FEDERAL COURT OF AUSTRALIA

Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 290

CONTRACTS – building contract – principles for determining existence of binding contract – allegation of partly written and partly oral contract - whether parties had reached agreement as to essential terms – whether agreement capable of enforcement - whether parties evinced intention to be legally bound –whether court can look at subsequent conduct of parties to determine whether final agreement reached - remedies where contract repudiated – damages for loss of profit – relevance of profitability of applicant in previous similar projects - relevance of profitability or otherwise of successful tenderer - where construction company invited to lodge tender for construction project – where several subsequent re-tenders - where ongoing negotiations between parties as to terms and scope of contract – where agreement to be based upon Australian Standard 2124-1992 standard terms of contract - where agreement alleged to derive from tender documents, letters, memoranda, and a telephone call.

TRADE PRACTICES – misleading and deceptive conduct - unconscionable conduct – application of Trade Practices Act 1974 ss51AB, 51AA – whether ‘special relationship’ between the parties - where alleged conduct suggesting negotiations concluded when in fact they were not

Masters v Cameron (1954) 91 CLR 353 applied

Geebung Investments v Varga Investments (1995) 7 BPR 14,551 cited

Tekmat Pty Ltd v Dosto Pty Ltd (1990) 102 FLR 240 cited

Baulkham Hills Private Hospital v GR Securities (1996) 40 NSWLR 622 distinguished

ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 considered

Relwood v Manning Homes [1990] 1 Qd R 481 considered

Pagnan v Feeds Products [1987] 2 Lloyd’s Reports 601 cited

Port Sudan Cotton Co v Chettiar [1977] 2 Lloyd’s Reports 5 cited

CBA Ltd v GH Dean & Co Lty Ltd & Dean [1983] 2 Qd R 204 cited

Commercial Bank of Australia v Amadio (1983) 151 CLR 447 cited

GRAHAM EVANS PTY LTD (ACN 009 774 378) v STENCRAFT PTY LIMITED

(010 734 997)

NG 62 OF 1995

SPENDER J

BRISBANE

25 MARCH 1999

THE COURT ORDERS THAT:

1. The application is dismissed.

2. The question of costs of the application is reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     This is an application filed on 6 February 1995 by Graham Evans Pty Limited (‘GE’) against the respondent, Stencraft Pty Limited (‘Stencraft’) claiming, pursuant to s 82 of the Trade Practices Act 1974, damages, interest and costs. On 24 March 1995, Lockhart J ordered by consent that the proceedings be transferred to the Queensland Division of the Federal Court.

2                     The central question on the application is whether there was a contract entered into by GE and Stencraft for GE to build a major residential construction project in Brisbane known as the “Dockside Stage III” project and if so, what was its content. GE by its statement of claim filed 6 February 1995 and amended statement of claim filed 17 June 1996 alleges that a concluded agreement was reached on 12 May 1994 that GE was to build the Dockside project for Stencraft at a contract price of $28.261 million. By its defence filed 23 June 1995, Stencraft denies that any concluded agreement was reached and alleges that its acceptance of GE’s contract price was subject to the acceptance by GE of the form of contract and deed of assumption.

3                     If there was a contract as alleged by GE, a further question is what damages ought be awarded for its repudiation by Stencraft.

4                     As will be seen, much ultimately turns in these proceedings on issues of fact and the proper inferences to be drawn from the facts as found. It has been necessary to have close regard to the context in which the parties have conducted themselves at the relative times and to the chronology of certain critical events.

Background and Facts

5                     Negotiations between the parties leading to the tender by GE for the Dockside project began on 25 March 1994 between Mr Ian Harrington, General Manager, Queensland of GE, Mr Murray Osbaldiston, GE’s Estimating Manager, Mr Steve Girdis, a director of Stencraft and Mr Fred Brands, the General Manager of F A Pidgeon and Son Pty Ltd (‘Pidgeon’), a shareholder of Stencraft. GE was at this time nearing completion of construction of a project known as “Goodwin Towers”. This had been a successful project, and had involved particular staff of GE referred to by the parties in these proceedings as the “A” team. Following that meeting and on the same day, Mr Brands for Stencraft forwarded a letter to Mr Osbaldiston enclosing documents relating to the construction of the Dockside project and inviting GE to tender for the project, such tender to be submitted by 12 noon, Friday, 22 April 1994. There then followed a period of approximately one month from late March to early May 1994 in which the parties exchanged extensive correspondence relating to the technical details of the Dockside project, including specification details, finishes schedules and architects’ drawings of the project.

6                     As a result of the detailed information provided by Stencraft, GE delivered its first tender in the sum of $29,196,873 by letter to Stencraft dated 22 April 1994.

7                     Mr Harrington, Mr Osbaldiston, Mr Girdis and Mr Brands met at the offices of Pidgeon on 26 April 1994 to discuss technical matters and the scope of work, and the form of the contract to be signed should GE ultimately be successful in their tender. In particular, Mr  Harrington for GE deposes in his affidavit sworn 9 November 1995 to a conversation that took place between himself and Mr Brands of Stencraft. He says that Mr Brands indicated that he was not familiar with the “JCCB” form of contract nominated in GE’s tender and preferred to use “AS2124” (Australian Standard 2124) in substitution, to which Mr Harrington replied “We don’t have a problem with that - we want to sort out the terms of payment and retention.” Mr Brands in his affidavit sworn 12 March 1996 deposes to discussing a large number of matters relating to scope, including:

“- formwork

- waterproofing the basement

- reinforcing

- concrete

- piling

- joinery

- carpet

- tiles

- kitchen benchtops

- vanity benchtops

- kitchen splashbacks

- kitchen cupboards

- art glass

- entry decoration

- granite in lobbies

- skirtings

- tiling in firestairs, anteroom and refuse room

- ceiling in firestairs, refuse room and anteroom

- cornices

- tiling to firehose reel cupboards

- access panels

- skirting in laundry

- laundry cupboards

- tiling to balconies

- Stair to car park

- angle corner guards

- grates to spoon drains

- louvres

- bin rooms to the villas

- escape stairs

- waterproofing system

- kitchen entry doors

- curtain pelmets

- insulation

- windows

- handrails and balustrades

- glass strength

- landscaping

- contract period

- hoarding

- boardwalk

- hydraulics

- lifts

- electrics

- fire services

- security

8                     Further correspondence, drawings and sketches followed the meeting on 26 April 1994.

9                     By letter dated 29 April 1994 GE submitted a re-tender in the sum of $28,344,000.00. Their letter said:

“Our tender is subject to the conditions and attachments of our original tender together with the attached Post-Tender Amendments.”

10                  On 6 May 1994 a further Re-Tender 2 for the Dockside Stage 3 project was sent by Mr Harrington to Mr Girdis. This was for a price of $28,434,439. The letter said:

“Our tender is subject to the attached Post Tender Amendments No. 2 and the following Conditions and Attachments of our previous tender submissions.

Original Tender dated 22^nd April 1994

Schedule of Clarifications Items 2 to 16

Exclusions

Schedule of Provisional Sums - excluding Access Panels

Re-Tender dated 29^th April 1994

Post Tender Amendments Items 2 - 21, 23 - 56, 58, 61 - 64 inclusive

Our price remains open for consideration for 28 days from the above date and thereafter may be subject to revision.”

11                  The “attached Post Tender Amendments No. 2” included an item:

“12. Conditions of Contract

Conditions of Contract to be AS2124-1992. Contract Annexure and Special Conditions of Contract to be mutually agreed.”

12                  On 6 May 1994 at the offices of Pidgeon, Mr Harrington and Mr Osbaldiston, on behalf of GE, accompanied by Mr Gregory McLean, the Operations Manager of GE, met with Mr Girdis and Mr Brands, who were in attendance on behalf of Stencraft. As appears from the contemporaneous notes of the meeting taken by Mr McLean and Mr Brands, the parties again entered into a lengthy discussion in relation to the technical aspects of the project. In addition to discussions concerning matters relating to scope, Mr McLean in his affidavit of 10 November 1995 deposes to a discussion between Mr Harrington and Mr Girdis in which Mr Harrington indicated that he wished to “tidy up the contract”, to which Mr Girdis responded “AS2124 conditions are on the word processor and a draft will be available on Monday.” Mr McLean also noted Mr Brands said words to the effect that GE’s price was somewhat uncompetitive when compared to other tenderers, but if a contract price of $28,000,000 could be reached then the parties could shake hands on the deal.

13                  Further discussions occurred on Thursday, 9 May 1994. At that meeting, GE submitted a further tender, offering to construct the project for the sum of $28,218,574.

14                  Since this document, together with the memorandum of 10 May 1994 and the telephone conversation of 12 May 1994, constitute the parameters of the contract the applicants allege came into existence on 12 May 1994, it is desirable to set the letter out:

“ PROJECT: DOCKSIDE STAGE 3

SUBMISSION OF TENDER

We have pleasure in submitting our tender for the construction of the above project for the Firm Lump Sum price of Twenty Eight Million, Two Hundred and Eighteen Thousand Five Hundred and Seventy Four Dollars ($28,218,574.00)

Our tender is subject to the following:-

·        We have allowed a contract period of 63 weeks from date of possession of the site and relevant Building Approvals.

·          We have attached:-

Schedule of Clarifications

Post Tender Amendments

Post Tender Amendments No: 2

Schedule of Exclusions

Schedule of Provisional Sums

Appendix

·          In support of our tender we submit that:-

We have carried out a thorough tender, within the time allowed and have been able to fully assess the documentation. We do have a number of issues that will need to be discussed and finalised post tender pre-award.

·          We offer the same construction team who are successfully completing the Goodwin Towers Project ahead of time, on budget, with minimal variations and to a high standard of workmanship.

·          We operate a fully documented Quality System.

·          We operate a pro-active safety management programme and have suffered only one lost time accident on the Goodwin Towers Project.

·          Our price remains open for consideration for todays (sic) meeting thereafter may be subject to revision.”

15                  It is important to note first that the letter stated:

“We do have a number of issues that will need to be discussed and finalised post tender pre-award”.

16                  The schedule of clarifications attached to the letter of 9 May 1994 commences:

“Further to our letter of 18th April 1994, we advise that there are items which require further detailing/specification”.

17                  There then follow eleven items under the statement:

“The following is a schedule of the assumptions/allowances that have been included in our tender for those items”.

18                  In the “POST TENDER AMENDMENTS” document, again attached to the letter of 9 May 1994, it is stated:

“3. Class 3 formwork acceptable.

…

15. Allow light and dark stained solid Tas Oak kitchens in lieu of 2 pack on Silky Oak and Victorian Ash.

…

58. Cash retention required Bank Guarantee not acceptable

Our offer is based on a 10% cash retention limited to 5% of the Contract value on monthly Progress Payments paid 15 calendar days after receipt of claim. Two and one half percent (2½%) of retention to be released at practical completion with the balance converted to a Bank Guarantee at completion of the punch list items or 60 calendar days, which ever (sic) is the lesser.”

19                  The “POST TENDER AMENDEMENTS (sic) NO. 2” document, again attached to the letter of 9 May 1994, provided in part:

“2. Paving/Landscaping

The Paving/Landscapng (sic) included in our tender is a budget allowance to provide Paving/Landscaping similar in extent and theme to the adjacent works.

In order to achieve this we require control over the Landscape design (No allowance has been included for design fees).

…

9. Joinery Fittings

Our tender is based on providing 2 pack lacquer doors to kitchens, vanities and Penthouse bar and for the use of the manufacturers standard dimensioned cabinetwork where possible.

We understand that the above specification is equal to the adjacent Moreton Tower.

As no handles are specified, we have included the PC sum of $2.50 per handle.

Should this not be acceptable an additional amount of $99,628.00 should be added to our tender to provide Joinery as revised specification.

…

11. Conditions of Contract

Conditions of Contract to be AS2124-1992. Contract Annexure and Special Conditions of Contract to be mutually agreed.

12. Reinforcing Steel

As previously advised, we believe that your quantity of 1800t of Reinforcing Steel is a reasonable allowance for the project as originally documented.

Accordingly, we have adjusted this quantity to reflect the revised basement design and have based our tender on the following provisional quantities to be re-measured and adjusted in accordance with the final plans and details.

We believe that the above method puts the onus for reducing the reinforcing content on the Structural Engineer. As we have no control over the Structural Design, should this method not be acceptable, an additional $279,798.00 should be added to our tender for the reinforcing factors as detailed.”

20                  It will be noted that most of the sum for reinforcing steel was for rod, but approximately $17,000 was for mesh.

21                  The parties recall that at the meeting on 9 May 1994 there was some discussion in relation to the joinery, which had been discussed at the meeting on 26 April 1994 and in relation to scope of the project, including matters in relation to landscaping, which had also been the subject of previous discussion. Mr McLean deposes to recalling Mr Girdis saying words to the effect “We don’t believe the joinery is a risk - we want it included, so lets (sic) split the difference and make it $28.2M.” Mr McLean says that at that point Mr Harrington indicated words to the effect “We can’t do it for that…”. The meeting then closed with the representatives of GE leaving the building.

22                  On 10 May 1994, Ian Harrington forwarded a memorandum to Mr Brands and Mr Girdis in the following terms:

“We have been considering how to overcome our impasse and the basic problem has been Graham Evans picking up risk where you do not perceive we have a risk.

We suggest the following:-

MONDAY PRICE AS SUBMITTED $28,218,574

Outstanding items as per the letter of 9 May 1994

Lump Sum for wet subgrade in accordance with

Geotechnical Engineers recommendation $20,000

Exclusions - We are still finalising the take

off but changes to fire doors on 108 doors

is worth around $11,000. Our risk $30,000

Nominated subcontractors.

As discussed the premiums have been reduced

to the minimum by us; and we believe using these

subcontractors considerably reduces Client risk

by nullifying design claims

IFS $22,000

SIGANTO STACY $19,000

ODG 60% x $56,000 $33,600

KONE $ NIL

APP $ NIL

We suggest on ODG that the premium is too high

so we share the cost to mutually reduce our risks

Boardwalk $( 20,000)

OUR PRICE $28,323,174

Client offer $28,200,000.

This is now close enough to do a split.

Price - $28,261,000

NOTE: We have therefore reduced our price a further ($22,400 + $61,000) $83,400 after dropping $215,865 between Friday and Monday. A total of $299,265.

With the joinery you believe that the $99,000 for 50% of solid timber doors is too much. We have not been able to get prices out of the market to match. The problem is that the most efficient kitchen manufacture is set up to do two pack doors and does not believe timber doors are good because of warping problems. We will have to get alternate quotes/split the work etc to achieve the number.

We suggest that the contract be agreed at $28,261,000, based on all 2 pack doors and an extra over P.C. rate of $1,800 per unit where solid timber doors are required. This then cuts out our risk and allows you to enjoy the best buying we can achieve in letting up the job.

We are very interested in doing this project and offer you an A-Team on site, backed up by good management.

Regards,

(Sgd) Ian Harrington”

23                  The crucial events concerning the alleged contract between the parties in this matter occurred on 12 May 1994. Mr Harrington in his affidavit filed 10 November 1995 states that he received a telephone call from Mr Girdis in his boardroom. Mr Harrington then deposes to a conversation in the following terms:

“He: “I want to talk to you about your price. Have you definitely included for any wet sub-grade?”

Me: “Yes we have.”

He: What about the fire doors?”

Me: “We would put it in our price and we’ll take the risk on it.”

A general discussion followed concerning “preferred sub-contractors”, which related to certain subcontractors that the respondent wished the applicant to use on the project.

Our conversation then continued with words to the effect:

Me: “We will use IFS, Siganto and Stacey and ODG (O’Donnell Griffin) - with ODG there is a big premium and we will share that premium and we will use Kone and APP.”

He: “Stencraft will talk to those subcontractors and a design meeting will start on Monday.”

A general discussion on doors followed with words to the effect:

Me: “We will agree a prototype for the doors.”

He: “OK. Because you’ve got timber doors as a PC (provisional cost) sum, please ensure that you will make your best buying effort.”

Me: “We will do that.”

He: “Will you put the “A” team on the job?”

Me: “Yes, if you will give us the job I will commit to you that we will use the “A” team which is Jeff Palmer, Trevor Fletcher, Greg Davis and Bill Halpin.”

He: “Will you confirm that the joinery doors are oak?”

Me: “Yes that is correct” (after conferring with Murray Osbaldiston).

He: “You can do the site establishment straight away - the BA (Building Application) will be approved in two weeks. Can you meet your program?”

Me: “Yes we can.”

He: “We would not like you to take on our job and Admiralty Towers and we are looking to award this job today to you, so you know that you’ve got the job before the Admiralty Towers tender goes in. We would like assurance that you won’t win Admiralty Towers.”

Me: “If you award us Dockside I am prepared to assure you that we won’t win Admiralty Towers.”

Steve Girdis repeated the question and I re-assured him so that there was no misunderstanding at all. The conversation then continued with words to the effect:

Me: “If this is going to happen I want conformation (sic) from you that the award is based on our offer of AS2124 and that it does include our terms of payment.”

He: “Yes it does. Please confirm that your office is at 129 Logan Road, Woolloongabba.”

Me: “That’s correct.”

He: “That’s good - I should be over about five o’clock and I’ll bring the letter with me.”

Me: “That’s great Steve.”

We then discussed the customising of AS2124. At the meeting referred to in paragraph 10 of this my affidavit, we had only discussed terms of payment and retention. The conversation continued:

He: “We’re still getting a few changes.”

Me: “Our offer is based on AS 2124, but if there are a few bits and pieces we will look into it.”

24                  Mr Girdis’s account of this telephone call, in his affidavit filed 8 February 1996, differs from Mr Harrington’s in that Mr Girdis states:

“I then said that the GE price of $28,261,000 was acceptable to Stencraft.

I said that we would be sending over the contract and a list of the documents describing the scope of work that afternoon.

I said that the contract would be based on AS2124 with changes.”

Mr Girdis states that in response to that statement Mr Harrington said that he could not comment on the changes until he had read them, and Mr Girdis said that he in turn wanted a quick response on the scope documents and the terms of the contract.

25                  What is important to note is that even on the version by Mr Harrington, the language is not consistent with a concluded agreement being reached in that conversation. Mr Harrington recalls saying “If you award us Dockside…” and “If this is going to happen I want conformation (sic)…”. There is also a reference to Mr Girdis saying “We are looking to award this job today to you” and “I should be over about five o’clock and I’ll bring the letter with me”. A conversation about customising AS2124, the statement by Mr Girdis that “We’re still getting a few changes” and Mr Harrington’s response “Our offer is based on AS2124, but if there are a few bits and pieces we will look into it” really highlight the form of AS2124 against which the contract would be performed was very much unresolved.

26                  Mr Harrington and Mr Girdis depose that on the afternoon on 12 May, Mr Girdis travelled to GE’s offices at Woolloongabba, where Mr Girdis met with Mr Harrington and handed him the letter of acceptance of the tender price in addition to a draft building agreement which was said to have been based on AS 2124 - 1992 as amended, a formal instrument of agreement and a building assumption deed. Mr Harrington then says that he shook hands with Mr Girdis, at which time Mr Girdis said, “Congratulations”. Following this, Mr Harrington states that he, Mr Girdis and Mr Osbaldiston engaged in general discussion.

27                  The letter of 12 May 1994 from Stencraft to GE stated as follows:

“

Dockside Stage III

“Stradbroke Tower and Villas”

We have pleasure in accepting your price of $28,261,000 (Twenty Eight Million Two Hundred and Sixty One Thousand Dollars) to undertake the construction of Stage III Dockside “Stradbroke Tower and Villas”. It is our understanding that your price is based on the details included in the attached Schedule and as amended by your correspondence and various offers which have been detailed in Appendix 1.

We confirm that you may commence site establishment and undertake any other preliminary items you believe are necessary (as permitted by the Local Authorities) and confirm that the construction period of 63 weeks will only commence on the date that the Building Approval is received from the Brisbane City Council.

We also confirm that you intend to provide the same “team” which recently completed the Goodwin Tower Development and include, but are not limited to:

Trevor Fletcher - Site Manager

Greg Davis - Structural Foreman

Bill Haplton - Finishes Foreman

We also understand that your Mr Greg McLean - Operations Manager, will be your nominated point of contact.

As your price includes design responsibility for certain trades, we would like to recommence Design Meetings in the week commencing Monday, May 16, 1994 and we will advise you of the nominated time and place for these meetings. We understand that your Mr John Kirkwood - Design and Construct Manager will attend these meetings on your behalf.

Also enclosed is the Draft Building Agreement which has been based on AS 2124 - 1992 as amended by our Solicitors, Corrs Chambers Westgarth. Please understand that this Contract is a “Draft” as we are still reviewing it and should we request any changes we will naturally discuss them with you. Could you also advise us of any concerns you may have.

Please also find enclosed a formal Instrument of Agreement which our Solicitors recommend be executed without delay to supplement our acceptance of your Offer, as confirmed by this letter.

Our Financier, Westpac Banking Corporation, also require you to sign a Building Assumption Deed, a copy of which is enclosed herewith.

Messrs Steve Girdis and Fred Brands are available to meet with you or your nominated representatives to discuss any of the above items on Friday, May 13, 1994.

Our acceptance is on the clear understanding that your company will complete the project to a high quality of finish and within the nominated time. We look forward to a mutually rewarding relationship on this project and to its satisfactory conclusion.”

28                  The contents of the schedule and appendix 1 are plainly in disconformity with the material in the letters of 9 and 10 May 1994.

29                  On 13 May 1994, GE sent a letter to Stencraft which stated:

“DOCKSIDE STAGE III

STRADBROKE TOWER AND VILLAS

We thank you for your letter of award of 12 May 1994 and confirm our acceptance of this award based on your supplied documentation and our offer as summarised in our letter of 9 May 1994 and revised by our memo of 10 May 1994.

We confirm receipt of post award information namely:

·      Draft Formal Instrument of Agreement

·      Formal Instrument of Agreement

·        Building Assumption Deed

·        Draft General Conditions of Contract

and advise that we have commenced reviewing this documentation and will contact you to finalise details once this review is complete.

We thank you again for this award and assure you of our commitment to complete this project on time, to quality and in a harmonious fashion.

Yours faithfully,

GRAHAM EVANS PTY LIMITED

(Sgd) I R Harrington

General Manager”

30                  Mr Girdis states that he received that letter on 16 May 1994 and attempted to telephone Mr Harrington but was unable to locate him. Mr Girdis says that he did speak to Mr Osbaldiston, using words to the effect:

“Murray, I’m concerned with the letter I’ve received and in particular the reference to an award. There has been no award yet. We have still got to reach agreement on the general conditions and the scope.”

31                  On 13 May 1994, GE submitted a tender for the Admiralty Towers project in the sum of $37,480,582. Mr Girdis said that he had a further conversation with Mr Harrington on 17 May 1994 in which Mr Harrington expressed concern in relation to the terms of the contract, giving a number of examples as to why it was unacceptable.

32                  There was a further design meeting held at Pidgeon’s offices on 18 May 1994, and a further letter from GE to Stencraft on 19 May 1994 which stated:

“

DOCKSIDE STAGE III

STRADBROKE TOWER AND VILLAS

Further to our letter of acceptance we have attached an upgraded Appendix and Schedule for your perusal and agreement.

In this upgrade we have:-

(a) Improved upon some of our original wording to make the clauses transparent for our Project Manager and your Superintendent to administer.

(b) Included provisional items/rates/quantities that were in the text into the schedule for ease of future administration.

(c) Added items back in that were inadvertently missed from the Appendix and reviewed new items added.

We trust this is acceptable.

Yours faithfully

GRAHAM EVANS PTY LIMITED

(Sgd) I R Harrington

General Manager”

33                  Notwithstanding the impression that the attached documents were a mere “tidying up”, or an upgrade, they in fact involve significant differences compared with the earlier documents.

34                  On 23 May, Stencraft sent a letter to GE, which letter provided in part:

“

Dockside Stage III

“Stradbroke Tower and Villas”

We are in receipt of your letter of May 13, 1994 and two letters of May 19. It is apparent some misunderstanding has arisen regarding the basis of this Contract. We do not accept your interpretation of our Award.

...

We are also at a loss to understand your letter of May 19 dismissing “out of hand” the draft of the General Conditions of Contract forwarded for your review and comment. We advised you during the course of negotiations that the Contract would be based on AS 2124 with amendments. More particularly, our acceptance of your price was not on the basis that Standard AS 2124 would be adopted. As part of your responsibility includes for Design, it is obvious that amendments must be made. If you are genuinely interested in proceeding with the project, would you please advise your concerns with those clauses which have been redrafted on an item-by-item basis. On receipt of your concerns, we will discuss these with you to see if we can resolve the issues.

Contrary to our verbal advice to your Mr Jeff Palmer on Thursday, May 19 no site establishment is to occur including the positioning of sheds on site until all of the above matters are resolved.

...”

35                  There were further meetings between the parties on 23 May 1994 and 24 May 1994 at which aspects of the scope of the project were discussed. Mr Girdis deposes that at the meeting of 24 May 1994, GE produced a revised version of AS 2124 for consideration by Stencraft’s solicitors. From 23 to 26 May 1994 letters passed between the parties in relation to finalising the formal instrument of agreement and the general conditions of contract. The parties met again on 30 May 1994 at the offices of F A Pidgeon & Sons. That meeting prompted GE to send a letter to Stencraft on 31 May 1994, which said in part:

“

DOCKSIDE STAGE III

STRADBROKE TOWER AND VILLAS

GENERAL CONDITIONS OF CONTRACT

Further to our meeting (Brand/Girdis/Harrington/McLean) of 30th May, we confirm our desire to agree General Conditions of Contract in accordance with the basis of our tender, whilst at the same time placing on record our willingness to mutually agree changes which do not increase the Contractor’s risk or costs.

...”

Then was set out a brief chronology of events and a large number of disputed amendments to AS 2124.

36                  On 1 June 1994 GE placed a site container on the Dockside site for the commencement of construction work. However, on the same day Mr Girdis informed GE by fax that negotiations were at an end and that Stencraft would proceed to make other arrangements for the construction of the Dockside project. “Without prejudice” discussions took place between the parties: however no resolution was reached, and on 21 July 1994 F A Pidgeon & Son Pty Ltd undertook to construct the Dockside project for $28,261,000.

37                  These proceedings were issued by the applicant in the New South Wales District Registry of the Court on 6 February 1995.

The Applicant’s claim

38                  The applicant’s claim as pleaded in its amended statement of claim filed 17 June 1996 contains three elements. These are:

1. Wrongful repudiation of a contract which the applicant alleges was reached on 12 May 1994;

2. Damages for unconscionable conduct in which the applicant alleges the respondent engaged in seeking to deny the existence or enforceability of a contract between the applicant and the respondent; and

3. Damages for misleading and deceptive conduct pursuant to s 82 of the Trade Practices Act 1974.

39                  I will deal with each of these claims in turn.

Damages for Wrongful Repudiation of Contract

40                  The nature of the applicant’s claim in contract is contained in paragraph 19 of the amended statement of claim. That paragraph pleads:

“19...the parties contracted for the construction by the applicant of the Dockside project upon the terms and conditions contained in the letters of 9 and 10 May 1994, and the conversation of 12 May 1994.”

41                  The preceding paragraph, paragraph 18 of the amended statement of claim, reiterates the content of the conversation of 12 May 1994:

“18. On 12 May 1994, in a telephone conversation between Mr Harrington in the presence of Messrs McLean and Osbaldistan (sic) on behalf of the applicant and Mr Girdis on behalf of the respondent, it was agreed between the parties:

(a) that at the specific request of Mr Girdis, the applicant would not try to obtain the Admiralty Towers contract by its tender because it had been awarded the Dockside project and to that end the applicant would submit its tender for the Admiralty Towers contract at a figure that would be uncompetitive, subject to the respondent confirming the conversation in writing that night;

(b) the applicant would use the respondent’s preferred and nominated sub-contractors;

(c) the applicant would employ the “A” team to effect and supervise the works;

(d) the respondent would award the contract to build “Dockside” to the applicant immediately on the terms of the applicants offers of 9 May 1994 and 10 May 1994, except as to cost of works, and expressly and in particular, that AS2124 general conditions of contract applied;

(e) the cost of works was $28.261 million;”

42                  The applicant then goes on to plead in paragraph 22 of the amended statement of claim:

“22. The respondent’s letter of 12 May 1994, aforesaid, did enclose draft altered terms of AS 2124, which alterations were substantially more onerous on the applicant as builder than the ordinary terms of AS 2124-1992 edition or alternatively amounted to a unique set of general conditions of contract.

23. At the time of the delivery of the letter aforesaid, or thereafter until the applicant had had the opportunity of perusing the proposed amendments, the respondent did not disclose to the respondent either that it proposed substantial amendments to AS 2124-1992 edition or that it would not proceed with the works except on the terms contained in its draft.”

43                  The applicant concludes its contract case in paragraph 27 by pleading:

“On 1 June 1994, the respondent denied the existence of any contract between the applicant and the respondent and, by that letter, repudiated any intention to perform any contract between the applicant and the respondent.”

44                  The respondent by its Defence admits there was a telephone conversation between Mr Girdis and Mr Harrington on 12 May 1994, but asserts, in par 9(b), that in that conversation:

“…

·        Mr Girdis said that the respondent accepted the price offered by the applicant and wanted the applicant to build “Stradbroke” (meaning the Dockside project) subject to acceptance of the contract and deed of assumption by the applicant;

·        Mr Girdis said that the respondent had its contract and deed of assumption ready and that he would bring them over to the applicant’s office later that day along with the formal instrument of agreement;

·        Mr Harrington said the applicant reserved its rights in relation to the contract documents; he said they would have to look over them;

·        Mr Girdis advised him to do so as quickly as possible;

·        Mr Harrington said that the applicant would adjust its tender price in relation to the Admiralty Towers project so as to become uncompetitive since they would rather work for the respondent than Seymour (meaning the proprietor of the Admiralty Towers project);

·        Mr Girdis said that was up to the applicant but insisted on having the A team and said that Seymour could use the B team."

45                  Stencraft’s contention is that in that conversation, rather than reaching a concluded contract, it merely accepted the price offered by the applicant and communicated its desire for the applicant to build the Dockside project subject to the negotiated acceptance by the applicant of the provisions in the documents that accompanied the letter of 12 May 1994.

46                  It can thus be seen from the way in which the parties have pleaded their cases that neither disputes that an agreement of some kind was reached on 12 May 1994. The issue for resolution by the court is whether it can be said that on 12 May 1994 the parties reached a concluded agreement as to all of the essential terms which was capable of enforcement.

47                  The relevant principles to determining whether there was a binding contract in this case are not in dispute. The parties must evince an intention to create legal relations. The applicant must demonstrate that there was sufficient consensus between the parties on all of the essential elements of the contract to warrant a finding that a concluded agreement was reached between the parties. This is a matter to be determined from the language the parties have employed. Dixon CJ, McTiernan and Kitto JJ said in Masters v Cameron (1954) 91 CLR 353 at 362-3:

“…Sir George Jessel MR said in Crossley v Maycock (1874) LR 18 Eq 180: ‘if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce’ (1874) LR 18 Eq, at pp 181, 182.

This being the natural meaning of ‘subject to contract’, ‘subject to the preparation of a formal contract’, and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract.”

48                  A useful summation of the general principles which apply where the parties contemplate the execution of a formal contract is elucidated by Kirby P, as he then was, in Geebung Investments v Varga Investments (1995) 7 BPR 14,551:

“1. The mere fact that the parties contemplate the execution of a formal contract, subsequent to an informal agreement, does not mean that that informal agreement is not presently binding.

2. The fact that the parties contemplate the drawing up and execution of a formal contract is a consideration which may point to the conclusion that no presently binding agreement was intended until that formal contract is executed.

3. The existence of matters of importance in which the parties have not reached consensus in their informal agreement will render it the less likely that they intended immediately to be bound before the execution of a formal document. Even where the parties have agreed on the ‘major matters’, their subsequent conduct may indicate that they did not intend to be bound until the other issues between them were resolved in a formal document (see in particular Masters v Cameron (1954) 91 CLR 353, at 361; Barrier Wharfs Ltd v W Scott Fell and Co Ltd (1908) 5 CLR 647, at 666; and Marek v Australasian Conference Association Pty Ltd [1994] 2 QD R 521 at 528).

4. In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct. Where correspondence between the parties after an informal agreement refers to important terms and conditions not mentioned during that informal discussion, it may more readily be inferred that the earlier discussion was simply a preliminary negotiation and not a binding agreement.

5. Depending on the size, importance and complexity of the subject matter, the less formal the initial agreement, the less likely it will be that it was intended to be legally binding and enforceable. Thus, an oral discussion which contemplates a subsequent formal written agreement is less likely to have been intended to have been immediately binding.

6. It is necessary in every case to consider the nature and importance of the transaction which the parties contemplate. Where the agreement concerns a large sum, or concerns a significant transaction, it is less likely to have been intended to be presently binding.

7. Depending on the subject matter, where the parties have not used solicitors but intended to do so for the drawing up of their formal agreement, that may also be a factor which will point to the non-existence of a binding agreement until the contemplated formalities have been agreed.

8. Where a binding agreement is said to have been formed as a result of correspondence, it is necessary to look at that correspondence as a whole. It is wrong to isolate any part of the correspondence from the rest in order to prove or disprove the existence of a binding agreement. The same approach should be taken to the analysis of words and phrases within the correspondence. Reference to an ‘agreement’ having been reached does not necessarily prove the existence of a presently binding contract. Conversely, references to a ‘proposed’ agreement, and similar expressions, will not necessarily mean that no agreement presently exists. It is a question of how the words are to be interpreted in their context, and in the light of the correspondence, viewed as a whole.”

49                  Mr Lennon QC, senior counsel for GE, referred the Court to a decision of Miles CJ in the Supreme Court of the Australian Capital Territory, Tekmat Pty Ltd v Dosto Pty Ltd (1990) 102 FLR 240. In that case the plaintiff built a shopping complex for the defendant. Construction was commenced and completed before the parties had reduced the terms of their agreement to a formal contractual document. The parties sought declarations as to what it was that constituted the contract between them. The parties were not in dispute that the contract fell within the first of the classes mentioned in Masters v Cameron (1954) 91 CLR 353 at 360. That is to say, the case is one in which “the parties 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”. The judgment of Miles CJ commences:

“ ‘The parties are to be regarded as masters of their contractual fate. It is their intentions which matter and to which the Court must strive to give effect.’

Those were the words of Bingham J in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at 611, a decision cited in the course of argument in the present case, words which were later described as ‘memorable’ in the English Court of Appeal (at 619). When parties to a contract are not in dispute about what it is that constitutes the agreement between them, then it is not within the province of a court to say that their agreement is constituted by something else. But what happens when each party acknowledges that there is a contractual relationship with the other party, but each has a different view about what it is that constitutes the contract or, as expressed by the editors of Cheshire and Fifoot’s Law of Contract (5^th Aust ed, 1988) Chap 1 what are the ‘phenomena of agreement’?”

50                  His Honour concluded that the parties entered into a contract whereby the plaintiff agreed to construct a project on the defendant’s behalf; the terms of the agreement were never varied, expanded or modified at a later date, subsequent negotiations being clearly towards the preparation of a formal contract to be executed by the parties. There was no agreement to further terms after the entry into the contract.

51                  The respondent in these proceedings advanced two primary submissions as to why any agreement reached on 12 May 1994 cannot, it alleges, be regarded as a concluded contract. First, it submits the parties did not reach a consensus on all of the essential elements of the contract and, secondly, it submits that the parties did not evince an intention to be immediately bound by any agreement reached on 12 May 1994.

52                  On the other hand, the applicant submits that there was a concluded agreement made on that day. It was submitted by Mr Lennon QC on behalf of the applicant that the applicant’s case has been and is that the formal documentation contemplated by the parties would be “based” on AS2124-1992 in that the specific provisions negotiated between the parties would be incorporated in a document based on AS2124; whether in an annexure (Annexure Part B is designed for such a purpose), or in special conditions as might be agreed upon, or in special conditions determined by, for example, the Court.

53                  The applicant in support of its contention that there was a concluded agreement points to a number of factors. The first is that in the memo of GE dated 10 May 1994, having referred to the competing prices earlier set out in that memo said:

“We suggest that the contract be agreed at $28,261,000.”

54                  Next, that in the previous meetings between the parties on 6 May and 9 May 1994, the respondent had said to the applicant to the effect that, provided agreement could be reached on price that day, it was prepared to do the deal that day. It was further submitted on behalf of the applicant that, at the time of those meetings, the parties knew that draft contract documents based on AS2124 were in the course of being prepared by the respondent’s solicitors and that the parties also appreciated that they were not then available for perusal. It was submitted that the respondent indicated its preparedness to contract and to refer to the contract as being based on AS2124 notwithstanding the current unavailability of a draft document based on it.

55                  It was further submitted that, notwithstanding the fact that Stencraft had received from its solicitors a draft based on AS2124 prior to Mr Girdis phoning Mr Harrington on 12 May 1994, Stencraft had not completed its own perusal of the draft before making the call nor had it yet furnished to GE a copy of the draft for its perusal. Nonetheless, Mr Girdis telephoned Mr Harrington with the intention of making a deal, a process which he saw as involving primarily price and scope. Mr Girdis, in the course of the telephone conversation on 12 May, indicated that GE could commence site establishment and undertake other preliminary items, and in his oral evidence said that he had accepted the price and “we thought we accepted the scope”.

56                  In addition to these factors, the applicants point to the manifestations of agreement, such as the shaking of hands and the offering of congratulations. In Geebung Investments v Varga Investments (1995) 7 BPR 14,551 at 14,571, Kirby P said:

“If business people have agreed upon essential terms and shake their hands upon their agreement, it is normally the business of the common law to uphold and enforce that agreement. It should not be the purpose of the law to rifle through the terms to find some particular which has not been agreed, which a party later seeking to renege relies upon in order to escape its bargain.

In business and in life symbols are important. So in the law. Here, as in Liquorland, there was a symbolic shaking of hands. In the marriage ceremony, there is a symbolic “giving and receiving of a ring and joining of hands”. With respect to those of a different view, I regard the shaking of hands between business people, in circumstances such as the present, as an important signal to each other and to observer(s) present that they were ad idem.”

57                  The question remains, however, as to whether the parties actually reached a consensus.

58                  Mr Lennon QC for GE submitted:

“Of course the parties contemplated reaching a further agreement. It was as stated in para 12 of the Post Tender Amendments. It was in relation to the Contract Annexure and Special Conditions. But that is not to say that such an agreement was a condition precedent to a contract. References to customising, to making changes, to tidying up, or even to reviewing are consistent with the parties attending to the performance of their obligations towards documenting a contract that is already in existence.”

59                  Stencraft says that plainly the parties did not reach a consensus because there was no agreement on consensus, no agreement on scope, there was no intention by the parties to be bound in the telephone conversation of 12 May and no intention to be bound in the documents of 9 and 10 May, or in the subsequent conduct.

60                  Notwithstanding the matters referred to by the applicant, in my opinion, this is not a case like Baulkham Hills Private Hospital v GR Securities (1996) 40 NSWLR 622. In that case the Court found that the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst also expecting to make a further contract in substitution for the first contract containing, by consent, additional terms. The relevant words were at 624D:

“In order to accept this offer I would appreciate your written response by that time and would expect that it would constitute a legally binding acceptance until such time as it is superceded (sic) by a formally binding agreement.”

61                  As the learned authors Greig and Davis note in The Law of Contract at 377:

“Where the parties’ agreement is incomplete, apparently dependent upon some additional step to be taken by the parties themselves, then prima facie there is no contract.”

62                  The position is that, even though there might be at first blush appear to be offer and acceptance resulting in a binding contract, and even though the parties might themselves have considered that they had reached finality, the Court may regard the parties as not having passed beyond the stage of negotiation. The Court will not draft a contract for the parties where they have failed to reach agreement.

63                  In my opinion, there was no agreement between GE and Stencraft as at the time of the telephone conversation of 12 May 1994 on the conditions of the contract, nor in my opinion was there any consensus on the scope of works the subject of the contract. The letter of 9 May 1994, one of the three component parts of the contract pleaded on behalf of GE, in an attachment entitled “Dockside Stage III Post Tender Amendments No 2”, contains:

“11. Conditions of Contract

Conditions of Contract to be AS2124-1992. Contract Annexure and Special Conditions of Contract to be mutually agreed.”

64                  This necessity was acknowledged by Mr Harrington in his oral evidence, where he said:

“When you tender for any sort of contract, the scope of work, the price and the general conditions go hand in hand.”

65                  There is other evidence supporting the conclusion that the parties contemplated the need to reach agreement on the conditions of the contract. The requirement for agreement appears in the earlier letters of 22 April 1994 and the letter of 6 May 1994. Further, in the course of negotiations, GE was advised by Stencraft that the contract would be based on AS2124 with amendments, and at the meeting on 6 May GE was advised by Stencraft that a draft conditions of contract would be available on Monday (9 May). On analysis, the words of the telephone conversation on 12 May do not support the view that there was an agreement that the contract would be in conformity with AS2124-1992. In that conversation Mr Girdis said that a draft contract would be delivered later that day for review. The further references to “customising” AS2124 and Mr Girdis’s statement that ‘they were still making changes to AS2124” in Mr Harrington’s account indicate that the basis of the draft contract, first, was not definite and, secondly, would require inspection and agreement. Importantly, Mr Harrington conceded that there were matters in annexure A which needed to be agreed. In particular, he agreed that the question of liquidated damages was a matter which was to be agreed and which had not been agreed. In my opinion, the parties did not agree on a completed version of AS2124.

66                  The subsequent conduct of the parties reveals that each proposed their own version of the contract. After the telephone conversation on 12 May 1994 Stencraft delivered its proposed conditions based on AS2124 with amendments, under cover of its letter of 12 May. GE’s version of conditions based on AS2124 with amendments was delivered at the meeting on 24 May 1994. That version contained items to be discussed and agreed, and Mr Harrington acknowledged that on 31 May there was an understanding that “special conditions would be necessary to customise the project”.

67                  The requirement in “11. Conditions of Contract” in the letter of 9 May was not overtaken by subsequent events. There was nothing said in the conversation on 12 May which modified, overtook or superseded that requirement. In my opinion, the position was that the parties had not agreed as to the conditions of the contract. A mere agreement that AS2124 general conditions would apply, as seems to be asserted on behalf of the applicant, would not identify the conditions of the contract. AS2124 is a standard form of general conditions which requires information to be inserted and requires alternatives to be chosen. Topics affected by this consideration include insurance, liquidated damages, bonus for early completion, marginal variations/day work, and the default liability period amongst others.

68                  Notwithstanding the indicia of agreement to which GE can point, the position in my opinion is similar to that in ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540. In my view, this case, like ABC, is one in which the parties contemplated that they would seek express agreement as to the conditions of the contract. So also, in Relwood v Manning Homes [1990] 1 Qd R 481. In that case, a guarantee agreement provided the guarantee was given in consideration of a creditor providing financial accommodation and/or credit terms to a debtor at the request of the guarantors. In the space on the guarantee form for the item “Credit Limit Required” the words “to be agreed” had been inserted. The Full Court of the Supreme Court of Queensland decided that, as the credit limit was “to be agreed” and as it had not been agreed, the guarantee did not come into operation.

69                  The consideration just referred to is sufficient for my conclusion that there was in truth no binding agreement constituted by the documents of 9 and 10 May and the telephone conversation of 12 May. Further, however, I think that there was not any consensus on the scope of the work. Three aspects of the scope of the work may be referred to in detail.

70                  The first deals with the question of display units. In earlier negotiations, Stencraft was concerned to obtain the earliest date it could for access to display units. On 6 May Mr Brands communicated Stencraft’s requirement that the display units be available by week 45. Mr Harrington on behalf of GE conveyed the impression that this was nothing more than a “preference” or “wish” on the part of Stencraft and not a requirement, notwithstanding his note of the conversation. In respect of the display units, he uses the expression “Want no later than’. GE’s offer of 9 May was silent on the display unit and access to it, but Stencraft’s appendix attached to the letter of 12 May set out again Stencraft’s requirement of access at week 45. Looking at the matter realistically, I do not think that the absence of reference by GE in its letter of 9 May to the question of display units permits the conclusion that as at the time of the telephone conversation on 12 May, Stencraft was in agreement with GE that there was no requirement for the provision of access to a display unit in the scope of the project. The abovementioned statement in Pagnan v Feeds Products [1987] 2 Lloyd’s Reports 601 at 611 and the reference to the observations of Lord Denning MR in Port Sudan Cotton Co v Chettiar [1977] 2 Lloyd’s Reports 5 at 10 in that case, (the latter perhaps having a heterodox flavour about them) focusses attention on the need to consider whether the parties were in fact in agreement on the terms alleged to be agreed.

71                  There were later negotiations concerning the topic of the display units but no agreement was ever reached on this aspect of the matter.

72                  Similarly, in relation to formwork, the earlier tender of 29 April was amended so that Class 3 formwork was offered. The tender of 9 May by GE included the item “Class 3 formwork acceptable” and “Exposed concrete finish - generally allowed as Class 3”. There appears to be no discussion of this item on 9 May or 10 May or in the memorandum of 10 May, but the evidence of Mr Harrington was that the earlier discussions between the parties was that Class 3 applied where it was not exposed, and anywhere that was exposed was still to be Class 2. The appendix by Stencraft to its letter of 12 May included the item “Class 3 formwork acceptable however any exposed joints to be ground off and made smooth after stripping”. The appendix by GE of 19 May returned to “Class 3 formwork allowed”. Mr Harrington’s note is that on 26 April Stencraft had said they would “be happy with Class 3…except exposed balcony soffits”. On 30 May the formulation by GE was “the exposed joints to receive an applied finish should it be ground off to make smooth after stripping”. In relation to this formulation, Mr Harrington said:

“…we were attempting to get a very precise wording as we had corrections to - it’s a - it was a big drafting exercise at the time”.

He was then asked

“The wording that you went back to was consistent with what they proposed on the 12^th?”

To which Mr Harrington replied “That’s correct.”

73                  The contract for which GE pleads does not reflect what Mr Harrington said had been discussed prior to 12 May, namely, the exposed formwork was to be Class 2 when the nonexposed formwork was to be Class 3.

74                  So too in relation to paving and landscaping. The initial proposal in the tender of 29 April was that it be a “provisional cost” item. The tender of 6 May proposed a similar arrangement but suggested a review of the landscaping concept. The tender of 9 May proposed an alternative arrangement to provide “…Paving/Landscaping similar in extent and theme to the adjacent works” with the applicant requiring control over landscaping. At the meeting on 9 May, Mr Brands said that the alternative proposed by GE was “too grey” and he wished to return to the 6 May treatment of paving/landscaping. It seems that this is where the matter was left. It is not referred to in the memorandum of 10 May nor was the issue discussed on 12 May. The only component of the alleged contractual parts which dealt with the paving/landscaping issue, namely the 9 May letter, dealt with it on a basis which Stencraft had indicated later on that day was unacceptable, because it was “too grey”.

75                  Again, as a matter of practical assessment, I do not think that the parties were agreed as to what was to happen concerning the paving and landscaping at the end of the telephone conversation on 12 May. The terms of the telephone conversation, even on Mr Harrington’s version of it, demonstrate to my satisfaction that Mr Girdis on behalf of Stencraft had not settled on the terms of the bargain; Mr Harrington on behalf of GE was saying that GE would be satisfied with the contract “based on” AS2124 and that GE was willing to look at other changes. I do not think the parties intended that a contract was concluded by the conversation. This conversation is not the conversation of a concluded agreement. Both parties in my view contemplated that Stencraft was to deliver a letter, and supporting documents including conditions, later that day. The letter from Stencraft of 12 May was clearly not an acceptance of the alleged offer. The letters of 9 May and 10 May lack finality, in the sense that even a simple acceptance of them would result in conditions still “to be agreed”.

76                  In deciding whether or not an agreement was intended to be immediately binding, the question is one of the construction of the words used, and the Court is able to look at the subsequent conduct of the parties in order to determine whether final agreement had been reached: CBA Ltd v G H Dean & Co Pty Ltd & Dean [1983] 2 Qd R 204 at 209; ABC v XIVth Commonwealth Games (1988) 18 NSWLR 540 at 547-8. One has to be cautious, nonetheless, in looking at subsequent conduct, because it may very well be that there is an element of negotiation in an attempt to resolve a serious matter of dispute as to the existence of an enforceable earlier contract. I am satisfied that at least by 13 May GE knew that what Stencraft was proposing on scope of work and conditions in its letter of 12 May and attachments was quite inconsistent with a contract constituted by the documents of 9 and 10 May and the contents of the telephone conversation on 12 May. There was no protestation at the disconformity. In this context it is significant that the letter of 13 May from GE to Stencraft contains the statement by GE:

“…we have commenced reviewing this documentation [a reference to the document supplied by Stencraft on 12 May] and will contact you to finalise details once this review is complete.”

77                  Also significant is the statement in an internal memorandum dated 13 May 1994 sent by Mr Harrington to Mr McLean:

“Now we have this project and return to construction mode, I should withdraw and leave the running to you and I would like to have the following involvement.

1. Negotiations to finalise all the conditions of contract including a full price review….”

78                  I am satisfied, particularly in the light of Mr McLean’s handwritten note on 20 May 1994, that Mr Harrington directed Mr McLean to “commit staff resources, to SPEND THE TIME with architect & other consultants, & minimize scope of work”. This in my opinion is inconsistent with the contention that by the end of the telephone conversation on 12 May there was an agreement between the parties on scope of the work. It is also perhaps a “straw in the wind” that in the letter of 23 May, GE wrote proposing alterations to the draft instrument of agreement. The recital to that letter does not mention the telephone conversation of 12 May, but says instead:

“The Principal awarded the Contract to the Contractor; refer letter 12th May 1994”.

[emphasis added]

79                  For the above reasons, I am not satisfied that a concluded contract was arrived at between the parties by the end of the telephone conversation on 12 May 1994, as the applicant contends. The arrangement was not of the Baulkham Hills type.

misleading and deceptive conduct

80                  The amended statement of claim, in par 32, alleges that, by purporting to accept the offer of 9 and 10 May when proposing material alterations to the terms of dealing without disclosing that fact, Stencraft represented that the enclosures to the letter of 12 May were not material alterations to the terms of dealing between the parties when in fact they were, and Stencraft proposed to rely on them. This representation is said to have occurred on 12 May. On a fair reading of the letter of 12 May with its enclosures, it seems to me that nothing in them is false or misleading, nor could GE have been under any misapprehension as to their nature.

81                  The letter commences by accepting the price of $28,261,000 and encloses an appendix which seeks to define or clarify the scope of works. Further, the enclosed documents include proposed conditions of contract and advance draft conditions of contract, as a draft upon which both parties were to comment. The essence of the s 52 claim is that Stencraft portrayed the negotiations as having been concluded when they were not. That is to say, the complaint by GE is that Stencraft described the offer as having been accepted when it really was a counter offer. In my opinion, the document is not misleading or deceptive. It is plain that what was being advanced by the letter of 12 May and the enclosures differed from what had been the subject of the documents of 9 and 10 May. The fact of changes in AS2124 had been adverted to in the telephone conversation of 12 May.

82                  Mr Harrington in his evidence agreed that he did not need a detailed study of the documents to observe that the AS2124 proposal by Stencraft was not a standard AS2124. The nature of the letter and attachments was plainly understood by GE, at least by 17 May. By that time, it seems to me, no acts causing loss had occurred and so, even if there were some conduct in contravention of s 52, in my view it was not productive of any loss.

unconscionability

83                  Section 51AB in my view does not apply to the dealings between GE and Stencraft, because the transaction was not one involving the supply of personal, domestic or household goods. In relation to the application of s 51AA, there is no special relationship between the parties or of facts which would support a plea of unconscionability in the Amadio sense. Deane J in Commercial Bank of Australia v Amadio (1983) 151 CLR 447 said at 474-5:

“Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogues (sic). In Blomley v Ryan (1956) 99 CLR, at p 405, Fullagar J listed some examples of such disability: ‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary'. As Fullagar J remarked, the common characteristic of such adverse circumstances ‘seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other’.”

84                  There will be judgment for the respondent on the applicant’s claim.

85                  I should, however, express my conclusion on the question of damages, in the event that my conclusion concerning the claim is in error.

86                  If there was a contract, it was repudiated by Stencraft and the measure of damages the Court should award, in my opinion, is the profit lost as a consequence of being denied the contract. It is, of course, for the applicant to establish that the project would have made a profit.

87                  There are two components of GE’s claim. They seek a percentage of between 3.5 to 8.14 per cent of the contract sum for the project, $28,261,000, and moneys expended on the project totalling $30,290. This latter sum seems to me to be a composite sum comprising all work on the Dockside project, including negotiations. In my view, it ought not be taken into account as an addition to any demonstrated lost profit.

88                  The methodology behind the formulation of GE’s claim for loss of profit is to establish the percentage of profit based on “flagship” projects that GE constructed. These “flagship” projects, as Mr Osbaldiston, the estimator for GE, conceded, were different in construction type and in contract value to the Dockside Stage III project. They were, nonetheless, the larger projects with which GE had been concerned. The argument for GE is that they had had an extensive history of projects with almost no occasion on which the project had been unprofitable. It was submitted that, of some 350 projects, two only had not returned a profit. While it was admittedly a matter of estimation, the “flagship” profit margins provided an appropriate basis on which to derive a profit margin that GE would have made had it been permitted to construct the Dockside Stage III project.

89                  On the other hand, Stencraft established that Pidgeon, who in fact constructed the Dockside Stage III part of the project, lost $1.9 million on the exercise, it having cost Pidgeon $31.8 million to do the work in respect of which it received $29.9 million. The actual experience of Pidgeon in the construction of the project was said to provide a sound basis for concluding that GE had not demonstrated that, had it performed the construction work, it would have made any profit at all.

90                  I do not accept the correctness of this submission. Given the almost impeccable record of GE in terms of profit return and my assessment of Mr Osbaldiston as an impressive and reliable estimator, I think it likely, had GE been able to construct the project, it would have done so profitably.

91                  For the Ipswich Community Centre, the tender price was $7,776,561 with a gross profit margin of 3.98 per cent; for Goodwin Towers, the tender price was $13,406,178 with a gross profit margin of 2.84 per cent; for Mackay COTAFE, the tender price was $7,592,285 with a gross profit margin of 1.21 per cent; the State Archives Building had a tender price of $15,881,325 with a gross profit margin of 1.57 per cent; and the Caboolture COTAFE building had a contract price of $8,160,726 with a gross profit margin of 2.59 per cent.

92                  In each case of the seven “flagship” projects above, (the term “flagship” is the applicant’s term in relation to projects where the tender price was greater than $7.5 million), the final contract price was higher than the tender price and the gross profit margin was also higher except in the case of Goodwin Towers, where the final contract price was less than the tender price but the gross profit margin actually achieved was 6.06 per cent. This, in my view, reflects the likelihood that there would be an enhanced profit margin arising out of variations.

93                  Mr Osbaldiston estimated that the profit on the Dockside project based on his tender would be a minimum of $972,000, a gross profit margin of 3.44 per cent.

94                  The written submissions on behalf of GE mistake the gross profit margin for the Goodwin Towers project. The figures quoted for the Goodwin Towers project are in fact the gross profit margin figures for the Ipswich Community Centre.

95                  I accept that on the evidence, including the evidence given by Mr Colin Taylor, the Goodwin Towers project was the most similar to the Dockside project of the various “flagship” projects. There is a large measure of broadbrush estimation about this aspect of the matter, but, doing the best I can, I think it right to apply a gross profit margin of 2.84 per cent to the tender price of $28,261,000, to arrive at a fair estimate of the lost profit. This is a conservative figure, in my view, for two reasons. First, it adopts the gross profit margin on the tender price rather than the gross profit margin of 4.87 per cent that was achieved on final contract value, and thus does not make any positive allowance for increase in gross profit margin as a likely result of variations. Secondly, the percentage adopted is in respect of a residential project and is slightly lower than the 3.44 per cent which Mr Osbaldiston said he anticipated as a minimum profit margin based on his tender estimate for the Dockside Stage III project.

96                  The calculation of the gross profit results in a figure of $802,612, which I round down to $800,000. This is the figure that I would have awarded for loss of profit on repudiation of the contract had I been satisfied that the contract on which GE relies had been made. I would also have allowed interest at 8 per cent from 1 January 1995 on that sum.

97                  However, for the reasons earlier given, the application should be dismissed.

98                  I will hear the parties on costs.

Associate:

Dated: 25 March 1999