SDR Australia Pty Ltd v Leighton Contractors Pty Ltd - [2012] WASC 434

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: SDR AUSTRALIA PTY LTD -v- LEIGHTON CONTRACTORS PTY LTD [2012] WASC 434

CORAM: ALLANSON J

HEARD: 4-8 APRIL 2011

DELIVERED : 16 NOVEMBER 2012

FILE NO/S: CIV 1767 of 2006

BETWEEN: SDR AUSTRALIA PTY LTD
Plaintiff
AND
LEIGHTON CONTRACTORS PTY LTD
Defendant

Catchwords:

Questions submitted for separate determination

Contract - Creation of contract by conduct of parties - Whether contract exists - Turns on own facts

Estoppel - Whether plaintiff estopped from denying existing contract - Turns on own facts

Misleading or deceptive conduct - Whether plaintiff represented work would be governed by contract - Turns on own facts

Legislation:

Trade Practices Act 1974 (Cth), s 51A, s 52

Result:

Questions answered

Category: B

Representation:

Counsel:

Plaintiff: Mr M Orlov
Defendant: Mr M H Zilko SC & Mr R M Wilenski

Solicitors:

Plaintiff: J D Finlay & Co
Defendant: Tottle Partners

Case(s) referred to in judgment(s):

Australian Crime Commission v Gray [2003] NSWCA 318
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd [1988] 14 NSWLR 523
Fazio v Fazio [2012] WASCA 72
Galaxidis v Galaxidis [2004] NSWCA 111
Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551
Grundt v The Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44
Legione v Hately [1983] HCA 11; (1983) 152 CLR 406
Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
Pegrum v Fatharly (1996) 14 WAR 92
RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149
Sullivan v Sullivan [2006] NSWCA 312
Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

ALLANSON J: In 2004, Co‑operative Bulk Handling Ltd (CBH) implemented a project to upgrade the Albany Grain Terminal. The project included the fabrication and erection of steel silos, also called storage cells. Leighton Contractors Pty Ltd was the main contractor for the project.
SDR Australia Pty Ltd (SDR) offered to work with Leighton, on an exclusive basis, on the construction of the storage cells.
Between about July 2004 and July 2006, SDR carried out the fabrication and erection of the cells and other related works. Leighton and SDR intended to execute formal written contracts, but did not.
SDR now claims that it is entitled to payment for the work it has done, calculated at reasonable rates or prices, in addition to the sum that Leighton has paid to date. It also seeks an order that Leighton deliver up bank guarantees that SDR provided as security in lieu of cash retentions. It says, in effect, that the parties did not conclude a contract. Leighton denies that claim and says the parties' relationship was governed by contract.
The parties agreed a list of questions for determination. Those questions are to be determined entirely on the documents and agreed facts. The parties agreed that the questions to be determined required the determination of 37 issues, although some of those issues appear to have been formulated before amendments to the pleadings, and the parties directed their submissions to the questions rather than the list of issues.
The parties produced a table of 145 agreed matters, and agreed all relevant documents. The facts agreed do not exhaust the facts required to be found.

Recurring terms

It is convenient to set out some defined terms used by the parties. I will follow their usage.
Contract 003 Works describes the works in which SDR would take delivery of free issue material, fabricate, paint, deliver to site and erect 10 x 6,000 tonne steel silos (or cells). The parties also referred to Contract 003 (in full, Contract No W1136/003), or the cells contract. Whether the parties made the contract is a central issue.
Package 101 Works, or Package 101, describes the concrete works and civil works or civils, to be undertaken as part of the project.
Additional Works describes seven other miscellaneous structural steel works packages for which SDR was invited to tender and which it offered to undertake as a variation to Contract 003:
(1)Package 105, fabrication and supply of structural steel work for two conveyors;
(2)Package 106, detail, fabrication and supply of structural steel work for a load in facility;
(3)Package 114, supply of conveyor trippers;
(4)Package 148, the C38 Gallery;
(5)Package 163, Conveyor Accessories and Steelwork;
(6)Package 164, manufacture and supply of structural steel support platform; and
(7)A2 Spouting, fabrication and supply of spouts and chutes.
Package 126 Works describes major steelworks to be supplied by SDR as part of the project; the parties referred also to Supply Contract 126 (in full Contract No W1136/126).
Leighton had a standard Works Contract and a standard Supply Contract. Leighton says the contracts for the Contract 003 Works, the Package 101 Works and the Additional Works were based on the terms of the Works Contract, or some of them, and the contract for Package 126 was on the terms of the standard Supply Contract.
SDR put forward commercial qualifications to parts of the Works Contract, some of which were not resolved. Somewhat confusingly, Leighton referred to the terms of the Works Contract that were not subject to unresolved qualifications as the Qualified Works Terms.
The contract entered into by CBH and Leighton is variously referred to as the main contract or the head contract.

The parties' positions

SDR pleads that there was no contract between it and Leighton. Leighton responds that there was a contract; and further pleads estoppel, mistake, and (by counterclaim) misleading and deceptive conduct.

SDR's pleaded position on the contracts

SDR pleads that, in relation to both Contract 003 and the Package 101 Works, Leighton notified it that it intended to enter into a formal written contract with SDR on commercial terms to be agreed in the future after Leighton and CBH had finished negotiating the terms and conditions of the main contract, and had executed the main contract. Leighton sent SDR a letter stating its intent to award Contract 003 to SDR on 15 July 2004, and a separate letter for the Package 101 Works on 5 August 2004. SDR pleads that the parties did not intend that any contract or contracts should come into existence governing the performance of the Contract 003 Works, the Package 101 Works, or the Additional Works until after Leighton had completed its contract negotiations with CBH and entered into the main contract, Leighton and SDR had completed their negotiations in relation to the commercial terms and conditions of the contract or contracts between them, and the agreed terms and conditions had been incorporated in a formal written contract. The parties did not complete their negotiations, did not agree to be bound by the Qualified Works Terms, and did not execute any formal written contract.
SDR pleads a similar case for Supply Contract 126. On 13 December 2004, Leighton notified SDR that it intended to enter into a separate formal written contract for SDR to detail, fabricate and deliver to site certain steel work on terms to be agreed in the future. The parties did not, however, complete their negotiations or enter into a formal contract in respect of those works.
Between July 2004 and July 2006, SDR performed works for Leighton in connection with the project, including the works intended to be the subject of Contract 003 and Supply Contract 126 and variations to those works, and for which Leighton has paid SDR the sum of $27,794,891 to date.
SDR claims the sum of $3,469,434.84 as the balance of the sum due to it for performing the works. It provides particulars of 19 sums which it says are payable:
a.the balance of the agreed lump sum price payable to SDR for the construction of the cells;
b.the balance of the sum payable to SDR for additional costs that SDR incurred as a result of time lost in performing the works due to Leighton being unable to provide SDR with the use of a crane on specified dates between 4 January 2005 and 22 December 2005;
c.the balance of the sum payable to SDR for specified additional work;
d.the sum refundable to SDR for an excessive back charge that Leighton applied for out of tolerance work carried out by SDR;
e.the sum payable to SDR for additional work caused by Leighton adding to a drawing;
f.the balance of the agreed lump sum price payable to SDR for the Package 101 civil works;
g.the sum payable to SDR for work done in connection with an additional retaining wall;
h.the balance of the sum payable to SDR for work done due to unsuitable material;
i.the balance of the sum payable to SDR for work done in connection with installing a mass concrete footing;
j.the balance of the sum payable to SDR in respect of additional costs that SDR incurred as a result of encountering latent conditions;
k.the balance of the sum payable to SDR for costs that SDR incurred as a result of time lost in performing the works due to inclement weather;
l.the sum payable to SDR for additional costs that SDR incurred as a result of having to work an additional 14 working days due to changes in the R&R (rest and recreation) roster;
m.the sum payable to SDR for additional costs that SDR incurred as a result of a national industrial relations stoppage on 30 June 2005 and industrial action on the site on 17 and 18 August 2005;
n.the balance of the sum payable to SDR for labour costs increases that SDR incurred and caused by Leighton entering into certified site agreements for mechanical works and for civil works and requiring SDR to pay higher wage rates and provide greater benefits and allowances than those which SDR had used to calculate its prices for the works that were intended to be the subject of Contract 003 and Supply Contract 126;
o.the balance of the sum payable to SDR for additional work caused by differences between the tender and issued for construction drawings (IFC drawings) for Package 105;
p.the balance of the sum refundable to SDR in respect of an amount that Leighton deducted from the price for Package 106 because of differences between the tender and IFC drawings;
q.the sum payable to SDR for additional work caused by differences between the tender and IFC drawings for Package 148;
r.the balance of the sum payable to SDR for additional work caused by Leighton including details in IFC drawings for Package 148, the value of which was expressly excluded from SDR's tendered price;
s.the balance of the sum payable to SDR for additional work caused by differences between the tender and IFC drawings for Package 126.

Leighton's defence

Contract 003 and Package 101

Leighton pleads that while the parties did not execute a contract, by no later than 30 September 2004 they had by their conduct concluded an agreement that the plaintiff would undertake the Contract 003 Works and had agreed and specified the scope of works, the contract sum, and the date for substantial completion. Leighton pleads, in the alternative, an implied term that the plaintiff would substantially complete the Contract 003 Works within a reasonable period of time.
Leighton pleads that SDR notified it of SDR's qualifications in relation to the Works Contract, and that some but not all of these qualifications were resolved. Leighton pleads that the Contract 003 Works would be governed by terms and conditions comprising the Qualified Work Terms. The Qualified Works Terms do not include all of the conditions or special conditions of its Works Contract.
Alternatively, Leighton says that 'on a proper construction' the Contract 003 Works were governed by a contract comprising certain but not all of the Qualified Works Terms.
A similar plea is put forward in relation to the Package 101 Works: by no later than 30 September 2004 the parties by their conduct concluded an agreement that the SDR would undertake the works specified in the Package 101 Scope of Works, for the Package 101 Works Contract Sum, and that those works would be governed by the Qualified Works Terms, or by some of them.

The Additional Works

Leighton pleads that, by no later than 30 September 2004, the parties by their conduct agreed that SDR would undertake the Package 105, Package 106, and the Package 114 Works, each for a lump sum as a variation to the Contract 003 Works.
Leighton further pleads that agreements were made by no later than 31 October 2004 that SDR would undertake the Package 148, Package 163, and the Package 164 Works. In each case, it pleads that SDR offered to undertake the works for a lump sum as a variation to the Contract 003 Works, that on each occasion a representative of Leighton orally advised SDR that Leighton had accepted its offer, and that SDR to Leighton's knowledge commenced undertaking the works in or about October 2004.
The plea regarding the A2 Spouting Works is slightly different. Leighton says that on 8 October 2004, by email, SDR offered to undertake the A2 Spouting Works for a specified lump sum as a variation to the Contract 003 Works, and on 11 October 2004 offered to supply additional items for a fixed sum, as a variation to its earlier offer. Leighton says that on 13 October 2004, by email, it accepted those offers.
Generally, Leighton says that the Additional Works were governed by a contract on the Qualified Works Terms, or some of them.

Supply Contract 126

Leighton pleads that, between 1 November 2004 and 5 November 2005, it sent SDR the specification for the Package 126 Works (I assume the date of 5 November 2005 is a typographical error). On or about 9 November 2004, SDR submitted a tender for those works. On 14 December 2004, Leighton told SDR that it intended to award the contract to SDR for a lump sum price of $3,688,885, subject to the acceptance of conditions to be finalised at a pre‑commencement meeting on 15 December 2004. At the pre‑commencement meeting, the parties agreed certain terms, under which SDR would undertake the Package 126 Works:
(a)SDR would undertake the Package 126 Works;
(b)SDR would submit progress claims by the 25^th day of each month;
(c)SDR would procure public liability and third party insurance cover totalling $5,000,000, and workers' compensation insurance cover;
(d)SDR would bear its own costs of delays due to industrial disruption, safety issues and inclement weather, unless granted by Leighton; and
(e)SDR would undertake the Package 126 Works for the fixed sum of $3,688,885 inclusive of all allowances.
Between 15 December 2004 and 13 January 2005, Leighton provided SDR with its pro-forma subcontract agreement (Supply Contract) which contained 46 general conditions, 28 special conditions and 12 annexures. On 13 January, SDR notified Leighton of changes it required to the terms of the Supply Contract. The parties agreed some of those qualifications and continued to negotiate as to others. They did not resolve two qualifications.
Leighton pleads that SDR undertook and Leighton administered the Package 126 Works in accordance with the matters which had been agreed at the meeting on 15 December 2005 together with the terms of the Supply Contract (except for the two unresolved qualifications). It says that by no later than 8 January 2005 the parties concluded an agreement on those terms. Again, it pleads in the alternative that the agreement may be construed to comprise some but not all of those terms.
The pleaded date of 8 January 2005 is also a typographical error. Both Leighton and SDR presented their cases on the basis that the date intended was 8 February.

The estoppel defence

Leighton pleads as an alternative that SDR is estopped from denying that the Contract 003 Works are governed by the Qualified Works Terms and were required to be substantially completed by the date for substantial completion.
Leighton says that, by its conduct, SDR represented to Leighton prior to commencing the Contract 003 Works that the Qualified Works Terms were acceptable to it and, if Leighton requested SDR to carry out those works:
(a)the Contract 003 Works would be governed by those terms;
(b)SDR would undertake the works for the Contract 003 Work Sums; and
(c)SDR would undertake the works by the date for substantial completion.
These collectively are said to be the Initial Works Representations.
Leighton pleads, further and alternatively, that after the commencement of the works contract, SDR represented that the works were governed by the Qualified Works Terms, it would undertake them in accordance with the Qualified Works Terms, and it would complete them by the date for substantial completion. These, collectively, are the Subsequent Works Representations.
Leighton pleads that in reliance on the Initial Works Representations, further and alternatively the Subsequent Works Representations it:
(a)directed SDR to undertake and continue to undertake the works;
(b)did not procure another contractor;
(c)did not enter into a formal written subcontract;
(d)administered the contract in accordance with the Qualified Works Terms, including by assessing progress claims and making progress payments on account.
On that basis, Leighton pleads that it acted to its detriment, and that SDR is estopped from denying that the Contract 003 Works are governed by the Qualified Works Terms, and were required to be substantially completed by the date for substantial completion.
Essentially the same plea is made with regard to Package 101 and the Additional Works.
In relation to Package 126, Leighton pleads, as an alternative to the plea that the parties concluded an agreement, that SDR represented to it that SDR:
(a)would undertake the Package 126 Works for the fixed sum of $3,688,885 inclusive of all allowances; and
(b)the Package 126 Works would be governed by the matters which had been agreed at the meeting on 15 December 2005 together with the terms of the Supply Contract (except for the two unresolved qualifications).
Leighton pleads that it acted to its detriment in reliance on those representations, and SDR is estopped from denying that the Package 126 Works are governed by those terms.

The counterclaim for misleading or deceptive conduct

By counterclaim, Leighton pleads that SDR is a trading corporation within the meaning of the Trade Practices Act 1974 (Cth), and made each of the representations pleaded in the estoppel defence in trade or commerce.
Leighton says that it relied on each of the representations, and that they were false. Particulars of falsity include that SDR has claimed payment in excess of the agreed lump sum, that SDR did not substantially complete the Contract 003 Works by the date for substantial completion, and that SDR alleges the various works are not governed by the terms which Leighton says were agreed.
It also pleads that each of the representations was in respect of a future matter, relying on s 51A of the Trade Practices Act.
Leighton claims loss and damage, but the quantification of that loss is not part of the questions put forward for separate decision.

The SDR reply and defence to counterclaim

SDR pleads that the Leighton representatives who conducted the negotiations with SDR did not have authority to conclude any contract with SDR which was governed by the Qualified Works Terms. This plea was explained or modified at trial, and SDR put forward the more limited contention that the Leighton representatives did not have actual authority to bind Leighton to a contract which was inconsistent with the continued reservation by Leighton of a right to ensure that the subcontract reflected the back to back arrangements with the main contract with CBH, and was inconsistent with the requirements of its Work Contract.

SDR admits that Leighton administered the works comprised in Contract 003, Package 101 and the Additional Works by reference to some of the various terms and conditions of its pro forma Works Contract; that Leighton did not engage another contractor to undertake any of the works; and that Leighton changed its position as a result of doing those things. It denies that Leighton did any of those things in reliance on or induced by any relevant representation by SDR.
SDR also admits that if it is established that it made the representations alleged, that the representations induced Leighton to assume or believe the existence of a contract between the parties on the pleaded terms, that the assumption or belief was reasonable in the circumstances, and that Leighton changed its position in reliance on those assumed facts, then Leighton will suffer material detriment if SDR is permitted to assert a position contrary to the assumed facts. That detriment will include Leighton's liability to pay SDR for work done in connection with the project on a quantum meruit basis which would exceed Leighton's liability to pay for the work if it was governed by a contract or contracts on the pleaded terms. SDR admits that if those facts are established it is estopped from asserting a position contrary to those facts.
SDR asserts, however, that when it commenced the Contract 003 Works and Package 101 Works, Leighton could not reasonably have understood that conduct to give rise to the Initial Works Representations.
More generally, SDR pleads that the inferences which Leighton ought reasonably to have drawn from its conduct were that SDR was acting in the expectation that they would subsequently enter into a contract, after completing their negotiations, and that contract would operate retrospectively from the commencement date of the Contract 003 Works. The Package 101 Works and the Additional Works would be listed as variations to that contract once it was finalised. SDR also pleads that its conduct was inconsistent with a representation that it was acting in accordance with a contract on the Qualified Works Terms, and in particular cl 28 of the Works Contract conditions.
Similarly, SDR pleads that its conduct was not such that Leighton could reasonably have understood it to give rise to the Package 126 Works representations.

The questions for determination

The parties agreed a list of questions for determination. Initially there were 12 questions, although issues relating to mistake were not pursued at trial.
The questions pursued were:
Contract or no contract
1.Whether the parties concluded a contract governing the performance of the Contract 003 Works, the Package 101, 105, 106, 114, 148, 163, 164 Works and the A2 Spouting Works, or any of them and, if so, upon what terms?
2.Whether the parties agreed that each of the Package 101 Works, Package 105 Works, Package 106 Works, Package 114 Works, Package 148 Works, Package 163 Works, Package 164 Works and the A2 Spouting Works should be carried out as variations to the Contract 003 Works and, if so, upon what terms?
3.Whether the parties concluded a contract for the Package 126 Works and, if so, upon what terms?
Representations
4.Whether the plaintiff made -
•the Initial Works Representations,
•the Subsequent Works Representations,
•the Initial Package 101 Works Representations,
•the Subsequent Package 101 Works Representations, and/or
•the Package 126 Representations?
5.If the answer to any part of question 4 is in the affirmative, whether the defendant relied on the representations to its detriment
Estoppel
6.Whether the plaintiff is estopped from denying that the Contract 003 Works, the Package 101 Works and the Additional Works, or any of them, were governed by the Qualified Works Terms?
7.Whether the plaintiff is estopped from denying that the Package 126 Works were governed by the terms pleaded in paragraphs 25 of the re-amended defence, set off and counterclaim?
Misleading and deceptive conduct
8.If the answer to any part of question 4 is in the affirmative, whether the representations were misleading or deceptive?
Mistake
(There were nine questions relating to whether the defendant paid certain sums and a mistaken belief. The parties agreed that those questions should not be determined at this hearing.)
Bank Guarantees
10.Whether the defendant's entitlement to security depended on the parties concluding their negotiations and entering into formal contracts for Contract 003 and Supply Contract 126?
11.Whether the defendant is entitled to retain the security?
Prices
12.If the parties did not conclude any contract governing the performance of the Contract 003 Works, the Package 101, 105, 106, 114, 148, 163, 164 and A2 Spouting Works or the Package 126 Works, did they nevertheless agree lump sum prices for the construction of those works and/or the rates and prices relied upon by the plaintiff in each of the Notifications of Claim referred to in the particulars of paragraph 11 of the statement of claim?
The substance of the first three questions is, in a sense, the threshold issue.

The facts

In January 2004, Chris Lazidis of SDR wrote to Geoff Cawkwell of Leighton, putting the case for SDR to be engaged in constructing the storage cells for the Albany project. SDR had recently carried out work for CBH at another facility in Esperance (Agreed Fact 1).
On 29 March 2004, Mr Cawkwell advised Mr Lazidis by email that it had been decided that Leighton would 'free issue' all material for the storage cells to SDR for fabrication, surface treatment, transport to site and installation. He continued:
Once the final quantity and cell design has been established I will forward to you the details required for you to provide the contract price for the project.
In March and April 2004, representatives of SDR, Leighton and CBH (and others) attended meetings relating to the project, including the first of a series of subcontractor meetings, and the first of a series of design progress meetings.
On 29 April 2004, Leighton wrote to SDR:
Leighton Contractors Pty Limited now confirm their agreement for SDR Australia Pty Ltd to commit to the detailing of cells in order to enable fixing of the commencement date with the Sub-contractor.

May 2004

On 3 May 2004, SDR wrote submitting an expression of interest and schedule of rates for the project (Agreed Fact 4). It repeated its earlier representation that the project would provide SDR with the opportunity of having all of its resources on the one project in the one location and on that basis offered three proposals:
1.Rates and prices for undertaking the Cell Ring Beam civils only
2.A reduction of $200,000 to that proposal if [SDR] undertake all of the civils
3.A further $100,000 [reduction] if [SDR] eventually get awarded the supply and installation of the mechanical steelwork associated with [the] project.
On 9 May, SDR sent an email to Leighton, with 'attached Scope of Work as requested'. The attached document described the scope of work in terms of 10 x 10,000 tonne storage cells.
On 10 May, representatives of Leighton, CBH, SDR and others attended a risk and price review meeting to discuss pricing issues. Subcontractor prices were due by close of business on Wednesday, 12 May, to be reviewed by Leighton on 14 May, for presentation to CBH on 18 May. At this meeting, questions were raised by SDR, and others, about the adequacy of allowances in the enterprise bargaining agreement (EBA) that would apply at the project.
On 10 May, SDR submitted a civils price schedule 'based on being successful on all the civils'. In the accompanying email, SDR referred to its earlier offer of a price structure based on the extent of work given to it.
On or about 11 May, in the course of administering the tender for the contract for civils (the Package 101 Works), Leighton provided SDR with a copy of its standard subcontract agreement entitled 'Works Contract'. The Works Contract was the basis for the contracts later offered for both Contract 003 and Package 101. Leighton's standard Works Contract had several parts:
(a)the Works Contract Instrument;
(b)the Works Contract Conditions;
(c)the Works Contract Special Conditions;
(d)the Annexures;
(e)the Specifications and Drawings.
The evidence does not reveal whether, or to what extent, the document provided to SDR on 11 May set out relevant Special Conditions and Annexures. Some parts of it may have been blank.
Particular clauses, and especially those to which SDR directed its commercial qualifications, are dealt with in more detail later in these reasons.
On 13 May, SDR provided Leighton with a written target price submission for the offsite fabrication and site installation of 10 x 10,000 tonne storage cells. Leighton responded requesting a breakdown of total man-hours and all contingency allowances within the price structure.
On 17 May, Leighton advised SDR and others that they had been asked by CBH for all subcontractors to revisit prices on an urgent basis. Subcontractors were asked to advise Leighton of the cost implications of increases in site allowance, project incentive payments and R&R schedules in the EBA.
On 18 May, SDR provided proposals, including costs associated with the proposed changes to allowances in the EBA.
On 20 May, SDR provided a price schedule (as requested) for a project of five cells only. On 24 May 2004, it sent a price schedule 'for the option of 10 x 6,000 T Cells based on the cells being identical to those constructed in Esperance'.
On 27 May, CBH wrote to SDR, copied to Leighton, in these terms:
Further to our previous advice that you are the nominated fabricator of the new grain storage cells for our upgrade works at Albany we would like to confirm that subject to agreement on contractual conditions with Leighton Contractors there will be 10 x 6,000 tonne cells constructed as part of the project.
Under these circumstances we would like you to reaffirm that you were still committed to the project since we understand that you are under pressure from other clients regarding SDR resources.
On 28 May, Leighton requested SDR and other contractors to have their new scope of work available for review by close of business on Friday, 4 June, followed by their revised price no later than noon Friday, 11 June.
Because communication was primarily by email, there was a degree of informality. There was no standard practice of identifying a work number or contract number in the subject heading of each email. I infer that the sequence of emails, from 13 to 28 May, relates to Contract 003. As Leighton and SDR were also discussing the Package 101 Works, there is the possibility of some confusion.
At this stage, it may be clearer if the dealings regarding each contract or package are dealt with separately.

Contract 003

June 2004

On 10 June 2004, Mr Lazidis wrote to Leighton, by email, regarding detailing. He concluded, 'it is important for me to know ASAP what work I can proceed with, so it would be preferable that when I come in I can go away with sections that are determined and a timetable for the rest'.
On 11 June, by email, Leighton provided drawings for SDR to commence detailing the cells (Agreed Fact 9). During the following days, arrangements were made for the delivery of steel plate to SDR.
On 17 June, by email, Leighton provided a delivery schedule. SDR provided the balance of its schedules for the proposed contract for Package 101, and its proposed commercial qualifications and technical qualifications for Package 101 (Agreed Fact 10). Commercial qualifications were stated in relation to 12 clauses of the Works Conditions, and six clauses of the Special Conditions (Commercial Qualifications). SDR also stated nine technical qualifications. Because the terms of the Works Contract were common to both packages, the Commercial Qualifications are relevant also to the dealings on Contract 003.
On 21 June, SDR and Leighton exchanged correspondence regarding the schedule for delivery of steel for Contract 003.
On 21 June, Leighton requested that SDR advise regarding total man hours for shop fabrication and painting, total man hours for site erection and painting, the number of weeks that cranes were required, and any other requirements from Leighton under the current arrangement for 10 x 6,000 tonne cells. The email also requested a method statement on how SDR intended to erect the cells so that Leighton could allow for the other works in the area.
On or about 22 June, SDR provided Leighton with its revised construction submission for the fabrication and site erection of 10 x 6,000 tonne cells, including its costs schedule (Agreed Fact 11). The submission included, as appendix B, a broad summary of the commercial and site conditions, which included:
•Liquidated damages will apply to agreed Contract completion dates.
•Retention will apply at 10% to a maximum of 5% of Contract Value reducing to 2.5% for defects liability period of 15 months at issue of acceptance certificate. Bank guarantees are acceptable in lieu of cash retention.
•Contract will be to current Australian Standard for the supply and installation Contract inclusive of special conditions similar to that executed between SDR and Transfield on CBH Esperance upgrade.
•The contractor has based his price on the Enterprise Bargaining Agreement (EBA) issued by the WACCI dated March, 2004.
On 22 June, SDR provided clarification on various matters relating to pricing.
By about 26 June, SDR had let a subcontract for shop detailing of the Contract 003 Works and accepted delivery of free issue steel at its workshop in Kwinana (Agreed Fact 12). SDR had commenced the Contract 003 Works by about 26 June, after Mr Cawkwell had authorised it to do so (Agreed Fact 13). It had not, to then, been provided with a proposed Works Contract for this contract.
Schedules for delivery of steel, which were exchanged between Leighton and SDR and marked up by Mr Lazidis, show that by June 2004, deliveries were scheduled into February 2005.

July 2004

On 9 July 2004, SDR by email provided a schedule to Leighton for the construction of the cells, advising that some of the procurement and fabrication times may need to be tweaked, but that site activities were fixed (Agreed Fact 14). The programme provided for a start date on 14 June 2004 and a finish date on 16 August 2005, with contingencies possibly extending that date to 15 February 2006.
Also on 9 July, Leighton and SDR proposed to conduct a Package 101 tender meeting, the agenda for which included contractual issues and qualifications. Again, those matters may have been common to both proposed contracts. There are no minutes from that meeting in evidence.
On 12 July, Leighton hosted a 'Kick Off Meeting' with representatives of SDR, CBH and others (Agreed Fact 15). I assume the meeting was in relation to the whole project.
By 15 July Leighton and SDR had agreed a lump sum price of $12,934,593 for the Contract 003 Works (Agreed Fact 17). On that day, SDR forwarded an email attaching 'what would be our qualifications to the proposed Works Contract Document'. The email further stated:
I have left the qualifications to the Special Conditions of Contract from the Civil Tender [that is, from the Package 101 tender] because I haven't seen any Special Conditions for the Cells.
I will return later in these reasons to the Commercial Qualifications, including those that were not agreed.
Later on 15 July, Leighton sent to SDR, by facsimile, a letter of intent to engage SDR as subcontractor, signed Geoff Cawkwell, Project Manager (Agreed Facts 18, 19). The letter contained some errors, and did not include attachments.
On or about 16 July, Leighton caused a corrected version of the letter and a copy of the Works Contract to be delivered to SDR (Agreed Fact 20). It read:
As you are aware, the CBH chairman and board of directors has endorsed the Albany Grain Terminal Upgrade Project as submitted by Leighton Contractors Pty Limited on 7 July 2004.
The necessary contractual arrangements between [Leighton] and CBH (the head contract) are currently being formalised.
Subject to agreement on commercial terms and conditions please accept this letter from [Leighton] as intent to engage SDR Australia as a subcontractor for the above referenced works in relation to the Albany Grain Terminal Upgrade.
A pro‑forma copy of our Works Contract is attached for your review. The final subcontract agreement will be based on these terms and conditions modified as considered as necessary by [Leighton] to match the head contract conditions on a back to back basis.
Prior to formalising a commitment to yourself can you provide comments on the acceptability of the [Leighton] standard terms and conditions of subcontract. Details of the applicable head contract conditions will be provided immediately when available.
I look forward to working with you throughout the project and strengthening the relationship between our respective organisations.
Leighton formally admits that at all times after 15 July 2004, the parties intended that SDR and Leighton would enter into a formal written subcontract after Leighton had entered into the main contract with CBH (Admission 129); and that at all material times the parties intended that they should enter into a formal written subcontract upon commercial terms to be agreed (Admissions 129, 130).
On 16 July, Leighton invited SDR to submit tenders for the first two packages of Additional Works, the Package 105 Works and the Package 114 Works. I deal with the Additional Works separately below. For the present, I note that in submitting tenders, SDR stated that it assumed each package would be treated as a variation to the existing cell construction contract (Contract 003). This statement was repeated in subsequent tenders for other packages.
On 18 July, SDR provided Leighton with a revised construction schedule for the cells together with a first of a series of pro forma weekly progress reports and forecast 'S' curves for site activities (Agreed Fact 21).
On 19 July, Mr Cremin of Leighton forwarded to Mr Lazidis a list of 17 comments under the heading 'Civil Package Issues'. Mr Lazidis responded the same day, with the apology, 'sorry if I've missed anything in the rush'.
One of the issues raised by Mr Cremin was in these terms: 'Quantity takeoff ‑ seek confirmation that scope adequately described from current drawings and that only quantities to be re‑measured'. To this, Mr Lazidis noted:
To price it in this manner, we have reviewed the drawings and have allowed to do the work shown on those drawings based on the [materials takeoff] that you have provided. Therefore, we have allowed for the excavation, forming up, supply and installation of reinforcing steel, placement of cast-ins, supply/placement/finishing of concrete and backfilling and compaction as shown on the drawings, but are reliant on your quantities for the quantum of our price. If your quantities do not include for something like rock excavation or cast-in components (or not enough of them), for example, and they are required we have not allowed for them in our price. We wish to confirm that your descriptions of [bill of quantities] items in general cover the activities that will be undertaken to complete the works, however, we have not determined whether your quantities are correct for each area.
Part of this exchange was in relation to a 'summary of impacts of [SDR's] commercial qualifications' and the 'risk attached to these in $ value'. SDR's qualification to Special Condition 25 (responsibility for costs caused by delays resulting from causes including industrial disputes, safety issues and inclement weather) was listed under this heading and noted as '**** significant!!'.

On 19 July, Leighton provided SDR with a revised construction programme for the project, including the cells. Also on 19 July, Leighton requested SDR to provide copies of all of its insurance policies, including the policy for public liability (Agreed Fact 24).
Later on 19 July, SDR provided Leighton with a further revised construction schedule for the cells, still showing completion (after allowing for contingencies) by 15 February 2006, and the parties worked to that programme as revised from time to time during the performance of the works (Agreed Fact 23).
From time to time during the performance of the works SDR provided further programs and progress reports to Leighton, and Leighton issued further programs and revised programs to SDR (Agreed Facts 25, 26).
On 20 July, Leighton sent SDR an email, subject 'Civil Contract' . I will refer to it again in relation to the Package 101 Works. But it is also relevant to the Contract 003 issues because, in it, Leighton stresses the need for 'a lump sum price based on a defined type of work and drawings'. Leighton referred also to discussion about scope changes, the permissible claims for inclement weather, and extensions of time. The email concluded:
As you can see from the above we are endeavouring to achieve a similar outcome to that which has been achieved with the cells contract so that the exposure to price changes can be managed to the satisfaction of [Leighton] Management. Remember the CBH comment nearly five months ago 'there will be no variations'.
The reference to outcome achieved on the cells contract suggests a degree of agreement which is not consistent with the matters still outstanding on Contract 003.
On 28 July, by email, Leighton advised SDR that its invoices had to be submitted by the close of business that day to be processed that month and that all future progress claims should be received by Leighton no later than the close of business on the last Tuesday of every month (Agreed Fact 29).
On 29 July, SDR submitted its first progress claim for the Contract 003 Works and at all material times thereafter Leighton made monthly progress payments on account (Agreed Facts 30, 31). The format of the progress claim included columns headed: Contract Value Including Variations; Retention; Percent Complete (Previous Period, This Period, To Date); and Money Earned. The progress claim for the period 1 July to 31 July 2004 claimed: the detailed drawings 70% complete, fabrication 3% complete, and 'preliminaries associated with 10,000T Cell option submissions' 100% complete. SDR claimed $199,132.17 (net) after retention of $11,178.51. The document also specifies a total contract sum of $13,025,001, with a maximum retention of $651,250.05. It was accompanied by an invoice for $199,132.17 plus GST.
On 30 July, the parties held a further meeting where they negotiated in relation to the Commercial Qualifications for both Contract 003 and Package 101. They did not reach any final agreement (Agreed Fact 35). The extent to which the parties did agree the Commercial Qualifications is the subject of agreed facts and is discussed in detail later in these reasons.

August 2004

On 3 August 2004, SDR advised Leighton of the names of two subcontractors engaged on the cell construction contract.
On 5 August, Mr Cawkwell sent an email to Mr Lazidis regarding the civils contract (Package 101). As it had for Contract 003, Leighton stated that the award of that contract was 'subject to resolution of commercial terms and conditions' and 'any clauses contained within [the head contract with CBH] that require a back to back arrangement with SDR will be advised and are subject to resolution prior to finalisation and signing of your contract with Leighton' (Agreed Fact 50).
By letter dated 11 August 2004, Leighton advised SDR that all future progress claims relating to the project should state certain details including the relevant purchase order number (Agreed Fact 53).
By fax dated 11 August 2004, SDR advised Leighton that it had received only part of the structural drawings for Annex A2 (the cell contract) which had been promised by 9 August. It advised that delivery dates would have to be pushed ahead by the same number of days as the drawings were late. On 12 August, by email, SDR again advised Leighton about delay caused by the late issue with drawings.
In early August, the parties discussed the need for a document control system. On 16 August, Leighton requested that SDR indicate clearly on all documents the contract to which it related (that is, contract number 003 (cells), 101 (concrete), 105, 106 or 114 (structural)) (Agreed Fact 54). At least for emails, this was regularly if not uniformly ignored.
By this time, SDR was providing weekly reports.
On 18 August, Leighton informed SDR by email that it had not received certain documents it required in relation to Package 101. SDR responded the same day. In its response Mr Lazidis commented:
[We] couldn't do much and can't do much without first getting the go ahead on the job and then the IFC drawings, hopefully now that we have A2 we can get the above information to you in a timely manner prior to the particular work is required to be undertaken on site.
The three structural packages: 105, 106 and 114, were referred to on occasions as A2. I infer that is what Mr Lazidis was referring to.
On 20 August, Leighton sent to SDR a spreadsheet setting out a schedule for off-site fabrication of the cells, asking if there was any impact on completion dates. Mr Lazidis, in response, referred again to IFC drawing delays and technical qualification response delays. Mr Cawkwell responded, including a request for SDR to advise 'what [technical qualifications] remain to be answered'.
On or about 28 August, Leighton provided SDR with its written specification for the Contract 003 Works (Agreed Fact 60). It is an agreed fact that SDR undertook all work necessary to complete the Contract 003 Works including the work referred to in that specification (Agreed Fact 61).
On 31 August, in relation to Contract 003, SDR provided its progress report for August. The accompanying email referred to outstanding matters on behalf of both Leighton and SDR, including the negotiations being carried out by SDR to arrive at an acceptable warranty document with manufacturers of the paint system. Among outstanding matters to be provided by Leighton, SDR stated:
Inclement weather ‑ prior to starting on site we need resolution on who is going to undertake liability for the cost of inclement weather (Agreed Fact 65).
SDR completed the email with a summary, in relation to Contract 003, in these terms:
Whilst we have experienced delays at the front end of this portion of the project (due to engineering), we believe that we are now clear of those problems, and believe that we are now able to meet our project obligations.
Under the heading 'Miscellaneous & Other Contracts', SDR wrote:
We will not be submitting a separate report for the civil and structural fabrication contracts this month, due to the early stages of those contracts … however, as you are aware we have and are continuing to experience significant delays in the receipt of IFC information for both the civil and structural contracts. These delays are having a significant impact on our ability to meet our project obligations.
I trust this provides you with an overall picture of our current status.
On 31 August, SDR also submitted its second monthly progress claim spreadsheet (Agreed Fact 63). For Contract 003, it records substantial progress for items 'Receive Materials' and 'Process Materials', but items for 'Fabricate & Paint' are recorded as 0% complete.
On and from 31 August 2004, SDR made progress claims and Mr Cawkwell, on behalf of Leighton, approved progress payments on the basis that the Package 101 Works should be treated as a variation of the Contract 003 Works, and that the agreed prices for the Contract 003 Works and the Package 101 Works were $12,934,593 and $5,156,947 respectively, excluding variations (Agreed Fact 64).

September 2004

Mr Lazidis attended a subcontractors meeting, on behalf of SDR, on 1 September 2004. The meeting dealt with Package 003, Package 101, and Packages 105, 106 and 114.
On 1 September, Leighton advised SDR that it was holding 10% retention on the monthly progress claims, that 'under the contract' there was no retention requirement but a requirement for 5% security (Agreed Fact 66). The email asked whether Leighton was to use the current retention withheld as part of the security. Mr Lazidis responded on behalf of SDR as follows:
Our contract with LCPL requires:
10% retention of progress claims until 5% of contract value is retained in lieu of security. We will substitute the retention with 2 x 2.5% bank guarantees to act as security once a reasonable amount of retention has accumulated to enable the release of the retention.
I trust this clarifies.
Thereafter Leighton continued to retain 10% of the amounts due to SDR in respect of its monthly progress claims which Leighton held as cash retentions until 5% of the relevant contract sum was held by Leighton (Agreed Fact 66).
On 7 September, Leighton issued a remittance advice advising that on 10 September the amount of $219,045 would be deposited to SDR's bank account (it does not specify on which contract). The remittance advice noted as an 'administration detail' that there was no agreement document. The remittance advice included the statement:
By accepting this payment you certify that you have satisfied all the conditions precedent to payment as set out in your contract with Leighton.
The statement that there was no agreement document was repeated on remittance advices issued on 28 September, 2 November, 30 November 2004. It did not appear on the remittance advice issued on or after 11 January 2005.
On 7 September SDR provided a copy of its worker's compensation insurance certificate to Leighton (Agreed Fact 67).
On 21 September, Leighton requested SDR to change the format of its invoices for its next progress claim to a single invoice containing the progress claim number, original contract value, variations, progress to date, less previous claims, total contract claim, GST component, and total amount payable (Agreed Fact 69). Mr Lazidis replied, on behalf of SDR, 'The one invoice format actually suits me better'.
On 22 September Leighton requested SDR to forward a copy of the paint specification/warranty for the cells (Agreed Fact 70). SDR submitted a draft warranty to Leighton the same day. Despite the difficulty in resolving an acceptable paint warranty, SDR did not dispute that it was required to provide one.
On 27 September, Leighton provided to SDR a copy of a Certified Agreement between Leighton and a major union (the AFMEPKIU) for the CBH Albany terminal project. Leighton advised SDR that the agreement should be used 'in its entirety for all your employees on the Cells Installations at Albany'.
On 30 September, SDR submitted its third monthly progress claim, including claims for Additional Works identified in the statement of claim (Agreed Fact 78). The progress claim included the original contract, and seven variations.
It is an agreed fact (Agreed Fact 79) that on and from 30 September at the latest, SDR made progress claims and Mr Cawkwell on behalf of Leighton approved progress payments on the basis that the Additional Works should be treated as variations to the Contract 003 Works, and that lump sum prices had been agreed for the Additional Works (excluding variations).
It is further agreed that:
(1)by its conduct in administering the works in accordance with SDR's qualifications regarding Works Contract Conditions 5 (retentions) and 18 (insurance), by no later than 30 September Leighton had communicated to SDR that those qualifications were acceptable (Agreed Fact 37);
(2)at various times before and after 30 September the parties gave notices to each other (within the meaning of Works Contract Condition 6.3) for various purposes in connection with the works in accordance with cl 6 of the Works Contract Conditions and that Leighton directed and valued variations in accordance with cl 33 of those conditions (Agreed Facts 80, 81).
On 30 September, Leighton requested that SDR submit ASAP site labour hourly rates (including classifications) for inclement weather and scope changes (Agreed Fact 71). The same request was made to other subcontractors and was not stated to be specific to any particular contract.
Further on 30 September, Leighton informed SDR in an email with the subject 'Paint Warranty' as follows:
We are trying to complete Head Contract document for signing mid next week.
We desperately require the finalised paint warranty for our legal department to review.
We would appreciate this by COB Friday 1/10/04 (Agreed Fact 72).
SDR attended Subcontractors Meetings on 1, 14 and 28 September and Design Progress Meetings on 7 and 24 September. The minutes of those meetings do not record any issues regarding the existence of the contract between the parties.

October 2004

Between 30 September and December 2004, Mr Cawkwell and Mr Lazidis exchanged further emails in relation to the terms of the paint warranty to be provided by SDR pursuant to Works Contract Conditions cl 38 and Annexure E (Agreed Fact 73). On 5 October 2004, Mr Lazidis advised Mr Cawkwell by email, 'We are down to the fine print, but I think it won't be ready for you until tomorrow. I will get it to you as soon as I can'.
On 5 October, Mr Lazidis wrote to Leighton by email with regard to Contract 003, enclosing SDR's progress report for September 2004, and advised: 'We are currently 17.9% complete against a forecast of 20.5%. This is largely due to the initial delays in engineering'. He said that SDR expected to be 'on schedule' in the next few weeks. In listing three outstanding matters to be resolved by Leighton, Mr Lazidis referred to the need to resolve who was going to undertake liability for the cost of inclement weather before starting on site.
Similarly, in relation to the 'A2 Structural' Packages (105, 106 and 114) Mr Lazidis advised SDR was 18.7% complete against a forecast of 28.8%, essentially due to delays in starting, and added:
We expect our end date to be met, however, some interim dates may have some small delays.
On 7 October, at a meeting attended by CBH and Leighton representatives, it was agreed that subcontracts including those for SDR, would be finalised 'subject to the head contract conditions not varying from the existing information'. SDR's subcontract was not, however, immediately finalised.

November 2004

Throughout the latter part of November the parties gave considerable attention to the finalisation of an acceptable paint warranty. The difficulty was not a failure of the parties to agree, but the finalisation of terms which involved a third party (the manufacturer).
On 30 November 2004, Leighton issued a remittance advice to the effect that on 6 December 2004 the amount of $2,057,883 would be deposited to SDR's account. This remittance advice shows as an administration detail requiring attention 'no agreement document'.

December 2004 onwards

On 1 December 2004, Leighton approved a claim by SDR for variations during November, including claims for inclement weather, in the sum of $328,625.61. On 8 December, by email, Mr Lazidis provided signed daily extra work summary sheets supporting the claim.
On 7 December, Mr Cawkwell advised Mr Lazidis that the paint warranty was 'the only item' now holding up the signing of the head contract.
On 9 December, Mr Lazidis provided Leighton with a construction schedule for the cells.
On 5 January 2005, CBH confirmed that the final version of the paint warranty provided on 23 December 2004 was acceptable (Agreed Fact 101).
By about 11 January 2005, Leighton had completed the contract negotiations with CBH and entered into the head contract (Agreed Fact 102).
On 11 January, Leighton sent to SDR a remittance advice that the amount of $2,087,169 would be deposited to SDR's account. The notice regarding the absence of a written contract is, for the first time, absent on this advice.
From about 27 January, at various times, SDR gave Leighton notices of delay and notices of claim under cl 28 of the Works Contract General Conditions for Contract 003 and/or the civils package (Agreed Fact 107).
In early February 2005, SDR submitted notices of claim numbers 35 and 76. Leighton subsequently paid SDR the sum of $1,080,000 in respect of claim number 35 and $230,000 in respect of claim number 76 (Agreed Facts 108, 109). The notices of claim followed the procedure prescribed in the Works Contract.
On 7 February, by fax, Leighton advised SDR of an understanding it had reached with two unions, the CFMEU and the AMWU, regarding conditions including working hours, unused sick leave, travel expenses, site allowances and living away from home allowance. SDR responded by email on the same day, referring to its commercial qualification to special condition 25 of the Works Contract and advising 'we need a direction to pay in accordance with these rate increases', and asking Leighton to confirm that it intended to compensate SDR for any increases in the site agreement from that which was presented by Leighton at the time of tender (March 2004).
On 8 February, Mr Gunnink of Leighton advised SDR that arrangements had been made to enable payment to be made on Package 126. The accounts department, he said, had placed payment on hold because there was no contract in place. Mr Gunnink continued:
That does bring me to the point of the Contract for package 003 and 126 ‑ at the moment I'm still waiting for some feedback/comments from you regarding the rate for [liquidated damages]/separable portions or delivery dates, as well as a few other items from my email of 24 January 2005. We need to get these items sorted out so that the contracts can be in place by the end of this month, to prevent any future problems with payments being held because of contracts not being in place.
Mr Lazidis responded the same day, asking if Mr Gunnink could advise him what was outstanding on those two packages. With regard to Contract 003, Mr Lazidis said 'no one has spoken to me about it for about six months'.
Again on the same day, Mr Gunnink replied by email. He prefaced his remarks on Contract 003 with the comment 'I haven't really looked at in detail yet'. Email facilitates speed of response, and also facilitates response without full consideration. This case generally illustrates how speed and efficiency are achieved, but at a cost in lack of documentation and precision.
Mr Lazidis replied, on the same day, in relation to the qualifications to cl 26.1 and cl 36 on Package 126.
On 9 February 2005, by email, Mr Lazidis put a proposal to Mr Gunnink, in relation to the release of the cash retentions. On 10 February 2005, SDR provided bank guarantees to Leighton in substitution for cash retentions. On 21 February 2005 and 25 February 2005, Leighton released the cash retentions (Agreed Facts 115, 116).
During February, the parties also corresponded regarding the scope of work for Contract 003, for the purpose of incorporating it in the contractual documents. The correspondence did not involve negotiation of terms, but identification of what had been agreed.
On 9 March 2005, Leighton referred to earlier correspondence in which SDR had offered to take on the risk inclement weather for specified lump sums, and asked whether it was still prepared to take on the risk. On the same day, SDR responded that it was not.
On 18 March, Mr Gunnink requested SDR to search for missing correspondence relating to the price for Package 148 so that Mr Gunnink did not 'miss any clarifications/exclusions that need to go into the contract' for the Contract 003 Works (Agreed Fact 117).
In about May 2005, a dispute arose between SDR and Leighton regarding the Package 101 Works. On 19 May 2005, SDR sent a fax to Leighton, apparently following a request that SDR start work on 23 May 2005 on certain of those civil works. SDR requested Leighton to identify the power it relied upon to direct SDR to carry out the work. In doing so, it asserted:
No formal contract was entered into between SDR Australia Pty Ltd and Leighton Contractors Pty Ltd for the civil works and no commercial conditions of contract have been finalized.

Leighton responded the following day:
It is agreed that no formal instrument of agreement has yet been signed. However, a Contract does exist, consisting of the offer and acceptance. The offer and acceptance documents include, amongst other things, the Works Contract Conditions, SDR's Commercial Qualifications and SDR's 'Civils Programme rev 1'. These are all express terms of the Contract, and the obligation of each party is to fulfil the requirements of these terms.
On 23 May 2005, Leighton requested SDR to carry out the works, while stating that it accepted that it 'would not be an acceptance of contractual liability to do so and that [SDR] does so without prejudice to the position stated in its letter to Leighton dated 19 May 2005'.
From then, the parties have been in dispute regarding the existence of a contract for any of the works. Despite the dispute, they maintained a commercial relationship over many more months, during which SDR continued to work on the project.
On 17 June 2005, Mr Gunnink again informed SDR that he appeared to be missing some correspondence and wanted to make sure that all clarifications and exclusions were picked up in the contract document (Agreed Fact 119). I read this request as merely clarifying what he had asked for in March.
At various times after mid‑2005, SDR applied for extensions of time to the date for substantial completion, as defined in the Works Contract Conditions. These applications were on occasion based on inclement weather, on other occasions were based on other causes (such as the unavailability of a crane). SDR, when giving notice of these delays, notified Leighton that should the delay result in an extension of time to the contract, it intended to claim the additional costs and expenses 'in accordance with the contract'. There are many such examples. The weight which can be given to them, despite their large number, is tempered by the position SDR stated in May.
From about 24 October 2005, SDR gave notices of dispute to Leighton in accordance with cl 46 of the Work Contract Conditions (Agreed Fact 122).
In about late October 2005 SDR submitted a notice of claim, and Leighton subsequently paid the sum of $15,939 in respect of that notice of claim (Agreed Fact 123). Thus, many months after the parties had entered into the dispute about whether their relationship was governed by contract, they continued to regulate their relationship and potential disputes by reference to the terms of the Works Contract, or at least some of them.
On 28 October 2005, Leighton gave notice to SDR of the agenda for a meeting to be held the following week. Items for discussion included: notices of dispute ‑ miscellaneous variations/claims; extension of time entitlement; labour agreement; and 'Contract Conditions ‑ Execution/finalisation of the sub‑contract/s'. The subcontracts were not, however, executed.

Package 101

In the course of administering the tender for the Package 101 Works, Leighton first provided SDR with a copy of its Works Contract. On 31 May 2004, Leighton formally invited SDR to submit a tender for the Package 101 Works. The tender closing date was 4 June 2004 (Agreed Fact 8).
Leighton provided the Package 101 tender drawings to SDR on 1 June 2004.
In a series of emails on 16 June 2004, SDR provided Leighton with a price schedule and methodology for two alternatives for Package 101 (in each case stating that qualifications and schedules would follow shortly). Later the same day, SDR wrote again by email stating:
As discussed, the mobilisation/preliminaries for this portion of the scope of work may seem high because our offer is subject to us undertaking the whole of the civil works, so the mobilisation/preliminaries for the whole of the civil works has been included in this offer.
SDR provided figures to enable an assessment of the proposal on a stand alone basis, stating 'our qualification stands that this must form part of the total civil contract, to enable you to assess our proposal for A2 on a stand‑alone basis, the mobilisation/preliminaries figures would come down by $89,234'.
On 17 June, by email, Leighton provided a delivery schedule. SDR provided the balance of its schedules for the proposed contract for Package 101, and its proposed Commercial Qualifications and technical qualifications (Agreed Fact 10).
At the same time SDR also provided the remaining schedules to its tender including details of insurance held, proposed project staffing, proposed subcontractors, and day works labour rates.
On 18 June at Leighton's request, SDR arranged for policy wording and certificates of currency for its policies of insurance to be delivered to Leighton.
Also on 18 June, Leighton requested SDR to confirm that prices submitted were based on EBA conditions which were forecast to apply from 1 January 2005 'as discussed in recent meeting'. The email of 18 June appears to be the only record of this meeting.

July 2004

On 9 July 2004, Leighton and SDR proposed to conduct a Package 101 tender meeting, the agenda for which included contractual issues and qualifications. There are no minutes from that meeting in evidence. On 13 July, referring to the meeting on 9 July, Leighton requested further information from SDR regarding its experience in works of the nature of the Package 101 Works. SDR responded the same day.
On 20 July, Leighton sent SDR an email, subject 'Civil Contract' in these terms:
Discussions have been held with senior management in regards to SDR being the nominated contractor for the civil works at Albany Grain Terminal. The main catching point for this to be approved by senior management is the scope definition and the fact that the price that has been developed is based on a schedule of rates applied to internally assessed quantities and not a lump sum price based on a defined scope of work and drawings.
Essentially for SDR to be the civil contractor the pricing structure and commercial terms have to be further negotiated and defined to provide a defined scope and lump sum price.
The aim of the next few days is to complete the process of defining the scope of works and commercial terms to the satisfaction of SDR and Leighton such that the civil works contract can commence.
To this end please make yourself available for a meeting at 9.00 am on Thursday 22 July 2004 to discuss the following:
•The scope is to be defined by Leighton in writing and with direct reference to drawings.
•Any scope changes will be priced based on the schedule of rates as submitted by SDR.
•Inclement weather is to be defined in terms of what will be claimed (ie only man‑hours not plant, equipment and supervision).
•Extension of time claim needs to be defined based on a schedule (supplied by SDR) defining float allowances for plant, equipment and supervision.
•A methodology statement is required for deep excavations in regards to sheet piling and dewatering. Are you able to provide something prior to Thursday?
•The final price is to be a lump sum price inclusive of mob/demob and all preliminaries.
As you can see from the above we are endeavouring to achieve a similar outcome to that which has been achieved with the cells contract so that the exposure to price changes can be managed to the satisfaction of Leighton management. Remember the CBH comment nearly five months ago 'there will be no variations'.
On 28 July, SDR provided Leighton with a price schedule 'as discussed' for civil works, setting out a lump sum payment for each of nine components and a total value of work. It appears to be responsive to the pricing issues raised in Leighton's email of 20 July.
On 29 July, SDR provided Leighton with a programme for the performance of the Package 101 Civil Works (Agreed Fact 34). The accompanying email stated that the programme was prepared
based on an award today and starting on site 3 weeks from award. So we just have to adjust based on a contract award date. Inclement weather is not built into it, so if we lose a week, you have to add a week … Sorry for the broad brush of a schedule but we can tidy it up over the coming days.
Again on 29 July, Leighton wrote to SDR, following a meeting the previous day, suggesting the possibility of savings in cost and time using alternative methods of construction and requesting SDR to consider and forward revised costings taking those alternatives into consideration. Mr Lazidis responded, itemising savings which could be achieved using alternative construction methodologies (Agreed Fact 33).
On 30 July, the parties held a further meeting where they negotiated in relation to the Commercial Qualifications for both Contract 003 and Package 101. They did not reach any final agreement (Agreed Fact 35).

August 2004

On 2 and 3 August 2004, SDR provided Leighton with lump sum prices for further works or items in connection with the Package 101 and Package 106 Works (Agreed Facts 39, 40, 42).
On 4 August, by email, SDR offered to undertake the inclement risks for the civil works for a lump sum of $165,199 on the basis that the party undertaking the risk takes it on from the commencement of the contract. Leighton did not accept.
By not later than 5 August the parties agreed that the lump sum price for the Package 101 Works, including the additions and reductions to the scope of works agreed to that time, was $5,156,947.08 (Agreed Fact 48).
On 5 August 2004, Mr Cawkwell sent an email to Mr Lazidis regarding the civils contract (Package 101) in which he wrote:
We have pleasure in advising that SDR have been awarded the civil contract for the CBH Albany Grain Terminal Upgrade.
The award of this contract is subject to resolution of commercial terms and conditions including extension of time costs and inclement weather costs.
As you are aware, the head contract between CBH and Leighton is now being reviewed and should be finalised by the end of August. Please note, as discussed, that any clauses contained within this document that require a back to back arrangement with SDR will be advised and are subject to resolution prior to finalisation and signing of your contract with Leighton (Agreed Fact 50).
On 18 August, Leighton informed SDR by email that, on a review of documentation in relation to the civil contract Package 101, it had noted that Leighton had not received required documentation. Leighton requested SDR to provide seven documents in accordance with the specifications. Leighton said that it needed to get those documents approved so as not to incur delays on site.
SDR responded the same day advising when documents would be provided. In that response Mr Lazidis commented:
[We] couldn't do much and can't do much without first getting the go ahead on the job and then the IFC [Issued for Construction] drawings, hopefully now that we have A2 we can get the above information to you in a timely manner prior to the particular work is required to be undertaken on site.
On 23 August 2004, SDR sent an email to Leighton stating:
I will need a letter of contract award that is somewhat more definitive than what we currently have (including a scope of work and a list of documents that form this contract).
Your urgent attention to this matter will be appreciated.
The material before the court does not disclose what prompted this request. On 24 August, Leighton sent to SDR a 'Scope of Works for the Construction of Concrete Works' for the project (W1136‑SOW‑CV‑0001) (Agreed Fact 55). There is no evidence that Leighton sent a more definitive letter of award and list of documents comprising the contract.
By about August, SDR had commenced some of the excavation work for Package 101 after that was authorised by Mr Cawkwell on behalf of Leighton (Agreed Fact 56). SDR undertook all work necessary to complete the Package 101 Works, including the works referred to in the Scope of Works (Agreed Fact 59).
On 25 August, Leighton raised concerns, originally expressed by their site superintendent about the level of engineering input SDR was putting into the beginning of the works on site.
Also on 25 August, Leighton sent an email to SDR and others, asking them to ensure, if they were intending to use subcontractors, that they furnish insurance details to Leighton in advance of any work being undertaken on site, and that subcontractors 'be made fully aware of the EBA rates etc'. SDR complied and requested its insurance broker to put together a check list of required insurances.
On 26 August, SDR sent an email setting out comments on the Scope of Work that had been issued, noting 'anomalies with my records'. The email included the following:
Also I note that you have not incorporated our qualifications. How will these be incorporated into the contract document?
The email then set out eight matters (Agreed Fact 57). The eight matters include some of the technical qualifications raised by SDR on 17 June 2004, but the email also shows some issues of commercial risk were still to be resolved:
We have made no allowance for rock excavation in our rates, or removal of rock in the sheetpiling quotations …
Our offer is based on the current pricing for steel (ie reinforcing steel, sheet piling, etc). As we have been led to believe that there is another price increase imminent (July), our rates and prices are based on being able to place orders in June for this material so as to avoid any price increase.
We have made no allowance to support existing structures, and Leighton will need to allow access for construction equipment into the A2 storage shed (such as an 11 metre high clearance for the driving of the sheet piles).
We have allowed for the dewatering on both options (C28 sheetpiling and open‑cut), but have made no allowance for any settlement of surrounding structures. Whilst we do not expect this to be an issue because of the structures that are near the excavations, we would need to undertake a detailed site review with Leighton and our dewatering sub‑contractor to verify this.
We have allowed for the sheetpiling to the depths required to construct the civil works as shown on the engineers drawings. We have made no allowance for any additional depth in sheet piling that may/or may not be required for any added excavation as contemplated in the Geotechnical Investigation.
Other matters referred to in SDR's email of 26 August as 'qualifications' do not appear in the technical qualifications raised in June ‑ at least in the version of the document in the trial bundle.
On 30 August, SDR advised Leighton that it had placed a subcontract for dewatering on the Package 101 contract.
On 31 August, SDR provided to Leighton a statement of its proposed methodology and schedule for the Package 101 Works for Leighton's review and acceptance. Leighton's project engineer, Sean Cremin, responded the same day with a review of the methodology indicating areas where it was not acceptable (including waterproofing). The proposed methodology as submitted by SDR was not approved.
Mr Lazidis responded the same day, referring to the earlier comments he had made about the changes to the wording on the Scope of Work regarding waterproofing. He continued:
We have to resolve that issue so that we can finalise our methodology and satisfy the contract's requirements for waterproofing.
The email continued:
To extend the waterproof membrane to ground level using SDR's methodology, based on the tender drawings, there would be an additional 411 m² of waterproofing at $87/m² (if we are to use the Parbury product you refer ‑ or less than a third of that rate if we can use Bituthane 3000), requiring a variation to our tendered price by $35,757 (there would be a further 180 m² if you want the C40/41 boot pits also lined, as they are above the watertable ‑ ie a further $15,660). Please advise if this is the method of application you require us to incorporate.
On 31 August, Mr Cremin replied also to Mr Lazidis' email of 26 August (Agreed Fact 62). He responded to each of the 'anomolies' noted by Mr Lazidis. His response deals with at least some of SDR's questions concerning the technical qualifications, if indirectly. For example, Mr Cremin states that the reference to the C28 tunnel is no longer applicable; and that it is the contractor's responsibility for the protection of existing buildings or structures which may be affected by work methods adopted. More generally, Mr Cremin refers to SDR's responsibility 'to do a detailed take-off for all the required work and as per contract undertake to inform themselves of such issues'. This appears to refer to Works Condition 8 of the Works Contract ‑ a condition which was not then, or later, agreed.
On 31 August, SDR also submitted its second monthly progress claim spreadsheet, including a claim for work done in relation to the Package 101 Works (Agreed Fact 63).
On and from 31 August 2004, SDR made progress claims and Mr Cawkwell, on behalf of Leighton, approved progress payments on the basis that the Package 101 Works should be treated as a variation of the Contract 003 Works, and that the agreed prices for the Contract 003 Works and the Package 101 Works were $12,934,593 and $5,156,947 respectively, excluding variations (Agreed Fact 64).

September 2004

Mr Lazidis attended a subcontractors meeting, on behalf of SDR, on 1 September 2004. The meeting dealt with Package 003, Package 101, and Packages 105, 106 and 114. The minutes record for Package 101 'start date Annex A2 ‑ access on Monday 6th Sept'.
At 1 September, further discussions were still required with regard to the scope of the Package 101 contract. The issue was noted as resolved at a meeting on 28 September, although the minutes say nothing more.
On 7 September SDR provided a copy of its worker's compensation insurance certificate to Leighton (Agreed Fact 67). SDR obtained public liability insurance and provided details some time after this (Agreed Fact 68).

October 2004

On 5 October 2004, in an email outlining progress on each package, Mr Lazidis noted: 'the civils report just states progress, without an 'S' curve to monitor progress, as access dates and construction schedules have not been finalised'. He further advised that any further steel would incur price increases that were put in place at the beginning of October.

The Additional Works

Packages 105, 106 and 114

On 16 July 2004, Leighton invited SDR to submit a tender for fabrication and supply of structural steel work for part of the project (the Package 105 Works). SDR submitted a tender for a lump sum on 22 July 2004. The tender contained a list of qualifications including a list of specific items for which allowance had been made, and those for which allowance had not been made, and rates for variations. Among the qualifications, the tender stated:
We have assumed that this would be treated as a variation to our existing Cell Construction Contract.
This statement was repeated in subsequent tenders for packages of works.
Also on 16 July, Leighton invited SDR to submit a tender for supply of conveyor tippers for Annex A2 (Package 114 Works), and SDR submitted its tender (with qualifications and specified items allowed for and those excluded) for the lump sum of $32,349 on 22 July (Agreed Fact 28).
On 21 July, Leighton invited SDR to tender for detail, fabrication and supply of structural steel work for a load in facility (Package 106 Works). On 2 August, SDR submitted a proposal for a lump sum, but subject to a list of qualifications, including rates for variations.
On 2 and 3 August, in connection with the Package 101 and Package 105 Works SDR provided Leighton with lump sum prices for additional works or items (Agreed Facts 39, 40, 42).
On 4 August 2004, SDR, by email, confirmed completion dates for the Package 105 Works of 10 September 2004, for the Package 106 Works of 27 September 2004, and for the Package 114 Works of 13 September 2004 (Agreed Facts 43, 46, 47). The completion dates are far removed from those set out in a progress report later submitted by SDR on 20 September 2004.

The conduct relied on by Leighton after 15 July is pleaded in par 2(c)(x) to (xv) of its defence. Some of these matters are not in dispute.
On 18 July 2004, SDR provided Leighton with its programme for the works, including the Date for Substantial Completion. The programme was revised from time to time. In particulars, Leighton identifies two documents (one of them an email) said to be programmes provided by Leighton before 30 September 2004. Otherwise it relies on programmes provided after 21 April 2005.
SDR provided progress reports with respect to Contract 003. It is an agreed fact that on 18 July 2004 SDR provided Leighton with the first of a series of pro‑forma weekly progress reports and forecast 'S' curves for site activities. In particulars of the defence, the great majority of the reports on which Leighton relies are dated after April 2005.
Leighton provided SDR with its written specification for the works, issued for construction, on 28 August 2004.
SDR undertook the works in the written specification.
The parties did various things in accordance with (or at least consistently with) various clauses of the Works Contract General Conditions: SDR obtained insurance cover (cls 18 and 19); Leighton retained 10% of monthly payments; and SDR provided security in substitution for cash retention (cl 5). SDR made progress claims and Leighton made progress payments (cl 35): three progress claims were made before 30 September 2004.
The parties also gave notices to each other under cl 6. Leighton directed and valued variations (cl 33).
SDR gave notices of dispute, notices of claim, and notices of delay under cl 36, but none of these was before 30 September 2004. Leighton does not rely on them in its contract claim. The vast majority of all notices and claims were made after May 2005, after SDR had disputed the existence of a contract.
Leighton further relied on the assertion that it did not require the terms of the Works Contract to be varied to match the terms of the head contract with Leighton, and did not require SDR to execute a written contract. In circumstances where the head contract was not completed until January 2005, I am not satisfied that this bears on the existence of a contract concluded by 30 September 2004.
Except as set out in its Commercial Qualifications, SDR did not communicate to Leighton that any of the proposed terms of the Works Contract were not acceptable to it. Leighton submitted, in general terms, that by its conduct SDR agreed to the balance of the conditions. It further submitted, again in general terms, that none of the unresolved Commercial Qualifications was fundamental to the operation of Contract 003 and the failure to agree those matters did not affect the making of a concluded and legally binding agreement as to the balance.
In determining the intention of the parties it would normally be important to have an understanding of the commercial context in which the dispute arises. Neither party led expert evidence, and there is no evidence about what the parties would ordinarily expect to be covered by their contract in a project of this nature. The best evidence I have on that question is to be found in the actual communication between the parties, and the matters which were in fact included in the Works Contract provided by Leighton to SDR.
For the following reasons, I find that there was no concluded contract.
First, Leighton's position that the parties, by their conduct, demonstrated an intention to contract without a formal written agreement requires, in practical terms, a finding that Leighton manifested that intent despite what it had said in its letter of 16 July, and despite the terms of its standard contract. The letter of intent patently discloses an intention that the conclusion of a legally binding agreement was to await the execution of a formal contract. A month later, Leighton expressed a similar reservation, in advising its intention to offer the contract for Package 101. And it did so again in December, when asked to confirm the award of Package 126. A concluded contract may still be extracted from the parties' later conduct despite the terms of the 15 July letter, but it is an important part of the context in which to evaluate the parties' later acts and communications. In particular, to the extent that Leighton relies on silence or inaction by SDR, that conduct must be viewed against what was written in July and later repeated.
Second, the letter of intent said that the contract was to be based on the terms and conditions in the Works Contract, modified as considered necessary by Leighton on a back to back basis following the conclusion of the head contract. That was repeated in August 2004, in regard to Package 101. Leighton and CBH concluded their contract on about 11 January 2005, sometime later than Leighton and SDR may have expected, and after Leighton says its contract with SDR began. While Leighton did not advise SDR of any terms to be modified by reference to the head contract with CBH, there was no occasion when it abandoned that reservation.
Third, the letter of intent must be read with the Leighton Works Contract, a copy of which Leighton provided to SDR for its review. It is, after all, the document which contains the majority of those terms which Leighton says the parties have established by their conduct. Clause 2 of the Works Contract General Conditions contemplates that the Works Contract would on execution operate retrospectively to the earlier of Leighton's written acceptance of the contract tender or offer, or the commencement of work. Clause 3 provides that the Works Contract is to contain the entire agreement. Other clauses, such as cl 7, emphasise that the entitlements of the contractor are limited to those set out in the written agreement.
More generally, the contract provides in detail for such matters as programs, delay and acceleration, variations, and valuation. The agreement about scope of work, price and time for completion cannot be isolated from the many and detailed provisions by which those essentials may be modified. Some of those matters were subject to qualifications
Fourth, it is necessary to be able to identify the contract which the parties have formed. The facts which have been agreed include specific conduct by each party which is referrable to some of the terms of the Works Contract. While the conduct relates to only a limited number of terms, it includes clearly significant clauses. Perhaps most importantly, from its first claim on 29 July 2004, SDR submitted monthly progress claims and Leighton paid on those claims, consistently with cl 35. But to succeed, Leighton requires the court to infer a tacit acceptance that the parties assented to be immediately bound by most of the other detailed terms.
There are a number of alternative inferences which can be drawn from the parties' conduct: the parties may have conveyed a mutual understanding that they were presently bound by the contractual terms, either all of them or those not qualified; or they may have acted as if they were presently bound by a limited number of contractual terms sufficient to conclude a bargain, with others to be agreed. Leighton pressed one or other of these alternatives, more strongly the second. Counsel for Leighton argued that this case falls into the fourth class described in Masters v Cameron: where the parties are content to be bound immediately and exclusively by the terms which they have agreed upon, whilst expecting to make a further contract in substitution for the first contract containing by consent additional terms. This was not said to arise immediately when SDR responded with its qualifications to the conditions of the Works Contract, but was to be inferred from their subsequent conduct. Counsel said:
What we say is that by 30 September we were content to be bound immediately and exclusively by the terms which we had agreed whilst expecting when the head contract was executed - expecting upon that happening to make a further contract in substitution for the first contract containing by consent additional terms, and if that consent couldn't be obtained then no additional terms would be implemented. (ts 233; see also at ts 325-326)
But there is another alternative: that the parties anticipated a contractual relationship and conducted themselves on the basis that while they were not presently bound, they would in the future enter a contract. They continued to negotiate and to perform the work in the expectation that this would occur. This may not be uncommon (see, for example, Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 [117]), although whether it is common in the case of such a substantial construction project was not the subject of evidence. The evidence does not satisfy me that the alternatives pressed by Leighton are to be preferred. This is particularly so when consideration is given to the uncertainty about what the terms of the contract would be.
Fifth, and in my opinion it is a critical factor, regard must be had to the way in which SDR put forward its qualifications. SDR expressed only a limited number of qualifications ‑ some of which were resolved. But it is not possible, from the parties' conduct, to infer agreement by either party to a contract containing those clauses that were not qualified.
The two emails setting out the qualifications, initially on 17 June 2004 with regard to Package 101 and then on 15 July with regard to Contract 003, were both informal. On 15 July 2004, SDR had not yet seen the proposed special conditions or all of the schedules for the cells contract. It later received issued for construction drawings, but the evidence does not disclose when, or whether, it later saw all of the other conditions or annexures.
SDR's statement of its qualifications cannot be construed as if it was intended to be a contractual document, or was intended to comprehensively state the terms on which SDR would contract. The qualifications were, in varying degrees, cryptic. I have set them out earlier in these reasons. For the present I refer to the various expressions: 'we assume that the contractor will be able to recover additional costs'; 'our prices and rates are based entirely on the quantities and descriptions provided' (this in response to cls 8 and 9, under which SDR would assume responsibility and financial risk for the completeness, adequacy, accuracy and content of site information and bills of quantity); SDR 'will require a right to recover loss or damage'; 'we accept this clause on the basis that the contractor will be reimbursed'. In essence, the conditions of the Works Contract required SDR to assume the commercial risk of omissions, ambiguity and discrepancies in the contractual documents, incompleteness and inaccuracy in estimates of quantities, and knowledge (or ignorance) of the site conditions. SDR did not accept that risk. This was a matter for resolution by mutually acceptable terms, not simply by deleting or deferring resolution of the subject clauses.
The unresolved qualifications may not have affected terms that were fundamental to the existence of an agreement. Even were this so, and it is a separate question, I am not satisfied that the evidence supports a conclusion that Leighton and SDR ever manifested an intention to contract on the balance of the terms, with the qualifications to be resolved at some later date.
Finally, Leighton presses for a finding that the parties agreed to be bound by terms of the standard Works Contract, to the extent that SDR did not state a qualification. But the balance of the express terms of that contract would override the qualifications which SDR required.
As a separate matter, it is true that SDR repeatedly and consistently wrote in its emails of the existing contract or the agreement. It is an important fact, but is not conclusive. SDR referred to the existing contract as early as 22 July 2004, when tendering for the Package 105 Works. Even on Leighton's case, a contract had not been formed by then. SDR's use of the language of contract and agreement is consistent with the expectation, objectively demonstrated by both parties, that they would later execute a formal agreement. I also take into account the degree to which each party responded quickly and informally, normally by email, and on occasions expressly without full consideration of the particular matter that had been raised. And the question again must be, when either party refers to their contract or agreement: 'What contract?' Even in its pleaded case, Leighton could not answer that question, referring to a contract on the Qualified Works Terms or a contract comprising certain but not all of them, if that is found 'on a proper construction'.

Package 101

Although the questions regarding Package 101 are distinct in some ways, my reasons for not finding that there was a concluded agreement are essentially the same. The unresolved qualifications were essentially the same for Package 101 and Contract 003.
There are some additional matters that require comment. Leighton pleads that the contract was concluded by the parties' conduct. It also pleads at par 10(l) of its defence that by its letter of 5 August 2004 it awarded the contract to SDR, and would rely on the full meaning, terms and effect of that letter at trial. The letter of 5 August 2004 does advise 'SDR have been awarded the civil contract'. But that is immediately followed by the condition that the award of the contract is subject to resolution of commercial terms and conditions.
In my opinion, there was no concluded contract on 5 August. In submissions counsel for Leighton did not submit otherwise: see, particularly at ts 326 ‑ 327.

The Additional Works

Leighton pleads that each of the Additional Works packages was a variation to the Contract 003 Works, and was governed by the Qualified Works Terms. It does not argue for a stand alone contract for any of them. In my opinion, this is the correct approach. In tendering for each package, SDR expressly qualified the tender by the assumption that the package would be a variation to Contract 003, and, by implication, would be governed by the terms of the contract to be entered for those works. The conduct relied on by Leighton is, essentially, the conduct said to give rise to Contract 003.
The evidence shows, for each of the Additional Works packages, a tender by SDR for defined works, with an agreed lump sum. Were it not for the qualification, on each occasion, that the particular package would be a variation to Contract 003, a separate agreement may have been formed.
As a result, I find that the parties did not conclude a contract on the Qualified Works Terms governing the Additional Works.

Package 126

The facts differ slightly for this package. When SDR wrote that it was still to be advised formally of the award of this contract, although (SDR said) a Leighton employee had advised it verbally, Leighton responded on 13 December 2004 with a letter of intent to enter into a formal contract, subject to acceptance of conditions to be finalised. Leighton then stated the basis on which it would accept financial liability should the contract not proceed. SDR and Leighton negotiated about how SDR would be paid on this basis, resulting in the further letter from Leighton on 14 December.
The meeting of 15 December 2004 was expressly on the basis that completion of a contractor checklist did not constitute an award of the contract. There is nothing between 15 December 2004 and 8 February 2005 to change the position stated in the letter of intent. It is true that there was further agreement on some of the conditions of the contract, but no agreement to be immediately bound by any of them. On 8 February, Leighton was still expressing the need to sort items out 'so that the contracts can be in place by the end of the month'.
While for this package there was a greater degree of agreement about the conditions in Leighton's standard contract, the letters of 13 and 14 December were explicit that the parties' obligations would be subject to the signed contract, and specified SDR's rights if that did not happen. The parties' later conduct, when viewed in the context of those letters, is not sufficient to demonstrate a concluded contract.

Estoppel

Leighton says that SDR is estopped from denying that the various works packages are governed by the Qualified Works Terms and were required to be substantially completed by the date for substantial completion.
Leighton relies on the principle that 'the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations': see Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, 547; Grundt v The Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674 ‑ 675; Legione v Hately [1983] HCA 11; (1983) 152 CLR 406, 4332 ‑ 4333; Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387.
Here, Leighton pleads an estoppel based on a series of representations from SDR's conduct. Those representations must be sufficiently clear and unambiguous before the law will find that it is unconscionable for SDR to deny responsibility for the detriment which arises because Leighton has relied on them. I have found that SDR's conduct did not give rise to a contract. A representation which is insufficient to give rise to a contract may still give rise to anestoppel: see Australian Crime Commission v Gray [2003] NSWCA 318 [190] ‑ [200]. In Galaxidis v Galaxidis [2004] NSWCA 111, Tobias JA (with whom Giles & Hodgson JJA agreed) said:
Much will depend upon the circumstances in which the representation is made and the context against which it is to be considered. In its context, the representation is sufficiently clear and unambiguous if it is reasonable for the representee to have interpreted the representation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely. In these circumstances, it would be unconscionable for the representor to deny responsibility for the detriment that arises because of that reliance [93].
See also, Sullivan v Sullivan [2006] NSWCA 312 [85]; Legione v Hately, 435 ‑ 436.

What is the conduct giving rise to the representations

Contract 003

Leighton says that, by its conduct and by its silence after having been sent the Works Contract, and in later providing the works program to Leighton, SDR represented to Leighton prior to commencing the Contract 003 Works that the Qualified Works Terms were acceptable to it and, if Leighton requested SDR to carry out those works:
(a)the Contract 003 works would be governed by those terms;
(b)SDR would undertake the works for the Contract 003 Works Sum; and
(c)SDR would undertake the works by the date for substantial completion.
In essence, Leighton asserts that by raising only the particular qualifications to the works contract that it did, SDR represented that a contract that did not contain those clauses was acceptable to it and the works would be governed by that contract. That position is flawed.
The facts on which Leighton bases this plea are largely agreed. A very significant reservation must apply to the limited statement of the terms Leighton says comprise the Qualified Works Terms: Leighton denies the significance of the qualifications SDR expressed to cls 7.3, 8 and 9.1(b), 11 and 27, and does not exclude those clauses from the Qualified Works Terms. In my opinion, the qualifications to cls 7.3, 8 and 9.1(b) are very important, for the reasons given above when considering the contract issue.
Another significant factor is that, as an agreed fact, SDR began work on the Contract 003 Works in late June 2004, before it received Leighton's letter of intent and the terms proposed for that contract, and before it had agreed a lump sum price for the works. As late as 15 July, SDR had not seen the proposed special conditions for the contract.

I also do not accept that the conduct relied on, in the circumstances, reasonably gives rise to the representations relied on in the defence. I have dealt with the circumstances in detail in relation to the contract arguments, including the terms of Leighton's letter of intent, the terms of its Works Contract, and the nature of the qualifications expressed by SDR. The Works Contract was put forward by Leighton as a series of provisions to be agreed. Where SDR raised matters by commercial qualification, they were for resolution by a mutually acceptable term. That conduct does not, in my opinion, give rise to the representation that the works would be governed by the Qualified Works Terms.
Because of the nature of the qualifications, and their bearing on who would assume certain commercial risks, any representation that SDR would carry out the works for the contract sum was substantially qualified. It would not have been reasonable for Leighton to interpret SDR's conduct in the way it now alleges.

The Subsequent Works Representations

Again the facts relied on are largely agreed. After the commencement of the Works Contract SDR undertook works specified in the scope of works, and submitted progress claims consistent with those works being undertaken on a lump sum basis for a contract sum of $12,934,593. SDR acted in accordance with certain of the terms of the Works Contract, including in relation to public liability insurance (cl 18), notices of delay and notices of claim (cl 28), progress claims (cl 35), and notices of dispute (cl 46). It applied for extensions of time by reference to the date for substantial completion. SDR did not object to Leighton acting in accordance with the Works Contract in retaining 10% of monthly progress claims (cl 5), giving directions and valuing a variation in accordance with cl 33, and issuing a revised program.
Leighton says that on each occasion, by that conduct, SDR represented that the works were governed by the Qualified Works Terms, it would undertake them in accordance with the Qualified Works Terms, and it would complete them by the date for substantial completion. The reasons set out above about the effect of SDR's Commercial Qualifications apply also to the Subsequent Works Representations.
I also consider that Leighton's claims are not a reasonable interpretation of SDR's conduct when that conduct is considered in the whole of the circumstances. SDR acted consistently with some of the terms of the Works Contract, but that was after it had received the letter of intent stating the basis on which Leighton proposed to contract, had been authorised to commence work, and had been provided with a contract which would, when executed, operate retrospectively. It advised Leighton of its qualifications immediately on receiving the Works Contract.
There are very many instances where SDR made claims ‑ for variations, extensions of time - and gave notices, consistently with the terms of the contract and referring to those terms. Leighton says SDR claims the benefits of the agreement when it suits, but cynically denies its existence in claiming payments additional to the sums agreed. Even the particulars given by SDR in its statement of claim identify amounts which are said to be the balance of an agreed lump sum. But almost all of these claims and notices were given or made after the exchange of correspondence in May 2005 in which SDR denied the existence of a contract. In May, Leighton requested SDR (for immediate purposes) to proceed as though the contract applied, on the basis that it was not an acceptance of contractual responsibility for it to do so. The completion of the project by reference to the Works Contract Conditions is as readily explicable by commercial pragmatism on each side as by cynicism on one.
When all of the circumstances are considered, I am not satisfied that Leighton has established the representations it claims.

The Package 101 and the Additional Works Representations

For these representations, Leighton relies on the same matters as it does for the Contract 003 Works. The plea is subject to the same arguments.
Some further findings are required regarding the Additional Works representations. SDR did represent that it would undertake each of the Additional Works as a variation to Contract 003, in each of its tenders saying words to that effect. That is, on each occasion SDR did not accept the commercial risk that the Works Contract, unqualified, would require it to accept. Both SDR's and Leighton's conduct assumed that the principal contract would come into effect. That conduct is not reasonably interpreted as representing that each Additional Works package would be carried out as a variation to a contract on the Qualified Works Terms, independently of whether Contract 003 was executed.

The representations regarding Package 126

Leighton pleads that, by its conduct, SDR represented to it that SDR:
(a)would undertake the Package 126 Works for the fixed sum of $3,688,885 inclusive of all allowances; and
(b)the Package 126 Works would be governed by the matters which had been agreed at the meeting on 15 December 2005 together with the terms of the Supply Contract (except for the two unresolved qualifications).
The representations asserted by Leighton with regard to Package 126 are inconsistent with the basis on which it asked SDR to carry out the works, with Leighton accepting financial liability for reasonable and substantiated costs actually and necessarily incurred by SDR for work performed should no formal contract be executed. It is not reasonable to interpret SDR's conduct in the way Leighton now alleges, when that interpretation is inconsistent with the basis on which Leighton asked SDR to proceed at the time.
I am also not satisfied, simply on the documents, that the matters agreed at the meeting on 15 December were intended to have contractual effect. That is inconsistent with Leighton's own document, and with the manner in which SDR signed it.

Did Leighton rely on the representations?

Although it is not necessary to consider reliance, on the documents in evidence I would not find that Leighton relied on the representations it has pleaded. The only evidence of reliance is Leighton's conduct. It is at least equally probable that Leighton relied on the expectation that, once the head contract was executed, it could resolve any remaining qualifications and execute a contract with SDR. With the delay in executing the head contract, the work started and continued without any significant dispute until May 2005.

Misleading or deceptive conduct

On the findings I have made, these questions do not arise.

Bank guarantees

No basis has been put forward for the retention of the security other than Leighton's entitlement under the contract or contracts. As I have found no contract was formed, there is no basis for Leighton to retain the security.

Prices

The parties agreed lump sum prices for each of the packages of works, but those prices were subject to the qualifications expressed by SDR. In particular, by its qualifications to cls 7, 8, and 9, SDR did not accept the commercial risks arising from possible ambiguity in documents, or incompleteness or inaccuracy of any bill or schedule of quantities.
Question 12 asks whether, if the parties did not conclude a contract, they nevertheless agreed lump sum prices for the construction of the specified works and/or the rates and prices for the work. I cannot see how an agreed rate or price can be separated from the contractual context in this way. For example, would Leighton agree a particular rate or price if it did not have the benefit of the assumptions of risk referred to above.
Question 12 cannot be answered.

Conclusion

I answer the questions put for separate determination in this way:
Question 1:The parties did not conclude a contract governing the performance of the Contract 003 Works, the Package 101, 105, 106, 114, 148, 163, 164 Works and the A2 Spouting Works, or any of them, on the terms pleaded by Leighton.
Question 2:The parties agreed that each of the Package 101 Works, Package 105 Works, Package 106 Works, Package 114 Works, Package 148 Works, Package 163 Works, Package 164 Works and the A2 Spouting Works should be carried out as variations to the Contract 003 Works but did not conclude a contract governing the performance of those works on the terms pleaded.
Question 3:The parties did not conclude a contract for the Package 126 Works on the terms pleaded by Leighton.
Question 4:SDR did not make the representations pleaded.
Question 5:It is not necessary to answer this question, but Leighton did not establish that it relied on any of the pleaded representations.
Questions 6: SDR is not estopped from denying that any of the Contract 003 Works, the Package 101 Works and the Additional Works were governed by the Qualified Works Terms
Question 7:SDR is not estopped from denying that the Package 126 Works were governed by the terms pleaded in paragraphs 25 of the re-amended defence, set off and counterclaim.
Question 8:Not necessary to answer.
Question 9:Not necessary to answer.
Question 10: Leighton's entitlement to security depended on the parties entering into formal contracts for Contract 003 and Supply Contract 126.
Question 11: There is no basis for Leighton to retain the security, there being no contract.
Question 12: Cannot be answered on the evidence.