FEDERAL COURT OF AUSTRALIA

 

Council of the City of Sydney v Goldspar Australia Pty Limited [2006] FCA 472

CONTRACT – whether validly terminated – if not, whether repudiation – if so, whether other party ready, willing and able to carry out contract

CONTRACT – whether terms as to cooperation, reasonableness and good faith to be implied

EVIDENCE – whether post contractual conduct relevant to implication of terms of contract

Council of the City of Sydney v Goldspar Australia Pty Limited [2002] FCA 1064related

Council of the City of Sydney v Goldspar Australia Pty Limited (No 2) [2002] FCA 1268 related

Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568; (2004) 62 IPR 274 related

Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 applied

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 applied

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153

Carr v JA Berriman Pty Ltd (1953) 89 CLR 327followed

Collins Hill Group Pty Ltd v Trollope Silverwood & Beck Pty Ltd [2002] VSCA 205 distinguished

Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378followed

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64applied

Foran v Wight (1989) 168 CLR 385 followed

Gardiner v Orchard (1910) 10 CLR 722 cited

Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529applied

Greaves v Wilson Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575applied

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640cited

Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 cited

Jenkins v NZI Securities Australia Ltd (1994) 124 ALR 605followed

Mackay v Dick  (1881) 6 App Cas 251 applied

Magill v National Australia Bank Ltd (2001) Aust Contract R 90–131, [2001] NSWCA 221 distinguished

Meehan v Jones (1982) 149 CLR 571applied

Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 cited

Psaltis v Schultz (1948) 76 CLR 547 cited

Rawson v Hobbs (1961) 107 CLR 466 cited

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 cited

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596applied

Winstonu Pty Ltd (t/a Harvey Norman Electrics) v Pitson [2001] FCA 541 distinguished

Carter and Harland, Contract Law in Australia, 4^th ed, 2002

Charles, ‘Interpretation of Ambiguous Contracts by Reference to Subsequent Conduct’, (1991) 4 Journal of Contract Law 16

Greig and Davis, The Law of Contract, (1987) 436–438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COUNCIL OF THE CITY OF SYDNEY v GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) AND DOUGLAS RAWSON-HARRIS

GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) v COUNCIL OF THE CITY OF SYDNEY

NSD 728 OF 2002

 

GYLES J

3 MAY 2006

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 728 OF 2002

 

BETWEEN:	COUNCIL OF THE CITY OF SYDNEY APPLICANT
AND:	GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) FIRST RESPONDENT   DOUGLAS RAWSON-HARRIS SECOND RESPONDENT   GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) CROSS-CLAIMANT   COUNCIL OF THE CITY OF SYDNEY CROSS-RESPONDENT
JUDGE:	GYLES J
DATE OF ORDER:	3 MAY 2006
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

The proceeding stand over to a date to be fixed.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 728 OF 2002

 

BETWEEN:	COUNCIL OF THE CITY OF SYDNEY APPLICANT
AND:	GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) FIRST RESPONDENT   DOUGLAS RAWSON-HARRIS SECOND RESPONDENT   GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) CROSS-CLAIMANT   COUNCIL OF THE CITY OF SYDNEY CROSS-RESPONDENT

 

JUDGE:	GYLES J
DATE:	3 MAY 2006
PLACE:	SYDNEY

INDEX

 

INTRODUCTION ................................................................................................................  [1]

FACTS .................................................................................................................................  [7]

PROVISIONS OF CONTRACT .....................................................................................  [122]

VALIDITY OF TERMINATION BY THE COUNCIL? ..................................................  [140]

Substantial breach ..................................................................................................  [141]

Express terms...........................................................................................  [142]

Implied terms...........................................................................................  [154]

Showing cause .......................................................................................................  [187]

Extension of time ………………………………………………………………  [189]

Termination ............................................................................................................  [193]

REPUDIATION OF CONTRACT BY GOLDSPAR? .....................................................  [194]

WAS GOLDSPAR READY AND WILLING TO CARRY
OUT THE CONTRACT? .................................................................................................  [199]

CONCLUSION ...............................................................................................................  [208]

 

REASONS FOR JUDGMENT

INTRODUCTION

1                     This is another round in what is assuming the proportions of a title fight between the cross-respondent, Council of the City of Sydney (the Council), on the one hand, and the cross-claimant, Goldspar Australia Pty Limited (Goldspar), on the other, arising out of a contract between them for supply by Goldspar to the Council of a number of multi-functional street poles, called hereafter ‘poles’ or ‘Smartpoles’. 

2                     On 28 August 2002 I delivered reasons for judgment in relation to four separate questions ordered to be determined in this proceeding pursuant to O 29 r 2 of the Rules of Court (Council of the City of Sydney v Goldspar Australia Pty Limited [2002] FCA 1064).  On 11 October 2002 I delivered reasons for judgment as to the orders to be made following the earlier reasons for judgment (Council of the City of Sydney v Goldspar Australia Pty Limited (No 2) [2002] FCA 1268).  In the result, the orders made on 11 October 2002 were varied on 17 October 2002 and 21 October 2002.  The answers to the separate questions related, in essence, to issues concerning copyright and intellectual property.

3                     On 7 May 2004 I delivered reasons for judgment which dealt with all outstanding claims by the Council against Goldspar and Douglas Rawson-Harris (Rawson-Harris), the second respondent (Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568, (2004) 62 IPR 274).  That decision led to orders being made on 18 June 2004. 

4                     This hearing relates to a cross-claim by Goldspar against the Council arising out of the termination of the contract.  These reasons for judgment are to be read with the previous reasons for judgment and assume knowledge of those reasons and the orders that have been made.  This, in effect, is a continuation of the previous hearings.  The previous history of the proceeding is a necessary backdrop to this segment of the matter.  However, a body of evidence has been led that relates to the cross-claim alone and involves a different focus from that in the previous hearings.  The evidence needs to be evaluated with that in mind.

5                     The contract documents were identified by an expert determination agreed to by the parties (Expert Determination).  I rejected a claim by the Council for rectification of the contract.  It will be necessary to go to the contractual documents in some detail, but, in order to sketch the issues in the case, it suffices to say that the contract provided the framework within which Goldspar would provide poles and accessories to the Council over a period of years.  Part of the backdrop was an intention to beautify some of Sydney’s streets prior to the Olympic Games to be held in the latter half of 2000.  In respect of each of the three years ended 30 June 1999, 30 June 2000 and 30 June 2001, the contract provided that the Council would take and Goldspar would supply a minimum of 300 poles and accessories.  The contract was formally entered into on 29 May 1998, although the manufacture of poles had commenced earlier.  A number of poles were supplied in the year ended 30 June 1999, although there is a dispute as to whether the number fell short of 300.  No poles were ever supplied in relation to the year ended 30 June 2000.  On 10 March 2000 the Council forwarded a notice of termination of contract to Goldspar.  By notice of 22 March 2000 Goldspar, in turn, gave notice of termination of contract to the Council, relying upon the Council’s alleged wrongful repudiation of the contract by virtue of the purported termination by it.  On any view, the contract had by then come to an end.  Goldspar’s cross-claim to be determined is for damages for repudiation of the contract by the Council and for certain associated claims.  The Council contends that its termination was effective and not a repudiation of contract.  It asserts that, even if this is incorrect, Goldspar was not in a position to itself terminate the contract and sue for damages because it was not then ready, willing and able to complete the contract. 

6                     In my opinion, the Council was not entitled to purport to terminate the contract as it did, and in so doing it repudiated the contract.  Goldspar was entitled to accept that repudiation and bring the contract to an end, which it did.  I am satisfied that Goldspar was ready, willing and able to perform the contract in the relevant sense and is entitled to damages.  Although the proper construction of the contract looms large, it is necessary to outline a number of facts and circumstances concerning the performance of the contract prior to the termination of it.  The evidence was voluminous and covered many facts and circumstances.  Many were not controversial and many had little, if any, ultimate importance.  I will only deal with those which I regard as significant in resolving the essential issues.  The written and oral submissions ranged far and wide.  Again, I shall deal with those that I regard as significant in the end result.

Facts

7                     The manufacture and supply of poles commenced in January or February of 1998, prior to the execution of the formal contract.  At that time, Goldspar had indicated that it would install the poles but had set out in some detail a description of how the poles would be supplied on alternative bases—namely, delivery only (described as Arrangement B), on the one hand, and delivery and installation (described as Arrangement C), on the other.  Arrangement B was that poles would be delivered to a single address in an unassembled state but ready for assembly with all parts in labelled boxes bearing full instructions on assembly methods.  The cranage off the truck was not included in the price.  Arrangement C included the following:

‘Our quote was based on being able to gain easy access to the pole site so we can drop the pole directly from the truck onto the rag bolt assembly.  All rag bolt installation will be on a site specific basis from a structural point and we need to be flexible in the methods used for installation at these sites.  The delivery of the poles to site will be as per our B method above and assembly of poles will happen once the pole is in place.  Electrical work will follow.’

8                     The poles were initially assembled on site prior to installation.  That accorded with the proposed procedure for supply and installation at that stage.  A document of 3 April 1998 entitled ‘Installation Procedures and Loading Parameters Issue D’ was a manual, the purpose of which was to provide relevant parties with step by step instructions on the correct procedure for installing the pole and its accessories.  It became part of the contract. 

9                     In April 1998, Adele Khreich (Khreich) of the firm of Tracey, Brunstrom and Hammond Pty Ltd was asked to give advice to the Council concerning the process of handling poles on site.  The instructions were as follows:

‘This confirms your instruction to TBH to assess the current status of Smart Poles procurement and design a monitoring system that will enhance the management of pole delivery to the contractors on site.

TBH will meet with Goldspar and their suppliers and assess the following:

·        Current status of production

·        Future productivity schedule

·        Assembly and delivery schedule to meet the Contractors requirements on site

Additionally TBH will establish a schedule to be used to manage the communication of site requirements to Goldspar, the tracking of Goldspar and their suppliers future progress, and the communication of likely delivery dates back to site.

TBH will undertake this work as a variation to our existing consultancy, and will itemise and invoice this work separately.’

10                  Khreich reported on 20 May 1998 to Terry Daly (Daly) of the Council with a copy to Bob Howard of the Department of Public Works.  Daly was the Deputy Director of City Projects for the Council.  Vasilios Angelo (Bill) Tsakalos (Tsakalos) was the Director.  Steven Newman (Newman) was then a project manager employed in City Projects.  None of Tsakalos, Daly or Newman gave evidence.  The report is not directly relevant to construction of the contract as such, but is of relevance because it indicates the then thinking of Khreich which was made known to the Council and is significant in understanding that which took place thereafter.  The report is too long to reproduce.  Khreich analysed the Goldspar tenders as providing $2000 difference between supply only, on the one hand, and supply, assemble and install, on the other.  He assessed the work of assembly and installation as only justifying an additional $900.  In particular, he believed the cost for assembly of approximately $1600 was considerably more than the cost of assembly in the factory which he assessed as $500.  Khreich’s recommended strategy was to place further orders on the basis of supply only, attempt to arrange a better price for assembly and installation but, if unsuccessful, to vary the Goldspar order to include those items.  It is of interest in the light of later events that one recommendation was:

‘COS to commence scheduling pole requirements beyond February 1999, and reconsider the poles procurement process in order to ensure that poles will be available for next year.’

11                  Forward scheduling of the poles was necessary because the contract provided the potential for different types of poles to be installed in different locations.  It was also necessary to have advance notice so as to be able to work in cooperation with the contractors engaged by the Department of Public Works in relation to corresponding work on the footpaths and roadways.  Goldspar had been provided with one such initial schedule.

12                  On 22 May 1998, Khreich wrote to Goldspar as follows:

‘RE:  SMART POLES DELIVERY – LONG TERM PLAN

Please find attached a schedule of poles required in the future to assist you in the placement of material supply orders.

Note that this schedule will be broken down to pole by pole as we approach the delivery dates to assist in coordinating the deliveries.

Note that for George St stages 1+2 and Retail Core (98), i.e.Leightons, Belmadar, and Reed, TBH has already supplied the pole by pole schedule breakup.  It is our intention after discussions with you to rework this schedule based on 15 poles per week rather then 6 poles per day.  However we need a commitment irrespective to weather that 15 poles a week will be delivered until the existing contracts are satisfied.

Council will issue and order for supply of these poles soon.  We will instruct you at a later time with respect to assembly and installation requirements, as soon as we know the details.’

The Schedule extended to March 1999.

13                  After an initial period, Goldspar, in order to improve efficiency, commenced assembling the poles off site and transporting them assembled for installation.  To assist in this, Goldspar rented an additional factory at Dee Why dedicated to the manufacture and assembly of the poles. 

14                  In August 1998 the Council purported to appoint Khreich as the Superintendent’s representative.  The contract provided for the appointment of a Council’s representative but did not provide for the appointment of a representative of the Superintendent.  ‘Superintendent’ meant the person responsible for supervising the Site, as nominated by the Council under the relevant clause.  The Superintendent was Wayne Anthony Burns (Burns) until he was replaced in September 1999 by Shane Henn (Henn).  Each was employed in City Projects.  There was also an obligation upon the supplier to have an individual to whom the Council or the Council’s representative could give directions and make enquiries at all times; that person was to be known as the supplier’s representative.  The supplier’s representative was initially Antony (Tony) Barnes (Barnes) who was later replaced by Rawson-Harris.  It does not appear that either Burns or Henn assumed an active or a decision-making role as the Council’s representative.  It rather appears that the day to day administration was left to Khreich, who took his instructions from Daly.  Burns was a project manager reporting to Daly.  Goldspar acquiesced in the role of Superintendent’s representative, although it sought Khreich’s replacement as such as early as February 1999 and complained about his independence in July 1999.

15                  The minutes of the Smartpoles Procurement Meeting of 2 December 1998 record:

‘WB to issue forward roll out specifications for work beyond March 1999…’

It will be recalled that the then current schedule expired in March 1999.  The effect of this entry is controversial.  Burns does not accept that it related to the following year.  According to Barnes it was preceded by a conversation between Barnes and Burns towards the end of November.  Barnes’ version is that he and Rawson-Harris and Burns had attended a meeting and whilst waiting for a lift after the meeting he said to Burns:

‘When will we get the delivery schedule for the next 300 poles?’

Burns replied that he was working on it and hopefully (would) have it in a few weeks.  Barnes was unsure whether he referred to delivery schedule or orders.  Burns simply denied the occasion.  Burns denied that the reference in the minutes of 2 December 1998 related to the orders yet to be placed for the forthcoming year but speculated that it related to tidying up aspects of the current order.

16                  Barnes gave evidence that late in January on an occasion during the Expert Determination, he asked Burns ‘have you got that delivery schedule for me yet?’.  Burns said ‘I’m working on it, probably after the determination, I’ll get it for you after the determination, words to that effect’.  Barnes agreed that he again was unsure whether he used the words ‘delivery schedule’ or ‘order’.  Burns did not recollect any such conversation.

17                  Barnes gave evidence that there was a similar conversation at another break in the Expert Determination.  He said to Burns:

‘Have you got the schedule yet because if we don’t get a schedule shortly we’re going to have to close the factory ...’

Burns replied:

‘I’m trying to get it finished – I’m trying to get it for you.’

Burns had no recollection of that conversation either.  I will return to this sequence of events later.

18                  On 16 April 1999 Barnes sent a facsimile to Burns in the following terms:

‘I regret to advise that due to Councils failure to supply any further schedules and constant breaches of contract with regards to payments to Goldspar, we have had to take the following action.

1.                  The factory at Boola Place has been shut and the lease is being terminated.

2.                  Mr. Phil Price, the Factory Manger, has been made redundant.

3.                  The other staff have either been let go or transferred to Mona Vale. (only one to Mona Vale)

Mr Ben Stubbs who was managing the accounts etc for the Contract from Mona Vale has been retrenched.

I find it very sad that the antics of Council have caused innocent workers to suffer in this manner.’

19                  On 20 April 1999 Colin Biggers & Paisley, solicitors, wrote on behalf of Goldspar to the solicitors for the Council seeking ‘delivery schedules promised since last November’.  The reply of 23 April 1999 responded:

‘With respect to delivery schedules, we are instructed that there are no delivery schedules outstanding.’

20                  On 21 May 1999 Barnes wrote to Burns by facsimile including the following:

‘In early November 1998, you are on record as stating that the next delivery schedule would be issued within a week or so.  This was not done before Christmas, despite many assurances that it would be issued.  During the Determination process, you again stated that the schedule would be a few days away.  This was then changed to “it will be issued as soon as the Determination is over”.  The Determination is over and yet you still have not issued any correspondence on this, in fact it appears you will not return any calls or faxes on any matters.’

21                  On 2 July 1999 Barnes wrote to the General Manager of the Council and said, inter alia:

‘We have to now request that you instruct the Superintendent to act independently, as is required by the contract, and to forthwith act on the following matters, as requested previously:

…

3.         Issue schedules (as he has already said he would) be issued for supply of poles in November 1998 and again after the Determination.’

22                  The reply of 5 July 1999 from Burns included the following:

‘3.        The Superintendent has no recollection of the statement alleged.  There are no schedules outstanding.  CoS will continue to order the Product in accordance with the Contract.’

23                  The reply of 15 July 1999 from Barnes to Burns included the following:

‘3.        With regard to the issuing of further schedules, the minutes of the Procurement meetings in November 1998, held at the offices of TBH, record that “Wayne Burns will issue the next schedule next week”.  Goldspar await the issue of this schedule.’

24                  The reply from Burns to Barnes dated 3 August 1999 included the following:

‘3.        A number of schedules have been issued since the meeting in question.’

25                  By letter dated 12 August 1999 Barnes wrote to Burns as follows:

‘Goldspar Australia Pty Ltd has discussed with its sub-contractors the closing dates for placement of pole component orders.  The purpose of these discussions has been to ensure purchase orders are placed by Goldspar in sufficient time to receive components, and thus manufacture the contracted quantity of poles, before the end of the 12-month Contract period 1 July 1999 to 1 July 2000.

To assist Council with its scheduling of pole deliveries for the Contract period 1 July 1999 to 1 July 2000, Goldspar wish to inform Council that a comprehensive pole delivery schedule must be received by Goldspar no later than 25^th August 1999.

In the event that a comprehensive pole delivery schedule is not received from Council by the above date, the subsequent accelerated delivery costs incurred by Goldspar in order to supply poles within the Contract period will be passed on to Council.’

26                  This is how the parties’ dealings as to the Council’s future requirements rested at the time of a significant meeting between Barnes, Khreich and one Martin Greenhill on 29 September 1999 to which I shall return.  Other events of significance had occurred in the meantime, some of which cast light upon the issue concerning future requirements.

27                  On 13 October 1998 Khreich advised Burns that Goldspar would not be installing poles in the future, and installation ceased at about that time.  This accorded with the earlier advice by Khreich to the Council.  There is a question as to whether the Council had the right to make that unilateral decision and, if so, the consequences of such a decision.

28                  In November 1998 Newman and Burns raised with Khreich the possibility of the Council pursuing the acquisition of Smartpole accessories outside the Goldspar contract and by late 1998 Streetscape had supplied Smartpole accessories to the Council.  I shall return to Streetscape in due course. 

29                  On 24 November 1998, the parties entered into an agreement for the Expert Determination and it commenced shortly thereafter.  On 15 January 1999 an Expert Determination was made as to the documents which comprised the contract and, on 19 January 1999, certain other claims were determined.  Further Determinations were made on 9 February and 3 May 1999.  By July a summons had been filed in the Supreme Court challenging the Determinations. 

30                  By no later than 21 December 1998 negotiations had commenced between the Council and Energy Australia as to the manner in which future installations of poles were to be done.  On that day there was a meeting between officers of Energy Australia and officers of the Council (including Tsakalos, Daly, Burns and Newman).  Newman’s notes of that meeting indicate that the Goldspar contract was discussed in some detail.  It was noted, amongst other things, that Goldspar will have supplied 502 poles by mid-late February (1999).  Tsakalos and Burns said that a master plan was 70–80 per cent complete and would be complete by, say, the end of January for the remaining 578 poles (to complete 1080).  There was a cryptic note within Newman’s notes which said ‘to be issued this week’. 

31                  A draft of Annexure A, of what was said to be ‘“Installation and Maintenance Agreement in respect of smartpoles in the City of Sydney Council Area” dated 2^nd February 1999’, was produced in early 1999.  Burns claims to be the principal author of that document.  It was described as a rollout plan, the purpose of which was to specify the scope of works, and associated requirements, for the installation of smartpoles by Energy Australia.  The foreword included the following assumption:

‘City of Sydney will continue as Principal of the smartpole supply contract (Contract no. 9733 – Supply of Multi-Functional Street Poles).  City of Sydney will order each of the poles and ensure Goldspar complies with the requirements of the supply contract.  This does not prohibit Council from augmenting its current supply by contracting to alternative suppliers.’

A summary of Supply Contract 9733 described Goldspar’s responsibility as follows:

‘▪     Supplying smartpoles to the specified quality.

▪     Provide a defects liability of 12 months from issue of a certificate of acceptance by City of Sydney.

▪     Supply poles within 12 weeks of an order being placed, and full production specification being provided.

▪     Supplying poles that comply with statutory requirements and relevant Australia Standards.

▪     Supply production drawings for fabrication of the smartpoles

▪     Supply the smartpoles in a form ready for assembly and installation’

The next draft sub-paragraph was as follows:

‘2.2      Ordering

The CoS will be responsible for ordering the smartpole componentry to be supplied to EA.  From the time the orders are placed it is expected that Goldspar will require 12 weeks to manufacture enough components to commence installing poles.  It is expected that EA will, use this time to commence below ground works. [emphasis added]

A copy of the ordering schedules will be passed to EA, for use in verifying Goldspar’s inventory sheets when picking up componentry.  It is critical that all changes in schedules necessitated by latent conditions be passed onto CoS so that the appropriate ordering schedules can be modified.  The ordering schedules are attached a s Appendix C.

OR

EA are responsible for ordering the necessary componentry.

[katy – should we make EA a Superintendent’s Rep for the purposes of ordering poles]’

[emphasis as in original]

The Introduction under the heading ‘Installation’ was as follows:

‘It is the CoS’s intention [t]hat the majority of Sydney be serviced by smartpoles in the long term.  A copy of the long term masterplan is attached as Appendix E.

In the interim, The CoS has prioritised a number of areas to be included in the Stage 1 rollout to be undertaken by EA.  This Stage 1 masterplan is attached as Appendix F.  The areas included in the Stage 1 masterplan have been chosen for a combination of functional, safety and aesthetic considerations.’

32                  A meeting on 23 February 1999, including Kheich, Burns and Newman, confirmed that the current projects totalled 520 which should have been completed by Goldspar by mid-March.  The notes of the meeting included the following:

‘TENDER SPECIFICATION TO BE ISSUED DRAFT ASAP

KWA TO COMPLETE DWGS

ADDITIONAL DWGS. i.e. COMPLETE COLUMN etc.’

There was also a note that Capral Aluminium Limited (Capral) had delivered 159 lengths to Goldspar, and another note which said:

‘TENDER PRE ORDER 100 LENGTHS:  ADEL & WAYNE.’

33                  This meeting, no doubt, related to the Request for Tender 9912 ultimately issued on 12 May 1999.  That Request had an Introduction which included the following:

‘1.        Council has undertaken an extensive capital works program to enhance the public domain, including the streets and parks within the City of Sydney.

2.                  The objectives of the program include to provide improved lighting in public places, and to rationalise pole furniture.

3.                  To meet these objectives, Council has developed the Smartpole system.  Smartpole accommodates a range of functions, servicing both the requirements of Council, the RTA, and energy Australia.

4.                  Smart-poles are considered to be-an important component of the upgrade of the public domain.  The reliable supply of the Smartpole is an important factor in achieving this objective.

5.                  Council seeks to complete the work under the Contract before the start of the Sydney 2000 Olympic Games.

6.                  Smartpoles have been installed in prominent locations throughout the City.  An number of parties (other than Council) have participated in the process of the development, documentation, supply, and installation of Smartpoles The third parties previously involves in the documentation, supply, or installation of Smartppoles will not be involved in the tender evaluation process.’

34                  This Request for Tender had been preceded by a letter of 10 May 1999 from Tsakalos to Rawson-Harris which was as follows:

‘This is to confirm my verbal advice of 10 May 1999 with regards to the above projects, as advised:

1.            City of Sydney is calling tenders for fabrication, assembly and supply of 300 Smartpoles™

2.            This tender is in addition to the City’s current contract with Goldspar.

3.            The tender is to be advertised in Sydney Morning Herald on 11 May 1999.

4.            Council has instituted a probity process with Rory O’Connor as the independent audition.

5.            Tender assessment will be by Council Staff and outsiders who have not had day-to day involvement in the current Goldspar contract.

Goldspar will have the opportunity to tender.’

35                  In the meantime, Khreich forwarded detailed requirements to Goldspar for a further seven poles on, or about, 15 March 1999 in the following form:

36                  The reference at the meeting of 23 February 1999 to ‘tender pre order 100 lengths’ is of some significance.  One of the constraints to the production of Smartpoles was the availability of column extrusions.  The only practical source of those extrusions was Capral.  It had provided the extrusions for the Smartpoles manufactured by Goldspar up to that time.  There was contention over the ownership of the die used to manufacture the extrusions.  If the Council were contemplating entering into a contract with an alternative supplier of Smartpoles there would be a practical problem in that supplier obtaining extrusions.  Hence, the reference to a tender pre-order.  In the course of a meeting on 28 May 1999, after the Request for Tender 9912 had issued, Council officers made the interesting discovery that Capral had 70 extrusions on hand.  It was at this same meeting that Khreich and Newman were endeavouring to secure the pre-order of supply of extrusions for the successful tenderer in relation to Tender 9912.  The relevant officer of Capral described the extrusions as a quantity left over from previous runs which were in stock.  Khreich and Newman decided to endeavour to acquire those extrusions for the purposes of Contract No 9912. 

37                  This led to a series of dealings between the Council and Capral which were complicated by the potential claims of Goldspar to be entitled to the extrusions which had been fabricated pursuant to the earlier arrangements between Goldspar and Capral.  The dealings were also complicated by Goldspar’s claims to intellectual property in relation to the die which had been utilised.  It is unnecessary for the purposes of this judgment to trace those dealings in detail.  Suffice it to say that Capral ultimately chose to sell the extrusions to the Council on the basis that it received an indemnity from the Council against claims from Goldspar. 

38                  On 9 July 1999, the Council issued Addendum No 6 to Tender 9912, one aspect of which related to these extrusions:

‘1.        NOMINATED SUPPLY

Replace

The City of Sydney has ordered three (3) tonne of upper pole extrusions for the work under the Contract from Capral Aluminium.  This material will be supplied to the Supplier to fulfil part of the work under the Contract.  The Supplier is responsible for taking delivery of the aluminium prior to anodising; and cut, drill, tap and anodise the material as required to complete the work under the Contract.  The Supplier will be responsible for checking the quality and quantity of the material.

The cost of, and delivery dates for, the material will be advised to the tenderers prior to the close of tenders.  The cost of the material will be deducted from the Suppliers progress claims.

with

The City of Sydney will supply free to the Supplier, three (3) tonne of upper pole extrusions for the work under the Contract from Capral Aluminium.  The extrusions to be supplied consist of the following:

The Supplier will be responsible for the transportation of the material from Capral’s Lidcombe store, where it will be loaded onto the Supplier’s truck.  The Supplier will be responsible for checking the quantity and quality of the extrusion at prior to removal from Capral’s yard.  The extrusions will remain the property of the City of Sydney.’

39                  The extrusions were actually delivered to the Council on 10 August 1999.  Whatever the legal rights and wrongs of that result may have been, it demonstrated a determination by the Council to facilitate the task of the successful tenderer for Tender 9912 at the direct expense of performance of the balance of the contract with Goldspar.  Goldspar was free to respond to Tender 9912 and did so.  However, the reality was that a successful tenderer was required to acknowledge intellectual property in the Council in a way which was unacceptable to Rawson-Harris, as must have been predicted by the responsible officers of the Council.  No conforming tender was lodged by Goldspar, again predictably.  No evidence was led from the decision makers at the Council as to the rationale for calling Tender 9912 in the face of the existing contract with Goldspar, nor to explain the obvious overlap in numbers of poles required, nor how it was regarded as practical that the two contracts might be fulfilled concurrently, each in a timely manner.

40                  A Smartpole Location Plan had been prepared by 11 June 1999 and a Smartpole Priority Zones Plan by 28 June 1999.  The agreement between the Council and Energy Australia was entered into on 23 June 1999.  There were 1131 Smartpoles on the Smartpole Location Plan. 

41                  The agreement with Energy Australia was described as an agreement by Energy Australia to install and maintain certain Smartpoles and a Fibre Optic Cable network for 47 close circuit television security cameras and certain other items of telecommunications equipment.  The detail of the agreement involved Energy Australia purchasing from the Council ‘Existing Smartpoles’ which meant:

‘approximately 521 smartpoles supplied and installed as at the date of this document or contracted to be supplied and installed by a third party as at the date of this document and the electrical network to support the supply of electricity to those smartpoles from the point of contact with the relevant Energy Australia substation to the Smartpole, as identified in schedule 1.’

It is apparent that those are the Smartpoles supplied by Goldspar.  The Council agreed to sell and Energy Australia agreed to purchase the uninstalled ‘New Smartpoles’ which were defined to mean:

‘approximately 610 Smartpoles to be supplied by COS and installed by EnergyAustralia generally in the areas identified in the Rollout Plan (as amended from time to time) in accordance with this document.’

The obligation was that:

‘Each of the New Smartpoles shall be delivered to EnergyAustralia by COS making them available for collection by EnergyAustralia at EnergyAustralia’s premises at Mowbray Road, Chatswood, or such other premises as the parties may agree.’

There was a different price for each of pole types A, B, C and D.  It was then the obligation of Energy Australia to install the new Smartpoles in accordance with the Rollout Plan and to supply and install other necessary equipment and accessories.  Energy Australia was also to operate and manage the Smartpoles and lighting infrastructure in accordance with the agreement. 

42                  It is to be noted that Tender 9912 dovetailed into this agreement as the obligation was to supply assembled poles including delivery but with no installation.  It is quite apparent that the Energy Australia contract and the matching Tender 9912 reflect the substance of what had been discussed between officers of the Council and Energy Australia in December 1998.  Contract 9912 did not include all of the accessories provided for by the Goldspar contract.  Streetscape was to play a role in relation to that. 

43                  On 12 August 1999 Goldspar wrote to Burns claiming that there had been a short order of poles for the year commencing 1 July 1998.  There was no substantive reply.

44                  On 29 September 1999 a meeting of some significance took place between Barnes, Khreich and one Martin Greenhill, a consultant quantity surveyor retained by Goldspar.  Before examining the detail of that meeting, I accept the substance of the evidence of Barnes that, in late November 1998 and January 1999, he requested from Burns advance notice concerning the orders to be placed for the 12 months’ supply to commence in July 1999. 

45                  I reject Burns’ denials of that evidence.  The evidence of Burns was generally unimpressive.  His claimed recollection of events was very poor – much worse than might have been expected, even if (as I find) his true role was more limited than his title of Council’s representative might have implied.  My impression when he gave his evidence was that he was not genuinely giving the best of his recollection.  His express denials of the evidence in question of Barnes were in marked contrast to most of his evidence and did not ring true at the time.  On the other hand, generally speaking, Barnes impressed as an honest witness, although particular aspects of his recollection may not have been reliable.  His evidence in question here was given in a convincing manner.  Counsel for the Council was able to point to differences in the precise wording of the various accounts given by Barnes in evidence – in particular, the difference between schedule and orders.  Nonetheless, these differences did not detract from the overall effect of the evidence.  I am satisfied that the entry in the minutes of 2 December 1998 related to the 1999–2000 year.  The substance of the contention of Barnes was repeated in correspondence over many months and the response was evasive at best. 

46                  Furthermore, Barnes’ version accords with the surrounding circumstances and the commercial probabilities.  Forward planning was essential for a project of this kind.  An orderly delivery of poles in the correct sequence was desirable for all parties.  The type of poles which were to be required was essential knowledge for the planning and commencement of manufacture.  Continuity of work was important.  There was an issue as to whether the dedicated factory organised by Goldspar should be maintained.  What is more, the Council’s forward planning beyond the 1998–1999 year, recommended by Khreich as early as 20 May 1998, was at an advanced stage by November/December 1998.  It had plainly progressed further when the draft schedule to the Energy Australia agreement was prepared in February 1999.  There was no reason why an interim schedule should not have been provided to Goldspar by that time.  Furthermore, the schedules were effectively complete by June 1999 and had still not been provided to Goldspar by the meeting of 29 September, notwithstanding continued requests.

47                  The only sensible conclusion from the overall circumstances is that in late 1998 Burns had assumed that, in accordance with past practice, Goldspar would be given the schedule that he and Tsakalos were preparing and were expected to complete shortly.  However, there was a change of heart in the Council camp, presumably after it was decided to pursue the Energy Australia arrangements and the alternative tender.  

48                  The meeting on 29 September 1999 was relatively well documented.  There were handwritten and typewritten notes and an email from Khreich to Henn which purported to summarise the outcome of that meeting.  Oral evidence was given by Barnes and Khreich.  The typewritten minutes prepared by Greenhill were agreed by Khreich to be a correct record although they are, to an extent, cryptic and leave some room for debate.  Barnes had a point of disagreement which is not of great significance in the case.  The minutes were as follows:

‘MINUTES OF MEETING HELD AT THE OFFICE OF T.B.H.

at 10.10am on Wednesday 29^th September 1999

 

PRESENT:   Adel Khreich [Tracey Brunstrom & Hammond]

                     Tony Barnes [Goldspar Australia Pty Ltd]

                     Martin Greenhill [Greenhill Consulting Services Pty Ltd]

1.         T.B. stated that M.G. would become the new Contractor's representative – to be advised in writing when it occurs.

2.         A.K. talked about the Smartpole rollout program required for year 2000.  Goldspar to supply poles under existing contract but installation would be carried out by Energy Australia, including footings.

            Note:  The Contract with Goldspar is a Supply and Installation Contract

3.         A.K. stated that Steve Newman was presently preparing the schedule for the first 100 poles, and that A.K. required this schedule by Thursday Night [30-9-99].  This schedule would be given to Goldspar early the following week [commencing Tuesday 5^thOctober -Monday 4^thbeing a Public Holiday]

4.         These 100 poles would be assembled by Goldspar [without outreach arms].  T.B. to talk to Capral and Hayman re earliest program times especially delivery rates and effect of Xmas shutdowns.

5.         A.K. stated that they require 3 poles before Xmas –2 x "A" poles, 1 x "AB" pole with RTA outreach. TBH would supply exact specification [this was presented to T.B. and M.G. after the meeting]

            Note:  No order or agreed price has been forthcoming.

6.         A.K. stated that the balance of the poles [655] would comprise approx. 15% [100] Type "A" with the balance mostly type "B" and "C" and very few Type "D". These would be for Broadway and Haymarket with probable delivery to Rozelle. The first 100 poles would be mostly type "A". These poles would be generic rather than site specific.

7.         A.K. stated that Canon Industries told him that they had lots of parts. A.K. requires Goldspar to supply delivery schedule.

8.         A.K. asked T.B. to check availability of Ragbolts and Pushbuttons.

9.         A.K. stated that TBH would authorise payment of 600mm outreach arms.

10.       A.K. stated that all future correspondence on the contract is to be addressed to him at TBH.

11.       A.K. asked if T.B. could get back to him by 5pm Friday 1^st October with reference to items 3 and 6 above.  T.B. advised that he would try to comply with this request.

            The meeting closed at about 11am’

49                  The point of disagreement by Barnes was as to any commitment by him to investigate supply times and come back to Khreich.  I am inclined to think that he probably did make a statement along those lines, not in order to fulfil any contractual commitment but rather to endeavour to progress the matter.

50                  Newman provided Khreich with a schedule on Friday 1 October 1999.  Khreich then forwarded it to quantity surveyors on behalf of the Council late on Tuesday 5 October 1999, the next working day.  That schedule was not provided to Goldspar at any time prior to 19 October 1999.  Khreich’s evidence on this point was most unsatisfactory.  In the first instance, he denied having received the schedule from Newman prior to 19 October 1999.  He corrected this statement when he observed that he had expressly said to the contrary in an email to Henn.  His attention was then drawn to other documents during the course of his cross-examination.  His initial explanation for not forwarding the schedule promptly was that he had been relieved of that responsibility because of the conversation he had with Rawson-Harris on 5 October 1999.  His contemporaneous version was that Rawson-Harris said to him (he having unsuccessfully attempted to reach Barnes):

‘Adel, listen to me very carefully.  We have had enough of Council, we believe that they are not acting properly, and that they are being dishonest.  We don’t want anything to do with them any more.  Now I have to go, Goodbye.’

A fax to that effect was received by Goldspar at 4.25 pm on 5 October 1999.

51                  Rawson-Harris replied on 6 October 1999, and his contemporaneous account of the conversation was as follows:

‘Adel, listen to me very carefully.  Goldspar has had enough of Council.  We don’t believe you have behaved with integrity.  We are not prepared to discuss anything with you.  Good-bye.’

Rawson-Harris went on:

‘It would be in the interests of both parties and would avoid ambiguity in the future to have meetings between us recorded and have any matters which you wish to put to us, apart from at those meetings, put in writing’

52                  Regardless of what was actually said on 5 October 1999 between Rawson-Harris and Khreich, the Council did not then and there allege that there had been a repudiation of contract and claim to bring the contract to an end.  It acted thereafter as if the contract was still on foot.  This was not surprising, as Rawson-Harris’ communication of 6 October 1999 made it clear that Goldspar’s position was not that it would not deal with the Council or carry out the contract, but, rather, that it would require dealings between them to be properly recorded.  This would have made it entirely appropriate for the schedule to have been provided under cover of a written explanation forthwith.  Khreich did not suggest that any failure by Barnes to provide information had any impact upon his failure to supply the schedule.

53                  A matter of importance, disclosed at the meeting of 29 September 1999, was that the Council were proposing that the poles should be delivered already assembled by Goldspar, but that installation would be carried out by Energy Australia.  This carried the seeds of controversy as it did not appear to comply with either contractual form of supply.  Greenhill noted that the contract was to supply and install.  Goldspar’s communication of 6 October 1999, apart from confirming that Goldspar had met and would continue to meet its contractual obligations, raised a number of issues which, in turn, provoked a reply from the solicitor for the Council which was met by a further reply from Goldspar.  It is not necessary to pursue those matters of detail. 

54                  On 5 October 1999, the Council had asked whether Goldspar would enter into a contract for Tender 9912 ‘in the form tendered’.  Goldspar responded negatively on 12 October 1999 (explaining why), which led to advice on 13 October 1999 that Goldspar would not be considered for that tender. 

55                  On 19 October 1999, Khreich, as ‘Superintendent’s Representative’, purported to give an instruction to supply product in accordance with the following requirements:

‘1.        The description of the Product to be supplied is shown in the attached four (4) page spreadsheet, entitled “ORDER PLACED WITH GOLDSPAR ON 19/10/99”, referring to 147 poles of types A, AB, B and D.  The pole numbers range from 2/001 to 2/147 inclusive.  This spreadsheet also describes various variations required in addition to the Product.

2.                  The Product is to be manufactured and supplied at the unit rates listed in the Schedule of Prices Part 2(D), which forms part of the Contract.

3.                  The Contract Price for the 147 poles referenced above shall be $408,879.00, as shown on the attached spreadsheet.

4.                  The total valuation of the Variation to the Contract Price (shown in item 3 above) shall be $382,708.52.  Details of the valuation of This Variation are shown in the attached five pages.

5.                  Time is of the essence with respect to delivery of the 147 poles.  The time for delivery shall be in accordance with Part 10 – Production Program of your Tender, which forms part of the Contract.  Delivery of the 147 poles shall be eight (8) weeks from the date of this letter, i.e. Close of Business on 15^th December 1999.  You are referred to Clause 17 of the Contract, which requires certain notices from the Supplier to Council prior to delivery.

6.                  Goldspar are to submit a program conforming to Clause 13.2 of the Contract setting out the various activities involved in the manufacture and supply process including production rates for all components, leading to final delivery of the 147 poles.  CoS wishes to review progress against such a program on a regular basis.

7.                  Goldspar is to provide evidence to CoS of current insurance policies as required by the Contract within seven (7) days of the date of this letter.

8.                  Goldspar is to submit its Quality Assurance System in accordance with Clause 28 of the Contract.  Cos requires to review the QA system within 14 days of the date of this letter.  CoS wishes to monitor the quality of the product at various stages of the manufacture and supply processes and will advise hold points once the Goldspar QA system is tabled.’

56                  The response from Goldspar dated 26 October 1999 was as follows:

‘RE:    CONTRACT NO. 9733 – MULTIFUNCTIONAL STREET POLES – SUPPLY OF PRODUCT

Thank you for your letter dated 19 October 1999.

Unfortunately, it does not constitute an order under the contract and^. given the problems we have had with Council, it should be a proper order under the contract. There are some fundamental difficulties which should have been obvious to you, but apparently were not.

Our initial evaluation of the points made in your letter are as follows:-

1.         Point 1 of Your Letter

The description is inadequate and is in fact erroneous in that it refers to pole components that have not yet been designed. It also refers to pole components that have never been referred to before or supplied by Goldspar. These should not have been included in the order. Why have they been included? Further the descriptions are inadequate and incomplete.

2.         Point 2 of Your Letter

This point refers to a schedule of prices as Part 2D. Part 2D of the Goldspar tender response sets for the price for poles in an unassembled state. As you know, Council issued asupply and install contract. Therefore, the correct schedule that you should have referred to was the supply and install schedule. This is the schedule of rates in Section E (before any variations or CPI). The prices that you include should reflect variations to Schedule^. E and CPI as per the contract.

3.         Point 3 of Your Letter

The contract price has been incorrectly calculated. You should recalculate the price by reference to Schedule E and as per the variations as put by Goldspar and accepted by Mr Morrissey in his independent determination dated 3 May 1999.

4.         Point 4 of Your Letter

We do not understand how you have calculated the amount of $382,708.52. Until we know the content required for the extra items in the Schedule (and some of which have not yet been designed), we cannot otherwise comment.  Obviously, we cannot agree to your calculation.

5.         Point 5 of Your Letter

We cannot understand how you can assert to be entitled to "make time of the essence" for delivery. Firstly, where do you claim to have this contractual right in the contract. Secondly, it has come to our attention that recently Council without our knowledge and without any consultation went toan aluminium supplier, Capral, and purchased the aluminium and upper extrusions for the mast poles which Goldspar had previously orderedand had been made for Goldspar so that Goldspar could meet its obligations toCouncil. Thirdly, the eight week order deadline as you know is totally unreasonable and in fact an impossibility.

In our letter to Council dated 12 August 1999, we advised thata minimum of twelve weeks would be required for extrusion of the aluminium sections alone. In addition, there is now the intervention of Christmas when Capral (oursupplier) is closed for approximately four weeks. There is also the further period of four weeks required for the anodising process. All of this has been known to you and Council since 12 August 1999 and we specifically advised Council that their next schedule for pole deliveries had to be received by 25 August 1999. The earliest delivery date (assuming acorrect order was received by 29 October 1999) would be 13 March 2000. Please therefore as a matter of the utmost urgency give this matter your attention and place a proper order with us for the poles, properly itemised and costed and in accordance with the contract.

To assist you in your scheduling, we draw to your attention that your present letter of 19 October 1999 only refers to 147 poles when in fact this year's schedule should be for 355 poles. This scheduling and orders should have been provided to us by 25 August 1999. This has been entirely in the hands and responsibility of the Council to provide this schedule and place this order. It is now 24 October 1999 and we still do not have a schedule or proper order. You will appreciate that substantial additional costs will be incurred to now fulfill this remainder of the orders in the short period still available.

Weplace on record that a full schedule was promised by Council in December 1998 and has never been received by us. We are concerned at the extent of the errors and omission in your letter of 19 October 1999.  Given that Council has now had nearly 11 months to prepare and check the documentation, it causes us to seriously consider the motives of your letter.

We note your comments on the provision of notices.

6.         Point 6 of Your Letter

We agree that a program needs to be urgently prepared and we will use all our endeavours to do this in accordance with Clause 13.2 of the contract immediately you have:-

(a)       placed a proper order clarifying what is to be supplied with a correct schedule of prices;

(b)       provided a further schedule for the remaining 208 poles that should have been ordered in August 1999; and

(c)        advised who will be designing the undesigned components and when this design will be completed and approved by Council and all appropriate authorities;

(d)          provided us with appropriate assurances that we will be paid for these poles. Please note that there is nearly $2 million owed to us by Council in previous orders as found by Mr Morrissey. We are aware Council disputes part of this, but there are obvious double dips and even on Council'sown figures, they owe us substantial moneys.

You will appreciate as a matter of simple logic that in a practical sense, no program can be produced until you have done all of these things. Please give these matters your urgent attention so that a proper program can be sensibly structured minimizing each delay.

We note your comments on progress reports to enable you to review progress against the^. agreed program once put into place.

7.         Point 7of Your Letter

Our understanding of the contract document is that it requires 14 days for the provision of the insurance policies from the date of receipt by us of a proper order. We will ensure that when we receive a proper order, we will comply. You will appreciate that until we have clarification on exactly what Council are ordering, we do not have the information to take out any such policies.

8.         Point 8 of Your Letter

This has already been done. We cannot see where in Clause 28 the Council has any right to review or monitor the quality of the product. We refer you to Clause 28. Clause 28.1 has been complied with. We are unawareof any circumstance which would give rise to the other provisions of Clause 28 applying.

It is inappropriate to arrange any meetings at this stage until you have complied with the above and in particular provided us with a proper order.

We are concerned to meet our obligations under the contract and we expect that you will give the above points we have raised your most urgent attention. You will see that the position is essentially that Council is not providing to us orders in proper form.

In addition, as mentioned above there are substantial amounts of money owed by Council to us which are not in issue and Council has not made payment to us. These amounts are immediately due and payable and we demand that payment be made forthwith. Councilis in a continuing state of breach of contract by not making these payments to us.’

57                  On 4 November 1999, Rawson-Harris wrote to the General Manager of the Council setting out a comprehensive complaint about the manner in which the Council had dealt with the contract.  A response was received dated 8 November 1999.

58                  Khreich then forwarded a letter of 8 November 1999 (Order No 1) to Goldspar in the following terms:

‘RE:  Contract Number 9733 – Multi-Functional Street Poles

Supply of Product – Replacement Order

Reference is made to the Contract between the Council of the City of Sydney ("Cos") and Goldspar Australia Pty Ltd ("Goldspar") for the Supply of Multi-Functional Street Poles, and our instruction to Goldspar to Supply Product dated 19^th October 1999.

The following instruction to Supply Product supercedes our referenced instruction of the 19^th October which you have disputed

Goldspar is instructed by CoS to Supply the Product in the attached schedule, in accordance with the Contract.

Please note the following items relevant to This instruction to Supply Product:

1.         The description of the Product to be supplied is shown in the attached three (3) page schedule, entitled "ORDER PLACED WITH GOLDSPAR 08/11/99", referring to 146 poles of types A, AB, B and D. The pole numbers range from 2/001 to 2/146 inclusive.

2.         The Product is to be manufactured and supplied at the unit rates listed in the Schedule of Prices Part 2 (D), which forms part of the Contract.

3.         The Contract Price for the 146 poles referenced above shall be $408,879.00, as shown in the attached schedule. The attached schedule also describes various variations required to the Product.

4.         The total valuation of the Product and the required variations, including adjustments for CPI shall be $792,918.39, as shown in the attached schedule.

5.         Time is of the essence with respect to delivery of the Product. CoS has assessed the Time for Delivery of the poles. In accordance with Clause 17.3 of the Contract, CoS nominates a 12 week delivery for the Product. Additionally CoS wishes to grant an additional two (2) weeks extension to this delivery date to allow for a reasonable shutdown over the end of year holiday period. As such delivery must be completed by Close of Business on 21^st February 2000. You are referred to Clause 17 of the Contract, which requires certain notices from the Supplier to Council prior to delivery.

6.            Goldspar are to submit a program conforming to Clause 13.2 of the Contract setting out the various activities involved in the manufacture and supply process including production rates for all components, leading to final delivery of the Product. CoS wishes to review progress against such a program on a regular basis.

7.         Goldspar is to provide evidence to CoS of current insurance policies as required by the Contract.

8.         Goldspar is to submit its Quality Assurance System in accordance with Clause 28 of the Contract. Cos requires to review the QA system within 14 days of the date of this letter. CoS wishes to monitor the quality of the Product at various stages of the manufacture and supply processes and will advise hold points once the Goldspar QA system is tabled.

Please contact the undersigned to agree a time to resume the Co-ordination Meetings so that any issues that require clarification can be discussed and clarified.’

59                  On that day, the Council resolved to award Tender 9912 to Streetscape and another company.  Khreich also separately replied to the facsimile from Goldspar of 26 October 1999.

‘RE:    Contract Number 9733 – Multi-Functional Street Poles
Supply of Product

Reference is made to your correspondence of the 26^th October 1999, in reply to our request to Goldspar to supply Product.

CoS is disappointed that you feel it inappropriate to attend a co-ordination meeting intended to progress the supply of Product.

CoS insists that Goldspar attend a co-ordination meeting and requests your presence at 2:00 PM Thursday, 11^th November 1999, at TBH's North Sydney office.

CoS notes your various concerns and your request for a “proper order”. We do not understand your reference to “proper order”, our view is that the Contract represents the Order from CoS to Goldspar.

CoS notes your concerns regarding pole components that may not have been previously supplied by Goldspar. While Goldspar has not been specific as to which components this concern is related to, you are advised that the Contract provides mechanisms for Goldspar to request a variation for such components, as well as extensions of time for the affected poles. Goldspar's statement that such components should not have been ordered is without basis. The effect of this concern on the supply of the poles can not be assessed from your reply. Our Replacement Order removes the requirement to supply various components that we assume caused you this concern.

With respect to Schedule of Prices, our instruction to supply product is clear in that such supply is requested in accordance with Schedule of Prices Part 2 (D). Any requested variations to this Schedule of Prices will be dealt with in accordance with the Contract.

Our calculation of the Total Price is clearly shown on the attached schedules and will be further explained to you at our scheduled co-ordination meeting.

CoS refutes the various allegations made in your correspondence referenced above. A number of these allegations are subject to current legal proceedings. The intention of this correspondence is to progress the supply and delivery of product, it is not appropriate for us to address your various allegations in this document.’

60                  The substantive reply by Goldspar to the letters of 8 November 1999 was dated 17 November 1999 and was in the following terms:

‘We refer to and reply to your two letters dated 8 November in relation to your purported instruction to Goldspar to supply poles to Sydney Council.

(i)        The pole description schedules provided by you are still in error.

(ii)       The Contract Price you have nominated for the poles, variations and CPI adjustment, is incorrect.

(iii)      The Schedule of Prices Part 2 (D) you have nominated (albeit with incorrect figures) refers to the supply of pole components, not assembled poles.

The correct schedule for assembled poles is the Schedule of Prices Part 2 (E) for which the correct Contract Price is $1,711,438.58, not including CPI adjustment which is based on pole delivery.

Please note that the above price includes the supply and assembly of the RTA Termination panels, EA Termination Panels and RTA cable entry covers which have been supplied by Goldspar in the 500+ poles delivered so far; non-supply of these items will negate Goldspar's warranty on the poles. In the event that Council does not require Goldspar's warranty, these items can be removed and the Contract price adjusted accordingly. Please advise when placing a proper order with correct prices.

When we receive a correct pole schedule, a correct Contract price, and a more appropriate allowance for the Xmas holiday period, together representing a proper order, we will be pleased to provide the requested Program. Until that time we see no need for any meetings with you.

We reject your claim that time is of the essence with respect to delivery. It is a recorded fact that you promised to provide Goldspar a requirements schedule by November 1998, Failing the long awaited receipt of the promised schedule, on 12th of August 1999 we wrote and advised the urgent need for you to place Council's pole requirement no later than 25th August 1999. This also was not done. We place on record that now, 3 months later, we still have not received that schedule of requirements.

In the event, you are attempting to place the responsibility for late delivery on Goldspar. We place on record that in a responsible and competent project management function structure you and Council would have provided Goldspar with the schedule of requirements, and a proper order many months ago that would have allowed for an orderly and timely delivery of poles.

We note and place on record that Council was clearly able to prepare and issue a tender for an alternate source of supply of poles by 12 May 1999, and yet was unable or unwilling to spell out its delivery requirements to Goldspar with whom it has an existing supply contract.

In the meantime we note that the Proper Order when received by Goldspar should relate to pole numbers 2/001 to 2/146 inclusive.’

61                  A period of intense inter parties communication then ensued at two levels – the first was at the contractual level between Goldspar and Khreich; the second was at what might be called the commercial level involving the Lord Mayor of the Council and others.  Whilst the latter is illuminating it ultimately went nowhere and the details need not burden what will, in any event, be a long judgment.  Goldspar fully exposed its concerns about the events to that time with no satisfactory substantive explanations by the Council.  It is necessary, however, to trace the contractual dealings in some detail. 

62                  On 26 November 1999 Barnes sent a facsimile to Khreich, the substance of which was as follows:

‘SUBJECT:  Independent assessment of your request for 146 poles.

We note that we have not received a response to our letter dated November 17 1999.

In view of the present issues we felt it was appropriate to retain an independent Quantity Surveyor to analyse the proper charges for the 146 poles referred to in your letter of November 8 1999.

We enclose this calculation of the purported amended order of November 8 1999. (we do not recognise this as a proper order).  We hope the enclosed calculations will facilitate the placement by you of a proper order.  Upon receipt of that order we will take all necessary steps to manufacture the poles as quickly as possible, given the difficulties as to timing and the availability of raw materials.

(N.B. We no longer have the 70 upper extrusion sections stored at Capral’s yard for us and improperly sold to Council.  This will cause delays).

Obviously there is a dispute between us as to many issues concerning your purported order, including:

1.                  The form of the order itself

2.                  The prices noted

3.                  The quantities

4.                  Delivery times

The enclosed calculation of price will hopefully eliminate one of these issues.  You are aware of our position on the other matters.  In the event we do not receive a proper order from you by Wednesday December 15 1999 we propose to refer the dispute to arbitration.’

I will not set out the enclosed calculations.

63                  By facsimile of 30 November 1999 Khreich forwarded three documents to Barnes.  The first was described as ‘Order No 2 for 1999/2000 year for 154 poles’.  It was in the following terms:

‘RE:  SUPPLY OF PRODUCT: ORDER UNDER CONTRACT No 9733

ORDER No 2 OF 1999/2000 YEAR

Goldspar is directed to supply the following products in addition to the Order dated 8^th November 1999.

1.         Supply only of 154 type B poles in accordance with the Contract.

2.         The product shall be delivered to Energy Australia Depot in Sydney, address to be advised in accordance with the Contract.

3.         Time for delivery shall be in accordance with the Contract, the period commencing from the date of this Order.

4.         The poles are to be numbered sequentially from 2/147 to 2/300.’

64                  The second was a response to Goldspar’s letter of 17 November 1999 and was in the following terms:

‘We refer to your correspondence dated 17 November 1999 (signed by Mr Douglas Rowson-Harris), and comment as follows:

·        The pole description schedule as shown in our letter dated 8^th November 1999 describes the Pproduct required to be supplied.  You are instructed again to supply as per our referenced order.

·        While we do not admit to any ambiguities or errors in the Order, we had organised a co-ordination meeting to clarify items in the schedule for your benefit, however you did not attend.  We would be pleased if you could attend such a meeting.

·        We confirm the order is based on Schedule of Prices Part 2(D), Supply only in accordance with the Contract.

·        Warranty of any product supplied by Goldspar is to be in accordance with the Contract.  Council is entitled to order product in accordance with the contract.

·        We deny your allegation that the schedule contains errors.

·        Council is of the view that the price shown in the order has been calculated in accordance with the Contract.

·        The Contract does not allow any entitlement for a Christmas shutdown, and it is inappropriate to make any further allowance.

·        Council rejects your various statements regarding orders that have allegedly been previously promised and comments made in your second last paragraph.

Goldspar are directed to supply in accordance with the Contract.’

65                  The third was a response to the letter from Goldspar of 26 November 1999 and was in the following terms:

‘We refer to your letter dated 26/11/99, entitled “Independent Assessment of your request for 146 poles”, and respond as follows.

·        You refer to Greenhill Consulting Services as “independent”, however at our last meeting you informed us that Mr Greenhill will be Goldspars future “Supplier’s Representative”.  We are still awaiting written confirmation of that advice.

·        The form and content of the order dated 8/11/99 are clear.  Goldspar is directed to supply the 146 poles in accordance with the Contract.

·        We are examining the Cost Summary attached to your letter and will respond to that shortly.  However, in the meantime we wish to note that Council’s order has been in place for some time, and we intend to status progress during December 1999.’

66                  On 2 December 1999 Goldspar, by facsimile addressed to Khreich as the ‘Superintendent’s Representative’, sought an extension of time for the date for delivery because of delays caused by acts omissions on the part of the Council, pursuant to cl 18 of the contract.  The terms of that facsimile were as follows:

‘RE:  EXTENSION OF TIME

Under Clause 18 of the Contract, we hereby notify you that Goldspar's requires an extension of the date for delivery because of delays caused by acts or omissions on the part of the Council.

Under Clause 18 of the Contract, Goldspar has taken all reasonable steps to prevent and minimise delays.  These steps have included:-

1.         the pre-ordering of 70 pole extrusions from Capral Aluminium; and

2.         the pre-ordering of other known components necessary to meet anticipated orders.

The delays have been caused as a consequence of:-

1.         Goldspar becoming aware that Council has without Goldspar's permission or knowledge purchased from Capral 70 pole extrusions, which extrusions were made from dies held by Capral exclusively to meet orders placed by Goldspar. These extrusions are therefore now not available and Capral advise that the earliest delivery date for further extrusions is 20th, February 2000.

2.         Council's failure to provide us with a schedule as promised in November 1998. This omission on the part of Council is a continuing omission and may be the basis for further applications for extension of time. On 12 August 1999, Goldspar wrote to Council (copy of this letter is enclosed) requesting the promised schedule by no later than 25 August 1999. We have not received any reply to that letter.

3.         Council's failure to give Goldspar proper order. Until we receive a proper order, we are not in a position to put into place a manufacturing regime for these poles. In particular:-

(a)        you have still not adequately described the poles and components;

(b)        you have not given us adequate instructions in respect to the RTA panels and Energy Australia panels;

(c)        you have deducted incorrect amounts;

(d)        you have referred to the wrong Schedule. You have referred to Schedule 2D which is for the supply of the poles in pieces. Your contractual obligation is to order poles on a supply and assemble basis. The correct Schedule therefore is Schedule 2E (without erection).

Goldspar is very concerned to obtain a proper order for the 146 poles and the 154B Poles. We would therefore ask you to give this your urgent attention so that further delays can be minimised. We note that whilst we are promptly responding to your correspondence, you are taking weeks to reply to ours. We need your immediate attention to the above so that we can pursue the fulfillment of our contractual obligations without delay.

We place on record that once we have received a proper order from you, and assuming that Capral deliver to us extrusions by 20^th February 2000, there will then be a further minimum period of four weeks required for anodising and a further 11 weeks for drilling and assembly as required by Schedule 2E.  The extension of time we therefore seek for the delivery of the 146 poles is 9 June 2000. We reserve our right to seek further extensions of time if Council continues to fail to provide us with proper orders.

We look forward to hearing from you.’

67                  On the same day Goldspar sent three other communications to Khreich responding to the three communications from Khreich of 30 November 1999.  The first related to the letter headed ‘Supply of Product’ and was in the following terms:

‘RE: YOUR LETTER HEADED “SUPPLY OF PRODUCT”

This letter is in response to our letter to you of 17 November 1999 and deals with your purported order of 146 poles. Responding to each of the points made by you:-

·                  Your pole description does not adequately describe the product and the inadequacies in your description are such that we are unable to order the required components to manufacture these poles.

·                In respect to ambiguities and errors, it is not Goldspar's contractual obligation to point these matters out to you, we did so as a matter of courtesy to enable you to consider them. If you choose not to correct these ambiguities and errors, that is a matter for you, but we will rely upon your failures in this regard. Goldspar has no contractual obligation to attend any meeting with you or with Council in order to fix up inefficiencies on the part of the Council in its ordering process.

·                We have pointed out to you on several occasions that Schedule 2D is a Schedule that relates purely to the supply of poles in an unassembled state. Our understanding of Council's requirements is that you require the poles in a supply and assembled basis. Are you saying to us that you now do not require us to assemble the poles prior to delivery? Please advise us by return as to what Council's requirements are in this regard. If you require them on an assembled basis, then we draw to your attention that the correct Schedule is Schedule 2E (excluding erection). We also point out that as Council is contractually obligated to order on an assembled, supply and erection basis, Goldspar will be claiming all profit that it would achieve on such a basis irrespective of whether or not Council orders on that basis.

·                 In respect to warranty, Goldspar understands its contractual obligations. We agree with you that Council is entitled to order product in accordance with the contract and we ask that Council do so without further delay.

·                 In respect to your denial of allegations of Schedule errors, we point out that the Schedule provided by you is totally inadequate. Some examples of the many errors and inadequacies in the Schedule are as follows:-

(a)      Council has in the past ordered up to four different types of lights. The Schedule does not identify what type of lights Council now requires. How can we order this component?

(b)      The Schedule refers to holes in the upper extrusions. It does not identify where those holes are to placed nor the size of the hole or the shape of the hole. Are we meant to guess this?

It is not up to us to point out to you the inadequacies of your Schedule. It is for you to provide us with a Schedule that properly identifies what you want done. The above are simply two examples of vagueness in your Schedule. There are, of course, many others and we ask you to provide us with a proper Schedule, and until you do so, your purported order is a contradiction in term because it cannot be the basis of any contractual obligation on our part that requires fulfillment.

·                 The calculation of the pricing is not in accordance with the contract and again this is not a matter of mathematical error, it is a matter of Council deliberately using the wrong Schedules. It therefore goes to the very heart of the purported order.

·                 We note that the contract does not allow any entitlement for Christmas shutdown. However, in your letter or 8 November 1999 (paragraph 5), you allowed a two week extension for the Christmas period. It is not, therefore, within your perogative to revoke that extension.

Goldspar is ready, willing and committed to perform its contractual obligations and upon receiving a proper order from Council for 146 poles, it will use all reasonable endeavours to produce those poles as soon as is practically possible. To date all delays have been a direct consequence of Councils acts or omissions. In this regard, please see our extension of time already requested.’

68                  The second related to Order No 2 and was in the following terms:

‘RE:    YOUR LETTER DATED 30 NOVEMBER 1999 – SUPPLY OF PRODUCT: ORDER UNDER CONTRACT NO. 9733 ORDER NO. 2 OF 1999/2000 YEAR

Thank you for your letter dated 30 November 1999.

We are perplexed by the content of your letter.

We have received no specification for the 154 B poles you have requested us to supply. Until we receive a proper specification with details of pricing and components, we are unable to take this further.

Goldspar is anxious to commence work on the production of these 154 B poles and therefore would be grateful if you would give this matter your urgent attention.’

69                  The third related to the assessment of prices and was in the following terms:

‘RE:    RESUPPLY OF PRODUCT – YOUR ASSESSMENT OF PRICES – GREENHILL CONSULTING SERVICES

Please note Greenhill Consulting Services are an independent consulting group. At this point of time, they are not the supplier's representative. We will advise you if and when they are so appointed.

We provided you with the independent assessment of Greenhill Consulting simply as an assistance to you so that you could provide us with a proper and correct order.

We are endeavouring to act reasonably by providing you with their summary of pricing so that possibly this could expedite the provision to us of a proper order from Council.

Whether you choose to use Greenhill Consulting Group's summary of pricing to assist you in preparing a proper order for the 146 poles is obviously a matter for you. Note however, that until we receive a proper order from you with proper pricing, it is not an order made in accordance with the contract.

We look forward to receiving a proper order from you.’

70                  Khreich replied by letter dated 15 December 1999 to Goldspar’s letter of 2 December 1999 relating to the supply of product.  The substance of the reply was as follows (omitting some of the detail):

‘RE: SUPPLY OP PRODUCT

We refer to your correspondence dated 3^rd December 1999 regarding supply of product in which you allege ambiguities in the recent order placed by Council for 146 poles, and respond as follows:

Council strongly denies your assertions that ambiguities exist in the Order, nonetheless we note that Council has been pro-active in its attempts over the last two months to clarify any alleged ambiguities in the Order, and will continue in its attempts.

We regret that Goldspar has to date declinedseveral invitations to attend project meetings intended to clarify and progress issues on the project. It is common practice for parties involved in managing projects to meet and co-ordinate the various issues on the project.

Below isour response to the specific issues raised in your referenced correspondence:

…

3.         PRICE: CoShas on a number of occasions since placing the Order confirmed to Goldspar that the Order is required to be fu1filled in accordance with Schedule of Prices Part 2 (D). This is also the case for Council’s Order dated 30^th November 1999.

4.         COLUMN ARRANGEMENT:  While the Product has been ordered in accordance with the Contract schedule of Prices Part 2(D), the state of the Product to be supplied was clarified verbally to your Mr Rawson-Harris on the 14^th December 1999 as “similar to the poles supplied for George Street North (stage 4)”.

In summary, Council’s understanding of the state of the Product at time of Supply is broadly outlined as follows without limiting any party’s obligations under the Contract:

·        Complete column arrangement, meaning the extrusion fixed onto the spigor including rims, caps etc and any bracketing, mounting kits and holes where pedestrian push buttons, audio tactile, outreaches and the like have been specified in the Order.

·        Outreaches assembled but detached from the poles.

·        Luminaries supplied detached from the outreaches and in their boxes.

·        Universal brackets supplied in a box.

·        Rag bolts supplied detached from the poles.

Council does not require the following from Goldspar at this stage:

·        EA panels – neither supply nor installation.

·        RTA panels – neither supply nor installation.

·        Installation of the poles.

We note Mr Rawson-Harris comments of yesterday that Goldspar will not accept responsibility for the affixing of the RTA and EA panels to the pole, including the removal of the cladding for such work by others.  Council agrees with these comments for Product where these panels had not been Ordered or Supplied.

The column arrangement as outlined above is also required for our second Order dated 30^th November 1999.

 

5.                  CHRISTMAS SHUTDOWN: Goldspar appear to have misunderstood Council’s comments in our letter of the 30^th November 1999. We repeat that “… it is inappropriate to make any further allowance”.^.  By this we are not revoking any extension of time we have previously given for the 8^th November 1999 Order.  There is no change to the delivery date.

We hope the above clarifies any misunderstanding that Goldspar may have had to date, and note that items 1 and 2 above do not affect the critical path for delivery of the Product, and that we regard our orders to be effective from 8^th November 1999 and 30^th November 1999 respectively.’

71                  On 15 December 1999 Rawson-Harris sent copies of the order which had been placed with Capral to both Khreich and Sue Puckeridge of the Council. 

72                  Khreich’s response to the extension of time claim was dated 21 December 1999 and was in the following terms:

‘RE: EXTENSION OF TIME CLAIM NO.1

We refer to your extension of time claim dated 2^nd December 1999, which we will reference as EOT1, and comment as follows.

You are claiming an extension of time for delivery. Please specify delivery of what given the position you have taken as at the present time.

We note that the order for 146 poles was originally placed on 19 October 1999. When the replacement order was placed on 8 November an additional 2 weeks was allowed for the Christmas shutdown period, As a matter of fact you have already had a significant extension of time. Nevertheless, Council wishes to assess Goldspar's entitlement for an extension of time as quickly as possible and request the following further particulars, in accordance with the requirements of Clause 18 of the Contract.

1.         Demonstration of the delay against the Contract Programme by Goldspar (refer Clause 18(iii).

2.         Evidence of the underlying statements made in your extension of time claim:

·        Goldspar had pre-ordered 70 pole extrusions from Capral Aluminium. We request confirmation of this on a Capral letterhead.

·        Goldspar had pre-ordered other known components necessary to meet anticipated orders.

·        Evidence of current orders for components with your suppliers.

·        Advise from Capral that further extrusions are not available until 20^th February 2000.

3.         Evidence of other steps taken by Goldspar to prevent and minimise delays (refer Clause 18(iv).

Until this information is received, Council is not in a position to assess an extension of time.’

73                  Goldspar’s response to that communication, being dated 21 December 1999, was as follows:

‘SUBJECT: Extension of time.

Thank you for your letter of 21 December, 1999 concerning Goldspar's application for an extension of time, answering our letter of 2 November, 1999.

In respect to your second paragraph it is obvious that the extension of time is sort in respect to poles, components and additions, the subject of your purported order of 8 November 1999.

In our opinion Goldspar has adequately particularised the basis of our entitlement to an extension of time, however, in answer to the matters you have requested we point out;

1.         See paragraphs 1, 2 & 3 of our letter of 2 December 1999.

2.         Evidence;

Ø      We have supplied you with Goldspar's order on Capral. Capral are only entitled to produce & supply Multi-function pole extrusions on our order. (all relevant plans are marked 'exclusive to Goldspar')

Ø      Goldspar has sufficient components, other than pole extrusions and luminaires.

Ø      Copy of current order with Capral for extrusions has been supplied to you.

Ø      We enclose Capral delivery advice as requested.

Ø      See above and see our letter of 2 December 1999.’

74                  On 22 December 1999 Goldspar sent to Khreich some correspondence from Greenhill Consulting responding, it was said, to Khreich’s letter of 15 December 1999 and Order No 2.

75                  On 24 December 1999 Khreich sent to Goldspar a letter from Page Kirkland Partnership (Quantity Surveyors) responding to the assessment made by Greenhill Consulting Services.  On 11 January 2000 Goldspar responded by attaching correspondence from Greenhill Consulting Services claiming that the Page Kirkland Partnership report was rejected as totally in error.  It was said:

‘We will now refer this matter to arbitration as again the Council is in Breach of Contract’.

No such reference occurred.

76                  Khreich’s response to the letter of 21 December 1999 from Goldspar concerning the extension of time was dated 12 January 2000 and was as follows:

‘RE: EXTENSION OF TIME CLAIM NO. 1

We refer to your correspondence dated 21^st December 1999 received at our offices on the 22^nd December 1999, regarding extension of time.

We have previously advised Goldspar that Council wishes to assess your entitlement for an Extension of Time as quickly as possible, however is unable to do so due to lack of further particulars which were outlined in our correspondence of 21^st December 1999.

Unfortunately your referenced correspondence does not provide any further evidence on the three issues raised in our correspondence. The information requested by Council is crucial in identifying the sequence of events that allegedly caused critical path delays and in assessing the Extension of Time Claim. The information provided by Goldspar to date in support of your claim leaves a large gap in our understanding of the proposed programme dates leading to the requested extension to 9^th June 2000.

At this stage we wish to remind you of the following facts:

·      The Contract time for delivery is 12 weeks from the time an order is placed.

·      Council's Order was originally placed on 19^th October 1999. This Order provided sufficient details for Goldspar to commerce procurement of Extrusions (which appears to be causing the alleged delay according to your Claim dated 2^nd December 1999).

·      Council issued a replacement Order on 8^th November 1999. The changes made from the original Order do not affect procurement of extrusions. In effect, the replacement Order gave you the benefit of three weeks.

·      The 8^th November _.Order gave you an extension of time of a further two weeks to allow for a Christmas shutdown period. Council was not obliged to issue this extension under the Contract but did so in the spirit of co-operation and to assist Goldspar. This extension exposes Council's rollout programme to delay risks.

·      You have refused to provide us the details requested in our 21^st December 1999 correspondence to assist us in assessing the Extension of time. The correspondence with Capral Aluminium does not justify an extension to 9^th June 2000.

·      Your request for an extension of time to 9^th June 2000 would put the delivery time from the original order at approximately 33.5 weeks, which is 2.8 times the Contract time, and is totally unreasonable.

Aluminum Extrusions

Your correspondence dated 15^th December 1999, purporting to include a copy of an order with Capral for extrusions dated 10^th June 1999 does not assist us in responding to your allegations made in your correspondence of the 2^nd December 1999, for the following reasons:

·      The order is not backed up by confirmation of the order from Capral as we had requested you to provide. We are all well aware of Capral's internal procedures for processing such orders.

·      The order does not appear to be a complete order as it does not include an agreement on price.

·      The order does not specify a delivery date, and as such your allegation that Council interfered with your ability to source extrusions can not be verified by this document.

·      Council does not understand why an order for extrusions allegedly placed by Goldspar on the 10^th June 1999 could not be fulfilled until 20^th February 2000, considering Council's purchase of extrusions from Capral was agreed in May 1999 and concluded in June 1999. We would assume that Capral's press could have been scheduled to extrude further sections in the period between 10^th June 1999 and 20^th February 2000 since a proper order had been placed with Capral by Goldspar.

Goldspar is hereby notified that its claim for an Extension of Time is rejected based on the supporting information provided by Goldspar to date. Council would be willing to reconsider this extension of time claim once the information we had previously requested is made available.’

77                  The immediate response of Barnes on behalf of Goldspar was dated 13 January 2000 in the following terms:

‘I acknowledge receipt of your fax of 12 January 2000.

Without wishing to inflame the situation you have only set out some of the relevant facts and with respect, what you have left out, presents a distorted portion of the true picture.

You will recall the history of the current position is as follows.

In December 1998 Mr. Wayne Burns, Superintendent of Contract 9733, promised to give Goldspar a schedule of what orders the council proposed to place in 1999. He promised to supply this by the end of December 1998. From January 1999 through to October 1999 despite repeated requests that Council place an order, we did not receive this from CoS.

On 12 August 1999 Goldspar wrote to CoS to put CoS on notice that unless we received an order promptly, there could be major delays with sub-contract suppliers. We have never received a response to this letter.

In the mean time Goldspar had made arrangements with Capral to purchase 70 extrusions that had been overproduced by Capral, against a previous order placed by Goldspar.

On 10 August 1999, behind our back, and with obvious ulterior motives (which have never been explained or justified), the council bought the 70 sections from Capral. (Why would Council do this? Did Council have someone else they had done a deal with to make some poles? We have never been provided with a just explanation.)

On 19 October 1999 you go through the charade of providing what on the face of it appears to be an order for 147 poles and accessories, but it contains so many errors that it cannot be acted upon.

Goldspar promptly wrote back to you pointing out to you some of the inadequacies in your letter of 19 October 1999. There was then a deafening silence until 8 November 1999.

On 8 November 1999, (nearly one year after our first request for a schedule of orders) you provide Goldspar with a revised order, which corrected some of the errors but still lacked sufficient clarity to enable all materials to be purchased.

The consequences of your errors in incorrectly defining the product to be produced has had major consequences on the supply on the outreach arms (which were incorrectly specified), which are on the same supplier critical path as the upper extrusions as both are produced concurrently.

I remind you of some matters I thought would have been obvious;

1          The Christmas shutdown is longer than two weeks as this is when the extrusion plants conduct their maintenance. CoS is well aware of this as they have already been through two previous Christmas periods during this contract. Again I must confirm, this is why Goldspar wrote to CoS on 12 August to advise them of the required times, which took into account the Christmas period.

2          The details advised in our letter of 12 December were patently clear, and the letter to CoS on 12 August 1999 did advise Council of the time frames required.

3          Goldspar tried to avoid the delays that Council has now brought upon itself by its failure to place orders in a timely manner.

4          A major part of the delay has been caused by Council's improper purchase of extrusions from Capral. Will Council make these available to Goldspar? If they are available, it may shorten the delay.

5          We have provided you with adequate information to consider the extension of time and await your response.’

78                  Khreich’s response dated 20 January 2000 was in the following terms:

‘Council acknowledges receipt of your fax dated 13^th January, received 14^th January 2000.

Our letter of the 12^th January 2000 left the Extension of Time open for reconsideration once the information we had previously requested is made available. Your response has once again attempted to present issues that from our point of view are without basis until you provide us the records to evidence your statements.

Your response continues to avoid the real facts and the specific particulars we have been repeatedly requesting which are necessary to evaluate the Extension of Time Claim.

For the record, we wish to correct the statements made in your fax:

1.         There are no documents that confirm your allegations that you were promised an order by December 1998. If you have such documents please supply them or alternatively please refrain from unsupported allegations.

2.         Your comments in the 5^th paragraph is incorrect. Council placed an order with Goldspar on the 19^th October 1999 and another order since.

3.         You appear to be attempting to reinvent history with respect to the 70 extrusions that Council purchased from Capral. Council confirmed with Capral in June 1999 that it wishes to purchase extrusions so long as the order placed by Council “... does not conflict with an order by Goldspar…”. You are informed that Council placed its order on 10^th June 1999 and the extrusions were supplied in June 1999. Capral did not identify any conflict between its order and any order of Goldspar. Your correspondence appears to mean that your order was placed after 12^th August 1999.

4.         Had Goldspar placed orders with Capral back in August 1999 as you allege, then further runs of the extrusions should have been possible by now. We would greatly appreciate it if you could supply the specific particulars that we requested which would prove or otherwise this allegation.

5.         In response to your last paragraph on page 1. We deny that such order is a charade. The fact is that the order of the 19^th October 1999 was more than sufficient for Goldspar to order components from its suppliers especially the extrusions which you are alleging are causing the critical delay.

6.         In the period between 19^th October 1999 and 8^th November 1999, Council invited Goldspar to project meetings to clarify the order and assist in progressing the Contract. Goldspar refused to attend and you are continuing to refuse to attend these meetings as of today. Council cannot clarify “errors” which are not known. The only matters identified, which did not amount to “errors” were identified by Doug Rawson-Harris on 14^th December 1999 and were addressed on 15^th December 1999. We would hardly call this “deafening silence” as you have on page 2 of your correspondence.

7.         In view of these fact, how could any reasonable person be pursuing the statements made your correspondence. However your intended distortion of the facts is made clear.

Unless and until the information requested by Council is supplied to Council, the request for an extension of time which has been rejected cannot be reconsidered.’

79                  On the same day, Khreich wrote to Goldspar as follows:

‘RE: PROGRESS STATUS

For the records we wish to confirm that Council requested TBH to status the progress of all Smartpoles suppliers on a weekly basis assist Council in managing the rollout programme and identify critical issues that require resolution.

TBH contacted you on Wednesday 12^th January 2000 and requested a meeting and access to your factory for this status.  You responded on the 14^th January 2000 by refusing TBH's request.

For the records the other suppliers have cooperated and allowed TBH access to status progress.

Your continuing refusal to attend project meetings and allow Council access to status progress is denying council the opportunity to manage the Contract timetable including the collection of data for the purposes of evaluating delays and causes of delays on the Contract.

Again we wish to request your permission to attend your factory and status the progress of the works.’

80                  Goldspar’s response concerning the extension of time dated 21 January 2000 was as follows:

‘SUBJECT: Goldspar Australia Pty Ltd Application for Extension of Time 1.

Contract with The Council of the City of Sydney

We acknowledge receipt of your letter of 20 January 2000.

Most of the matters that you place on record we disagree with and do not accord with our understanding of the factual position.

Goldspar has provided you with sufficient information to allow you to properly and fairly assess Goldspar's entitlement to an extension of time.

The tone of your letter and of previous correspondence from you leaves us with considerable concern as to whether you are able to fairly and objectively assess our application for an extension of time.

Goldspar is entitled to have your reasons for rejecting it's application for extension of time and we Would be grateful provide these reasons by return facsimilie.’

81                  Goldspar’s response to the letter concerning progress status was also dated 21 January 2000 and was in the following terms:

‘SUBJECT: Response to your letter Progress Status.

I am in receipt of your letter of 20 January 2000 regarding the Progress Status. So that we can consider your request in the context of the existing contractual rights and obligations of the parties, we would be grateful if, you could provide us with the following:

Please advise:

1.         Under what Clause in Contract 9733 you say obligates Goldspar to allow you to come on to it's premises.

2.         Under what Clause in Contract 9733 you say obligates Goldspar to allow you to assess it's stock levels.

3.         We were surprised to learn from your letter that there are other supplies supplying you under our contract and that these suppliers “have cooperated and allowed TBH access to status progress”. So that we may understand the significance of this we would be grateful if you would:

a)      Identify the suppliers to which you refer.

b)      Advise us a to how they are cooperating with you.

c)      Advise us precisely on what matters you have sought their cooperation.

4.         We look forward to receiving your response and assure that upon receiving the above information we will give it our prompt consideration’

82                  On 25 January 2000 Goldspar advised that Rawson-Harris would assume the position of ‘Supplier’s Representative’ for the contract.

83                  On 28 January 2000 Khreich responded concerning the extension of time request as follows:

‘RE: EXTENSION OF TIME 1

Council acknowledges receipt of Goldspar's facsimile dated 21^st January 2000.

We reiterate our advice that Extension of Time 1 is open for reconsideration once the information and the specific particulars we have been repeatedly requesting is made available.

For the record, we make the following responses and requests related to the statements made in your facsimile:

1.         Please provide your understanding of the factual position on the matters on which you disagree. This information could assist in any reconsideration of Extension of Time l.

2.         We do not have sufficient information, as evidenced by our previous correspondence, to assess in any reconsideration of Extension of Time 1, your entitlement to an extension of time.

3.         We have assessed and I formally rejected your application for extension of time in Extension of Time 1, based on the limited information you had provided. We reiterate, that Extension of Time 1 is open for reconsideration once the information and the specific particulars we have been repeatedly requesting is provided.

4          Our reasons for rejection of your application for an extension of time for Extension of Time 1 have been made clear in our previous correspondence.

Unless and until the information requested by Council is supplied to Council, the request for an extension of time, which has been rejected, cannot be reconsidered.’

84                  On the same date Khreich replied concerning progress status as follows:

‘RE:  PROGRESS STATUS

Council acknowledges receipt of Goldspar’s facsimile dated 21^st January 2000.

Using the numbering from your facsimile we advise as follows:

1.                  Council is seeking your permission and cooperation to conduct a status visit each week, a process that is considered beneficial to all parties in the coordination of the Smartpole manufacture and installation.

2.                  Comments as for Item 1.

3.                  The other Suppliers acknowledge the benefits of regular statusing.  As the statusing activities are conducted cooperatively with these Suppliers, there should be nothing of significance that you should need to understand.

4.                  Given this response to the items raised in your letter, a favourable reconsideration of your position that would allow the statusing of your works would be appreciated.’

85                  Khreich gave evidence that late in January he telephoned Goldspar concerning access to the factory and spoke to Barnes who said:

‘There’s nothing for you to see, we haven’t assembled any poles, there’s no reason for you to come to the factory because there’s nothing for you to see.’

86                  On 14 February 2000 Rawson-Harris, on behalf of Goldspar, wrote to John McDowall of Tracey Brunstrom & Hammond Pty Ltd concerning cl 18 of the contract as follows:

‘We draw your attention to Clause 18 of the Contract as revised by the Council after tender.

Please note, Council has itself to blame for any time delays related to early supply of upper extrusions as Council, without Goldspar's permission, took delivery of product held by Capral under Goldspar's order.

You should also note that the orders by Council could not be acted on until after 14 December 1999 when we finally received clarification of what you were ordering. By that time, most of our suppliers were finalising orders for the Christmas close down. As a result, the delivery date for aluminium upper extrusions and RTA arms is now 20 to 25 February 2000.

The lead-time for anodising is now four weeks. Therefore, we anticipate the first poles will be delivered at the beginning of April 2000 at a delivery rate of 6 poles per week in accordance with the Contract (300 poles per year). In view of Council's continued failure to pay our accounts (refer Goldspar's letter to Cr. Sartor 14/02/00 – copy attached), we will invoice you for each pole and will deliver it on a strictly COD (bank cheque) basis. Please let us know if these arrangements will be met. We cannot commence assembly of the poles until we have your response. Of course, this letter replaces all previous correspondence on the matter of delivery of these poles.

Please now tell us on what grounds you have denied Goldspar an extension of time.’

87                  On 15 February 2000 Khreich wrote to Rawson-Harris as follows:

‘RE: Delivery Time

Reference is made to the Contract between the Council of the City of Sydney (“Cos”) and Goldspar Australia Pty Ltd (“Goldspar”) for the Supply of Multi-Functional Street Poles, and our instruction to Goldspar to Supply Product dated 19^th October 1999 which was further clarified and confirmed in a replacement order dated 1^st November 1999.

We note that Goldspar has claimed en extension of time for delivery and was notified that its claim for an Extension of Time has been rejected based on the supporting information provided by Goldspar to date. Council has stated that it is willing to reconsider this extension of time claim once the information we previously requested is made available. Goldspar has not, to date, made the information available as requested.

We have made several requests including at least three (3) written requests for Goldspar to submit a programme in accordance with the Contract. To date we have not received a programme.

Council requested that Goldspar allow TBH to undertake a regular review of production progress to enable Council to manage this Contract and associated tasks such as holding yards, etc. Although this process occurred for previous orders, Goldspar has refused to allow Council to obtain such information. Our verbal request was made on the 12^th January 2000 and written requests on the 20^th and 28^th January 2000.

The Date for Delivery of Product for our order of the 8^th November 1999 remains 21^st February 2000.

In accordance with Clause 17.1 of the Conditions of Contract, Goldspar is obliged to advise Council not less than 14 days before the Date for Delivery (i.e. prior to the 7^th February 2000) that the product is ready to be delivered. Council has not received the Notice. On receipt of that notice the Council is obliged to immediately nominate a place for delivery.

In the absence of that Notice from Goldspar, you are hereby notified that the address for delivery shall be Energy Australia Yard, Fairlight Street, Five Dock, NSW.

Delivery is to occur to Five Dock by the 21^st February 2000 in accordance with the Order.’

88                  Khreich then wrote to Rawson-Harris on 19 February 2000 as follows:

‘RE: Your Letter Dated 14/02/2000

We acknowledge receipt of your fax dated 14/02/2000 regarding extensions of time.

The allegations set out in your abovementioned facsimile have all previously been asserted by yourself and rejected by Council. We do not see any benefit in Goldspar continuing to repeat these allegations without providing further evidence that an extension of time is warranted.

With respect to payments for product delivered and to be delivered, Council can only act in accordance with the Contract.

The grounds for rejecting Goldspar's extension of time have previously been outlined to you. Your correspondence does not provide us with the additional information which we have previously requested to enable Council to review its position on the matter.

In relation to your assertion that you anticipate the first poles to be delivered at the beginning of April 2000, we remind you that pursuant to the contract and our Order dated 8 November 1999, you are obliged to deliver the full number of poles specified in that Order by 21 February 2000.

We refer you to our letter to you dated 15 February 2000. The delivery rate of 6 poles per week you suggest is based on an incorrect interpretation of the contract and is not in accordance with the Order which was properly placed under the contract.’

89                  Khreich then wrote on 22 February 2000 to Rawson-Harris as follows:

‘RE: Your letter dated 14 February 2000

We refer to your letter dated 14 February 2000 and our previous correspondence arising from it.

In regard to the following statement appearing in your letter dated 14 February 2000:

“In view of Council's continued failure to pay our accounts (refer Goldspar's letter to Cr Sartor 14/02/00 – copy attached), we will invoice you for each pole and will deliver it on a strictly COD (bank cheque) basis.”

Council:

i)          rejects Goldspar's assertion that Council has failed to pay any accounts which are due and owing; and

ii)         advises that the proposed regime of delivery and payment is not in accordance with the Contract.

We note the above statement by Goldspar is another example of Goldspar's failure to comply with the Contract.’

90                  On 23 February 2000 the Acting General Manager of the Council wrote to Goldspar, attention Rawson-Harris, enclosing a notice to show cause pursuant to cl 25 of the General Conditions of Contract (the first show cause notice) which was in the following terms:

‘NOTICE TO SHOW CAUSE UNDER CLAUSE 25 OF THE
GENERAL CONDITIONS OF CONTRACT

 

TO:     GOLDSPAR AUSTRALIA PTY LIMITED

            (ACN 002 705 991)

 

WHEREAS:

A.        By the Supply Contract made between the Council of the City of Sydney (“the Council”) and Goldspar Australia Pty Limited (ACN 002 705 991) (“the Supplier”), the Supplier agreed to execute the Works under the Supply Contract upon and in accordance with the General Conditions of Contract.

B.         Clause 13.1 of the General Conditions of Contract provides inter alia:

“13.1   Rate of Progress

“The Supplier shall proceed with the work under the Supply Contract with due expedition and without delay.”

C.        Clause 25.2 of the General Conditions of Contract provides:

“25.2   Default by the Supplier

If the Supplier commits a substantial breach of contract the Council may give the Supplier a written notice to show cause.”

D.        On 8 November 1999 Tracey Brunstrom & Hammond Pty Limited (“the Superintendent's Representative”) ordered from the Supplier 146 Type A, AB, B and D poles (identified by pole numbers 2/001 to 2/146) (“Order 1”). Order 1 specified that delivery of the poles must be completed by close of business on 21 February 2000.

E.        The Supplier has not delivered any poles ordered under Order 1 on or by the specified delivery date and has therefore committed a substantial breach of the Contract.

F.        Further, the Supplier has committed substantial breaches of the Contract, including a substantial breach of clause 13.1 of the General Conditions of Contract, by inter alia:

a)         failing to deliver in accordance with Order 1 and the Supply Contract; and

b)         failing to proceed with the Works under the Supply Contract pursuant to Order 1 and engaging in the correspondence referred to in the Schedule to this Notice and the conduct referred to in the correspondence.

F.      This Notice is a Notice under clause 25 of the General Conditions of Contract.

NOW THEREFORE TAKE NOTICE that the Council hereby requires the Supplier, pursuant to clause 25.2 to show cause in writing why the Council should not exercise a right referred to in clause 25.4. The Supplier must show cause by 9:00 am on Friday, 3 March 2000 by delivery of the show cause to the General Manager, The Council of the City of Sydney, Level 6, Town Hall House, 456 Kent Street, Sydney, New South Wales, 2000.

(The Schedule is omitted.)

91                  By letter of the same date, the Acting General Manager of the Council wrote to Rawson-Harris as the Supplier’s Representative, referring to a facsimile of 25 January 2000 addressed to Khreich, enclosing what was said to be a further notice to show cause pursuant to cl 25 (the second show cause notice) which was additional to that which had previously been delivered.  This notice was in the following terms:

‘NOTICE TO SHOW CAUSE UNDER CLAUSE 25 OF THE
GENERAL CONDITIONS OF CONTRACT

 

TO:     GOLDSPAR AUSTRALIA PTY LIMITED

            (ACN 002 705 991)

 

WHEREAS:

A.        By the Supply Contract made between the Council of the City of Sydney (“the Council”) and Goldspar Australia Pty Limited (ACN 002 705 991) (“the Supplier”), the Supplier agreed to execute the Works under the Supply Contract upon and in accordance with the General Conditions of Contract.

B.         Clause 13.1 of the General Conditions of Contract provides inter alia:

“13.1   Rate of Progress

"The Supplier shall proceed with the work under the Supply Contract with due expedition and without delay.”

C.        Clause 25.2 of the General Conditions of Contract provides:

“25.2   Default by the Supplier

If the Supplier commits a substantial breach of contract the Council may give the Supplier a written notice to show cause.”

D.        On 30 November 1999 Tracey Brunstrom & Hammond Pty Limited (“the Superintendent's Representative”) ordered from the Supplier 154 Type B poles (identified by pole numbers 2/147 to 2/300) (“Order 2”). Order 2 specified that delivery of the poles must be completed in accordance with the Supply Contract, the delivery period commencing from the date of Order 2. That is, the additional 154 poles were to be delivered on or by 22 February 2000.

E.        The Supplier has not delivered any poles ordered under Order 2 on or by 22 February 2000 and has therefore committed a substantial breach of the Contract.

F.        Further, the Supplier has committed substantial breaches of the Contract, including a substantial breach of clause 13.1 of the General Conditions of Contract, by inter alia:

a)         failing to deliver in accordance with Order 2 and the Supply Contract; and

b)         failing to proceed with the Works under the Supply Contract pursuant to Order 2 and engaging in the correspondence referred to in the Schedule to this Notice and the conduct referred to in the correspondence.

F.        This Notice is a Notice under clause 25 of the General Conditions of Contract.

 

NOW THEREFORE TAKE NOTICE that the Council hereby requires the Supplier, pursuant to clause 25.2 to show cause in writing why the Council should not exercise a right referred to in clause 25.4. The Supplier must show cause by 5:00 pm on 3 March 2000 by delivery of the show cause to The General Manager, The Council of the City of Sydney, Level 6, Town Hall House, 456 Kent Street, Sydney, New South Wales, 2000.’

(The Schedule is omitted.)

92                  Goldspar responded to Khreich’s letter of 22 February 2000 by letter dated 28 February 2000 in the following terms:

‘Thank you for your letter. Our letter of 14 February 2000 has obviously been misunderstood by you. At the meeting that we had with Council in December 1999, at which you were present, Mr Sartor offered to pay for poles on a COD basis. Our letter of 14 February 2000 simply reflected what we understood to be the basis offered by Council for future payment.

In any event, the issue is theoretical because as you know:-

1.         we have requested extensions of time from the Council because of our inability to get raw materials from suppliers, particularly extrusions, in order to meet the alleged orders placed by you on an accelerated delivery basis; and

2.         as you also know, we are having difficulty with many suppliers who are insisting upon upfront payments before they will accept an order from us.

3.         As you also know Council improperly purchased 70 pole upper extrusions, which at the time were subject to a prior order from Goldspar on Capral and were being held in stock for supply to Goldspar.

Under the terms of the contract, the Council is obligated to grant us an extension of time. We insist upon that extension of time and to date it has not been granted. You have sent us a show cause notice, but as you would appreciate, you are not entitled to send this given that you are obligated to give us an extension of time under the contract terms and you have not done that.

We are currently looking at alternative possibilities for obtaining supplies of extrusions and other raw materials and will keep you informed on the outcome of our enquiries.

In respect to your assertion that Council has paid us all moneys due, we reject that assertion. As you are aware, we are currently pursuing a legal claim against the Council in the Supreme Court in the Commercial List concerning the determination and Council's obligation to pay us.

Furthermore, you are well aware that there were retention moneys and moneys held in trust and that the allegations by you concerning the non-supply of various extrusions has proved to be false and you admitted this (see your letter of 19 February 2000). There are therefore very significant and substantial moneys due to Goldspar by the Council.’

93                  On 2 March 2000 Rawson-Harris forwarded to the General Manager of the Council Goldspar’s responses to the two notice to show cause letters, that response being dated 1 March 2000 and being in the following terms:

‘RESPONSE TO TWO ‘NOTICE TO SHOW CAUSE’ LETTERS BOTH
DATED 23 FEBRUARY 2000 UNDER CLAUSE 25 OF THE GENERAL

CONDITIONS OF CONTRACT

 

In respect to the two ‘Notice to Show Cause’ letters referred to above, one in respect to 146 poles and one in respect to 154 poles Goldspar Australia Pty Limited (“Goldspar”) responds:-

1.         Goldspar denies that the Council of the City of Sydney (“the Council”) has any entitlement to serve upon Goldspar either of the Notice to Show Cause, as served or at all.

2.         Notwithstanding paragraph 1 and without conceding that the Notices to Show Cause has any validity whatsoever Goldspar says that it has properly and legitimately sought from the Council through its superintendent an extension of time and that extension of time has been wrongfully refused by the Superintendent and therefore by the Council.

3.         Under the terms of the Contract alleged by the Council (which Contract is not by Goldspar admitted). Goldspar is entitled to an extension of time and the Council is not entitled to refuse that extension of time. Goldspar relies upon the matters set forth in its letters of 2 December 1999 and 21 December 1999 to the Council's superintendent.

4.         The Council's failure to act reasonably in granting the extension of time and refusing that extension of time as sought by Goldspar in its letter of 2 December 1999 and 21 December 1999.

5.         The Council, by improperly purchasing 70 lengths of aluminium pole extrusions, subject of a prior order by Goldspar on Capral Aluminium, knew or ought to have known that by so doing it detrimentally effected Goldspar's ability to provide early deliveries of poles. Goldspar had ordered these extrusions which are normally subject to otherwise long delivery lead times, as part of its preparation for the timely manufacture of poles. Goldspar arranged for the extrusions to be held by Capral until Goldspar received a proper order from Council and the pole manufacture could commence.

6.         Apart from the issues above, at all material times the Council knew or ought to have known, the production rate offered to Council was based on delivering 300 poles per year, a weekly production rate of six. Even had Goldspar received a proper order on 8 November 1999, allowing for a 12-13 week lead time to commencement of delivery as nominated in the alleged contract document, plus allowing for the Christmas shutdown for maintenance of the extrusion plant, the total number which might have been delivered by the date of Council's Notice to Show cause dated 23 February 2000 would have been zero. In November 1998 the Council agreed to provide to Goldspar an order and production schedule to enable the orderly delivery of Council's requirement which Council did not do. Goldspar has on numerous occasions since November 1998 requested that schedule and order. Council's recent purported order was dated 8^th November 1999, and was not clarified until 14 December 1999, some 12 months after the Goldspar request for an order and schedule. By

a):        by failing to provide an order and production schedule and

b):        delaying the provision of a proper order, Council has itself detrimentally affected Goldspar's ability to deliver the annual quantity within the 12 month cycle of procurement.

The Council has ignored Goldspar’s requests.

7.         In respect to paragraph (b) of the Council's Notice to Show Cause, Goldspar says that it has acted at all times with due expedition and without delay.

8.         In respect to paragraph (c) Goldspar says that it has not committed a substantial breach of any alleged contract with the Council and that the Council is not entitled to issue a Notice to Show Cause on Goldspar under any alleged contract or otherwise.

9.         In respect to paragraph (d) Goldspar does not acknowledge and denies that the order placed by the Council's superintendent as referred to in paragraph (d) was a proper order, that Goldspar had any obligation to accept that order, that Goldspar had any obligation to manufacture or do anything in respect to that alleged order. Furthermore, Goldspar says that the alleged order was not an order at all in that it was uncertain, did not properly identify the poles, accessories or variations to poles and was therefore in any event not capable of acceptance.

10.       In respect to paragraph (e) of the Notices to Show Cause Goldspar relies upon its entitlement to an extension of time and says that the Council is in breach of its contractual obligations in refusing to grant an extension of time to Goldspar.

11.       In respect to paragraph (f) of the Notices to Show Cause Goldspar denies that it has committed substantial breaches as alleged by the Council or at all.

12.       In respect to paragraph (f) of the Notices to Show Cause Goldspar denies that the alleged Notices are a notice given under clause 25 of the alleged General Conditions of Contract and says that the Council is not entitled to give any such notices and does not admit that Clause 25 of the General Conditions of Contract as alleged have any binding affect either at law or otherwise.’

94                  The Council acknowledged receipt of the response to the notices to show cause on 3 March 2000 and indicated that the Council was currently considering that response.  Council said it would inform Goldspar shortly of the action it proposed to take. 

95                  Khreich responded to Rawson-Harris’ letter of 28 February 2000 by letter of 7 March 2000 in the following terms:

‘RE: Your letter dated 28 February 2000

We acknowledge receipt of your letter dated 28 February 2000.

Your letter inaccurately refers to a without prejudice offer made in a without prejudice meeting by the Lord Mayor regarding future payment mechanisms. For the record we wish to remind you that Goldspar formally rejected the offer and as such, reference to that offer are without basis.

Until receipt of your letter, Council did not know that many suppliers we requesting up front payments with respect to the current orders or that you were seeking alternative suppliers for extrusions and other raw materials. You will recall that Council has been requesting Goldspar to provide programming and progress status information for some time and that Goldspar has refused all such requests to date.

In regard to the other statements made in your letter, Council has previously replied to these issues. Your letter does not provide additional information but merely repeats the same issues. Council refutes the various allegations made in your letter.’

96                  Goldspar’s response to that letter was dated 9 March 2000 and was as follows:

‘RE: MULTIFUNCTION POLE – EXTENSION OF TIME

We are in receipt of your letter of 7 March 2000. We respond as follows:-

1.         We confirm that the meeting with the Council was on a without prejudice basis, but our understanding is that the offer made by the Lord Mayor to pay on a COD basis was an open offer. We note however that this offer has now been withdrawn by you.

2.         We notified you promptly upon being advised by our suppliers that they were requesting upfront payments. The fact that you did not know previously is neither here nor there. We notified you promptly upon being advised by our suppliers that this was the case.

In any event, there have been earlier occasions when we had advised you of instances where suppliers had required payments to be made upfront. We suggest you have a careful look at previous correspondence.

3.         In respect to your comment “Council has been requesting Goldspar to provide programming and progress status information for some time and that Goldspar has refused all such requests to date”, you are incorrect. The correct position is:-

(a)        Goldspar has been asking Council to provide it with a proper schedule and programming since November 1998. Council has promised to provide Goldspar (see November 1998 correspondence and meetings) with a schedule and a program for orders.

(b)        Council has, notwithstanding numerous requests from Goldspar, failed to provide this schedule and programming (see our letter to Council of August 1999 in which this was drawn to your attention and to which we have never received a response).

(c)        Goldspar is not in a position to do Council's scheduling and programming for it. It is up to the Council to do this.

(d)        We place on record that notwithstanding numerous requests for orders from Council, no attempt was made even to place a proper order until November 1999 when Council would have known, with the intervention of the Christmas period, it would be extremely difficult to organise suppliers.

(e)        Many of our suppliers are aware of the refusal by Council to pay Goldspar what the Council owes to Goldspar in respect to these poles. For this reason, Goldspar is having difficulty with its suppliers of raw materials in being able to obtain these supplies on normal business terms.

(f)        Goldspar is using all reasonable commercial endeavours to obtain raw materials, but is not in a financial position to be able to pay for these upfront in a context where it is very uncertain as to whether or not the Council will meet its contractual obligations to pay Goldspar.

4.         We invite Council to consider putting forward to us what arrangements it is prepared to make to ensure that Goldspar will be paid for any poles that it provides to Council. In this way, it may assist Goldspar in being able to convince suppliers to provide raw materials on normal commercial terms.

We look forward to hearing from you.’

97                  On 10 March 2000 the Council forwarded to Goldspar a notice of termination bearing that date in the following terms:

‘NOTICE OF TERMINATION OF CONTRACT

 

To:      Goldspar Australia Pty Limited (ACN 002 705 991)

2/81 Bassett Street,

Mona Vale, NSW, 2103

 

Contract between the Council of the City of Sydney and Goldspar Australia Pty Ltd for the Supply of Smart Poles (“the Contract”)

Take Notice that as Goldspar Australia Pty Limited (“Goldspar”) has by its response dated 1 March 2000 failed to show reasonable cause by the time required by the Council of the City of Sydney's (“Council”) Notice to Show Cause dated 23 February 2000 (arising from Council's order dated 8 November 1999) Council hereby terminates the Contract in accordance with Clause 25(4)(b) of the Contract.

Further and without prejudice to the preceding paragraph, take Notice that as Goldspar Australia Pty Limited (“Goldspar”) has by its response dated 1 March 2000 failed to show reasonable cause by the time required by the Council of the City of Sydney's (“Council”) Notice to Show Cause dated 23 February 2000 (arising from Council's order dated 30 November 1999) Council hereby terminates the Contract in accordance with Clause 25(4)(b) of the Contract.

Further and without prejudice to the preceding paragraphs Goldspar by it's conduct, acts and omissions since at least 19 October 1999 including it's failure to deliver any Smart Poles to Council pursuant to orders dated 8 November 1999 (Order No 1) and 30 November 1999 (Order No 2) has manifested an intention not to be bound by the Contract and has thus repudiated the Contract. Council hereby accepts Goldspar's repudiation and hereby terminates the Contract.’

98                  Goldspar responded by a notice dated 22 March 2000 in the following terms:

‘TERMINATION OF CONTRACT

 

WHEREAS the Council of the City of Sydney (“the Council”) has unlawfully, wrongfully and without proper cause purported to terminate the Contract between the Council and Goldspar Australia Pty Limited (“Goldspar”) for the supply of Multi-Function street poles (“the Contract”)and such purported termination amounts to a wrongful repudiation of the Contract THEREFORE Goldspar relies upon the Council's wrongful repudiation of the Contract and hereby terminates the Contract with the Council.’

99                  On 16 April 2000 Khreich responded to Goldspar’s letter of 9 March 2000 concerning an extension of time in the following terms:

‘RE: Your Letter Dated 09/03/2000 – Extension of Time

We refer to your fax dated 09/03/2000 regarding extension of time. We appreciate some time has elapsed and that the Council has terminated your contract since your letter. However, for the record and despite having previously responded to the various issues you raise, we feel it is necessary to correct a number of inaccurate allegations that you have made in this fax, as follows (using your paragraph numbers):

1.         Our letter of the 7^th March 2000 does not withdraw any offer made by the Lord Mayor. There was no offer on the table at the time referred to which could have been withdrawn. Goldspar formally rejected the Lord Mayor's offer, we refer you to your correspondence of the 21^st December 1999, paragraph 4.

2.         We are aware of instances in 1998 when your suppliers requested upfront payments. However we were not aware that this was an issue in year 2000 until your fax of the 28^th February 2000. You will recall that we requested you on several occasions to communicate to us the status of your and your suppliers progress and that you had refused to do so.

3.         The fact is that we had repeatedly requested (in writing) that you provide programmes in accordance with your contract obligations and that while on one occasion you promised to do so, Goldspar never provided such programmes. We do not understand how you can say that this position is “incorrect”.

In answer to items 3(a)-(f) of your letter we respond as follows:

(a)        Our records do not indicate that any such promises were made.

(b)        Council has provided Goldspar with schedules in accordance with the requirements of the Contract

(c)        Goldspar was requested to provide programmes of its own production activities in accordance with the requirements of the Contract, and failed to do so.

(d)        Again you are misrepresenting the correct position. Council provided an order on the l9^th October 1999. To satisfy Goldspar's concerns about the content of the order, Council then re-issued the order on 8 November 1999. Goldspar accordingly knew back in October of Council's requirement for further poles.

(e)        Council has paid Goldspar in accordance with the contract and as determined by Mr Morrissey.

(f)        Goldspar was requested on a number of occasions to provide evidence of progress status and refused to do so. Council has always met its obligations under this Contract and on a number of occasions exceeded such obligations by assisting Goldspar with its cashflow ahead of actual progress.

4.         This question need not be addressed given the termination of the contract.’

100               Goldspar’s response to that letter was dated 17 April 2000 and was as follows:

‘SUBJECT: Your letter 16^th April, 2000.

Your letter contains errors regarding correspondence and discussions held.

1.         The letter of December 21 1999 clearly refers to dollar values not payment terms.

2.         Capral Aluminium Ltd has required a Bank Guarantee from Goldspar against the orders placed for the upper extrusion to suit the Multi-Function Street Pole. Council has been well aware of this. Other sub-contractors to Goldspar Australia Pty Ltd have since requested up front payments as they are aware of the difficult situation that has developed between Council and Goldspar.

3.         There is no obligation in the Contract for Goldspar to provide the requested programmes. The obligation has always been upon Council to provide Goldspar with a dear and unambiguous schedule from which it can order components to manufacture poles.

Responses to Item 3 (a) – (f) are as follows;

a).        The discussions took place between Mr. Barnes of Goldspar and Mr. Wayne Burns of Council. Goldspar's records do however, show our comments to be correct.

b).        Council never provided a schedule. The schedule you claim to have supplied on October 19 1999 contained at least 150 errors.

c).        Goldspar was under no obligation to provide Council with production schedules.

d).        See b/ above. The purported order of October 19 1999 was never sufficient for Goldspar to act.

e).        You are incorrect and this will be clearly established at the court hearing. Council has fallen approximately $1.4 million short of the monies determined by Mr. Morrisey, should be paid to Goldspar.

f).        With respect, you are incorrect.

i).         Council unilaterally attempted to change the schedules from 6 poles per week to 6 poles per day

ii).        Refused to pay for accessories

iii).       Refused to pay for erection of poles

iv).       Refused to pay as per agreed schedule of rates

v).        Refused to pay for variations

vi).       Failed to use Goldspar exclusively when this was a condition that induced Goldspar to contract with the Council in the first place.

vii).      The poles delivered after the Determination have not been paid for. Why not?

viii).     Monies supposedly held in trust against undelivered parts has not been returned despite the parts being delivered. Why not?’

101               It is relevant to trace the dealings between Goldspar and Capral from 10 June 1999.  On that day, Barnes had a conversation with Garth Lindsay (Lindsay) of Capral in relation to extrusions which were on hand.  Barnes’ evidence was that Lindsay rang him and said:

‘Tony, we are getting ready for stock take, we’ve still got some extrusion for the Sydney job out here and I need to get an order to cover it, otherwise at the end of June it will be scrapped.’

Barnes replied:

‘Garth, can you forward me details of what’s there and I will issue an order straight away.’

On that day an order was faxed from Goldspar to Capral for 70 lengths of pole extrusion.

102               Barnes’ evidence is that his next conversation concerning extrusions was with Greg Phillips (Phillips) of Capral in mid-October 1999.  Barnes rang Phillips and said:

‘Greg, we have just received another order, I am going to need those 70 extrusions.’

Phillips said to him:

‘I will find out where they are and let you know.’

Later on the same day Phillips rang Barnes and said:

‘Shit, Barnesie I can’t find it, I think it’s been scrapped.’

Barnes said:

‘You’re kidding.’

Phillips said:

‘I will try and find out more about it and I will get back to you.’

A couple of days later, Phillips called him back and said:

‘I can’t understand how but somehow it has been given to Sydney Council, I am trying to get to the bottom of it, I will call you when I know more.’

Barnes said:

‘Yes, thanks for the good news.’

103               It was put to Barnes and to Rawson-Harris that they had appreciated from the terms of Addendum No 6 to Tender 9912 of 9 July 1999 that the extrusions in question had been made available to the Council.  Each denied that and I accept those denials.

104               On 21 October 1999 Rawson-Harris made a diary entry which included:

‘… spoke to Greg Phillips of Capral.  He said we should be injuncting Council as he said they are doing something.  He also said he could arrange metal before Christmas if required.  I said we could only do this if we can make sure we get paid.’

105               Mark Glynn of Capral made the following note for file on 21 October 1999:

‘4.00pm spoke to Doug Harris who advised as follows:

He was concerned that the City of Sydney was or intended to use intellectual property (dies) that belonged to Goldspar and related to the Smartpole,

He is concerned that City of Sydney will use or will attempt to copy the Goldspar tooling,

Goldspar claim to be the owner of the drawings and want Goodcard Pty Ltd to be noted as the owner of the drawings,

Goldspar advise that there is still 100t to come off this tooling.  Additional 147 poles will shortly be ordered.  Orders not currently with Capral,

Harris advised that he be in the process of sending to us a letter advising of this situation and confirming his instructions.  Letter to be faxed in tomorrow 22 October 1999.

Harris confirmed that metal previously sold by Capral to City of Sydney, which was subject to a meeting involving Nada Sekulich, Capral Corporate Counsel and Andrew Cooper, previous Regional Manager, was no longer an issue.  This point was clarified by MCG because it had been the subject of discussion last week involving Greg Phillips and Nada which resulted in a call being made to Andrew Cooper.

Action:  Capral to await fax from Harris.

MCG confirmed with Garth that there are no orders currently on the Goldspar die with either of Distribution or Extrusion divisions.’

Rawson-Harris had little recollection of the detail of that conversation, although he did recall speaking with Glynn.

106               This was followed by a letter of 26 October 1999 from Goldspar to Capral setting out in some detail Goldspar’s contentions in relation to the unauthorised sale of extrusions to the Sydney City Council and claiming the exclusive right to use of the die in question.  Certain undertakings were sought.  Rawson-Harris said that the letter was drafted by the lawyers and that certainly appears to be so.  There was considerable cross-examination of both Rawson-Harris and Barnes as to the statement in the letter that pole extrusions were produced pursuant to Goldspar’s order and were held for Goldspar.  That cross-examination was at most relevant to credit and, in my view, was of marginal impact.  The extrusions were undoubtedly made using the die in question and must have been responsive to initiatives from Goldspar, although whether they were produced in relation to actual orders may be another matter.  There is no suggestion that they were produced in response to an order from anybody else.

107               On 30 October 1999 Rawson-Harris spoke to Greg Morrison (Morrison) of Universal Anodisers Pty Ltd which was then the only anodiser in Australia with capacity to anodise in any quantity upper pole extrusions in excess of 6.5 metres.  In the course of the conversation, Rawson-Harris said:

‘I was just wondering how your lead times are going.  How do you think you’ll be in the New Year?’

Morrison replied:

‘It will be about four weeks.’

108               On 8 November 1999 Rawson-Harris sent a fax to Garth Lindsay of Capral concerning extrusions as follows:

‘Please indicate lead time for delivery of 146 sections of E3104 in the following lengths.’

(Various lengths for various types of extrusion were set out.)

109               The reply was that for any order placed before 5.00 pm on Friday 19 November 1999 delivery would be at the end of the second week of February 2000.

110               On 23 November 1999 Barnes forwarded a fax to Lindsay of Capral attaching Order 30/61 and asking for confirmation of the delivery dates so that time could be booked with the anodisers and the rest of the manufacturing process programmed.  The order was for 147 extrusions.  The response of the same date was as follows:

‘We are in receipt of your order 30/61 dated 23/11/99 for section E3104.

In order for us to secure capacity on the mill, we require 50% deposit with the placement of this order.

With the deposit of these funds into our account or a bank guarantee in place this week, we would expect delivery of mill finish metal into our store approximately the first week of February 2000.

Please confirm this week which way you wish to go with regard to the placement of funds.’

111               Barnes replied on 24 November 1999 as follows:

‘I am in receipt of Greg Phillips letter of yesterday (copy attached) confirming receipt of our order #30/61 for 147 lengths of extrusion from die E3104.

Goldspar are pleased to send Capral a 50% deposit however we need to have details of how much this will be.

Please send me a pro-forma invoice and I will have a cheque couriered to you within 24 hours.

If you have any further questions please do not hesitate to contact me.’

112               On 2 December 1999 Barnes rang Lindsay and said:

‘What’s the current delivery schedule on the Sydney extrusions?’

Lindsay replied:

‘20 February’.

113               On 2 December 1999 Capral wrote to Goldspar as follows:

‘Further to my correspondence dated 23/11/99, please be advised the following amounts are required deposited into our account for the processing of the above-mentioned order.

Deposit required $30,000.00

Deposited with Capral prior to 16/12/99

The order will not proceed without this amount deposited by the required date.

Should you have any other queries please do not hesitate to contact the undersigned.’

114               By letter of 21 December 1999 Capral advised Goldspar as follows:

‘Further to your placement of the above-mentioned order, we wish to inform you that the delivery will be in the vicinity of February 21^st.

The reason for the extended delay is due to the mill running behind schedule from the end of year sales rush.  If there are die and extruding problems with this section, the delivery date could run out even further.

If you have any queries re this order, please do not hesitate to contact the undersigned’

115               On 24 December 1999 Goldspar deposited $30 000 to the credit of the account of Capral and forwarded a fax with a copy of the deposit slip attached to the facsimile referring to the order sent on 23 November 1999.

116               On 25 January 2000 Rawson-Harris sent the following fax to Lindsay of Capral:

‘We note you have said you have Multi-function street pole upper extrusions available now (29 off) this is well ahead of your E.D.D. – please hold as we have programmed this for manufacture 20–25^th Feb at earliest as per “your” E.D.D. time.

This material has to be delivered direct to Universal so we need to check with Greg exactly when he can anodise these.

We will let you know!’

Rawson-Harris said that when he received the information about the availability of extrusions he rang all the suppliers to try to accelerate the position.  He claimed the result was that he could not marry the steel with the aluminium and the anodising until 1 April 2000.  There is no reason to doubt that evidence.

117               On 1 February 2000 Glynn sent the following fax to Rawson-Harris:

‘Happy New Year.  I called to day but you are out of the office.

To avoid any confusion, I have attached a schedule showing the status of your order number 30/61 and also details of the allocation of the $30,000 deposit we hold and details of further payments required to complete order.

Could you please review and if you have any queries please call me or Garth Lindsay who you have been talking to.’

The schedule was as follows:

‘Goldspar Australia

Goldspar Order No. 30/61

Status of S/O 101774300 including details of allocation of $30,000 deposit held and payments required to complete production and delivery of order.

Length	Extruded	Extruded	50% payment made before production	Order in system	Extrusion date
1) 9.47	28 lengths @ $779.03	$21,812	$10,906	Nil
2) 7.07	50 lengths @ $581.58	$29,079	$14,540	$29,079	Approx 24 Feb 2000
3) 2.27		Nil	$930	$1,860	Approx 4 Feb 2000
			$26,376
	Deposit held		$30,000
	Balance of deposit		$3,624

1)         Remaining 50% payment required before delivery

2)         Remaining 50% payment required before delivery of 50 lengths already extruded. 50% payment required before remaining 50% is extruded.

3)         Remaining 50% payment required before delivery.’

118               On 6 March 2000 Steve Davis (Davis) of Capral faxed Barnes as follows:

‘I am replying on behalf of Garth to your conversation this morning.  Your order no 31/17 in the following quantities is available as follows

60 x pieces of 219mm x 4.47mm round tube in alloy 6082 T4 in 8.00 meter lengths the cost = $436.32 per length

Deposit required = $13089.60

60 x pieces of 150mm x 3.00mm round tube in alloy 6082 T4 in 6.00 meter lengths.

Cost = $151.51 per length

Deposit required = $4545.31

Current lead time on press is week ending 5/5/00

Please note re your order 30/61 that balance of P3104 in 7.07 meter lengths (50 off) has not yet been ordered. See schedule attached from 1^st Feb 00.’

119               The schedule is as follows:

‘Goldspar Australia

Goldspar Order No. 30/61

Status of S/O 101774300 including details of allocation of $30,000 deposit held and payments required to complete production and delivery of order.

Length	Extruded	Extruded	50% payment made before production	Order in system	Extrusion date
1) 9.47	28 lengths @ $779.03	$21,812	$10,906	Nil
2) 7.07	50 lengths @ $581.58	$29,079	$14,540	$29,079	Approx 24 Feb 2000
3) 2.27		Nil	$930	$1,860	Approx 4 Feb 2000
			$26,376
	Deposit held		$30,000
	Balance of deposit		$3,624

1)         Remaining 50% payment required before delivery

2)         Remaining 50% payment required before delivery of 50 lengths already extruded. 50% payment required before remaining 50% is extruded.

3)         Remaining 50% payment required before delivery.’

120               On 17 March 2000 Goldspar faxed Lindsay of Capral as follows:

‘As you have been verbally advised, The Council for the City of Sydney has chosen to terminate its contract with Goldspar for the supply of Multi-function Street Poles.

Due to this action by Council I must now request that as of 10.00am today, we suspend the extruding of any more aluminium sections from die E3104 (the MFSP extrusion) until further advised by either me or Doug Rawson-Harris.

If you have any further questions please do not hesitate to contact me.’

121               On 11 April 2000 Capral advised Rawson-Harris that 50 per cent of Order 30/61 was held on the floor and the balance had been extruded and was held at the Extrusion Division.  Negotiations continued thereafter between Capral and Goldspar which it is unnecessary to recite for present purposes.

Provisions of contract

122               With that factual background in mind it is necessary to consider the provisions of the contract more closely.  As with many contracts of its type, its construction is complicated because it is made up of various documents not always neatly dovetailing together.  This contract is further complicated because a non-conforming tender was accepted and because there were addenda to the tender documents issued from time to time.  Another difficulty is that the General Conditions of Contract have all the hallmarks of being a standard form document.

123               So far as poles are concerned the basis of the tender was in two parts – the George Street project and future CBD projects.  The George Street project was for 130 Type A poles or column arrangements, 30 Type B, 10 Type C and 10 Type D.  One basis was supply (to a nominated site within the CBD) with footings and installations by others, and the other was supply and install (to a project site within CBD) of the column arrangement with footings by others.  So far as future CBD projects were concerned (that is from 1 July 1998 onwards) the basis was:

‘The City of Sydney are committed to take minimum delivery of 300 column arrangements for each year, over subsequent three year period.

Provide unit rates for the following equipment manufacture and supply to site.’

There followed a list of equipment including Type A, Type B, Type C and Type D column arrangements and various pieces of ancillary equipment. 

124               The alternative basis was:

‘Provide unit rates for the following equipment manufacture, supply and installation to site.’ 

The last item was:

‘15.      Installation of concrete footing and ragbolt assembly as detailed and approved by Tenderers Structural engineer.’

125               I have referred earlier to the Manual outlining the methods of delivery.  That was part of the contract.

126               Much argument turned upon cl 17 of the General Conditions of Contract dealing with delivery.  Clause 17.1 was as follows:

‘17.1    Time and Mode of Delivery and Liquidated Damages

Not less than 14 days before the Date for Delivery, the Supplier shall notify the Council in writing that the Product is ready to be delivered. The Council shall immediately nominate a place for delivery and provide the Supplier with a Program for Delivery setting out Sub Dates for Delivery of specified quantities of the Product. If installation of the Product is required under the Supply Contract, the Council shall also nominate details of the Site and the Superintendent.

Where a Program for Delivery requires the Supplier to withhold delivery of the Product beyond the Date for Delivery, the Supplier shall be entitled to reimbursement for any costs for storage of the Product incurred at the rate specified in the Schedule of Rates.

If the Supplier fails to deliver any of the quantities of the Product by the relevant Sub Dates for Delivery specified in the Program for Delivery, the Supplier shall pay the Council by way of liquidated damages the amount calculated in accordance with this clause for every day after but not including the relevant Sub Dates for Delivery which the specified quantity of the Product is not delivered in accordance with the Program for Delivery until that specified quantity of the Product is so delivered.

Liquidated damages under this clause will be calculated as the amount per day for each type of the Product set out in the Annexure multiplied by the quantity of the Product to be delivered in accordance with this clause.’

127               Clause 17.3 was as follows:

‘17.3    Staged Delivery

The Council may direct the Supplier to supply a Stage of the Product in the quantities and on the Dates for Staged Delivery set out in the Annexure.

The Supplier acknowledges and agrees that the Council may by not less than 4 weeks written notice to the Supplier alter the quantities of a Stage of the Product or the Dates for Staged Delivery set out in the Annexure. If a date or dates for delivery of a stage have not been included in the Annexure but the quantities of a Stage of the Product have been included, the Council may, by not less than 4 weeks written notice to the Supplier, nominate a date or dates to become the Dates for Staged Delivery of a Stage of the Product in accordance with this clause.

Where the details of the quantities of a Stage of the Product and the Dates for Delivery for Staged Product have not been provided in the Annexure the Council may nominate, by not less than 12 weeks written notice to the Supplier, the quantities of a Stage of the Product^-and one or more Dates for Staged Delivery of a Stage of the Product and that, in the event of such notice being given by the Council, the Supplier shall comply with clause 17.1 in respect of delivery of the Stage of the Product by one or more of the Dates for Staged Delivery. The Supplier shall thereafter deliver the balance of the Product to be supplied under this Supply Contract in accordance with clause 17.1, subject to the Council's right to issue a further notice specifying further quantities and Dates for Staged Delivery of a Stage of the Product in accordance with this clause.

Where the Council directs the Supplier to supply a Stage of the Product on the Dates for Staged Delivery set out in the Annexure, or a Stage of the Product on the Dates for Staged Delivery determined in accordance with paragraphs 2 or 3 of this clause, the following references in this Supply Contract shall be read in the following manner:

-      “Product” shall be read as “Product or Stage of the Product”.

-      “Date for Delivery” shall be read as “Date for Delivery or Dates for Staged Delivery”.

-      “Sub Dates for Delivery” shall be read as “Sub Dates for Delivery or Sub Dates for Staged Delivery”.

The Supplier shall deliver the Stage of the Product on the Dates for Staged Delivery set out in the Annexure, or on the Dates for Staged Delivery determined in accordance with paragraphs 2 or 3 of this clause, in the manner set out in clause 17.1. The Council shall also be entitled to deduct liquidated damages of the amount per day set out in the Annexure multiplied by the quantity of the Stage of the Product to be supplied on the Dates for Staged Delivery for every day after but not including the day which is not less than 14 days prior to the Dates for Staged Delivery until the date when notice in writing that the Stage of the Product to be supplied on the Dates for Staged Delivery is ready to be delivered is given by the Supplier to the Council.’

128               ‘Date for Delivery’ means:

‘(a)       where the Annexure provides a date for Delivery, the date;

(b)       where the Annexure provides a period of time for Delivery, the last day of the period;

but if an extension of time for Delivery is granted under Clause 18, it means the date resulting from the extension of time.’

‘Product’ means:

‘the goods to be supplied by the Supplier under the Supply Contract which are to be handed over to the Council or a person designated by the purchaser’.

‘Program for Delivery’ means:

‘a program issued by the Council setting out the dates and times for delivery of specific numbers of the Product to the Place for Delivery stated in the Annexure’.

‘Sub Dates for Delivery’ means:

‘the dates for delivery of specified quantities of the product set out in a Program for Delivery provided by the Council to the Supplier under clause 17.1’.

‘Site’ means:

‘the place where the Product is to be installed, if installation is required by the Supply Contract’.

‘Stage of the Product’ means:

‘quantities of the Product set out in the Annexure, or determined in accordance with clause 17.3 that are to be delivered by the Dates for Staged Delivery’. 

‘Dates for Staged Delivery’ means:

‘the dates set out in the Annexure’.

129               In the Annexure, beside the words ‘Date for Delivery: (Clause 17)’ are the words ‘See Dates for Staged Delivery’.  The amended Annexure, under the heading ‘Stage of the Product (Clause 17.3)’ includes (so far as is relevant) the following:

‘Stage Two          Future CBD Projects

Pole Type	Minimum Quantity per financial year –  starting July 1998 for 3 years
A	100
B	100
C	60
D	40’

130               A related clause is cl 13 ‘Progress and Suspension’, the relevant parts of which were as follows:

‘13.1    Rate of Progress

The Supplier shall proceed with the work under the Supply Contract with due expedition and without delay.

The Supplier shall not suspend the progress of the whole or any part of the work under the Supply Contract, except where the suspension is under Clause 25 or is directed or approved by the Council under Clause 13.

The Supplier shall give the Council reasonable advance notice of any information documents or instructions required by the Supplier.

The Council shall not be obliged to furnish information, documents or instructions earlier than the Council should reasonably have anticipated at the Date of Acceptance of Tender.

13.2     Contract Program

For the purposes of Clause 13 a'contract program' is a statement in writing showing the dates by which or the times within which the various stages or parts of the work under the Supply Contract are to be executed or completed.

A contract program shall not affect rights or obligations in Clause 13.1.

The Supplier will furnish to the Council a manufacturing program, including details of manufacture of the Production Sample in a form approved by the Council.

The Supplier shall not, without reasonable cause, depart from:

(a)        a contract program included in the Supply Contract; or

(b)        a contract program furnished to the Council.

The furnishing of a contract program or of a further contract program shall not relieve the Supplier of any obligations under the Supply Contract including the obligation to not, without reasonable cause, depart from an earlier contract program.’

131               Clause 16 deals with variations.  Clause 16.1 is as follows:

‘16.      VARIATIONS

16.1     Variations to the Product

The Supplier shall not vary the work under the Supply Contract except as directed or approved by the Council under Clause 16. The Council may direct the Supplier to alter, add to or omit work under the Supply Contract.

If the Supplier requests the Council to approve a variation, the Council may do so in writing. A direction or approval by the Council of a variation may be conditional. The conditions may include a condition that the Supplier shall not be entitled to any extension of time for delivery or for completion, or extra remuneration in respect of the variation or anything arising out of the variation which would not have arisen, had the variation not been approved.

The Council shall not be obliged to direct or approve a variation to assist the Supplier.

Unless the Council and the Supplier agree upon the price for a variation directed or approved under Clause 16, the variation shall be valued under Clause 16.2. Any Additional Product directed by the Council to be supplied by the Supplier under this Supply Contract will be valued in accordance with clause 16.2.’

Clause 16.2 provides a method of valuation.

132               Clause 18, dealing with extensions of time, was as follows:

‘The Supplier shall take all reasonable steps to prevent and minimise delay.

When it becomes evident to the Supplier that anything, including an act or omission of the Council, the Council's employees, consultants, other suppliers or agents, may delay the work under the Supply Contract, the Supplier shall promptly, on it becoming so evident to the Supplier, notify the Council in writing with details of possible delay to the Date for Delivery and the cause.

The Supplier shall be entitled to an extension of the Date for Delivery for delay provided

(i)        it gives a notice in writing to the Council within 28 days of the date of cessation of the cause of the delay;

(ii)       the notice sets out in detail a statement of the underlying facts and the reasons for the delay and how manufacture of the Product has or will been delayed;

(iii)      the delay is demonstrable against the Contract Program;

(iv)      Council is satisfied that the Supplier has taken all possible measures to avoid or minimise the delay have been taken by the Supplier, including rescheduling, reprogramming and expediting and adjusting the sequence of manufacture of the Product;

(v)     that the only cause of delay recoverable by the Supplier is breach of an express term of this Supply Contract by the Council or a variation instruction under clause 16 1.

The Supplier's notice shall specify the number of days extension of time claimed and shall include details of the delay, the cause and a complete statement of the facts upon which the claim is based.

The Supplier shall not be entitled to an extension of time:

(a)       for any delay occurring more than 28 days prior to the date upon which the Supplier gives notice in writing to the Council of a claim for extension of time; and

(b)       in respect of a delay caused by an event, other than a direction, act or omission of the Council or the employees or agents of the Council, occurring after the Date for Delivery in respect of which the extension is sought.

Notwithstanding that the Supplier is not entitled to an extension of time the Council may at any time before the issue of the Final Payment Certificate by notice in writing to the Supplier extend the Date for Delivery.  *The Council will not unreasonably deny a claim for an extension of time where the event causing the delay is beyond the control of the Supplier.*

If the Supplier has paid or the Council has deducted liquidated damages and the time for delivery is extended, the Council shall forthwith repay to the Supplier any liquidated damages paid or deducted in respect of the period up to and including the Date for Delivery.

A delay by the Council or failure to grant a reasonable extension of time shall not cause the Date for Delivery or the time for delivery of the Product to be set at large.

The Supplier agrees that if the time for Delivery is extended by the Council under Clause 18 on account of a cause of delay, it shall not be entitled to any delay, additional or other costs as a result or arising from such extension of time for Delivery (with the exception of the storage costs referred to in clauses 13.6 and 17.1.)’

*The sentence enclosed by asterisks was a handwritten inclusion.

 

133               The relevant part of cl 25 which deals with default is as follows:

25.1     Preservation of Other Rights

If a party breaches or repudiates the Supply Contract, nothing in Clause 25 shall prejudice the right of the other party to recover damages or exercise any other right.

25.2     Default by the Supplier

If the Supplier commits a substantial breach of contract the Council may give the Supplier a written notice to show cause.

25.3     Requirements of a Notice by the Council to Show Cause

A notice under Clause 25.2 shall:

(a)        state that it is a notice under Clause 25 of the General Conditions of Contract;

(b)        specify the alleged substantial breach;

(c)        require the Supplier to show cause in writing why the Council should not exercise a right referred to in Clause 25.4;

(d)        specify the time and date by which the Supplier must show cause (which time shall not be less than 7 clear days after the notice is given to the Supplier);

(e)        specify the place at which cause must be shown.

25.4     Rights of Council

If by the time specified in a notice under Clause 25.2 the Supplier fails to show reasonable cause why the Council should not exercise a right referred to in Clause 25.4, the Council may by notice in writing to the Supplier:

(a)        take out of the hands of the Supplier the whole or part of the work remaining to be completed; or

(b)        terminate the Supply Contract.

Upon giving a notice under Clause 25.2, the Council may suspend payments to the Supplier until the expiration of the earlier of:

(i)         the date upon which the Supplier shows reasonable cause;

(ii)        the date upon which the Council takes action under Clause 25.4(a) or (b);

(iii)       the date which is 7 days after the last day for showing cause in the notice under Clause 25.2.

If the Council exercises the right under Clause 25.4(a), the Supplier shall not be entitled to any further payment in respect of the work taken out of the hands of the Supplier unless a payment becomes due to the Supplier under Clause 25.6.

…

25.10   Rights of the Council on Termination

If the Supply Contract is terminated under Clause 25.4(b) the rights of the Council shall be the same as they would be at common law if the Supplier had wrongfully repudiated the Supply Contract and the Council had elected to treat the Supply Contract as at an end and recover damages.’

134               Clause 26 is an arbitration clause. 

135               Clause 33, headed ‘Installation of the Product’, included the following:

‘If the Supply Contract requires installation of the Product the following provisions will apply:

The Program for Delivery issued to the Supplier by the Council under clause 17.1 shall set a date for completion of the installation of each quantity of the Product to be delivered by the Sub Dates for Delivery.  When the Supplier delivers the Product to the Site in accordance with the Program for Delivery, it shall install the Product at the direction of the Superintendent in accordance with the Specification.’

136               Part 10 of the Tender was headed ‘Production Program’ and was as follows:

‘PRODUCTION PROGRAM

If required by the Specifications or the Conditions of Tender, each Tenderer shall submit a preliminary Production Program for the carrying out of the work under the Contract.  The program shall contain such information as required by the Specifications.

The Tenderer shall indicate its proposed hours of work and working days.

To produce a completed order once all materials have been delivered to the factory the production time required to produce a sample batch of 2 poles would be 16 weeks from date of order.

Because of the delivery times as stated above the first order would require a time frame of 16 weeks. Time frame on future orders would be reduced to 6 - 8 weeks because all initial tooling and pattern making dies would be in place and completed.

Proposed working hours to complete and fill order to proposed specifications will be 8 AM to 4 PM Monday to Friday as well any overtime necessary to keep up with production schedules’

137               The first part of the General Specification was as follows:

‘1.        GENERAL

This contract is for the manufacture, supply/delivery and warranty of:

MULTI-FUNCTIONAL STREET POLES

for the City of Sydney, with the option of incorporating the installation of the columns as part of the contract.  The column shall include for the supply of all nominated attachments/brackets/accessories as indicated within the documents.’

[emphasis added]

138               The scope of works set out as part of s 2 of the Specification included the following:

‘2.        …

c.         The contract works shall generally comprise but not necessarily be limited to the following:

i.          Manufacture of cast, ribbed, circular hollow base section of column: diameter and length to suit pole type.

ii.         Manufacture of extruded 150mm x 150mm square hollow steel section - lengths to suit pole type.

iii.        Manufacture of ‘Unistrut’ type P3300 channel – lengths to suite pole type.

iv.        Manufacture of 200mm long ‘Bracket’ extrusion section for mounting to ‘Unistrut’ as 1200mm centres on upper part of column.

v.         Manufacture of 1200mm long corner extrusion sections.

vi.        Manufacture of access cover extrusion sections in 1200mm lengths.

vii.       Manufacture of column top cap finish.

viii.      Manufacture of all mounting bracket types.

ix.        Manufacture of all luminaire/banner/traffic light etc outreach arms including attachment brackets and connections.

x.         Manufacture and incorporation into pole base all proposed electrical  equipment mounting bracketsand fixings.

xi.        Assembly of complete lighting column including all screw fixing base plate mounting, welding and accessories to form a complete installation

xii.       Use of corrosion resistant materials, connection joints, screws fixings etc only either individually or the connection between materials with a minimum 10 year corrosion guarantee.

xiii.      Compliance with all Roads and Traffic Authority codes, Standards and design drawings.

xiv.      Compliance with all Energy Australia Codes, Standards and design drawings.

xv.       Compliance with Australian Standards for each material type/condition and use.

xvi.      Finishing of external surfaces, cleaning and delivery to site in nominated locations within the City of Sydney CBD.

xvii.     Testing and commissioning of-manufactured pole with and without accessories/outreach arm mounted.

xviii. Manufactured Technical Drawings and bound Technical Catalogue of parts.

xix.      Provision of two pre-production prototype units including all accessories.

d.         The complete Installation shall conform with the latest Edition of relevant Australian Standards. In the event of new Editions being published during manufacture, the instruction of the Council Representative shall be sought and any modification of change made shall be carried out.

e.         The Supplier shall include for all fixings, boxes, supports, brackets and other items of sundry equipment in order to form complete pole arrangements ie – Type A, B, C, & D.

f.          The works shall consist of the supply and installation of all materials, fixtures, fixings and equipment required to form a complete installation.

g.         All materials, fixings and equipment detailed shall be new before being installed.  Under no circumstances shall any second hand/reclaimed materials be used on any part of the installation, without prior consent in writing of the Council Representative.’

139               Section 9 dealt with installation and was as follows:

‘The installation portion of the contract requires the Supplier to:

1.         Supply and install the street light luminaires to the outreach arms

2.         Supply and install all cabling from the luminaire to RCD/fuses at the base of the pole

3.         Supply and install terminal strip/DIN rail and plate RCD (Residual Circuit Breaker)/fuses including terminations

4.         Installation of pole to site within CBD (to be nominated), position pole and provide concrete footing base with Rag Bolt assembly of a type recommended by an independent structural engineer

The Supplier shall arrange for all necessary incoming underground cabling/conduiting and pay all fees associated/necessary to Energy Australia.

All electrical work shall be installed to AS3000, Energy Australia service rules and be carried out by a Licensed Electrician.

The luminaires shall be equal to GEC Osram – 250w metal halide Optispan Aeroscreen luminaire complete with integral ‘Ultratech Australia’ stop dimming control gear 3 stage 100%, 70%, 40%.

The Supplier shall incorporate, in the design, slotting and other arrangements to achieve perfect horizontal and vertical alignment of the poles, outreach arms, luminaires, etc, having regard to the likely tolerances in the installation of the footings and rag bolt assemblies.’

Validity of TERMINATION BY tHE COUNCIL?

140               The notice of termination relied upon three separate bases—the first was failure to show reasonable cause as required by the notice to show cause dated 23 February 2000 (the first show cause notice) (arising from the Council’s Order No 1); the second was failure to show reasonable cause pursuant to another notice dated 23 February 2000 (the second show cause notice) (arising from the Council’s Order No 2) (in each case relying upon cl 25(4)(b) of the contract); and the third was Goldspar since 19 October 1999 manifesting an intention not to be bound by the contract and thus having repudiated it.

Substantial breach

141               A condition precedent to the right to give a written notice to show cause pursuant to cl 25 is that the supplier shall have committed a substantial breach of contract.  The first substantial breach alleged in each notice to show cause was failure to deliver the poles ordered under Order No 1 on or by 21 February 2000 and Order No 2 on or by 22 February 2000.  Reference was also made to cl 13 as to progress.  Goldspar disputes that that was any substantial breach of the contract. 

Express terms

142               The Council’s position substantially depends upon the application of cl 17.3 of the General Conditions of Contract.  Clause 17 illustrates the difficulty of applying standard general conditions to this arrangement.  The Annexure identified stage 2 as ‘future CBD projects’.  No delivery dates were stated, rather, a minimum quantity of four types of poles per financial year was stated starting in July 1998 for three years.  It was submitted for the Council that the effect of this was that, absent any other notification, the contractual obligation binding upon Goldspar was to deliver the minimum quantity of each type of pole by the end of each financial year with the last day of the financial year being the Date for Delivery for the purposes, inter alia, of cl 17.1 and cl 17.3.  There are great difficulties with this construction of the contract.  It will be recalled that there was an option for the contract to be a supply and install contract.  The first of the three financial years of stage 2 was such a contract.  The bare requirements of the Schedule together with cl 17 plainly could not operate in relation to such a contract.  Precise and timely advance notice would be required of the place of installation of each pole of each type, together with precise details of the accessories to be included.  That, of course, is what happened for the year expiring on 30 June 1999, leaving aside the question as to whether there was any under-ordering.  The Specifications provided for the seven poles in March 1999 are a good example of what was required.

143               It is not at all clear at whose option the contract would include installation.  Whatever be the correct answer to that question, it is submitted for Goldspar that, once the election was made, that option had been exercised and could not be exercised again.  It is submitted for the Council that the option could be exercised from time to time as the Council saw fit in relation to any pole or group of poles.

144               In my opinion, the construction contended for by Goldspar is to be preferred.  Both the language of the contract and the commercial context favour that construction.  The conclusion that it would be open to one party to switch at will between one alternative and the other, pole by pole or group of poles by group of poles, is not sensibly open.  Clause 17 needs to be construed against that background.

145               Goldspar’s claim that the contract was for supply and installation is referred to in the notes of the meeting of 29 September 1999 kept by Greenhill.  That was the first substantive discussion of the requirements for the then current year.  Nonetheless, the first purported order of 19 October 1999 referred to the rates being listed in the Schedule of Prices Part 2(D) that related to supply only.  That discrepancy was pointed out in Goldspar’s letter of 26 October 1999.  Nonetheless, the same statement is made in the critical Order No 1 of 8 November 1999.  Goldspar again pointed out the discrepancy in its communication of 17 November 1999.  Order No 2 for 154 poles was silent on the point.  The supply was to be for ‘154 Type B poles in accordance with the Contract’ – although delivered to Energy Australia depot rather than being installed.  Khreich’s letter of 17 November 1999 purported to confirm that the order of 8 November 1999 was based upon Schedule of Prices Part 2(D). 

146               It is worth repeating the relevant portion of one of the communications from Goldspar to Khreich of 30 November 1999:

‘We have pointed out to you on several occasions that Schedule 2D is a Schedule that relates purely to the supply of poles in an unassembled state. Our understanding of Council's requirements is that you require the poles in a supply and assembled basis. Are you saying to us that you now do not require us to assemble the poles prior to delivery? Please advise us by return as to what Council's requirements are in this regard. If you require them on an assembled basis, then we draw to your attention that the correct Schedule is Schedule 2E (excluding erection). We also point out that as Council is contractually obligated to order on an assembled, supply and erection basis, Goldspar will be claiming all profit that it would achieve on such a basis irrespective of whether or not Council orders on that basis.’

147               Any ambiguity in relation to Order No 2 in respect of the basis for delivery was clarified by Khreich’s letter of 15 December 1999 in which it was made clear that that order was also required to be fulfilled in accordance with the Schedule of Prices Part 2(D).  However, the information in that letter under the heading ‘Column Arrangement’ makes it quite clear that the Council was unequivocally requiring poles assembled in a certain manner pursuant to both orders. 

148               In my opinion, the Council simply was not in a position to call for the supply of assembled poles on the basis of a Schedule of Prices Part 2(D).  In the first place, as I have said, Goldspar was correct in taking the view that, in the events which happened, the contract was a supply and install contract for the relevant period.  The Council could not unilaterally revert back to the supply basis at will.  In the second place, the instruction to deliver the poles assembled could not be given if supply only was required.  Although counsel for the Council made a valiant attempt to persuade me that some obscure provisions of the contract contemplated assembly as part of the supply only option, that argument could not stand with the clear descriptions of the work in the relevant contractual Manual amongst other things.  The fact that Goldspar was prepared to deliver assembled poles without installing them does not alter the position.  It took the stance that it was entitled to be effectively paid in full.  Its acquiescence in the same situation for part of the 1999 year is of no greater significance.  In my opinion, this fundamental point is decisive in establishing the invalidity of each notice to show cause.  It has been submitted for Goldspar that the obfuscation by the Council and Khreich on the point was deliberate.  Whilst I am inclined to the view that that is correct, it is unnecessary to come to a final conclusion about that for the purposes of this issue. 

149               There were some faint suggestions in the course of submissions that Orders No 1 and No 2 may have been regarded as variations pursuant to the contract.  This was not fully developed nor appropriately pleaded.  It was not the way that the Superintendent or the Superintendent’s Representative expressed matters at the time.  In any event, any such contention would meet a formidable barrier in the passage from the judgment of Fullagar J in Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 at 346–348 (agreed in by the other members of the Court).

150               It is also submitted on behalf of Goldspar that Order No 1 lacked important information and detail, namely:

(i)         No information was provided in relation to the location of holes required to be drilled into the poles to accommodate the specified accessories.

(ii)        No information was provided in relation to the specifications or positioning of the luminaires required to be provided for the poles.

151               That was correct.  Whilst this would normally be the kind of detailed information which might be provided informally, and whilst Rawson-Harris and Barnes may have been able to make educated guesses about some of the information, an order having the draconian consequences contended for by the Council must be complete and self-contained.  In my opinion, this notice was not.

152               It can also be said that Order No 2 of 30 November 1999 directing Goldspar to supply ‘154 Type B poles in accordance with the contract’ lacked necessary detail.  No information was provided in relation to outreach arms, luminaires or other attachments to be supplied in relation to the positioning of the attachments or in relation to the location of holes required to be drilled to accommodate the attachments.  Furthermore, no definite date or time for performance was specified.

153               It is contended for Goldspar that the Council was not in a position to make time of the essence by either notice.  That would probably be correct if non-compliance with the time limit was, of itself, to be regarded as sufficient to enable peremptory rescission.  That is not the question here.  The notices are said to found breaches of contract entitling the issue of a show cause notice.  If, as contended by the Council, cl 17 was complied with in issuing Orders No 1 and No 2, then failure to comply with them would be a breach of contract, although the failure of Order No 2 to nominate a time for compliance would be a complicating factor.

Implied terms

154               Goldspar also contends that the Council was bound to act reasonably and in good faith when issuing directions and notices under cl 17 of the General Conditions of Contract and that it did not do so.  I shall return to that contention.  It also contended for the following implied terms of the contract:

‘(a)       Council would co-operate with Goldspar to enable the Contract to be performed and not prevent or hinder Goldspar in the performance of its contractual obligations;

            …

(b)       Council would provide to Goldspar a schedule of its requirements under the Contract beyond those already notified in the schedule to the General Conditions annually or, alternatively, at reasonable times in the course of the year so as to enable Goldspar to plan for and schedule timely and efficient manufacture of poles and accessories to be supplied pursuant to the Contract.’

It was also pleaded by Goldspar that:

‘14.      In or about November 1998 Goldspar requested, and Council agreed or, alternatively, represented to Goldspar, that Council would provide to Goldspar a schedule of requirements (“the schedule of requirements”) in respect of the next 300 poles to be supplied by Goldspar to Council pursuant to the Contract.

            …

15.       Council did not provide any schedule of requirements as council had agreed or, alternatively, represented to Goldspar that it would provide either in or about November 1998 or at any time thereafter and notwithstanding further requests by Goldspar that it do so.’

155               I have accepted the substance of the factual evidence of Goldspar that underlies the pleading in paragraphs 14 and 15.  However, I do not see that as amounting to a variation of contract or as a separate contract.  It was not framed as such at the time and it is unlikely that either side would vary a formal contract in that way.  There would also be questions as to the authority of those concerned.  Further, as pointed out by counsel for the Council, there is no pleading of estoppel.  In any event, the representation or promise was disavowed well before the events that commenced with the meeting of 29 September 1999.  In my opinion, the allegations go nowhere as such. 

156               The implied terms (a) and (b) above need to be considered.  I have already adverted to the difficulty of applying cl 17 to a supply and install contract.  Even in the case of a pure supply contract, it would be contrary to common sense if, as contended for by the Council, a notice could be given at any time requiring delivery of the whole contracted amount within 12 weeks, particularly as the Council could increase the quantities above the minimum.  Such a construction would be starkly at odds with the underlying commercial situation.  The poles had to be installed by somebody and had to be installed in a sensible sequence.  It would make no sense at all for large numbers of poles to be delivered at the one time compared with delivery according to a staggered schedule of deliveries.  Furthermore, the constraint involved in the obtaining of extrusions from Capral meant that it would be quite impractical to manufacture large numbers of poles in a period of weeks.  It can be deduced from the contract that 12 weeks was a reasonable period of time within which to manufacture a pole from a standing start but it is absurd to think that it would be reasonable time for manufacturing and delivering the whole of a year’s supply, assembled or not.  It is equally absurd to suggest that the supplier should maintain a stockpile of the year’s supply or something close to it to enable it to meet peremptory demands from time to time. 

157               Counsel for the Council submits that cl 17 cannot be read down, that this is a contract which tightly binds the supplier and can be taken to have been deliberately framed to do so. 

158               There is a good deal to be said for Goldspar’s contention that the Council was required to give advance orders or directions and, in particular, give any notices (including quantities) pursuant to cl 17 prior to the commencement of the relevant period – in this case, prior to 1 July 1999 in order to give commercial efficacy to the contract and avoid absurd results.  

159               The concern about obtaining an order from the Council for poles for the 1999–2000 year was not restricted to Goldspar.  The following evidence was given by Khreich:

‘When did you first receive information as to when the poles would be required to be delivered?---I received instructions from a Mr Terry Daley, our client at Council, and the date is mentioned in my affidavit but it was around August of ’99, July or August of ’99 and the information was that they require poles for the Energy Australia contract as soon as possible or it was going to cost Council money.

When was that, in August 1999?---As I said it was in July/August 1999.

July/August.  So you had been told by Mr Daley, had you, in July or August that there was an urgent need for poles, is that right?---That’s correct.

Well, what did you do when you were told by Mr Daley in July or August that Council had an urgent need for poles?---Well, I requested details of orders from Council.

Who did you make that request to?---It would have been Mr Daley right there at the same conversation.

So you said to Mr Daley, well I have got to get an order out to Goldspar, did you say something like that?---Yes, to that effect.

Was this in July?---I can’t – in July/August is all I can remember, around that time.

You said to Mr Daley when he told you we have got an urgent need for poles, well to this effect, you had better give me an order to give to Goldspar?---Something to that effect, yes.

Of course in July the Council still hadn’t taken delivery of Capral extrusions, had they?---I am under the impression is was July when they took delivery.

When you said to Mr Daley I have got to have an order for Goldspar, what did he say?---Well, that’s, I’m just repeating I guess what I would say would have happened at that meeting.  I would suggest that Mr Daley went and asked Mr Newman to compile the order.

So you don’t recall what Mr Daley said to you when you said to him can I have an order for Goldspar?---No, I don’t recall the answer, no.’

[emphasis added]

This, of course, led to the series of orders in question.

160               It will also be recalled that a precise specification was given by Khreich for seven poles in March 1999.

161               In one sense there is no difficulty in implying the pleaded term (a) – it reflects the following passage from the judgment of Mason J (Gibbs, Stephen and Aickin JJ agreeing) in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (Secured Income Real Estate) (1979) 144 CLR 596 at 607–608:

‘But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract.  As Lord Blackburn said in Mackay v. Dick [(1881) 6 App. Cas. 251, at p.263]:

“as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”

It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract.  As Griffith C.J. said in Butt v. M’Donald [(1896) 7 Q.L.J. 68, at pp.70–71]:

“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”

162               The difficulty lies in giving content to that obligation.  It is not a mechanism for alleviating the consequences of hard, even harsh or unconscionable, contractual provisions.  The duty of cooperation does not extend to being nice or even reasonable to the other party.  As Mason J said in Secured Income Real Estate (at 607):

‘It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract.  It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract.  Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit.  In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.’

163               I am inclined to the view that the first part of the pleaded implied term (b) (annual notification) whilst sensible, is not a necessary implication in the requisite sense.  However, I am persuaded that the second part of that term should be implied.  Clause 17 must be construed in a manner that could apply to the supply and install option if chosen.  It is clear enough that the clause cannot operate, literally construed, in isolation from the other provisions in relation to that option for reasons already explained.  It is obvious that reasonable advance notice must be given of the precise locations, types of pole and accessories in order to make the contract effective.  The pleaded term is a sensible application of the general Mackay v Dick obligation of cooperation and, if it be necessary, meets the requirements for implication of a term set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283.  Such a term would also have appropriate application to a supply contract.  Clause 17 applies across the board and I have pointed out the absurdities involved in the literal construction of it proposed on behalf of the Council, even in the case of a supply only contract.

164               The proposed implication is consistent with and supported by, but does not depend upon, the conduct of the parties in the performance of the contract.  There has been considerable debate about the use that can be made of post-contractual conduct (eg Charles, ‘Interpretation of Ambiguous Contracts by Reference to Subsequent Conduct’, (1991) 4 Journal of Contract Law 16).  The current received wisdom is that it may not be used for purposes of construction of the contract (Winstonu Pty Ltd (t/a Harvey Norman Electrics) v Pitson [2001] FCA 541; Magill v National Australia Bank Ltd (2001) Aust Contract R 90–131, [2001] NSWCA 221; Collins Hill Group Pty Ltd v Trollope Silverwood & Beck Pty Ltd [2002] VSCA 205).  However, Charles QC (as he then was) referred with approval to the view of Greig and Davis (The Law of Contract (1987) 436–438) that subsequent conduct could provide a basis for implying an additional term into an existing contract.  A similar view is expressed by the authors of Carter and Harland, Contract Law in Australia, 4^th ed, 2002 at [719].  I can see no difficulty in regarding subsequent conduct as relevant to the question as to whether a term is necessary to give business efficacy to the contract.  Indeed, if a contract has been performed without adhering to, or without inconsistency with, the claimed term, without complaint or commercial difficulty, that would be powerful evidence that the term is not necessary.  The law prefers facts to prophecies (HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [39]).  It would be odd to imply a term as necessary where such a conclusion would be contrary to the facts as they later appeared.  If conduct may be relevant to negative the implication of a term as being necessary then it should also be relevant to support the implication of a term on the same basis.  Here, the contract was always administered on the basis that advance notice of particular requirements was required to be given by the Council.  Indeed, even Orders No 1 and No 2 illustrate that.  It is a short, and appropriate, step to say that such notice must be reasonable, as had been the case in practice until 19 October 1999.

165               It is apparent from my findings of fact that the implied term was not complied with in issuing Orders No 1 and No 2.  It follows that they could not found any substantial breach of contract for the purposes of the show cause notices. 

166               The next live question is whether a term that the Council would act reasonably and in good faith when issuing directions and notices under cl 17 of the General Conditions of Contract is to be implied.  The answer to that question will be of particular importance if I am wrong in implying the term just discussed.  There is a bewildering variety of opinions in the authorities and commentaries as to the implication of terms as to reasonableness and good faith in commercial contracts.  For example, in this Court compare the more adventurous approach of Finkelstein J in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [61]–[65] (although see Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 at [119]) with the more cautious approach of Gummow J in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 and the Full Court in Wenzel v Australian Stock Exchange Ltd (2002) 125 FCR 570 at [80]–[81].  All of the relevant authorities, save perhaps for the recent Victorian Court of Appeal judgment in Esso Australia Resources v Southern Pacific Petroleum NL [2005] VSCA 228 (which took a conservative line) have been discussed at length recently in numerous articles and a book (eg TM Carlin, ‘The Rise (and Fall?) of Implied Duties of Good Faith in Contractual Performance in Australia, (2002) 25 University of New South Wales Law Journal 99; JW Carter and A Stewart, ‘Interpretation, Good Faith and the “True Meaning” of Contracts: The Royal Botanic Decision’, (2002) 18 Journal of Contract Law 182; A Wallwork, ‘A Requirement of Good Faith in Construction Contracts?’, (2004) 20 Building and Construction Law Journal 257; B Zeller, ‘Good Faith – Is it a Contractual Obligation?’,(2003) 15 Bond Law Review 215; JW Carter and E Peden, ‘Good Faith in Australian Contract Law’, (2003) 19 Journal of Contract Law 155; PD Finn, ‘Good Faith and Fair Dealing: Australia’, (Speech delivered at Commercial Good Faith Conference, Auckland New Zealand, 2 September 2005); E Peden, Good Faith in the Performance of Contracts, (2^nd ed, 2003)).

167               In 2002 Carter and Stewart (supra, p 190) said ‘perhaps the most important unresolved issue in Australian contract law today is the extent to which the law recognises an implied requirement of good faith in performance and enforcement.’  Nothing that has occurred since has resolved the issue in a manner binding upon me.  Even Finn J, one of the principal proponents of such an obligation has recently said extra-judicially that ‘ … one cannot, for the moment, be assured that the regulation of contractual behaviour under the good faith rule will take root in Australia at all, or other than limply.’  (supra)

168               The best way for a single judge to travel through this thicket is to concentrate upon the particular contractual provision in question, in the particular contract, in the particular circumstances of the case.  When this is done, in my opinion, an instruction or direction could not validly be given pursuant to cl 17 for the purpose of causing Goldspar to default in order that the Council would thereby have a pretext for terminating its contract with Goldspar so that the works the subject of that contract could be done by others.  That conclusion follows from the application of principles enunciated in a series of High Court decisions. 

169               The closest analogy is Carr v JA Berriman Pty Ltd.  In that case a clause in a building contract provided:

‘The Architect may in his absolute discretion and from time to time issue … written instructions,  written directions … in regard to:

(a)       The … omission … of any work. …

The Builder shall forthwith comply with all Architect’s Instructions…’

The contract was for the erection of a factory building in accordance with drawings and specifications prepared by the architect.  A clause of the specification provided that all steel should be supplied by the building owner and that all structural steel should be delivered to the contractor or sub-contractor’s yard.  The builder was to allow for the fabricating and erecting of all structural steel work.  Fabrication was part of the work of the contractor.  The contractor obtained a tender from a sub-contractor for fabrication prior to the entry into the contract which was accepted after the contract was entered into and the architect advised accordingly.  Some weeks later, the architect wrote to the builder in the following terms:

‘I have been instructed to inform you that my clients, … have made arrangements with Arcos Products Pty. Ltd. of Parramatta Road, Lidcombe, to supply and fabricate the structural steel work for the above job, and that the respective order has been placed with this firm.  In explanation I would like to add that this arrangement was made necessary by the peculiar steel supply position of to-day.  I shall be glad if you would kindly inform me at the earliest of your allowance for the fabrication of the steel, which thus becomes a deduction post (sic) from your contract.’

The fabrication of the structural steel represented a substantial part of the contract.  It was held that the making of the contract with Arcos Products Pty Ltd constituted a serious breach of the building contract and that the architect’s letter was not the valid exercise of a discretion to omit works.  Fullagar J (who gave the leading judgment) said (at 347):

‘Clause 1 is part of a printed form, and the powers conferred upon the architect extend to the giving of directions on a great variety of matters in addition to the “omission of any work”.  The clause is a common and useful clause, the obvious purpose of which—so far as it is relevant to the present case—is to enable the architect to direct additions to, or substitutions in, or omissions from, the building as planned, which may turn out, in his opinion, to be desirable in the course of the performance of the contract.  The words quoted from it would authorize the architect (doubtless within certain limits, which were discussed in R. v. Peto ((1826) 1 Y. & J. 37 [48 E.R. 577]) to direct that particular items of work included in the plans and specifications shall not be carried out.  But they do not, in my opinion, authorize him to say that particular items so included shall be carried out not by the builder with whom the contract is made but by some other builder or contractor.  The words used do not, in their natural meaning, extend so far, and a power in the architect to hand over at will any part of the contract to another contractor would be a most unreasonable power, which very clear words would be required to confer.’

170               That principle was applied by the High Court in Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378 in circumstances relevantly not dissimilar from the present facts.

171               Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 dealt with cl 14 of the then standard contract for the sale of land in New South Wales, which was in the following terms:

‘14.      If the Vendor shall be unable or unwilling to comply with or remove any objection or requisition which the Purchaser has made and shall not waive within fourteen days after the Vendor has given him notice of intention to rescind this Agreement, the Vendor, whether he has or has not attempted to remove or comply with such objection or requisition, and notwithstanding any negotiation or litigation in respect thereof, and whether the Purchaser has or has not taken possession shall be entitled by notice in writing to rescind this Agreement.’

Barwick CJ held that there had been no requisitions within the meaning of the clause but said (at 538):

‘If the matter be approached, as in my opinion it should not, by assuming that what the appellant had said in his “requisitions” 2 and 33 were requisitions within the meaning of cl. 14 of the contract, it ought, in my opinion, to be held that it would be unconscionable for the respondent to have attempted to exercise his powers under cl. 14, in the circumstances.  I would have thought clearly it was so, because what he would be doing would be to deny to the purchaser the performance of an essential obligation which he had undertaken when entering into the contract with knowledge of the existence of the caveat.  In this connexion I find no need to refer to decisions on the use of this type of clause in connexion with land under common law title.  The title to this land is under the Real Property Act.  The caveat was lodged and presumably notified before the sale was made.  To allow the vendor to rescind in the circumstances would be to afford him the right, in substance, to say that the sale was in reality no sale at all:  only a transaction conditional on his own willingness to perform.’

McTiernan J agreed with the Chief Justice.  Walsh J said (at 543):

‘The principles by which limitations have been imposed upon the right of a vendor to exercise the power conferred by such a clause as cl. 14 are well known and they were of course recognized by the learned primary judge, who referred in his judgment to some of the authorities on this subject.  But with due respect to his Honour I am of opinion that he did not give sufficient weight, in deciding whether the respondent did attempt to use the power arbitrarily or unreasonably, to some features of the case to which I shall now refer.’

His Honour dealt with matters particular to the case and then said (at 546):

‘I am of opinion that what the respondent could not do, if acting reasonably, was to exercise the power under cl. 14 to get rid of its contract with the appellant whilst the litigation with Doris Parkinson was still pending.  The respondent was not engaged in that litigation because it had made the contract with the appellant.  The case is not one in which the existence of that contract involved, or might involve, the respondent in expensive litigation of which otherwise it would have been free and which it was reasonable for it to avoid by exercising its power of rescission.’

Gibbs J said (at 547):

‘In my opinion, it was unreasonable for the respondent on 7th April 1971 to attempt to exercise the power of rescission given by cl. 14 of the contracts and the attempt was accordingly ineffectual.  I concur with what my brother Walsh has said in his judgment in relation to this aspect of the case.’

Stephen J said (at 549):

‘Courts have approached the task of confining the operation of such clauses within what are regarded as proper limits in one or other of two ways; the vendor has been denied the right to rescind either upon the basis that, as a matter of construction, the circumstances of the particular case do not fall squarely within the terms of the clause or else because, although, on its proper construction, the clause applied, nevertheless, the vendor having attempted to use the rights conferred upon him for an improper purpose, he could not be permitted to rely upon its terms.  In Webster’s Conditions of Sale, 3rd ed., p. 356, the learned author concludes that: “It is not really a question of construction —the court interferes with the contract to prevent a fraud being committed.”  It perhaps matters little which of these two approaches be preferred; there may, on analysis, be no very clear distinction between them.  I do not propose in this judgment to adhere to any clear distinction between the two approaches.’

After reviewing the authorities, his Honour said (at 554–555):

‘It cannot be, consistently with the authorities to which I have already referred, that a vendor may, in such circumstances, take advantage of what it believes to be only a passing cloud which the purchaser has pointed out must be, and which both parties believe will be, removed and, while proceeding in fact to have it removed, declare that it constitutes such an obstacle in fulfilling its contractual obligations as to entitle it to have recourse to cl. 14.  To do so is to employ the clause for a purpose quite foreign to that which the courts have regarded as its true function.’

172               One of those authorities was Gardiner v Orchard (1910) 10 CLR 722, particularly the passage from Isaacs J, including the following, concerning a clause similar to cl 14 (at 739–740):

‘In considering whether such a clause justifies a vendor in any given case in cancelling his contract, the Court must bear in mind three things:  First, the purpose of every such condition, which is a matter of law, and is stated in the passage quoted from Greaves v. Wilson ((1858) 25 Beav. 290 [53 E.R. 647]); next, the necessity for bona fides on the part of the vendor in using his power for that purpose:  see also Woolcott v. Peggie ((1889) 15 App. Cas. 42).  This is a question of fact, and is admitted here.  The third essential is that the cancellation must be reasonable.  Reasonableness is a question of fact, dependent on the whole of the circumstances, though one of those circumstances consists always of the wording of the contract itself.’

The reference to Greaves v Wilson was explained by Stephen J as follows (at 552):

‘His Honour’s reference to Greaves v. Wilson ((1858) 25 Beav. 290 [53 E.R. 647] is to a passage in which Sir John Romilly M.R. said ((1858) 25 Beav., at p. 293 [53 E.R., at p.649]) that such conditions were introduced to meet the case where a vendor finds that he is to be put to:  “ ... so much expense and trouble as to make it unreasonable that he should be called upon to do it.”  The learned Master of the Rolls emphasized that it was always “a question of the reasonableness of the thing required”.  As early as 1841 Lord Langdale M.R. had used reasonableness as a test of the validity of the vendor’s rescission in his judgment in Page v. Adam ((1841) 4 Beav. 269, at p. 285 [49 E.R., 342, at p. 348]).’

173               There was further discussion of cl 14 in Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575.  Barwick J, after referring to the decision in Godfrey Constructions, said (at 587):

‘Broadly it may be said that the vendor will not be allowed to use his contractual right if it would be unconscionable in the circumstances to do so.’

 

Later he said (at 588):

‘According to my view of the contract between the parties, the obligation to transfer to the appellant the fee simple in the land was central and fundamental to their bargain.  It must be a relatively rare case, in my opinion, in which cl. 14 can conscionably be used to avoid performance of such an obligation.’

Gibbs J cited with approval the following passage from Viscount Radcliffe in Selkirk v Romar Investments Ltd ([1963] 1 WLR 1415 at 1422–1423) (at 590):

‘Thus, it has been said that a vendor, in seeking to rescind, must not act arbitrarily, or capriciously, or unreasonably.  Much less can he act in bad faith.  He may not use the power of rescission to get out of a sale ‘brevi manu’, since by doing so he makes a nullity of the whole elaborate and protracted transaction.  Above all, perhaps, he must not be guilty of ‘recklessness’ in entering into his contract, a term frequently resorted to in discussions of the legal principle and which their Lordships understand to connote an unacceptable indifference to the situation of a purchaser who is allowed to enter into a contract with the expectation of obtaining a title which the vendor has no reasonable anticipation of being able to deliver.’

174               Meehan v Jones (1982) 149 CLR 571 concerned a special condition in a contract for the sale of land on which an oil refinery had been built as follows:

‘This contract is executed by the parties subject to the following:- (a) the purchaser or his nominee entering into a satisfactory agreement or arrangement with Ampol Petroleum Limited for the supply of a satisfactory quantity of crude oil … (b) the purchaser or his nominee receiving approval for finance on satisfactory terms and conditions in an amount sufficient to complete the purchase hereunder.’

Gibbs CJ said (at 580–581):

‘The intention of such a clause in my opinion is to leave it to the purchaser himself to decide whether the terms and conditions on which finance is available are satisfactory.  The condition prevents a purchaser from being obliged to go through with a sale when he does not believe that he can raise the necessary funds.  Such a condition is generally entirely for the protection of the purchaser, and it is the satisfaction of the purchaser, not that of some hypothetical reasonable man, that will satisfy the condition.  No doubt it may be implied that the purchaser will act honestly in deciding whether or not he is satisfied.  However, it does not seem to me necessary, in order to give business efficacy to a contract, that a condition should be implied that the purchaser will make reasonable efforts to obtain finance.  The parties may expect that he will, but he does not contract to so do.’

Mason J said (at 589):

‘To say that a “subject to finance” or “subject to finance on satisfactory terms and conditions” clause denotes finance which is satisfactory to the purchaser is not to say that he has an absolute or unfettered right to decide what is satisfactory.  To concede such a right would certainly serve the object of the clause in protecting him.  But it would do so at the expense of the legitimate expectations of the vendor by enabling the purchaser to escape from the contract on a mere declaration that he could not obtain suitable finance.  With some justification the vendor can claim that the agreement made by the parties is not an option but a binding contract which relieves the purchaser from performance only in the event that, acting honestly, or honestly and reasonably, he is unable to obtain suitable finance.’

After referring to authority, his Honour said (at 590–591):

‘In this case it is not necessary to decide whether the purchaser, in deciding whether finance is on satisfactory terms, is bound to act honestly or whether he is also bound to act reasonably.  The cases already mentioned appear to support the first rather than the second alternative.  And there is some ground for thinking that the parties contemplated that the question was to be left to the honest judgment of the purchaser rather than to the judgment of a court as to whether the purchaser acted reasonably in the circumstances.

On the other hand, it has been said that a condition of this type imports an obligation or promise on the part of the purchaser to act honestly and reasonably (Barber v. Crickett ([1958] N.Z.L.R. 1057); Scott v. Rania ([1966] N.Z.L.R., at p. 539), per Hardie Boys J.; Gardner v. Gould ([1974] 1 N.Z.L.R. 426)).  McCarthy J., who in Scott v. Rania ([1966] N.Z.L.R., at p. 534) preferred to base his reasoning on the principle that a party to a contract cannot be permitted to rely on his own wrong, later in Gardner v. Gould ([1974] 1 N.Z.L.R., at p. 428) adopted the implied promise theory.  The reasoning which underlies the decisions of this Court upholding the implication of an obligation on the part of a party to a contract to do all that was reasonable on his part to obtain a statutory consent applies with equal force here.  In Butts v. O'Dwyer ((1952) 87 C.L.R. 267, at p. 280), Dixon C.J., Williams, Webb and Kitto JJ. said:

“It has been held in cases too numerous to mention both before and after the classic statement of Bowen L.J. in the case of The Moorcock ((1889) 14 P.D. 64, at p. 68) that the law raises an implication from the presumed intention of the parties where it is necessary to do so in order to give to the transaction such efficacy as both parties must have intended that it should have.”

Here the expressed intention of the parties was that the purchaser would obtain finance; his obtaining of finance on satisfactory terms was necessary to give the transaction its intended efficacy.  The consequence would be that he had an obligation to do all that was reasonable on his part to obtain that finance.  It would make for greater consistency to say that, if the purchaser is bound to act reasonably in seeking to obtain finance, he is bound to act reasonably as well as honestly in deciding whether the finance was satisfactory.  So understood the special condition would preserve an even balance between the vendors and the purchaser.  However, I have no need to decide the question.  Here it makes no difference whether the purchaser was under an obligation to act honestly or honestly and reasonably in deciding whether the terms of an offer of finance were satisfactory.’

Wilson J agreed with Mason J and was inclined to believe that an honest judgment was all that was required although there was necessity to express a concluded view as to that (at 597).  Murphy J took the view that no implication was necessary (at 596–597). 

175               I shall return to these authorities having examined the purpose of the Council in purporting to utilise cl 17 as it did.  The most significant indicia of the true purpose of the Council was the so called order of 19 October 1999.  Out of the blue it purported to make time of the essence for delivering nearly one half of the annual requirement in the space of eight weeks.  There had been no hint of that requirement at the meeting of 29 September 1999, as a result of which it would have been reasonably anticipated that an order would be received promptly for a true staged delivery of the required poles for the balance of the current annual period with a small number of poles to be delivered by Christmas.  Goldspar had been pressing for forward scheduling since late 1998 and had received no response.  The Council had, by then, acquired the only stock of extrusions in existence and was about to let a tender which, in addition to utilising those columns, would be competing with Goldspar for all relevant supplies.  The ‘order’ was given on opaque terms which would obviously be regarded as unacceptable by Goldspar.  There was the reference to time being of the essence, correctly described by counsel for Goldspar as menacing as it flagged termination of the contract if the impossible demand was not met.

176               No evidence was called by the Council to explain this extraordinary behaviour.  Khreich made it apparent that the timing and form of the order was dependent upon the instruction to him by Newman and was the responsibility of the Council, not himself or his firm.  Burns was no longer the supplier’s representative.  Henn, who replaced him, was not called.  Those potentially responsible for the decision, namely, Tsakalos, Daly and Newman, were not called.  As no appropriate explanation was proved, the usual Jones v Dunkel inference is available as to all issues upon which they could have given relevant evidence. 

177               Order No 1 does nothing to improve the Council’s position.  It was obviously the result of it being appreciated within the Council’s ranks that the order of 19 October 1999 could not be supported on any basis as it simply did not comply with even the most draconian reading of cl 17.  The fact that more time was allowed by Order No 1 than the order of 19 October 1999 was inevitable given the contractual provisions and the interpolation of the Christmas period.  In that respect I accept Goldspar’s contention that, in this industry, it was quite unrealistic to allow only two weeks extra time for the Christmas shutdown.  It necessarily involved much longer dislocation.  The situation was exacerbated by Order No 2 simply calling for supply of the balance of the annual requirement ‘in accordance with contract’, whatever that meant.  Each order was, to say the least, ambiguous as to the basis for delivery and payment.  Given the history of the matter, any reasonable exercise of the contractual powers by the Council would have nominated an appropriate date for the commencement of deliveries and a reasonable schedule for supplying the poles thereafter on terms which complied with the contract so far as the form of delivery was concerned.  The conclusion as to the Council’s true purpose is assisted by the fact that there was an immediate recourse to the show cause and termination provisions as soon as the Council deemed them to be available.

178               The circumstances provide powerful evidence of subjective bad faith on the part of the relevant Council officers.  That conclusion is strengthened when attention is paid to other aspects of the matter.  Khreich’s initial advice of 20 May 1998 carried with it the seeds of the fruit borne in late 1999 and early 2000.  He advised that Goldspar had too favourable a contract on a supply and install basis – which was the then basis of the contract.  The strategy thereafter was obviously to seek to unwind that favourable position.  However, it is to be noted that as early as that date Khreich recommended that the Council commence scheduling pole requirements for the next annual period.  The negotiations with Energy Australia as to installation had obviously commenced prior to the meeting of December 1998, which is recorded in the evidence.  It could not be clearer that a purpose of that contract, and the dovetailing Tender 9912, was to cut Goldspar out of installation and to set the scene for cutting Goldspar out of the contract altogether.  Notwithstanding persistent requests, the Council did not offer any explanation for the letting of Tender 9912 at the time and did not do so in evidence.  Further, there was no reason at all why a complete forward schedule of poles could not have been provided to Goldspar no later than 28 June 1999 (prior to the commencement of the next contract period) and no reason why a substantial interim schedule could not have been provided some months before that.  No explanation was then, or has now, been given for that failure.

179               It also needs to be borne in mind that the parties had been in dispute as to various matters including payment of outstanding monies and ownership of intellectual property.  Some were referred for Expert Determination in late 1998, and by 30 June 1999 disputes concerning the valuation of work were the subject of proceedings in the Supreme Court of New South Wales. 

180               Another important aspect of the matter is the role of Streetscape.  Something of the background appears in an earlier judgment (Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568, (2004) 62 IPR 274 at [97]–[98] and [112]). 

‘On 13 May 1998 Matchett introduced Rawson-Harris to Paul Obeid and Moses Obeid and on 15 May 1998 the Obeids made Rawson-Harris an offer effectively to purchase the benefit of the Council contract, which was refused.

In July 1998 Streetscape Pty Ltd (Streetscape) was formed with the directors being Matchett and Peter Harrison from KWA and Moses Obeid.  Matchett was the Managing Director.  From then on Streetscape sought to obtain pole business from the Council.  It supplied some pole accessories in late 1998.

…

In December 2000 Project Architecture Pty Ltd was formed by Tsakalos and Proctor.  Proctor left the employ of the Council at that time.  Tsakalos resigned from the employ of the Council in June 2001.  In the second half of 2001 Project Architecture was engaged by Streetscape to assist in negotiations with Adelaide City Council for the supply of poles.  Tsakalos attended presentations with Matchett and Obeid.  Goldspar was a competitor for the Adelaide Council business.’

181               It is also to be noted that Newman had worked with Matchett at KWA previously.  This background was fleshed out in evidence given by Rawson-Harris when being cross-examined as to allegations that he made, after receiving the ‘order’ of 19 October 1999, of collusion between Mr Obeid (by then a Minster in the New South Wales Government) and the City of Sydney to the disadvantage of Goldspar.  That evidence was as follows:

‘MR ELLICOTT: … How did Mr O’Bede [sic]get into the act, did he have some relationship with Streetscape or KJW, is that right?---He got into the act, his sons and Mr Matchett from KWA approached us, I think it was in May ’98, to buy the contract or do a joint deal with a contract with us.

And he came into it through - - -

HIS HONOUR: I am not sure the witness is finished?---And then we had designed some new items for parts for the council for banner arms and those banner arms, the council came to see the last design and then a week later the O’Bede’s supplied those parts to the council without asking us to supply. Now then we received parts of the bracket arms which were the brackets which were the angle brackets for holding the stop signs and the no standing signs and we hadn't made tooling for them and we hadn't been asked to supply them although I had designed them and they appeared at the council sites with Streetscape's name on them. We also received a translation of an El Telegraph article which was an interview with Mr O’Bede and it stated that the council wanted to get rid of us in that article.

What was the paper - - -?---El Telegraph, which is Eddie O'Bede's own newspaper.

I see?---We couldn't believe the article when we read it because - - -

Don't worry, you have been asked – the O’Bedes --- ?---Anyway, that's fine. Then, when we were told that the council were retendering our tender Mr Alec Osborne, who is as friend of mine, was having dealings with Dunhills at the time and their liaison with the council, their solicitor, said to Mr Osborne, not knowing he was a friend of mine, that council were going to fix Goldspar and retender the tender.

My recollection may be wrong but it is implicit in what you say and I seem to recall it from the last hearing that it was your belief that the O'Bedes had an interest in Streetscape, is that the point or not?---I did.

I think that's where the O'Bedes came in, if I may say so?---They were, Streetscapes was formed about two or three months after they had the meeting with us because we didn't want to deal with them. They had offered the pole contract for the Olympics.  they said, if we did a deal with them they could guarantee the pole contract for the Olympics, the flagpole contract, that is.’

Whilst much of this evidence is hearsay, it was prescient insofar as Goldspar’s fate was concerned. 

182               In late 1988 the Council was sourcing accessories for poles outside the Goldspar contract from Streetscape with the Council exploring the possibility of increasing those items.  It will be seen that Rawson-Harris alleges that Streetscape was given access to and used Goldspar’s designs in relation to the supply of the accessories.

183               The evidence does not give any detail about La Mer, the other successful tenderer in 9912, or as to the number of poles each tenderer was to supply.  It is common ground that all of the poles required pre-Olympics (at least 600) were supplied pursuant to Tender 9912.  The objective facts were that, once Streetscape came into the picture, Goldspar only received an order for seven more poles in total instead of at least another 600 and was cut out from some of the accessories in relation to the then current period in favour of Streetscape.  It was hardly evidence of paranoia on the part of Rawson-Harris that he should feel that Streetscape had the inside running with the Council and that Goldspar was being excluded accordingly.

184               It can be safely concluded that by late 1998 the responsible officers of the Council – probably Tsakalos and Daly – had decided that Goldspar would not be permitted to carry out the contract beyond the year then current.  Thereafter, Council officers conducted themselves on that basis but with the aim of being able to dispense with the services of Goldspar without being in breach of contract.  The extent to which Khreich was a party to the machinations of Council officers is uncertain.  A person of his experience and knowledge could hardly have failed to suspect what was afoot but he appears to have taken the position of seeking instructions from Daly, acting upon those instructions and then loyally defending them.  I am particularly troubled by the role that Khreich played at the meeting on 29 September 1999 and its immediate aftermath.  If he knew what was coming, then he participated in a dishonest and cynical piece of play acting.  If he did not, then he must have been shocked by the instruction he received via Newman which led to the ‘order’ of 19 October 1999.  Nonetheless, he executed the instruction, defended it and then placed two subsequent orders which were no more reasonable and proceeded to defend them, both at the time and in evidence.  Giving him the benefit of the doubt, I am inclined to think that his participation in the meeting of 29 September 1999 was an endeavour to get the supply of poles from Goldspar moving but that objective was quickly and firmly countermanded by Council officers. 

185               In my opinion, Orders No 1 and No 2 were given when they were and in the form they were not for the purpose of securing the performance of the contract on the part of Goldspar so as to give the Council the benefit of that contract but, rather, to set up a position whereby the Council could argue that Goldspar’s services had been validly dispensed.  This would then meet the objective of preventing it from doing any further work, which rather would be done by others, without the necessity of paying damages for breach of contract.  In my opinion, that is contrary to the manner in which the contract could be administered according to the High Court authorities that I have discussed.  Those authorities warrant the implication that cl 17 would be administered in good faith in the sense of honestly for the purposes of enabling the Council to obtain the benefit of the contract.  Although it is less clear, those authorities also warrant the implication that cl 17 would be administered reasonably for the same purpose.  The conduct of the Council in relation to Orders No 1 and No 2 can be described as neither in good faith nor reasonable in that sense.  It follows that neither Order No 1 nor Order No 2 were valid or effective. 

186               The net result of all of this is that, in my opinion, Goldspar was not in substantial breach of either contract by virtue of failure to comply with either Order No 1 or Order No 2 as at 23 February 2000.  Furthermore, in my opinion, alleged repudiation of contract is not ‘a substantial breach of contract’ within the meaning of cl 25.2.  Indeed, cl 25.1 draws a distinction between breach and repudiation.  I should add for the sake of completeness that the reference to progress pursuant to cl 13 adds nothing to the Council’s case.  It assumes that Goldspar was bound to deliver any number of poles requested on 12 weeks’ notice.  Thus, neither show cause notice was valid. 

Showing cause

187               Clause 25.2 gives the Council a discretion to give a written notice to show cause.  It is further argued for Goldspar that this discretion is also conditioned upon the implied term of reasonableness and good faith.  That is a difficult argument because it must assume a substantial breach of contract and the clause only relates to a notice to show cause – the substantive discretion to terminate comes into play at a later point of time, although Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234provides support at least for reasonableness as a criterion to be satisfied.  If so, the term would be breached as I regard the whole exercise as designed to effect the anterior purpose of preventing Goldspar from completing the contract.

188               The next thing to note about cl 25 is that, pursuant to cl 25.4, the Council may, by notice in writing, terminate the contract if ‘the Supplier fails to show reasonable cause why the Council should not exercise that right’ (emphasis added).  In other words, there must be an objective failure by the supplier to show reasonable cause.  The clause is not conditioned upon the satisfaction of the Council or any other party (cf Renard Constructions (ME) Pty Ltd v Minister for Public Works; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91).  Even if both orders were valid and effective so that there was a substantial breach of contract to support each show cause notice, Goldspar did not fail to show reasonable cause when called upon to do so.  In my opinion, the response to the notices showed reasonable cause why the Council should not terminate the contract by reason of failure to comply with each order on the terms ordered.  Bearing in mind the time of year and the availability of components, compliance with the orders was quite impractical. 

Extension of time

189               An important aspect to be considered on the question of the showing of reasonable cause is the application made by Goldspar for an extension of time pursuant to cl 18 of the General Conditions of Contract.  I need not set out the relevant correspondence again.  There are difficulties of construction of cl 18.  It seems that the first two paragraphs apply across the board.  The third, fourth and fifth paragraphs relate to what is described as an ‘entitlement’ to an extension.  The sixth paragraph, including the handwritten amendment, relates to an overriding general discretion to grant an extension coupled with an obligation to not unreasonably deny a claim where the event causing the delay is beyond the control of Goldspar.  The remainder of the paragraph is general.  Leaving aside all other difficulties, I cannot see how Goldspar could have established an ‘entitlement’ to an extension in the face of the terms of paragraph (v) of the third paragraph.  However, the general discretion to extend is a horse of a different colour.  The second paragraph describes a wide set of circumstances which would justify notification, which must then be considered with a view to exercising the general discretion coupled with the obligation.  In considering that issue Khreich was obliged to do more than merely pursue the interests of the Council – he was required to give genuine and bona fide consideration to the factors advanced by Goldspar.  (Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 per Davies J at 532; Sheppard J at 542–4, see also Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 per Mason CJ and Dawson J at 96 and Gaudron J at 150; and Jenkins v NZI Securities Australia Ltd (1994) 124 ALR 605 discussed below).

190               In my opinion, there were causes of delay beyond the control of Goldspar and, in the circumstances, it was unreasonable to deny a claim for a reasonable extension of time for those causes.  Rather than give bona fide consideration to that issue, the approach by Khreich was to take issue with every contention on the part of Goldspar in an adversary and argumentative fashion having regard only to the interests of the Council.  It is not necessary to come to a view as to what particular extension of time should have been permitted, assuming that the orders bound Goldspar according to their terms.  That question was never properly addressed. 

191               It was disingenuous of Khreich to regard the lack of advance notice from the Council as to its intentions as irrelevant to the question of time when he had hitherto administered the contract on the basis that advance notice of requirements was required:  witness the seven poles in March 1999; his request of Daly in July or August to supply him with an order; the fact that the discussion of 29 September 1999 presupposed that there would be an order forthcoming; and the fact that orders indeed were forthcoming.  It was also disingenuous to regard the appropriation of the existing Capral extrusions by the Council as irrelevant.  He could not have doubted the bona fides of the order which had been placed by Goldspar to hold them in June 1999 or underestimated the significance of having that number of poles on hand.  It was certainly seen as very important for the successful tenderer for 9912.  Indeed, the constraints of supply by Capral, particularly at the time of year and with a competing contract on foot, were obviously known to Khreich and Council officers in that connection.  It was also disingenuous to contend that more should have been done by Goldspar with Capral prior to 8 November 1999.  Why would Goldspar place a firm order with Capral when all it had was the derisory ‘order’ of 19 October 1999 in relation to which time was said to be of the essence.  That was obviously issued in order to trap Goldspar into a situation of default with termination to follow.  The proof provided to Khreich of the order placed with Capral in December and, in particular, the payment of the deposit and the updates from Capral as to delivery provided an answer to criticism on this issue.

192               It will be apparent that I was not impressed by Khreich’s attempts in evidence to justify the various positions taken by him, particularly after 29 September 1999.  He was most unconvincing. 

Termination

193               Clause 25.4 gave to the Council a discretion to terminate.  It follows from the findings that have been made that the necessary preconditions to exercise that discretion did not occur.  It is also argued that the exercise of that discretion is subject to an implied term as to reasonableness and good faith.  This arises in a different context to the similar questions discussed earlier.  In Jenkins v NZI Securities Australia Ltd the Full Court considered the following clause: 

‘5.08 On the third anniversary of the first Drawdown Date, the Financier will review the Facility with a view to extending the Repayment Date by a further period of 12 months.  If the Financier is prepared to so extend the Repayment Date, it will notify the Company accordingly and request the Company to advise whether it so wishes the Repayment Date to be so extended.  Upon receipt of such notice from the Financier, the Company shall advise the Company [sic] within seven (7) days as to whether it wishes the Repayment Date to be extended.  If the Company so advises the Financier, the Repayment Date will be extended for a further period of 12 months and otherwise the Repayment Date will remain unaltered.’

Beaumont, Gummow and Carr JJ said (at 619):

‘We would add that the law would oblige the financier to conduct the review in good faith and, perhaps, also reasonably, in the sense of paying regard to the interests of both parties:  Amann Aviation Pty Ltd v Commonwealth (1990) 92 ALR 601; 22 FCR 527 at 532, 542–4, affd (1991) 174 CLR 64 at 96, 150; 104 ALR 1; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 280; cf Hughes Bros Pty Ltd v Trustees of Roman Catholic Church for Archdiocese of Sydney (1993) 31 NSWLR 91.’

I should follow that guidance and imply a term accordingly.  There is an air of unreality in considering breach of that term because, for it to arise, the show cause notice must be taken to have been valid and Goldspar would not have shown reasonable cause.  However, I have no doubt that in purporting to rescind the contract the Council was acting pursuant to the determination which had been formed to remove the work from Goldspar and give it to others and so was in breach of the implied term, no matter how it is precisely framed.

Repudiation of contract by Goldspar?

194               It is argued for Goldspar that cl 25 constitutes an exclusive method of terminating the contract.  Whatever may be the position in relation to breach as such, I am not persuaded that cl 25 would exclude termination at common law by acceptance of repudiation.  In my opinion, however, the facts fall well short of establishing repudiation on the part of Goldspar at the time of termination.  The principles concerning repudiation have recently been restated by Finn and Sundberg JJ in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 as follows (at [102]):

‘The principles governing repudiation of a contract are, as we understand it, not in issue and for present purposes can be stated shortly.

(i)        A party will have repudiated a contract if, by words or conduct, it evinces an intention no longer to be bound by it or if that party shows it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way:  Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-626;  Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623. 

(ii)       The party’s conduct is to be judged objectively by reference to the effect it would be reasonably calculated to have upon a reasonable person:  Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, above, at 658;  Satellite Estate Pty Ltd v Jacquet (1968) 71 SR (NSW) 126 at 150.

(iii)      A party that acts on a genuine but erroneous view of its obligations under the contract will not for that reason alone have repudiated it.  That party may still be willing to perform the contract according to its tenor:  DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431-432;  Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.  But persistence in an untenable construction will ordinarily be regarded as repudiatory:  Summers v Commonwealth (1918) 25 CLR 144 at 152;  and see Chitty on Contracts, above, par 25-018.’

195               It is interesting that their Honours added immediately thereafter the following paragraph which has resonance in the present case (at 103):

‘We would note, additionally, that in the case of contracts of significant duration in which interaction and some level of cooperation is required, it is common for parties without formally varying their contract to conduct their dealings inter se in ways that they find acceptable and convenient, fair and reasonable, or commercially necessary “rather than by reference to a priori rights and duties”: cf Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11, 110 at 11,117.’ 

196               If it were not for the letter of 14 February 2000 from Rawson-Harris to McDowall of Tracey Brunstrom & Hammond Pty Ltd, I would regard the Council’s argument as having very little merit.  The correspondence on all sides was contentious.  Positions were being taken on various matters which would be difficult to sustain if pressed.  Rawson-Harris was in a position of great difficulty.  He was faced with conduct on the part of the Council which exhibited lack of bona fides and he could not but have been conscious of the probability that the Council was setting Goldspar up for termination of contract, which would mean that he would not be paid short of litigation.  On the other hand, if he did not take appropriate steps to perform the contract, then the Council might be able to terminate the contract without incurring a liability to pay damages.  Save for the letter in question, I would not conclude that Goldspar unequivocally indicated that it would not, under any circumstances, supply 300 poles within a reasonable time – perhaps even by the end of the relevant financial year. 

197               It needs to be appreciated that the letter in question was part of a course of correspondence relating to the request for an extension of time.  An extension of time, if granted, would have the effect of altering the contractual obligation.  It should have been granted.  The response from Khreich of 19 February 2000 was to insist that the obligation was to deliver the full number of poles specified in the order of 8 November 1999 by 21 February 2000.  It is to be noted that the letter in question from Goldspar supplied accurate information as to the expected delivery of extrusions and performance of anodising and accurate information as to when it was anticipated that deliveries would commence.  Furthermore, the statement concerning delivery of extrusions indicated to the reasonable reader that there was a contractual arrangement to that effect.  Such a contract with Capral would be inconsistent with an intention not to carry out the contract.  Seen in this context, in my opinion, the letter was not such as to evince an intention not to be bound by the contract in the relevant sense.  It is to be seen as an exaggerated statement of position in a continuing debate and as ‘part of the posturing that often accompanies negotiation’ (per Ipp AJA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [156]). 

198               I thus conclude that, by its notice of termination, the Council repudiated the contract and Goldspar was entitled to and did accept the repudiation and bring the contract to an end.

Was Goldspar ready and willing to carry out the contract?

199               The Council’s defence sets out a number of particulars in support of its contention that Goldspar was not ready willing and able to carry out the contract.  Rawson-Harris and Barnes were each subjected to a searching cross-examination on the issue.  I am satisfied that Goldspar was ready, willing and able to carry out the contract as at March 2000, notwithstanding the criticisms advanced on the part of the Council.

200               The requirements to be proved by a party, which has properly brought a contract to an end by accepting a wrongful repudiation by the other party to an executory contract and seeks damages, was considered in Foran v Wight (1989) 168 CLR 385, although that was not the precise point of the case.  Such a party must establish that it was ready and willing to carry out the contract on its part at the time of acceptance of the repudiation and readiness and willingness includes capacity.  However, in a situation in which the wrongdoer relieves the other party from actual performance in the future, that task is not particularly demanding.  In Psaltis v Schultz (1948) 76 CLR 547 Dixon J said (at 560):

‘It is enough that he is not presently incapacitated from future performance and is not indisposed to do, when the time comes, what the contract requires.’

201               In Rawson v Hobbs (1961) 107 CLR 466 Dixon CJ said (at 481):

‘One must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness.’

202               In Foran v Wight Mason CJ said (at 408–409):

‘… in the case of termination for anticipatory breach the plaintiff will generally be able to show at the time of termination that he would have been able to perform at the time for performance by demonstrating that he was not then disabled or incapacitated from such performance.’ [emphasis added]

Brennan J said (at 425):

‘To speak of an incapacity which is “substantial” and of a resolve or decision which is “definitive” is to import a test of degree.  A test of degree inevitably gives rise to differences in the evaluation of facts and produces some uncertainty in the resolution of concrete cases.  Yet, in the great variety of circumstances to which the test might be applied, it is impossible to posit terms of greater precision.  Lord Sumner’s phrase – “wholly and finally disabled” – is too demanding a test of incapacity to accord with reasonable commercial practice but it is indicative of the range which the test of substantiality connotes.  The test of incapacity, … as an element in readiness and willingness, is an exacting test though it must be expressed as a matter of degree.’

Deane J said (at 437):

‘ … I do not accept the proposition that a party must incur the expense necessary to put himself in a position where he can positively demonstrate actual or potential readiness and willingness to perform a contract before he can accept the repudiation of the other party and thereby rescind.  In my view, that proposition is unjustified by either principle or common sense.  Absence of actual or potential readiness or willingness to perform a contract will prima facie preclude a successful action against the other party for specific enforcement of the contract or for the recovery of damages for its breach.  It does not, of itself, preclude rescission of the contract by acceptance of the other party’s repudiation.  Were it otherwise, the law would require the useless and futile expenditure by an innocent party of whatever time, effort or money was necessary to place himself in a position where he could positively demonstrate actual or potential ability to perform a contract in order to be able to bring it to an end on the ground that it had already been repudiated by the other party.’

Dawson J said (at 452–453):

‘Even where a party has been absolved by the repudiating party from performing his future obligations under the contract he must show that at the time of the repudiation he was ready and willing to complete the contract had it not been repudiated.  But in proving his readiness and willingness where he has been absolved from tendering performance he may not have to prove a great deal.  For example, in Cort v. Ambergate Rly Co. ((1851) 17 Q.B. 127 [117 E.R. 1229]) the plaintiffs could and did prove that they were ready and willing to manufacture railway chairs in accordance with their contract at the time it was repudiated by the defendants.  But they were not required to prove that they had taken steps to manufacture the chairs in order to be able to tender them.’

Later his Honour said (in the context of the conveyancing case) (at 454):

‘All that the purchasers were required to show was that at the time of the repudiation, that is, at the time they were absolved from future performance, there was not a “substantial incapacity” on their part or a “definitive resolve or decision” against the performance of their obligations.

… They merely had to prove that, at the time of the defendants’ repudiation, two days before the settlement date, they were not incapacitated from raising that amount and had not resolved or decided against doing so.   That was a relatively light burden to discharge and, upon the evidence, I think that the plaintiffs did discharge it.  There is nothing in the trial judge’s findings which requires a contrary conclusion.’

Both Deane J and Dawson J point out that, in establishing the quantum of damages, the innocent party may have to go further. 

203               I am satisfied that Goldspar had the ability to carry out the contract properly construed.  There is no reason of substance to doubt the technical competence of Goldspar.  It had already delivered hundreds of poles and those concerned, particularly Rawson-Harris, had a considerable amount of expertise in the field.  An attack was made upon the financial ability of Goldspar to carry out the contract.  It can be concluded that the company was in a somewhat precarious financial position.  However, a proprietary company of this kind, in essence, depends upon the situation of those backing it.  The critical point is that Goldspar had met all reasonable requirements up to the time of termination, including the payment of the deposit to Capral.  Furthermore, the position of Goldspar would have been quite different if the Council had scheduled for deliveries in a proper sequence from the commencement of the year 1999–2000 with the consequent cash flow.  Goldspar had a backer, apart from Rawson-Harris, who had assisted as required and who had taken a role in the commercial negotiations with the Council. 

204               There was also a substantial attack upon the readiness and willingness of Rawson-Harris to carry out the contract as properly construed.  The cross-examination of Rawson-Harris provides support for the view that he was fed up with, and highly suspicious of, Khreich and the relevant Council officers, at least by 5 October 1999 and did not change his attitude thereafter.  He was also reluctant to accept the results of the Expert Determination as far as the amounts due to Goldspar were concerned and held a view about intellectual property which was inconsistent with that of the Council and with the finding ultimately made in this case.  Those views influenced the positions he took as events developed following the first ‘order’ of 19 October 1999.  The cross-examination also gave support to the conclusion that Rawson-Harris was inclined to hold firm to his own position and not lightly give ground.  I should say that I regard Rawson-Harris as essentially an honest witness although tending to be unnecessarily argumentative.

205               A good deal of the impact of the cross-examination is removed, however, when the context is understood.  As I have already said, by October 1999 Rawson-Harris had every reason to be deeply suspicious of Council officers and Khreich, who had been the mouthpiece of the Council in relation to this contract.  I am not concerned about the fact that Rawson-Harris was not convinced by the Expert Determination, notwithstanding that it was subsequently upheld in the Supreme Court of New South Wales.  It is not unreasonable that a losing party might not be convinced by the result of a lay determination.  I would say the same concerning the question of intellectual property.  Although I found that issue substantially against the interests of Rawson-Harris, I can understand that his position was honestly and firmly held.  In my opinion, the critical matter to understand is that Goldspar was on sound ground both legally and, more particularly, commercially in having sought advance notice of firm requirements prior to or within a reasonable period after the commencement of the relevant period on 1 July 1999 but which still had not been provided by 5 October 1999.  Furthermore, the requirements, when given on 19 October 1999, were both legally and commercially, indefensible.  As I have already said, Orders No 1 and No 2 did nothing to alleviate the substance of the problem.  Thus, Rawson-Harris was faced with the position that was quite unreasonable from a legal and commercial viewpoint, tenaciously defended by Khreich on behalf of the Council. 

206               It was, no doubt, possible that, faced with this situation, Rawson-Harris might have been tempted to play a cat and mouse game and simply await the inevitable termination of contract which was so clearly flagged.  He did not take that course.  Goldspar undertook a substantial contractual commitment to Capral backed by payment of a substantial sum of cash and made arrangements with anodisers and others in order to actually commence the delivery of poles in early April.  That is not consistent with Goldspar not being ready and willing to carry out the contract.  I am unimpressed by arguments concerning the position that Rawson-Harris was taking as to the terms upon which delivery would take place.  At the time of termination the Council was persisting in conduct which, in my opinion, was in breach of its contractual obligations and in bad faith.  It does not lie in its mouth to complain about steps Rawson-Harris took to seek to protect Goldspar’s financial position which could not help but have been badly affected by the manner in which the Council had conducted itself in relation to this contract.  I have already referred to the tendency of parties to take negotiating positions.  The premature repudiation by the Council meant that Rawson-Harris was never called upon to take a final position on any debatable issue. 

207               There was every reason why Rawson-Harris would want Goldspar to carry out the contract.  It was committed to take extrusions from Capral and had paid it a substantial deposit.  It had no other use for the extrusions.  Fulfilling the contract would entitle Goldspar to considerable cash flow, and if it was correct that the contract was supply and install (as in my opinion it was) then, according to Khreich’s assessment, it should have been profitable.

Conclusion

208               It follows that Goldspar is entitled to damages for the repudiation by the Council of its obligations under the contract.  During the course of submissions, it was agreed that the quantum of damages would not be dealt with before I had decided issues of liability.  I have now done so and the matter will stand over to enable the hearing on damages to be scheduled and for the parties to raise any other issues arising out of these reasons.

I certify that the preceding two hundred and eight (208) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:

Dated:              3 May 2006

Counsel for the Cross-claimant:	JV Nicholas SC; DAC Robertson
Solicitor for the Cross-claimant:	Osbornes Lawyers
Counsel for the Cross-respondent:	RJ Ellicott QC; M Condon
Solicitor for the Cross-respondent:	PricewaterhouseCoopers Legal
Dates of Hearing:	26, 27, 28, 29, 30 September 2005, 4, 5, 6, 7, 10, 11, 12 and 14 October 2005
Date of Judgment:	3 May 2006