Stencraft Pty Ltd v Graham Evans Pty Ltd B95/1999 [2000] HCATrans 370 (21 June 2000)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B95 of 1999

B e t w e e n -

STENCRAFT PTY LTD

Applicant

and

GRAHAM EVANS PTY LTD

Respondent

Application for special leave to appeal

GLEESON CJ

KIRBY J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 21 JUNE 2000, AT 12.48 PM

Copyright in the High Court of Australia

MR P.A. KEANE, QC: May it please the Court, I appear with my learned friend, MR P.A. FREEBURN, for the appellant. (instructed by Corrs Chambers Westgarth)

MR E.J.P.F. LENNON, QC: May it please the Court, I appear for the respondent. (instructed by Clayton Utz)

CALLINAN J: Gentlemen, there is something I should say. I know Dr Girdis quite well, and also Ms Valmae Pidgeon whose names are mentioned. Is there any problem about that?

MR KEANE: Not from our side, your Honour.

MR LENNON: Not from our side, your Honour.

GLEESON CJ: Yes, Mr Keane.

MR KEANE: Your Honours, the central question before both the trial judge and the Full Court of the Federal Court was whether or not there was a concluded contract between the parties. That question involved issues which overlap in terms of agreement as to terms, and a concluded intention to be bound. What makes this case special, in our submission, is that there are unorthodox aspects of the reasoning of the Full Court whereby the Full Court came to its own impression of the answers to those questions without addressing important aspects of the trial judge's reasoning - - -

GLEESON CJ: Well, I am more in favour of dealing severely with unorthodoxy, Mr Keane. Where did they depart from principle? Did not this case involve the application of well-settled principles to the particular facts?

MR KEANE: Your Honour, in so far as the well-settled principle is that one comes to an objective assessment, or an assessment of the objective intention of the parties, then in our respectful submission, there was a departure from settled principle in the application of principle to the case in that - and this is not simply a debating point - eight times in the judgment there are references to the subjective views of one or other of the parties. Once there is a reference to the objective view, and that is in a context where his Honour Justice Dowsett, writing the judgment, was coming to a conclusion that he would not accept evidence given by one of our witnesses in circumstances where that evidence had not been rejected below, and where it was really not relevant to reject it on appeal. We have identified the various points at which, in the judgment, the eight points, where reference is made to a subjective view of one side or the other about the bargain that has been made - - -

CALLINAN J: Is that the fundamental criticism that you make of the reasoning in the Full Court?

MR KEANE: Your Honour, there are really three basic criticisms; that is the first. The second is that in the judgment in the Full Court, important matters which the trial judge regarded as compelling to the view that the parties had not reached a concluded agreement on terms and had not manifested in an objective way an intention to be bound. Can we just run through them briefly. We have put them in our outline, but just to state them briefly.

The first is - and we should introduce this with something by way of introduction: your Honours, the contract that was found to be made was found to be made in an oral conversation, a telephone conversation on 12 May, which followed a couple of pieces of correspondence. One piece of correspondence not relied upon, but which did precede that, was a letter of 6 May from the respondent which said that the tender was subject to agreement on conditions and special conditions. His Honour the trial judge refers to that at page 4, line 25. There was a further letter of 9 May 1994. That is one of the letters said to form part of the agreement that was found. That letter referred to a number of issues which needed to be discussed and finalised post tender and pre award. There were items which required further detail and specification and a requirement that the conditions of the contract were to be mutually agreed. Your Honours will see that at page 5, lines 30 to 35, and page 6, line 50.

GLEESON CJ: Mr Keane, can I ask you one small matter of fact? Was any work actually done under this contract? I am sorry, I withdraw the words "under this contract". Was any work actually commenced by this builder?

MR KEANE: A temporary structure was erected as a place from which to work on the site and there were a couple of meetings.

GLEESON CJ: That is all. The only reason I ask the question is that experience shows that sometimes, because of a desire to commence building work, the parties make a contract in two stages. In other words, contemplating that a more formal or more comprehensive contract will be made at a future time, nevertheless, because there is some urgency about getting started, they make a less complete contract.

MR KEANE: That is the point at which we reach - the point which we reach is that by these unorthodox processes, the Court reached a conclusion that there was a fourth-class Masters v Cameron type contract, which was that the parties intended to be immediately bound on the question of price in relation to the contract, even though they expected there would be further discussions in respect of conditions and scope of works. In other words, there was an immediately binding contract in respect of price which was binding no matter what might have ultimately been agreed in relation to scope and conditions.

Your Honours, while accepting that such an agreement can be made and was upheld in Baulkham Hills v G R Securities, that was a case referred to in Justice Dowsett's judgment at page 58, paragraphs 44 and 45, where the conclusion that the parties intended to reach an agreement, whether or not they could make a further, more perfect agreement on other aspects of it, and come what may, that was a case where that decision depended upon the interpretation of a written document. In that respect, it is contrasted with the 14^th Commonwealth Games type of case, which your Honour the Chief Justice will recall, where it was indicated that it is a strong thing indeed to hold that the parties had intended to bind themselves irrevocably on a matter of price in respect of works, where other terms have yet to be agreed, and where the binding agreement is held to bind come what may.

In this case, there is no clear words indicating that intent, rather it is come to as a matter of inference or impression. As we say, that is a strong thing to do and it is an even stronger thing to do when one does it ignoring various features which have been identified by the trial judge, such as the need to resolve the conditions that are said to be required to be resolved in the letter of 9 May, and his Honour's finding at page 23, line 27, that that was not overtaken by subsequent events. In the Full Court, that problem, that compelling point, is not addressed, much less analysed and diffused.

As to the conversation of 12 May, there were no words in that conversation which expressly articulated an agreement. The language of it was not consistent with a concluded agreement being reached in that conversation. I refer your Honours to page 10, line 40 - - -

KIRBY J: Now, Mr Keane, you have got to two points, the first about subjective, objective - it does not need words from us to restate the principles there. That is simply the application of settled principles. The second, in relation to the Masters v Cameron category, that is also settled principle. If this were one of those cases which raised the general question of a contract to make a contract, that is potentially a significant question. But this does not seem to be that; this is just another case that would require us to go through the facts again and come to the same or a different conclusion as the Full Court.

MR KEANE: Your Honour, we accept that if we were simply asking the Court to do the exercise again, the case would not be special. We do submit, however, that it is inappropriate for an intermediate appellate court to come to a different view about a matter which may involve the application of settled principle to facts, but to do it in a way which does not address compelling considerations in one side's favour, just simply does not address them.

KIRBY J: But do you suggest that this Court would be re-expressing in some different way the principles in Masters v Cameron, or not?

MR KEANE: No. We do submit this Court would be indicating the limits which must apply to the possibility of inferring a fourth-class Masters v Cameron contract where there are not clear words to that effect.

KIRBY J: Is that law to facts.

MR KEANE: Yes, your Honour.

KIRBY J: There is nothing special about that. It happens every day.

MR KEANE: What we say makes the case special is that in this case the conclusion which was reached, was reached on the basis of recurrent references to subjective intention, a failure to recognise, much less deal with, compelling considerations noted by the trial judge pointing in one direction and, thirdly, a failure to recognise considerations identified by the trial judge in terms of subsequent conduct which were quite inconsistent with the existence of a concluded agreement.

CALLINAN J: We did what you ask and what you say we should do in Yates v Boland, did we not?

MR KEANE: Yes.

CALLINAN J: A case in which the Full Court of the Federal Court had made quite different findings and ignored various matters that the trial judge had found and said.

MR KEANE: That is right, your Honour. And to return to your Honour Justice Kirby's question, really what we are leading to is the submission that what makes the case special is the concerns of the administration of justice.

KIRBY J: Essentially, it seems to come down to a complaint about the reasoning of the judge in the Full Court, Justice Dowsett.

MR KEANE: Which occurs, your Honour, in the context where - - -

KIRBY J: We do not sit here to correct judicial reasoning, as such, but the orders and the conclusions that they lead to.

MR KEANE: But, with respect your Honour, to the extent that the conclusion of the trial judge, having regard to the reasons which he advanced, to the extent that it was correct, and to the extent that there has been, by an unorthodox approach, a different result reached, in which the reasons why the trial judge is wrong are not explained, the due administration of justice, in our respectful submission, may involve this Court in correcting that approach.

The third thing we wanted to talk about related to subsequent conduct. In that regard, after the conversation of 12 May, our side presented a letter. Now, it is not said that the contract was concluded by presenting a letter. The letter said, "We accept your price". It then indicated that there would have to be further provisions made in relation to the terms and conditions. As to scope, it contained provisions as to scope of works different from those which had previously been exchanged and which ex hypothesi had not yet been agreed. Rather than protest, the respondent submitted a further and different version of the scope of works and his Honour the trial judge relied upon internal memos of the respondent which acknowledged the need for negotiations to finalise all of the conditions of the contract, including a full price review, and a direction that staff resources were to be committed to minimising the scope of works; plainly inconsistent with the notion that there was a concluded contract.

So, your Honours, in our respectful submission, these unorthodoxies led to, what we submit, is an incorrect result - and a very strong result - in the sense that there has been an inferred fourth-class Masters v Cameron contract, an inferred contract whereby the parties have agreed to be bound as to price, but come what may as to the negotiations about terms and conditions, including things like liquidated damages, which it was accepted at trial on the other side had to be negotiated but had not been; a matter vital in the context of commercial development.

GLEESON CJ: I gathered from what you said to me earlier when I asked about the facts, that this was not a case where the parties were under some kind of pressure of urgency of circumstances, to get a concluded agreement about something.

MR KEANE: Your Honour, in the Full Court it was thought that the possibility that the "A" Team, a particularly skilful group of people in the employ of the respondent, might be committed to another job - - -

CALLINAN J: The "A" Team?

MR KEANE: The "A" Team, and it weighed with his Honour in the Full Court that in order to ensure they were not committed elsewhere, this contract was required to be concluded that day, on the 12th. What that consideration does not answer is that in that conversation there was discussion about bringing over a letter which is going to contain some conditions, and which will contain what turned out to be, in effect, a counter offer in terms of scope of works.

GLEESON CJ: Is this not one of these cases where the ultimate outcome depends really upon the weight that a judicial mind attaches to countervailing considerations?

MR KEANE: It does, your Honour, and that is why it is of particular importance that the view that the trial judge has taken as to the various countervailing considerations should be respected, at least so far as to say why he is wrong in having been moved by them.

GLEESON CJ: This is one of those cases where clients always say they would like a one-handed lawyer because any lawyer you asked a question would say "on the one hand, this" and "on the other hand, that".

MR KEANE: Quite, your Honour. We accept immediately that the case does involve a balance - - -

KIRBY J: I suppose you would be entitled to say that that makes it all the more important that orthodox principles and correct rules of law are manifestly observed in coming to an opposite conclusion.

MR KEANE: Yes, your Honour, in particular in not dealing with considerations which do have weight in pointing to a particular answer, and the answer the trial judge came to.

GLEESON CJ: Is this a convenient time to break?

MR KEANE: Yes, your Honour.

GLEESON CJ: We will adjourn until 2.15 pm.

AT 1.05 PM LUNCHOEN ADJOURNMENT

UPON RESUMING AT 2.22 PM:

GLEESON CJ: Yes, Mr Keane.

MR KEANE: Thank you, your Honours. Your Honours, there were just two other matters by way of detail to complete our submission: the first, if we can take your Honours to page 26 of the record. We mentioned earlier in relation to the criticisms we make of the reasoning a failure to take into account or to address what the learned trial judge made of some subsequent conduct, conduct subsequent to the alleged contract. If your Honours look at paragraph 77, your Honours will see an internal memorandum which is recorded as following a letter that has been sent:

"Now we have this project -

and our case is, they had the project in the sense that the price had been agreed and the tender process was complete, post tend pre-award -

and return to construction mode -

Negotiations to finalise all the conditions of contract including a full price review..." -

are proposed and your Honours will see the handwritten note of 20 November where Mr Harrington is directing one of his subordinates to, amongst other things, minimise the scope of works.

GLEESON CJ: You might have a question there. That is an interesting question, is it not, the extent to which internal communications within a corporate party can be relied upon when you are looking at subsequent conduct.

MR KEANE: Your Honour, they seem to have perhaps made available the letter of 13 May, which is referred to between lines 30 and 35, and in relation to that question, and the point we are making, we take your Honours to this, is that his Honour Justice Dowsett in the Full Court does not refer to these matters as having any significance at all.

KIRBY J: Is that not getting close to subjective intentions though, if it is not known to the world or not known to others?

MR KEANE: Your Honour, it may be, and there is a question, I suppose, as to the extent to which one can use it, but it does reflect rather strongly on the likelihood that there was a consensus struck in the conversation of the 12th, when one of the parties to that consensus, that alleged consensus, is saying, now get all the negotiations completed, including a review of the price, and reduce the scope of works as much as you can. The significance of that is not dealt with at all.

Finally, your Honours, page 59, where the test is stated, where the effect of the Baulkham Hills approach is stated, in paragraph 45 lines 17 to 20, and we draw the Court's attention to the circumstance that it is stated in terms of the terms of a written document. It is on that basis that we say it is a strong thing for a court to conclude that by inference, that is to say not by reason of express words, written or oral, but by inference from words and conduct, that the parties have reached the conclusion that they will be bound as to price, come what may in relation to their negotiations as to scope of works. Those are our submissions.

GLEESON CJ: Thank you. Yes, Mr Lennon.

MR LENNON: Your Honours, the applicants assert that the intermediate appellate courts' reasons contain references, that is unorthodox references, described as eight or recurrent, to subjective intention. Our submission is, and only for the purpose of dealing with this as a special leave point, reference to the reasons disclosed that there is no merit in that assertion of unorthodoxy by the appellate court.

Might I ask you to look at five passages in the reasons to make my point, starting with application book page 41 at line 7 - it is line 15 in the large print:

At a meeting on 9 May 1994 -

Just putting that in context briefly, your Honours, the first tender had been submitted on 22 April, the parties had been meeting since that time and now the narrative is taken up, and this is the exposition of the judgment of the Full Court that is criticised for being unorthodox. At a meeting a letter is produced, third line into that paragraph:

The letter was accompanied by a number of documents -

It is not necessary to give close analysis. In the last sentence:

There is no apparent reason why the letter with enclosures should not be characterized as an offer capable of acceptance.

Go from there, if you please, to application book page 57 line 22, under the heading, "Formation of the Contract":

After the meeting on 9 May, the offer made by the appellant on that date had either been rejected or had lapsed. Thus the memorandum of 10 May -

that is the next step following the letter -

constituted a new offer based upon its own terms and those of the offer made on 9 May.

I will just skip down a sentence or two:

The offer was still open on 12 May when Girdis rang Harrington. As the appellant's case assets a contract made in the course of that telephone conversation, the next question is whether or not what was said by Girdis constituted an acceptance of the offer. That problem must be considered in light of the fact that the parties expected eventually to enter into a contract based on AS 2124 as amended.

That is a reference to the terms of the previous correspondence which had referred to that expectation in the communications; it is not an indirect reference to subjective intention.

KIRBY J: Can you help me on this? Is subjective intention of parties forbidden, is it territory that must not be entered, or is it simply that when you look at what they subjectively intended, you always have to remind yourself that it is only to be taken into account as it points to the objective determination that the court, looking at all the facts, decides?

MR LENNON: Well, I would answer that, generally, subjective intention - - -

KIRBY J: I mean, witnesses get in a box and they will describe things as they have perceived it.

MR LENNON: Generally, subjective intention is irrelevant to the question of whether the parties, by their communications, made a contract. In relation to this case, the special leave point is whether, in fact, the judgment reasons reflect a misuse of subjective intention and we join issue.

KIRBY J: Unorthodox,.....was said.

MR LENNON: We say, when you look at the reasons, you cannot find that there is any use of subjective intention in this particular case, and I am demonstrating that by re-showing - - -

KIRBY J: I realise what you are doing; I am just trying to get the principle clearly in mind.

MR LENNON: The judge recognises the principle correctly and states it expressly in a passage I am about to take you to, and bear with me while I take you through these five instances. The question then, as posed by the reasons, on page 57, just before line 35:

The question is whether or not, in anticipation of that final agreement, they chose to enter into an agreement to regulate their relationship in the meantime.

Go from there to application book page 61 line 22:

Girdis believed that both scope and price were agreed, although he now suggests that the parties were at cross-purposes as to scope.

There is a reference to belief, but I will read on:

There can be little doubt, however, that on 12 May, he was speaking in the context of the final offer documents.

They are the documents I have referred your Honours to.

It is clear from his and Brands' evidence that they were aware of those documents at the time of the telephone call.

They were the documents that had been exchanged.

From the appellant's point of view, Girdis could only have been responding to the memorandum of 10 May.

That had been sent and received.

It is not clear to me how or why he now asserts otherwise, but even if he was mistaken at the time of the conversation, his words did not disclose that. It is his objective meaning which is relevant.

So, the judge who wrote this was excluding references to belief, such as may have got into the record or may have excited the interest of the trial judge, and the judge whose reasons are under criticism now is proceeding in an orthodox manner.

I move from there to the following page of the application book, page 62. Your Honour the Chief Justice inquired whether there was any commercial context such as urgency which might have explained that the words of the parties should be taken, having regard to the meaning they could properly bear, to be expressing an intention to be bound immediately, and here it is all set out in detail:

There were, however, reasons why the parties may have wanted immediate agreement.

And then he sets out what the parties knew from their previous dealings and conversations and he says at line 20:

These matters were known to both parties.

So he is not delving into the minds of individual parties to negotiations.

Girdis knew the tenders for -

a competing project, that is -

Admiralty Towers were closing on 13 May, and Harrington must also have known this.

Quite so. Harrington was intending to tender for it.

Girdis was eager to have the A Team on his project and was correspondingly anxious to ensure that the appellant did not assign it to Admiralty Towers.

Putting it another way, commercially Girdis' company was wanting to book up, or obtain a commitment from, the builder it had in front of it. They had reached the stage of the negotiations reflected in the correspondence, which I have briefly described, and the question was whether, since the tenders for the competing project were closing the very next day, the words might reflect an intention to book up this particular builder, this day, so that he would not submit a tender for the competing project. And so his Honour goes on:

During negotiations, the building period had been discussed in a way which suggested an element of urgency about getting on with the project. These matters were known to both parties.

And so, his Honour deals explicitly with the circumstances, that is the commercial circumstances known to both parties in which they were participating. There is not the slightest hint in that of an unorthodox taking into account of subjective intention. At appeal book 50, his Honour is noting just after line 40 - - -

KIRBY J: See line 5 there:

You thought you had a deal then? Yes, we did.

That is like subjective intention.

MR LENNON: Well that, in fact, is a piece of evidence which was elicited by the trial judge, when he asked that witness those questions, and his Honour, the judge whose reasons are being criticised, was setting out a passage of evidence and nowhere does he indicate that he has taken any statement to that effect into account and, indeed, the effect of what I have read from his Honour's explanatory narrative - in this part he is summarising the evidence - when he proceeds to deal with, in the analytical part of his judgment, he expressly explains the relevance of subjectively ascertained intention, and it does not figure in it. You have not been referred by our learned friends to anything which really indicates that there has been an unorthodox use of subjective intention by the judges at the intermediate appellate level. I want to say nothing about the use made of subject intention by the trial judge.

KIRBY J: This is only the first of the three points that were argued. Is this your good point; you do not want to come to the other two?

MR LENNON: No, your Honour, I was just pausing while I was reflecting that there are really only two points, as we saw our learned friends. Their next point was that the reasons were not explanatory. I am sorry to be slow. The answer to the assertion that the reasons are not explanatory is really to be similarly dealt with by looking at the reasons commencing at application book page 65. In line 1 he says:

The learned trial judge appears to have concluded that there was no concluded agreement, largely because there was no agreement as to the variations to be made to AS 2124, including the completion of blank spaces.

Now these cases, Masters v Cameron Cases, do tend to require a detailed study of what the parties' context has been and what they have done, and this is not my purpose, not inappropriate, but purely for the purpose of addressing the special leave point. The learned judge at the intermediate appellate court now proceeds to set out at length over these pages, having reached his own conclusions as he sets them out on the previous page under the heading "Conclusion", he now addresses the things that troubled the trial judge and he deals with them and he does not rely on subjective intention. What principally he relies on is the notion that did not seem attractive to the trial judge, but the parties, without doing violence to the notion of what is truly an essential term in a legal sense, can decide during their negotiations when they have, in effect, had enough. That is, they can define what are important terms to them, having regard to the commercial considerations as to whether or not they want to now commit each other to legal relations.

In this particular case, the builder was to go into possession of the site, and the Court was informed this morning that the builder went in and started some work. On the case propounded by the applicant, there would be no relevant contract. It would be just going in there, pursuant to what? On the case propounded by the respondent, it was going in on an interim contract suitable to the parties, quite extensively documented, as will have been perceived from the exchanges of correspondence in this long tender and re-tender process. It was perfectly open to the intermediate appellate court to conclude that the trial judge was incorrect to deny to the parties the opportunity to decide for themselves how much certainty they needed to bring into the resolution of the terms of their building contract.

The attitude or approach of the trial judge is set out at application book page 22 and it can be usefully summed up in the two lines commencing at line 20:

The Court will not draft a contract for the parties where they have failed to reach agreement.

And he went on to say why he thought they had failed to reach agreement. They had not, in fact, filled in every blank in AS 2124. But it simply is not the case that the leaving of a blank in a document always carries with it the consequence that the parties have failed to reach agreement and the court must declare that the parties did not intend at that time to reach an agreement; it is a question of balance and evaluation of the intention of the parties.

Now, once again, that is something that was done at the trial, and it was redone at the appellate court level, and my learned friend wants this Court to do it again. The leverage comes from the assertion that the reasons are not good enough or that there are recurrent references to subjective intention. But, in our submission, they are not shown to infect this judgment and to make it appear that its unorthodox approach has denied somebody a fair trial or a fair appeal or deprived them of a right of appeal to this Court, because the reasons are so obscure.

Your Honours, the third point seems to be the references at application book page 26. This is a reference to subjective intention. The passage that was shown to you by my learned friend, Mr Keane, is from the trial judge's reasons. One would have thought that it could be easily argued that it was wrong for his Honour to put one particular interpretation on that document, it is obviously capable of more than one interpretation, could have indications going both ways, but Mr Justice Dowsett's reasons proceed independently of that and, rhetorically, one would say, well why not? Why should his Honour, in relation to a piece of subjective evidence, which was ambiguous or equivocal, deal with that necessarily taking every little aspect of the judge below. The judge below did not, in fact, say that the passage on page 26 was central to his reasoning. Just after line 35 he says it is "significant", but the central reasoning of the judge, as described by him, was that he thought there were too many outstanding terms, that is blanks, not completed in this standard form of contract, AS 2124.

Your Honours, those are our submissions.

GLEESON CJ: Thank you, Mr Lennon. Yes, Mr Keane.

MR KEANE: Your Honours, just briefly, our learned friend took you to the record at page 61 line 30. That is the one reference to objective intention. We mentioned earlier that there were eight - - -

KIRBY J: But it is a very firm statement by his Honour that it is the "objective meaning that is relevant". It could not be a clearer exposition of the principle that you say is missing from his reasons.

MR KEANE: And, your Honour, when one looks at it in its context, it is not a guiding principle in relation to the resolution of the case. It is - - -

KIRBY J: But you are saying the judge made a sort of fundamental mistake of contract law, that he was looking at the issue from the point of view of the subjective intention of the parties, and if it had been simply the reasons without that statement, you might be able to advance that, but when his Honour specifically states that "It is his objective meaning which is relevant", then really he answers your criticism.

MR KEANE: In that one area, your Honour.

GLEESON CJ: One thing we do not want to encourage is an idea that there is a need for repetition amongst judges or counsel.

MR KEANE: No, your Honour, I accept that. The other thing we wanted to say is that, in relation to the question of urgency, there was an urgency. What was affected by the discussion on 12 May and the provision of the letter, was an end of the tender process. The builder became the only tenderer in the field.

GLEESON CJ: We will adjourn for a short time to consider the course we will take in this matter.

AT 2.45 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.46 PM:

GLEESON CJ: The Court is of the view that the decision in this case turned upon the application of well-established principles to the facts and circumstances of the particular case and the matter raises no point that warrants a grant of special leave to appeal. The application is refused with costs.

AT 2.47 THE MATTER WAS CONCLUDED