PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 9700 of 2005

PRA ELECTRICAL PTY LTD (ACN 062 906 487)	Appellant
PRA ELECTRICAL PTY LTD (ACN 062 906 487)	v
PERSEVERANCE EXPLORATION PTY LTD (ACN 010 604 878)	1^st Respondent
PERSEVERANCE EXPLORATION PTY LTD (ACN 010 604 878)	and MR RICHARD MANLY SC	2^nd Respondent

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JUDGES:	MAXWELL P, NETTLE AND ASHLEY JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	4 December 2007
DATE OF JUDGMENT:	18 December 2007
MEDIUM NEUTRAL CITATION:	[2007] VSCA 310

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Contract – Offer and acceptance – Term of agreement that contract not come into effect until formal instrument of agreement executed by parties – Whether condition precedent to formation of contract or condition entitling supplier of services to suspend performance of contract in event of non-compliance – Whether contract should be implied in terms of agreement other than term concerning execution of formal instrument – Whether supplier of services estopped from denying that executed formal document not required, and that binding contract existed between parties.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr B Jenner	Russell Kennedy
For the 1^st Respondent	Mr J Digby QC with Mrs K L Stynes	Clayton Utz
For the 2^nd Respondent	No Appearance ( see n 7)

MAXWELL P:

I have had the considerable advantage of reading in draft the reasons for judgment of Ashley JA. For the reasons given by his Honour, I too would dismiss the appeal.

NETTLE JA:

I have had the advantage of reading in draft the reasons for judgment of Ashley JA.

I agree with his Honour that this is a case of implied contract or, perhaps more precisely, one in which the parties agreed by their conduct[1] to act on an agreement embracing all of the terms set out in or referred to in the letter of 16 August 2004, except for Special Condition SC4.
[1]Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, 693; Vroon BV v Foster’s Brewing (1994) 2 VR 32, 79; cf Gjergja v Cooper [1987] VR 167, 205 (Ormiston J).

I reject as untenable the suggestion made by counsel on behalf of the appellant (PRA) that it was caught unaware on the issue. It is true that the point was not agitated below. But the issue of estoppel was the subject of debate; and, in my view, it would be fanciful to suppose that there might be evidence relevant to the question of implied agreement that was not thought to be relevant to the issue of estoppel.

Views may differ, perhaps, as to the precise point of time at which the agreement came into existence. As McHugh JA said in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd:[2]
[2](1988) 5 BPR 11,110, 11,117-8, Brambles Holdings Pty Ltd v Bathurst City Council (2001) 53 NSWLR 153, 176 [71]-[82] (Heydon JA).

… in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new

terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.

Ultimately, however, the question is whether ‘viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain’.[3] And, as it happens, I tend to agree with Ashley JA, that the provision and acceptance of guarantees on 25 August 2004, taken with what had gone before, was enough to reveal the existence of a binding agreement. If, however, that were not enough, I consider that the dealings between PRA and Perseverance, viewed as a whole and objectively from the point of view of reasonable persons on both sides, would be taken to bespeak a concluded bargain, on the terms mentioned, by no later than the demand for and payment of the first progress claim in September 2004.
[3]Vroon BV v Foster’s Brewing (1994) 2 VR 32, 82, citing Meates v Attorney-GeneraI [1983] NZLR 308, 377 (Cooke J), and see Ormwave Pty Ltd v Smith [2007] NSWCA 210 [70]–[76] (Beazley JA).

As Ashley JA says, it may not be necessary to reach a concluded view on the question of estoppel. But, if it matters, I consider that Perseverance has proved the matters which must be established for that purpose:[4]
[4]Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-9.

1) It has shown that it assumed there was an agreement on the terms mentioned. Mr Cullen (who was in effect the project manager engaged by PRA) gave uncontradicted evidence that he believed there was a binding agreement and that if he had believed otherwise he would have secured the signature of PRA to the formal contract. Similarly, Mr Sloane (who was the managing director of Perseverance) gave uncontradicted evidence that he believed that PRA had agree to and accepted the terms of the agreement and was bound by them.

2) As Ashley JA explains, there is no doubt that PRA induced Perseverance to assume that there was a binding agreement on the terms mentioned.

3) It is obvious that PRA knew that Perseverance was acting and that PRA intended Prevenance to act on the basis that there was a binding agreement. As well as making and receiving payment of claims pursuant to the agreement, PRA requested that terms of the agreement be varied and made allegations that Perseverance was in breach of the agreement and sought to justify delays on the basis of what it alleged was Perseverance’s failure to comply with the agreement.

4) It can be seen that Perseverance both acted and abstained from acting in reliance on its assumption that there was a binding agreement. Among other things which it did and abstained from doing, Perseverance made payments pursuant to the agreement and gave directions which were referable only to the existence of the agreement and, in addition to Mr Cullen’s evidence that, if he had he known there was not a binding agreement, he would have procured PRA’s signature to the formal contract, Mr Sloan gave uncontradicted evidence that, if he had realised there was not a binding agreement, he would have suspended works until the formal contract was signed.

5) It is evident that departure from the assumption that there was a binding agreement would be productive of detriment. For unless PRA were kept to the assumption that there was a binding agreement, Perseverance would be deprived of the benefit of the contractual conditions pursuant to which it purported to take work away from PRA and now seeks to rely upon in defence of PRA’s allegations. This is a case in which the minimum equity would require that PRA be kept to the assumption that there was a binding agreement on the terms mentioned.[5] Otherwise it would be impossible to put Perseverance back in the position in which it would have been but for its actions and abstentions on the faith of the

assumption.

[5]Commonwealth v Verwayen (1990) 170 CLR 394, 411, 454, 501; cf. Giumelli v Giumelli (1999) 196 CLR 101, 120 [34]-[50].

If, therefore, it were it not possible to imply the existence of a binding agreement, I agree with Ashley JA that the appellant would be held estopped[6] from denying the existence of the agreement.
[6]As a matter of equitable promissory estoppel.

I would dismiss the appeal.

ASHLEY JA:

In 2004, Perseverance Exploration Pty Ltd (‘Perseverance’ or ‘the respondent’[7]) was the owner of a goldmine at Fosterville near Bendigo, and PRA Electrical Pty Ltd (‘PRA’) was an electrical contracting company based at Crafers, South Australia. There was major electrical work to be done at the goldmine. On 2 July 2004 Cullen Mining Services Pty Ltd (‘Cullen’), project manager appointed by Perseverance in respect of proposed works at the goldmine, invited PRA to tender for the electrical works. It is only necessary for the moment to record that –
[7]There are two respondents to the appeal. The second, the arbitrator, did not appear, but undertook to abide the Court’s decision. It is thus convenient to refer to Perseverance simply as ‘the respondent’.

· PRA lodged a tender. Following communications between the parties, by letter dated 16 August 2004 Perseverance awarded the contract, as it said, to PRA. The latter commenced to perform works on site in very early September.

· A dispute concerning arose between the parties some months thereafter concerning the performance of works. Perseverance, in substance, ejected PRA from the site.

· PRA gave formal notice of dispute on 27 May 2005. Attempts to resolve the matter having failed, the parties agreed in August 2005 to refer their differences to an arbitrator.

· Still later, Cullen issued a certificate of cost to complete. That led on to PRA giving a second notice of dispute, by which it contended that there was no contract between it and Perseverance.

· The contention was advanced before the arbitrator who had been appointed in respect of the first dispute. In circumstances which are

presently unimportant, the arbitrator ruled that the parties had concluded a binding and enforceable agreement in mid August 2004. It was in those circumstances that PRA brought a proceeding by originating motion[8] in which it sought, inter alia, declarations that at no time did the parties enter into a contract, that there was no arbitration agreement between them, that the arbitrator’s ruling was a nullity and not enforceable; and by which it sought an injunction restraining the arbitrator from taking any further steps in the arbitration.

[8]Filed 2 December 2005.

The proceeding came on before the learned trial judge upon a single issue – that is, whether there was between the parties at relevant times a contract which incorporated, inter alia, AS4000-1997 general conditions of contract. Both parties accepted that his Honour was to determine that question on affidavit material which was before him. No witness was cross-examined. There were no pleadings.

His Honour described the rival contentions this way:

The position of PRA was that any agreement achieved by 17 August 2004 was expressly agreed to be subject to the execution of a formal contract and that this was never done. Accordingly no contract was entered into. As I have mentioned, Perseverance contended that the execution by PRA of the 16 August 2004 letter brought into existence a binding contract and that it included AS4000-1977. Alternatively, it contended that PRA was prevented by the doctrines of waiver or estoppel from denying the existence of this contract.

His Honour held that there was an operative contract between the parties at relevant times. By this appeal, PRA challenges that conclusion. Although I analyse the matter somewhat differently than did his Honour, I consider that his conclusion was correct.

Pertinent circumstances

In light of the various threads of the competing submissions, it is necessary to descend to some detail in setting out relevant documents and the actions of the parties. I begin with the tender document.

On 2 July 2004, Cullen sent PRA an invitation to tender for electrical and instrumentation work at the goldmine. The tender document was in the form of an offer to perform described works in accordance with the tender documents, which included special and general conditions of contract; and to complete such works within the time(s) stated for the contract sum. It provided that the principal would prepare a ‘conformed contract document’. It also provided an order of precedence in the event that documents comprising the contract revealed ambiguity, discrepancy or inconsistency. Relevantly, special conditions (‘SC’) ranked higher in the order of precedence than general conditions (‘GC’).

I turn to mention some of the special conditions. SC4, headed ‘Evidence of Contract’, provided that GC6 was ‘deleted in its entirety and replaced with the following’:
The Contract shall not come into effect until the formal instrument of agreement (Conformed Contract Document) is executed by the parties.
The Principal will prepare the Conformed Contract Document, to include all amendments to the Tender Document resulting from the issue of Addenda (if any), any amendments made and agreed between the Principal and the Tenderer prior to award of Contract, as well as, where agreed, submissions made by the Tenderer. Pre-award correspondence, minutes of meetings, and the Tender itself, shall not be physically included in the Conformed Contract Document. The Information to Tenderers and the Conditions of Tendering, will not form part of the Conformed Contract Document.
SC14 provided that, pursuant to GC32, the contractor was to give the superintendent a construction programme as specified. Particularly, the contractor was required to submit a construction programme, addressing specified issues, within 14 days of acceptance of tender.

SC17 provided that, in addition to provisions contained in the general conditions, the principal might terminate without cause.

SC18 provided a regime[9] for the issuing of tax invoices in respect of the amounts certified by progress certificates; and for the principal, ordinarily, to pay the amount shown on an invoice within 14 days of receipt.
[9]Substituted for part of GC37.2.

SC20.1 provided that the principal should not be liable upon any claim by the contractor except if written notice of claim and full particulars were supplied by the contractor within specified periods of the occurrence or circumstances upon which the claim was based.

I go to the general conditions, noting immediately that the tender document provided, at the outset of Part 2, that ‘the general conditions of contract shall be the Australian General Conditions of Contract AS4000–1997’.

By GC 1, ‘contract’ was defined, except where the context otherwise required, to have the meaning in clause 6.

GC5 provided for the giving of security.[10] An Annexure provided that security was to be in the form of an unconditional bank guarantee for 10 per cent of the contract sum.
[10]The term was defined by GC1.

GC6 assumed much importance in argument. Replaced, see above, by SC4, and under the heading ‘Evidence of Contract’, this is what it said:

Until a formal instrument of agreement is executed by the parties, documents evidencing the parties’ consensus shall constitute the Contract. If such Contract requires a formal instrument of agreement, the Principal shall, within 28 days of the date of acceptance of tender, send it in duplicate for execution by the Contractor. Within 14 days after receiving them, the Contractor shall (if they are correct) properly execute both copies and return them.
Within 14 days after receiving then, the Principal shall execute both copies, have them stamped as necessary and send one copy to the Contractor.

GC22 required the principal to give possession of the site sufficient for the commencement of works within seven days of days of acceptance of tender.

By GC37.1, the contractor was to make monthly progress claims.

GC39.2 empowered the principal to give the contractor a written notice to show cause in the event of the contractor committing ‘a substantial breach of the contract’. In the event that the contractor failed to show cause, the principal’s rights were specified by conditions 39.4–39.6.

GC39.7 empowered the contractor to give the principal a written notice to show cause in the event that the latter committed a substantial breach of the contract. In the event that the principal failed to show cause, the contractor’s rights were specified by condition 39.9.

GC42.1 provided for dispute resolution. Either party was empowered to give written notice of dispute. Thereafter, by condition 42.2, the parties were obliged to confer at least once in an attempt to resolve the dispute, or to agree on methods of doing so. But if the dispute was not resolved within 28 days of service of notice of dispute ‘that dispute shall be and is hereby referred to arbitration’.

I go to the conduct of the parties. It can be grouped into conduct before and after the acceptance of tender by the Perseverance letter of 16 August 2004 (‘the 16 August letter’).

In the period between 2 July and 16 August 2004 the following occurred:

·On 20 July, PRA submitted its very detailed tender. In a covering letter, it stated, inter alia:
Contract conditions and programmes to be to our agreement, generally based AS 4000, including payment for unfixed materials, maximum 5% retention and 30 days credit terms.
·Notwithstanding that reservation, by its tender PRA offered to perform the work in accordance with the tender documents, which included, subject to the effect of the special conditions, the general conditions in the form of AS 4000–1997.
·There were communications between Cullen and PRA between 22 and 28 July, and a face to face meeting on 23 July. Various matters pertinent to the proposed contract were discussed.
·On 30 July Cullen emailed PRA seeking ‘some further clarifications’, and clarifying several matters raised by Cullen in its letter dated 23 July. In the first category, Cullen sought confirmation of PRA’s ‘acceptance of the terms and conditions of the contract – General Conditions AS4000–1997 and Special Conditions as provided in the Special Conditions’. In the second category, Cullen advised that it required bank guarantees for 5 per cent of the contract sum ‘within 28 days of award of tender’, and sought PRA’s confirmation of its agreement thereto.
·By email of 2 August PRA confirmed that it would give the required guarantees, and confirmed acceptance of the general conditions in form AS4000–1997 and the special conditions.
·Also on 2 August Cullen provided PRA with milestone dates. They envisaged PRA being given possession of site progressively from 1 August, and PRA completing the work, ‘pre-commissioning’ by mid January 2005.
·Between 3 and 12 August there were further communications between PRA and Cullen concerning the detail of the proposed contract.

On 16 August, Perseverance sent a letter of award to PRA. Most pertinently, it said this:

Letter of Award
Perseverance Exploration Pty Ltd are pleased to confirm the award of the Contract for Electrical and Instrumentation Installation for the Fosterville Gold project to P.R.A. Electrical Pty Ltd (ABN 12 062 906 487) in accordance with the following documents:

Item

From

To

Date

Description

1

Cullen Mining Services (CMS)

P.R.A. Electrical Pty Ltd (PRA)

2 July 2004

Request for Tender (electronically on CD), issued under cover of letter of invitation to tender

…

11

CMS

PRA

30 July 2004

E-mail requesting further clarifications

12

PRA

CMS

2 Aug. 2004

E-mail response to request for further clarifications

13

CMS

PRA

2 Aug. 2004

E-mail sending Milestone Dates

We confirm the following:
·The contract sum is a fixed lump sum for the amount of Three Million Two Hundred and Ninety-three thousand, Four hundred and Thirty-one dollars ($3,293,431) excluding GST.
·The date for practical completion is 28 January 2005.

The Date of Acceptance of Tender is 16 August 2004.
…
Please confirm your acceptance of the award of this contract by signing below and returning an original signed copy of this letter to the Principal, with a copy faxed to Cullen Mining Services on (03) 9532 0993. A formal contract document will be issued to you for signing in due course.

The letter of award, as will now be apparent, provided for PRA’s confirmation of its acceptance of the award. The confirmation, signed by PRA’s Managing Director, and dated 17 August 2004, relevantly said this:

We confirm acceptance of the award of this contract to P.R.A. Electrical Pty Ltd (ABN 12 062 906) by Perseverance Exploration Pty Limited.
Signed for P.R.A. Electrical Pty Ltd Date: 17/8/04
Print Name: Peter Atkinson Position: Managing Director

I turn to the conduct of the parties after 16 August. I need not refer to everything which they did, but only to matters which give the gist of what occurred. Thus –
·     Weekly site meetings were held, attended by representatives of PRA and Cullen.[11] The first of them was held on 19 August. At that meeting, inter alia, PRA advised that it was organising the security required under the contract, Cullen explained the process of progress payment certificates and tax invoices for which the contract provided, and Cullen undertook to provide PRA with updated milestone dates for access to the various areas on site. Cullen, it was also recorded, was collating all the latest documents – scope of works, drawings, schedules - for forwarding to PRA.
[11]And Perseverance, on occasion.
·     At the meeting of 19 August, a so-called ‘CD of the Contract Document’ was handed to PRA’s representatives. But the parties agreed, in the context of this litigation, that it was not a document which met the requirements of SC4. Regardless of that commonly adopted position, the fact is that the document was never executed.
·     Perseverance gave PRA possession of the site – although not, according to PRA, in accordance with the tender.[12]
[12]The alleged delay was part of PRA’s claim reliant on GC34.
·     PRA’s workmen came on site and from early September 2004 performed works which – subject to the disputes which arose – were undertaken in accordance with the provisions of the tender and the further documents listed in the 16 August letter.
·     On 25 August 2004, PRA gave bank guarantees in accordance with the correspondence of 30 July and 2 August. It renewed a guarantee as late as 23 August 2005. PRA had agreed to submit the guarantees to Perseverance, and they were directed to the latter.   Absent any suggestion that Perseverance did not receive them, it is an inevitable inference – the material before the Court does not permit a direct finding - that it did so, and accepted them.
·     All the guarantees referred to a ‘contract or agreement’ between Perseverance and PRA. It was identified as ‘Contract FCC 306”. That detail must have been provided by PRA. The tender document was headed “Tender Document for Contract No. FCC 306’. It contained, inter alia, both the general and special conditions. Often, in correspondence subsequent to 17 August 2004, PRA identified the contract to which it was adverting as contract FCC 306.
·     PRA provided a construction programme, on 26 November, which was an update of the construction programme that had been provided on 2 August. By late November, completion times had been enlarged – at least in part, it may be conjectured, by reason of variations to the works.
·     PRA made requests that Cullen give directions for contract variations as contemplated by GC36.
·     PRA issued progress claims, and sought payment under the general conditions. It sought to rely upon ‘our contract’. So, on 15 December its Managing Director emailed Cullen in part as follows:
We hereby notify you that you are again in breach of our contract conditions in regards to the issuing of our Payment Certificate.
Our contract states that you shall issue a Progress Certificate within 14 days after receiving our Progress Claim, which was submitted on the 30/11/04.
It is very concerning that we should have to pursue this issue every month, had you required us to finance this project further, then this needed to be agreed to prior to commencement.
As you have failed to issue the Progress Certificate within the 14 days we deem our Progress Claim to be the Progress Certificate.

· PRA relied upon GC34 ’of our contract’ to notify delays to the works.

· PRA relied upon GC28 when seeking clarification of what Cullen required with respect to certain materials, labour and construction plant.

· PRA foreshadowed ‘a formal claim which .. would be submitted as per our contract conditions outlined in AS 4000–1997–25 (Latent Conditions)’.

· Cullen, as agent for Perseverance, superintended the performance of work by PRA.

· Perseverance made progress payments, though not as claimed by PRA.

· On 21 December, Perseverance issued a show cause notice to PRA reliant on ‘clause 39.2 of the Contract’.

· On 23 December PRA responded substantively, notwithstanding that it referred to having received advice that the notice was defective for the purposes of ‘clause 39.2’. In its response, PRA said, inter alia, that ‘the Principal issued the Contract and this occurred on 17 August 2004’. It made other references to ‘the contract’.

· Also on 23 December, PRA issued a show cause notice to Perseverance reliant on (condition) 39.7.

· By letter dated 30 December 2004, Perseverance expressed itself not satisfied with PRA’s response, and gave notice of removing the remaining works from the latter. There is no doubt that this was in reliance on GC39.4.

· On 27 May 2005 PRA gave notice of dispute in respect of the work being taken out of its hands. That was the procedure authorised by GC42.1. Under the heading ‘Background’, the notice stated, inter alia, that ‘the parties entered into a contract on 16 August 2004.’ Thereafter in the document it was claimed that ‘the Principal has breached the Contract’.

· Subsequent to the notice being given, and before the matter was referred to arbitration, the parties held the conference mandated by GC42.2.

· PRA took a prominent role in determining the identity of the arbitrator. Its solicitors communicated with the arbitrator at the outset concerning his appointment.

· On 25 August 2005, after referral of the dispute to arbitration, Cullen certified that it had cost Perseverance an added $4.865 million to complete the electrical works, such amount being payable by PRA. That led on to PRA giving a second notice of dispute dated 9 September 2005, by which it asserted, inter alia, that ‘the Parties have not executed a formal instrument of contract’.

· In the period January to August 2005, PRA by its solicitors communicated with Perseverance, and later its solicitors, in a way which assumed that a contract was on foot in the terms of the documents identified in the Perseverance letter of 16 August 2004.

· According to Cullen, about $265000 of the total amount invoiced by it to Perseverance was referable to work done in ‘its role as Superintendent of the Contract’.

Characterisation of Events

The analysis at trial

Were it not for SC4, the conduct of Perseverance and PRA between 16 August 2004 and 9 September 2005 would suggest that there existed between them an operative contract by which the latter was to perform for reward works in the terms of the documents referred to in the letter of 16 August; that the parties had embarked upon performance of that contract; and that, when dispute had arisen, they had sought to avail themselves of remedies which it conferred.

But SC4, relied upon by PRA, cannot be ignored.

The learned trial judge observed that there was a major shift between GC4 and SC6. He noted PRA’s submission as follows:

The point put on behalf of PRA is that the dealings between the parties, including the addition of the express term SC4, were what were insisted upon by Perseverance and accepted by PRA. This, it was said, put the contractual situation into the third of the categories specified in Masters v Cameron, namely “one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract”.[13]

[13]Masters v Cameron (1954) 91 CLR 353, 360 (Dixon CJ, McTiernan and Kitto JJ).

Recognising that subsequent to the handing over of the (irrelevant) CD on 19 August 2004, ‘the preparation and execution of the formal contract appears to have gone no further’, his Honour noted that nonetheless ‘the parties conducted themselves as if an agreement had been executed’.

Then his Honour framed a pertinent enquiry:

I return to 17 August 2004 when Perseverance said the contract was in fact entered into. The question must be determined, not by searching the minds of the negotiators for their subjective intentions; it is to be determined upon an objective assessment of the dealings between the parties.
In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd Mahoney JA said that in considering the question of whether there was a binding contract between the parties
“it is of assistance to distinguish between three questions: did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?”

Having done so, His Honour expressed this conclusion:

The terms of the Perseverance letter of 16 August 2004 and the acceptance of PRA dated 17 August 2004 and the fact of the acceptance show that the offer and the acceptance coincided and that the parties had a contracting mind.

That led on to his Honour’s analysis of SC4. The way in which he resolved the matter was as follows:

32 The question, then, becomes one of the construction of Special Condition 4 which is a term of the accepted offer. If it were not for the emphatic terms of the first sentence in that Special Condition, I would have little difficulty in concluding that the effect of the Special Condition is to create a contract of the first category mentioned in Masters v Cameron, namely,
“one in which 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.”

33     It is clear that neither party was at liberty to insert in the conformed contract document a term which had not been agreed prior to the award of the contract on 16 August 2004. Within seven days of acceptance of tender PRA was entitled to possession of the site in accordance with General Condition 24.1 and was, within 14 days, obliged to submit its construction program in accordance with Special Condition 14. It had 28 days after the date of acceptance of tender to provide security for performance in accordance with General Condition 5. It is hard to think, in these circumstances, that the supposed bystander would fail to infer an agreement with the consequence that PRA or Perseverance could simply walk away from these obligations without committing a breach of contract at any time prior to the execution of the conformed contract. In this context, counsel for Perseverance pointed out that, unlike these other provisions, Special Condition 4 does not provide a time for the preparation and execution of the conformed contract document. The argument of PRA would then leave the parties indefinitely in a state of contractual uncertainty. I have no difficulty in concluding upon an assessment of the dealings between the parties as at 17 August 2004 that they intended to make a concluded bargain on that date and that that bargain included the 18 documents listed in the letter of 16 August 2004 which, in turn, included AS4000-1977 and Special Condition 4.
34     The first sentence of Special Condition 4, however, provides that the contract “shall not come into effect” until the execution of a form of instrument of contract. It is not legally possible to put this proviso to one side on the basis that one or both of the contracting parties did not have it in mind or had not read it.
35      It is necessary now to construe this sentence in order to extract its meaning. It is obvious enough that it must be construed in its contractual context, bearing in mind that it ranks high in the order of precedence of documents which comprise the contract. Perhaps its obligation is to do this within a reasonable time. It does not oblige the parties to execute the instrument although that, too, may be implied. If Perseverance were to fail to prepare such an instrument within a reasonable time it may be supposed that PRA could then seek relief for breach of contract. And so long as Perseverance remained in breach and the contract remained on foot PRA could rely upon the first sentence to resist an allegation of breach for not commencing its performance of its obligations under the contract. In this sense the significance of the first sentence can be characterised as suspensory, as was the case in MR Hornibrook (Pty) Ltd v Eric Newham (Wallerawang) Pty Ltd. This is more consistent with the dealings between the parties than to characterise the sentence as amounting to a condition precedent.
36      In Hornibrook, a sub-contractor had sued for the balance claimed to be due to it for work done in carrying out certain works in connection with the construction of the Perseverance Creek Dam for the Toowoomba City Council. The point at issue was whether the sub-contractor was entitled to rectification of the sub-contract to allow it recover the rise and fall adjustments made to payments by the council to the defendant under the head contract in respect of work done by the sub-contractor. It was only in the calculation of the final balance after the completion of the works and the issue of the final certificate that the defendant had claimed that no rise and fall provision operated. The High Court agreed with the trial judge that, as the defendant had made progress payments to the sub-contractor as though the sub-contract contained the clause necessary to give effect to the agreement of the parties, the appropriate clause was omitted from the sub-contract6 by mutual mistake. The only reservation that the members of the Court had to rectifying the sub-contract was the existence of a clause in the sub-contract that it was “subject to the approval in writing” of the council. That raised the question whether the sub-contract could be rectified and enforced without further approval from the council. The members of the Court held as follows:
“The position is that the contract has been fully executed by the plaintiff and even if contrary to all reason the council were to withhold its approval to the rectified contract that would not mean that the plaintiff could not enforce its claim for payment of an amount calculated in accordance with the terms upon which the parties agreed, for the work done by it and accepted by the defendant. We think that the preferred basis upon which such a claim should be sustained is that in the circumstances the suspensory condition may be regarded as having ceased to have significance. Although that condition was not fully satisfied, the parties may be found, by reason of their conduct in performing and accepting their services upon the terms of the rectified contract, to have waived the condition and to have treated themselves as bound unconditionally by the terms of that contract.”[14]

37 PRA, therefore, as a beneficiary of the obligation created by the second sentence of special Condition 4, is entitled, but not obliged, to suspend performance so long as the conformed contract is not produced and executed. This it did not do. … But, having [pressed on with the work] [PRA] cannot months later be heard to assert the suspensory effect of Special Condition 4. As a matter of legal analysis the High Court in Hornibrook characterised such a situation as one of waiver. I am of opinion that the present case should be analysed in the same way. …
38 I conclude, therefore, that the solitary issue identified by counsel for PRA should be determined in favour of Perseverance. A contract was entered into between the parties on 17 August 2004 and this contract incorporated the General Conditions AS4000-1997, subject to the modifications set out in the Special Conditions. The contract entered into was subject to the suspensory provisions of Special Condition 4, but these were waived by PRA’s conduct in commencing to perform the contract.[15]

[14](1971) 45 ALJR 523, 524 (Menzies, Windeyer and Walsh JJ).

[15]I have omitted the citations from paragraphs [32]–[38] of his Honour’s reasons. The full text of the reasons is at [2006] VSCA 432.

His Honour concluded, in short, that on 16 and 17 August 2004 the parties evinced an intention to be forthwith contractually bound in the terms of the 16 August letter. The consequence was that their agreement contained SC4. How was the condition to be read so that it would not preclude the contract operating in accordance with the parties’ intention to be immediately bound? The answer was to treat SC4 as suspensory, able to be relied upon by PRA to resist an allegation of breach for failure to commence its contractual obligations, but in fact waived by performance.

Before this Court, appellant’s counsel argued that there was nothing in the 16 August letter which detracted from the force of SC4. Against that background, his Honour had erred, it was submitted, by proceeding from a finding that there was a concluded contract which included SC4. This had led him to give the condition a meaning at odds with its plainly intended operation: that is, as a condition precedent to a binding agreement coming into operation.

Senior counsel for Perseverance placed considerable reliance on the 16 August letter. Although in terms the tender was an offer, acceptance of which would give rise to contract, (subject to whatever operation SC4 might have) counsel submitted that the letter constituted an offer to PRA to enter into a contract which either did not contain SC4, or in which the effect of SC4 was modified by the sentence which provided that ‘ a formal contract document will be issued to you for signing in due course’ (not my emphasis). On one, and perhaps both aspects of this analysis, no question of waiver would arise.

Counsel advanced an alternative argument which took as its starting point acceptance of the analysis of the learned trial judge that a contract had been concluded which contained SC4, the first sentence of which had suspensory operation. He submitted that his Honour had been correct to conclude that PRA had waived reliance upon the same. But he contended that his Honour’s reference to waiver ‘by PRA’s conduct in commencing to perform the contract’ should not be read too literally. His Honour had not meant, counsel argued, that there was waiver so soon as PRA took a first step consistent with performance of a contract in the terms of the documents referred to in the letter of 16 August. Counsel appeared to recognise, however, the force of an observation by Nettle JA that the condition which was considered in Hornibrook[16] could be characterised as a condition subsequent, whereas, on its face, SC4 might be characterised as a true condition precedent to formation of contract.
[16]MR Hornibrook (Pty) Ltd v Eric Newham (Wallerawang) Pty Ltd (1971) 45 ALJR 523.

If either aspect of the respondent’s submission concerning the letter of 16 August was accepted, it would undermine the appellant’s attack on his Honour’s analysis. But I do not accept the submission. To my mind, the request by Perseverance that the letter be signed by PRA was no more than a way of ensuring that there could be no argument that PRA’s offer had been accepted, and as to the precise terms of the contract which was awarded. Neither could I read the sentence relied upon by Perseverance as modifying the apparent meaning of part of a document which the letter identified as one of the documents constituting the awarded contract.[17]
[17]In support of a submission that the letter of 16 August was not of present relevance, counsel for the appellant drew attention to the fact that in terms it awarded the contract – as distinct from proclaiming that the contract was now on foot. It is unnecessary to consider the validity or otherwise of that submission.

That leads on to consideration of the appellant’s argument. I consider that it should be accepted. The consequence of his Honour’s approach was that SC4 could not be construed as a condition precedent to formation of contract, which was its natural meaning. Further, in giving the condition the meaning which he did, the learned judge, recognising that it was not on all fours, nonetheless used Hornibrook by analogy. But the analogy was not apt, for the reason assigned by Nettle JA in argument.

There are matters which tend against the conclusion which I have reached. First, I agree with the learned trial judge that the conduct of the parties on 16 and 17 August was compatible with there being coincidence of offer and acceptance, and with the parties then having a contracting mind. But that would not necessarily gainsay SC4 having effect as a provision of the third kind discussed in Masters v Cameron.[18]
[18](1954) 91 CLR 353, 360–362.

Second, perhaps of greater significance was a possible tension within the tender document. For despite SC 4, various obligations of an apparently contractual nature – the obligation to provide a construction programme, and to provide guarantees - had as their starting point acceptance of tender.[19] It may be said with some force that it would be compatible with upholding a substantial commercial contract to give SC4 a meaning which would permit contractual effect being given to obligations of the kind just mentioned. But I think that the existence of those obligations was not necessarily inconsistent with SC4 operating as a condition precedent. Had PRA not complied, for instance, with its obligation to provide a guarantee, its response to any complaint of breach of contract would have been, relying upon SC4, that there was no operative contract. In any event, such an obligation could have crystallised if a formal document had been promptly prepared and executed.
[19]Obligations readily compatible with the inoperative GC6.

Third, not every statement which by its language appears to constitute a condition precedent to formation of contract will be so construed.[20] But to conclude in the present case that SC4 did have such operation would not necessarily sit uncomfortably, for reasons which I have attempted to explain, with obligations which had acceptance of tender as their nominal starting point.
[20]Masters v Cameron (1954) 91 CLR 353, 362–363.

Implied contract

At trial, the parties joined issue whether PRA was estopped from denying that a contract came into existence between itself and Perseverance on 16 or 17 August 2004. Perseverance contended that the circumstances of the case founded an estoppel – whether by conduct, or equitable. Counsel for the parties relied upon affidavits which outlined the circumstances of the matter both before and after 16/17 August 2004 to respectively support and deny the contention that an estoppel of either kind arose.

In the course of the hearing, however, the Court suggested that - if the approach of the learned trial judge was not upheld - the preferable analysis might be that the events which occurred gave rise to an implied[21] contract – except for the omission of SC4 - in the terms of the documents referred to in the 16 August letter. Counsel for Perseverance accepted, unsurprisingly, the validity of such an approach. He submitted that all the material which could be pertinent was before the Court. Counsel for PRA at first accepted that this was so. But, given time to reflect, he foreshadowed a submission that the question of implied contract might be one in respect of which his client would seek to adduce further evidence. The Court enquired what that evidence could be. It offered counsel the opportunity to make a supplementary submission directed to that point, and to the question of implied contract more generally. It gave Perseverance the opportunity to reply to any further submission for PRA.
[21]‘Informal’ was another descriptive term used in discussion between the Bench and counsel.

Each party took advantage of the opportunity which was offered. Counsel for PRA contended, in short, that the Court should not conclude that the circumstances disclosed an implied contract, because the parties were ‘not truly ad idem’. But if the Court was minded to conclude that there ‘is a possibility of a finding of a contract implied by conduct’, then it should remit the issue for determination by the trial judge. Such determination, it was submitted, should follow delivery of pleadings. The taking of evidence was foreshadowed.

Counsel for Perseverance submitted, as I understand it, that if the Court did not uphold the reasoning of the learned trial judge, then it should decide that PRA was estopped from contending that a contract did not come into operation in the terms of the documents identified by 16 August letter (but excluding SC4). Only if the Court held that no such estoppel operated should it proceed to consider the question of implied contract.

Pausing for a moment, I do not agree that issues should be considered in that sequence. The questions whether a contract came into existence, whether formal or implied, must in my opinion be resolved before consideration is given to the possible operation of an estoppel.

Concerning implied contract, counsel for Perseverance submitted that if the reasoning of the learned trial judge was not upheld then there was ‘an overwhelming objective factual basis’ for the Court to conclude that a contract in terms of the documents identified in the 16 August letter (but not including SC4) should be implied from the conduct of the parties. Counsel also submitted that there was no occasion to remit the matter for the taking of further evidence and determination by the trial judge. The submission for PRA, in substance, that its conduct was consistent with AS4000 and Part A of the tender document – and nothing more – was ‘implausible, unrealistic and contrary to the facts already before the Court’. Further, even if the managing director of PRA had considered that AS4000 was the document which governed any obligations which the company had after 17 August, evidence of such belief was irrelevant to the necessary enquiry.

In my opinion, implied contract does provide the appropriate characterisation of the events which occurred, and no reason has been demonstrated why this Court should remit the issue for the delivery of pleadings, the taking of evidence, and then determination by the learned trial judge. To be clear, I consider, for reasons which I will develop, that PRA’s further submissions should be rejected. The implied contract, I consider, was in the terms of the documents identified in the 16 August letter, except that it did not include SC4. The preferable view, in my opinion, is that such agreement commenced on 25 August 2004, or at latest within a day or so thereafter.

Brogden and Ors v The Directors of the Metropolitan Railway Company[22] is often cited as an exemplar of the circumstances in which a contract may be implied, and as to the relevant principles. The parties to a longstanding arrangement for the supply of coal by the one to the other took steps to reduce their arrangement into a formal agreement. A draft was prepared, but the matter went no further. Thereafter, for a period, the parties acted in accordance with the arrangements mentioned in the draft. Then the a dispute arose concerning the supply of coal. The supplier denied that there was a contract which bound him. The House of Lords held otherwise.
[22](1877) 2 App Cas 666.

I should refer to some parts of their Lordships’ speeches. Lord Hatherley said this:

My Lords, Mr. Herschell, in his extremely able argument in this case, has given us every assistance that we could wish to have for its determination, and has, as it appears to me, put the case on a very proper foundation, when he says that he will not contend that this agreement is not to be held to be a binding and firm agreement between the parties, if it should be found that, although there has been no formal recognition of the agreement in terms by the one side, yet the course of dealing and conduct of the party to whom the agreement was propounded has been such as legitimately to lead to the inference that those with whom they were dealing were made aware by that course of dealing, that the contract which they had propounded had been in fact accepted by the persons who so dealt with them.[23]

[23]Ibid 682.

Upon the timing issue, his Lordship said:

… If you ask me, when in my judgment the agreement was complete, I answer that the agreement was complete when the first coals … were invoiced at the differing price, and when that differing price was accepted and paid. … It does establish a course of action on the part of the Plaintiffs of such a character as necessarily to lead to the inference on the part of the Defendants that the agreement had been accepted on the part of the Plaintiffs, and was to be acted upon by them; and they did act upon it accordingly.[24]

[24]Ibid 686.

Lord Blackburn put the matter this way:

When they had come so near as I have said, still it remained to execute formal agreements, and the parties evidently contemplated that they were to exchange agreements, so that each side should be perfectly safe and secure, knowing that the other side was bound. But, although that was what each party contemplated, still I agree (I think the Lord Chief Justice Cockburn states it clearly enough), “that if a draft having been prepared and agreed upon as the basis of a deed or contract to be executed between two parties, the parties, without waiting for the execution of the more formal instrument, proceed to act upon the draft, and treat it as binding upon them, both parties will be bound by it. But it must be clear that the parties have both waived, the execution of the formal instrument and have agreed expressly, or as shewn by their conduct, to act on the informal one.” I think that is quite right … If the parties have by their conduct said, that they act upon the draft which has been approved of by Mr. Brogden, and which if not quite approved of by the railway company, has been exceedingly near it, if they indicate by their conduct that they accept it, the contract is binding.[25]

[25]Ibid 693.

Brogden did not raise the complicating issue of a provision such as SC4. But it shows that where, subsequent to the preparation of an unexecuted document - which the parties intend should constitute a contract between them – those parties act consistently with its provisions, it may be concluded that they have entered into an informal or implied contract in the terms of that document – and from a date identified by particular conduct.

Indicia of a contract of the kind under discussion were elaborated upon by Kirby P, as his Honour then was, in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd.[26]The case concerned the apparently deliberate conduct of a property developer in not executing a printed contract submitted by managing architects. The architects’ claim, based on the printed document, being resisted on the basis that the developer had never assented to the document, the New South Wales Court of Appeal held that assent could be inferred.
[26](1988) 14 NSWLR 523.

Empirnall, like Brogden, was not on all fours with the present case factually. But the search is for principle.In that connection, concerning indicia of assent, Kirby P said this:

I would infer that Empirnall gave its assent to the printed contract tendered to it by Machon Paull. I reach that conclusion because I consider that the objective bystander, looking at all of the facts, would conclude that Empirnall had accepted that Machon Paull was carrying out its performance of their agreement according to the printed contract which it had supplied and agreed to that course.

and
2. The relationship between the parties is also important. The law might less readily infer assent to an arrangement to be bound to a printed contract between individuals involved in a personal association than it would in circumstances of a contract allegedly arising out of an apparently regular business or professional association. Here, the relationship between the parties was a continuing one for commercial purposes. Work was done and accepted within that relationship. Progress payments were claimed and made. The relationship between a property developer and a firm of managing architects might possibly be explained by reference to an imputed contract or one agreed to orally. But it is less likely that such parties would enter a protracted arrangement, involving a substantial building project, and large sums of money without settling in some little detail the terms of their relationship. It is in this way that the identity of the parties and the nature of their relationship may more readily give rise to the inference that they had agreed to be bound by a printed contract than would be the case, say, in dealings between private individuals having no similar commercial attributes.
…

and
4. The progress payments made over the whole course of dealings between the parties were compatible with the acceptance by Empirnall of the printed contract. They followed the procedures envisaged by the printed contract.[27]

[27]Ibid 530 (Kirby P).

Geebung Investments Pty Ltd v Varga Group Investments (No.8) Pty Ltd[28] raised a question whether an oral agreement to settle a proceeding, intended to be formalised in an executed document, was binding upon the parties in the absence of such a document. A majority of the New South Wales Court of Appeal[29] held that the parties had evinced an intention to enter into a binding agreement, and were bound by it. The case did raise the Masters v Cameron issue; but again it was not the present case factually.
[28](1995) 7 BPR 14,551.
[29](Gleeson CJ and Kirby P).

Kirby P said this:

It is well settled that a court may have regard to the parties’ communications after the formation of an allegedly binding agreement in order to determine, objectively, whether or not the parties intended to form a binding agreement: …

and
The principles to be derived from the authorities, relevant to the resolution of the present appeal, may be summarised as follows:
1       The mere fact that the parties contemplate the execution of a formal contract, subsequent to an informal agreement, does not mean that that informal agreement is not presently binding.
2       The fact that the parties contemplate the drawing up and execution of a formal contract is a consideration which may point to the conclusion that no presently binding agreement was intended until that formal contract is executed.
3       The existence of matters of importance in which the parties have not reached consensus in their informal agreement will render it the less likely that they intended immediately to be bound before the execution of a formal document. Even where the parties have agreed on the “major matters”, their subsequent conduct may indicate that they did not intend to be bound until the other issues between them were resolved in a formal document …
4       In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct. …
5       Depending on the size, importance and complexity of the subject matter, the less formal the initial agreement, the less likely it will be that it was intended to be legally binding and enforceable. Thus, an oral discussion which contemplates a subsequent formal written agreement is less likely to have been intended to have been immediately binding.
6       It is necessary in every case to consider the nature and importance of the transaction which the parties contemplate. Where the agreement concerns a large sum, or concerns a significant transaction, it is less likely to have been intended to be presently binding.
…
8       Where a binding agreement is said to have been formed as a result of correspondence, it is necessary to look at that correspondence as a whole. It is wrong to isolate any part of the correspondence from the rest in order to prove or disprove the existence of a binding agreement. …[30]

[30]Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551, 14,569-70 (Kirby P).

Tekmat Pty v Dosto Pty Ltd,[31] like Geebung, was an authority to which we were referred by counsel for PRA. Miles CJ held that the parties had entered into a Masters v Cameron type 1 agreement in September 1997. The principal question was whether later negotiations and correspondence had culminated in a further agreement, or a variation of the agreement already reached, notwithstanding an absence of formal documentation. His Honour held that no further agreement had been reached. At the last relevant time for consideration, important questions remained in dispute. Further, his Honour held, the plaintiff had not established that there was agreement about further terms of the extant contract. I do not think, with respect, that the case provides more than the working-out of particular factual circumstances - although it may be said to illustrate the undoubted fact that the proponent of an agreement carries the burden of persuasion.
[31](1990) 102 FLR 240 (Miles CJ, Supreme Court of the Australian Capital Territory).

I have already described in considerable detail the way in which the parties behaved after 17 August 2004. I should say that the objective bystander, considering such conduct, and being apprised of the contents of the documents identified by the 16 August letter - including SC4 - would conclude that the parties had by intent entered into a binding and operative agreement notwithstanding that no conformed contract document had been prepared and executed; and that the terms of the agreement – absent SC4 - were to be found in the documents identified by the 16 August letter. So much, it would be concluded, was discernible from the conduct of each of the parties - whether it be the undertaking of obligations or the reaping of benefits.

In reaching such a conclusion, I consider that the relationship which existed between the parties would be considered important. Each of them was a commercial entity. They negotiated a detailed agreement over a six week period. It was an agreement of considerable commercial import, the value of the works the subject of the agreement running into the millions of dollars. In my opinion the objective observer would think it very improbable, in a commercial dealing of that magnitude, that -
·     if PRA in fact entered upon the works programme; and
·     if Perseverance facilitated it doing so; and
·     if, in the course of the works – and, indeed, even after PRA had been ejected from the site in purported reliance upon a term contained in the tender document – each of the parties repeatedly referred to and relied upon the aspects of the documentation listed in the 16 August letter,
nonetheless SC4 showed that they had not entered into a binding and operative agreement in the terms of the documentation (absent SC4). Rather, it would readily be inferred that those commercial entities had agreed to be bound by such documentation (but excluding SC4) for the purposes of determining their respective rights and obligations.

It might be complained that the conclusion which I favour has enabled the effect of a Masters v Cameron type 3 condition to be avoided. Let that be accepted. Even so, I see no reason why, conceptually, the circumstances of a special case might not dictate that outcome.

It might also be said that if SC4 was, in effect, blue-pencilled, there would be no provision for formalising the contract. That is not necessarily so. Perhaps GC6 would revive in those circumstances. But even if that was not the case, it would only mean that the contract was to be found in the voluminous documentation identified in the 16 August letter.

Thus far I have said little about the date on which the implied contract should be held to have commenced. Very little was said about the matter in argument, although counsel for PRA observed that if a contract was to be implied then a question as to commencement date would arise.

The issue might not be a sterile one. If commencement long postdated 17 August 2004, the substantial rights and liabilities of the parties would have to be considered under two successive legal regimes.

The case is not one in which, as at 16 August, there was any want of agreement about the essential terms of the works contract[32] – which is not to say that every detail was then resolved. What stood in the way of a contract springing into existence on that day was SC4. From the standpoint of the objective observer, the question was whether a particular circumstance, or a concatenation of circumstances, led to the conclusion that the parties had agreed to enter upon, and had entered upon, a contract which did not contain SC4.
[32]Later, I deal with and reject arguments raised by PRA to the effect that, even well after 17 August, there were areas of contractual uncertainty.

If the conduct of the parties on 16 and 17 August had been considered by an independent observer at that time, eschewing the significance of later occurring events, I should say that the observer would not have then been satisfied that a contract was operative between the parties. It might have been concluded that their conduct was consistent with, although it did not bespeak, SC4 having effect. The same might be said of the events which occurred at the site meeting on 19 August.

But moving forward to 25 August, PRA arranged for the giving of bank guarantees referable to contract FCC 306. That was the contract to which the tender document related. It was a feature of the tender conditions that security should be given. The guarantees which were given were consistent with correspondence which had passed between the parties, and which was part of the documentation identified by the letter of 16 August. That correspondence had noted a requirement, accepted by PRA, that the latter submit guarantees within 28 days of award of tender. The objective observer would note that, since the award of tender had not been converted into a conformed contract document, the effect of SC4 was that PRA had been under no obligation to provide the guarantees. The fact that PRA had in fact provided the guarantees, which at least inferentially Perseverance had accepted, the observer would think, was a powerful indication that a contract was operative in the terms of the documents identified by the 16 August letter, but excepting SC4. In so concluding, the observer would be entitled to take into account, although in the particular instance I do not think it would be necessary, such colour as might be provided by earlier circumstances - I refer particularly to the events at the site meeting held on 19 August – even though such events if considered at that earlier time had been equivocal.

In the event, I consider that by 25 August – or within a day or so thereafter, allowing for acceptance by Perseverance - there was unequivocal evidence that an implied contract such as I have described was operative between the parties. It is in my view beside the point that some later event – there were very many of them, but I instance the making in September 2004 of the first progress payment claim, and its processing - would yield the same conclusion.

In the period between 17 and 25 August 2004, it seems, not much was done by PRA. In the event, I think it is unnecessary to consider whether, in some circumstances, a later event which demonstrates unequivocally that a contract exists between A and B may entitle re-characterisation of an earlier event - previously considered to be ambiguous – so as to result in an earlier time of commencement of contract.

Earlier, I summarised arguments advanced for PRA why this Court should not make a finding of implied contract and I said that I rejected them. Something more must be said about those matters.

It will be recalled that counsel for PRA submitted that if this Court considered it possible that a contract might be implied by conduct, then it should remit the issue for determination by the trial judge. In that connection, the giving of evidence was foreshadowed. Counsel made this submission:

The unchallenged evidence is that the Appellant considered AS4000 to be the document which governed any obligations it had after that date. Its conduct is consistent with AS4000 and Part A … At any hearing in respect of the question of whether a contract is to be implied from conduct the Appellant would wish to lead evidence to make good these assertions.

The Court should of course pay close attention to a submission that the disposition of an issue might be affected by further evidence. But it is not obliged to ignore the material which is before it in considering whether the submission is persuasive. In the present case, it is the fact that Peter Atkinson, the managing director of PRA, at one point deposed that he ‘presumed that PRA was contractually bound by AS4000’. But in the same affidavit he deposed that he had received the email from Cullen dated 30 July 2004 and that he had sent the email in reply dated 2 August (to each of which I referred at [31]) in which he confirmed PRA’s acceptance of ‘AS 4000-1997 General Conditions and the Special Conditions as the contract terms’. Moreover, Mr Atkinson signed the letter of 16 August confirming acceptance of the award of the contract - which was expressed to include, inter alia, the tender documents and the emails of 30 July and 2 August. That documentation alone provides powerful reason to doubt, even if Mr Atkinson’s ‘presumption’ be relevant, that in the sentence of his affidavit mentioned by counsel he was deposing to a presumption that PRA was bound contractually only by AS4000.

There are other indicia which suggest that Mr Atkinson was not so deposing. Counsel for Perseverance pointed out, I think with considerable force, that if Mr Atkinson had considered AS4000 to be the document which governed any obligations of PRA after 17 August 2004, or that it was AS4000 and Part A of the tender document, then there was – (1) No reference to PRA as contractor. (2) No contract price. (3) No scope of work. (4) No completion date. (5) No schedule of rates. (6) No agreement consistent with the tender documentation.

Again, counsel for Perseverance submitted, also I think with force, that the position advanced for PRA was illogical and conveniently selective. It invited the Court to imagine that any implied contract between the parties picked up only a fragment of the documentation - that fragment excluding the special conditions which were to its general disadvantage.

In all, I am not at all persuaded that the foreshadowed further evidence, even if relevant, could advance a case which – for the reasons which I have given - I doubt was ever made by PRA.

Counsel for PRA also submitted, as I noted earlier, that there were indications that the parties were not truly ad idem about the terms of any implied agreement. He instanced, first, the absence of a stated commencement date for works, the absence of a date for practical completion, and what he submitted were ‘out of date’ milestones at the time of the award of the tender. By reason of the two matters last-mentioned, he argued, uncertainty was revealed.

I think that there was nothing to this point. Counsel conceded that the fact that work commenced on a particular date may evidence by conduct a commencement date.[33] Then, as to a date for practical completion, the same was stated in the 16 August letter, which was one of the identified contractual documents. Finally, milestone dates were set – by Cullen in a 2 August email to PRA. That email also was identified by the 16 August letter as a contractual document. It appears PRA may have been given possession of the site later than the milestones anticipated. But that does not raise an issue of contractual uncertainty, or of the parties not being ad idem. Late-given possession, consistently with the contract which I would imply, might generate an entitlement to an extension of time for completion.
[33]Alternatively, it might be argued that the commencement date was the date on which PRA was to be first given possession of part of the site. That date was fixed by revised milestones provided by Cullen to PRA on 2 August 2004. It would be immaterial that possession was in fact not given on that date – if such was the case.

Second, counsel for PRA submitted that the parties were not ad idem with respect to the regime for making progress claims. I do not agree with that submission. It is the fact that the regime established by GC37.2 was varied by SC18. But that does not mean that the parties were not agreed upon the effect of their agreement. Want of agreement is not demonstrated by the circumstance that the parties later get into argument.

Third, counsel for PRA submitted that there was want of consensus because Part A of the tender document provided for progress claims to be made monthly, but that Cullen requested or required claims to be made by the 25^th of the month.

It is the fact that Cullen made such a request. Plainly it did so for administrative purposes. It is also the fact that PRA objected that there was no such contractual requirement – although it seems to have agreed to attempt to meet such a time frame. The events do not demonstrate want of agreement about a contractual obligation.

Fourth, it was really a different kind of point, counsel for PRA submitted that his client’s acknowledgement of the 16 August letter was not conduct relevant to the implication of a contract. It was argued that PRA’s action in acknowledging the award was ‘intrinsically bound up with the expectation created by SC4 that a Conformed Contract Document would be produced in due course’.

There is a short answer to the submission. Implication of a contract in the terms of the documents identified by the 16 August letter does not depend on PRA having ‘acknowledged’ the letter - which is in any event strictly a misdescription of what it purported to do.

Estoppel

Strictly, it is unnecessary to deal with the issue of estoppel which was agitated by the parties. But for sake of completeness, in case I was wrong about there being an implied contract between the parties, and in case the submission for Perseverance which I noted at [54] was correct, I should say something about the matter.

Counsel for the respondent contended in their written submissions that PRA was estopped from relying upon SC4 to deny the existence of a contract between the parties. Estoppel, both by conduct and equitable, it was argued, can apply to prevent the denial of the existence of a contract.[34] In the present case, the pertinent category of estoppel was estoppel by conduct, as explained in Thompson v Palmer[35] and in Grundt and Ors v Great Boulder Pty Gold Mines Ltd.[36] In oral argument, however, counsel seemed to agree with Nettle JA that the asserted estoppel should rightly characterised as an equitable estoppel, of which Waltons Stores(Interstate) Ltd v Maher[37] is what may be called a contractual example.
[34]Counsel cited Waltons Stores (Interstate) Ltd v Maher & Anor (1988) 164 CLR 387.
[35](1933) 49 CLR 507, 546-547 (Dixon J).
[36](1937) 59 CLR 641, 656-657 (Latham CJ), 674-676 (Dixon J). Counsel did not seek to argue that this was an instance of estoppel by convention, as to which see Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 244. Probably he was concerned that Con-Stan is authority for the proposition that estoppel by convention can operate only where the mistaken assumption relates to a state of fact. But see, inter alia, Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd [1998] 2 VR 70, 76-78 (Callaway JA) and Equuscorp Pty Ltd v Wilmoth Field Warne [2007] VSCA 280, [56]-[73].
[37](1988) 164 CLR 387.

Concerning estoppel, the dispute between the parties was essentially conducted at a factual level. Counsel for the respondent submitted that the conduct of the appellant on and subsequent to 17 August 2004 caused the respondent to assume that a binding contract existed and was being performed by the parties. The respondent acted in certain ways in reliance on that assumption. If the appellant was now permitted to deny the existence of a binding and operative contract, the respondent would suffer significant detriment. In response, counsel for PRA analysed the circumstances relied upon by the respondent to make out the elements of the alleged estoppel, and submitted that in every instance the proof was not established. In the context of equitable estoppel, he submitted that the respondent had not satisfied three at least of the matters for proof described by Brennan J in Waltons Stores.[38] In the course of his submissions counsel argued, more than once, that the respondent was impermissibly seeking to rely upon conduct which occurred after 17 August 2004. So, for example, he submitted that ‘the representations must be at or before 17 August 2004 when it is said a contract was formed’.
[38]Ibid, 428-429.

In my opinion, assuming for the sake of argument that there was no contract[39] operative between 17 August 2004 and 19 September 2005, the appellant would be estopped from contending the contrary. I consider that the estoppel would appropriately be characterised as an equitable estoppel.
[39]That is, containing the terms which I have described.

The matters for proof, fashioned to the circumstances of this case, can be stated as a question: Did Perseverance establish that representations made by PRA (consisting of words and/or other conduct) caused it to make an assumption of law that is, that an executed document was not required in order that there be, from 17 August at latest, a binding contract between them otherwise in the terms of the documents identified in the 16 August letter - which in turn, as PRA knew or intended should be the case, caused Perseverance to act or refrain from acting such that a detriment would be suffered if PRA was now allowed to set up rights inconsistent with the assumption? If the answer be yes, then PRA should be compelled to adhere to the assumption, as the minimum required equity in the circumstances.

It was submitted for Perseverance that PRA made ‘clear representations’ that an executed document was not required, and that Perseverance was led to assume that by 17 August 2004 the parties had entered into a binding and operative contract. In respect of the claimed assumption, reliance was placed on affidavits sworn by Graeme Sloan and Tony Gee. With respect to the alleged representations, counsel focused upon the appellant’s confirmation of acceptance of the award of the contract on 17 August, the course of the appellant’s conduct thereafter until 9 September 2005, and the belated assertion that no contract existed between the parties.

Upon the question whether Perseverance had made an assumption of the kind contended for, counsel for PRA submitted that Mr Sloan’s affidavit was relevantly equivocal, that Mr Gee’s state of mind was not the state of mind of Perseverance, and that in any event Mr Gee’s state of mind, described in equivocal language, had not been communicated to PRA.

I reject those submissions. Mr Sloan was the managing director and chief executive officer of Perseverance. In my opinion the pertinent part of his affidavit[40] was not equivocal. Plainly, his stated belief that PRA had agreed to and accepted the terms set out in the contract was an intended reference to a contract in the terms of the documents identified by the 16 August letter, save and except for SC4.
[40]Sworn 16 March 2006, [4].

I go to the criticism directed to reliance on Mr Gee’s affidavit sworn 15 February 2006. Mr Gee was a senior man at Cullen, which was admittedly the agent of Perseverance. Contrary to the submissions for PRA, his state of mind was pertinent. Beyond that, para 26 of his affidavit explained why he did not pursue formalisation of what he considered was already a sufficiently formalised, and operative, agreement.

I should add this: the likelihood that an assumption was made by Perseverance, as deposed to by Messrs Sloan and Gee, is in my opinion emphasised by the conduct of Perseverance and its agent over a period of many months; and by the averment of each of those men that they would have acted to formalise the agreement had there been the slightest suggestion that there was not a contract operative between the parties.

I turn to the representations relied upon by Perseverance.

Counsel for PRA submitted that the first of those matters – simply its confirmation of acceptance of award of the contract - could not stand as a representation that an executed document was not required. I agree.

Then, as to the respondent’s reliance on the course of the appellant’s conduct between 17 August 2004 and 9 September 2005, counsel for the appellant submitted that such conduct was irrelevant because any representation must have been made ‘before 17 August 2004 when it is said a contract was formed’. I reject that submission. Ex hypothesi there was no such contract. The respondent’s argument was that conduct over the period in question acted as a continuing representation which bore upon its assumption that an executed document was not required, and that a contract, the terms of which were otherwise those set out in the documents identified by the 16 August letter, had been in operation from 17 August 2004.

Counsel for the appellant also submitted, concerning his client’s conduct between 17 August 2004 and 9 September 2005, that the respondent had not shown that it had perceived the conduct to constitute a representation. In this connection, counsel focused upon an alleged deficiency in Mr Gee’s February 2006 affidavit. But I consider that there was no relevant deficiency.

I turn to the submission for Perseverance that by its conduct PRA had continued to represent, for eight months after the works were taken out of its hands, that a contract was on foot. According to counsel for PRA, any such representation was irrelevant:

The actions of PRA or its advisers in the period after Perseverance purported to terminate the contract are irrelevant to the question of an estoppel denying the existence of a contract.

I do not accept that submission. The conduct of PRA and its advisers between 30 December 2004 and 9 September 2005 was relevant to a continuing assumption by Perseverance that an operative contract existed between the parties which determined their rights and obligations – including a right of reference to arbitration – beyond the date of exercise of the right which Perseverance asserted was available under GC39. I should also note that, contrary to PRA’s submission, Perseverance did not purport to terminate the putative contract on 30 December 2004. Rather, it sought to exercise the power conferred by GC39.4(a).

I turn to the consequences of the alleged reliance on the assumption induced by PRA. In written submissions, counsel for Perseverance asserted that his client – (1) permitted PRA to come on site, and there commence and continue works. (2) Accepted progress claims, had them assessed by Cullen, and paid PRA in excess of $1.5 million. (3) Did not remove PRA from the site immediately upon poor performance. (4) Served a show cause notice. (5) Exercised rights in reliance on GC39.4. (6) Responded to and addressed notices of dispute raised by PRA.

There is no doubt – I except (3), about which there will likely be argument - that Perseverance did those things. On the footing that it was not contractually obliged to do so, the very likely explanation would be that it did so on the basis of its assumption, reliant on PRA’s conduct, that such a contract in fact was operative between them.

Two contrary arguments were raised by PRA. First, that what Perseverance did was founded upon an unwarranted assumption made by Mr Gee as at 19 September 2004. Second, that the third matter specified by Perseverance was not supported by evidence. I accept the second argument, but reject the first of them. I do not agree that Mr Gee’s assumption was unwarranted or unexplained. Further, I do not agree that Mr Gee’s assumption was the only foundation for the conduct of Perseverance over the period of time.

The fourth requirement of equitable estoppel described by Brennan J in Waltons Stores[41] was that the defendant must know or intend the plaintiff to act or abstain from acting as it did in reliance upon the assumption which was induced. Counsel for PRA submitted that it was clear that Perseverance had not made out that element. I do not agree. PRA evidently intended that Perseverance would act – as, for instance, by making progress payments, by entertaining variations and claims, and by entering into the dispute resolution regime set out in the tender document – in reliance upon an assumption that there was a contract operative between them.
[41](1988)164 CLR 387, 429.

That takes me to alleged detriment. It was submitted for Perseverance that in the postulated circumstances it would suffer significant detriment if PRA was now permitted to deny the existence of the contract. Thus: (1) Inability to rely on GC39 for the purposes of recovering the additional cost of an alternate contractor. (2) The circumstance that costs had been incurred in administering the contract. (3) Exposure to a quantum meruit claim by PRA rather than one for payment in accordance with the contract. (4) Inability to rely upon the terms of the contract to resolve disputes. (5) Expenditure of costs in relation to PRA’s instigation of arbitration proceedings, and in responding to other (assumed) contractual steps instigated by PRA.

PRA denied that any detriment would be sustained in the hypothetical circumstances now under consideration. I do not agree.

As to the first alleged detriment, PRA argued that by a process of adjustment Perseverance would never pay more than a fair price for the work done. But I do not accept that is necessarily so. Moreover, absent the contract Perseverance could not call GC39.6 in aid.

As to the second alleged detriment, it was submitted that there would be no detriment because the respondent plainly wanted the electrical contracting work to be supervised. I accept that this was the case. But I think that Perseverance made a fair point in arguing that, if the work had been performed on a quantum meruit basis, there would have been no need to incur cost in administering the precise terms of the contract.

I turn to the third alleged detriment. Counsel for PRA submitted that there was nothing to it, because in a quantum meruit claim a court would take detriment to Perseverance into account in determining the benefit to be received. The argument was not much developed, and I express no opinion about its merits.

I go to the fourth alleged detriment. Counsel for PRA contended that there was nothing to it because, if the Court declared that there never was a contract, and that there was no extant arbitration between the parties, PRA would then agree to arbitrate whatever matters remained in dispute if Perseverance so wished. But in the hypothetical circumstances it does not follow – arbitration depending on grace, not entitlement – that no detriment would be suffered by Perseverance. A detriment may consist of being deprived of a source of remedy.

As to the fifth alleged detriment, counsel for PRA drew attention to his client’s acceptance that it would be liable for any costs thrown away, on an indemnity basis, by reason of the institution of the arbitration proceedings. So, it was submitted, there would be no detriment to Perseverance. But the respondent’s alleged detriment was in respect of moneys expended more generally in consequence of the respondent’s assumption that a contract was on foot.

Orders

I would dismiss the appeal.

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Citations

PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd [2007] VSCA 310

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Item	From	To	Date	Description
1	Cullen Mining Services (CMS)	P.R.A. Electrical Pty Ltd (PRA)	2 July 2004	Request for Tender (electronically on CD), issued under cover of letter of invitation to tender
…
11	CMS	PRA	30 July 2004	E-mail requesting further clarifications
12	PRA	CMS	2 Aug. 2004	E-mail response to request for further clarifications
13	CMS	PRA	2 Aug. 2004	E-mail sending Milestone Dates

[2007] VSCA 310

18 December 2007