Marble & Cement Work Co Pty Ltd v Parchem Construction Products Pty Ltd - [2009] SADC 38

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MARBLE & CEMENT WORK CO PTY LTD v PARCHEM CONSTRUCTION PRODUCTS PTY LTD
[2009] SADC 38
Judgment of His Honour Judge Barrett
22 January 2009
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE
The plaintiff manufacturer of precast concrete panels obtained from the defendant supplier of chemicals a quote for product. The quoted price per drum was discounted on the basis of a bulk order. The plaintiff took delivery of 3 single drums to produce sample panels for the client's selection. After client's selection, the plaintiff placed a bulk order. The defendant foreshadowed, correctly, that it might not be able to supply the full bulk order. Was there a binding agreement consisting of the offer/quote and acceptance/placing of first single drum? Held: no binding agreement as claimed. Agreement only for supply of single drums.
Queensland v JL Holdings Pty Ltd (1996-7) 189 CLR 146; Banque Commercial SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; Jarvis v Pitt (1935) 54 CLR 506; Dare v Pulham (1982) 148 CLR 658, considered.

TRADE AND COMMERCE - TRADE AND COMMERCE GENERALLY - STATUTES RELATING TO MISLEADING OR DECEPTIVE CONDUCT IN TRADE - SOUTH AUSTRALIA
When plaintiff placed orders for single drums of product defendant had not disclosed that it may not be able to supply all of a bulk order - whether defendant had misrepresented by silence that it was able to supply a bulk order. No suggestion of fraud. Held: no misrepresentation by silence.
Misrepresentations Act (SA) 1972; Trade Practices Act 1974; Fair Trading Act (SA) 1987, referred to.
Gould v Vaggelas (1984-5) 157 CLR 215 at 236; Misrepresentation and the Legislative Connection by Malcolm Robertson QC, considered.

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DUTY OF CARE - RELATIONSHIP OF PROXIMITY
Plaintiff was a prospective purchaser of defendant's product - whether there arose an obligation in defendant to make inquiry and disclose that it may not be able to supply all of a bulk order when it had only orders for single units. Held: Defendant not negligent in not making inquiry.
Disclosure Obligations in Business Relationships ed. Tina Cockburn and Leanne Wiseman see chapter entitled Good Faith and Non-disclosure by Professor Finn, considered.

MARBLE & CEMENT WORK CO PTY LTD v PARCHEM CONSTRUCTION PRODUCTS PTY LTD
[2009] SADC 38

This case concerns the manufacture of precast concrete panels for the walls of two stages of the building of the TAFE Cooking School at Regency Park in 2000-2001. The plaintiff is a manufacturer of the panels and the defendant is the manufacturer and supplier of chemicals that may be used to make the panels. The plaintiff purchased stocks of one of the defendant’s chemicals for the production of its panels, but the defendant ran out of supplies. The plaintiff had to make the remainder of the panels by an alternative method. It claims from the defendant the financial losses it says it suffered as a result of the defendant’s failure to provide sufficient quantities of the chemical to complete the job. The defendant denies liability.
The Issues
1. The plaintiff sues the defendant under three heads.
(a) In contract – the plaintiff alleges that there was a contract between it and the defendant in which there was an implied term that the defendant would supply all of the chemicals needed to complete the plaintiff’s job. In breach of that implied term, the defendant did not supply all of the required chemical. Was there a contract and was there a breach?
(b) The plaintiff alleges that the defendant misrepresented to it that the defendant would supply all of the chemical needed to complete the job.
Was there a misrepresentation by the defendant? If there was a misrepresentation, did the plaintiff rely upon it?
(3) Tort – the plaintiff alleges that the defendant had a duty of care towards it. More specifically the defendant had a duty to disclose to the plaintiff that it had limited supplies of the required chemical and might not, or would not, be able to meet the plaintiff’s needs. In breach of that duty, the defendant said nothing about the finite supplies until the plaintiff had committed itself to manufacturing panels with the relevant chemical.
Was there a duty on the defendant to disclose to the plaintiff its limited supplies of the chemical? Was there a failure to disclose?
2. If the defendant is found liable to the plaintiff what losses did the defendant suffer?
The trial
The plaintiff called eight witnesses. Three of the witnesses were from the plaintiff’s factory. One was from the builder who ordered the panels. Those witnesses were:
i)      Mr Andolfatto, the managing director of the plaintiff
ii)     Mr Beltrame, the yard foreman of the plaintiff
iii)    Mr Miller, a technical consultant with the plaintiff
iv)     Mr Logman, the project manager employed by the builders.
There was essentially no challenge to the truthfulness of these witnesses nor to their experience in the manufacture of precast concrete panels. It was accepted that the plaintiff is a prominent manufacturer of such panels in SA. The same can be said of the two other witnesses called by the plaintiff –
v)     Brian Floreani and
vi)     Leo Floreani.
These witness were prominent competitors of the plaintiff in the manufacturer of panels. They jointly prepared a report on aspects of the precast concrete industry.
The two final witnesses are the two accountants who gave evidence in support of the claim for damages. They are:
vii)    Mr Ellery and
viii)   Mr Lindquist.
The defendant did not give evidence. The defence called an accountant, Mr Holmes, and an expert in concreting, Mr Coomb.
How the plaintiff’s claim arises
The plaintiff’s claim arises from its being forced to manufacture about half of the precast concrete wall panels for the Regency Park Cooking School by an alternative method to that planned and quoted for. The plaintiff says that as a consequence of having to change manufacturing methods it suffered loss. It suffered loss because:
1. There were costs in changing from one method to another
2. The second method was more time consuming and costly
3.The second method was less than ideal. The panels did not have the same uniform finish as the ones made by the first method.
The two methods of making panels
It is necessary to describe the two methods of manufacture. The outer walls of the building are precast concrete panels. The panels are fixed to frames erected on site. The panels are manufactured at the plaintiff’s premises and transported to the site. The panels take the form of moulds made by the plaintiff. There were 8 different sized moulds for the Regency Park job. There are two ways to make the panels – the face up method and the face down method. The face up method has been largely replaced by the face down method. It seems to be agreed in the industry that the face down method provides a more uniform finish.
Face down method
The face down method involves applying first into the mould a release agent so that the ingredients of the panel that go into the mould do not stick to it. That chemical release agent is supplied by the defendants but is not the subject of any dispute in this trial. (The witness Mr Beltrame referred to problems with the release agent but it is agreed by both parties that there were no problems with that chemical. He is taken to mean retardant.)
The next step is to brush the inside of the mould with a retarder or retardant (I will use the latter expression). This is the chemical that is the subject of the dispute. The chemical operates to slow to varying degrees the curing of the concrete. After the retardant is applied to the mould, the concrete is poured in. The concrete is a mixture of cement, sand and aggregate. Aggregate consists of the very small pebbles or shells that give the surface of the panels their character. The plaintiff stockpiled supplies of sand and aggregate so as to achieve a uniform finish. Once the concrete in the mould has set or cured to a certain stage, the panel is released from the mould and stood upright. High-pressure hoses spray water on to the partly cured face of the panels removing sand. The face of the panels is that which was in contact with the bottom of the mould (hence face down). The type of retardant used in the mould determines the depth of aggregate that remains exposed after the high pressure spraying. To put it another way the retardant determines the extent of the setting of the concrete and hence how much sand will be removed by the high-pressure water. There were three types of retardant that were manufactured by the defendant. They became relevant in the trial. The three types of retardant are described in terms of colours, although I am not sure how they come to be so described. The yellow retardant results in the quickest setting, and, after the spraying, exposes the least aggregate. It allows the removal of the least sand by the high-pressure water. The end result is the smoothest of the three surfaces with the least depth of aggregate exposed. The yellow retarded the curing process the least. The panels made with the yellow retardant are nearest to being set or cured and so the water washes away the least sand.
The green retardant is the middle of the three.
The brown retardant exposes the most aggregate. It allows the removal of the most sand. The finish thus achieved is the roughest of the three with the greatest depth of aggregate exposed. The brown retarded the curing the most so that the water washes away the most sand. The panel made with the brown retardant is set or cured the least of the three by the time the water is applied to it.
The finish eventually sought and specified by the architect, and hence the builder, was that achieved by using the middle retardant – the green. That retardant has been described as preco-green, the word “preco” being common to both of the other retardants as well.
Following the specifications from the architect and the builder the plaintiff wanted to manufacture the panels for the job at Regency Park with the defendant’s preco-green retardant. At least for the scale of building work undertaken by the plaintiff, the preco-green chemical was sold by the defendants in 20 litre drums.
Face up method
The face up method does not use retardant at all. A release agent is first put into the mould in the same way as is done with the face down method. The concrete is then poured into the mould. The faces of these panels are uppermost (hence face up). They are manually trowelled by skilled employees. When the panels have set or cured they are released from the mould. This method is a dying art and a decreasing number of concrete workers have the skill to carry out this sort of work. The plaintiff did have some older workers who could, and in the event, did, produce panels by the face up method. The smoothness and uniformity of the panels produced in this way relies on the skill of the workers in manually trowelling the face. With the face down method the finish is achieved by the exact fit between the concrete and the mould.
The course of making the panels
I will return shortly to a closer analysis of how the ordering of the retardant and manufacture of the panels proceeded but what happened can be described generally in these terms. The plaintiff ordered from the defendant single tins of brown, green and yellow retardant so the client could select the desired finish. The “green finish” was selected. Thereupon the plaintiff sought to order the first of the green retardant to begin production. It expected to be able to order more as the job proceeded. It did not propose to order for immediate delivery all of the retardant it anticipated needing for the whole project. In a not dissimilar way it did not order from Adelaide Brighton Cement all of the cement needed for the whole project. The plaintiff expected that it would be able to obtain its supplies of cement as and when it needed them. I do not necessarily mean by that that the plaintiff’s experience with the supplies of cement can be treated legally in the same way as with the defendant. That will have to be the subject of further consideration, but the plaintiff proposed purchasing its supply of the retardant in a similar way to that regarding the supply of cement. It did not propose stockpiling its retardant.
The position was different with the sand and aggregate it needed. The plaintiff knew it would have to purchase and stockpile all the sand and aggregate it needed because it had to have an homogenous supply to ensure a uniform colour and texture.
Shortly after the architect approved a prototype panel using the green retardant the defendant told the plaintiff that it had finite stocks of the green retardant and may have difficulties sourcing sufficient for the plaintiff’s needs. That was a surprise to the plaintiff. The plaintiff then purchased all the available stocks of the green retardant and made as many panels as it could. Both parties investigated further sources of green retardant, but without success. As it turned out there were no other sources of the green retardant. The plaintiff experimented with the brown and the yellow retardants and with thinners to see if it could achieve a result satisfactory to the client and its architect and builder. In the event the results of the experiments were not acceptable to the client. The plaintiff determined that the only alternative was to use the face up method. It had some employees who could manufacture panels using this method. About half of the panels were made with the green retardant and the balance were made by the face up method. The client (although not the architect) accepted all the panels and paid for them. The job was completed on time. The plaintiff says that it nevertheless suffered financial loss by being forced to proceed using the face up method.
The claim in contract
The plaintiff says that there was a contract between the parties for the sale and supply of retardant sufficient to carry out its job. In breach of that contract the defendant failed to supply the entire quantity required.
Formation of a contract
To conclude a contract there must be offer and acceptance. The plaintiff’s submission is that an offer is an expression of willingness to contract on certain terms, made with the intention that the agreement should be binding as soon as the offer is accepted by the person to whom it is addressed. Mr Hoile, for the defendant, did not dispute the accuracy of that submission and I accept it. I also accept Mr Hoile’s submission that the question of whether there was a concluded agreement will be answered by detailed findings of fact about the communications between the plaintiff and the defendant prior to 9 October 2000, although, necessarily, communications after that date will bear on those findings of fact. The 9 October 2000 is the date on which the defendant told the plaintiff that it might have difficulties in supplying the full quantity of retardant. I will set out the relevant communications and the dates upon which they occurred. I will then analyse the critical communications. Before doing that however, I must refer to the Statement of Claim.
Statement of Claim
Mr Ross-Smith acknowledged in his opening that the plaintiff was not in a position to prove an express term of its contract with the defendant as alleged in paragraph 19 of the Statement of Claim. That paragraph reads:
It was an express term of the Agreement (“the express supply term”) that the defendant had or would have sufficient quantities of Retarder – Green to supply to the plaintiff. 900 litres or thereabouts thereof or 1,800 litres or thereabouts thereof if two coats were used.
Instead he relied on an implied term. Paragraph 20 of the Statement of Claim reads:
20.In the alternative to paragraph 20 (sic) it was an implied term of the Agreement (“the implied supply term”) that the Defendant had or would have sufficient quantities of Retarder - Green to supply to the Plaintiff the quantities.
The plaintiff also pleaded a collateral warranty as follows:
21.In the further alternative to paragraph 20 and 21 [sic] the Defendant warranted (“the collateral warranty”) to the Plaintiff that it had or would have the quantities to supply the Order.
In his address Mr Ross-Smith defined the contract. Paraphrased it is, he submits, an agreement that the defendant would supply to the plaintiff preco retardant sufficient to enable 4,500 square metres of panels, estimated to require 900 litres, but possibly more, the colour to be green or such other colour as the plaintiff might choose, at a price of $222.32 per 20 litre drum (T877).
In his address Mr Ross-Smith first submitted that the offer was the order for brown retardant made by the plaintiff on 31 July. The acceptance by the defendant consisted of the supply of the brown retardant (T883). This is how the offer and acceptance was pleaded in paragraph 18 of the Statement of Claim although there was no reference to brown retardant.
During Mr Hoiles’s address (T956-957) Mr Ross-Smith sought to amend paragraph 18. I set out the original paragraph 18 with the words sought to be deleted underlined and the proposed amendments in italics:
18.The giving of the Order/a quote on 31 July 2000 and the acceptance of the Order/placing an order for product constitutes an agreement (“the Agreement”) between the Plaintiff as purchaser and the Defendant as supplier of sufficient Retarder – Green for the manufacture by the Plaintiff of the panels with a surface area of 4,500 square metres or thereabouts at the ex-warehouse price of $222.32 for each 20 litre unit size the product to be supplied on specific orders placed in accordance with the Plaintiff’s production schedule for the Regency TAFE project (T957).
The application to amend was opposed and argument was deferred (see Addresses T1097 to T1101). The objection to the amendment is that it raises an entirely new contract. I move to rule on the application.
Application to amend Statement of Claim
It is true as Mr Hoile submits, that the proposed amendment changes the bases for the contractual claim. The essential elements of the alleged contract are changed. The offer is no longer the order placed by the plaintiff but is instead the quote provided on 31 July 2000 by the defendant. The acceptance is no longer the acceptance by the defendant of the plaintiff’s order but becomes the plaintiff’s order (see later discussion about which order). The amendment is sought after the evidence is closed. It was sought during counsels’ addresses. Mr Hoile cites authoritative support[1] for the proposition “pleadings define and limit the issues to be determined at trial and put each party on notice of the case it will have to meet” (see defendant’s outline paragraph 11). Pleadings are designed to achieve procedural fairness. The cases there cited dealt with relief granted outside the purview of the pleadings or the particulars of damage. The cases do not deal principally with the criteria for the amendment of pleadings. Another case cited by Mr Hoile does bear on the criteria for amendment. Although Queensland v JL Holdings Pty Ltd (1996-7) 189 CLR 146 dealt with a pre-trial application for amendment, that case is authority for the proposition that so long as it is possible to avoid prejudice to the other side, a party should not be prevented from litigating a fairly arguable issue.
[1] Banque Commercial SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287 per Mason CJ and Gaudron J and 288 per Brennon J – see also Dare v Pulham(1982) 148 CLR 658

The issues for consideration on the application to amend in this case are therefore the arguability of the proposed amendment and the possible prejudice to the defendant. I will not dwell on the arguability point. In my view the amendment recasts the elements of the alleged contract in an arguable fashion. So far as prejudice is concerned, I see no reliance by the plaintiff on evidence not already before the court. Mr Hoile submitted that the defence was denied the opportunity to proof Mr Gebethner, Darren the storeman and possibly others (T1100-1101). In my view, the need to proof these witnesses is no greater in the light of the proposed amendments than it was on the plaintiff’s case as originally pleaded. I find there will be no forensic prejudice suffered by the defendant if I allow the amendments, aside possibly from the question of costs, which can be dealt with in the usual way. I allow the amendment to paragraph 18 of the Statement of Claim.
Communications between the parties
20 July 2000
Mr Miller, the plaintiff’s quantity surveyor, submitted the tender for the job to the builders. The tender was for $1,880,760 (Exhibit P1 page 27). At this stage no panel had been produced for approval by the client. That did not happen until 29 September.
31 July 2000
There were several communications on this day.
·Mr Miller contacted the defendant by telephone enquiring about the supply and cost of retardant. It is not clear to whom he spoke. It was not the state manager Mr Gebethner.
Mr Miller’s evidence of that phone call was as follows:
… Well, the enquiry was obviously – We had won the job at this stage and it was a fairly large job and I wanted to get hold of a costing, the best price I could for that size of job and also to get a hold of, in particular, the first drum so that we could get the sample process going. So that was the lines of the phone call and I just rang him to explain this is the situation, we have this large job. I had two or three queries myself which was what coverage per … litre do we get in square metres and whether we need the primer; whether we needed one or two coats and I also asked him to send me data sheets that I could have on hand in case the architect or builder wanted to look at what was involved with the product. (T475)
Although Mr Miller said in his evidence that his enquiry was made after the plaintiff had “won the job” (T475) I do not think that can be accurate, at least as far as formal acceptance of the tender was concerned. The tender was not accepted until 5 August 2000.
There was some discussion during the phone call about what colour retardant might be best for the job, and brown was settled on as possibly being the most appropriate.
·Mr Miller sent the defendant a fax which, materially, read as follows:
Could you please fax me any data sheets – work method details etc on preco-hi-V (brown) retarder, plus a cost to use for approx. 4,500 square metres of panel. 5 square metres per square litre = 900 litres? primer?? possibly double if we need (2) coats. (Exhibit P1 page 28)
·Mr Miller received a fax from Mr David Gebethner, the state manager of the defendant. In effect the fax provided a quote for the supply of preco-brown retardant. The quote was prefaced by this passage:
Prices for the product are as follows, please note they are special project prices given the volume required.
The quote for the brown retardant was $222.32 per 20 litre drum. The quote attached some data sheets as requested (Exhibit P1 pages 29-31).
The plaintiff says this fax is the offer by the defendant to enter a binding agreement.
5 August 2000
The plaintiff’s tender was accepted by the builder.
Between 31 July and 15 August
The plaintiff orders one x 20 litre drum of brown retardant (T479-480). The plaintiff says that, on one construction of its case, this is an acceptance of the offer made by the defendant on 31 July. The single drum was to be used to produce a sample panel for the client to consider.
15 August 2000
Collection/delivery of 20 litres of brown retardant (Exhibit P1 page 35).
Between 15 and 25 August
The architect rejected the panel produced with the brown retardant. He said it was “too deep” – meaning that too much of the aggregate was exposed. The plaintiff decided to see if the green might produce an acceptable result. Mr Miller said he spoke to someone called “Darren” from the defendant about the green, and in due course collected a drum of green retardant from the defendant.
25 August 2000
Colletion/delivery of 20 litres of green retardant (Exhibit P1 page 38).
End of August
An end-of-month invoice was rendered by the defendant to the plaintiff which included the two 20 litre drums of brown and green retardant (Exhibit P1 page 45). The price appearing on the end-of-month statement showed the price per unit as $349.99, as had the individual invoices rendered at the time of each delivery (Exhibit P1 pages 35 and 38 respectively). The plaintiff’s managing director, Mr Andolfatto, said that upon receipt of the monthly statement he rang Mr Gebethner complaining about what he saw as the overcharging of those quantities. He referred Mr Gebethner to the facsimile dated 31 July (Exhibit P1 page 30) quoting $222.32 per 20 litre drum. He said Mr Gebethner suggested he pay the account but that there would be a later adjustment to reflect the price earlier quoted. The plaintiff points to that telephone call to support the proposition that it had a contract with the defendant to supply all the retardant needed for the whole project at the reduced bulk price. It is important to note that the first stage of the approval process, ie the approval by the architect of a small sample panel, had not yet taken place.
4 September 2000
Mr Miller sent a fax with attention to Mr Gebethner and Darren seeking advice as to when he might obtain a drum of yellow retardant because he hoped that day to make a sample using the yellow retardant. In his fax he further said that he was not sure which colour would be used in the job. He asked whether the yellow retardant would be the same price as the brown which had already quoted for on 31 July The fax was divided into two. The query about when the yellow retardant was made attention “Darren” and the query about the cost of the yellow retardant was made attention “Dave” (meaning Mr Gebethner) (Exhibit P1 page 56). Although the fax ended “Please confirm” there is no evidence of any confirmation.
Collection/delivery of 20 litres of yellow retardant (Exhibit P1 page 57).
27 September 2000
The small sample panel manufactured with the green retardant was approved (Exhibit P1 page 63). This was the first stage of the approval. The second stage was the production and approval of a prototype panel using the green retardant.
29 September 2000
The builder/architect gave approval for the proto type panel manufactured with the green retardant (Exhibit P1 page 65). Only on this day did the plaintiff know that the large quantity of retardant which it required would be the green retardant. There is no evidence of any communication between the parties between 29 September and 9 October.
9 October 2000
There were several communications on this day.
Mr Andolfatto spoke to Mr Gebethner on the telephone. His evidence of that telephone call is as follows:
From what I recall, it was me asking to order a quantity of preco-green, I can’t remember. It could be like 20 drums or – because we were in a serious state of production and his comment then was, at that stage and I felt that he was surprised himself, saying that they may not be able to produce all of this, but they are searching for materials. They have located 17 or 18 drums that is readily available and they are looking at searching for raw materials so that more can be produced (T160).
Mr Andolfatto said that he immediately placed an order for whatever supplies of the green retardant the defendant could lay its hands on. Mr Andolfatto sent a fax placing that order (Exhibit P1 page 71A). Mr Andolfatto said that at that stage he did not know how much of the retardant they would need for the whole job (T160-161).
Mr Gebethner sent a fax to the plaintiff. It was addressed to “Leo” (meaning Mr Andolfatto) at the top of the fax but in the text it was addressed “Dear Bob” (meaning Mr Miller). The fax refers to the telephone discussion regarding prices of the green retardant. There are three pertinent passages of that fax as follows:
·Prices for the product are as follows, please note they are special project prices given the volume required.
In light of our discussions regarding this matter, I have since been notified by our manufacturing facility that the major raw material component for the preco Hi V (green) has been withdrawn from the market.
This places questions on our ability to supply the entire order to your organisation. However we have currently in stock in our central warehouse 19 x 20 ltr units which we would be pleased to quit at a substantial discount.
·There then followed a quote for the green retardant of $153.64 per drum. There is one further pertinent paragraph after the quote. It is as follows:
·I do apologise for inconvenience that this may cause your organisation, but as you can see the situation has been taken out of our hands until we can source a new supplier for the raw material (Exhibit P1 page 72).
Thereafter invoices show that there were further deliveries of drums of green retardant on the following dates:
11 October 2 drums (Exhibit P1 page 74)
17 October 9 drums (Exhibit P1 page 76)
16 November 8 drums (Exhibit P1 page 78).
1 December 2000
On or about 1 December Mr Andolfatto had spoken to a Mr John Martin from the head office of the defendant in Sydney and was apparently told by him that there would be some further supplies of the green retardant. Mr Gebethner in Adelaide, must have learnt of that communication because he wrote by fax on 1 December to the plaintiff saying that that was an error. He said in the fax that the defendant presently had no supply of the green retardant but it had enough raw materials to manufacture “2 by 200 litres units of preco High V green”. He went on to say that once that manufacture had taken place there would be no further supply of the preco green retardant (Exhibit P1 page 84).
7 December 2000
Delivery of 12 drums of brown retardant (Exhibit P1 page 86). The plaintiff was going to see if he could achieve a satisfactory result with the brown retardant given that there were finite supplies of green.
9 December 2000
This is the date upon which the building schedule required the plaintiff to deliver the first of their panels to the building site. The schedule changed from time to time but as at 9 October, the first delivery was programmed to take place on 9 December. The plaintiff’s witness gave evidence that generally it took about a month to produce a panel ie from the time manufacture began until the time it had fully cured. Mr Andolfatto said that the curing process might not take as long but generally it was thought that the whole process would take a month. That would suggest that work to produce panels due to be installed on 9 December would have to begin to be manufactured on about 9 November ie a month after the defendant first indicated there might be problems with supplying the required amount of the green retardant.
4 January 2001
Mr Gebethner wrote to the plaintiff saying that the raw material referred to in the fax of 1 December had been used to produce green retardant but the product was of such poor quality that they were not willing to release it for sale. He said:
The preco High V has officially been withdrawn from the market.
He added:
In light of this situation and discussions regarding this matter, I have notified our manufacturing facility of your predicament with the only outcome being that we may be able, or you may be able to source the product from another supplier/manufacturer.
He went on to apologise about the inconvenience to the plaintiff (Exhibit P1 page 100‑101).
19 January 2001
Delivery of water based retardant (Exhibit P1 page 102). This was to be used to experiment with other retardants. It was not successful.
28 February 2001
There was a site meeting at which the plaintiff told the builder that it was unable to manufacture any more panels by the face down method and henceforth they would produce panels by the face up method. It appears that the architect was not satisfied with the panels produced by the face up manner but the client agreed to accept panels manufactured in that way. In due course, the rest of the panels, being about half of them, were made by the face up method. They were accepted by the client, installed and paid for.
The defendant made efforts between 9 October 2000 and 4 January 2001 to locate further sources of the green retardant but was unsuccessful. The plaintiff experimented with both the brown and the yellow retardants and a water based retardant. It tried other ways of producing the panels but none was acceptable to the client. As I have already indicated, in the end the face up method was accepted by the client, effectively overruling the architect who had said it was, in his view, unsatisfactory. The balance of the panels were made by the face up method. They were erected without the plaintiff being required to pay the client any penalty for lateness.
Analysis of communications - preliminary
I preface my analysis of the evidence by the observation that while there was evidence from both Mr Andolfatto and Mr Miller that the plaintiff had purchased retardants from the defendant for earlier building jobs, there was no evidence of any established usage or practice between the parties. There was no evidence of any prior understandings between the parties about how orders were placed. The only evidence I did hear of this sort was from Mr Andolfatto who said that it was not the plaintiff’s practice to purchase all of its retardant before manufacture. It purchased retardant as needed during the project. As I have earlier mentioned that practice was like its practice with the purchase of cement and unlike its practice with the purchase of sand and aggregate.
The other preliminary point I make concerns the credibility of the lay witnesses called by the plaintiff. I find that all of the plaintiff’s witnesses were completely honest and generally reliable. I have identified, or will identify, the few occasions on which I think that any one of them might be mistaken as to a fact.
Offer and acceptance – the plaintiff’s position
In its amended paragraph 18, the plaintiff asserts that the defendant made an offer on 31 July 2000 by the tender of its quote. The offer is said to be the supply to the plaintiff of sufficient green retardant to manufacture all its panels at $222.32 per unit. In paragraph 20 of its Statement of Claim the plaintiff asserts that the defendant implied that it had sufficient supplies to meet the plaintiff’s needs. Even in its amended paragraph 18 the plaintiff is somewhat elliptical about what is the order which constitutes the acceptance of the plaintiff’s offer. I will return to that topic shortly.
Offer and acceptance – the defendant’s position
The defendant disputes that on 31 July 2000 it offered to supply the plaintiff the full quantity of retardant. It submits that the quote is no more than an invitation to treat (defendant’s address T967). The defendant did not know at that stage what colour retardant the plaintiff might require. The plaintiff itself did not know. The plaintiff did not know until at least 27 September, when the architect approved the small panel made with the green retardant. It did not really know until two days later. On 29 September the architect approved the prototype made with the green retardant. In these circumstances the defendant says, that the parties were not ad idem as to the nature and quantity of the product the subject of the alleged offer on 31 July. That being so, there could not be, and there was not, an offer at that time.
Instead there were discrete verbal contracts for the supply of retardant. There were contracts for the supply of what I might describe as the pre-approval single unit orders of brown, green and yellow retardants. Those orders were made by Mr Miller to an employee of the defendant, possibly Darren the storeman. The single drums of those colours were delivered on 15 August, 25 August and 4 September respectively.
Then there was what I would describe as the bulk order for green retardant. It was made after approval by the architect. Mr Andolfatto rang Mr Gebethner on 9 October. He placed the bulk order. When he did so Mr Gebethner said that there might be problems with the supply of green. Mr Andolfatto ordered effectively all green retardant that the defendant could then lay its hands on. There were subsequently deliveries of 19 drums as follows: 2 drums on 11 October, 9 drums on 17 October and 8 drums on 16 November. That was all the green retardant the plaintiff ever managed to secure although it was some time before the defendant finally said that it could not provide any more.
Thereafter there were deliveries of brown retardant (12 drums on 7 December) and a water-based retardant (19 January 2001) both of which were used to see if alternatives to green might prove satisfactory. They did not.
The decision to proceed by the face up method was made on or shortly before 28 February 2001.
Discussion
The plaintiff’s dilemma in identifying precisely what is the agreement between the parties highlights the fatal flaw in its case.
Its case in contract as originally pleaded in paragraph 18 of the Statement of Claim was that the agreement was concluded when its order for retardant (the offer) was accepted by the defendant. The preceding paragraphs 10-17 of the Statement of Claim clearly suggest that the order being referred to in paragraph 18 is the bulk order for green retardant. That was made by Mr Andolfatto on 9 October (even though the exact date in October is not specified in paragraph 15).
The plaintiff’s difficulty with the case as originally pleaded is that in the very telephone call Mr Andolfatto made to the defendant on 9 October to place the order, Mr Gebethner said there might be a problem with green retardant. Mr Gebethner plainly gave no undertaking in that phone call to supply sufficient green retardant to complete the job. On the contrary he was foreshadowing a possible inability to do so. The contract case as originally pleaded was doomed to failure.
Early in his address (T883-885) Mr Ross-Smith identified the contract differently. He identified Mr Miller’s fax of 31 July (Exhibit P1 page 28) to the defendant asking for a quote as the offer to treat. He nominated the offer as coming from the defendant in its quote of 31 July, not from the plaintiff by its order. Although the quote was for brown retardant he submitted it should be taken as meaning that the quote was a reduced unit price for the whole job of whichever colour retardant the plaintiff required. When the plaintiff knew what colour it wanted it would specify that colour in a later communication. The unit price should be taken to include such single drums of retardant as the plaintiff might require to prepare samples from which the client would make its selection. The quote should be read as an offer to enter a contract to supply retardant by instalments.
Mr Ross-Smith nominated the acceptance of the offer as the placing of an order by Mr Miller for the single drum of brown retardant somewhere between 31 July and 15 August. 15 August is the date shown on the invoice as being the date of delivery of the drum of brown retardant (Exhibit P1 page 35).
Having identified the contract in these new terms the plaintiff applied to amend paragraph 18 of its Statement of Claim and I have granted that amendment. As I have already noted, the amendment remains elliptical about which of the plaintiff’s orders for product constitutes the acceptance. Reading the amended paragraph 18 in conjunction with the preceding paragraphs one might conclude that the order being referred to is the bulk order for green retardant placed by Mr Andolfatto on 9 October, but in his address Mr Ross-Smith refers to the first order ever placed by the plaintiff ie the order made by Mr Miller for the single drum of brown retardant (T883-885).

While the amendment overcomes the insuperable hurdle I have mentioned, it raises other problems. Recapitulating, on the amended pleading the agreement was for the sale and purchase of retardant at a discounted bulk price per unit sufficient to complete the plaintiff’s job. The agreement is concluded when Mr Miller placed the order with an employee of the defendant for a single drum of brown retardant somewhere between 31 July and 15 August (I think the order is likely to have been placed after 5 August because the plaintiff’s tender for manufacturing the panels was not accepted until 5 August).
The first difficulty with the contract claim as amended is that which is thrown up by the evidence of communications about the price per unit of the retardant. I have no reason to doubt that the defendant was keen to secure a contract with the plaintiff. It was a relatively large order worth approximately $9,000 if only one coat of retardant was applied to each mould and twice that if two coats were applied. The parties had entered contracts for the purchase and supply of retardant on earlier projects. When Mr Miller asked for a quote, Mr Gebethner promptly gave one. He quoted a unit price of $222.32 discounted for “the volume required”. When the quote was given on 31 July the plaintiff’s tender had still not been accepted and accordingly the plaintiff had not yet produced any samples. Accordingly Mr Miller placed only orders for drums of brown and green retardant which were delivered on 15 and 25 August respectively. The invoices for the individual drums and the end of August statement all quoted the full price per unit, not the discounted price (see Exhibit P1 pages 35,38 and 45 respectively).
I reject Mr Hoile’s submission that these invoices are evidence, if not proof, of there being no agreement to supply bulk retardant at a discounted price. In the absence of evidence from the defendant I think it possible that the invoices may have been prepared by an employee or employees of the defendant who were not aware of the state manager’s quoted discounts. The position changes however, when Mr Andolfatto rang Mr Gebethner about the end of month statement. Mr Gebethner did not, as he might have done, tell Mr Andolfatto that he could pay just the discounted price. Instead he told him “to pay [the] account in full and the adjustment would be made later” (T164). In my view that tends to negate an agreement already reached to provide all retardant at the discounted bulk price. It tends to support the inference that the discounted price was one dependent on a bulk order. No bulk order had been made by the end of August. There had only been two orders for single drums with which to make samples for the client’s selection. No selection was made by the client until 27 September. In fact Mr Miller made one further order of a single drum, this time for yellow retardant. That order was made on 4 September. Mr Miller made a subsequent enquiry about whether the price for the yellow drum would be the same as for the other colours, but that request was never answered. Even after the end of August telephone call between Mr Andolfatto and Mr Gebethner the invoice for that drum of yellow retardant, dated 5 September, was also for the full price (Exhibit P1 page 57). No bulk order was made until after the client’s approval on 27 September. Mr Andolfatto made the bulk order on 9 October. In that phone call the defendant told the plaintiff that there may be problems with the supplies. In my view the full price invoice of 5 September for the yellow retardant casts further doubt on there being an earlier agreement to supply all orders for retardant at the discount bulk price. As keen as the defendant might have been to secure a contract for the supply of the plaintiff’s large scale requirements, it was not willing to discount single unit orders. Mr Gebethner did nothing in the phone call with Mr Andolfatto on 9 October to facilitate a discount immediately, and he did nothing to ensure that the later single unit invoice for the yellow retardant was at the reduced price.
The second problem with the amended case in contract relates to the state of mind of the plaintiff. At the time of the alleged acceptance of the offer between 5 and 15 August, can Mr Miller really be taken to have then bound the plaintiff to order in due course the full amount of retardant? True it is that the plaintiff had had its tender for the manufacture of panels accepted by the client. That happened on 5 August. That might have lead the plaintiff to be quite confident that in due course the client would require the plaintiff to produce panels using the face down method. If that was the client’s preferred method (and it was certainly the preferred method in the industry at that time) then the plaintiff would need retardant. It appears that the defendant had a monopoly in supplying the preco type of retardant. It was regarded in the industry as the best. The plaintiff might also have been confident that the client would be happy with one of the colours in the preco range. Notwithstanding the confidence the plaintiff might have had in these matters there was in August no certainty about any one of them.
In those circumstances would the plaintiff really intend to bind itself to a bulk order before those uncertainties were removed? Why would it? At that stage it had no reason (despite what followed) to believe that it had to move quickly to secure an adequate supply. So far as one can see there was no reason to think it could not secure the same bulk discount if it put off binding itself until it could be certain of requiring the whole amount of retardant.
As against these considerations Mr Andolfatto did ring Mr Gebethner at the end of August to remind him of the quote. He did, at least initially, seek to pay only the discounted price. That might be some evidence of an agreement. The truth may however be that Mr Andolfatto had not turned his mind to the consequences of seeking to pay only the discounted price. He might not have turned his mind to the question of whether Mr Miller’s order of the drum of brown retardant had bound his company to order all the retardant, even if events had turned out differently and the client’s selection and specifications did not require the use of retardant from the defendant. Certainly it is not difficult to see what arguments the plaintiff might legitimately have mounted if it learned in September that it did not require retardant from the defendant beyond the single drums it had used to make the samples.
In support of the plaintiff’s claim in contract Mr Ross-Smith relied on the South Australian case of Jarvis v Pitt (1935) 54 CLR 506. That case arose out of the supply by a quarry company (the respondent) of stone for the construction of Bonython Hall at the University of Adelaide. The appellant was a builder who successfully tendered for the construction of the Hall. Mr Ross-Smith draws an analogy with the parties in the present case. He places his client in the position of the unsuccessful builder/appellant in that case. The builder was found to have contracted with the quarry and was therefore liable to pay for all of the stone required for the building. The loss for the builder in that case represents the win for the plaintiff in this case he argued. The relevant facts of that case are as follows:
The University’s architects chose stone from the respondent’s quarry as the stone to be used in the building. The quarry provided the architects with a written quote specifying the volume price for the whole job. The architects asked the quarry to supply each builder/tenderer for the job with a copy of the written quote. Each tenderer, including the appellant, based its tender on that quote for stone. The High Court, and the judge at first instance, found that the quote from the quarry represented the offer by the quarry to contract with the successful tenderer. The appellant’s tender was successful and it began ordering and taking delivery of the respondent’s stone in instalments. A dispute, which is not relevant to this case, arose between the parties and the builder, with the assent of the University, declined to take further deliveries of the respondent’s stone. It obtained supplies of stone elsewhere. The quarry successfully sued the builder for the balance of the stone.
The plaintiff says that the analogy is apt. The defendant made an offer to contract with the plaintiff for the supply of the whole of the plaintiff’s requirements of retardant. Upon acceptance of the offer by the plaintiff, the defendant was bound to supply the whole order. The plaintiff’s acceptance consisted of its placing the order for the single unit of brown retardant. In Jarvis v Pitt it was the builder/acceptor who defaulted. In this case it was the defendant/offeror who defaulted. But that is of no consequence. The contracts were concluded in an analogous manner. I should add that Mr Ross-Smith was very conscious that Jarvis v Pitt should not be regarded as a binding precedent, but it should be seen as an apt case illustration.
Mr Hoile submitted that Jarvis v Pitt was wholly inapt. The critical distinguishing feature between the two cases is that in Jarvis v Pitt the quarry’s quote included detailed reference to the stone selected by the architects as well as to the volume price. The architects directed that all builders should tender on the basis of that quote. Upon the University’s granting the tender to the appellant, the stone and the quantity and the price were clearly identified. Further, the subsequent deliveries of stone to the appellant were in conformity with the quote. Unlike in the present case, the deliveries were of the stone specified for the construction. The stone was not being used for further assessment by the client. There was no ambiguity about what was being delivered.
In my view the two cases are distinguishable on the basis submitted by Mr Hoile. Jarvis v Pitt is not an apt case illustration. In fact it tends to highlight the one off nature of the single unit orders of the three colours of retardant placed by Mr Miller. The bulk order attracting the bulk discount price was placed by Mr Andolfatto after the green retardant had been chosen by the client. The difficulty for the plaintiff is that at the very point that the bulk order was made, the defendant foreshadowed the possibility of being unable to meet it.
Conclusion about contractual claim
Ultimately there was in my view no agreement between the parties for the sale and purchase of the full amount of retardant necessary to complete the plaintiff’s job. There were instead discrete orders for each of the three colours of retardant before approval by the client, and after approval by the client there was a bulk order by the plaintiff for the supply of so much green retardant as the defendant could produce, the defendant having warned the plaintiff that there might be a supply problem. Those orders were met. The defendant further reduced the unit price of the retardant by reason of the inconvenience to which the plaintiff had been put.
Having found there was no contract for the sale and purchase of the bulk retardant there is no need to consider the questions of an implied term or a collateral warranty in the contract that the defendant had in its possession the whole of the retardant that the plaintiff wished to obtain. I dismiss the plaintiff’s claim in contract.
Claim in misrepresentation
I turn to the second head of the plaintiff’s claim. It is that the defendant misrepresented to the plaintiff that it had sufficient quantities of green retardant to fulfil the plaintiff’s needs. The plaintiff alleges the misrepresentation in paragraph 22 of the Statement of Claim as follows:
22.By the communications from the Defendant to the Plaintiff described in paragraphs 5, 7, 8, 10, 11 and 15 of this pleading (“the communications”) the defendant represented (“the representations”) to the plaintiff and that the defendant had or would have the quantities to supply the order.
The communications there referred to are on and before Mr Andolfatto’s telephone call to Mr Gebethner on 9 October. Paragraphs 5, 10 and11 relate to oral statements attributed to the defendant’s employee. Paragraph 7 relates to Mr Gebethner’s faxed quote of 31 July. Paragraphs 8 and 15 do not in fact relate to statements on behalf of the defendant at all. They relate to oral statements by Mr Miller and Mr Andolfatto respectively. Insofar as paragraph 22 alleges a positive misrepresentation by the defendant, the plaintiff does not pursue it. There is no evidence to support such a claim.
Paragraphs 25, 28, 30 and 33 allege four “further representations”. They relate to oral and written communications between the plaintiff and the defendant between 9 October and 1 December. None is pursued by the plaintiff. There is no evidence to support them. Put at its highest for the plaintiff, the defendant expressed hopes of obtaining further supplies but nothing alleged in the evidence could possibly amount to a misrepresentation.
That leaves the claim pursued by the plaintiff that there was misrepresentation by silence on the defendant’s part before 9 October. The misrepresentation is that the defendant had sufficient retardant to meet the plaintiff’s requirements. The claim is pursued under the Misrepresentations Act (SA) 1972 as amended, the Trade Practices Act 1974 as amended and the Fair Trading Act (SA) 1987 as amended. The plaintiff does not, and could not on the evidence, allege that there was a fraudulent misrepresentation. It alleges an innocent misrepresentation. It submits, uncontroversially, that the misrepresentation must induce the plaintiff to alter its position (see article by Malcolm Robertson QC, as he then was, Misrepresentation and the Legislative Connection and the case referred to therein Gould v Vaggelas (1984-85) 157 CLR 215 at 236). In this case the plaintiff proceeded down the track of seeking to manufacture its panels by the face down method using the defendant’s retardant. I have considered the materials in the cases cited by Mr Ross-Smith bearing on the question of silence amounting to a misrepresentation. Assuming for the moment (although I do not find) that the communications from the defendant to the plaintiff before 9 October did amount to a misrepresentation that the defendant was able to fully supply the plaintiff with its needs for retardant, the plaintiff’s reliance on that misrepresentation stops on 9 October. When Mr Andolfatto rang Mr Gebethner on that day to place the bulk order Mr Gebethner immediately told him that there might be a problem with supply. Notwithstanding that information Mr Andolfatto ordered all the green retardant that the defendant could supply and in due course began manufacturing panels with that retardant. In my view he cannot be criticised for having done so, notwithstanding the defendant’s warning about the possibility of problems with supply. The plaintiff did not have many options. It could have immediately abandoned the plan to manufacture using green retardant and determined there and then to proceed by way of the face up method. It did not have to deliver any panels to the site until early December. Panels take about a month to manufacture. It still had about a month to consider his options. The course Mr Andolfatta chose to adopt seems to me perfectly sensible and understandable. He already had the client’s approval for the green/face down panels. He may not have been able to get approval to change to the face up method. (As events turned out, the architect rejected the face up panel, but the client overruled him and accepted them.) The defendant held out some hope that it might be able to obtain enough green retardant. Mr Andolfatto pursued the defendant in the search for more supplies and he made other unsuccessful attempts to secure supplies himself. He experimented with other retardants sold by the defendant but the results were not satisfactory. He only turned to his client in February 2001 with the plan to change to the face up method when all other options had been exhausted. While no criticism of Mr Andolfatto’s actions can be sustained, it is plain that from the moment he placed the bulk order for green retardant on 9 October, he was not relying on any misrepresentation by the defendant that there was an adequate supply. As reasonable as his subsequent actions were, he knew he was taking a risk that there would not be enough green retardant. He was, in my view, not induced by any misrepresentation to take the path he did. An essential ingredient of the case based on misrepresentation is therefore missing. I dismiss the claim based on misrepresentation.
The claim in negligence
In paragraphs 23, 24, 27, 29, 31 and 41 of the Statement of Claim the plaintiff asserts that a duty rested on the defendant to disclose to it its limited supplies of retardant. That duty arose from the communications between the parties (see paragraph 23). In his address Mr Ross-Smith referred to the obligation as having its roots in the Law of Torts. Using the language of that branch of the law Mr Ross-Smith asserted that upon the defendant giving its quote on 31 July there arose a relationship of neighbours between the parties such that the defendant had to meet a standard of care towards the plaintiff. The failure to exercise that standard of care was negligent on the defendant’s part and that founds an action in Tort. Mr Hoile submitted that none of these words appear in the Statement of Claim and the plaintiff cannot rely on this cause of action.
I would not dismiss the plaintiff’s claim on that account. The factual bases for the claim are asserted in the Statement of Claim. The defendant is not prejudiced if the plaintiff later characterises its claim as it now does.
The plaintiff refers to the text Disclosure Obligations in Business Relationships edited by Tina Cockburn and Leanne Wiseman. At paragraph 1.6 the authors cite an analysis written by then Professor Paul Finn entitled Good Faith and Non-disclosure. Professor Finn suggests that there is a “graduated liability scheme” for disclosure. The obligation to disclose is at its lowest where there is a relationship at arms length between strangers. The obligation is higher where one party reasonably places reliance on the words and actions of another and where there is an assumed responsibility. The obligation is at its highest where there are recognised fiduciary relationships.
The authors cite Professor Finn’s analysis that disclosure obligations are determined by the reasonable, or objectively determined, expectations of the parties. I respectfully accept that analysis.
The question then is to determine the reasonable expectations of the parties in this case. Before the disclosure by the defendant on 9 October of its possible supply problems, where did the parties stand in relation to each other using the continuum referred to by Professor Finn? In my view they were possibly independent entities standing at arm’s length. I think it is likely that they were a step further along the continuum where one party reasonably places reliance on the words and actions of the other. It could not be said that there was a fiduciary relationship. Before 9 October the plaintiff had told the defendant about its planned works. It had asked for and received a quote for the retardant. The plaintiff purchased three separate units to see which would suit its client. When the plaintiff sought to order its bulk supply, the defendant disclosed its problem. On the evidence available to me I would not be willing to conclude that the defendant was aware of its problem before the bulk order was supplied, or at least shortly before that. Even without hearing evidence from the defendant I would not be willing to conclude that the defendant’s failure was any more than a failure to make earlier enquiry of its suppliers. In the circumstances I do not think that the defendant has failed to discharge such liability as it bore towards the plaintiff.

I dismiss the application based on Tort.
Conclusion
I dismiss each of the three claims made by the plaintiff. I dismiss the case for the plaintiff. I will hear the parties as to consequential orders.