,408,020

The annotated 18 July letter

118 The amended letter [“the annotated 18 July letter”, but sometimes simply referred to as ‘the 18 July letter’, there usually being no particular relevance in the first version of that letter which fell away once the annotated letter was sent] is in the following terms:

“Re: Stadium Australia Hydraulic Services Tender Adjustment

Further to our discussions with yourself K Parslow, J Scicluna, L Hutton and P Walker we have investigated all aspects of the hydraulic services with view of obtaining a final tender price and advise as follows.

The following is to be read in conjunction with documents as listed in our Tender Adjustment dated the 4th and 27th June 1997.

$7,360,000.00

1. Tender dated 10th March 1997 ~~$7,560,000.00~~ [handwritten deletion]

2. Authorities requirements (less separate gas main) $103,380.00

3. Kitchens and concessions (including branch
pipework) $1,195,928.00

4. Additional amenities $1,765,850.00

5. Additional work requested by Consultants
& Architect $1,634,606.00

~~6. Hose cocks to the following:-~~

~~a) Level 0 roadway (20 off) $15,000.00~~

~~b) Concessions (48 off) $9,000.00~~

~~c) Seating tiers Level 2 (12 off) $8,000.00~~

~~d) Seating tiers Level 5 (4 off) $2,000.00~~

e) Seating tiers Level 8 (8 off) $38,000.00**

**(includes pump up grade)

~~f) Seating tiers Level 8 North/South~~

~~(4 off) $16,000.00~~

~~$88,000.00~~

7. Stormwater drainage from main to collection sump

of north and south stands $18,000.00

8. Downpipes to Level 6 box gutters $28,000.00

9. Increase recycled water pressure pump capacity and
pipework $43,000.00

10. ~~Increase capacity of sewerage pumping stations to take~~
~~Level 1 amenities west stand (subject to co-ordination~~
~~with new layouts) $18,000.00~~

~~11. Offset plumbing west stand to connect to sewer (subject~~
~~to co-ordination with new layouts) $19,000.00~~ [handwritten deletions]

12. Change toilet pans in Level 1 temporary and relocatable
toilets to Concorde (408 off) ($94,900.00)

13. Reduce services within Level 0 ring main ($286,000.00)

14. Delete underslung water services under

Levels 2 & 4 ($147,500.00)

15. Delete branch pipework in concessions ($407,500.00)

16. Combined gas services & run high

pressure branches ($19,000.00)

17. Change sanitary fixtures ($100,000.00)

18. Wall hung urinals changed back to slab type ___

($7,600.00)

TOTAL TENDER PRICE ~~$11,411,264.00~~ [handwritten deletion]

$11,086,264.00 [handwritten addition]

19.

Additional Work Outside Of Hydraulic Services Scope

a) Irrigation storage tanks $339,300.00

b) Irrigation pipework including

conduits $74,780.00

c) Automatic filling or irrigation

tanks $104,700.00

d) Stormwater pumps $62,650.00

e) Drains to photographers moat $26,326.00

_______________________

TOTAL $606,756.00

Temporaries $715,000.00

[handwritten addition]

PROJECT TOTAL $12,408,020.00

[handwritten addition]

Our Tender Adjustment Excludes The Following:-

1. Painting of services;
2. Sheathing of hot water insulation;
3. Sub-soil drainage;
4. Cash retention;
5. Performance bond;
6. Roof gutters, rainwater heads, external downpipes, overflow, flashing & spitters;
7. Electrical works;
8. Cranage of materials and plant;
9. Fire extinguishers;
10. Trench gratings and frames;
11. Piers, lintels, encasement works;
12. External site services;
13. Trade waste storage tanks;
14. Fit out of kitchens and concessions;
15. Gas service for Olympic frame;
16. No allowance for sales tax;
17. Fire hydrant and fire hose reel cabinets;
18. Fire hose reels and/or fire hydrants to seating tiers;
19. Drainage of seating tiers;
20. Stormwater drainage of north and south seating tiers;
21. Access panels for in wall & induct cisterns.

We request retention and payment terms be negotiated.

Should you require any additional information please contact the undersigned.”

119 Mr Twiss gave evidence that although he has no clear recollection of speaking to Mr Keith about the letter, it was his usual practice to obtain Mr Keith’s approval before submitting letters such as this and would have done so. [Mr Twiss’ Statement, 24 January 2002, paragraph 19] Mr Keith gave evidence that Mr Twiss was authorised to make this decision. [Transcript page 224]

120 JRK submits that these discussions did not result in a formal signed document and that full agreement between the parties had not been reached. [Transcript page 122] [Mr Keith gave evidence that the amount agreed upon did not represent a “final total project price” and was not therefore a fixed price payable by Multiplex for whatever hydraulic works it might request of JRK thereafter on the Stadium Australia Project.] [Admitted subject to relevance] [Mr Keith’s Affidavit, 11 September 2001, paragraph 39]

121 Mr Keith gave evidence that the sum of $12,408,020 was for the works set out in JRK’s letters to Multiplex dated 10 March 1997, 4 June 1997, 27 June 197, 18 July 1997 and 12 August 1997 and the 128 technical drawings attached to the letter of 4 June 1997 (“the JRK original works”). [Mr Keith’s Affidavit, 11 September 2001, paragraph 8]

122 Mr Keith also gave evidence that this agreement as to price had been made with Multiplex and was in place certainly by 12 August 1997, but that scope was to be finalised. The price agreed to was however in connection with some of the scope [Transcript page 225 - 226]. The following exchange took place:

“Q. What I asked you is this, you also knew at that time, you also believed at that time that Mr Twiss had negotiated a scope of works to go along with that contract value of $12,408,020 and I think you said yes?

A. Yes.

HIS HONOUR: Q. What was the basis of that belief of yours?

A. We had a number of drawings there and the dynamic design had been progressing and he adjusted the price so I think when he (Mr Twiss) altered it, when he amended it in his handwriting and initialled it that was the basis, on that a set of documents scope of work.

Q. Is that something he told you?

A: Yes.

CORSARO: Q. You were allowing Mr Twiss to negotiate with the Multiplex people to try and agree scope and price at that time, correct?

A. Yes.”

123 Mr Parslow gave evidence that as at this date, he understood the position to be that under its contractual obligations, JRK was obliged to supply and install a DAF unit and saw it as one of his responsibilities to ensure that JRK’s scope of works included this obligation. It would have been his responsibility to ensure that the contract expressed such an obligation, however the amount of detail would be limited to what was written in the contract and Multiplex relied on letters from JRK and drawings. Multiplex did not seek to update all information. [Transcript page 244 - 245]

12 August 1997

124 JRK sent a letter to Multiplex stating a “Total Contract Price” of $12,408,020 (Exhibit DY2, tab 21, JK01-051). The letters prior to this letter had referred to the price as the “Total Tender Price”.

125 This letter was in the following terms:

“re: Stadium Australia
Hydraulic Services Contract Price

240 The plaintiff’s objection to certain paragraphs of the defendants’ affidavits based upon the rule in Browne v Dunn is rejected. Those paragraphs are allowed.

Applying the principles to the facts

241 There are some real difficulties in working through the fundamental issues thrown up for determination. There is some validity as it seems to me, in several of these submissions put by each of the parties.

242 The commercial circumstances to be taken into account seem clear on the evidence. Stadium Australia was a one off unproven structure. There was a finite timeframe within which the Stadium had to be completed. At the time the December version was sent out, tenderers were being asked to tender in circumstances in which there was no completed and fixed body of data plans and specifications. That request for tender document went out at a time when it was clearly understood that the design would be dynamic. Throughout the history of the relevant relationship both parties assumed and expected that they would have a concluded contract regulating their relationship. Both approached the transaction on the basis that a formal written instrument regulating their mutual contractual rights and obligations was a fundamental requirement for both of them. There can be no suggestion that in this industry there could have been contemplated by the parties the notion of a $12 million contract otherwise than in writing. The assumed industry position was that contracts of this nature and magnitude would have to be in writing. Mr Cooksley's evidence already referred to was quite clear namely that the signing of a sub contract by a subcontractor was an essential and indeed indispensable part of the sub contract relationship. As far as he was concerned it was an essential requirement generally for all Multiplex subcontractors to sign subcontract agreements. He had even made known to subcontractors representatives that in the absence of the execution of a subcontract they might not be paid at all. His experience was that when the first payment was processed it was necessary to have a signed copy of the contract. If, which I doubt, it was necessary to sight specific evidence of the industry position, this evidence satisfies me of such a general industry practice.

243 The curious circumstance that following the sending of the annotated 18 July 1997 letter, Multiplex went about sending across the 27 November version and later became enmeshed in detailed but ultimately inconclusive negotiations with JRK as to the terms of the 27 November version, provides the plaintiff with a real basis for its submission that the objective intent of the parties discernible in weighing the whole of the matrix of fact and relevant communications, was not to make a concluded bargain.

244 Much is also made by the plaintiff of the fact that the 5 December version had simply not included any reference to the creation of a 'design brief'. [See the concession by Mr Corsaro SC at transcript page 354]. Hence the strength of the plaintiffs position relying on the so-called 'alternative approach'. Here the plaintiff draws heavily and arguably exclusively, upon the fact that each of the 12 December 1997, 4 March 1997 and 7 March 1997 letters from JRK had been couched in terms of a tender price based on the 5 December version. Each had used the following words at the commencement of the second paragraph:

"Our tender price is based on the tender documents enclosed with your invitation to tender…"

245 The plaintiff argues that In contradistinction, a radical departure from this form of words is to be seen in the commencement of JRK's letter of 10 March 1997 where it notifies that it constitutes the submission of "an alternative proposal". The letter, on the plaintiff’s submission, must be read as no longer suggesting that its content is based on the tender documents enclosed with the original invitation to tender but to the contrary clearly states that it is an alternative proposal, inter alia in respect of which the hydraulics services price is based on the tender plans and specification. The plaintiff points out that only that section of the materials forming part of the documents sent out with the December 1996 request for tender are referred to in the letter. And importantly, as has already been mentioned, the proposal was for JRK to work together with Multiplex and others to complete a co-ordinated fully engineered hydraulics services design to be documented in one of two ways.

246 It does seem to me there is a degree of inconsistency between the plaintiffs heavy reliance upon its letter of 10 March 1997 and its immediately following letters to suggest that the alternative proposal removed the 5 December 1996 version of the subcontract terms completely from contention on the one hand, and the plaintiffs submission on 27 May 1997 [at a point in time which sits squarely between 10 March 1997 and 1997] of a Quality Assurance Manual of the type stipulated for in clause 10 of the Special Conditions forming part of the 5 December 1996 subcontract version, on the other hand. This inconsistency arises not withstanding the extent to which Quality Assurance Manuals may have been common in significant construction projects for the reason that formal subcontracts are the norm in relation to such subcontracts and the inference is clearly open that such subcontracts stipulate for provision of such Manuals. I draw that inference. At the very least, JRK was sending confusing signals to Multiplex if JRK had been seeking to communicate the form of radical departure from the anterior regime for which it now contends.

247 It seems to me that it is very important not to be drawn into too much of the very close detail as to those matters which separated the parties in their negotiations extending up to late 1998 when they were essentially focusing upon the 27 November sub contract version. The strength with which their respective positions were pressed in those negotiations and their inability to agree on a number of matters ought not to be weighed in the same way as if a Masters v Cameron dispute turned on those later negotiations. It is quite plain that those negotiations did not result in a concluded contract. The reason why those negotiations become relevant is as part, but only part, of the integers to be taken into account together with all other relevant circumstances in the objective assessment of whether their communications evidenced, as at the sending of the annotated 18 July 1997 letter, an intention to make a concluded bargain.

248 The crucial, as it seems to me, objective circumstance, which forms the substratum of the parties communications, is the circumstance that the parties had engaged in a tender process which had led to the plaintiff becoming the preferred tenderer against a background in which the norm was for a detailed form of sub contract to be entered into. The evidence given by Mr Cooksley, which as I understood it was not gainsaid by any evidence adduced by the plaintiff, was that the signing of a sub contract by a subcontractor was an essential and indeed indispensable part of the sub contract relationship. A mere glance at the types of provision generally covered by the subcontract forms examined during the proceedings makes this proposition plain. Mr Cooksley said as much at transcript page 299.

249 In my view to interpret the use in the plaintiff’s letter of 10 March 1997 of the words "an alternative proposal" as appropriately in context clearly telegraphing an intent to jettison the entirety of the 5 December sub contract version is to go too far. In context this is to overstrain the extent to which the words should be taken as having meaning. Nor do I see the subsequent requests that "retention and payment terms be negotiated" in the letters of 4 June, 18 July and 12 August read together with the 10 March 1997 letter, as appropriately, in context, clearly telegraphing any such intent. Reference has already been made to the submission on 27 May 1997 by the plaintiff of a formal document called for by the 5 December subcontract version. Had the plaintiff wished to communicate such a radical departure from the way in which the parties were conventionally engaged in the negotiation, one would have expected at the least to find the plaintiff, in the all-important 18 July 1997 letter (whether as first sent or in the annotated letter), alluding to the need for altered sub contract terms to be negotiated.

250 Alternatively and arguably looking at the matter another way, if one focuses upon the terms of the 18 July 1997 letter and its annotated version, there is such a clearly discernible intent to contract evident by the terms of this exceptionally carefully negotiated letter, as to clearly evidence an intent by the parties to make a concluded bargain albeit expecting to make a further contract in substitution for the first contract containing by consent, additional terms.

251 There are a number of reasons that show an objective intention to be bound by an agreement immediately:

(a) JRK was working on site on a temporary contract;
(b) by March 1997, JRK had been told it was the preferred tenderer. Mr Cooksley’s evidence at Ex D14, paragraph 20 was not challenged;

(c) JRK was asked to bring the design to a state which allowed it to submit a final tender price and it was paid for that;

(d) Mr Twiss’ involvement in the design development throughout the period before July 1997;

(e) JRK’s letter of 12 August 1997, submitting the “ contract price ” is language that confirms the existence of an agreement; and

(f) the submission of the first progress claim by JRK after the 18 July 1997 letter showed a contract price of $12,408,020.

252 Furthermore, the conduct of Multiplex in seeking the bank guarantees at the stage that it did (December 1997) suggests that it believed that legal relations had already been created or were to be created in advance of the execution of any contract document. This is matched by JRK then providing those bank guarantees in accordance with the agreement [Ex P2, docs 5 & 6].

253 As the defendants’ submit, the appropriate way to view the chronology is shortly as follows [the following extract taken from the Defendants written submissions is essentially complete with the omission of one or two sentences]:

· JRK submitted a tender on 12 February 1997 [which] conditionally offered to do the permanent hydraulics works for the price of $8,524,000 on certain terms. JRK’s offer was conditional in the sense that it excluded certain items and proposed terms different from the Multiplex tender conditions. However, it expressly incorporated the documents referred to in the Invitation to Tender. By that letter JRK advised Multiplex that it could not determine a final price for the design of the permanent hydraulics works for the project until briefed on the overall design.

· A number of post tender interviews between the parties and Multiplex’s consultants followed to clarify the design brief in connection with the works [Ex D14, para 15; Ex D8, paras 10-15]. By tender letter dated 4 March 1997, JRK revised its price to $7,816,000 while still advising Multiplex that the price should not be considered as final as it still needed to be briefed on the design details.

· JRK revised its tender price to $7,560,000 by letter dated 10 March 1997. The 10 March 1997 tender letter should be viewed as a step towards a better tender price. It suggests a practical way out of resolving the question of design details. Its starting point is the hydraulic services price based on the tender plans and specifications of $7,560,000, which price would remain provisional until JRK completed the design. The arrangement proposed by JRK was that JRK would prepare a design which could be submitted for approval and on which JRK would be in a position to price the works on a final basis.

· In the meantime, Multiplex was assessing its position on the permanent hydraulics works based on the preliminary price referred to in the 10 March 1997 tender letter. That could only be made final on a design that was to be completed by JRK. JRK became Multiplex’s preferred tenderer [Ex D14, para 17-20].

· JRK then commenced doing the work in connection with the permanent hydraulic services. Mr Twiss of JRK worked with Multiplex’s design consultant, Sinclair Knight Merz to develop an hydraulic design on which JRK could then base its final price for the design and construction of the works required [Ex D10, paras 7-12 and Mr Twiss at T281/9-T292/15].

· On 27 May 1997, JRK submitted a Quality Assurance Manual . Submission of such a document had been stipulated for in clause 10 of the Special Conditions [Ex DY, vol 1, tab 3, pages JK02-041-JK02-042]. The matter had been specifically treated with in the Plaintiffs letter of 27 May 1997 earlier referred to. [Ex DY, vol 2, tab 11];

· Further discussions with Multiplex and Sinclair Knight Merz followed and then on 4 June 1997, JRK submitted a further revised tender price of $12,326,850 [Ex DY, vol 2, tab 7]. That tender identified revised drawings and specifications upon which the tender price was based. That tender letter is a ‘tender adjustment’, adjusting the price but not the fundamental conditions. What it sought to do was to explain why the tender price had increased from the preliminary price of $7,560,000, which is expressly referred to in the tender letter. It cannot be treated as a separate tender price divorced from the rest of the formal documents. It merely goes to explaining that, having carried out the exercise that was proposed in the tender letter of 10 March 1997, JRK was now closer to a final tender price.

· That was followed by a letter dated 27 June 1997 in which JRK identified savings of $960,000, reducing the overall tender price to $11,366,850 [Ex DY, vol 2, tab 14]. This is consistent with a Design and Construct contract where the contractor in the course of the design work looks for and proffers any savings that are capable of being made to the works.

· JRK revised the tender price again by letter dated 18 July 1997. The price now became $11,411,264 with work to an amount of $606,756 identified as falling outside the scope of the works. This letter incorporated expressly the tender letters of 10 March 1997, 4 June 1997 and 27 June 1997 and impliedly (via the 10 March 1997 letter) the material forming a part of the Invitation to Tender. By this letter JRK represented that it ‘[had] investigated all aspects of the hydraulic services with the view of obtaining a final tender price…” [Ex DY, vol 2, tab 22].

· JRK’s letter of 18 July 1997 became the basis of further negotiations between the parties and led to a further revised final tender dated 12 August 1997 for $12,408,020 [Ex DY, vol 2, tab 21; Ex D10, paras 17-19]. This later revised tender was a re-engrossed form of the 18 July 1997 tender that was the subject of discussion and acceptance by Multiplex on or about 18 July 1997. Consequently, the 12 August 1997 letter stated, “Further to our discussions with yourself we have pleasure in submitting our contract price…”. Mr Twiss gave unchallenged evidence that he was asked to submit the final contract price and he did so by this letter [Mr Twiss at T278/51-T279/12].

· From that time on, until 8 May 1998, the parties were moving forward as though they were bound by a contract. JRK made progress claims in accordance with the terms and conditions of the subcontract. Multiplex administered and paid those progress claims in precisely the manner it would be expected if the 5 December version set the terms and conditions of the subcontract. JRK made variation claims. Up to that date, Multiplex had paid and JRK had received $7,776,113.80 [Ex DX, Blue Folders, PAB.01.697. Mr Twiss gave clear evidence that he prepared the progress claims, “we had to get John to sign a form” (the statutory declaration) and that the first time he had done that was on this project should be preferred and accepted [Mr Twiss at transcript page283/13-55]. Mr Keith agreed that he contemplated that the general conditions that would apply if the parties agreed to a subcontract, were the conditions that contained Schedule 5, clause 2(c) [Mr Keith at transcript page 223/39-46].

254 A not insignificant pointer, as it seems to me, supporting the inference that the annotated 18 July 1997 letter was a letter by which the parties intended to be bound in terms of a concluded bargain is the circumstance that the second form of sub contract sent by Mr Cooksley to the plaintiff included as an annexure, albeit not given an annexure number, a copy of the annotated 18 July letter. There is no doubt that the evidence proved this occurrence. It was accepted by both counsel that a document in this form on the evidence had indeed been included at the end of this version of subcontract [see transcript pages 96, 339, 340]. The very communication of this letter at this important point in time highlights its significance as a contractual document.

255 When pressed in argument to identify where the annotated 18 July 1997 letter (incorporating by express or implied reference (1) the plaintiffs letter of 10 March [which in turn incorporated other documents and plans by reference], (2) the plaintiffs letter of 4 June 1997 which expressly incorporated certain plans and specifications and (3) the plaintiffs letter of 27 June 1997) failed to throw up certainty in terms of the scope of work which the plaintiff was engaging to carry out, Mr Gray of counsel for the plaintiff was forced to submit that it was the entirety of the enumerable detailed terms and conditions usually to be found in a sub contract which were missing. [See transcript pages 369-371 and in particular 371.54]

256 The detailed transcript of argument particularly where Mr Gray addressed submissions repays careful reading. The Court endeavoured to elicit from Mr Gray an answer to the question of whether the annotated 18 July 1997 letter read together with those materials which are incorporated by reference in it, if read in isolation from any other document, was sufficiently precise as to scope of work and price as to leave no question of uncertainty. As I understood Mr Gray's responsive submissions the answer was generally in the affirmative although Mr Gray repeatedly sought to make the point that the problem would be inhere in the fact that the whole of the usual 'inch and a half' of terms and conditions to be found in the detailed forms of sub contract which were the norm in the industry, would by definition be absent. And Mr Gray then travelled through, again and again, those areas of dissension which later were evident in the negotiations following the submission of the November form. Looking at the later forms of dissension does not assist in the determination of the particular question which the Court had put to Mr Gray which endeavours to address the important question of certainty in terms of the scope of work to be provided by the plaintiff. Looking at the later forms of dissension of course does play a material part in the determination of whether or not the objective assessment of all the communications evidence an intention to make a concluded bargain.

257 Whilst I confess that my mind has wavered in terms of assessing a most curious set of circumstances, at the end of the day I have reached the clear conclusion that Multiplex is correct in its contention that a binding and enforceable agreement exists between the parties. Insofar as the agreement is in writing it is comprised of the following documents:

(a) Multiplex’s Invitation to Tender dated 5 December 1996, including the documents incorporated by reference [Ex DY, vol 1, tab 3], namely:

(i) The Multiplex Subcontract Deed of Agreement;

(ii) Annexures A to O;

(ii) Hydraulics Specification Revision 0 dated November 1996;

(iv) Documentation Register;

(v) Special Conditions;

(vi) Site Safety Instructions;

(vii) Design Brief;

and

(b) JRK’s 18 July 1997 letter, as amended, incorporating by express or implied reference the plans and documents [Ex DY, vol 2, tab 20], namely:

(i) JRK’s letter dated 10 March 1997, which incorporates other documents and plans by reference [Ex DY, vol 2, tab 7];

(ii) JRK’s letter dated 4 June 1997, which incorporates expressly plans and specifications [Ex DY, vol 2, tab 12];

(iii) JRK’s letter dated 27 June 1997 [Ex DY, vol 2, tab 14]

258 The agreement was formed between the parties on or about 18 July 1997, but before 12 August 1997, when Multiplex accepted JRK's final tender price of $12,408,020 as contained in JRK’s letter dated 18 July as amended in the contemplation that the parties would make a further contract containing additional or other terms in substitution (Masters v Cameron class four type of agreement). Neither party addressed submissions suggesting that there were any material differences in the terms of the 12 August 1997 letter as opposed to the terms of the annotated 18 July 1997 letter.

259 On my findings either the 5 December 1996 letter [generally referred to in this judgment as 'the 5 December 1996 version"] had annexed to it each of the documents referred to in sub-paragraph (1)(a)(i)-(vii) of paragraph 11 above or those documents were available for inspection by the plaintiff at the time. The evidence in relation to and position in relation to Parts E and F of the Design Brief is referred to below.

The identification of the drawings issue

260 In my view the plaintiff is not entitled to raise the issue of uncertainty or mistake sought to be raised concerning the suggestion that the parties are unable to agree and the evidence does not make plain which precise set of drawings was communicated in as part of the 5 December 1996 sub contract version.

261 In any event, on my findings the tender price was based upon the JRK set [Exhibit D 12] and the June 1997 Architecturals [Exhibit D 13]. The Minter Ellison drawings were not in existence at the time. Mr Hutton's evidence was that the drawings were stored electronically and that when the drawings were accessed or printed, they were automatically updated by the computer system with the most current architectural detail then contained within the system. Therefore the architectural details overlaid on the hydraulic drawings printed by SKM for Multiplex in late January 2002, that is the Minter Ellison set, do not necessarily reflect the state of architectural development as it was in 1997. In my opinion because of the way the SKM data base works, they are likely to reflect a much later stage in the development of the architectural design for Stadium Australia".

The identification of the Design Brief issue

262 The plaintiff’s particulars of the respects in which the parties are said not to have agreed on the scope of work to which the price of $12, 408,020 related [ MFI P 2], do not include any reference to the Design Brief. In consequence the question of whether or not Parts E and F of the brief [to be found in volume one of Exhibit D 6 (1)] were included in the materials sent out with the 5 December invitation to tender documents was not available on the pleadings to be litigated. In any event on my findings these Parts were available from 5 December for inspection by JRK. (See evidence given by Mr Cooksley at transcript page 294.20].

Estoppel

263 In light of the above holding it is unnecessary to go on to deal with the questions raised by the estoppel argument. The question of what the decision of the court may have been the matter not been resolved in the fashion identified in the above findings becomes somewhat academic.

Short Minutes of Order and further submissions

264 By reason of the complexity of some of the issues raised it is possible that the above reasons have not dealt with every aspect of the matters which required to be determined. In that regard the parties have leave to address further submissions should there be any suggestion that some matters remain necessary to be clarified by determination. The parties will be invited to address any such further submissions and to prepare short minutes of order following their having been given an opportunity to read the above reasons.

I certify that paragraphs 1 – 264
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on Thursday
14February 2002

Susan Piggott

Associate

14 February 2002

Last Modified: 03/14/2002

Citations

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CITATION:	John R Keith Pty Limited v Multiplex Constructions (NSW) Pty Limited & Anor [2002] NSWSC 43 revised - 3/12/2002
FILE NUMBER(S):	SC 3387/00
HEARING DATE(S):	30/01/02, 31/01/02, 1/02/02, 5/02/02, 6/02/02, 7/02/02, 8/02/02
JUDGMENT DATE:	14 February 2002
PARTIES :	John R Keith Pty Limited (Plaintiff) Multiplex Constructions (NSW) Pty Limited (First Defendant) Multiplex Constructions Pty Limited (Second Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Mr V Gray (Plaintiff) Mr F Corsaro SC, Ms R Rana (Defendants)
SOLICITORS:	Gye & Associates Lawyers (Plaintiff) Minter Ellison (Defendants)
CATCHWORDS:	Contract - Formation of contract - Ongoing negotiations - Intention to contract - Masters v Cameron classes - Whether binding and enforceable subcontract formed between the plaintiff and second defendant - If a contract is found, an arbitration clause requires proceedings to be stayed pursuant to s53 (1) of the Commercial Arbitration Act 1984 (NSW) - Invitation made by defendant to plaintiff to tender for the design and construction of hydraulics services for the Stadium Australia project - Request to tender contained documents including standard subcontract agreement - Plaintiff submitted tender proposal based on tender documents - Plaintiff issued series of revised proposals modifying both tender price and scope of work - Plaintiff notified as being preferred tenderer - Plaintiff commenced work - Plaintiff sent letter outlining total tender price and scope of work which letter was negotiated, amended and resent by consensus - Plaintiff sent subsequent letter referring to total contract price - Second subcontract agreement sent to plaintiff in terms different from original standard subcontract agreement - Subsequent negotiations ensued between parties over terms of second subcontract agreement - Whether binding contract was formed at any time during ongoing negotiations between parties - No formal signed agreement entered into by parties - Fourth class of Masters v Cameron - Existence of informal contract with further terms to be negotiated and included in a formal document - Relevance of prior negotiation and subsequent conduct - Objective determination of the intention of the parties - Classical theory of contract formation - Relevance of the subjective intention of the parties - Admissibility of post-contractual conduct - Whether parties arrived at a consensus capable of forming a contract - Whether alternative proposal put forth by plaintiff constituted an abandonment of the terms of the original subcontract - Whether second subcontract negotiations supports or mandates inference that parties did not intend to make concluded bargain
LEGISLATION CITED:	Commercial Arbitration Act 1984 Evidence Act 1995 ss60,70 Supreme Court Rules
CASES CITED:	Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Allen v Carbone (1975) 132 CLR 528 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 Brambles Holdings Ltd v Bathurst City Council (Unreported, 2001, NSWCA, Mason P, Heydon JA and Ipp AJA) Brunninghausen v Galvanics (1999) 46 NSWLR 538 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR [97011] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Godecke v Kirwan (1973) 129 CLR 629 Graham Evans Pty Ltd v Stencraft Pty Ltd 16 BCL 335 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 63 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145 Inland Revenue Commissioners v Raphael [1935] AC 96 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988) Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475 Masters v Cameron 1954 91 CLR 353 Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 Raguz v Sullivan (2000) 50 NSWLR 236 Reardon -Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Revenue Commissioners v Raphael [1935] AC 96 at 142 Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 Sinclair Scott Co Ltd v Naughton (1929) 43 CLR 310 Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 Thompson (1933) 49 CLR
DECISION:	Short minutes to be brought in.