Vassallo Constructions Pty Ltd v Andergrove Lakes Pty Ltd [2014] FCA 862
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QUEENSLAND DISTRICT REGISTRY |
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GENERAL DIVISION |
QUD 133 of 2013 |
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BETWEEN: |
VASSALLO CONSTRUCTIONS PTY LTD ACN 078 963 498 Applicant |
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AND: |
ANDERGROVE LAKES PTY LTD ACN 123 210 720 Respondent |
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JUDGE: |
DOWSETT J |
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DATE: |
15 AUGUST 2014 |
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PLACE: |
BRISBANE |
REASONS FOR JUDGMENT
BACKGROUND
1 On 5 March 2013 the applicant (“Vassallo”) commenced these proceedings against the respondent (“Andergrove”). Vassallo seeks:
recovery of a debt allegedly due pursuant to a contract;
damages for breach of contract;
damages pursuant to s 236 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (the “CCA”);
interest; and
costs.
2 Vassallo is a builder. Andergrove was, at the relevant time, engaged in property development. In 2011 and thereafter, Andergrove proposed to develop land in the Mackay region (the “development”). It retained Westera Partners Pty Ltd (“Westera”) to provide services in connection with the development, including the calling of tenders for engineering works. Westera employed one Sam Ide (“Mr Ide”) who performed numerous relevant functions as an employee of Westera, acting on behalf of Andergrove.
3 On or about 29 September 2011 Westera invited tenders for the performance of certain works in connection with the development (the “invitation to tender”). On 31 October 2011 Vassallo submitted a tender (the “first tender”), the “tendered price” totalling $6,904,238. Following negotiations, Vassallo submitted amended tenders (the “amended tenders”) and eventually, a final tender (the “final tender”). Pursuant to the final tender the “tendered price” totalled $6,680,801. On 9 December 2011 Westera sent an email to Vassallo, with various attached documents (the “alleged acceptance”). Vassallo pleads that Westera, on behalf of Andergrove, thereby accepted Vassallo’s final tender. Andergrove denies such acceptance and seeks summary dismissal of the major part of Vassallo’s claim in contract on the ground that Vassallo has no reasonable prospect of establishing such acceptance.
4 As to the claim under the CCA, Vassallo pleads that if the alleged acceptance did not constitute an acceptance by Andergrove of an offer by Vassallo, then it constituted actionable misleading or deceptive conduct. Andergrove denies any such misrepresentation and seeks summary dismissal of this claim. In argument counsel for Vassallo all but conceded that the claim pursuant to the CCA should only proceed if the contract claim is also to proceed. The balance of the claim relates to a relatively small amount of work performed by Vassallo, pursuant to specific arrangements with Andergrove. One such arrangement was made prior to the alleged acceptance. The other was made after the alleged acceptance. Andergrove does not seek summary judgment with respect to those parts of the claim.
5 In the course of these reasons it will be necessary to refer to numerous emails. As is often the case, many of them contain grammatical, spelling and other errors. In these reasons, the emails are set out uncorrected.
THE proposed amendmentS
6 Vassallo seeks to amend its statement of claim to allege that if no contract was formed on 9 December 2011, subsequent negotiations between the parties led to the formation of a contract on 29 March 2012, 3 April 2012 or 5 April 2012. Andergrove opposes the application for amendment upon the basis that if the amendment were allowed, Vassallo would have no reasonable prospect of success in establishing any such alleged contract. Lack of prospect of success may not, technically, be a basis for resisting the amendment. It is a test prescribed by statute in connection with summary judgment applications. However if, by the proposed amendment Vassallo seeks to raise a claim which will be susceptible of summary dismissal, then there would be no point in allowing such amendment. In any event the parties have conducted the matter on that basis. Vassallo’s proposed amendments do not raise a claim pursuant to the CCA as an alternative to its claim that a contract was made on 29 April, 3 May or 5 May 2012. Nor does it address such a claim in its supplementary written submissions. In oral submissions counsel for Vassallo seemed to suggest that there was an alternative claim pursuant to the CCA, although he conceded that it would be difficult to advance. In the circumstances, I proceed upon the basis that there is no such alternative claim. Vassallo also seeks to make other amendments to the statement of claim. Where they are relevant, I shall identify them.
summary judgment
7 Section 31A of the Federal Court of Australia Act 1976 (Cth) (the “Federal Court Act”), relevantly provides:
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
8 In Spencer v Commonwealth (2010) 241 CLR 118, French CJ and Gummow J said at [25]:
Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue.
9 Their Honours went on to note that the case involved, “important questions of public and constitutional law and potentially complex questions of fact” (at [27]), and so they concluded that it was unsuitable for summary dismissal.
10 Hayne, Crennan, Kiefel and Bell JJ said at [58]-[60]:
How then should the expression “no reasonable prospect” be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is “no reasonable prospect”. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like “no reasonable prospect” is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes … , as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt.
In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like “clearly”, “manifestly” or “obviously”) as “frivolous”, “untenable”, “groundless” or “faulty”. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word “reasonable”, in the phrase “no reasonable prospect”, be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a “frivolous”, “untenable”, “groundless” or “faulty” claim.
Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.
11 In Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 at [37] Sundberg J identified the following considerations as being relevant to the determination of an application pursuant to s 31A:
• In applying s 31A, the court does not conduct fact finding but must assess the strength of the allegations made by reference to the pleadings, affidavits and any other evidence adduced, in order to determine whether the claim is sufficiently strong to warrant a trial… . Ultimately, the court must consider whether there are any real, as opposed to fanciful, issues of fact or law that require proper determination at a trial.
• In assessing whether there are reasonable prospects of success, the court should draw all reasonable inferences (but only reasonable inferences) in favour of the non-moving party… . Moreover, where the evidence on a summary judgment application is of an ambivalent character, there will be a real issue of fact and therefore reasonable prospects of success for the purposes of s 31A … .
• The moving party bears the onus of persuading the court that its opponent has no reasonable prospects of success … . However, where the moving party establishes a prima facie case for summary judgment, the opposing party must be able to point to “specific factual or evidentiary disputes that make a trial necessary” … .
• As s 31A requires in effect a prediction as to the outcome of a claim, the court should be more reluctant to summarily dismiss a claim where real questions of fact and credit arise. In those cases, the court will not have all material evidence before it until trial, the credit of important witnesses will not have been tested and it will as a consequence be very difficult if not impossible to fairly assess the prospects of the claim … .
12 This approach was adopted by Stone J in Smartec Capital Pty Ltd v Centro Properties Ltd [2011] FCA 716, and by Kenny J in Deputy Commissioner of Taxation v Berhad (No 2) [2010] FCA 1296. As to what amounts to a “real” question of fact, Finkelstein J said in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372, at [23]:
… The judge is to decide whether the opposing party has evidence of sufficient quality and weight to be able to succeed at trial. There will be cases where the asserted facts appear to be so improbable that there is no point in allowing them to go to trial. There will be others where the opposing party has not been able to show that the asserted facts are likely to be established at a trial.
THE TENDER PROCESS
13 Clause 11 of the invitation to tender provided:
Requirements in respect of all matters specified in this General Specification shall be considered as incidental to the works and no separate rates shall be provided in the Schedule in respect thereof.
A “schedule of rates and quantities” was attached. Although quantities of work were specified, very few rates were supplied. Presumably, it was expected that tenderers would supply appropriate rates. The terms “schedule of rates”, “bill of quantities”, “schedule of rates and quantities” and perhaps other, similar terms have, at least to some extent, been used interchangeably in the various documents and in submissions. Rather than seeking to achieve consistency in this regard, I have adopted a flexible approach to such terminology. Hopefully, I have done so in a way which will avoid confusion.
14 A significant issue in this case depends upon the distinction between a “lump sum” contract and a “schedule of rates” contract. Broadly speaking, I understand a schedule of rates contract to stipulate quantities of work to be performed, and the rates at which such work is to be performed so that, in the event that more or less work is actually involved, the total price will vary. On the other hand, a lump sum contract stipulates a fixed price for all of the work to be performed. In practice, this dichotomous taxonomy is not strictly observed. There are many variations, generally of a hybrid nature. See Brooking on Building Contracts (5th ed) at paras 1.6 – 1.9, 5.3, 7.1 – 7.15 and 8.1 – 8.5.
15 It may be that cl 11 of the invitation to tender (set out above) was meant to indicate that Andergrove required a lump sum contract. In any event, Vassallo offered a “tendered price”, said to be made up of various “schedule descriptions”. Schedules containing rates and quantities were attached. The amounts in the schedules added up to the “tendered price” of $6,680,801. By note 9 (“note 9”) the first tender provided:
Schedule of rates contract – All quantities are to be measured for payment purposes.
However, note 6 provided:
Our lump sum price has included the use of two 50mm flex-drive pumps only to maintain the water level. If wellpointing is required, the work will be carried out at cost +10% or at a negotiated rate.
16 This use of the term “lump sum price” may have some significance. It is not necessary that I set out in detail the terms of the amended or final tenders. However the final tender expressly included the notes to the first tender, so that notes 6 and 9 were part of it.
the alleged acceptance
17 On 9 December 2011 Mr Ide sent the alleged acceptance to Mr Victor Vassallo (“Mr Vassallo”), a director of Vassallo, with various attachments. The email stated:
We are pleased to provide the attached letter of intent and associated draft contract documents.
Please don’t hesitate to contact me should there be any questions.
The attached letter (the “attached letter”) read:
Re: PROPOSED MIXED-USE DEVELOPMENT
“ANDERGROVE LAKES”
Lot 1 on RP 43663 & Lot 2 on RP 745241
Beaconsfield Road East, ANDERGROVE
OUR REF: G09-241
On behalf of our client, Andergrove Lakes Pty Ltd, we are pleased to confirm the principal’s intention to award you the civil contract for Andergrove Lakes Stage 1 - 3, subject to finalisation of terms with financiers, with a view to commencing work on - site in March, or as soon thereafter as the weather permits.
The form of the contract will be as per the attached draft (subject to changes within the scope of the draft required by the directors, on their review) and the contract is proposed to be entered following return of both directors at the end of January. At that time, a letter of finance approval will be provided from the principal’s financier. The financier may require a Tripartite Agreement with your company to take over the contract to further support its security.
The other Tenderers have been notified of the intention to award the contract to your company.
We look forward to working with you on this project.
Should you have any queries please contact Sam Ide at our Brisbane office.
18 Also attached was an unexecuted “Form of Formal Instrument of Agreement” (the “instrument of agreement”) which identified “Contractual Document Parts” as including the instrument of agreement, itself and;
General Conditions of Contract and Annexures AS4000 – 1997 (incorporating Amendments Nos. 1, 2 and 3) (the “general conditions”);
an unexecuted “Letter of Acceptance” (the “letter of acceptance”);
the Tender Documents, including various documents exchanged between the parties during the tender process (the “tender documents”), one of which was a “schedule of rates and quantities” (the “schedule of rates and quantities”); and
the Project Specifications and Drawings (the “specifications”).
19 As far as I can see all of these documents were attached to the email. On 9 December 2011, Mr Vassallo replied to Mr Ide’s email of the same date as follows:
Thanks for the letter of your intention to award the following contract to Vassallo Constructions.
We will review the draft contract and confirm our acceptance early next week.
Once again we look forward to working with you on this project and should you require anything further do not hesitate to contact me.
Thereafter there was correspondence concerning a pump. On 7 February 2012, Mr Breadley, a “senior estimator”, employed by Vassallo, sent an email to Mr Ide as follows:
As per our discussion the only issues we had with the draft contract was in relation to the Formal Instrument of Agreement, I have noted these and my understanding of how these are to be addressed in accordance with our conversation,
1. Contract nominated as “Lump Sum” Agreement when our tender stated that
it was to be schedule of rates
Whilst it is to be a Lump Sum contract that all difference in quantities will be treated as adjustments to the lump sum and therefore we will be paid at the tendered unit rate for the actual quantity constructed (This will need to be noted in the contract)
2. Schedule of quantities does not form part of the contract
This will be corrected so that the schedule does form part of the contract.
I hope the above is acceptable to yourself and our client and look forward to progressing with the project.
Mr Ide replied on 22 February 2012 as follows:
Please find attached revised draft contract documents that include some changes to section 2.0 and 3.0.
Bob – you advised that the BOQ are to form part of the contract. We have not stated this in section 3.0. Section 2.5 of the standard conditions of contract outlines the process for adjusting the sum for actual quantities. We are currently working through our drawings and “ghosting” stage 4 and 5 works due to request by Council. We will send through the final plans when this is complete along with 12d file to your surveyor likely next week.
Ross will now review the documents to allow preparation of the final contract documents.
Please don’t hesitate to contact me should there be any questions.
THE STATEMENT OF CLAIM
20 In its statement of claim, Vassallo pleads relevantly as follows:
4. On or about 31 October 2011 the applicant submitted a written response to the Invitation to Tender (the “Applicant’s Tender” or “the Vassallo Tender”).
5. Following a telephone conversation between Victor Vassallo and Ide on or about 21 November 2011 the applicant submitted a further document dated 28 November 2011 (“the 21 November 2011 Discussion” and “the First Updated Tender Costing”).
6. On 6 December 2011, the respondent provided to the applicant a written document namely a revised bill of quantities (“the Revised Bill of Quantities”).
…
17. By written document dated 7 December 2011, the applicant provided to Westera, on behalf of the respondent, a further document containing a revised tender price in accordance with the Revised Bill of Quantities supplied by the respondent to the applicant on 6 December 2011 (“the Second Updated Tender Costing”).
18. On 9 December 2011, by e-mail from Ide on behalf of the respondent to Victor Vassallo on behalf of the applicant, the respondent formally accepted the Vassallo Tender as amended by the Second Updated Tender Costing (“the Formal Acceptance E-mail”).
19. The Formal Acceptance E-mail expressly stated, inter alia, as follows:
“On behalf of our client, Andergrove Lakes Pty Ltd, we are pleased to confirm the principal’s intention to award you the civil contract for Andergrove Lakes Stages 1 - 3, subject to finalisation of the terms with financiers, with a view to commencing work on-site in March, or as soon thereafter as the weather permits.
…
The other Tenderers have been notified of the intention to award the contract to you company.”
20. The Formal Acceptance E-mail was accompanied by a formal agreement, the express terms of which:
(a) Incorporated the General Terms of Contract AS4000 unamended;
(b) Included the terms of the Applicant’s Tender as amended by the First Updated Tender Costing and the Second Updated Tender Costing;
21. In the circumstances the applicant and the respondent entered into an contract whereby the applicant agreed to undertake the work defined by the Applicant’s Tender, as amended by the First Updated Tender Costing and the Second Updated Tender Costing, in consideration for the respondent making payments to the applicant for that work (“the Agreement” or “the Contract” and “the Contract Works”).
22. The express terms of the Contract include those contained in:
(a) The Applicant’s Tender as amended by the First Updated Tender Costing and the Second Updated Tender Costing;
(b) The General Terms of Contract AS4000 unamended.
THE PLEADING AND THE EVIDENCE
21 Paragraphs 20 – 22, as they presently stand, are unclear. Vassallo seems to plead that the terms of the contract are contained in the two identified documents, the final tender and the general conditions. The assertion that the “General Terms of Contract”, (presumably the general conditions) in their “unamended form”, formed part of the contract may be a little misleading. The relevant form of the general conditions is exhibited to Mr Ide’s affidavit (exhibit “SJI-22”) and to that of Mr Vassallo (exhibit “VGV15”). In each case the exhibit shows that it incorporates amendments 1, 2 and 3, presumably amendments to the “standard form” of the general conditions. However I understand Vassallo to mean that the general conditions (as so amended) were not further amended by the parties for the purposes of the proposed transaction.
22 On the material, it seems somewhat unlikely that the alleged acceptance resulted in a contract containing the terms identified in the final tender and the general conditions. Assuming for the moment that the alleged acceptance can sensibly be construed as being responsive to the final tender, it nonetheless specifies an agreement which reflects the content of the email and all attachments. None of these documents comprised part of any offer comprised by the final tender. Although Vassallo submits that the general conditions were to be included in the contract, I cannot see that it offered to contract on that basis. Thus the alleged acceptance seems to be more like an offer to contract than an acceptance of such an offer. Mr Breadley claims that he was told by somebody, probably Mr Ide, that the “general conditions (unamended)” would be adopted in any contract. I shall return to that matter. No doubt those conditions were widely used in the building industry.
23 Andergrove denies that any binding contract was formed. It asserts that the wording of the alleged acceptance did not comprise an acceptance of the final tender. Andergrove also submits that the subsequent conduct of the parties demonstrated that no binding contract had been formed.
24 Both parties have treated the present application as raising two questions. The first is whether or not the alleged acceptance resulted in a binding contract. That question focusses primarily upon the fact that the alleged acceptance contemplated a lump sum contract, whilst Vassallo’s final tender was for a schedule of rates contract. The second question is described by Andergrove as, “No concluded agreement as at 9 December 2011”, and by Vassallo, as “The No Objective Intention To Be Bound Argument”. As to the first question, Andergrove focusses on the alleged acceptance. Vassallo seeks also to rely upon the history of the tender process and the conduct of the parties after 9 December 2011. As to the second question, Andergrove again focusses on the alleged acceptance and on the parties’ subsequent conduct. Vassallo seeks also to rely on the prior conduct of the parties. The distinction between the two questions is artificial and in some respects, unhelpful. The true question is whether the parties made a binding contract. That process necessarily involved agreeing to terms and agreeing to be bound by them. This distinction arises from cases such as Masters v Cameron (1954) 91 CLR 353. Those cases deal with situations in which the parties have reached apparent agreement in advance of the execution of a written agreement. Questions frequently arise as to whether the parties have agreed to be bound contractually in advance of such execution.
THE FIRST QUESTION – WAS AN OFFER ACCEPTED?
25 In Masters v Cameron Dixon CJ, McTiernan and Kitto JJ said at 360:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution.
At page 361 their Honours continued:
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have and therefore do not have. any binding effect of their own: Governor &c. of the Poor of Kingston-upon-Hull v. Petch … . The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v. Parker … or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v. Miller … . Lord O’Hagan said: “Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. … ”
Omitting footnotes and citations, Andergrove submits, at paras 22 and 28 of its written submissions:
22. The proper categorisation of the parties’ conduct depends upon ascertaining their intention and for that reason the categories should not be seen to be unduly rigid … .
23. Because the intention is to be objectively ascertained the words used are to be construed in the context in which they were made.
24. The following passage from the judgment of Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd … is apposite:
“There is ample authority for the proposition that reference may be made to the correspondence between the parties subsequent to 13 June 1986 for the purpose of showing that “it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature” … . In the present case that correspondence has a particular bearing on the interpretation and understanding of the earlier communications in that it constitutes an important source of information as to what are matters incidental, or for that matter essential, to a transaction of the nature in question. In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron … dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract.
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and common sense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.”
25. It should also be noted in terms of the overlap between the question of completeness of the agreement and intention to be legally bound that there is an important distinction. As McLelland CJ in Eq said in Kassabian v Lagonicos … :
“There must be more than the arrival by the parties at a consensus. The parties must intend that the consensus at which they have arrived should there and then constitute a binding contract.”
[emphasis added]
26. Equally, the absence of consensus on essential terms, whether those are widely accepted in the case law as essential (in respect of particular kinds of contract) or where they can be objectively seen as considered by the parties to be important, tends to indicate that the parties did not intend to be immediately bound. For example, an examination of the parties’ negotiations as to matters beyond those contained in the putative agreement may indicate that there were other matters which the parties can objectively be seen to have considered to be important in any agreement that they may reach. The existence of continued but unresolved negotiation on these matters may indicate the absence of an intention to be bound to a less comprehensive agreement.
27. Evidence of subsequent communications between the parties is admissible for the purpose of demonstrating that they did not intend to be bound until further matters were agreed and a formal contract had been drawn. … As Heydon JA put it in Brambles Holdings Ltd v Bathurst City Council: … “post-contractual conduct is admissible on the question of whether a contract is formed”.
28. In Sagacious Procurement Pty Ltd v Symbion Health Ltd … Giles JA (with whom Hodgson and Campbell JJA agreed) made useful reference to some of the authorities on this question in the following way:
“[100] So also in Brambles Holdings Ltd v Bathurst City Council … at [25] Heydon JA said succinctly, referring to the same cases, that “post-contractual conduct is admissible on the question of whether a contract is formed”.
[101] In Barrier Wharfs Ltd v W Scott Fell & Co Ltd at 669 Griffiths CJ had considered that subsequent correspondence between the parties showing that they continued in negotiation “negatives the idea of an existing concluded contract”. In Howard Smith and Co Ltd v Varawa … his Honour had said at 78 that “the question being whether the parties had in fact concluded an agreement on 1st December, any statements or conduct on their part after that date inconsistent with the existence of a concluded contract are relevant for this purpose”. In B Seppelt and Sons Ltd v Commissioner for Main Roads … regard was had to subsequent communications showing that the parties contemplated the execution of a formal contract, and Mahoney JA said at 9155, with reference to Barrier Wharfs Ltd v W Scott Fell & Co Ltd and Howard Smith and Co Ltd v Varawa, that although it was not conclusive on whether a binding contract had previously been made, the regard -
... does provide support in the present case for the view that, as the parties understood it, whether the contract was to proceed was affected by matters to be agreed concerning settlement, and that in relation to that agreement, it was proposed to exchange contracts and proceed in the normal course of conveyancing.”
I should point out that in ABC v XIVth Commonwealth Games (1988) 18 NSWLR 540, the reference by Chief Justice Gleeson to “13 June 1986” is to the day upon which the alleged contract was said to have been made. Thus his Honour was dealing with the relevance of events occurring after any agreement was allegedly made.
26 Vassallo submits at paras 20 – 22 of its submission that:
20. In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd … , McLelland J said:
“The intention of the parties to be legally bound by their consensus is sufficiently clearly expressed to take the case out of the third class of cases referred to in Masters v Cameron … that is, “ ... cases in which the terms of the agreement are not intended to have, and therefore do not have, any binding effect of their own” (at 361). There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich J and Dixon J, in Sinclair, Scott & Co v Naughton (1929) … at 317, namely, “ ... one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”
21. Subsequently, McHugh JA stated in the Court of Appeal … :
“However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances ... If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.
Even when a document recording the terms of the parties’ agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that “the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms”: Sinclair, Scott & Co Ltd v Naughton (at 317).”
22. The applicant’s case is that the contract that formed on 9 December 2011 was of the “first class” or, in the alternative, the “fourth class” or a combination of both classes.
27 Andergrove stresses the distinction between consensus as to the terms of a proposed agreement and the demonstration of an intention to be bound by such terms. This distinction is, in effect, the basis for the classification system adopted in Masters v Cameron and supplemented in Baulkham Hills. In the traditional language of the law of contract, one party may propose (or “offer”) terms, expressly or impliedly indicating that, if the offeree indicates that it will be bound to those terms (or “accepts” the offer), it will also be bound. In the present case Vassallo pleads that the alleged contract contained the terms of its final tender and the general conditions. The question, then, is whether Vassallo offered to contract on that basis, and whether Andergrove accepted that offer by the alleged acceptance.
Lump sum or schedule of rates
28 Both parties rely upon note 9 which I have set out above. I have also set out note 6 of the tender, and cl 11 of the invitation to tender.
29 In the unexecuted instrument of agreement (part of the alleged acceptance) cll 2.0, 3.0 and 4.0 provided:
2.0 SCOPE OF WORKS
The work to be carried out under the contract is for stages 1 - 3 and includes the supply of all plant and materials and the construction of earthworks, stormwater drainage, water reticulation and sewer reticulation, civil electrical services and wetlands as described in the attached drawings and specifications. All material under this contract shall be supplied by the Contractor.
For works reasonably within contemplation of scope of works and there is no item rate for it, it is deemed to be included in other item rates.
3.0 FORM OF CONTRACT
The Contract is to be a Lump Sum Contract.
The Schedule of Quantities does not form part of the Lump Sum Contract, but the Contractor is to complete a priced Schedule of Prices with each item extended so that the total of all items equals the total of the Lump Sum Tender.
The whole of the Contract, including maintenance, shall be completed to the satisfaction of the Superintendent.
The Contractor shall allow in his lump sum for the control of, and co-ordination with, nominated sub-contractors. The Contractor will be responsible for the progress of all works and no claim will be accepted for delays caused by the lack of liaison with sub-contractors or failure by him to complete work within the contract time.
4.0 CONTRACT SUM
The Contractor must carry out work under the contract in accordance with the Contract documents for the price of “SIX MILLION, SEVENTY THREE THOUSAND, FOUR HUNDRED AND FIFTY FIVE DOLLARS excluding GST; $6,073,455 (GST excluded).
30 However, in cl 1 of the instrument of agreement, the “Submitted Bill of Quantities/Schedule of Rates” was identified as a “contractual document part”. Further a document headed “Schedule of Rates and Quantities” was included with the attachments which were part of the alleged acceptance. Vassallo submits that the apparent conflict between a lump sum contract and a schedule of rates contract may, to some extent, be resolved by reference to the general conditions. At paras 27 and 28 of its written submissions it submits:
27. It is important to note that the difference between a pure “lump sum contract” rather than a “lump sum deemed variation schedule of rates contract” is stark in terms of their practical operation.
28. This difference is explained by Breadley … .
An extract from Mr Breadley’s affidavit then follows. The extract is more easily understood if read in context. The relevant passage appears at para 19 of the affidavit as follows:
In relation to the Original Tender:
19.1 Note 9 in the Original Tender states that the “Schedule of Rates Contract – All quantities are to be measured for payment purposes”. This reflects our intention that we would be paid for what we did, irrespective of whether it was higher or lower than the bill of quantity. For example:
(a) if the bill of quantities provided for the placement of 1000 cubic meters of gravel, but we actually only had to place 800 cubic meters, we would be paid for 800 cubic meters.
(b) if the bill of quantities provided for the laying of 100 metres of pipe, but we actually had to lay 150 meters, then they would pay us the per rate for 150 meters rather than 100 meters.
The key issue with “Schedule Rates of Contract” is that the quantities are not fixed, but vary depending actual works. However, the rate is usually fixed. We find that this is particularly fair to both parties. The reference to our lump sum price in Item 6 would seem to be an error as it suggests that a lump sum contract i.e. one price or a fixed price where this is not the case.
It is important to note that standard form lump sum contracts, such as the AS4000, usually contain an option as to whether the bill of quantities forms part of the contract. If it does, any error in quantity that is more than $400 in value will be a deemed variation. If it does not, then the lump sum is the lump sum and the cost of the error in quantity is not recoverable.
31 Mr Breadley asserts that the reference in note 6 to “lump sum price” was an error. He seems to have considered that such reference was inconsistent with the tender being for a schedule of rates contract as suggested in that note. Nonetheless, Vassallo had at least calculated an “overall” price and included that figure in its tender. Vassallo now seems to submit that its tender was for a lump sum contract which contained a bill of quantities, a form of contract which was contemplated by the general conditions. Two relevant definitions appear in cl 1 of the general conditions as follows:
bill of quantities means a document named therein as a bill of quantities issued to tenderers by or on behalf of the Principal, stating estimated quantities of work to be carried out;
…
schedule of rates means any schedule included in the Contract which, in respect of any section or item of work to be carried out, shows the rate or respective rates of payment for the execution of that work and which may also include lump sums, provisional sums, other sums, quantities and prices … .
Clause 2 contemplates two distinct forms of contract to which the general conditions may apply. It provides:
Nature of Contract
2.1 Performance and payment
The Contractor shall carry out and complete [work under the contract] in accordance with the Contract and directions authorised by the Contract.
The Principal shall pay the Contractor:
a) for work for which the Principal accepted a lump sum, the lump sum; and
b) for work for which the Principal accepted rates, the sum of the products ascertained by multiplying the measured quantity of each section or item of work actually carried out under the Contract by the rate accepted by the Principal for the section or item,
adjusted by any additions or deductions made pursuant to the Contract.
2.2 Bill of quantities
The Alternative in Item 10(a) applies.
Alternative 1
A bill of quantities forms part of the Contract and shall be priced in accordance with subclause 2.3.
Alternative 2
A bill of quantities does not form part of the Contract and shall not be priced in accordance with subclause 2.3 unless so stated in Item 10(b).
2.3 Priced bill of quantities
Where a bill of quantities is to be priced:
a) all items included in the bill of quantities shall be priced and extended by the Contractor and the prices as extended shall on addition equal the sum accepted by the Principal for carrying out the whole of the work to which the bill of quantities relates;
b) the Contractor shall lodge the bill of quantities so priced and extended with the Superintendent before the expiration of the time for lodgement stated in Item 10(c) or such further time as may be directed by the Superintendent from time to time;
c) notwithstanding any other provision of the Contract, the Contractor shall not be entitled to payment until the Contractor has lodged the bill of quantities so priced and extended.
If the aggregate amount in a priced bill of quantities does not equal the sum accepted for the work, the subject of the bill of quantities, the Superintendent shall (unless the parties agree within 7 days of notification) determine an appropriate correction of errors and inconsistencies in rates and prices therein, so that the aggregate amount equals such sum.
2.4 Quantities
Quantities in a bill of quantities or schedule of rates are estimated quantities only.
The Superintendent is not required to give a direction by reason of the actual quantity of an item required to perform the Contract being greater or less than the quantity shown in a bill of quantities which forms part of the Contract or schedule of rates.
2.5 Adjustment for actual quantities
Where, otherwise than by reason of a direction to vary [work under the contract], the actual quantity of an item required to perform the Contract is greater or less than the quantity shown in a bill of quantities which forms part of the Contract or schedule of rates:
a) the Principal accepted a lump sum for the item, the difference shall be a deemed variation;
b) the Principal accepted a rate for the item, the rate shall apply to the greater or lesser quantities provided that where limits of accuracy for a quantity in a schedule of rates are stated in Item 11, the rate shall apply to the greater or lesser quantities within the limits, and quantities outside the limits shall be a deemed variation.
If such a bill of quantities or schedule of rates omits an item which should have been included, the item shall be a deemed variation.
Notwithstanding the preceding provisions of this subclause in respect of a bill of quantities, a variation shall not be deemed for actual quantities of an item pursuant to paragraph (a), or for an omitted item or any adjustment made for actual quantities of an item pursuant to paragraph (b), if the difference, the value of the omitted item or the adjustment respectively is less than $400.
32 Clause 2 must be read in conjunction with “Part A” which is annexed to the general conditions. Items 10 and 11 of Part A are as follows:
10 Bills of quantities
(subclause 2.2)
a) Alternative applying
(subclause 2.2) ……………………………………
If nothing stated, Alternative 1 applies
b) If Alternative 2 applies, No/Yes (delete one)
is the bill of quantities If neither deleted, the bill of
to be priced? quantities shall not be priced
(subclause 2.2)
c) Lodgment time ……………………………………...
(subclause 2.3(b)) If nothing stated, 28 days after date of acceptance of tender
11 Quantities in schedule of rates, Upper Limit………………………...
limits of accuracy Lower Limit………………………..
(subclause 2.5(b))
33 As I have previously observed, lump sum contracts and schedule of rates contracts may take many forms. The general conditions contemplate two different types of lump sum contract. In the first type a priced bill of quantities forms part of the contract. In the other form, there may be a bill of quantities, and it may be priced, but it does not form part of the contract. In effect Vassallo seeks to rely on the reference in note 9 to a schedule of rates contract as supporting its claim that the total price was to vary, according to the amount of work actually done. However that approach raises problems in that the alleged acceptance seems to assert a lump sum contract. Vassallo then seeks to resolve the problem by suggesting that the reference in note 9 was actually a reference to a lump sum contract including a bill of quantities as contemplated by cl 2.2 of the general conditions. However the expression “schedule of rates contract”, as used in note 9 seems to describe a class of contracts which is not limited to contracts of the kind described in cl 2.2. This approach is inconsistent with Mr Breadley’s assertion that the reference in note 6 to a lump sum contract was an error.
34 It is difficult to see why the reference in note 9 should be construed as referring to a contract of the type identified in cl 2 of the general conditions. Vassallo seeks to justify such an approach by reference to Mr Breadley’s evidence at paras 15 and 16 of his affidavit to which I have previously referred. He says:
15. My recollection is that, prior to Vassallo Constructions submitting any tender, I was advised by someone at Westera Partners, probably Ide, that the contract awarded to the successful party would be in the form of “AS4000” unamended. I do not recall the basis of that recollection, but all the various tenders that were prepared by me on behalf of Vassallo Constructions were premised on that representation (“the Understanding”).
16. While I do not presently recall the specific basis for doing so, I believe that:
16.1 Ide was aware of the Understanding; and
16.2 Ide and I discussed the Understanding on several occasions.
This evidence is particularly vague and, like much of the evidence of both Mr Vassallo and Mr Breadley, may be arguably inadmissible. In any event, neither the invitation to tender nor the various iterations of the tender referred to the general conditions. As Vassallo pleads a contract evidenced in writing and does not seek rectification, or even plead prior oral communications as being relevant to the formation of the contract, it is difficult to see how it can rely on such evidence.
35 I cannot, for present purposes, decide the precise meaning of the reference in note 9 to a “schedule of rates contract”, but clearly, any such contract would involve a schedule of rates. The bill of quantities contemplated by cl 2 of the general conditions is a document prepared by the principal and provided to the contractor who is to price it and lodge it with the superintendent within the period of time specified in item 10(c) of Part A. It is not clear to me that a schedule of rates prepared by the contractor as part of the tender process necessarily satisfies those requirements. Clause 2 seems to contemplate the bill of quantities being priced pursuant to the contract. It could not be so priced before the contract had been made. However it may be that the parties could adopt a document created prior to contract as satisfying the requirements of cl 2.
36 Even if the reference to a schedule of rates contract in note 9 is to be read as including a lump sum contract which includes a bill of quantities pursuant to cl 2 of the general conditions, the assertions in cll 2.0, 3.0 and 4.0 of the instrument of agreement are quite inconsistent with Andergrove’s having accepted a tender on that basis. The words used in those clauses of the instrument of agreement might appropriately describe the alternative situation contemplated in cl 2 of the standard conditions, a lump sum contract in which a bill of quantities, not forming part of the contract, is nonetheless priced. However, as I understand the general conditions, in those circumstances, the actual amount payable would not vary by reference to the amount of work done. I do not understand Vassallo to submit that it offered to contract on that basis.
37 Vassallo then submits that by the alleged acceptance Andergrove in fact elected, pursuant to cl 2 of the general conditions, to include the schedule of rates and quantities in the general conditions. It submits that the election provided for in clause 2.2 was made when item 10(a) in Part A of the general conditions was left blank in the copy attached to the alleged acceptance. However numerous items in Part A have been left blank, an issue which may be relevant when I come to consider the question of consensus. It may be that the reference in the attached letter to “changes within the scope of the draft” was intended to refer to those variable terms, although it may have had a wider application. In any event, cll 2.0, 3.0 and 4.0 of the instrument of agreement are clearly inconsistent with the inclusion of the schedule of rates and quantities as part of any contract.
38 Vassallo submits that, “[t]he blatant inconsistency between clause 3.0 [of the instrument of agreement] and the balance of the Draft Contract should be resolved as a matter of construction by preferring the latter over the former.” This outcome is said to be, in part, attributable to the fact that the alleged acceptance included a schedule of rates and, in part, to note 9. Of course, cl 2 of the general conditions contemplates the possibility that a bill of quantities, not forming part of the contract, may nonetheless be priced. Presumably such pricing will be relevant pursuant to the contract for some purpose other than fixing the amount payable. Thus Vassallo derives little support from reliance on the presence of the schedule of rates and quantities. As to note 9, it contains its own uncertainties which arise out of the various possible meanings of the term “schedule of rates contract”. In the end, the question is whether Mr Ide’s objective intention was to accept Vassallo’s final tender. Consideration of this question does not involve the same process as that which would be adopted in construing the terms of a contract, the binding nature of which was not in dispute. Given that the tender was for a schedule of rates contract, the instrument of agreement suggests that the alleged acceptance could not be an unqualified acceptance of the final tender. Other aspects of the attached letter also lead to that conclusion. I shall discuss those matters at a later stage.
39 Vassallo then submits that Andergrove’s submission places undue emphasis upon the draft contract rather than the email of 9 December 2011 and the “surrounding circumstances”. It is said that an acceptance need not be express and can be inferred from the party’s conduct. Vassallo refers to para 36 of its submissions in which it sets out certain circumstances which are said to support its submission that a contract was made on 9 December 2011. Paragraph 36 is in the part of the submissions dealing with the second aspect of the case rather than the first. The fact that Vassallo relies on para 36 of its submissions in connection with both aspects of the case demonstrates that the distinction between them is, to some extent, artificial. In any event, I shall deal with para 36 now, at least to the extent that it is said to be relevant to the first aspect of the case.
Surrounding circumstances
40 In paras 36.1 and 36.2, Vassallo relies on the fact that after the first tender, the parties negotiated, leading to amended tenders. I see no support for Vassallo’s case in the fact that negotiations occurred.
41 In para 36.3 Vassallo refers to Mr Breadley’s evidence concerning the intended adoption of the general conditions. Even accepting that the parties had addressed that possibility, no such provision was included in the final tender which included note 9. Further, Mr Ide chose to respond in a way which clearly stipulated that there was to be a lump sum contract, and that the schedule of rates and quantities was not to be part of the contract. In those circumstances, any previous understanding is irrelevant for present purposes. Vassallo does not plead that Andergrove was bound to anything which had been previously said or understood. Further, the attached letter clearly contemplated the possibility of amendments to the draft contract (by Andergrove’s directors), including the general conditions. Any prior understanding that the general conditions would be adopted in an “unamended” form was clearly negatived.
42 Vassallo then submits, at para 36.4, that cl 6 of the general conditions specifically contemplated the parties’ reaching a binding agreement before the execution of a final contract. Clause 6 provides:
Evidence of Contract
Until a formal instrument of agreement is executed by the parties, documents evidencing the parties’ consensus shall constitute the Contract. If such Contract requires a formal instrument of agreement, the Principal shall, within 28 days of the date of acceptance of tender, send it in duplicate for execution by the Contractor. Within 14 days after receiving them, the Contractor shall (if they are correct) properly execute both copies and return them.
Within 14 days after receiving them, the Principal shall execute both copies, have them stamped as necessary and send one copy to the Contractor.
The Superintendent may extend the time under this clause by written notice to the parties.
Curiously, there is, as far as I can see, no reference to cl 6 in the statement of claim. It is referred to in the proposed amendments, but only with regard to the alternative allegation of a contract made on 29 March, 3 April or 5 April 2012. At the outset, I make two obvious points concerning this clause:
its presence in a standard form contract does not, by itself, give it any legal effect as between negotiating parties, unless they have somehow agreed to be bound by it; and
it is engaged only if the negotiating parties have reached a “consensus”.
43 Vassallo does not explain how cl 6 might operate so as to create a contract where one would not otherwise exist. At least implicitly, Vassallo seems to submit that in cl 6 the word “consensus” implies something less than an enforceable contract which may be given contractual effect by virtue of that clause. I very much doubt that cl 6 has that effect. As I have said Andergrove distinguishes between reaching “consensus” as to terms and agreeing that they will be immediately binding. It does not follow that the word “consensus” is used in the same way in cl 6. The word may have shades of meaning. The Shorter Oxford Dictionary suggests that it may mean “agreement”, or it may mean “unity of opinion”. In the former sense it may include an agreement constituting an enforceable contract. However it may also include “unity of opinion” as to appropriate terms without any intention to be bound immediately by those terms. While cl 6 may deal with problems such as those addressed in Masters v Cameron, I doubt very much that it was meant to override the intention of the parties as to whether agreed terms were immediately to be binding. In my view, in cl 6, the word “consensus” is used to describe an agreement to be bound contractually in advance of the execution of a formal contract. The subsequent reference to “acceptance of tender” refers to the fact that a contract is often formally made by such acceptance. Acceptance will, however, only result in a contract if there is an objective intention to be bound. In this case, neither side submits that a contract was formed by a simple acceptance of the final tender. Even Vassallo submits that the contract was to include the general conditions which were not referred to in the final tender.
44 Clause 6 recognizes the possibility that the terms of an “interim” contract may not be the same as those eventually adopted in a formal contract. It seems to be, in effect, a “definition” section. Clause 1 provides that in the general conditions, the word “contract” has the meaning given in cl 6. Clause 6 ensures that if the parties elect to incorporate the general conditions into both their interim and final contracts, they will apply to each such contract according to its particular terms, even if those terms differ as between the two contacts. None of this affects the need for a demonstrated intention to be bound.
45 Vassallo seems almost to suggest that Andergrove was bound to certain “ground rules”, said to be established by cl 6. The expression “ground rules” is used in Vassallo’s supplementary outline which concerns the claims to be raised by the proposed amendment, but the same notion seems to underlie the claim that a contract was formed on 9 December 2011. Clause 6 could only have that effect if the parties had so contracted. Vassallo submits that the parties contemplated that the general conditions would be included in any contract. Mr Breadley’s evidence supports the submission. However no such case is pleaded in connection with the claim that a contract was made on 9 December 2011. In the proposed amendments, Vassallo alleges a consensus for the purpose of cl 6, but does not plead any prior agreement to be bound by the general conditions or cl 6. I see no basis for inferring that because, according to Mr Breadley, he was told that the general conditions would be adopted in an unamended form, Andergrove was bound by cl 6. In any event, the attached letter clearly demonstrates that the parties had not reached a consensus. Finally, as I have said, Vassallo’s submission is based upon an incorrect construction of cl 6.
46 At para 36.5 Vassallo refers to an email to Mr Breadley from Mr Ide dated 6 December 2011. It attached a “final schedule” for completion and inclusion in the “contract documents”. Whilst the email suggests an expectation that there will be a contract, it does not assist in ascertaining the effect of the alleged acceptance.
The terms of the alleged acceptance
47 At para 36.7 Vassallo submits that the email of 9 December 2011 has a “sense of finality”. I accept that the email and attachments suggest an expectation that Vassallo and Andergrove would agree. However the fact remains that the alleged acceptance contemplated a lump sum contract of which no bill of quantities was part. That was not the basis upon which Vassallo had tendered. Further, other aspects of the alleged acceptance suggest something less than an intention to be bound contractually at that time. I refer particularly to the expression “letter of intent” in the email and the expression “the principal’s intention” in the attached letter, the intention being to “award” a contract. I accept that such wording may, in an appropriate case, be construed as an acceptance. In this case, however, other references indicate the contrary intention. Apart from the question of a lump sum or schedule of rates contract, they include:
the words “subject to finalisation of terms with financiers”;
the reference to a contract “as per the attached draft”;
the statement that the attached draft contract might be changed by Andergrove’s directors after they returned at the end of January; and
the anticipated need for a tripartite agreement between Andergrove, Vassallo and Andergrove’s financier, the terms of which seem not to have been settled.
48 As to the first point, Vassallo seems to submit that the words, “subject to finalisation of terms with financiers”, had the effect of including such a condition in a contract formed at that time, rather than of identifying a matter with which Andergrove wished to deal before entering into any binding agreement. However nothing in the letter suggests that Andergrove anticipated there being two contracts. The contract referred to in para 1 of the attached letter is plainly the contract referred to in para 2. Hence it is clear that the “subject to finalisation” condition was a statement about the time at which a contract would be made, rather than a condition of a contract then being made. It also seems unlikely that negotiation of the tripartite agreement was necessarily going to be a simple matter.
49 There is no doubt that Andergrove expected to enter into a contract with Vassallo. The notification to other tenderers was consistent with such an expectation. However there is no basis for inferring that Andergrove’s objective intention, on 9 December 2011, was to enter into a binding agreement, subject to various conditions, including some which were yet to be negotiated.
50 At para 32 of Vassallo’s submissions it submits:
The Draft Contract was not tendered as a document to be signed, but rather as a document for the consideration of both parties so they could each review it to ensure it reflected the agreement already reached by the parties. In this regard, the tendering of the Draft Contract did not and cannot amount to a counter-offer.
The submission assumes the existence of a binding agreement but says nothing to justify that assumption.
Does the subsequent conduct of the parties invite any relevant inference as to the existence of a contract?
51 At para 36.8, Vassallo refers to the subsequent conduct of the parties as demonstrating that a contract had been formed. To my mind, the matters there identified are, generally, at least, equally consistent with an expectation that a contract would be made as with a belief that a contract had already been made. These matters are more directly relevant to the alternative case which Vassallo seeks to raise by way of amendment. I shall consider them in addressing that application.
Was there a relevant acceptance?
52 I return to the body of Vassallo’s submissions concerning the question of acceptance. At para 33, Vassallo submits that the provision in the instrument of agreement (which excludes the schedule of rates and quantities from the contract) was an error, presumably by Mr Ide. Vassallo advances three bases for its allegation of error. First it submits that the various tenders included note 9 so that “[i]t must have been clear that [Vassallo] was tendering on the basis that any resulting contract would involve a ‘schedule of rates’ “. I accept that proposition, as does Andergrove. However the submission says nothing about the alleged acceptance or its objective effect. As observed in Masters v Cameron at 361, the parties may have agreed on the terms but nonetheless wish to reserve the right to withdraw at any time prior to signing of the final contract. By asserting a term not in accordance with an extant offer, a party avoids entering into a binding contract, whether that be the intention or not.
53 Secondly, Vassallo submits that certain aspects of the prior conduct of the parties suggest that any non-inclusion of the schedule of rates was an error. In particular, it points out that no such issue was raised at a meeting held on 21 November 2011 at which Messrs Breadley, Vassallo, Kinneally and Grimm were in attendance, Messrs Kinneally and Grimm being directors of Andergrove. I see no reason for drawing inferences as to topics which ought to have been addressed at that meeting. In any event there is no suggestion that the parties reached any agreement. They were entitled to change their positions. The instrument of agreement clearly asserted that the contract was to be a lump sum contract, not including a schedule of quantities.
54 Finally, it is said that the “error” was subsequently “corrected without challenge”, and that such correction suggests that Mr Ide had been in error. Whilst such correction may suggest that the matter was not of much importance to Andergrove, it does not follow that Mr Ide’s earlier position was a “mistake”. Nor does it follow that the alleged acceptance should be construed in a way which is contrary to its plain meaning. Perhaps Mr Ide was unaware of note 9, or perhaps he misunderstood it. Alternatively, he may simply have considered that it was in Andergrove’s interests to seek a different form of contract, or he may have decided to avoid making a binding agreement at that time.
55 Assertions of error are made elsewhere in the submissions. For example, Vassallo submits that:
Even a document of acceptance which misstates the terms of the offer it purports to accept may nevertheless upon its proper construction amount to an unqualified and unconditional acceptance of the offer because that is how a reasonable recipient in all of the relevant circumstances would have understood it … .
Cited as authority for the proposition are the decision of Gibbs J in Quadling v Robinson (1976) 137 CLR 192 at 201 and that of Kirby P in Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677. Both cases deal with the exercise of options. Elsewhere in these reasons I observe that the decision in Ballas v Theophilos (No. 2) (1957) 98 CLR 193 at 196 (which dealt with the exercise of an option) has been treated as establishing that the acceptance of an offer must be “clear and unequivocal” if it is to result in a binding contract. However I do not accept that either the reasons of Gibbs J or those of Kirby P justify the proposition that a contract may be formed by an acceptance which is in different terms from those offered. I accept that background circumstances may inform the recipient’s understanding of an acceptance. Nonetheless I see no principled justification for the submission that an acceptance should generally be read in such a way that it corresponds to an extant offer, simply because the offeror assumes or asserts that to be the case. In any event there is a significant distinction between acceptance of an offer and exercise of an option. In the former case, the offer and acceptance will comprise the terms of the contract. It will be construed and enforced on that basis. The exercise of an option involves the exercise of pre-existing rights which are to be ascertained by reference to documents other than the purported exercise.
56 In any event, in Quadling, Gibbs J considered that an exercise of option which suggested a departure from the terms of any contract contemplated by the option might be ineffective. At 200 – 201 his Honour said:
In Laybutt v. Amoco Australia Pty. Ltd. … I discussed the nature of an option, but whether (as I think) the option in the present case was a conditional contract of sale, or whether it was merely an irrevocable offer to sell, it is clear that the exercise of the option, to be valid, must have been absolute and unqualified and must have bound the respondents to perform the very terms set out in the option. Authority is hardly necessary to support this statement, but some of the cases are collected in the judgment of Smith J. in Ballas v. Theophilos … (which was affirmed on somewhat different grounds … ). However, it is not always easy to determine whether the purported exercise of an option should be understood as attempting to vary the terms of the option or as intending to accept its terms without modification, notwithstanding that they may have been misdescribed, or notwithstanding that the grantee of the option may have indicated that he intends to perform the contract in a manner for which the terms of the option do not provide. Thus although a notice misstates the terms of the option which it purports to exercise, it may nevertheless amount to an unqualified and unconditional exercise of the option: see Carter v. Hyde … . On the other hand, if the grantee of an option sets out his own erroneous understanding of the option, and then purports to exercise the option as so understood, there will (speaking generally) be no effective exercise of the option: see Cavallari v. Premier Refrigeration Co. Pty. Ltd. … . It must of course depend upon the proper construction of the document by which the grantee purports to exercise an option whether it amounts to an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option.
57 Gibbs J distinguished between a mis-statement of the terms of the option (which might not detract from the validity of the exercise of the option) and an attempt to exercise an option on the basis of an erroneous understanding of it (which exercise may be ineffective). In Prudential, at 677, Kirby P adopted the above passage from Quadling. In the present case, it is quite clear that Mr Ide was not indicating that he intended to enter into a schedule of rates contract but was proposing a lump sum contract.
No acceptance of offer
58 The alleged acceptance was not an acceptance of Vassallo’s tender and did not result in a binding contract.
The Second Aspect - Consensus
59 Vassallo submits that the alleged acceptance and the prior and subsequent conduct of the parties demonstrate that a binding agreement was made on 9 December 2011. The relevant prior conduct is identified in paras 36.1 - 36.7 of Vassallo’s submissions. As I have previously observed, such conduct is at least equally consistent with an expectation that a contract would be made, as with a belief that there was already a contract in existence. Taken at its highest, such conduct does not offer any justification for ignoring the clear meaning of the alleged acceptance. In para 36.8(j) and subsequent paragraphs, Vassallo relies upon conduct subsequent to 9 December 2011. As I have previously said, I shall deal with that conduct in more detail in connection with the application to amend. At this stage, it is sufficient that I say that it offers no basis for giving the alleged acceptance a meaning which its words do not support. Each party asserts that the wording of the alleged acceptance supports its case. I have previously explained my reasons for concluding that the email and attached letter demonstrate a clear intention that no binding agreement be formed as at 9 December 2011. The instrument of agreement also suggests that they were not agreed. The email of 9 December 2011 between Mr Vassallo and Mr Ide, Mr Breadley’s email of 7 February 2012 and Mr Ide’s email of 22 February 2012 (all set out above) suggest that no agreement had been reached prior to the last-mentioned date.
60 Vassallo’s submissions cannot be reconciled with the well-established requirement that any acceptance must bind Andergrove “clearly and unequivocally” to the terms of the tender. The words “clearly and unequivocally” come from the judgment of Dixon CJ in Ballas v Theophilos (supra). As I have said, that case concerned the exercise of an option. However it has been regularly cited as applying to the acceptance of an offer.
61 All of the objective evidence, as opposed to assertions by interested persons (in the sense that they are associated with one or other of the parties), points away from the formation of a contract as at 9 December 2011. Vassallo has no reasonable prospect of establishing the contrary proposition.
THE CCA CLAIM
62 As I have observed, counsel for Vassallo effectively submitted that this claim should only proceed if the original claim in contract (ie upon a contract made on 9 December 2011) proceeds. The alleged operative misrepresentations appear at para 32 of the statement of claim as follows:
32. By sending, or allowing Westera to send, the Formal Acceptance E-mail accompanied by a formal agreement the respondent made the following representations to the applicant within the meaning of that term in section 18 of Schedule 2 of the CCA:
(a) That a Contract existed between the respondent and applicant to undertake the Contract Works (“the Contract Representation”);
(b) That, in the event that if a binding contract did not in fact exist in law, that it would agree to contract being executed in the terms set out therein, namely:
(i) Incorporating the General Terms of Contract AS4000 unamended; and
(ii) Including the terms of the Applicant’s Tender as amended by the First Updated Tender Costing and the Second Updated Tender Costing.
(the “Agreement Representation”)
(c) That in any event, the applicant would be undertaking the Contract Works in accordance with the rates set out in the Applicant’s Tender as amended by the First Updated Tender Costing and the Second Updated Tender Costing.
(the “Works Representation”)
63 As I understand it Vassallo accepts that if it enjoys no reasonable prospect of success in establishing its case in contract, it enjoys no reasonable prospect of success in establishing operative misrepresentations.
THE PROPOSED AMENDMENT – PARA 22A
64 Amongst other amendments to its statement of claim, Vassallo seeks to insert para 22A as follows:
22A In the alternative to the allegations of paragraphs 21 and 22 hereof :-
(a) On 29 March 2012 the applicant and the respondent reached consensus, within the meaning of Clause 6 of AS-4000 1997, as to all terms of the formal contract they anticipated executing.
Particulars
(i) email and attachment from Kinneally on behalf of the respondent to Victor Vassallo on behalf of the applicant dated 29 March 2012 at 6:53pm; and
(ii) email from Victor Vassallo on behalf of the Applicant to Kinneally on behalf of the respondent dated 29 March 2012 at 9:46pm.
(b) By email dated 3 April 2012 at 7:37am Ide on behalf of the respondent advised Victor Vassallo on behalf of the applicant he was trying to finalise contract documents today for issuing.
(c) By email dated 3 April 2012 at 10:44am from Ide on behalf of the respondent to Victor Vassallo on behalf of the applicant, the respondent requested the applicant to amend an attached Schedule of Rates for inclusion in the contract.
(d) Agreeing to the request referred to in subparagraph (c) hereof the applicant sent to Ide on behalf of the respondent a further updated tender costing dated 3 April 2012 (“the Third Updated Tender Costing”).
(e) By an email dated 3 April 2012 at 5:15pm Ide on behalf of the respondent advised Breadley and Victor Vassallo on behalf of the applicant inter alia:-
(i) “see attached contract”;
(ii) “Three copies of the contract and one copy of drawings have been sent to your office”; and
(iii) ‘‘I look forward to progressing the signing of contract and starting construction”.
(f) On 3 April 2012 the applicant received an initial letter dated 3 April 2012 wherein Westera by one of its directors, further and alternatively, employees, and further and alternatively, agents, one Bret Arthur, on behalf of the respondent unconditionally advised of the respondent’s acceptance of the applicant’s third updated tender (“the initial letter of acceptance of the third updated tender”).
(g) On 4 April 2012 Damian Vassallo on behalf of the applicant by telephone requested Ide on behalf of the respondent to revise the initial letter of acceptance of the third updated tender.
(h) On 5 April 2012 the applicant received a final and revised letter dated 3 April 2012 wherein Ide on behalf of the respondent unconditionally advised of the respondent’s acceptance of the applicant’s third updated tender (“the final letter of acceptance of the third updated tender’’).
(i) The final letter of acceptance of the third updated tender was “acceptance of tender” within the meaning of clause 6 of the general conditions of contract of AS4000/1997 and further and alternatively clause 6 of the general conditions of contract G09/241A.
(j) In the premises of paragraphs 22A(a) to (i) the applicant and the respondent entered into a contract whereby the applicant agreed to undertake the work defined by the applicant’s tender as amended by the first updated tender costing, the second updated tender costing and the third updated tender costing in consideration of the respondent making payments to the applicant for that work (“the alternative Agreement” or “ the alternative Contract” and “ the alternative Contact Works”) .
(k) The express terms of the alternative Contract are to be found in the documents referred to in paragraph 22A(e) (i) and (ii) hereof or alternatively in those documents save for:
(i) the last sentence in the second paragraph in Clause 3.0 of Section One “Form of Formal Instrument of Agreement”; and
(ii) special condition 8 therein and the words in Part B being “Clause 2.5. See attached Special Conditions” therein, each of which was incorrectly included in those documents contrary to the consensus referred to in paragraph 22A(a) hereof.
65 The proposed alternative claim arises substantially out of events after 9 December 2011. I have already set out the correspondence which immediately followed the alleged acceptance. Following that correspondence, on 10 March 2012, Mr Kinneally sent an email to Mr Ide, with copies to Messrs Grimm (the other director of Andergrove), Vassallo and Breadley. The email clearly demonstrates that the terms of any agreement were still being negotiated. It seems that the parties had been proceeding on the basis that Andergrove’s financial arrangements were to be in place prior to the execution of a formal and unconditional contract. However, on or before 10 March 2012, Mr Vassallo suggested that they instead enter into a contract which was conditional upon finance being obtained. Mr Kinneally agreed to this proposal. At the end of Mr Kinneally’s email he notes:
Next action:
a) Bob to review and send to you works program and resolve with you;
b) RK to review contract and advise if identifies possible additional provisions;
c) Sign Contract subject to finance becoming unconditional.
66 On 14 March 2012 Mr Kinneally sent an email to Mr Damian Vassallo, proposing arrangements for communications between the parties, in negotiating the contract and thereafter. He proposed that “[f]or communications with entering into the contract”, he would deal with Mr Vassallo (not Mr Damian Vassallo) and Mr Breadley, copying correspondence to Mr Ide and Mr Damian Vassallo. He distinguished between that correspondence and, “all communications after that in the administration of the contract”, which correspondence was to be between Mr Ide and Mr Damian Vassallo. Mr Vassallo (not Mr Damian Vassallo) replied as follows:
I concur with your comments.
The chain of command from our end will be all contractual matters are to go through Damian Vassallo … Gary Brittian … and Sam …
…
Once a contract has been entered into than no more correspondence will be sent to you directly.
…
67 On 16 March 2012, under cover of an email to Mr Vassallo, Mr Kinneally forwarded a draft “side agreement” with “CBA”, presumably concerning finance. On 17 March 2011 Mr Kinneally forwarded Annexure Part B to the standard conditions, proposing its inclusion in the contract. He also forwarded proposed special conditions, one of which was the condition as to finance.
68 On 19 March 2011 Mr Vassallo advised Mr Kinneally that he was seeking legal advice concerning the side agreement. In another email dated 19 March 2011 Mr Vassallo advised that:
We are currently looking at the special conditions you require and will let you know of any changes.
The changes you require to the AS4000 contract have been forwarded to our solicitor and I will get back to you once I have his comments.
69 On 19 March Mr Vassallo sent an email to Mr Carey, his solicitor, as follows:
See attached Emails from Ross Kinneally requesting the following to form part of the contract for a Lakes Subdivision in Mackay.
The attachments are as follows:
1. Changes requested to the AS 4000 standard contract (this was not provided at tender and has only now been forwarded to us).
2. Additional special conditions to the contract.
3. CBA’s request to include a Builders Side Deed as part of the contract.
4. Draft contract negotiated and agreed previously between the Consulting Engineers and ourselves.
Look at the changes to amend AS 4000 (we believe that our first position should be not to accept any changes and see how we go).
We will look at the special conditions and let you know what we are prepared to agree to and suggest any changes (I will forward this to you separately for your comments).
Review the Builders side Deed and advise if we should accept it as is or if any changes should be made. We have already agreed to the Draft Contract and are happy to proceed with it.
Please review the documents and get back to me ASAP as Ross and we are fairly keen to finalist this contract.
70 On 22 March 2012 Mr Vassallo sent an email to Mr Kinneally. It contained comments concerning the proposed amendments, special conditions and the side agreement. He refused to agree to the inclusion of Annexure Part B. He sought to amend a proposed clause providing for a “fixed cost lump sum” contract which may have excluded price variations attributable to, “incorrect quantities in the bill of quantities”. Mr Vassallo also rejected proposed special condition 4 which provided that there be no variations to the contract sum unless the cost was included in the progress claim for the relevant period. Proposed special condition 6 provided for the possible extension of the works. It provided that any such work would be paid at the rates set out in the bill of quantities. Mr Vassallo said that whilst Vassallo “generally” accepted the proposal, he did not believe that it should be part of the contract. He also requested amendments to the proposed side deed. Although Mr Vassallo also accepted the proposed condition as to finance, on 23 March he sent an email to Mr Kinneally, seeking to limit the time period during which the contract would remain conditional.
71 Mr Vassallo’s proposal that the parties enter into a conditional contract is of some interest. It is difficult to reconcile his claim that he already had an enforceable contract with his suggestion that the parties enter into a conditional contract. It would be very curious if he were suggesting that he wanted a conditional contract in place of an unconditional contract. However he may have understood that any agreement made on 9 December 2011, by virtue of the attached letter, was conditional upon finance. Nonetheless it is also difficult to see why Mr Vassallo would have raised the question of another conditional contract if he believed that he already had such a contract. His immediate problem, as he would have seen it, was the delay in obtaining finance. A request for a time limit on the condition may have been understandable, yet that was not his initial request. His initial request was for a conditional contract. That request was consistent with a belief that there was no binding contract and a desire to obtain as much certainty as he could concerning Andergrove’s commitment to the proposed contract. Perhaps one should not put much weight on this matter for present purposes, but it may go to Vassallo’s prospect of success at trial.
72 On 25 March 2012 Mr Kinneally sent an email to Mr Vassallo in which he accepted Mr Vassallo’s rejection of Part B to the general conditions. He also accepted proposed amendments to the side agreement and the amendment to the finance condition. Mr Kinneally identified two matters as still in issue between the parties. Both seem to have involved the drafting of further provisions for inclusion in the contract. One matter concerned Mr Kinneally’s proposal that claims for variations be included in the progress claim for the relevant period. The other matter related to a clause which would have provided for the extension of the works being undertaken, and the rates at which such additional work was to be performed.
73 On 27 March 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
Attached is amended Special Conditions for your approval. I think we got to the stage that as a matter of practice variations will be included in progress claims as they go so the clause is OK. I certainly however don’t want this to become a basis of unreasonable variation claims. We believe we have covered most items.
Once the design of tower footing and stays are done it might be something you give a separate price for and do and similarly for ski lodge piers. We can deal with that separately down the track.
Let me know if you have any issues with the attached amended special conditions.
74 On 28 March Mr Vassallo sent an email to Mr Kinneally saying:
Please find attached a few minor changes to the special conditions. Please note, we agree as a matter of practice, claiming variations would generally be done within the month that the work is undertaken. As discussed however, we do not believe that clause 4 is necessary as the Principle is adequately covered by AS4000 and this clause is to be deleted. As such, all variations should be identified by the Superintended under AS4000, even if they are not claimed within the month the works are undertaken. Please call me if you need to discuss further.
75 On 29 March Mr Kinneally sent an email to Mr Vassallo saying:
We accept below position. Attached are amended conditions to which we have made two minor changes as raised by Sam as follows;
1. Clause 4(b) – Contractor not being responsible for early works area but is still responsible for own employees, subbies and supplies in early works area and defects in WUC; and
2. Clause 8 last sentence as reference to “other contractors” means other contractors engaged by Principal but Contractor is still responsible for its own sub-contractors.
The reference to the “below position” may have been to Mr Vassallo’s email under reply. Mr Kinneally’s email was copied to Mr Ide. The last paragraph stated:
Sam [Mr Ide] could you please assemble contract using attached Special Conditions and get to Victor for signing by Vassallo Constructions Pty Ltd. Chris is back Easter Weekend and can sign for us or we can both do on 16th.
76 On Thursday 29 March 2012 Mr Vassallo sent an email to Mr Kinneally as follows:
Thanks for your email.
I wish to confirm that we are in full agreement and as stated below once the contract documentation has been sent to us I will sign and return for you and Chris to countersign.
We look forward to commencing the works once all financial documentation has been executed and the site has dried out enough.
Damian will be contacting Sam to see if we can do some temporary drainage works to clear some of the surface water to allow the site to dry out quicker (if we don’t do this it could be months before we can enter the site).
We look forward to commencing the project.
77 Vassallo submits that this email constituted an acceptance of an offer, creating a concluded agreement. I shall return to this matter. It would be odd, however if, having spent so much time in negotiating the terms of a written agreement, and with its execution imminent, the parties should, for the first time, choose to be legally bound prior to such execution.
78 On 30 March 2012 Mr Ide sent an email to Mr Vassallo as follows:
Drainage works sounds sensible. Can you or Damian please provide scope of proposed works and cost? I know it is included in WUC however we just need to monitor costs while the contract is not signed and finance pending.
Let me know if you have any questions.
79 Mr Ide clearly indicated that there was, as yet, no contract. Mr Vassallo did not contradict him. On Monday 2 April 2012 Mr Vassallo sent an email to Mr Ide as follows:
I am taking two weeks leave starting Good Friday and returning back to work on 23/04/12. It would be good if we could execute the contract documents this week if possible.
80 On 3 April 2012 Mr Ide sent an email to Mr Vassallo as follows:
I am trying to finalise contract documents today for issuing.
81 On that day, Mr Ide also forwarded a schedule of quantities, asking Mr Vassallo to make amendments to it. Later that day, Mr Breadley returned the amended document. In a later email to Messrs Breadley and Vassallo on that day Mr Ide said:
Contract documents are on the way to your office. Items to note:
1. Liquidated damages has been left blank. Note that under AS4000 if this is left blank it does not preclude the Principal from claiming liquidated damages however the cost must be verified.
2. Special conditions included in annexure B as discussed between Victor and Ross. I added a condition 8 which is a copy and past (from sentence in form of contract.
3. See attached contract. Three copies of contract and 1 copy of drawings has been sent to your office. Three copies are to allow 1 for you, 1 for Ross and 1 for us. If you have any questions regarding the contract please contact me.
I look forward to progressing the signing of contract and starting construction. We have received approval for construction drawings from Council and just need to lodge the compliance certificate (and associated fees) 7 days prior to a proposed pre-start meeting. See attachment fyi.
82 Some importance may attach to a letter dated 3 April 2012 (the “tender acceptance letter”) from Mr Arthur on behalf of Westera Partners Pty Ltd, to Vassallo. It was as follows:
On behalf of our client, Andergrove Lakes Pty Ltd, we are pleased to advise acceptance of your tender for the Lump Sum of $6,066,455 (G.S.T. excluded).
The Construction Period shall not exceed 30 weeks. The works shall commence as outlined in Clause 2 of the Special Conditions to the Contract
Should you have any queries please contact Sam Ide at our Brisbane office.
83 Mr Vassallo was unhappy with the sentence dealing with the construction period and proposed that it be amended to provide that:
The construction period shall be 30 weeks in accordance with the conditions of contract AS4000.
He considered that this amendment would provide scope for extensions in the case of bad weather. On 5 April 2012 Vassallo received the amended tender acceptance letter, still dated 3 April 2012. At first blush, that letter (in its original form and as amended) may seem to have contractual effect. However, in an email dated 30 April 2012 Mr Kinneally asserted to Mr Vassallo that Mr Ide had sent it to Vassallo with the intention that it be included in the contract. Mr Vassallo did not contradict this assertion. Indeed, in Vassallo’s supplementary outline at para 71, it submits that the amended tender acceptance letter was, “but a machinery step facilitating the execution of a formal instrument of agreement in a given time frame.” Vassallo goes on to submit that alternatively, it may have constituted the acceptance of an offer, namely Vassallo’s final tender. I shall return to these matters. A draft letter, in similar, but not identical terms had been amongst the proposed contract documents forming part of the alleged acceptance.
84 On 5 April 2012 Mr Vassallo signed the contract on behalf of Vassallo, but only after amending it further. Concerning these amendments he said at para 110 of his affidavit:
110. In relation to “VGV47”, I make the following comments:
110.1 I amended the Second Special Conditions by:
(a) removing paragraph 8 which stated “Where an item is shown on the engineering drawings and is not listed in the Bill of Quantities, the item shall be deemed to be included in the lump sum” (“the BOQ Amendment”); and
(b) inserting a new paragraph that said “ Total liquidated damages shall be limited to 10% of the contract amount” (“the Liquidated Damages Amendment”).
110.2 I made the Liquidated Damages Amendment on the basis that my trust in Kinneally had broken down and I was concerned that he was trying to set me up to broaden the potential damages payable by Vassallo Constructions. In particular I was concerned that in the circumstances where we did not deliver and he had some contracts for houses that fell through, that he’d try to sue Vassallo Constructions for all of the resulting losses.
110.3 I believe that capping the liquidated damages at 10% was not unreasonable because $600,000 was a significant penalty if we failed to deliver.
110.4 I made the BOQ Amendment because, in my view, its effect would be that we had to rely that their bill of quantities being correct and if it wasn’t we would then, effectively, wear the consequences of that as it would be deemed to be part of the lump sum.
110.5 I thought by signing the contract with those changes sending it off to Kinneally it may help punch through the parties’ differences and allow the parties to finalise their positions.
85 On 10 April 2012 Mr Damian Vassallo sent an email to Mr Ide and Mr Kinneally as follows:
I have sent the three signed copies of the Andergrove Lakes contract via courier this morning. Please note that we have made a few minor changes.
… Where an item is shown on the engineering drawings and is not listed in the Bill of Quantities, the item shall be deemed to be included in the Lump Sum Price.
As previously discussed, we do not accept this clause and as such, have removed it.
… Part B of General Conditions of Contract – Clause 2.5 see attached “Special Conditions”. – Appears to have been left in by mistake so has been removed.
… Item 8 of Special Conditions – Where an item is shown on the engineering drawings and is not listed in the Bill of Quantities, the item shall be deemed to be included in the Lump Sum Price.
As previously discussed, we do not accept this clause and as such, have removed it.
… Special condition Item 8 added – Total liquidated damages shall be limited to 10% of the contract amount. Considered necessary as no value has been included for liquidated damages.
Also, could you please provide an estimate of when possession of site is likely to occur so that we can begin resourcing this project.
We look forward to starting this project and should you wish to contact me, please feel free to do so.
86 These issues seem to have related to matters identified by Mr Ide in his third email dated 3 April 2012. On 10 April 2012 Mr Vassallo sent an email to Mr Damian Vassallo (with copies to Mr Ide and Mr Kinneally) saying:
I should also add that I included a liquidated damages rate of $1,000 per day. Although we expect to complete the project within the agreed timeframes, it was difficult for me to accept the risk of an open ended liquidated damages liability rate in the unlikely event that this was to apply.
Damian was not aware of this addition as I made it prior to leaving on holidays.
I hope that you understand us adding this in and please feel free to contact Damian should you have any concerns and he will pass them onto me.
87 On 11 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
Hi Victor,
I gather you are on leave to. Given we are in contract entry stage still it is appropriate that I communicate directly with you on the below Issues.
I don’t have in front of me documents Sam sent to you for signing so my following comments are based on what appears below and recollection.
In principle if the change is a correction to something we agreed that that is fine. e.g point 2 below. You have been quite particular in recent emails to call a closure to changes to the contract which I accept and in any event it will mean going back to the bank to have your contract re-approved.
- Point 1 deletion is anew request. It has been in contract since start. It is important because without that paragraph it may continually come down to definitional issues in every single item set out in the Bill of Quantities. i.e. the contractor claims every item as being the absolute minimum for that item. I haven’t Bill of Quantities in front of me but is an item was “100 mm conduit rate $X/m” the principal has the expectation that rate includes everything to supply, trench, sand, backfill, compact, etc. If the rate is not take to include the other work the contractor can claim the rate as just supply of 100mm conduit and claim trenching, sanding, backfilling an compaction as variations.
While we understand the risk we are taking if quantities are incorrect, deleting this clause opens up an entirely new issue which we are unable to accept. You have considerable experience In this type of work and have had all drawings for 5 months or so and complete access to Sam for clarification. Could I recommend that you review the drawings again and satisfy yourselves based on your experience if anything is not covered by your rates. We are prepared to accept the risk of quantities being inaccurate.
- Point 2 as I accept if a mistake as should be corrected subject to review on my return.
- Point 3 same as point 1.
- Point 4 is new as a limit plus in your further email suggestion [liquidated damages] of $1,000 per day is new. I am prepared to accept the limit (subject to confirmation from Chris) but not $1,000 stipulation. I haven’t calculated what real [liquidated damages] will be and most contracts just leave blank and it becomes a matter of proof later on so we are not wasting our time unnecessarily now. We are not expecting any delays and the contract has the usual provisions fairly protecting contractor and principal when it comes to extensions.
We gave the tenants notice at the end of last month and my recollections is they need to be out by about 23rd of this month. CBA requested an updated valuation because of the size of the project. Herron Todd White expect to be come third week of April. I expect we can give you the letter from CBA as all finance conditions are satisfied about first of May.
Our preference is to work with you on this project. Yours was not the cheapest tender. If you are having second thoughts for whatever reason we would not hold it against you but would like to know urgently.
88 Mr Vassallo replied on 11 April 2012 as follows:
Hi Ross,
I will begin be assuring you that we are not having any second thoughts and are in fact looking forward to constructing this high profile project, we simply want the contract to be fair for both us, us as the Contractor, and you as the Principle.
Please find below a response to your comments:
Points 1 & 3 - Ross, both these items actually appeared to us as a surprise as we did not notice this change in the Form of Agreement until the finalised documents had been sent. On further review however we do acknowledge the this clause had been added into the second draft, however our concentration was on the items specifically referred to in the associated email and must have been overlooked.
As you are aware, all our discussions have centred around us wanting to undertake the works under AS4000 and the clauses referred to are a large deviation from the intent of AS4000.
After reviewing your comments, we do however understand your concerns. We have also done some checks on the Bill of Quantities and are reasonably confident that there should not be any surprises however we do not wish to accept the risk that something may have been overlooked in scheduling this project. We are however keen to negotiate a clause that better suits both parties. Please find below a clause which is based on another contract which we believe addresses both parties concerns.
Minor omissions in the description of items in the Bill of Quantities but which are necessary for the satisfactory completion and performance of the works under the relevant scheduled items shall be supplied and executed by the Contractor and shall be deemed to be included in the item rate.
We believe that this clause added into the special conditions will address the concerns raised in your example and cover us if an item has been completely missed in the Bill of Quantities.
Point 4 - My apologies for throwing this in at the last minute. It was my belief that these kind of items would simply be filled out with the standard rates which we usually see (usually $500- $1,000 per day). I did not anticipate this being left blank and was not aware of the potential claims if it was. Since we have been contracting, we have never had a contract where [liquidated damages] have not be stipulated and formed part of the contract.
Our concern is that, for example, one day past the specified completion date, a potential claim against us could be “loss of revenue if land purchasers were to pull out of the contract’’. This would open us up to potential huge costs for simply being one day late. This is a risk that we are not able to accept as it is out of our control.
Generally we see [liquidated damages] rates of $500 per day however have recently noticed ones slightly higher. We based our $1,000 per day [liquidated damages] on an interest rate of 6% per annum of the contract amount which we believe is reasonable. We are however open to negotiate this rate if you believe your reasonable costs would be higher.
As the signed documents have already been sent, I would suggest that the relevant pages are re-issued by email so that we can sign and send back.
I believe that the hard yards are done and we look forward to addressing these few last concerns so that we can finalise the contract.
Please let me know if you can agree to these changes.
89 Plainly, Mr Vassallo, in amending the draft contract, indicated that he did not accept any offer inherent in Mr Ide’s conduct in sending the draft to him. It also follows that Mr Vassallo did not consider that the letter of 5 April 2012 had resulted in the formation of a binding contract, probably because the parties had been, for some time, negotiating the terms to be included in a formal, written contract.
90 On 12 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
Hi Victor,
I understand your position as you understand this contract is the first of many civil contracts on the estate. I will discuss with Chris and Sam next week and come back to you but I still have concerns. I have the advantage of being involved in many projects as a lawyer dealing with construction contracts upfront and in resolution acting for principals, contractors and project managers/civil engineers as well of a principal but most have been limited to South -East Queensland where there is many quality contractors as well as those who take short cuts contractors who you avoid. Most contracts I see including those prepared by Project Managers and Civil Engineers have Part B amendments to AS4000 as I previously presented to you so that the contract is more of a turn key contract project delivery intent where the contractor delivers the project rather than just looks at individual elements. Government contracts often have more extensive part B amendments.
I can understand in Mackay your position is fairly special in that you don’t have much competition as a quality contractor. Also most construction contractors in SE Qld are totally focused and dependent on contracting where you have a broad diversified revenue base. I know you do Main Roads Work and perhaps they are more work undertaken basis or the work is more uncertain. I am surprised you haven’t been in contracts with Part B amendments and can only conclude perhaps as not the turn key project delivery intent we usually see.
We are extremely cautious and don’t wish to see variations, first as it shows a deficiencies/lack of control in tendering and contractor selection phases, second as changes feasibility and third as risks being unfunded. We very reluctantly deleted the clause of having to include all variation claims in the progress claim relative to the period when the work was undertaken and with respect couldn’t see how you would be unfairly treated. You very firmly rejected that request. If you have never entered contracts and have no need or wish to enter contracts to be awarded projects that include clauses dealing with discipline of including variations in progress claims and taking responsibility for overall delivery then I understand your position of not being prepared to on this instance and I would take the same position.
Let me come back to you on points 1 and 3. I am unsure if we are able to agree on deletion of this provision as I am not sure if our company should take on additional risk in project delivery. If we have no choice we will naturally have to but that is not clear. The example I gave is the obvious one but even on your suggested wording there is still the risk for dispute as whether something is minor or not minor. As I said were were looking for the contactor to be responsible for project delivery and if anything has been missed in Bills of Quantities with your experience you would know and have requested clarification or identified it as an omission in tender submission. Could I suggest you review the drawings and Bill of Quantities again and see if anything has been missed. If following your review your position changes please come back to me by email asap.
Point 4 [liquidated damages] I am prepared to do calculations and discuss with you further.
Subject to weather we would like to be underway first week of May hence we need to resolve this one way or the other asap. I will be back in the office on Monday.
91 On 13 April 2012 Mr Vassallo sent an email to Mr Kinneally as follows:
Hi Ross,
I appreciate you do not want any surprises, our main concern regarding Points 1 and 3 is that we have seen many poorly designed and scheduled contracts.
On further review and discussion with my team, we have formed the view that Westera appear to have done a good job designing and scheduling the project. The only missing item that we are aware of and have previously identified is the removal of the houses.
As such, in order to illustrate our commitment to the project we will accept the clause in questions with an exception added for the removal of the houses which we will discuss with Sam on possession of the site.
I will await your response regarding [liquidated damages] and discuss with you further.
We have begun scheduling our resources to begin first week of May if the site is dry enough to ensure no delays of the project.
92 On 18 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
In your previous email you mentioned about resourcing up for a start early May and Sam mentioned Bob requesting something yesterday. Until such time as the contract is agreed and signed and the conditions precedents are satisfied you should not do anything that you are not prepared to loose if the contract doesn’t go ahead. We know we are committed to paying for grass stockpiling and drainage to the limits as authorised but that is all.
We are working up eastern precinct design and as of yesterday we identified an issue that is going to require design changes to the Western Precinct as well as authorisation from Council and it is unlikely we will be able to start within the month.
93 On 18 April 2012 Mr Vassallo sent an email to Mr Kinneally as follows:
Thanks for the update Ross.
We have put a fair bit of internal commitment to resourcing the project team and scheduling of plant, but have not placed any orders or commissioned any subcontractors.
I’ll be back at work next Monday and we can discuss the design issues then.
94 On 19 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
As I said until such time as the contract is agreed and signed and the conditions precedents are satisfied you should not do anything that you are not prepared to loose if the contract doesn’t go ahead. We know we are committed to paying for grass stockpiling and drainage to the limits as authorised but that is all.
The directors have identified a serious issue with the proposed contract with you which we are reviewing and it may not go ahead.
Mr Vassallo responded on 24 April 2012 as follows:
I am back at work and tried to call you yesterday.
Could you please let me know how things are going and whether I can assist to resolve any design or contract issues.
95 On 25 April 2012 Mr Vassallo sent an email to Mr Kinneally as follows:
Further to my email on Tuesday, I would like the opportunity to discuss the matters raised in your emails of Wednesday and Thursday last week (18/4/12 & 19/4/12). You initially indicated that the project may be delayed due to a design issue and then subsequently said that the Directors had a problem with the contract with us and that it may not proceed.
Until receipt of these last two emails, we were operating in good faith that formalisation for signing of the contract had been resolved, and that as discussed we were progressing toward a start in late April/early May. As I stated in my last email, we have programmed work in progress to ensure that personnel and resources are ready for an immediate start and undertaken preliminary administrative and site works.
We received a “Letter of Intent” dated 9 December 2011 and subsequently a “Letter of Acceptance” dated 3 April 2012, which in effect constitute a contract under AS4000. All subsequent work has been carried out in good faith on the basis of that correspondence.
Given that the recent lack of communication and failure to my calls, I am now concerned about your intentions with regard to the contract in so far that you have previously stated that you have adequate presales to satisfy your finance obligations which is the only condition requiring confirmation.
I remain hopeful that we can resolve any new issues quickly with a view to commencing on site as soon as possible in order to maximise the current “dry” period.
Please advise by no later than 5.00pm Thursday 26 of April 2012 how you intend to proceed.
96 On 26 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
I will give you a call tomorrow morning. I have meetings all day. Clearly outstanding is [liquidated damages].
97 Mr Vassallo sent an email dated 26 April 2012 to Mr Kinneally as follows:
Thanks for your email.
Please advise the best time to expect your call, and I will ensure that I am available. We can discuss the [liquidated damages] tomorrow as I see this as a fairly minor issue.
98 On 27 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
Before we discuss further matters we need to clarify the status of the contract you refer to in your below email. The fundamental legal and commercial position is that where it is contemplated that a formal agreement will be agreed and signed then the parties are not bound until the formal agreement is agreed and signed. I looked at AS4000 particularly clause 6 and can see the confusion re if there was issued an unconditional “Letter of Acceptance”. The issue of a Letter of Intent is exactly that but is not a contract.
Sam sent Bob on 22 February a draft of a contract which had embodied in it was a copy of Letter of Acceptance. Sam sent ob on 3 April 2012 a copy of contract for signing by all parties which had embodied in it a Letter of Acceptance which as the party to it Westera Partners signed. The Letter of Acceptance embodied in the contract was dated 3 April, 2012 included Construction Period shall be 30 weeks. You contacted Sam and asked him to amend the Letter of Acceptance to say the Construction Period shall not exceed 30 weeks which Sam reissued to you on 5 April, 2012 but it remained dated 3 April, 2012. The letter was to be embodied in the contract the contract signed and returned.
So in your email below what Letter of Acceptance are you saying formed the contract (the one sent and dated 3 April, 2012 or the one emailed to you on 5 April, 2012 and dated 3 April, 2012) and what then is the contract date?
99 On 27 April 2012 Mr Vassallo sent an email to Mr Kinneally as follows:
I just tried to call you in relation to your email. Could you phone me when you are free please.
Mr Kinneally sent an email to Mr Vassallo on the same day as follows:
As I said, before we discuss further matters we need to clarify the status of the contract you refer to in your below email (25 April). The points you make in your below email are technical and unless we understand your position we do not have a benchmark to go forward.
Please reply to those points as soon as possible by email.
100 Mr Vassallo replied on 29 April 2012. After first complaining about the fact that he had not been able to speak to Mr Kinneally by telephone he continued:
As I see it, what constitutes the contract are the facts of each sides actions and the documents and correspondence supporting them. The actual date can be determined at any time now or in the future and I will not comment on this matter until I have sought expert advice (bearing in mind your professional qualifications).
I want to know if you intend to continue on with this contract with us, as you seem to still be implying in your emails. We need clear direction. We will continue to act as if we will be constructing this project until you tell us otherwise. Due to the size of this contract we have forgone tendering numerous large projects and declined good jobs that we could have undertaken.
We have recently heard from one of our major suppliers that you awarded this contract to another contractor approximately two weeks ago and they are currently resourcing the project. Please confirm if this is correct so that we know what our position is.
If my comments above are incorrect then you should, as promised in your email of 12 April 2012, Point 4 [liquidated damages] “prepare calculations for discussion” and confirm your verbal advice that the finance condition has been satisfied by way of documentation.
I look forward to hearing from you by close of business 30 April 2012.
101 On 30 April 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
At this stage we are intending to proceed with another contractor. I have not called you back due to how negotiations have been handled to date.
He then gave his version of the events which had occurred since 9 December 2011. He concluded:
You should urgently brief a lawyer with the relevant expertise to advise you on your legal position. Unless I hear from you by close of business today that you withdraw your assertion of a legal contract I will assume that you continue to standby that assertion in which case we will need to seek an urgent determination of the issue which will have negative cost implications. We are not prepared to let the matter go on.
102 On 1 May 2012 Mr Vassallo sent an email to Mr Kinneally as follows:
Hi Ross,
Thank you for finally being honest with me. I am curious as to how long you would havecontinued the farce of pretending to move forward. I can only assume that you hadn’t sewn everything up with the other contractor and wanted to keep me on the hook for as long as it suited you. I can also understand why you didn’t want to talk to me directly given the way you have conducted yourself.
I am very disappointed that you didn’t even give me the courtesy of a phone call before making your decision to go with another contractor. I have always acted honestly and fairly with you throughout the process and the accusations you have made regarding the negotiations are unjust, and can’t go unanswered.
None of the Special Conditions or Annexure B were revealed to us at the time of tender (other than the finance condition) and in fact we had been told that the contract was to be administered under AS4000 unamended. When we received the special conditions and Annexure B mid March this year, and with great surprise to see new conditions, we entered into negotiations in good faith in an effort to achieve a fair outcome for both parties. At no time during the negotiations did either party have any sort of advantage over the other. You were not forced to make any compromises and I can only assume that you did so because they were fair and reasonable. All negotiations were amicable and I believed were all but resolved, with only a couple of minor issues to be finalised when you got back from holidays. In our experience, it is always best to have all contractual issues resolved up front so that there are no surprises down the track.
In your most recent correspondence, you have placed a great deal of emphasis on the need to minimise your risks. I can only state the obvious by saying that it goes both ways. I am sure that if you were acting for us in your professional capacity on any other project, you would have agreed with our approach. You will always find a contractor who is willing to take on extra risks in order to win a contract, especially in a depressed market. We have seen many of them go broke or leave town if things go bad. We have been in business in Mackay for nearly twenty years and I can assure you that we have established our good reputation because we are careful and always provide quality work and within the project timelines.
The Letter of Intent dated 9 December 2011 was issued so that we could do everything necessary to ensure a hasty commencement of thecontract in March or as the weather permitted. We have expended a considerable amount of time and money readying for this project. To my mind the only risk was that you may not get finance (and you confirmed that pre-sales were in place to satisfy your finance commitment at our meeting of 9/03/12). At no time did I consider that you would renege on a signed Letter of Intent and a Letter of Acceptance, as I had assumed that you had higher business ethics than that. Your only concern now is to protect your own interests by asserting that we undertook the preliminary work at our own risk.
There is of course a contract, and the signed Letter of Acceptance and your actions affirms this. Furthermore, I believe that if the tables were turned and we had walked away from the project because we had a better offer elsewhere, you would have been quick to take legal action. Whether we choose to take this action is another matter. Any sort of litigation or the potential for such would only serve to hold your project up and provide me with an unneeded distraction. Whilst I am extremely tempted to do so, given the deceptive way that you have conducted yourself of late, I don’t wish to prolong my association with your group.
My position on this matter will of course be based on your prompt payment for all costs undertaken to date. A full account will be forwarded shortly.
In closing I can only say that your company has missed a great opportunity to work with a good local contractor and an excellent team of highly qualified personnel.
103 On 2 May 2012 Mr Kinneally sent an email to Mr Vassallo as follows:
Hi Victor,
I don’t wish to be too pointed but you are an experienced and extremely robust commercial negotiator and I understand your motivation in relation to pushing the boundaries and reducing your risk wherever possible. I respect your commercial skills. However we found in the circumstances your approach too strong and even over the last 2 weeks when we obviously put out our concerns you did persist with claiming there was a contract. To make that claim when it was legally untrue meant that neither of us could be as open as we were previously. Iam not naive to keep speaking openly when serious legal claims are being made. You had tied our hands.
My email of 30 April was very professional. I referred to your strong approach to the negotiations we had. I did not make comments about your intentions, honesty or ethics as that would have been unnecessary and I don’t intend to correct the inaccuracies nor respond to the unnecessary judgements in your below email.
We have no reason to speak in any negative terms about your company’s ability to deliver and will not do so. While you may never wish to engage with us again we will not make the same claim but more items would be resolved earlier.
Provided that your costs are substantiated and limited to the authorised amounts they will be paid promptly. Please email your invoice and details of your costs through to me this week for payment.
104 The “authorised amounts” are, I assume, the amounts outstanding with respect to the work performed under special arrangements, to which work I have previously referred.
Vassallo’s submissions concerning the proposed para 22A
105 Vassallo asserts that a contract arose out of a “consensus” between the parties which occurred on either 29 March or 3 April 2012. Alternatively, a contract arose when the amended tender acceptance letter (dated 3 April) was received by Vassallo on 5 April 2012. Vassallo submits that:
generally, a binding contract will be formed upon the acceptance of a tender, unless it is expressly stipulated that there is to be no contract, “until certain formalities have been complied with”;
in this case, the parties dealt with each other, “in a manner reflecting normal industry practice”, so that the ground rules for their negotiations were contained in cl 6 of the general conditions;
clause 6 envisaged, in this case, not only that a binding contract might arise before the anticipated execution of the formal agreement, but further, that a binding contract might arise prior to (formal) acceptance of a tender;
the “ground rules for negotiation set by clause 6 are hardly surprising in this case given that there was a formal invitation to tender”;
at no time up to and including 5 April 2012 did Andergrove dispute or question the application of cl 6 to the dealings between the parties;
unless a binding contract is to be regarded in this case as arising prior to formal acceptance of a tender from Vassallo, there is, “no sensible reason to conclude that a tender made by [Vassallo] ought not be regarded as an offer capable of acceptance and thereby giving rise to a binding contract”;
having regard to cl 6 the parties should be presumed to have actually anticipated the prospect that a formal instrument of agreement might require correction of errors prior to execution; and
the better view, particular having regard to cl 6, is that “a consensus, constituting there and then a binding contract arose by exchange of emails on 29 March 2012”.
106 Whilst I accept the first proposition, it seems to have little relevance here, given that it is clear that neither party ever intended that the proposed contract would be constituted by the simple acceptance of a tender. Vassallo’s case is that both parties always intended to contract on the basis set out in the general conditions. Vassallo does not plead that, any time prior to 9 December 2011, Andergrove ever indicated that the general conditions were to form part of the proposed contract, although in his affidavit, Mr Breadley claims that they were mentioned to him by someone at Andergrove. At least from that date, the parties were clearly negotiating a formal, written agreement. That fact may be a powerful factor militating against the conclusion that at some time thereafter, and in the process, the parties ever entered into an interim agreement.
107 The other propositions depend very much upon the assumption that cl 6 could somehow create a contract where none otherwise existed. I have already given my reasons for rejecting that proposition. The references to “normal industry practice” seems to be intended to strengthen the viability of that proposition. Mr Vassallo gave evidence to the effect that the use of the general conditions was “usual industry practice” but I am unclear as to the relevance of that evidence. Vassallo is not, as far as I can see, seeking to establish contractual terms implied by industry practice. Use of the term “ground rules” may be misleading. Nothing in the material suggests that Andergrove ever accepted any particular proposal as to how the parties would negotiate. Mr Breadley asserts that he was told that the general conditions would be used, but even accepting that proposition at face value, there is no plea that the parties bound themselves to negotiate on that basis.
108 As I have previously observed, there may be an argument that where the parties indicate that any contract which they may make will include the general conditions, the presence of cl 6 may strengthen any available inference that they intended to contract in advance of execution of a formal agreement. However, even on that basis, the clause could not negative a clear intention to the contrary.
109 I see no reason why Andergrove should have, at any time on, or prior to 5 April 2012 disputed or questioned the “applicability” of cl 6 to the dealings between the parties. As far as I can see, no occasion arose for such a dispute or question prior to Mr Vassallo’s email dated 25 April 2012. Mr Kinneally appears first to have raised cl 6 in his email of 27 April. Vassallo must establish the pleaded contract by reference to the dealings between the parties. Clause 6 is not a shortcut to a contract. However I keep in mind its presence in the general conditions.
110 Vassallo also submits, concerning the question of acceptance that:
acceptance of an offer by a document is a matter of construction;
the construction question is to be resolved “according” to what a reasonable recipient of the purported document of acceptance would have understood, being familiar with the terms of the offer and the surrounding circumstances, including the dealings between the parties;
the proper construction of the document of purported acceptance must amount to an unconditional and unqualified acceptance of the rights and liabilities of the offer;
there will be no acceptance if the reasonable recipient would regard the purported acceptance as introducing a new term into the bargain;
the words used in the acceptance need not necessarily conform precisely to the terms of the offer;
where acceptance is unqualified, a request for better or varied terms does not convert acceptance into a contract offer;
the reasonable recipient may ignore misdescriptions and errors in a document which otherwise appears to be an unequivocal communication of acceptance;
the requisite level of conformity between the term of the purported acceptance and the offer is irrelevant if a binding contract has already been made; and
such purported acceptance being merely a written record of an agreement previously made, and considering the “intricacies and voluminous content of building contracts of this type, the parties ought be presumed to have actually anticipated the prospect that a formal instrument of agreement might require correction of errors prior to execution”.
Of these very general propositions, I need only comment upon the last three. As to the question of misdescriptions and errors, I have already set out my understanding of the authorities. The other two points do not assist in this case as both simply assume the existence of a contract which is to be superseded by a more formal agreement. It is for Vassallo to establish such a contract rather than to assume its existence.
111 Vassallo’s case concerning events after 9 December 2011 involves the isolation of a small number of incidents from the rest of the history of dealings between the parties, contrary to the canons of construction which it propounds. In reality, whatever Vassallo expected prior to 9 December 2011 as to the terms of the proposed contract, the parties were, thereafter, clearly negotiating for a written contract, substantially in the form forwarded by Mr Ide to Vassallo on that day. Vassallo certainly did not accept that offer. The resulting negotiations were somewhat protracted. Nonetheless, until 25 April 2012, there was never a point at which the parties appeared to negotiate on any other basis. This consideration must be kept in mind in considering the three versions of Vassallo’s alternative case.
29 March 2012
112 Vassallo pleads that Mr Kinneally’s email dated 29 March 2012 and Mr Vassallo’s response of the same date effected a “consensus” for the purposes of cl 6. It may be that Mr Kinneally’s email indicated agreement on the “minor changes” notified by Mr Vassallo in his email of 28 March 2012. However he also identified other proposed amendments. Mr Vassallo’s email of 29 March may have indicated Vassallo’s acceptance of the proposed terms but, given the history of the matter, it does not follow that the parties intended, then and there, to be bound. Vassallo seems tacitly to submit that Mr Vassallo’s enthusiastic language puts the matter beyond doubt. However both parties clearly understood that there was to be a written contract.
113 Given the extent of the negotiations, it seems most unlikely that they contemplated some sort of interim agreement. There was no suggestion that work should commence forthwith. Indeed, Mr Vassallo seems to have understood that work could only be done by arrangement with Andergrove. It is significant that when, on 29 March 2012, Vassallo suggested that it might commence drainage work, Mr Ide, in his email of 30 March, stressed the fact that the contract had not yet been signed. He appears to have proceeded on the basis that if the work were to be done, it would be pursuant to special arrangements, and not pursuant to an existing contract. The same approach had been taken in early December 2011 with respect to site clearance. Again, on 18 April 2012, Mr Kinneally was at pains to stress that Vassallo should be conscious of the fact that there was no contract, and that it, “should not do anything that you are not prepared to loose [sic] if the contract doesn’t go ahead.”. In Mr Vassallo’s response of 18 April 2012, he did not assert an existing contract but referred to, “a fair bit of internal commitment to resourcing.”. Both men were focussed on the execution of the written agreement. Mr Ide’s email of 30 March 2012 clearly indicated that Andergrove did not believe that a contract had been made. Vassallo did not suggest to the contrary.
3 April 2012
114 On 2 April 2012, Mr Vassallo suggested that he would like to execute the contract before he went on leave. On 3 April Mr Ide was trying to finalize the relevant documents, again suggesting that the parties placed great weight upon execution of the agreement which they had negotiated. His second email on that day suggests that there were items in the schedule of rates and quantities which had been, or were to be amended. Mr Ide understood that he needed Vassallo’s help, suggesting that the quantities and rates had not all been previously agreed. In his third email, Mr Ide drew Vassallo’s attention to two matters, suggesting that he did not believe that it had agreed to them. In one respect he was mistaken in his actions. Nonetheless, he clearly did not understand that the terms of the draft had been agreed. Mr Damian Vassallo’s email of 10 April 2012, and Mr Vassallo’s email of the same date demonstrate that there was, in fact, no agreement. Vassallo submits that a contract was made on 29 March, and that these subsequent exchanges were simply attempts to re-negotiate its terms. To my mind it is much more likely that they reflect an absence of an intention to be bound.
115 In the event that Vassallo fails to establish a contract made on 29 March 2012, it submits that the provision by Mr Breadley, on 3 April 2012, of the amended schedule of rates and quantities, completed the “consensus”. On this view of the case, the tender acceptance letter of 3 April, as amended and re-delivered on 5 April, constituted merely, “a written record of a contract already finalised”, or, “but a machinery step facilitating the execution of a formal instrument of agreement in a given timeframe”. As I have said, this view of the letter co-incides with Mr Kinneally’s assertion as to the reason for its creation, and for its being forwarded to Vassallo. Vassallo does not rely on the letter as supporting its submission that a contract was formed on 3 April 2012.
116 I suspect that Vassallo’s use, in its submissions, of the word “consensus” rather than the word “contract” is deliberate and critical to those submissions. It cannot be seriously argued that the supply of the amended schedule for inclusion in the anticipated contract was, in some sense, the acceptance of an offer. Rather, I suspect that Vassallo relies upon a proposition which I have previously rejected: that cl 6 can operate to create a contract where there is a consensus which falls short of creating such a contract. It may be arguable that the amended schedule, when adopted by Mr Ide, resolved the only matters then outstanding as between the parties, but the fact remains that they had, over some months, demonstrated the clear intention that they would be bound by their written agreement and had given no indication of any intention otherwise to be bound. Hence I reject the submission that any agreement was made on 3 April 2012.
5 April 2012
117 Finally, Vassallo submits that a contract was made on 5 April 2012 by the delivery to Vassallo of the tender acceptance letter dated 3 April 2012 in its amended form. It seems that, as pleaded, Vassallo’s case for a contract made on 5 April 2012 depends upon cl 6, and the assertion that the tender acceptance letter (as amended) constituted the acceptance of a tender, thus engaging that clause. I have already rejected that interpretation of cl 6.
118 It may be, however, that in its submissions, Vassallo goes a little further, submitting that the tender acceptance letter, as amended, may have resulted in a contract being made on 5 April 2012, without regard to cl 6. Vassallo identifies an error in the letter in that the total price is incorrect. The discrepancy is small. I do not understand Andergrove to rely on it as depriving the tender acceptance letter (as amended) of any capacity to constitute an acceptance of Vassallo’s final tender. At para 75 of its submissions, Vassallo submits that certain aspects of Mr Ide’s third email of 3 April 2012 suggest that a bargain had been struck, apparently implying that these matters in some way strengthen the inference that a contract was made on 5 April. I consider such matters to be equivocal. It is not necessary that I consider them in any more detail. Vassallo also submits that Mr Ide’s variation of the terms of the earlier draft was inconsistent with an agreement reached between Mr Kinneally and Mr Vassallo and therefore should be ignored. I do not understand the legal basis for this submission. Even if some non-binding “agreement” had been made between Mr Vassallo and Mr Kinneally, the fact remains that on 3 April 2012, Andergrove indicated its willingness to be bound only to the terms which it offered on that day. There was no other offer which Vassallo could accept. It would have been easy enough for Vassallo to draw attention to the error and have it corrected. In fact, Vassallo did so when Mr Vassallo amended and signed the contract. That conduct amounted to a counter offer which was never accepted.
119 However one looks at it, the tender acceptance letter poses problems for Vassallo. As Mr Vassallo did not accept it in its original form, it can hardly propound it as being, in that form, an acceptance of a pre-existing offer. In any event, it is clear that Mr Vassallo considered that he was still at liberty to negotiate fresh terms. The question of time for completing the works could hardly be described as trivial. Nonetheless Vassallo submits that a contract was formed upon receipt of the tender acceptance letter in its amended form. Where, as here, there is a long history of negotiation, and no clear evidence of any intention to be legally bound prior to the contemplated execution of a formal agreement, it is difficult to see any reason for the parties suddenly departing from that course in order to give the current state of negotiations interim contractual effect. There is no reason to believe that, in this case, the parties had any such intention. Further, as I have already observed, it seems that the letter was simply a feature of the proposed agreement.
120 That the parties had no intention to contract also appears from their subsequent conduct. On 5 April, Mr Vassallo further amended the draft contract and signed it. At paras 109 – 110 of his affidavit he said:
109. On 5 April 2012 I signed a contract which incorporated the AS4000 Terms, the Schedule B Annexure and, subject to one minor change, the Second Special Conditions. Exhibit “VGV47 is a true and correct copy of this signed document.
110. In relation to “VGV47”, I make the following comments:
110.1 I amended the Second Special Conditions by:
(a) removing paragraph 8 which stated “Where an item is shown on the engineering drawings and is not listed in the Bill of Quantities, the item shall be deemed to be included in the lump sum” (“the BOQ Amendment”); and
(b) inserting a new paragraph that said “ Total liquidated damages shall be limited to 10% of the contract amount” (“the Liquidated Damages Amendment”).
110.2 I made the Liquidated Damages Amendment on the basis that my trust in Kinneally had broken down and I was concerned that he was trying to set me up to broaden the potential damages payable by Vassallo Constructions. In particular I was concerned that in the circumstances where we did not deliver and he had some contracts for houses that fell through, that he’d try to sue Vassallo Constructions for all of the resulting losses.
110.3 I believe that capping the liquidated damages at 10% was not unreasonable because $600,000 was a significant penalty if we failed to deliver.
110.4 I made the BOQ Amendment because, in my view, its effect would be that we had to rely that their bill of quantities being correct and if it wasn’t we would then, effectively, wear the consequences of that as it would be deemed to be part of the lump sum.
110.5 I thought by signing the contract with those changes sending it off to Kinneally it may help punch through the parties’ differences and allow the parties to finalise their positions.
121 On 10 April 2012 Mr Damian Vassallo sent the signed contracts to Andergrove and by email, advised Messrs Ide and Kinneally of the amendments. Later that day Mr Vassallo, by email, sought to make a further amendment to the liquidated damages clause. Negotiation continued between the parties, but no agreement was reached as to the question of liquidated damages. As far as the evidence goes, Andergrove did not sign the proposed contract.
122 I conclude that although, for quite a lengthy period, the parties expected to make an agreement, Vassallo has no reasonable prospect of establishing that such agreement was ever concluded. It follows that leave to amend should be refused.
SUBMISSIONS AS TO COSTS AND OTHER ORDERS
123 I shall receive submissions as to appropriate orders and as to costs.
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I certify that the preceding one hundred and twenty-three (123) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. |
Associate:
