Salisbury Mausoleum P/L v Both
[2007] SASC 152
•4 May 2007
SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
SALISBURY MAUSOLEUM P/L v BOTH
[2007] SASC 152
Judgment of The Honourable Justice Debelle
4 May 2007
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Contract to make model of mausoleum – plaintiff deferred project for period of time – plaintiff later asks that project recommence - whether plaintiff repudiated contract – whether defendant terminated contract – whether later negotiations varied existing contract or created a new contract – appeal allowed.
Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 437; British and Beningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48; Brogden v Metropolitan Railway Co (1877) 2 App Cas 666; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Heyman v Darwins, Ltd [1942] AC 356; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60; Shevill v Builders Licensing Board (1982) 149 CLR 620; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401, applied.
SALISBURY MAUSOLEUM P/L v BOTH
[2007] SASC 152Magistrates Appeals: Civil
DEBELLE J. The plaintiff carries on the business of constructing mausoleums. It has constructed them in other States in Australia. In 2001, it entered into an arrangement with the City of Salisbury to construct a mausoleum in the area of the Council and on land owned by the Council.
The plaintiff’s architect was Mr J Galluccio. In order to assist the promotion of sales of crypts and niches in the mausoleum, the plaintiff decided to have a model made of the proposed mausoleum. The plaintiff entered into a contract with the defendant, a model maker. The defendant’s work premises were close to Galluccio’s office. Galluccio often directly dealt with the defendant on behalf of the plaintiff. In that respect, he acted as the plaintiff’s agent.
A Contract to Make a Model
As the magistrate found, the terms of the contract were set out in the defendant’s quotation for the work dated 17 May 2001. The essential terms of the contract were:
·that the defendant would construct a model of the proposed mausoleum to a scale of 1:87.
·the model was to be constructed according to drawings and information supplied by Galluccio.
·that the work was to be completed in the first week of July 2001.
·the total cost of the model was to be $14,000.
The plaintiff accepted the quotation and completion date by an email dated 18 May 2001. The defendant began the project. He prepared drawings of the model. The model was not completed by the first week in July 2001.
Performance is Deferred
In August or September 2001, the plaintiff deferred the project for a time because of financial difficulties it had encountered. Its bank was not willing to lend money on the project because the plaintiff could not offer a mortgage of the land as a security. That was because the mausoleum was to be built on Council land. The managing director of the plaintiff, Mr Farrugia, instructed Galluccio and the defendant to put the project on hold until he had resolved the company’s financial difficulties.
On 24 August 2001, the defendant sent Farrugia a letter enclosing an account for $8,800. The work was described as “work to date including labour and materials”. The letter was in the following terms:
I received your acceptance of my Quotation to construct this model on the 28th of May 2001. It was to be completed in early July.
As you have previously agreed during phone discussions I have made every effort to complete the project in good faith. Difficulties have been experienced in obtaining the information required to construct the Model. At a meeting with you and the Projects (sic) Architects in mid July I was instructed to stop work until further information was available. This was to be the following week.
No information has been provided and according to my most recent communications with the Architects no work is being undertaken to provide the required information. I was also advised to do no further work on the Project.
I have made many efforts to contact you but have had no reply.
I have suffered loss as a result of this prolongation and the cessation of all work.
As a result of these circumstances I have placed all items in storage, to enable future completion if agreed and required.
I have enclosed an account for work to date. It is due for immediate payment.
I consider this amount to be less than what I may otherwise claim but in goodwill gesture will accept it as full payment if the terms are complied with.
If payment is not received within 7 days I reserve the right to claim to the fullest extent of my legal rights any amounts in excess of this amount due to what is a repudiation and termination of the agreement. I also advise that should full settlement not be made or other terms of settlement agreed by me in writing you will be liable for further costs.
I regret that the Project has stalled and would welcome the opportunity to complete it if all matters can be resolved.
The plaintiff did not immediately pay the sum of $8,800. The defendant did not press for payment.
On 29 August, the defendant sent Farrugia an email in these terms:
Thank you for your call earlier today.
I would like to confirm the following arrangements for the Model of this project.
My account will be paid in full as per terms stated in the documents received by you.
You will be consulting with your Architects to prepare the information by me to continue the Model.
I anticipate being able to recommence your project in approximately 2 weeks. This is upon completion of a current Model undertaken when your model was placed on hold.
In good faith I will not accept any further work if my account is settled as stated and confirmation is received, within 7 working days, from your architects that all information will be available at the time of the proposed resumption of work on the Model.
I look forward to resumption of work and a prompt completion of the Model.
I will return to consider the effect of these two documents.
The Plaintiff Wishes to Proceed
The parties did not meet again until January 2002. By then, the plaintiff had resolved its financial difficulties and was ready to proceed. Farrugia rang the defendant and informed him that the plaintiff wished him to proceed with the model. It appears that there was more than one meeting in January, February and March 2002. The evidence is not entirely clear as to how many meetings were held and when they were held. Although the parties proved a number of emails exchanged between the parties, there was a gap in those emails between August 2001 and 19 March 2002. It is possible to glean from the evidence the following.
In February 2002, a meeting was held in the defendant’s workshop. The defendant insisted that the plaintiff pay his fee of $8,800 stating that he would not resume the work until that sum was paid. The plaintiff paid the fees by two cheques drawn on 13 and 15 February 2002.
Stripped to essentials the plaintiff’s case was that, after it had paid the defendant’s fee of $8,800, the defendant continually promised to complete the work according to the contract but failed to keep his promises. The defendant’s case was that the initial contract had come to an end and that in 2002 he was negotiating on the terms of a new contract. However, as will be seen, the defendant did not terminate the original contract.
It is common ground that, in February 2002, the drawings of the mausoleum had been altered which would cause an increase in the work on the model. The defendant increased the price and the plaintiff agreed to that increase. As the plaintiff had already paid $8,800, a further $6,450 had to be paid. That was an increase in price of $1,250. However, the parties had difficulty in agreeing a completion date.
Negotiations as to Date for Completion
The evidence of the plaintiff and that of the defendant diverge as to the completion date. Farrugia and Galluccio gave evidence that the defendant agreed to have a model ready by 17 March, the Feast of San Giuseppe, a day when the plaintiff hoped to make sales of interests in the mausoleum. Their evidence was that the defendant wrote the date 17 March 2002 on a beam in his workshop. The defendant agreed that he wrote that date on the beam but his evidence was that he did not promise completion by that date.
In mid-March 2002, Farrugia began what was a relatively frequent correspondence by email between Farrugia, the defendant and Galluccio.
By an email to the defendant on 19 March 2002, Farrugia complained that the defendant had not provided a timetable for the completion of the model. The relevant part of the email read:
I am getting concerned that I am still waiting for a timetable which was promised on Friday 8 March. That deadline was postponed to weekend of 9 & 10 March. When I called you on Monday morning 11 March, you said you would send it shortly. Eight days later I am still waiting.
We also agreed that John & I would visit every Wednesday to view progress. You cancelled the first meeting and were not at your office last Wednesday.
…
I am willing to put the above aside on the following conditions:
1. I receive your timetable today, and
2. John and I see some real progress at tomorrow’s meeting at 11am.
This was the first of a number of emails sent to the defendant by either Farrugia or Galluccio in which each complained that the defendant had not contacted them or had refused to answer calls.
On 3 April 2002, Galluccio sent an email to the defendant, the relevant parts of which read:
I have been trying to contact you from the 27th of March up until this morning. I have left messages and you have not returned any of my calls.
When we had met with Tony Farrugia on the 22nd of March, we had reached an agreement on the changes relating to reducing the scope of work on the model in order to contain costs. At that point you outlined that you were going to consider your position and inform us of the outcomes in writing. My impression at the time was positive and I was and still am in the opinion that an agreement could be reached where all parties have compromised.
We waited for your reply on the 25th of March, it was not received. On the 26th of March I had called you to follow up on the status of your reply and you had mentioned that it was on its way. We are still waiting.
I find your lack of communication unsettling and of concern. …
We require your confirmation on when the model will be delivered.
I acknowledge that we have only just recently spoke at 3.30 pm today, however, I will proceed with this note as planned I would appreciate a written reply. You have outlined to me why you have delayed your reply. It appears that you have matters relating to your land settlement in Kent Town occupying your thoughts and time. At the same time you mentioned that you have a contingency plan in regards to undertaking your model making work. I have asked that you communicate your position and keep the communication likes open so that we can work together on the matter relating to the model.
On 8 April, Farrugia sent an email to the defendant asking for a commitment to a completion date. The relevant part of the email read.
I think I have been more than patient since our meeting with you in John’s office on Friday 22 March. I have agreed to the price increase in line with the additions and deletions John suggested on the 22 March.
I must have the model finished by no later than Tuesday 30 April which is 23 days to finish the model. I am not interested in business days etc.
I want this commitment in writing to both John and myself by no later than 12pm tomorrow Tuesday 9 April.
The rest of the email complained of embarrassment caused by the delay. The reference in the first paragraph to an agreed increase in price is a reference to the fact that the plaintiff had agreed to pay $6,450 for completion of the model in addition to the sum of $8,800 already paid, an increase of $1,250 over the original cost of $14,000.
On 9 April 2002, the defendant sent an email to Galluccio in these terms:
At the moment I am unable to confirm a delivery date for the Model. To do so would be irresponsible and unfair to all concerned. I do not wish to enter into a Contract under these circumstances.
There is a legal dispute over the premises from which I operate and my lease.
The outcome will determine if I need to move premises. Resolution of this matter is anticipated shortly. This matter was expected to be resolved around the time of my meeting with Tony and yourself.
Based on my most recent discussions I expect clarification of my position within the next day or two. I will keep you informed.
It will have been noticed that the defendant speaks of entering into a new contract.
Later that same day, Farrugia sent an email to the defendant rejecting the defendant’s assertion of a new contract, complaining of the lack of progress with the model, and asking for it to be completed by 30 April. The relevant parts of the email are in these terms:
As I told you yesterday, I am not willing to wait beyond 30 April.
You have a contract with Salisbury Mausoleum Development Pty Ltd. This is the legal advice I received last week.
I reject your assertion that you notified me last year of a cancellation of our original agreement. When I spoke to you on the telephone in January (after leaving numerous messages on your mobile, none of which you returned) you said you were pleased that the project was going ahead. Not once did you mention either John and myself of notifying me of the cancellation. John kept telling me day after day that you wouldn’t recommence work on the model until after you had been paid your outstanding account.
The defendant responded on 13 April by a handwritten note which he handed to Galluccio who in turn sent the note to Farrugia. The relevant parts are in these terms:
I called in to discuss Salisbury Mausoleum Model. Briefly, time to construct model needs to be extended 2 weeks. This is to allow for complications. I expect to be able to finish the model in accordance with my previous estimate – about 3 weeks (17 week days)…
Note – I am committed to providing the model ASAP. But need to allow for reasonable contingencies.
The note makes no reference to a new contract with the plaintiff. Instead, the defendant asserts that he is “committed to providing the new model ASAP”. Farrugia responded with an email dated 15 April insisting on receiving the model by 8 May and setting out his complaints about the delays and the reason why the plaintiff required the model by 8 May. Farrugia followed that email with another sent three hours later. It was in these terms.
Since I sent you that email this morning John has advised that you were coming this morning to pick up plans and drawings. He also confirmed that you were starting work on the model today.
I have been advised that you did not show up. I trust that you are going to Studio 9 this afternoon and as promised start work on the model today.
I repeat that Wednesday 8 May is the deadline. (Original emphasis)
The defendant responded to Farrugia on 16 April in these terms:
Wednesday the 8th of May is not the Completion Date I nominated in my hand written note, of Saturday last, forwarded to John of Studio 9 Architects. My agreement with John yesterday to immediately proceed with the Model was based upon the acceptance of the completion date as set out in my note. This was done in good faith to avoid the delay incurred until the appropriate written agreements could be exchanged and signed.
Your emails demand that the 8th of May must be the completion date.
I accept your rejection of my offer to build the Model as discussed with John.
Accordingly, I have ceased all work and will commence another Project.
On the same day, he sent an email in like terms to Galluccio. While the assertion that 8 May is not the completion date that the defendant had nominated is correct, it is surprising that the defendant was complaining of that date. The plaintiff had in fact allowed three or four extra days for completion, that is to say, 8 May is a few days later than the three weeks (or 17 working days) to complete to which the defendant had referred in his note of 13 April.
This exchange of communications on 13, 15 and 16 April led to a meeting between Galluccio and the defendant on the afternoon of 16 April. Galluccio sent an email to the defendant on 17 April confirming the arrangements made at that meeting. According to Galluccio, the parties had resolved all issues and had reached agreement.
On 10 May 02, you suggested that we should not expect the model to be in a position or state where it may be publicly displayed.
You have committed that the final availability date for the completed model to be picked up shall be on Friday 24th of May 2002. Time to be confirmed. If the model is completed prior to this date, you will advise.
We confirm that original quotation for the completed of the model was $14,000. We confirm that you are not registered for GST. Please confirm and make available your ABN for taxation reasons.
A progress payment of $8,800 has been forwarded to you. Could you please provide us with tax complying receipts of this payment.
The Balance of the payment shall be made to you on final completion and inspection of the model. The outstanding balance will be made up as follows.
Difference of the amount due of $5,200 + the cost variations as per your email dated the 23rd of March 02 of $1,250.
…
I believe that the above represents our agreement. Should there be any discrepancies please advise immediately. In the mean time (sic) we are under the assumption that you are progressing with the construction of the model and that you will advise on a weekly basis where we are able to come to inspect and confirm production.
We sincerely look forward to the production of a sensational model which we have come to expect from you.
(It is common ground that the date in the first line of the quoted extract should be 10 April 2002). Galluccio sent a copy of the email to Farrugia. The defendant did not dispute the terms of the agreement as set out in that email.
The next day Farrugia asked Galluccio by email to ascertain from the defendant whether he could safely invite guests to a function on 24 May at which the plaintiff would have the model on display. Galluccio sent Farrugia’s email to the defendant who responded in these terms:
Invitations for 25th would seem more appropriate. Farrugia may have misunderstood.
“You have committed that the final availability date for the completed model to be picked up shall be on Friday 24th of May 2002. Time to be confirmed. If the model is completed prior to this date, you will advise”.
The second paragraph of that email is a direct quotation from Galluccio’s email of 17 April. That is an indication that the defendant did not question what Galluccio had stated to be the terms of the agreement in his email of 17 April.
On 1 May, Galluccio sent the defendant an email in these terms:
I haven’t received your letter today as discussed – I told Tony & the chairperson of the Mausoleum board that they will have a confirmation today, at least in draft. I know that you are committed to the project, but I need to put Tony and his board at ease and you’re not making it very easy for me.
All the acknowledgement needs to do is to confirm my previous E mail to you outlining dates and costs. I have given you the entity and the ACN’s etc, so you should be right.
Finally, please confirm a time for next week, Tony is keen to see how you are going.
The evidence did not explain the reference to “the letter” in the first paragraph of that email. It seems that the defendant was to send a letter confirming the terms of the arrangement as set out in Galluccio’s email of 17 April.
On 6 May, the defendant sent a letter to Farrugia. The relevant part of the letter read:
This Quotation is based upon the partially completed model constructed under another Contract with your Company. Payment for this work has been settled in full, thank you.
I have consulted with you’re Architects and obtained revised drawings of the project.
Costs to complete the model are as follows:
Total cost $6,450.00
No GST included
Note. It does not include large trees, packing case, cover or jarrah support stand.
The letter also stated that the schedule construction period was approximately 3 weeks. The letter concluded in these terms:
COMPLETION Wednesday 18th December 2002, is the requested completion date. It has been explained that I work as a sole operator and that legal complications with my Tenancy may cause delays with project completion. You will be kept fully informed.
ACCEPTANCE A written acceptance from the Client is required within 3 working days of delivery of this document to the Clients Architects.
Thank you for your consideration and I will be committed to completing the Model at the earliest opportunity.
The rest of the letter is in terms of similar import to the quotation prepared by the defendant in May 2001. It will have been noticed that the defendant speaks of a new contract.
Farrugia agreed to the terms of the defendant’s letter of 6 May. He wrote, “accepted” on the second page of the letter and signed it within a day or two of 6 May. He gave it to Galluccio to return to the defendant. The defendant says that no contract came into existence because his offer was not accepted within 3 days.
It seems that Galluccio was not aware of the fact that the defendant required the offer contained in the letter of 6 May to be accepted within 3 days. Galluccio’s evidence was that after 6 May he continually tried to contact the defendant by phone. On 21 May he sent an email to the defendant in these terms:
Please note, I attended our appointment at 8.40am this morning as agreed and arranged last Friday. Your workshop was locked.
I have tried calling you several times today. I keep on getting your answering machine.
Could you please make contact with this office and report on the status of the model and why you were not able to meet with me this morning.
I will need to reschedule our meeting ASAP.
I await your reply.
On 23 May, he sent the defendant another email stating that he had tried contacting the defendant each day for the past 3 days without success. He asked about progress on the model. On 24 May, the defendant replied in these terms:
Due to a medical problem I am currently on sick leave. This situation will be reviewed by my doctor on Monday next.
I wish to bring to your attention that I have not received from your Client written confirmation of acceptance of my offer to complete the Model. This was a specific condition of the offer. All mail was collected from my premises earlier today and it has not been received.
Galluccio then asked the defendant to complete the model and to nominate the date of completion. The model was not built by 24 May.
Later Dealings
It seems that Galluccio arranged a meeting to see the defendant on 7 June 2002 but the defendant cancelled that meeting. Another meeting was arranged for 11 June but it did not proceed because the defendant could not be contacted. A meeting was rescheduled for 18 June. There is no evidence whether the meeting was held. Other attempts at meetings were made in the latter part of the year. Ultimately, the defendant agreed in November 2002 to complete the model by 18 December. The agreement is evidenced by a hand-written alteration to the letter of 6 May. The alteration changes the completion date to 18 December 2002 and is initialled by the defendant. The defendant failed to complete the model by that date. He did not provide the plaintiff with a model. The plaintiff commissioned another model maker to make the model.
The Magistrate’s Decision
The magistrate found that the plaintiff had repudiated the contract made in May 2001. He did not, however, find that the defendant had terminated the contract. He simply held that the lengthy pause between August 2001 and early 2002 “amounts to repudiation by the plaintiff, and the parties are forced to start again”. He then found that the emails exchanged between the parties in March, April and May 2002 did not result in a new contract. He held that, as the plaintiff had repudiated the initial contract, the defendant was entitled to $8,800 damages. He dismissed the plaintiff’s claim.
For the reasons which follow, the magistrate erred in holding that the plaintiff had repudiated the contract and that was enough to conclude its contract with the defendants. The plaintiff’s clear evidence was that it always intended to proceed with the project. It only deferred performance until it resolved the financial issues. If the defendant believed that the plaintiff had repudiated the contract, it was necessary for him to decide whether he terminate it. However, he did not do so. The initial contract, therefore, remained on foot.
Did Defendant Terminate the Contract?
A party is entitled to terminate a contract if the other party repudiates it. However, neither breach nor repudiation by one contracting party of itself terminates the contract and it is necessary that the other party elect to treat it as discharged: Heyman v Darwins, Ltd [1942] AC 356; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327; Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 at 454. As a general rule, one party remains bound to perform its obligations notwithstanding breach by the other unless he terminates the contract for the breach or repudiation by the other party. The contract made in May 2001 therefore remained on foot unless the defendant terminated it.
I turn to consider whether the defendant terminated that contract. In his letter of 24 August 2001, the defendant referred to “a repudiation and termination of the agreement”. That expression appears in this context in that letter.
I have enclosed an account for work to date. It is due for immediate payment.
I consider this amount to be less than what I may otherwise claim but in goodwill gesture will accept it as full payment if the terms are complied with.
If payment is not received within 7 days I reserve the right to claim to the fullest extent of my legal rights any amounts in excess of this amount due to what is a repudiation and termination of the agreement. I also advise that should full settlement not be made or other terms of settlement agreed by me in writing you will be liable for further costs.
I regret that the Project has stalled and would welcome the opportunity to complete it if all matters can be resolved.
When read in its context, it is apparent that the defendant is not terminating the contract. Instead, he is asserting that the plaintiff has repudiated or terminated the contract. As already mentioned, the plaintiff had not repudiated the contract. The plaintiff’s intention was merely to postpone the work until its financial difficulties had been resolved. Repudiation is a serious matter and is not to be lightly found or inferred: Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60 at 71; Shevill v Builders Licensing Board (1982) 149 CLR 620, per Wilson J at 633; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, per Mason J at 32; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 per Brennan J at 643 and per Deane and Dawson JJ at 657. A party will not establish that the other has repudiated the contract unless he proves that the other party has “become wholly and finally disabled” from performing his contractual obligations: British and Beningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48 per Lord Sumner at 72; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 per Devlin J at 450; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, per Mason CJ at 262, with whom Deane, Dawson and Toohey JJ agreed, and per Gaudron J at 280. The plaintiff had not become disabled from performing its obligations. The magistrate erred in finding that the plaintiff had repudiated the contract.
The last sentence in the passage just quoted is not the language of termination. The defendant’s use of the word “stalled” is consistent with the plaintiff’s case that Farrugia had told the defendant that the project was deferred until the financial position had been resolved. The defendant was expressing his willingness to complete the model under the existing contract. The expression “if all matters can be resolved” is not a statement that resumption will depend on the defendant agreeing any term of a new contract. Instead, the defendant is expressing his understanding that resumption will depend on the plaintiff being able to resolve the matters which had prevented it from proceeding with the contract.
Any doubt as to the meaning of the defendant’s letter of 24 August is set at nought by the email sent by the defendant on 29 August 2001 to Farrugia. In that email, he speaks of recommencing the work and of a resumption of the work. The email has already been quoted. There is no mention of either termination or repudiation. While the words “resume” and “recommence” are capable of being consistent with a new contract, there is no suggestion of a new contract in the defendant’s email. The terms of the email indicate that Farrugia had spoken to the defendant and had told him that the plaintiff wanted him to complete the work. The tenor of the defendant’s email is that the work will be completed in accordance with the terms of the existing contract. This finding is consistent with the terms of the defendant’s defence which does not plead that the defendant terminated the contract or that the plaintiff had repudiated it.
The Contract is Varied
As the contract had not been terminated, the negotiations through the first months of 2002 were negotiations to vary the terms of an existing contract. They were not negotiations to agree a new contract. Only three matters were the subject of variation. First, the drawings had been altered, which resulted in increased work on the model. That led to the second variation which was an increase in the price from $14,000 to $15,250. As the plaintiff had already paid $8,800, a balance of $6,450 was to be paid. The third variation was a new completion date. The exchange of emails in the first few months of 2002 demonstrates that the parties were able to increase the scope of the works with the plaintiff paying the higher price. The only matter of any difficulty was the completion date.
The emails exchanged between the parties show that fixing the new completion date was the subject of continuous negotiation. The issue came to a head after the defendant had given Galluccio his hand-written note on 13 April.
Galluccio sent a copy of the hand-written note to Farrugia. That caused Farrugia to send an email on 15 April nominating 8 May as the completion date. The defendant then sent his email dated 16 April stating that 8 May was not the completion date. I have already noted that the defendant’s attitude was quite inconsistent with what he had said in his hand-written note. In addition, there is an interesting exchange between the magistrate and the defendant. It follows an answer from the defendant to counsel in cross-examination that the hand-written note was no more than “an indicative thing”, an answer which indicates how the defendant was seeking in the witness box to resile from an agreement to complete the model by a specified date.
Q. It’s an agreement, isn’t it. It’s evidence of an agreement.
A. Sorry?
Q. It’s evidence of an agreement you had come to with the architect.
A. I took that meeting to be a discussion about what -
Q.Well, it’s an agreement. You used the word it’s an ‘agreement’ in your e-mail. ‘My agreement with John yesterday.’
A.If that’s what you say.
Q.It’s an agreement reached with you and John, isn’t it.
A.If that’s what you say.
Q.That’s what you say, isn’t it, in your email.
A.The email, yes, it’s probably bad –
Q.‘My agreement with John yesterday.’ You reached an agreement with him, didn’t you.
A.Yes.
By that email, the defendant acknowledged that an agreement existed between himself and the plaintiff to complete the work. Although the defendant speaks of his agreement with John, the defendant had reached agreement with Galluccio as the plaintiff’s agent. The defendant was well aware that Galluccio was the plaintiff’s agent.
Another consideration is that the language of the hand-written note is the language of variation of an existing agreement, not of negotiation of a new agreement. The defendant seeks an extension of the time to complete the model. While the extension sought varied between two weeks at one point in the note and three weeks at another, it is clear that the defendant is seeking an extension of that which had already been agreed. That conclusion is reinforced by the note that the defendant added at the foot of the document:
Note - I am committed to providing the model ASAP but need to allow for reasonable contingencies.
His statement that he was committed to providing the model is the language of a person who recognises that he has agreed to supply the model.
If the defendant did not then agree a completion date, later events show that he agreed to complete the model by 24 May.
After the exchange of emails on 15 April and on the morning of 16 April, Galluccio and the defendant met on the afternoon of 16 April and reached an agreement. Galluccio’s email of 17 April confirms what had been agreed at that meeting. That email has been quoted earlier. It stated the three issues which had to be agreed before the contract could be varied. They were the variations to the model, the new price, and the completion date. The plaintiff had already agreed the variations and the consequent increase in price. The only outstanding question was the completion date. Galluccio stated that the agreed completion date was to be 24 May. The email concluded:
I believe that the above represents our agreement. Should there be any discrepancies please advise immediately. In the mean time (sic) we are under the assumption that you are progressing with the construction of the model and that you will advise on a weekly basis where we are able to come and inspect and confirm production.
The defendant did not reply stating that Galluccio had wrongly stated any aspect of the agreement. Generally speaking, it is contrary to the objective theory of contract to conclude that silence on the part of the defendant should be construed as indicating his assent to what Galluccio said had been agreed. The silent acceptance of an offer is generally insufficient to create a contract: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 692; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 534 per McHugh JA. However, Galluccio was not making an offer. Instead, he was recording his understanding of what had been agreed. But the silence of the defendant is not the only basis on which to conclude that the parties had by then agreed a completion date. Later events demonstrate that the defendant did not dispute the terms of the agreement as recited by Galluccio in his email of 17 April.
The first of these is the defendant’s response to the question whether Farrugia could safely invite guests to the function on 24 May at which he hoped that the model would be on display. The magistrate failed to refer to the defendant’s email in his reasons. It is a critical oversight. As noted earlier, Galluccio sent the defendant a copy of Farrugia’s email of 18 April asking if they could invite guests on 24 May and the defendant responded stating that invitations for 25 May would be more appropriate. He then repeated the paragraph in Galluccio’s email of 17 April where Galluccio had said that it had been agreed that the completed model would be ready by 24 May. That is a very clear indication that the defendant did not question what Galluccio had stated to be the terms of the agreement. When regard is had to all of the events between 13 and 17 April, it is clear that the parties had agreed that the completion date was 24 May.
That conclusion is reinforced by the fact that the letter from the defendant to the plaintiff dated 6 May which purported to set out the terms of a new agreement reiterated each of the matters recited in Galluccio’s email of 17 April. It stated the fact that there were revised drawings and that the balance of the price to be paid was $6,450. Significantly, it states a completion date of 24 May 2002. It is another link in a chain of evidence that shows that the defendant had agreed the terms of the email sent by Galluccio on 17 April. In the letter of 6 May the defendant had added the following:
A written acceptance from the Client is required within 3 working days of delivery of this document to the Clients Architects.
It is not clear why the defendant included that term. It can have no force or effect since the defendant had already agreed what had been set out in Galluccio’s memorandum. When the defendant’s conduct is viewed as a whole, it is clear that he had agreed to provide a finished model by 24 May. He failed to do so and was in breach of the contract as varied in February, March and April 2002.
The magistrate made no findings as to the credibility of any witness. He did not base any finding on a preference as to the evidence of one witness over another. His findings are essentially based on the events and the exchange of emails. With one exception, I have adopted a like approach. That exception concerns the defendant’s evidence that he had terminated the contract and was negotiating a new contract in 2002. The evidence was, in my view, opportunistic. When cross-examined as to when he had terminated the contract, he said that he had terminated it when he was paid in early 2002. However, at that time he knew the plaintiff wanted to proceed and wanted him to complete the model. He says nothing of a termination in August 2001. Any suggestion of a termination in August 2001 is inconsistent with his email of 29 August 2001. He disputed the evidence of Farrugia and Galluccio that the payment in February 2002 was made on a condition that he proceed to complete the model. I accept the evidence of Farrugia and Galluccio on this topic because it is consistent with the terms of the emails exchanged between the parties. Another pointer to the conclusion that in early 2002 the parties were seeking to vary an existing agreement are the fact that all of the other terms of the contract made in May 2001 remained on foot. All that was changed was the price for the model and the completion date. This is an ordinary case of one party agreeing to do work for another where, after a delay, the work is resumed and the parties amend the price because of variations and fix a new completion date.
The magistrate held that the parties did not ever agree the terms of a contract. For the reasons just expressed, the correct question was whether the parties had agreed a variation of the agreement they had made in May 2001. There is unequivocal evidence that the defendant agreed in April 2002 to complete the model by 24 May. In addition, there is unequivocal evidence that the defendant agreed in November 2002 to complete a model by 18 December. The defendant had in November 2002 initialled an alteration to the letter dated 6 May in which he had specified a completion date of 18 December. He failed to complete the model by that date. If there is any doubt about a variation to the contract being agreed in April 2002, there is no doubt that the parties agreed that the model would be supplied by 18 December. The defendant did not deliver a model. He was therefore in breach of the variation made in November 2002, if not also of the variation agreed in April 2002.
For these reasons, the appeal will be allowed. The order of the magistrate will be set aside and in lieu thereof there will be judgment for the plaintiff in the sum of $8,800.
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