L-Tag Technologies Co Ltd v SA Cement Supply P/L - [2014] SADC 120

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
L-TAG TECHNOLOGIES CO LTD & ANOR v SA CEMENT SUPPLY P/L
[2014] SADC 120
Judgment of His Honour Judge Muscat
7 July 2014
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - CONTRACT IMPLIED FROM CONDUCT OF PARTIES
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - RATIFICATION
CORPORATIONS - FORMATION - PRE-REGISTRATION CONTRACTS - ADOPTION OR RATIFICATION
PRIVATE INTERNATIONAL LAW - CHOICE OF LAW - CONTRACTS - PROPER LAW OF CONTRACT - GENERALLY
The Plaintiffs sued the Defendant alleging a breach of contract entered into for the supply of cement by the Plaintiffs to the Defendant. The Defendant accepted that lengthy negotiations were entered into aimed at a contract formation but that no contract was ever created because negotiations ended after the Defendant re-negotiated its terms of supply with its current supplier. Issues relating to contract formation, agency, pre-registration contracts and ratification all raised on the evidence. The question of the proper choice of law also considered, both in relation to contract formation and the law of the contract.
Held:
1. No finalised contract entered into by the parties.
2. No legal agency to enter into contract.
3. No ratification of the pre-registration contract.
The Plaintiffs' claims dismissed.
Corporations Act 2001 (Cth) s 9, s 131, referred to.
White Cliffs Opal Mines Ltd v Miller (1904) 4 SR (NSW) 150; Union Transport Group v Continental Lines SA [1992] 1 All ER 161; United Railways of the Havana and Regla Warehouses Ltd [1960] Ch 52; Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd (2011) SASC 42; Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 117; Masters v Cameron (2008) 238 CLR 570; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; Australian Broadcasting Corporation v XIVTH Commonwealth Games Ltd (1988) 18 NSWLR 540; Barrier Wharfs Ltd v W Schott Fell & Co (1907) 5 CLR 647; Thompson v Palmer (1933) 49 CLR 507; Life Savers (A’asia) Ltd v Frigmobile Pty Ltd [1983] 1 NSWLR 431; Watson v Davies [1931] 1 Ch 455; Dibbins v Dibbins [1896] 2 Ch 348; Metropolitan Asylums Board Managers v Kingham & Son (1896) 6 TLR 217; Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653; Bedford Insurance Co Ltd v Institutio De Resseguros Do Brasil [1985] QB 966; Powercor Australia Ltd v Pacific Power [1999] VSC 110; Re Portuguese Consolidated Copper Mines Ltd (1890) 45 Ch D 16; Lydney and Wigpool Iron Ore Co v Bird (1886) 33 Ch D 85; Bruce v Tyley (1916) 21 CLR 277; Hely-Hutchingson v Brayhead Ltd [1968] 1 QB 549; State Bank of Victoria v Parry (1990) 2 ACSR 15; Bonython v Commonwealth (1950) 81CLR 486; Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 141 ALR 374; Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277; R G Mortensen, Private International Law in Australia (LexisNexis Butterworths, 2006) 404 , applied.
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622; Sinclair, Scott & Co v Naughton (1929) 43 CLR 310; Kelner v Baxter 918660 LR 2 CP 174; Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45; Breeze v Cambridge Gulf Holdings NL [1997] WASC 9; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50; Pouler Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCSFC 131; Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd (1985) 2 Lloyds Rep 36; Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; Robinson v Tyson (1888) 9 (NSW) L 297; Capper’s Pty Ltd v L & M Newman Pty Ltd [1960] NSWLR 143; Hely-Hutchingson v Brayhead Ltd [1968] 1 QB 549; Huddart Parker Ltd v Ship "Mill Hill" (1950) 81 CLR 502; Ananda v Tomar (No 4) (2012) 291 ALR 292; JW Carter Contract Law in Australia (6th ed, 2013); G E Dal Pont Law of Agency (Lexis Nexis Butterworths 2008), considered.

L-TAG TECHNOLOGIES CO LTD & ANOR v SA CEMENT SUPPLY P/L
[2014] SADC 120
Introduction

The Plaintiffs claim, that pursuant to an e-mail dated 12 April 2007 and after confidential negotiations lasting more than one year, the Defendant (‘SA Cement’) accepted an offer made by the first Plaintiff (‘L-Tag’) on behalf of the second Plaintiff (‘L-T Trading’- a company at the time yet to be formed in Hong Kong) for the sale and supply of 90 000 tonnes of cement to SA Cement, to be delivered in separate shipments over the course of one year.
The Plaintiffs claim the e-mail was the acceptance of a ‘Sale and Purchase Contract 2007’ (‘the March Contract’), a draft written contract sent by e-mail on 1 March 2007 by L-Tag’s agent to the CEO of SA Cement.
The Plaintiffs have also pleaded, in the alternative, that in the event such a contract was not formed then the e-mail represented an agreement for a single shipment of 19 000 tonnes of cement.[1]
[1] Amended Statement of Claim at [19].
SA Cement denied the Plaintiffs’ claims, submitting that the content of the 12 April 2007 e-mail was simply an order for a single ‘trial’ shipment of cement and not the beginning of any long term contractual arrangement. It contended there was no acceptance of this offer by the Plaintiffs and accordingly no contract was formed, either for the sale and supply of 90 000 tonnes or 19 000 tonnes of cement.
In addition to the primary issue of the existence of a contract, there are a number of secondary issues raised by SA Cement during its closing address to the court, which were not canvassed in detail at trial. Broadly speaking, these are issues which did not require a significant amount of oral evidence, as they were technical in nature and related to the requisite authority to negotiate a contract on behalf of L-T Trading and the law relating to pre-incorporation contracts and the proper law of the contract.
The evidence-in-chief of the principal witnesses was presented through the tender of affidavits,[2] with each witness then extensively cross-examined.
[2] The parties agreed to this process during pre trial hearings.
Much documentary evidence[3] was also presented to me, from which I was asked to conclude by the Plaintiffs that it supported their claim that a contract was entered into between the parties.
[3] P1 and P2.
For the reasons which I set out below I dismiss the Plaintiffs’ claims that any contract was created between them and SA Cement.
Background
The Parties
The first Plaintiff is L-Tag Technologies Co. Ltd. (‘L-Tag’), which is a wholly owned subsidiary company of another company (‘Loxley’). L-Tag was incorporated for the purpose of exploring trade opportunities between Australia and Thailand.[4] Its primary business is as a trader and developer of technology in the areas of energy and waste management.
[4] P4 at [8].
Mr Graham Storah (‘Storah’) is the Managing Director of L-Tag[5], and lived in Thailand. Mr Manfred Gross (‘Gross’) was said to be the Australian agent for L-Tag and who conducted the majority of the negotiations with SA Cement. Gross is a self employed business consultant with a background in electronics and finance.
[5] L-Tag’s most senior shareholders are Storah and Khun Dhonhohai Lamsan.
The second Plaintiff, L-T Trading Hong Kong Co. Ltd (‘L-T Trading’) is a wholly owned subsidiary company of L-Tag,[6] established for the purposes of entering into the subject financial transaction for the importation of cement with SA Cement in order to ‘access the export price’. It is not in contention that L-T Trading was yet to be incorporated as at the time the contract is said to have been formed, [7] nor that either contract was to be entered into by L-Tag on behalf of L-T Trading.
[6] Storer is the sole director and shareholder of L-T Trading.
[7] L–T Trading was incorporated in Hong Kong on 3 July 2008.
SA Cement is a company incorporated for the purpose of participating in a joint venture to import cement for use by Hallett Concrete Pty Ltd (‘Hallett’), a concrete supply company that had become dissatisfied with the conduct and consistency of cement of its supplier, Adelaide Brighton (‘AdBri’).
SA Cement and Hallett are subsidiary companies of the MSP Group of companies, their core business being in the building supply industry, with a number of vertically integrated companies providing and utilising a supply chain within the MSP Group. Hallett is MSP Group’s concrete supply company, which is a key component of MSP Group’s operations.
Mr Mark Pickard (‘Pickard’) is the Managing Director of the MSP Group of companies of which SA Cement is a subsidiary. He is also the sole director, shareholder and secretary of SA Cement.
Mr Barrie Hosking (‘Hosking’) has been the CEO for MSP Group since 2003 and at all material times has acted as Pickard’s agent in the subject negotiations.
Negotiations for the supply of cement
During 2005, Hallett were experiencing difficulties with the consistency of cement that it sourced from AdBri (the monopoly supplier of cement in Adelaide) which was sourced principally from AdBri’s Birkenhead plant. Hallett became dissatisfied with the quality of the product supplied to it by AdBri.[8]
[8] D1/D1A [16].
These quality issues were raised by Hallett with AdBri on numerous occasions, in the period prior to SA Cement commencing negotiations with L-Tag.
AdBri effectively denied that there was any problem with its product and Hallett should accept AdBri’s cement as it conformed to Australian Standards.[9] AdBri’s contract with Hallett included a clause which gave AdBri the first right of refusal in the event that Hallett determined to change supplier. If Hallett were to find alternative cement supplies, the contract stipulated that AdBri was to be given the chance to price match that supplier before Hallett was permitted to change suppliers. It would only be the case that Hallett was permitted to change suppliers if AdBri could not match or better the price of Hallett’s new supplier, otherwise Hallett would be in breach of its supply contract with AdBri.
[9] D1/D1A at [19].
Significantly, as AdBri controlled the local cement market, it was important for Hallett to maintain a good relationship with AdBri, unless and until Hallett could secure a viable long term contract with another supplier. Business operations could be made very difficult by AdBri for Hallett, if Hallett were to sever its relationship in search of a preferable external source of supply, but failed to secure that source forcing it to revert back to AdBri.
As a result of these issues, Hosking and Pickard decided to investigate the potential for importing cement into South Australia. SA Cement was then incorporated for the purposes of importing cement for use by Hallett.
In approximately March 2006, Gross, on behalf of L-Tag, began negotiations for the supply of cement from Siam Cement Trading (‘Siam Cement’) in Thailand, with Hosking, on behalf of SA Cement.[10]
[10] Gross’ legal authority to act on behalf of L-Tag was disputed at trial by SA Cement.
During the course of negotiations there were numerous meetings, correspondence and e-mails exchanged between Gross and Hosking, as well as other third parties, whose involvement was essential to the performance of any contract, including shipping companies and Siam Cement.
A draft of the March Contract was prepared and sent by Gross to Hosking on 1 March 2007. That agreement had been amended by L-Tag and SA Cement on a number of occasions prior to that date to accord with both parties’ wishes and capabilities.
On 12 April 2007 Hosking sent an e-mail to Gross, confirming an order for 19 000 tonnes of cement, in accordance with the terms and conditions ‘as per the draft supply agreement’ and confirming that shipping for the delivery of that amount of cement had been arranged for late May 2007.
The e-mail also stated that the supply agreement was to be signed the following week, with letters of credit to be arranged in the weeks thereafter.
SA Cement subsequently executed a shipping charter for 90 000 tonnes of cement on 24 April 2007, hedged funding with its bank on 30 April 2007[11] and nominated a laycan[12]of 27 May 2007 for the first shipment.
[11] See P2 at 608.
[12] This period is typically expressed as a number of days to be fixed within a set beginning and end date of a commodity delivery contract. When parties agree on a laycan of three set days, loading should start between those days. When more time is needed demurrage cost is due. If loading has not started before the end of the laycan, the seller may cancel the delivery.
It is clear that at the beginning of the negotiations (at least by 2 March 2006) that both Gross and Storah knew there existed issues with the local supplier, AdBri, and of the hurdle this placed in the way of SA Cement finalising any contractual arrangements.[13]
[13] P2 at 106A; see also 194 and 200.
On 9 May 2007, before any agreement could be signed, AdBri notified Hallett of its knowledge of SA Cement’s contractual negotiations with L-Tag. Over the course of the next few weeks AdBri and Hallett negotiated a new commercial arrangement, including monetary compensation, access to premium cement and additional revenue through the purchase of quarry assets.
SA Cement thereafter did not proceed with the shipping charter, which was terminated on 1 June 2007 and the proposed cement supply agreement with L-Tag ended on 23 July 2007.[14]
[14] P2 at 274; P3/3A at 113 and P4/4A at 115.
The Plaintiffs claim the 12 April 2007 e-mail represented the acceptance of the supply agreement and thus, through its non-performance, SA Cement is in breach of that contract.
The Plaintiffs claim damages to place them in a position they would have been had the contract been performed. The Plaintiffs rely on a report, in conjunction with amended calculations, of their expert Mr Michael Michaels (‘Michaels’) in this respect and claim the amount of damages is simply calculated arithmetically in the amount of $380 863 from the cancellation of the supply contract (90 000 tonnes) and in relation to the first order in the amount of $113 331 (19 000 tonnes).[15]
[15] See report and evidence of Michaels, who calculates damages by multiplying the total tonnage of cement by the price per tonne.
SA Cement has argued that the e-mail of 12 April 2007 was simply a negotiation for a one off ‘trial’ shipment and not the beginning of any longer term supply agreement. It submits that it wanted to ‘test’ whether the ultimate importation arrangement would work and to mobilise AdBri into whatever action it was going to take. It characterises this e-mail as an ‘invitation to make an offer’ as opposed to an offer in and of itself.
In support of their defence SA Cement contend that many of the essential terms of the agreement were not in fact in place or agreed, at the time of this negotiation. These will be detailed later in my reasons.
Outline of Plaintiffs’ Case
90 000 tonnes Contract
The Plaintiffs claim that various communications,[16] viewed in light of the provision of the March Contract via e-mail on 1 March 2007,[17] proves that they were ready and willing to perform the contract, waiting only for confirmation from SA Cement to signify its acceptance.[18] Accordingly, it submits, an offer, capable of acceptance, was extended to SA Cement.
[16] P2 at 505, 511 and 530.
[17] P2 at 485.
[18] Plaintiffs’ Closing Outline at [5].
Relevantly, the March Contract, and the relevant communications, relied upon by the Plaintiffs are as follows:
1.The March 2007 Contract, provides, inter alia, that:
1.1.The vendor would be a company known as L-T Trading Hong Kong Co Ltd;
1.2SA Cement would purchase the cement from L-T Trading;
1.3.The cement would be Ordinary Portland Cement Type I and Portland Cement Type III;
1.4.Each shipment to SA Cement was to comprise of the following:
1.4.1.Ordinary Portland Cement Type I for the quantity of 14 000 metric tonnes +/- 10% at SA Cement’s option. The price Free on Board (‘FOB’) was $51.50 USD per metric tonne; and
1.4.2.Portland Cement Type III for the quantity of 5000 metric tonnes +/- 10% at the SA Cement’s option. The price FOB was $57.50 USD per metric tonne.
1.5.The total quantity of cement provided for in the Contract would be 90 000 metric tonnes +/- 10% at the Defendant’s option with the size of each shipment being 18 000 metric tonnes +/- 10% at the Defendant’s option;
1.6.The source of cement would be Siam Cement Thailand;
1.7.Delivery of the Products would be within thirty days [30] from the date of the Contract;
1.8.Payment for the First twelve [12] month period would be via Non-Restricted Irrevocable Letter of Credit in United States Dollars per shipment in favour of L-T Trading;
1.9. The Contract would continue until April 2008; and
1.10.The Contract would be governed in accordance with the laws of Hong Kong.
2.The relevant e-mails provide as follows:
19 March 2007[19]
[19] P2 at 505.
Manfred, [Gross]
Just to confirm:
All we need is a letter from our client stating that they wish to proceed with the deal: from Marks [Pickard] words “very quickly”. In the letter should be a comment on how they understand the process and an official intro to their bank (noting that you should have established the relationship already). Ideally “signing by Tuesday 27 March” should be included. First delivery to be by end April 2007.
We have checked on both contracts: ours with SCT and with the client, SA Cement. All is ok.
We will establish in the coming three days a Hong Kong company, L T Trading, and will have an account in Hong Kong with Bangkok Bank. The back to back L/C’s will be through this entity and you will be paid from this company.
Thank you for your input and detail.
Kind Regards,
Graham Storah
21 March 2007[20]
[20] P2 at 511.
G, [Storah]
Spoke with Barrie [Hosking] this morning. He is OK with the email I sent yesterday and will reply within the next day or two with the formal confirmation from MSP to proceed once he has spoken with Mark [Pickard] to confirm delivery and shipping dates.
He is very pleased that the bag specs meet Australian Standards as this is something that will have to be proven to the local stevedoring firm before they will unload the shipment. I will study the SCT documents and come back and let you know if we need anything more formal. (Emphasis added)
This means that MSP will use one of the standard SCT bags. Need to confirm which one but suggest that it will be the one with the plastic liner in it.
The only issue as such remaining is whether the bags can be stacked 5 high. Does SCT have any experience with this? If not we will need to discuss getting some sample bags so MSP can trial.
Regards,
M [Gross]
8 April 2007[21]
Mark, [Pickard]
All seems to right with the cement but do need the anticipated letter from Barrie [Hosking] to confirm a wish to proceed so that we may get the bag manufacturing underway soonest. (Emphasis added) We have spoken directly with the bag makers and they very clearly state the polypropylene quality and denier of their bags is far superior of the Chinese sample unit we received from you. Further that you will be satisfied with their product.
Samples have been sent directly to Barrie [Hosking]. We do need your assistance in the letter, however, please.
I have received further enquiries on our ability to deliver timber as it seems that CHH is in disarray in the region. Any advice or assistance you could provide would be greatly appreciated.
Thank you and regards,
Graham
Graham Storah Managing Director
L-TAG Technologies Co. Ltd.
[21] P2 at 530.

The Plaintiffs claim that the acceptance of this offer was the e-mail dated 12 April 2007 from Hosking to Gross.[22] The e-mail was in the following terms:
Manfred, [Gross]
I confirm the SA Cement order for 19kt of cement ex SCT (14kt type 1 and 5kt type 3) with specifications, terms and conditions as per the final draft supply agreement. We have arranged shipping for late May 2007. We understand that we will sign the supply agreement next week and the letter of credit and details will be arranged in the next few weeks.
Regards,
Barrie Hosking
Chief Executive Officer
MSP Group of Companies
[22] P2 at 551.
The Plaintiffs further claim that on or shortly after 8 May 2007 and prior to 27 May 2007, Hosking informed Gross that the contract had now been duly executed by SA Cement, with Hosking stating:
Mark [Pickard] has signed the agreement. It is sitting at the bottom of this pile.[23]
[23] Plaintiffs’ Amended Statement of Claim at [6].
Hosking did not explicitly deny making this statement, however, he says that he added the rider that L-Tag could not have the agreement as SA Cement still had issues to sort out with AdBri. He further stated that he requested Pickard sign the contract because Pickard was often away and he wanted a signed execution page which he could later marry up to an agreement with changes to it.[24]
[24] T 207 line 14.
Pickard signed on that basis. The document he signed was incomplete. There were a number of significant matters still to be negotiated and the authority of Hosking was limited. Hosking was not permitted to present a version of the contract displaying Pickard’s signature until the negotiations in relation to it were complete.[25]
[25] T 206-207.
19 000 tonnes Contract
The Plaintiffs have also pleaded, in the alternative, that at the very least, there existed a contract for one shipment of cement (19 000 tonnes) which was created on 12 April 2007.[26] They have not pleaded the alleged offer and acceptance in relation to this contract, however, there are a number of formulations as to what could be characterised as offer and acceptance which I will discuss later.
Outline of Defendant’s Case
[26] Amended Statement of Claim [19].
90 000 tonnes Contract
SA Cement submits that there was no evidence of an offer being made by Gross, or either of the Plaintiffs (draft agreements were provided to SA Cement but these were unsigned).[27]
[27] Defendant’s Written Closing Submissions at [4].
SA Cement contended that there was no act by it which could be construed as an acceptance of the draft contractual arrangements being negotiated between it and the Plaintiffs.[28]
[28] Defendant’s Written Closing Submissions at [4].
SA Cement strongly submitted that the suggestion that a contract would have been agreed to orally, is commercially implausible in the context of various factors.[29]
[29] The 15 months negotiation of a written document, and the exchange of nine draft written contracts; given that the parties had no prior relationship and were negotiating approximately a $5 million transaction; Siam Cement’s requirement that it be provided with a signed written contract between L-T Trading and SA Cement, prior to agreeing to supply cement; and the serious threat posed to Hallett by AdBri.
SA Cement contended that from the outset, the parties understood that for SA Cement to continue to execute a contract under the threat by AdBri would have potentially ended Hallett’s multi-million dollar concrete business.
Implicitly, both parties were aware of the position of AdBri, the terms of the agreement between AdBri and Hallett and the effect upon SA Cement of AdBri purporting to strictly enforce the terms of its contract with Hallett.
SA Cement relies on the evidence of Storah in this regard, where, in an e-mail sent to Pickard, he expressly acknowledged that no contract had been concluded.
The e-mail stated:
4 June 2007[30]
Mark [Pickard]
I just need to confirm with you that there is no need for any written contract with you regarding the transaction.
We have in place a process that will allow a third party to raise L/C’s.
You would not be in breach of any contractual obligation.
Please call me as soon as convenient.
Regards,
Graham [Storah]
[30] P2 at 731.
During questioning from me as to the meaning behind this e-mail Storah responded:
HIS HONOUR
QThat might be so, but there had been no contract agreed to that point, is that what you’re saying to Mr Pickard, ‘but we could try and move forward with what we have done so far’, is that the point you’re trying to convey to him.
AYes, your Honour.[31]
[31] T 181 line 34 – T 182 line 2.
Whilst on its face, it would appear that Storah has made a concession of some significance, it cannot be viewed in isolation and needs to be considered in its proper context. I will not rely on this statement as a proper reading of the transcript reveals that this email was expressing to Storah that there was no need for any written contract regarding the transaction for 90 000 tonnes over the course of a year and that that contract would not be in breach of any contractual obligations SA Cement had with AdBri.
19 000 tonnes Contract
SA Cement argued that despite knowing since 12 April 2007 that it had made an offer for one shipment of 19 000 tonnes of cement, neither Plaintiff accepted that offer, nor took the necessary steps to perform the proposed contract. SA Cement validly terminated any contract which arose from the offer made on 12 April 2007.[32] Perhaps, more accurately, SA Cement contends that the failure of the parties to take any steps in relation to the alleged contract and the question of the 19 000 tonne contract, languished in the inactivity.
[32] Defendant’s Written Closing Submissions at [9].
Issues for Determination:
There are a number of issues that arise for determination in this action. They can be usefully summarised as follows:
(a)Which law is applicable for determining the formation of the contract?
(b)Have the principles of contract formation been met?
(c)Have the Plaintiffs met the additional necessary requirements of a pre-registration Contract (including what pre-registration laws apply to the contract)?
(d)If so, did Gross have the requisite legal agency to act on behalf of the promoter, L-Tag, acting on behalf of the pre-registration company, L-T Trading?
(e)What is the proper choice of law of the contract, if a contract was formed?
(f)Are there damages and if so what is the quantum?
I will deal with each of these issues in turn.
Which law is applicable for determining the formation of the contract?
It is necessary, in this case, to first decide what the proper law of the contract is, as it is now well settled that the putative or proper law of a contract determines whether there has been a valid offer, or, more commonly, whether the offer has been validly accepted.[33]
[33] White Cliffs Opal Mines Ltd v Miller (1904) 4 SR (NSW) 150; Union Transport Group v Continental Lines SA [1992] 1 All ER 161 at 168 as cited in R G Mortensen, Private International Law in Australia (LexisNexis Butterworths Australia 2006) 404 [15.32].
It is also accepted that the proper law can be the law chosen by the parties.[34] However, that approach is clearly pre-judicial, when the very question in dispute is whether one of the parties did actually accept the other’s terms (which includes any clause dealing with the choice of proper law of the contract).[35] It would be circular to use the choice of law clause in an alleged contract (which only applies if the agreement is binding) in order to find that the agreement is, in fact, binding. In that case, the application of the proper law, as determined objectively, is most appropriate.[36]
[34] White Cliffs (1904) 4 SR (NSW) 150.
[35] Cf Albeko Schumaschien v Kamborian Shoe Machine Company Ltd (1961) 111 LJ 519.
[36] R G Mortensen, Private International Law in Australia (LexisNexis Butterworths, 2006) 404 [15.32].
In making this determination, it is helpful to look at the place where the alleged contract was negotiated, the place of performance of the alleged contract, the place of business or residence of the parties, and the nature and subject matter of the alleged contract.[37]
56 In this case, the relevant law for determining whether a contract exists is South Australian law, given that the contract was negotiated in South Australia, the parties were resident in South Australia (except for Storah who was resident in Thailand) during the negotiations and the subject matter of the contract was the supply of cement from Thailand to South Australia.
[37] United Railways of the Havana and Regla Warehouses Ltd [1960] Ch 52 at 91.
Have the principles of contract formation been met?
The principles which apply in determining whether parties have reached a binding contract have been authoritatively stated and are well settled.[38]
[38] Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd (2011) SASC 42 at 100.
It can be appropriate, at times, for a court to seek to resolve issues about how and when a contract was formed using the conventional analysis of offer and acceptance. Such an analysis is often inconsistent with the way in which the parties themselves have acted during the course of developing contractual relations. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd,[39] McHugh JA (with whom Hope and Mahoney JJA agreed) stated:
It is often difficult to fit a commercial arrangement into the common layers; analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of ‘offer’, and ‘acceptance’, ‘consideration’ and ‘intention to create a legal relationship’ which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of offer and its acceptance together with an intention to create a binding legal relationship. … A bilateral contract of this type exists independently of and indeed precedes what the parties do. Consequently it is an error ‘to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed’ … Nevertheless, a contract may be inferred from the acts and conduct of the parties as well as or in the absence of their words … The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances show a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract.[40] (Citations omitted)
[39] (1988) 5 BPR 11, 117.
[40] Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR at 11, 117.
The seminal authority relevant to the present circumstances is Masters v Cameron,[41] where the High Court identified three classes of cases in which the parties, who have been in negotiation, reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by way of a formal contract.
[41] (2008) 238 CLR 570.
These are as follows:
1.Where the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.
2.Where the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.
3.Where the parties have not intended to make a concluded bargain at all, unless or until they execute a formal contract.
In the each of the first two classes, there is a binding contract. In the third, a binding contract is not formed, until the formal document is executed.
In Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd,[42] McLelland J held that, in addition to the three classes discussed in Masters v Cameron above, there is a fourth class as expressed by Knox CJ, Rich and Dixon JJ in Sinclair, Scott & Co v Naughton:[43]
4.One in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.[44]
[42] (1986) 40 NSWLR 622.
[43] (1929) 43 CLR 310.
[44] Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317.
This decision was upheld on appeal.[45] However, McHugh JA, with whom Kirby P and Glass JA agreed, did not refer expressly to the suggested fourth category and held:
[T]he decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in light of the surrounding circumstances … if the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction. Even when a document recording the terms of the parties’ agreement specifically refers to the execution of a formal contract, the parties may be immediately bound.[46]
[45] GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631.
[46] Ibid at 634.
Whilst the existence of a fourth category has been acknowledged in subsequent judgments,[47] its existence is by no means settled or uncontroversial.
[47] Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 at 494-495, Brunninghausen v Galvanics (1999) 46 NSWLR 538 at 545, John Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43, Telstra Corporation v Australia Media Holdings (1997) 24 ACSR 55.
It has been said that in Masters v Cameron, the High Court purposefully identified points on a continuum of transaction without identifying a fourth category and had they intended there to be a fourth category, they would have stated so.[48]
[48] Tolhurst, Carter, & Peden: Masters v Cameron – Again (2011) 42(1) Victoria University of Wellington Law Review 49 at 62.
Further, it has been argued that the initial agreement, in situations where parties are bound by an agreement to execute a formal document containing additional terms, falls within the second category, because the first agreement will be enforceable unless superseded by a later agreement.[49]
[49] JW Carter, Contract Law in Australia (6^th ed, 2013) at 5-07.
Has a Contract for 90 000 tonnes of cement been formed?
In this matter, the parties have reached agreement upon terms of a contractual nature. They have also agreed that those terms would be dealt with by way of a formal contract. Whether that contract is in fact legally binding, is a matter to be determined having regard to the intentions of the parties, objectively ascertained.[50]
[50] GR Securities Pty Ltd V Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634 per McHugh JA.
Accordingly, the determination of whether or not the contract is legally binding involves an analysis of both the pre and post contractual conduct of the parties.
Having considered the whole of the evidence and the relevant principles of law previously discussed, I am not satisfied that the parties entered into a final and settled 12 month contractual agreement for the supply of 90 000 tonnes of cement.
The circumstances of this case fall fairly and squarely within the third category of Masters v Cameron, as it is objectively clear that the parties did not intend to make a concluded bargain until a formal contract was executed.
Because the exchanged communications were in writing, the question of their “intention” was prima facie to be resolved objectively and as a matter of construction of the relevant documents.[51]
[51] Australian Broadcasting Corporation v XIVTH Commonwealth Games Ltd (1988) 18 NSWLR 540.
The evidence does not objectively disclose an intention on the part of the parties to be legally bound by the terms of the draft supply contract as at 12 April 2007 as alleged by the Plaintiffs, until a formal written contract was signed by both parties. This conclusion is reached, having regard to the cumulative effect of a number of considerations, which, broadly speaking are:
·     An examination of the negotiations and written draft agreements and outstanding issues;
·     The lengthy history of negotiation of a written contract;
·     The nature and value of the agreement, being a significant transaction the absence of any prior relationship between the parties;
·     The fact that Siam Cement would not supply the cement to the Plaintiffs until Siam Cement, received a signed written document from SA Cement;[52]
·     The serious threat posed by AdBri to Hallett, and the knowledge of that threat by the Plaintiffs at the time of entering the contract; and
·     The conduct of the parties, in particular of the Plaintiffs, after the alleged contract was entered into.
[52] T 156 lines 8-25; T lines 33-36; T 173 lines 8-16.
What follows is an expansion of these considerations.
In determining whether the parties intended to conclude an immediately binding contract, it is relevant to make an assessment of the parties’ pre-contractual conduct. The parties’ post-contractual conduct is also relevant, albeit for a limited purpose, which I will come to later.
It is not necessary nor appropriate to refer to every aspect of the parties pre-contractual and post-contractual conduct. I will refer to those matters which I consider are illuminating in terms of whether or not there was the formation of a contact and the principal matters mentioned in the course of the parties’ submissions.
With these principles in mind, I turn to consider the issue of whether the March Contract e-mailed to SA Cement, their subsequent e-mail communications and the final e-mail from the SA Cement of 12 April 2007, evidences an intention to be immediately bound by the March Contract for 90 000 tonnes of cement.
Notably, the e-mail from Gross attaching the March Contract, included a reference to a ‘draft’ supply agreement, and the subsequent e-mails relied on by the Plaintiffs made reference to a contract being signed, once confirmation of a willingness to proceed had been confirmed.[53]
[53] P2 at 511, 505, 530.
An examination of the negotiations and written draft agreements and outstanding issues:
While it may appear that the parties have agreed on terms of a contractual nature, by virtue of the e-mail dated 12 April 2007, (requiring delivery by late May) there remained the requirement for sufficient terms referable to that contract, many of which remained, at the time the ‘offer’ was made to SA Cement, under negotiation, namely:
Quality and specification of cement
From late February, through to 2 March 2007 there are e-mails[54] between Gross and Storah, discussing the grind of cement.
[54] P2 at 487.
On 1 March (a few hours before the March Contract is sent), Gross sent an e-mail to Storah, indicating his assumption that once he has sent the agreement through (presumably the March Contract) Hosking will ‘come back and ask me about the grind. If the grind isn’t at 3,600 they can’t make and deliver the precast slabs.’[55]
[55] P2 at 487.
Storah replied via e-mail to Gross on 2 March indicating that ‘they can make: it just takes a couple of hours longer to allow them to lift.’[56]
[56] P2 at 487.
These e-mails are evidence of a view held by the Plaintiffs at the time the March Contract was sent that they themselves viewed the contract as a ‘draft’, and not in fact a final ‘offer’ as alleged by them.
Additionally, Storah gave evidence that as at 1 March 2007, there was no contract between L-T Trading and SA Cement, although there was an agreement between the two Chief Executives of the respective companies that they would do business together. He said a contract still needed to be drawn up and signed by the parties, and that at the time the details still outstanding at this point were grind and fineness of cement, and the quality of cement.[57]
[57] T 150. I am willing to accept Storah’s evidence on this point, as it is a statement against interest.

In my view these are significant matters that go to the very heart of the case. The grind fineness of cement informs the quality of the cement and the issue of quality informs the SA Cement’s market.
In light of SA Cement’s motivation for seeking an alternative cement supply arrangement through L-Tag, the mere fact these issues alone were unresolved at the time, is evidence in and of itself to support a conclusion that, at this point, in the absence of this issue being resolved, there would be no mutual intention to enter into binding contractual arrangements.
Bags
There is a significant amount of documentary evidence between the relevant dates (1 March-12 April 2007) negotiating the bag specifications and their conformity with Australian standards, and their ability to be stacked on ships.[58]
[58] P2 at 488, 490, 494, 449A, 499, 507, 509, 510. 511, 514, 530, 536.
Importantly, on 2 April 2007 there is an e-mail from Gross to an employee of SA Cement advising that ten sample bulker bags would be arriving at Hallett ‘by the middle of next week’, for Pickard to do his stacking tests with.[59] This is clear evidence that the bags to be used were not yet finalised at this point, and indeed, were not due to be received by Hallett until approximately 11 April 2007. This would leave little, if any, time for the bags to be tested and approved prior to the e-mail of 12 April 2007.
[59] P2 at 536.
There is also an e-mail on this same day from Storah to Pickard discussing bag quality, Storah indicating the sample bags have been sent to Hosking directly and that he should be satisfied with this product.[60] There appears to be no finalisation or acceptance of these bags by Pickard or Hosking in the period before 12 April 2007.
[60] P2 at 530.
Shipping
Between 1 March 2007 and 12 April 2007, there was again, quite a lot of documentary evidence alone indicative of ongoing shipping negotiations.[61] It was not until 5 April 2007 that an e-mail was sent from the shipping agent to SA Cement indicating that a firm offer has been sent on SA Cement’s behalf to the shippers.[62] A signed contract was not sent to the shipping agent until 24 April 2007,[63] after the contract is alleged to have been entered into between the parties.
[61] P2 at 504, 516-520, 147.
[62] P2 at 549.
[63] P2 at 594-607.
Finances
SA Cement was still in the process of settling financial arrangements, after the alleged offer was provided to them for their acceptance. In addition to a number of e-mails[64] indicative of ongoing and incomplete arrangements regarding letters of credit and hedging by SA Cement to enable it to import cement, the alleged acceptance of an offer, that is, the e-mail dated 12 April 2007 from Hosking to Gross ordering 19 000 tonnes of cement, stipulates that the ‘letter of credit and details will be arranged in the next few weeks’.[65]
[64] P2 at 488.
[65] P2 at 551.
Term of Contract
Additionally, at the point of the alleged contract being entered into, the period for which the supply agreement would consist was unsettled. The term contained within the March Contract was for one year and 90 000 tonnes of cement.[66] Prior to this agreement, the contract was being negotiated on the basis of a three year supply of cement. In his evidence, Storah himself stated, that at this time, Pickard was concerned about the term of the agreement being for one year as he wanted three years of supply.[67] There was a reason for Pickard’s concern. He could not cause SA Cement to be left to further negotiations after only one year. This exposure was rendered more commercially acute by the difficulties potentially posed by AdBri.
[66] P2 at 485B.
[67] T 151.
The above evidence contradicts the Plaintiffs’ assertion that all of the key terms of the contract were agreed by 1 March 2007.[68]
[68] Amended Statement of Claim [10].
The lengthy history of negotiation of a written contract:
In light of the lengthy history of negotiation of a written contract, it seems commercially implausible that the parties would intend to enter into a final and binding contract for 90 000 tonnes of cement prior to that contract being signed by both parties.
The evidence reveals that the parties negotiated a sale and purchase agreement over 15 months between March 2006 and May 2007.[69] Between September 2006 and April 2007 nine drafts of a written contract were exchanged between the parties.[70]
[69] P1 at 8; P2 at 217, 221; P3A; Exhibit D1A [27], [67].
[70] P1 at 73, 79, 80, 99, 111, 116, 117; P2 at 121, 172; Exhibit P3A [47], [53]-[55], [61], [65], [99], [100], [102]; Exhibit D1A [40], [42], [43], [49], [51].
Further, Gross consistently sought the provision of a signed written contract from SA Cement.[71] Likewise, it was the intention of Storah to be provided with a signed written contract before the parties were to be bound by their contractual agreement.[72]
[71] Exhibit P3/3A at [82], [83], [86], [104-107]. P2 at 507 and 551.
[72] T 154.
Storah agreed that L-Tag was only willing to proceed once it had received a signed copy of the agreement.[73] In support of an existing agreement, he pointed to the shipping order and signed agreement from Pickard and said that the combination of these two meant that ‘they had a deal’ and that there was a ship on the way and a laycan put in place.[74] Storah said that Gross had communicated to him that Hosking had showed him the contract that Pickard had signed but that Hosking refused to give him the signed contract, stating the reasons for this being the ongoing issues with AdBri. He nonetheless took this as an indication that SA Cement were still willing to proceed.[75]
[73] T 177.
[74] T 177.
[75] T 178.
In my view, in light of that fact that Gross so consistently sought the provision of a final and executed contract before any supply would occur, objectively points to the fact that no finalised contract existed between the parties. This is not surprising from a commercial perspective. The parties were here situated in two different counties, with the anticipation of involvement of an entity in a third country. Shipping and international credits in banking were also involved. This is a very different scenario to that of an Adelaide company purchasing from a manufacturer based in Adelaide.
Objectively, it would also be expected that if SA Cement had intended the 12 April 2007 e-mail to be an acceptance of the supply agreement then it would be expected that it would have simply provided the signed agreement to Gross because it was binding itself to the agreement.
Further, even if this ‘signed’ agreement was provided to Gross, it does not follow that a binding contractual arrangement would therefore be in place.
This contract was yet to be signed by the Plaintiffs and was, not in and of itself, an offer, given the unresolved nature of its terms.
The nature of the agreement being a significant transaction and the absence of a prior relationship of the parties:
This point does not need much expansion suffice to say, that if the prices for cement contained in the March Contract provided are used, that is, for 90 000 tonnes of cement (14 000 tonnes of Type I Portland Cement at 51.50 USD per tonne and 5000 tonnes of Type III Portland Cement at 57.50 USD per tonne at five shipments) then the contract is worth approximately five million dollars to the parties.
On this basis alone, it is unlikely that either party would be prepared to enter into such a significant transaction without a signed formal document.
Siam Cement would not supply the cement to the Plaintiffs until it received a signed written document from SA Cement:
It is equally clear on the evidence that the parties understood that a contract between L-Tag and Siam Cement would not come into existence until there was a signed contract between L-T Trading and SA Cement for the supply of cement.[76]
[76] T 156 lines 8-25; T 170 line 33-36; T 173 line 8-16.
Storah stated that Siam Cement was not willing to enter into a contract with L-Tag unless Siam Cement sighted a signed agreement between L-Tag and SA Cement. Storah said that a contract was not signed between L-Tag and Siam Cement because no ‘signed deal’ with SA Cement was achieved.[77]
[77] T 156.
This also makes the Plaintiffs’ argument that there was an oral agreement between L-Tag and SA Cement untenable, as SA Cement has submitted.
The serious threat posed by AdBri to Hallett Concrete, and the knowledge of that threat by the Plaintiffs at the time of entering the contract:
There is evidence, both through the documents contained in Exhibits P1 and P2 and the oral evidence, that the Plaintiffs knew from the outset[78] that SA Cement was attempting to move away from their current supplier AdBri, who were providing them unsatisfactory cement and not positively responding to their attempts at rectifying this situation. There is disagreement however, between the parties as to the extent that L-Tag was aware of the contractual arrangements between AdBri and Hallett and to what extent those arrangements would affect SA Cement’s dealings with L-Tag in the subject agreement.
[78] P1 at 106A; see also at 194 and 200.
Accordingly, I consider that I am in a position to make the following findings:
·     By 2 March 2006, both Gross and Storah knew that SA Cement needed a consistent supply of cement, as if it were to ‘go down the importing path and there was a problem getting shipment, their local manufacturer, AdBri, would not come to the rescue’.[79]
·     From the beginning of the negotiations, Storah knew that once SA Cement broke away from AdBri, it would not be able to go back and therefore was after a contract for a minimum of three years.[80]
·     SA Cement made it clear to Gross and Storah that if AdBri discovered that negotiations were secretly taking place between them, the negotiations would likely be ineffective.[81]
·     The Plaintiffs were not aware of AdBri’s right of first refusal clause contained in AdBri’s contract of supply with Hallett during the negotiation stage.
[79] Ibid.
[80] P4/4A at [65].
[81] D1A at [19], [21.5], [27]-[28]; T 71 lines 18-26; T 76 lines 16-33.
The Plaintiffs clearly knew of the potential consequences for SA Cement if this new alternative form of cement was not viable. Their ignorance as to the contractual terms of Hallett’s contract with AdBri, does not ameliorate the submission that AdBri’s involvement and threat of a supply cut and or price increase, would fatally threaten the business of Hallett.
The above is enough to objectively indicate that the parties only ever intended to enter into a binding contractual arrangement when a formal document was signed, as a failure to do so would be a commercial risk for SA Cement and consequently Hallett. Put simply, SA Cement needed a mutually signed and finalised contract in their hands, ensuring the consistent supply of the requisite quality of cement before they would risk terminating or jeopardising the supply agreements with AdBri, and the Plaintiffs were well aware of this.
The conduct of the parties, in particular of the Plaintiffs, after the alleged contract was entered into:
Evidence of post-contractual conduct can only be used for a limited purpose. In determining whether the parties intended to conclude an immediately binding contract, post agreement conduct may be taken into account.[82] The conduct may be relevant to show that it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, not until a formal contract had been drawn up embodying all matters incidental to a transaction of such a nature.[83]
[82] Australian Broadcasting Corporation v XIVith Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-548 (Gleeson CJ with whom Hope and Mahoney JJA agreed).
[83] Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386.
It is also permissible to rely on post-agreement conduct for the purpose of considering whether it was inherently likely that the parties to a transaction would have intended to bind themselves to an informally expressed agreement or whether they intended to await a formal contract.[84]
[84] See Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386 at [115], citing BSeppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147.
In Barrier Wharfs Ltd v W Schott Fell & Co[85] as cited in Commonwealth Bank of Australia v Carotino[86] Higgins J, in considering whether a binding contract existed, examined the subsequent conduct of parties and held that there was no concluded contract. On appeal to the High Court, Griffith CJ, in dismissing the appeal, helpfully stated the following:[87]
I agree, therefore, with the conclusion of the learned Judge below that up to that time there was no concluded contract. It appears to me that what the defendants did was to intimate their willingness to enter into a contract upon the basis of the terms as to which there had been a provisional agreement, but that a formal contract must be drawn up, which was to be approved by them, and that that approval was to be given before a concluded contract should come into existence.
It is said for the plaintiffs that, even if that were so prima facie, yet the subsequent correspondence showed that in fact there was a contract entered into on 6th February; and that, if there was any ambiguity in the terms of that contract, the subsequent correspondence showed what the real intention of the parties was. For the defendants it is said that, even if the documents up to 6th February on their face disclosed prima facie a concluded contract, the subsequent correspondence was in the nature of continued negotiation, and showed that a concluded contract had not been entered into. I do not think it is necessary to refer in detail to that correspondence. It is sufficient to refer to one or two of the letters. …
In my judgment the learned Judge below was right in his conclusion that there was no concluded contract in fact; that the letters did not on their face disclose a contract. I think further that, if prima facie they disclosed a contract, the subsequent correspondence shows that it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature.
[85] (1907) 5 CLR 647.
[86] [2011] SASCFC 110 at [86].
[87] Barrier Wharfs Ltd v W Scott Fell & Co Ltd at 668-669.
Signed Shipping Charter
On 24 April 2007 Hosking sent a a signed shipping charter to Ted Reiss Chartering.[88] The charter was for five cargoes of 15-18 metric tonne shipments between May 2007 and September 2008, ‘fairly evenly spread’. The laycan was for 1 May 2007 and the cargo was between 27 May-3 June 2007.[89]
[88] P2 at 594-607.
[89] P2 at 599.
SA Cement denied that this was evidence of a view held by them that a binding contract was on foot.
Hosking said that the one year term of this shipping contract was negotiated to keep the price down by negotiating more than one shipment. He said that the termination clause was such that once they had negotiated and finalised shipping arrangements, he felt he could terminate later ships successfully.[90]
[90] T 293 line 34.
Pickard’s evidence in relation to this contract was that he had committed to the ships but they could be pushed out and that “we may have been able to find other cargoes for those ships”.[91] He said he had a number of avenues investigated in relation to this shipping contract. When asked why Hosking cancelled the shipping contract having investigated alternative cargo he said they could have imported other materials but chose not to.[92]
[91] T 386-387.
[92] T 387.
Clearly, the evidence of Hosking and Pickard was inconsistent on this point, namely, why a shipping contract was entered into for 90 000 tonnes, if they were not, as they argue, of the view that a full and complete contract had been formed for the supply of 90 000 tonnes of cement.
In my view, their inconsistencies, tell against the credibility of both Hosking and Pickard and are indicative of a concern held by each about the truth of why they entered the shipping contract for 90 000 tonnes, although it does not necessarily do so. I consider the real reasons why they entered into the shipping contract are as follows:
1. The shipping charter for 90 000 tonnes of cement was entered as part of the negotiation phase with a view to securing ships for the larger and final supply agreement, so if and when those arrangements were finalised, they were in a position to perform the contract as the ships would be available.
2. They were of the view that if a final contract was never entered into they had options with regard to how they dealt with the shipping charter namely:
(a)to terminate the shipping arrangements following the first shipment and bear the consequences of doing so, or;

(b)access alternative arrangements which would see the ships used for other cargo.

There was no further specific evidence provided in relation to what these termination clauses were, however a perusal of the contract itself reveals the following cancellation clause:
(a) Should the Vessel not be ready to load (whether in berth or not) on the cancelling date in Box 21, the Charterers shall have the option of cancelling the Charter Party.[93]
(b) Should the Owners anticipate that, despite the exercise of due diligence, the Vessel will not be ready to load by the cancelling date, they shall notify the Charterers thereof without delay stating the expected date of the Vessel’s readiness to load and asking whether the Charterers will execute their option of cancelling the charter party, or agree to a new cancellation.
Such an option must be declared by the Charterers within 48 hours after the receipt of the Owners notice. If the Charterers do not exercise their option of cancelling then this Charter Party shall be deemed to be amended such that the seventh day after the new readiness date stated in the Owner’s notification to the Chatterers shall be the new cancelling date.
The provisions of sub-clause (b) of this clause shall operate only once and in case of the Vessel’s further delay, the Charterers shall have the option of cancelling the Charter Party as per sub-clause (a) of this Clause.[94]
[93] Note that Box 21 on the relevant shipping contract is empty.
[94] P2 at 597 (clause 8).
As indicated in clause (a) the Charterers (SA Cement) have the option of cancelling the Charter Party, provided the vessel is not ready to load on the cancelling date (of which there is not one). On this basis it is helpful to look at the term of the contract and the amount of shipments. The contract stipulates that there are to be 90 000 tonnes to be delivered over the course of one year. This results in a shipment of approximately every two and a half months. Subsequently, there is a basis for arguing that if SA Cement were to cancel the shipping arrangements very soon thereafter, the first shipment would allow enough time for the shipper to be notified prior to the vessels being loaded, in cooperation with the above cancellation clause.
Whilst the above indicates some support for Hosking’s evidence that they had the ability to terminate later shipments, the absence of specific and expert evidence on this point means that I am not in a position to unequivocally conclude that SA Cement was in a position to ‘successfully’ terminate the shipping charter or what consequences they would or would not suffer if they were to do so.
Ultimately, I am prepared to accept that SA Cement entered into a contract for a potentially longer term than may have been necessary, in order to secure particular arrangements in the event other compatible arrangements were agreed. That is, the supply agreement for 90 000 tonnes was finalised.

That being said, this issue does not materially advance matters, in terms of whether or not there was a contract formed. I agree with SA Cement’s submission that in light of all the contractual terms still outstanding, it would take a significant leap of inference to say that the fact it took steps that were clearly preparatory to a much larger order, meant that there was a contract for the supply of 90 000 tonnes of cement, pursuant to the March Contract.
Further, SA Cement agreed that it entered into a binding shipping contract (with Ted Reiss Chartering) and that it paid the commission for the termination of that contract, in addition to AdBri taking up some, if not all, of the shipping originally secured by SA Cement.
Continuing negotiations in relation to:
Price
As at 8 May 2007, the issue of price had not been settled. This is evidenced through an e-mail from Storah to Pickard,[95] which appears to be a response from Storah to an enquiry from Pickard in relation to the cost of Type III cement, stating that ‘from the beginning, we have always stated that the cost of Type III would be in the order of $US57.50, which we subsequently confirmed in the draft’,[96] and was conceded by Storah.[97]
[95] P2 at 635.
[96] Ibid.
[97] T154.
Storah gave evidence that the price was only a minor detail.[98] I am not prepared to accept his evidence in this regard, in light of the prospective amount of cement to be imported – up to 90 000 tonnes. A price variation of 50 cents to a dollar per tonne would be a significant detail in the minds of both parties.
Term of Contract
[98] T 153.
On or after 8 May 2007 Gross attended Hosking’s office.[99] Gross gave evidence that he told Hosking that he was unsettled that SA Cement had not signed the agreement but that they were proceeding with the first order and were making bags and asked if he could have the agreement. He was told by Hosking that he could not have the agreement yet as there were still issues to sort out with AdBri. Gross said at this point he was unaware of AdBri’s knowledge of the negotiations.[100]
[99] D1A at [60].
[100] T 93 lines 11-13.
On this topic, Hosking said he did not recall Gross stating that they were proceeding with the first order and were making bags, but he remembers quite clearly the conversation about ‘I haven’t got a signed agreement. You promised it to me etc.’
Hosking said the agreement he was referring to was the draft agreement they were sent in March which had changed the term from three years to one year, which was a major issue for SA Cement, as if it was to move away from AdBri, it required a long term deal.[101]
Bags
[101] T 206.
There were continuing negotiations in relation to bags,[102] right up until 4 May 2007 when Pickard sent an e-mail to Storah reluctantly agreeing to accept ‘spouted bags’ as opposed to the desired ‘double lined bags’, if they were able to meet the laycan date.[103] In this e-mail Pickard also requests if they use these bags in the future, whether this would result in a reduced price.[104]
[102] P2 at 625, 626 and 635.
[103] P2 at 625.
[104] Ibid.
Not only is this e-mail indicative of the unfinalised nature of which bags were to be used but also indicates that price of the bags was still being negotiated at this point after the alleged offer and acceptance is said to have occurred.
Shipping
Between 19 April and 20 April 2007, there are a number of e-mails between Hosking and Ted Reiss, renegotiating terms of the Shipping Charter.[105] These continuing negotiations are indicative of unfinalised shipping arrangements, which in turn, is further objective evidence that indicated the parties, at that point, had no concluded agreement.
Quality of Cement
[105] P2 at 585-590.
The unresolved nature of the negotiations is further evidenced through this provision of an additional contract provided to Hosking on 23 April 2007 (‘the April Contract’) by Gross.[106] This contract amended the Blaine fineness of Ordinary Portland Cement Type I, amongst other things,[107] indicating that, importantly, the quality of the cement was not settled either at the alleged date of offer, or the alleged date of acceptance. As already discussed the Blaine fineness dictates the quality of the cement.
[106] P2 at 591-591S.
[107] This contract also amended the quantities of Ordinary Portland Cement Type I and Type III for each shipload of cement, the terms relating to the source of supply, and notification of SA Cement’s cement requirements and allowed the delivery of cement to ports on the eastern seaboard of Australia.
The quality of the cement or lack thereof was in fact the primary reason for SA Cement’s move to investigate alternative sources of quality supply for Hallett.
In light of SA Cement’s evidence that its move away from AdBri was a result of quality issues, it is difficult to reconcile that either party, with this in mind, would be willing or intending to enter into a contract without this matter, at the very least, being settled for quantities of cement of either 90 000 tonnes or 19 000 tonnes.
Provision of new ‘Draft agreement’ as at 23 April 2007
As a result of negotiations continuing from 12 April 2007, a further draft contract was provided by Gross to Hosking on 23 April 2007. This contract amended (from the March Contract) the following:[108]
·     The Blaine fineness of Ordinary Portland Cement Type I;
·     The quantities of Ordinary Portland Cement Type I and Portland Cement Type III for each ship load of cement;
·     The terms relating to the source of supply; and
·     An additional clause allowing the delivery of cement to ports on the eastern seaboard of Australia.
[108] P2 at 591-591S.
In addition to various clauses being amended, the fact that an additional agreement was so provided after the Plaintiffs’ offer was made on 1 March 2007 and when the offer was supposedly accepted on 12 April 2007 by SA Cement strikes at the very heart of any suggestion of a settled contract.
Given the value of the contract, I accept that it is commercially implausible, that in the absence of a written signed contract by both parties, that a contract would have been entered into.
Alleged signed contract by Pickard (April Draft Agreement)
After 23 April 2007, Hosking altered the April Draft Contract, by changing the cement specifications at Annexure 1.[109]
[109] T 298 lines 17-32, T 300 line 35- T 302 line 3.
Neither party contends that Pickard signed the execution page of the April Draft Contract.[110]
[110] T 206 line 35 – T 207 line 16, T 301 line 36, T 302 line 3.
The Plaintiffs claim that the execution of the April Contract is at the very least an admission that the terms were acceptable to it.[111]
[111] Plaintiffs’ Closing Outline at [15].
SA Cement has refuted this contention. Hosking says that Pickard signed the execution page of the document, in the expectation that he would make further amendments and present a final offer to Gross.[112] Pickard’s evidence on this issue was that he would often ‘pre-sign’ documents and leave the detail of the contract to Hosking.[113]
[112] T 206 line 35 – T 207 line 16, T 301 line 36, T 302 line 3.
[113] T 394.
At a meeting on 8 May 2007 between Gross and Hosking at Hosking’s office Gross asked for the agreement, and whilst Hosking told him that he had the agreement and it was signed, he could not yet provide it to Gross as there were still issues with AdBri to contend with.[114]
[114] P3/3A at [104]-[107].
While some of the details of this meeting were not agreed to in evidence, both Gross and Hosking did agree the meeting took place and that Hosking told Gross that Pickard had signed the contract but that there were still issues to be sorted out with Adbri.[115]
[115] P3/3A at [104]–[107], D1/1A at [62].
SA Cement explain Pickard’s conduct in signing this agreement as being, in short, the product of convenience, saying that it was signed by Pickard, in accordance with the usual company practice whereby Pickard would often sign blank documents, allowing Hosking to execute those documents at his convenience.[116] Pickard expanded and said that at this time he probably did not read the agreement before signing it[117] and that he did not think he would be bound by it.[118] Whilst this may seem a very risky way to conduct business, I am satisfied that was the arrangement which existed between Pickard and Hosking. Documents were often signed by Pickard out of convenience to permit Hosking to pursue matters until a final resolution was achieved which was satisfactory to the company.
Plaintiffs continuing to treat with SA Cement
[116] T 393.
[117] T 394.
[118] T 395.
There is evidence that the Plaintiffs continued to treat with SA Cement in an attempt to salvage something from their extensive negotiations.[119] This is further objective evidence that the Plaintiffs were not of the view that a contract was ever finalised and breached.
Non-performance by Plaintiffs
[119] P2 at 766-767, 759.
There is no evidence that the Plaintiffs did anything following the 12 April 2007 e-mail from Hosking ordering 19 000 tonnes of cement to be shipped in late May 2007.
Not only were there still issues in negotiations between the parties, indeed on 27 May 2007 Gross sent an e-mail to Storah confirming with him their discussions from ‘Friday night’, expressly telling Storah that ‘L-Tag would not be getting a signed agreement because MSP hadn’t yet sorted out its issues with Adelaide Brighton’.[120]
[120] P2 at 714.
In his evidence, Storah eventually conceded that, as at this time, namely 27 May 2007, it would have been almost impossible to fulfil a supply contract for 19 000 tonnes of cement by the end of May 2007.[121]
[121] T 180 line 7.
Even in the event the first stages of contract formation were fulfilled, namely offer and acceptance, the Plaintiffs were not in a position to actually perform the contract at the date specified for performance. This factor also strongly supports the absence of a binding contract.
Contract for 19 000 tonnes of cement
As indicated, the Plaintiffs claim, in the alternative, that a contract was formed for the purchase of 19 000 tonnes of cement, though the alleged offer and acceptance constituting this contract was not pleaded.
In my view, it is clear that on 12 April 2007 Hosking placed a purchase order for 19 000 tonnes of cement. SA Cement in their closing address conceded that by virtue of it placing this order it was sufficiently certain about the matters relevant to that shipment to be able to make that purchase order.[122]
[122] T 527.
For example, there were e-mails during the first part of April 2007, culminating in Pickard agreeing to accept the bags for the first shipment.[123]
[123] T 477; P2 at 625.
This, however, in the context of this purchase order, does not relieve the Plaintiffs from having to prove that the legal formalities of offer and acceptance were completed in this case and that there is evidence which in a precise way allows me to find that these two elements of contract formation are made out.[124]
[124] Defendant’s closing address – T 528.
Accordingly, what is required for a concluded agreement, is a precise offer, and likewise an acceptance of that offer.
Given a failure by the Plaintiffs to plead the relevant offer and acceptance relied upon to make out this agreement, what follows is an assessment of two potential formulations in relation to the relevant offer and acceptance and an analysis of both.
On one formulation, the 12 April 2007 e-mail can be characterised as an offer. On this formulation, there is no evidence, either documentary or otherwise, capable of amounting to an unequivocal acceptance of that offer. This is supported by the evidence of Storah, who was clear during his cross-examination that there was no verbal acceptance of that offer.[125]
[125] T 171.
Further, there was no acceptance, through conduct, as Storah also gave evidence that he was not going to do anything to perform the order for the first shipment, until he had a signed copy of the agreement.[126]
[126] T 177 and 179.
On this formulation, that which has not been accepted is capable of being withdrawn. SA Cement withdrew its offer to the Plaintiffs on 23 July 2007.[127]
[127] Amended Statement of Claim [22]; Defence [16.2]; D1A; P3/3A at [113]; P4/4A at [91]–[98].
Accepting the assertion, only for the sake of discussion, that there was an acceptance of this offer, indicated by the Plaintiffs to SA Cement, the Plaintiffs were not, in any event, in a position to perform the contract as at 27 May 2007.[128] I note SA Cement’s withdrawal of its offer of 12 April 2007 had no bearing on the Plaintiffs’ inability to perform the contract, as this withdrawal occurred well after the date for performance of the alleged contract for 19 000 tonnes.
[128] T180.
On this formulation, there is no binding contractual arrangement for 19 000 tonnes, as there was no contract formed and even if there was, the Plaintiffs were unable to perform that contract.
On another formulation, the 12 April 2007 e-mail from Hosking could be characterised as an acceptance. What follows then is the question – of what offer? There are two offers capable of being characterised as such.
The first is the March Contract provided by the Plaintiffs on 1 March 2007, which, putting aside the voluminous negotiations relating to the terms of this agreement, which occurred between 1 March and 12 April 2007 as discussed earlier, differs in material respects to the alleged acceptance, in particular the tonnage and delivery date. The authorities are clear that acceptance must be unequivocal and any proposal putting different terms, however slight, is a counter-offer.[129]
[129] J W Carter Contract Law in Australia (Lexis Nexis Butterworths 2013) 56 [3-19].
The second potential offer is the e-mail correspondence on 11 April 2007 from Hosking to Gross asking:
How soon SCT [Siam Cement Trading] can have 19kt bagged and ready to go. Can you ask and get an estimated date? Assume 5kt of type 3.[130]
[130] P2 at 548.
In my view, this amounted to no more than Hosking making a request for information about when a delivery of cement could occur, which was answered by Gross in the affirmative.[131] Therefore this e-mail is not capable of being characterised as an offer.
[131] P2 at 551.
Accordingly, on the evidence, there could be no separate and binding agreement for 19 000 tonnes of cement, because the Plaintiffs have failed to establish or prove the necessary elements of contract formation and even if they had, they were not in a position to perform this ‘purchase order’.
Conclusion re contracts
I conclude therefore, for the reasons stated above, that there does not exist a binding contract between the parties for the sale and supply of either 90 000 or 19 000 tonnes of cement.
I further reject the Plaintiffs’ claim in the alternative that SA Cement should be estopped from denying the supply contract on the basis that the Plaintiffs never acted to their detriment in a commercial context.[132]
Have the Plaintiffs met the additional necessary requirements required of a Pre-Registration Contract?
[132] Thompson v Palmer (1933) 49 CLR 507 at 547.
Both the alleged contracts in this matter are entered into by L-Tag (the ‘vendor’), on behalf of L-T Trading, a company not yet incorporated at the time the contracts were allegedly entered into. This is because, on the pleadings, every theory proposed by the Plaintiffs[133] regarding contract formation occurs after L-Tag is identified as the vendor from 1 March 2007.[134]
[133] Amended Statement of Claim [12]-[16]; [18]-[19].
[134] P2 at 485-485S; 507; 591-591S; 883-900.
As a result these contracts are what are commonly referred to as ‘pre-registration contracts’. Such contracts require additional criteria be met by the pre-registration entity in order for a valid contract to be formed.
Further, such contracts give rise to serious questions about the rights and standing of the ‘promoter’ of the pre-registration entity. In this case, the ‘promoter’ is L-Tag.
The Plaintiffs pleaded that the contracts are ones entered into on behalf of one company (L-T Trading which was to be incorporated once the contracts were entered into) by another company (L-Tag). Accordingly the principles applicable to pre-registration contracts are invoked. I will discuss this in detail shortly.
SA Cement contends that L-T Trading has not met the additional requirements for the formation of a pre-registration contract.
It submits that L-Tag, as the promoter of the pre-registration company (L-T Trading) does not have any right to claim pursuant to a contract allegedly entered into for L-T Trading. It submitted the position is analogous to an agent acting without authority. In that situation, the agent would have no prima facie right to sue for performance of the contract.[135]
[135] Defendant’s Written Closing Submissions [2].
Two questions arise for consideration; first, does L-Tag qualify as the ‘promoter’ of L-T Trading and secondly does L-T Trading qualify as a company under the Corporations Act 2001 (Cth) (‘the Act’). I will address the first of these questions later when I discuss agency. The second of these questions is addressed directly below:
At common law, a contract made on behalf of a non-existent company, did not bind the company once it was incorporated, nor could the company ratify it, although it might bind the signatories personally.[136]
[136] Kelner v Baxter 918660 LR 2 CP 174 as cited in Halsbury’s Laws of Australia, 110 – Contract: III Terms and Parties: (8) Capacity of Parties: (D) Capacity of Corporations: (IV) Pre incorporation Contracts.
However, where it is clear the parties intended to contract with the company, and it transpires that the company was not in existence, there is no contract with anyone.[137]
[137] Halsbury’s Laws of Australia, 110 – Contract: III Terms and Parties: (8) Capacity of Parties: (D) Capacity of Corporations: (IV) Pre incorporation Contracts; Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45.
The common law principles have since been altered in Australia by Section 131 of the Act which, provides as follows:
(1) If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time - within a reasonable time after the contract is entered into.
In short, the contract will be validly formed with the pre-registration company, providing the pre-registration company registers the company and ratifies the contract ‘within a reasonable time’ after the contract is entered into.
An issue arises in this case, as a result of the pre-registration company being incorporated in Hong Kong. The first hurdle for the Plaintiffs, submitted by SA Cement, is that a ‘company’ is defined by section 9 of the Act as follows:
company means a company registered under this Act and:
(c) in Parts 5.7B and 5.8 (except sections 595 and 596), includes a Part 5.7 body; and
(d) in Part 5B.1, includes an unincorporated registrable body.
As L-T Trading was not incorporated under the Act, but incorporated under the laws of Hong Kong it would appear that this section and subsequently its requirements for timely ratification and incorporation to result in a validly formed contract do not apply.
Support for this proposition can be found through contrasting the definition provided in the Act for company and that which is proffered for a corporation as follows:
(1) Subject to this section, in this Act, corporation includes:
(a)a Company: and
(b)any body corporate (whether incorporated in this jurisdiction or elsewhere); and
(c)an unincorporated body that under the law of its place of origin, may sue or be sued, or may hold property in the name of its secretary or of an office holder of the body duly appointed for that purpose.

Similarly, as submitted by SA Cement, there are other provisions in the Act which deal specifically with the application of that provision to foreign companies. If it was intended that the section apply to foreign companies, that would be made express within the definition of company in Section 9, as it has been in other definitions in the Act.
Accordingly, a body corporate, which is not within the definition of company under the Act cannot ratify a contract under Section 131. Thus, a corporation registered or formed in another jurisdiction cannot ratify a pre-registration contract under Section 131.
The question then becomes, what law is to be applied in order to determine the pre-registration issue? This is an entirely separate issue to the issue of the proper law of the contract dictated in accordance with the ‘choice of law’ clause contained (and accordingly, the law in relation to the ‘proper law of the contract’ as opposed to the law under the Act) in the March Contract which has no bearing on this question.
As L-T Trading was incorporated in Hong Kong, it would ordinarily fall to the pre-registration laws of Hong Kong to determine whether or not the pre-registration entity has complied with the additional requirements imposed upon it.
Relevantly, the applicable Hong Kong Ordinance provides as follows:
1. Where a contract purports to have been made in the name or on behalf of a company at a time when the company has not been incorporated:
(a)Subject to subsection (2) and any express agreement to the contrary, the contract shall have effect as a contract entered into by the person purporting to act for the company or as agent for it, and he shall be personally liable on and entitled to enforce the contract accordingly;
(b)The company may, after incorporation, ratify the contract to the same extent as if it had already been incorporated at that time as if the contract has been entered into on its behalf by an agent acting without its authority.
2. Where a contract is ratified by virtue of this section, the person who purported to act for or on behalf of the company in making the contract shall not thereafter be under any greater liability than he would have been if he had entered into the contract on behalf of the company as an agent acting without its authority and after its incorporation.
The Plaintiffs, who asserted reliance on the Hong Kong Ordinance, did not adduce any evidence, expert or otherwise, in order to assist me in applying this ordinance to the issue of pre-registration and consequently the effect, if any, it has on the alleged contract. Accordingly, what follows is a strict application of the provided legislation to the factual scenario in this case.
On a strict application, the above Ordinance would allow L-Tag to enforce the March Contract (if it so existed). However, at this point, common law considerations become applicable.
Whilst, as is the case under Australian pre-registration law, ratification and incorporation must occur within a ‘reasonable time’ of a contract being entered into, the principles and logic behind this requirement are helpful in determining, in this case, whether ratification and incorporation have in fact occurred within a ‘reasonable’ time, from a commercial perspective.
At common law, ratification cannot occur after the time for performance of a contract has passed to the detriment of the party who has not begun to perform the contract.[138]
[138] Life Savers (A’asia) Ltd v Frigmobile Pty Ltd[1983] 1 NSWLR 431 at 438; (1983) ASC 55-251 per Huntly JA, CA.9 See, for example, Watson v Davies[1931] 1 Ch 455; (1930) 144 LT 545; Dibbins v Dibbins[1896] 2 Ch 348; Metropolitan Asylums Board Managers v Kingham & Son (1896) 6 TLR 217; Life Savers (A’asia) Ltd v Frigmobile Pty Ltd[1983] 1 NSWLR 431 at 438; (1983) ASC 55-251 per Huntly JA, CA; Hughes v NM Superannuation Pty Ltd(1993) 29 NSWLR 653 at 665; 11 ACLC 923; 48 IR 424 per Sheller JA (Kirby P and Meagher JA concurring); Bedford Insurance Co Ltd v Institutio De Resseguros Do Brasil[1985] QB 966; [1984] 3 All ER 766; [1984] 3 WLR 726; Powercor Australia Ltd v Pacific Power[1999] VSC 110.
However, it was thought to be ‘arguable’, in the context of section 183 of the Corporations Law (repealed), that a company could ratify a contract after the time at which performance of the contract was to commence.[139]
[139] Breeze v Cambridge Gulf Holdings NL[1997] WASC 9.
It is a question of fact in each case what is a reasonable time for ratification. Mere time is nothing except with reference to the circumstances.[140]
[140] Re Portuguese Consolidated Copper Mines Ltd(1890) 45 Ch D 16 at 34 per Bowen LJ.
The following post-registration ratification periods have been regarded as ‘reasonable’ for the purposes of section 131 of the Corporations Act 2001:
- one month — (ratification of a commercial property lease);[141]
- seven weeks — (ratification of a real estate sub-lease agreement where the seven weeks included all of December and the first half of January).[142]
[141] Classic International Pty Ltd v Lagos(2002) 60 NSWLR 241; 11 BPR 20,573; [2002] NSWSC 1155.
[142] Kevroy Pty Ltd v Keswick Developments Pty Ltd(2009) 69 ACSR 635; [2009] QSC 49.
The contract for the supply of cement was said to have been entered into on 12 April 2007. The date for performance of that contract was to be 27 May 2007. The terms and conditions of that alleged contract for sale are per the March Contract. Formal alternative arrangements for the supply of cement by AdBri to SA Cement were made on 31 May 2007. SA Cement was advised that any agreement was cancelled on 23 July 2007. L-T Trading was incorporated on 3 July 2008 and ratified the supply contract on 10 September 2008, both dates falling over one year after the date for which performance of the contract was required to take place. During the period between cancellation of the contract and the date of ratification and incorporation, the Plaintiffs did nothing to attempt to enforce the contract, which they allege to have existed at that time.
In my view, the reality of the situation is that L-Tag stood by and allowed SA Cement to partake in the commercial arrangements with AdBri without seeking to enforce the contract, for over a year. During this time, SA Cement would have been of the view that they had validly withdrawn the purchase order of 12 April 2007 and cancelled any negotiations with SA Cement and were therefore free and able to partake in further commercial arrangements, in substitution for those they had cancelled.
L-Tag should have done something in a time which reflected the commerciality of the agreement and their failure to do so has left me with no choice but to find that the ratification and incorporation did not occur within a commercially ‘reasonable time’ so as to alter the common law position, that a contract cannot be concluded with a company yet to be formed.
Does L-Tag Qualify as the ‘promoter’ of L-T Trading and if so does Gross have the requisite agency to act on behalf of the promoter, L-Tag , acting on behalf of the pre-registration company, L-T Trading?
In the event a determination is made that a pre-registration contract could be formed, there still arises for consideration whether or not L-Tag is in fact the ‘promoter’, in law of L-T Trading, and, subsequently whether Gross, has the requisite legal authority to act as the agent of L-Tag in their capacity as L-T Trading’s promoter.
Plaintiffs’ Case
The Plaintiffs pleaded that Gross was, at all material times, the duly authorised agent of the L-Tag in its dealings with SA Cement.[143] They pleaded that in February 2006 Storah, the Managing Director of L-Tag, verbally authorised Gross to negotiate with SA Cement on behalf of L-Tag on terms that he would relay the information between SA Cement and L-Tag. They further pleaded that the terms of this verbal agreement were that Gross would not bind L-Tag without Storah’s consent.[144]
[143] Amended Statement of Claim at [4].
[144] Amended Statement of Claim at [4.2].
They pleaded that Gross was later verbally authorised by Storah in March 2007 to commit L-Tag and the company yet to be formed (L-T Trading) to the terms of the written contract pleaded.
They submitted that Gross acted as agent for L-Tag in its capacity as promoter of the company to be formed (L-T Trading).[145] The terms of Gross’ agency for L-T Trading was conferred in the same terms as his agency with L-Tag.[146]
[145] Amended Statement of Claim at [4.5].
[146] Amended Statement of Claim at [4.6].
The Plaintiffs did not produce any documentary evidence to support their contention, the evidence in this regard being wholly oral from Storah during his cross-examination, where he added to his affidavit evidence by saying:
·     L-Tag’s Board of Directors passed a verbal resolution to proceed with the deal with SA Cement. (Defence Counsel sought production of the company minutes of that meeting which were never produced);[147]
·     In relation to whether or not L-T Trading resolved to authorise L-Tag to operate as promoter of L-T Trading, Storah said that he spoke to the major shareholder (Duong Chi Lamsan) and that he had told him to do this is if it was necessary. This authorisation was not recorded;[148]
·     There was no need to pass a formal resolution because Storah and Lamsan had absolute majority voting power;[149]
·     There was no written agency agreement nor a resolution to authorise Gross to act as agent as it was his responsibility and he verbally appointed Gross due to a very strong past relationship with him when he was part of the South Australian Government.[150]
[147] T 138.
[148] T 139.
[149] T 139.
[150] T 139.
Defendant’s Case
SA Cement submits that if the court were to determine that a pre-registration contract could be formed, formation of that contract requires either a party or authorised agent to make the requisite exchange of offer and acceptance.[151]
[151] Defendants Written Closing Submissions at [106].
It further submitted that for a pre-registration contract to be validly formed by L-Tag as promoter, the Plaintiffs’ evidence needs to prove the following sequential propositions:
1     L-Tag was authorised by its Board to promote a contract on behalf of an unregistered Hong Kong entity;
2     L-Tag’s Board authorised Storah to enter into an agency agreement with Gross for that purpose;
3     Storah made an agency proposal to Gross, in terms capable of acceptance by Gross, in sufficient detail to meet the minimum requirements of an agency contract with L-Tag (as opposed to Storah);
4     Gross unequivocally accepted an agency with L-Tag; and
5     Gross performed the role of promoter on behalf of L-Tag.
SA Cement submitted that the Plaintiffs adduced no evidence to prove any of the above propositions, despite the fact that an agency relationship was pleaded and not admitted[152] and that in their statement of claim the Plaintiffs pleaded that the alleged offer was made by Gross in March 2007, the acceptance was received by him on 23 March 2007, and it was Gross who received the offer for the alleged first sale on 12 April 2007.[153]
[152] Amended Statement of Claim at [4]; the Defence does not plead to the allegation, and it is deemed to be denied by operation of rule 100(5) of the District Court Rules 2006 (SA).
[153] Amended Statement of Claim at [90].
SA Cement contends that neither L-Tag nor L-T Trading have been able to establish the agency and authority of Gross, by which it is asserted offer and acceptance were exchanged.[154] It further submitted that L-Tag has not ratified any contract allegedly entered into by Gross.[155]
[154] Defendant’s written closing submissions at [1.2].
[155] Defendant’s written closing submissions at [1.1].
They contend that on the above basis, there cannot be a finding that Gross had any actual authority.[156]
[156] Defendant’s written closing submissions at [3].
Legal Principles of Agency/Promoters:
Although a promoter of a company cannot be considered an agent or trustee for the company, the company not being in existence at the time, the principles of the law of agency, are applicable to this case.[157] I will therefore discuss these principles in detail, as they are relevant to both issues of Gross as agent for L-Tag, and L-Tag as promoter for L-T Trading.
[157] Lydney and Wigpool Iron Ore Co v Bird (1886) 33 Ch D 85 at 93; 54 LT 242 per Lindley LJ.
Agency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties.[158]
[158] International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644, at p 652.
The need to determine whether the relationship of principal and agent has been created lies in the legal consequences of such a relationship.[159] Where an agency relationship is created, the terms of that relationship determine the scope of the agent’s authority to bind the principal, and to claim against the principal for an indemnity, lien or remuneration.[160] An agent who acts within the scope of his or her authority can bind the principal and maintain such a claim. The principal can enforce any contract effected by the agent within the scope of the agent’s authority.[161]
[159] G E Dal Pont, Law of Agency (LexisNexis Butterworths 2008).
[160] G E Dal Pont, Law of Agency (LexisNexis Butterworths 2008).
[161] Ibid.
The assessment of whether or not an agency relationship exists in this case, is effectively a two stage process:
1.Was an agency relationship created?; and
2.What is the scope of that agency relationship?
Creation of Legal Agency
The legal relationship of agency can be created by three broad methods, namely:[162]
(a)By express or implied agreement, whether or not contractual, between principal and agent (these are both limbs of ‘actual authority’).
(b)By the subsequent ratification by the principal of the acts done without authority by the person, whether or not an agent, on the principal’s behalf; or
(c)By operation of law pursuant to the common law doctrines of agency by necessity and agency arising from cohabitation.
[162] G E Dal Pont, Law of Agency (LexisNexis Butterworths 2008).
In this case, only (a) and (b) above are potentially relevant. Importantly, although agency is sometimes said to be created by the ostensible or apparent authority, this concept is not relevant here as its existence simply estops a principal from denying the agent’s authority to act on behalf of the principal for the transaction in question. This is not the case here, and is, in fact quite the opposite scenario, as it is the principal (L-Tag) which is seeking to rely on the relationship of agency to enforce a contract.
The relevant method in this matter is (a) above, agency by express or implied agreement, that is, actual authority. Agency by subsequent ratification namely (b) above cannot apply to this matter as ‘ratification of an unauthorized act must be effected within a reasonable time of the unauthorized act.’[163] As discussed earlier, this has not occurred in this case.
[163] Re Portuguese Copper Mines Ltd (1890) 45 Ch D 16 at [31] per Lindley LJ and at 34 per Bowen LJ as cited in G E Dal Pont, Law of Agency (Lexis Nexis Butterwortjs 2008).
Actual authority arises where a principal grants, and the agent accepts, authority for the agent to perform specific tasks for the principal.[164] It is therefore consensual, although the manifestation of consent may be express or implied.[165]
[164] Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132 per Clarke and Cripps JJA.
[165] Pouler Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCSFC 131; 2005 220 ALR 211 at[124].
Scope of the Authority
Once it is established that the relationship of principal and agent has been created, it is then essential to ascertain the scope of the authority conferred upon the agent by virtue of the agency. This is important for the following reasons.
An agent who contracts within the scope of his or her actual authority binds the principal who can then sue and be sued under the contract. The same is the case in relation to the defaults committed within the scope of the agent’s actual authority. The principal may also be liable if the agent acts within his or her ostensible authority, though, as mentioned, this is not relevant here.
In determining the scope of Gross’ actual authority, the scope is assessed with reference to the principles of express and implied authority (both of which are forms of actual authority).
Express Authority / Implied Authority
Express authority is provided when the authority is given by express words whether oral or written to engage in a particular form of conduct.
The relevant representation may be by words or conduct of the principal and a court must consider the totality of the principal’s actions.[166]
[166] Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd (The “Raffaella”) (1985) 2 Lloyds Rep 36, at p 41.
Authority is implied when it is inferred from both the conduct of the parties and the circumstances of the case, the latter including the office or position in which the agent is placed.[167]
[167] Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 488 per Willmer LJ.
Where an agency agreement is in writing, the scope of the actual authority is ascertained by reference to both the express words of the agreement (express actual authority) and any proper implications to be drawn from those words, trade usage and the course of business between the parties (implied actual authority).
Where the agency agreement is oral, the scope of the agent’s authority is to be determined by reference to the purpose of the agency ascertained by reference to the surrounding circumstances and the usual course of the business in which the agent is engaged.
Importantly, in determining whether a relationship of agency exists, the onus of proof lies on the agent, through whom he or she seeks to charge another as principal.[168] In other words, the onus of proof lies on the person seeking to rely on the relationship of agency, here, the Plaintiffs.
[168] Robinson v Tyson (1888) 9 (NSW) L 297 at 300 per Windeyer J, at 211 per Innes J.
Analysis
On his evidence, Storah provided Gross with authority to act as agent for L-Tag in their negotiations with SA Cement for the Supply Agreement, and, ultimately bind one or both of the Plaintiffs to the ultimate and finalised agreement.
The authority for Gross to act as agent can potentially stem though two avenues.
1.The first being, through a resolution passed by L-Tag to either appoint Storah as agent for the transaction and employ Gross as his agent for that same purpose, (or through Gross himself being authorised by the board directly to act as agent) or; (express actual authority); or
2.Through Storah’s implied authority by virtue of his position as Managing Director, and, subsequently, the provision of same to Gross. (implied authority)
I start with the first avenue. Was Gross given express actual authority to bind L-Tag to a cement supply contract of the form alleged?
On the evidence provided by the Plaintiffs on this issue, Storah conceded that there was no agency agreement nor a resolution to authorise Gross to act as agent for L-Tag because it was his responsibility and he verbally appointed Gross due to a very strong past relationship with him when he was part of the South Australian Government.[169]
[169] T 139.
On the basis of this evidence alone, I am not satisfied that the Plaintiffs have discharged their onus of proof to establish Gross’ express actual authority to act as L-Tag’s agent and bind them to supply arrangements of any sort.
I then move on to the second avenue. This requires an assessment of whether Storah himself had the authority act on behalf of L-Tag in the subject negotiations, as the general rule in determining whether the principal has the capacity to appoint an agent, is that what a person may do him or herself, he or she may do by an agent,[170] with two exceptions: the first being where a statute prescribes that the act or instrument in question is to be done or executed by the principal in person; and the second where the principal’s competency to do the act arises by virtue of some power, authority or duty of a personal nature.[171]
[170] Christie v Permewan,Right & Co Ltd (1904) 1 CLR 693 at 700 per Griffith CJ as cited in Halsbury’s Laws of Australia,1 – Nature and Formation – Agency [15-10].
[171] Bruce v Tyley (1916) 21 CLR 277 at 288-9; 22 ALR 215 per Isaacs J.

Neither of these exceptions arise for consideration here, and thus, both Storah and L-T Trading as ‘principals’ have the capacity to employ an agent to do that which they have the authority to do. The question then becomes what does Storah, as Managing Director, have authority to do?
The Act includes a replaceable rule that permits directors to confer on a managing director any of the powers that the directors can exercise.[172]
[172] Corporations Act 2001 (Cth) s 198C (1).
Where the directors do not expressly confer any powers on a managing director, there will still be an implied conferral of power.
The law is that ‘when a board of directors appoint one of their number to be managing director … they thereby impliedly authorise him to do all such things as fall within the usual scope of that office’.[173]
[173] Hely-Hutchingson v Brayhead Ltd [1968] 1 QB 549 at 586 per Lord Wilberforce, cited with approval in State Bank of Victoria v Parry (1990) 2 ACSR 15 at 29 per Nicholson J as cited in G E Dal Pont Law of Agency (LexisNexis Butterworths 2008)
The matters that fall within the usual scope of that office are a question of fact to be determined on a case by case basis, taking into consideration factors including the size of the company, the nature of its commercial undertakings and the roles and responsibilities of the managing director.
Generally speaking, however, the managing director of a company has authority to commit the company to contracts entered into within the ordinary course of the company’s business.[174] Yet, in every case, a court will require sufficient evidence to infer what the usual scope of the office of a managing director was in a particular case.
[174] Capper’s Pty Ltd v L & M Newman Pty Ltd [1960] NSWLR 143 at 145-6 (Fc) (where it was held that the managing director had authority to bind the company under a contract for the purchase of steel because it was in the ordinary course of the company’s business).
In seeking to apply the legal principles outlined above, in particular, whether Storah had the requisite authority to enter into the contract alleged and subsequently, employ an agent to undertake those duties on his behalf, it is necessary to ask whether, entering into a contract for the supply of 90 000 tonnes of cement for an approximate cost of 4.4 million USD or 1 million USD for 19 000 tonnes falls within the usual scope of that office.[175]
[175] Hely-Hutchingson v Brayhead Ltd [1968] 1 QB 549 at 586 per Lord Wilberforce, cited with approval in State Bank of Victoria v Parry (1990) 2 ACSR 15 at 29 per Nicholson J.
In making this assessment, the following factors are particularly relevant:
·Storah is the Managing Director of L-Tag which was incorporated in 2005 to explore trade opportunities between Australia and Thailand. He is one of the senior shareholders of L-Tag together with Lamsan (who is one of the largest shareholders);
·The annual turnover of L-Tag is approximately 1 million AUD. Loxley’s annual turnover is approximately 350 million AUD annually; and
·L-T Trading is a wholly owned subsidiary company of L-Tag. L-T Trading was established for the purposes of entering into the subject financial transaction for the importation of cement with SA Cement in order to ‘access the export price’. Both alleged contracts were to be entered into by L-Tag on behalf of L-T Trading.[176]
[176] L –T Trading was incorporated in Hong Kong on 3 July 2008.
It is certainly arguable that Storah had authority, as Managing Director of L-Tag and sole director and shareholder of L-T Trading, to enter into a binding contract for the supply of cement in either quantity alleged.
I am not convinced, however, in the absence of any formal agreements or oral evidence from Lamsan or others, that the Plaintiffs have discharged their onus of proof, in relation to Gross’ authority to act as agent for L-Tag in negotiations and to the entering a contract for L-Tag.
The same can be said for the authority for L-Tag to promote a contract on behalf of an unregistered Hong Kong entity, and in fact, the fact that the minutes of L-Tag’s verbal resolution to proceed with the deal with SA Cement were called for and not produced, is telling against the Plaintiffs.
Accordingly, I cannot find that Gross had authority to act as agent as pleaded by the Plaintiffs, nor did L-Tag have authority to promote L-T Trading.
What is the Proper Law of the Contract?
In their closing outline of argument, the Plaintiffs raised the issue of the system of law to be applied. They were reluctant to tie their colours to the mast, stating that:
[41] If it appears to be the case of a company to be formed in Hong Kong represented the common agreement of the parties then there is no relevant difference between the laws and the Plaintiffs accept SA Cements position as pleaded at [25.2], namely that the parties have submitted to the laws of South Australia.
[42] However, if there is a genuine dispute about whether the use of a company to be formed in Hong Kong once the Supply Agreement had been signed and then Hong Kong law is slightly more favourable to the plaintiffs in that the first plaintiff has equal standing to sue and be sued.
The Plaintiffs provided section 32 of the ‘Hong Kong Companies Ordinance’ (discussed above) relating specifically to pre-registration contracts.
The Plaintiffs proffered no legal argument as to what would be the proper selection at law.
SA Cement on the other hand contends that the correct law to be applied in this case is the law of South Australia. It provided comprehensive legal authority for this selection.[177]
[177] Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 at 65; Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 604; Kahler v Midland Bank Ltd [1950] AC 24 at 42; Re Helbert Wagg & Co [1956] Ch 323 at 341; Bonython v Commonwealth [1951] AC 201 at 219; United Railways of the Havana and Regla Warehouses Ltd [1960] Ch 52 at 91; Regie Nationale des Usines Renault SA v Zhang (2002) 201 CLR 491 at [72]; Lazard Bros & Co v Midland Bank Ltd [1933] AC 289 at 298.
As discussed earlier, this ‘choice of law’ selection is an entirely separate issue, governed by entirely separate legal principles to both the selection of the proper law dictating which ‘pre-registration’ laws are applicable and, and the proper law used for determining whether or not there had been a validly formed contract.
The particular ‘choice of law’ is relevant to determine the validity and enforceability of the contract and its terms and the extent of the rights and obligations which are not expressly set out.
On this basis, the determination of this issue is in effect now redundant, given that:
(a)Both parties have conceded the only relevant difference between the laws of Hong Kong and the laws of South Australia are those relating to pre-registration, which have been discussed and decided above; and
(b)That the primary issue in contention in this matter is whether a valid pre-registration contract has been formed, both of which matters are discussed in detail above.
The general rule is the proper law of the contract is the system of law which the parties express (as is the case here) or impliedly choose as the law governing their contract or, in the absence of such a choice, the ‘system of law with which the contract has its closest and most real connection’.[178]
[178] Bonython v Commonwealth (1950) 81CLR 486 at 498; Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 141 ALR 374 at 385.
The March Contract under which the ‘trial shipment’ for 19 000 tonnes of Cement is to operate stipulates ‘This Contract shall be governed by and construed in accordance with the laws of Hong Kong’.[179] This is what is referred to as an ‘express choice of law’ clause.
[179] P2 - Sale and Purchase Contract Article 22 at 642.
When it comes to an express choice of law, the courts will tend to respect the parties choices as to law to determine their dispute and apply the chosen law as the proper law of the contract.[180] It is imperative that parties are held to the consequences of foreign jurisdiction clauses agreed to as part of a contract, absent strong reasons to the contrary, since it is the policy of the law that parties that have made a bargain, should keep it.[181]
[180] Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277.
[181] Sir Owen Dixon in Huddart Parker Ltd v Ship “Mill Hill” (1950) 81 CLR 502; [1950] ALR 918 at 508-509 (CLR) as cited in Joshua Thomson, Commercial Contract Clauses Principles and Interpretation (Thomson Law Book Co 2008) 106101 [85050].
Importantly, in this case the country whose legal system has been selected need not have any factual connection with the parties or the subject matter of the contract.[182]
[182] BHP Petroleum Pty Ltd v Oil Basins Ltd [1985].
On this basis, the laws of Hong Kong apply, to the extent they materially differ. As the only law of Hong Kong provided is Ordinance 32A, already discussed, I assume that the other relevant laws of Hong Kong do not materially differ. This point is largely moot, however, as there are no remaining issues of law to be decided, given the formation of the contract was decided applying South Australian law due to its objective connection and the issue of pre-incorporation was decided applying Hong Kong law, as it was the country in which the pre-incorporation entity was incorporated.
What are the Damages?
In the event that I am wrong and there exists a contract, then I turn my mind to the assessment of damages.
The Plaintiffs engaged a chartered accountant, Michael Michaels to prepare a report quantifying the loss sustained by L-T Trading as a result of a cancellation of the Sale and Purchase Contract (the March Contract) by SA Cement, or alternatively the loss sustained by L-T Trading pursuant to the cancellation of the purchase order of 19 000 tonnes of cement.[183]
[183] Economic Loss Calculation prepared by Michaels at P2 at 815.
In writing this report, Michaels relied on various primary documentation, including the March 2007 contract, the e-mail confirming the purchase order of 12 April 2007 from MSP Group, the Statement of Claim and Defence.[184]
[184] Ibid.
He also relied on other secondary sources including Australia’s Cement Industry Report – ‘Punching Above Its Weight 2006-2012’, AdBri’s Annual Report for the year ended 31 December 2006 and the Reserve Bank of Australia Exchange Rates.[185]
[185] Ibid at P2 at 816.
Essentially, the report was prepared through an arithmetic calculation based on the essential details contained in the supply contract being:
1.    The Product defined as:
(a)Ordinary Portland Cement Type I
(b)Portland Cement Type III
2.    Each Shipment to SA Cement Supply Pty Ltd was to comprise of the following:
(a)Ordinary Portland Cement Type I for the quantity of 14 000 metric tonnes +/- 10% at SA Cement Supply Pty Ltd’s option. The price Free on Board (“FOB”) was 51 USD;
(b)Portland Cement Type III for the quantity of 5 000 metric tonnes +/- 10% at SA Cement Supply Pty Ltd’s option. The price FOB was 57 USD per metric tonne.
3.   The total quantity covered by the contract was to be 90 000 metric tonnes +/- 10% at SA Cement Supply Pty Ltd’s option with the size of each shipment being 18 000 metric tonnes +/- 10% at SA Cement’s option.
Michaels assumed that L-T Trading was in a position to acquire stock to satisfy the order.
He revised his original calculations as to the Plaintiffs’ loss based a price increase from 1 January 2008 for both Type I (46 USD to 50 USD per tonne) and Type III cement (fixed price of 52.50 USD per tonne).[186]
[186] T 116 lines 14-27.
On the basis of the above, his ultimate conclusion, based on the difference between the cost that L-T Trading would purchase the cement for, and the revenue to be raised was that L-T Trading’s economic loss from the cancellation of the March Contract is approximately $414 914.[187]
[187] T 116 lines 3-29.
Michaels’ revised calculations were tendered in evidence.[188]
[188] P5.
Later, in the evidence there arose an issue relating to the additional costs of the bags which resulted in the loss having to be adjusted to an agreed amount of $380 863.[189]
[189] See amended Economic Loss Calculation tendered during the Plaintiffs’ closing argument.
He calculated the economic loss for the cancellation of the 19 000 tonne shipment as $120 773.[190] This figure was later also adjusted in keeping with the additional costs associated with the bags to a total sum of $113 331.[191]
[190] See P5.
[191] Amended Economic Loss Calculation tendered during the Plaintiffs’ closing argument.
SA Cement argued during its closing address that in terms of L-T Trading suffering a ‘loss’, that at the time when the contract was (if in fact there was one) due to be performed, L-T Trading had not been registered, and therefore an entity which does not exist cannot have an expectation of anything. It submitted that the evidence of Storah under cross-examination was that no money was expended by anyone, and thus the only loss is expectation loss by a company which, at the time the contract was due to be performed, did not exist.
SA Cement also provided an expert report from Thomas Douglas (Douglas) who is the Executive General Manager (Marketing and Sales) at AdBri and has been the director of two major joint venture cement enterprises for the past 12 years.[192] He also has various other relevant involvements within the cement industry.[193]
[192] Economic Loss Calculation at P2 at 840.
[193] Ibid.
He was engaged by SA Cement to provide an opinion on the profit margins traders, such as what the Plaintiffs, could reasonably expect to receive on the type of transaction being negotiated between the Plaintiffs and SA Cement; whether or not Siam Cement, a company registered in Thailand, would have concluded a contract with L-Tag (a company registered in Hong Kong) in the terms of the undated draft and also to comment on Michaels’ expert report.
In preparing his report he was provided with a draft copy of the March Contract, the report prepared by Michaels, and a series of correspondence between Siam Cement and L-Tag between January and April 2007.
With respect to damages, he criticised the report of Michaels, stating that the margins being sought by the Plaintiffs for the two different types of cement of 5 USD per tonne and 6.50 USD per tonne respectively, were unreasonable for a number of reasons[194] and that the profit margin on traded products would be better served by reviewing accepted international practices being between 1 USD per tonne (Type I) and 2 USD per tonne (special cements) and applying this to the volumes involved.
[194] Ibid at P2 at 839.
The evidence of Douglas was simply generic and based on what he considered to be the appropriate trading margins on large volumes of cement as he understood were the practices of the Asian trade houses.
Further, I am mindful that given his position with AdBri and its relationship with SA Cement, that there exists a lack of objectivity on his part. I have taken this into account in assessing his evidence.[195]
[195] Ananda v Tomar (No 4) (2012) 291 ALR 292 at [52].
As the Plaintiffs put it, this was a ‘sensational deal’, which they brokered and which SA Cement, through Douglas, considered to be unusually high and unrealistic in light of what Douglas knew of the industry. However one describes it, that was the commercial reality achieved, if I accept the evidence of the Plaintiffs on this topic.
I am prepared to accept their evidence and so rely on the report and arithmetic calculations of Michaels. The purpose of damages is to put the party, as best as possible, in the position it would have been had the contract been performed.
Accepting the cement could be sourced at the prices claimed by the Plaintiffs, as I have, then it follows there is no reason, in logic, not to accept the claimed loss.
Orders
The Plaintiffs’ actions against SA Cement are dismissed.