Supreme Court New South Wales

• Medium Neutral Citation: ARA Electrical Engineering Services Pty Ltd t/as Bass Electrical Engineering NSW v McConnell Dowell Constructions (Aust) Pty Ltd [2011] NSWSC 1377
• Hearing dates: Monday, 31 October 2011
• Decision date: 31 October 2011
• Jurisdiction: Equity Division - Commercial List
• Before: Brereton J

Decision

Judgment for the defendant with costs

• Catchwords: CONTRACTS - Whether binding and enforceable agreement - defendant provides plaintiff with request for quotation for building works - plaintiff submits quote - defendant responds that plaintiff is successful tenderer and provides draft sub-contract agreement with schedule of rates to be filled out by plaintiff - plaintiff fills out and returns draft contract - plaintiff contends provision of draft contract and announcement that plaintiff successful tenderer comprised offer capable of acceptance - plaintiff contends accepted offer by filling in blanks and returning document to defendant - defendant had communicated that draft sub-contract was subject to review and had reserved to itself final execution - improbable that defendant intended to be bound by whatever plaintiff inserted in schedule - matter inserted in schedule not subject to prior discussion - viewed objectively no intention that parties be bound without both parties executing and communicating execution to one another.
• Category: Principal judgment
• Parties: ARA Electrical Engineering Services Pty Ltd t/as Bass Electrical Engineering NSW (plaintiff); McConnell Dowell Constructions (Aust) Pty Ltd (defendant)
• Representation: Counsel: Mr G Carolan (plaintiff); Mr S Robertson (defendant); Solicitors: Schweizer Kobras (plaintiff); Maddocks Lawyers (defendant)
• File Number(s): 2011/198727

Judgment (ex tempore)

1 HIS HONOUR: The defendant McConnell Dowell Constructors (Aust) Pty Limited ('McConnell Dowell') is the head contractor in a project for the construction of a tug boat facility at Port Kembla. On 21 April 2011 it sent to the plaintiff ARA Electrical Engineering Services Pty Limited trading as Bass Electrical Engineering NSW ('ARA'), a request for quotation for electrical works in connection with the project. The request for quotation specified as the scope of works the supply, installation and connection of a new substation and electrical cable to the Integral Energy network, the supply and installation of a switchboard, the installation of lighting and cable, the installation of a communication cable conduit, and (as a provisional sum item) the supply of a light pole. The request for quotation did not contain any relevant provisions regulating the bidding process or providing for when, if at all, a quote might be accepted, or the consequences of selection of a preferred tenderer.

2 After an earlier higher quotation submitted on 4 May 2011, ARA on 18 May 2011 submitted a quote expressed to be for a total cost of $478,890 excluding GST, but specifying as an exclusion "substation costs, PC sum of $201,000 based on uncertified drawings and electricity distributor construction fees". In the quote, various "general conditions" were listed, including:

Conditions of Contract:

We would require the opportunity to review and mutually agree conditions of contract prior to an acceptance of any order for the works.

3 On 25 May 2011, McConnell Dowell sent to ARA an email as follows:

We are delighted to advise Bass Electrical Engineering Pty Limited [a company associated with ARA] is nominated as the successful tenderer for the HV & LV electrical works of the above mentioned project.

Please review the revised subcontract agreement, signed [ sic ] and return two original copy [ sic ] to the undersigned. Ensure to fill out some of the missing information by hand, such as the name & details of Bass's representative on site and the schedule of rate table.

Please also complete the Endeavour Energy's Letter of Intent (attached) ASAP, as we urgently need to establish contact with EE for the transformer.

A pre-start meeting will be arranged once you have nominated a Bass Electrical's [ sic ] representative for this project.

4 Attached to the email was the form of the draft sub-contract, which nominated ARA as the subcontractor and McConnell Dowell as the head contractor. The schedule to it described the sub-contract works as "Electrical works. More fully described in appendix A attached hereto". It left blank the name of the sub-contractor's representative. As to the subcontract sum and currency, it provided "Australian Dollars (AUD) $ + GST. More fully described in appendix B or as otherwise payable in accordance with the Sub-Contract".

5 Appendix A, entitled "Subcontract Works", referred to:

Supply, Install and connect the new substation and electrical cable to Integral Energy network...

Supply and Install Switchboard...

Installation of Lighting and cable...

Installation of Communication Cable Conduit...

Supply of Light pole (Provisional sum item)...

Commissioning and Testing.

6 Appendix B, entitled "Sub-Contract Sum", provided:

The Subcontract sum is a Lump Sum price for the works comprised of the components listed in the table below.

7 The following table listed the seven items in the scope of works to which I have referred, and various sub-items under each of them. It left blank the amount for each submission-item, and the total sub-contract sum. Accordingly, the document submitted under cover of the email contained no provision as to the contract price.

8 Subsequently - probably on 27 May 2011, which date has been inserted on the document - officers of ARA completed the blank spaces in the draft sub-contract. In the schedule, the name of a project manager was inserted as the sub-contractor's representative. In appendix B, "the Sub-Contract Sum", the column under the heading "Amount" was completed by the insertion of handwritten figures for each sub-item; which totalled $679,890. In addition, the rates to be charged for the purpose of any variations were also inserted. There is nothing to suggest that those rates for the purposes of variations had been the subject of any earlier communication, discussion or agreement.

9 On 2 June 2011, Mr Le Beau on behalf of ARA attended at the project site with David Ball, the nominated Project Manager, and spoke to Mr Adamczewski of McConnell Dowell. He handed Mr Adamczewski two completed and signed originals of the contract. Mr Adamczewski said to him words to the effect, "This price in the contract is much higher than what you quoted. You are not the cheapest tenderer. We cannot proceed on this basis". Mr Ball and Mr Le Beau then left the site. Subsequent correspondence confirmed that McConnell Dowell did not propose to proceed with a contract with ARA.

10 By statement of claim filed on 17 June 2011, ARA commenced these proceedings, claiming specific performance of what it asserted to be a contract for a sub-contract for construction of the electrical works in question and, alternatively, damages for breach of contract. By the time of the hearing the claim for specific performance had been abandoned, as had pleaded claims in respect of allegedly misleading and deceptive conduct and estoppel.

11 The proceedings first came before the Court on 5 August 2011, when a direction was made that the plaintiff serve any evidence on which it proposed to rely by 26 August 2011, and the proceedings were adjourned to 2 September. On that day, a direction was made that the period within which the plaintiff was to serve its evidence be extended to 16 September 2011, and the proceedings were adjourned to 23 September. On 23 September, there was no appearance for the plaintiff; a direction was made that without leave the plaintiff not be permitted to rely on any further evidence in chief and that the defendant serve any affidavit evidence upon which it intended to rely by 21 October. The proceedings were adjourned to 28 October with the defendant to notify the plaintiff of those orders. On 28 October the proceedings were set down for hearing today.

12 At the outset of today's proceedings, the plaintiff sought leave to adduce oral evidence to quantify its claim for damages. That leave was opposed. Having regard to the history of procedural defaults on the part of the plaintiff, coupled with the absence of any explanation for why the evidence had not been served any earlier, the prejudice that would be occasioned to the defendant by receipt of evidence at this stage which the defendant was in no position to meet, and the prospect that if I were ultimately to conclude that the plaintiff were entitled to damages, that question could, if necessary and appropriate, still be dealt with on an inquiry as to damages, I declined to grant the leave sought.

13 The fundamental question then is whether there was a binding and enforceable contract between McConnell Dowell as head contractor, and ARA as subcontractor. So far as price was concerned, despite the submissions of McConnell Dowell to the contrary, it seems to me that objectively viewed, there was consensus as to price. The quote of 18 May 2011 was for $478,890 excluding the substation costs, which were expressed as a prime cost sum of an additional $201,000. The total of those figures is $679,890. The price inserted by ARA in the draft contract was that price. The manner in which the schedule was completed was, in my view, consistent with ARA's quote. Objectively viewed, I think there was consensus on a price of $679,890 including the costs associated with the substation.

14 That is not to say, however, that there was a concluded contract. The plaintiff does not suggest that the 25 May email operated as an acceptance of an offer contained in the quote, such as to establish a contract with effect from the sending of the email. That concession is correctly made, as the quote was not an offer capable of immediate acceptance. In particular, the reservation contained in the general conditions, in respect of reviewing any conditions of contract, precluded it from being an offer capable of immediate acceptance. It therefore could not have been accepted by the 25 May email.

15 As ultimately put, the plaintiff's case was that the 25 May email, together with the draft contract that accompanied it, constituted an offer capable of immediate acceptance, and that it was accepted by ARA completing the blanks in it and, presumably, communicating acceptance by return of the executed contracts to McConnell Dowell on 2 June.

16 In that respect, a number of observations must be made about the email and, more particularly, the subcontract. The email submitted "the revised subcontract agreement" for "review", signature and return of two original copies. It therefore contemplated that what was submitted would be the subject of review by ARA. Importantly, the draft contract submitted was unsigned by McConnell Dowell. This indicates that McConnell Dowell was, as is not uncommon, reserving to itself the right of last execution. This is even less surprising when the draft contract was incomplete in form and silent as to price. If ARA could insert in it only the price of $679,890 then it would be implicit that there was already some contract in place, which (for reasons already advanced) there was not. It would be unlikely that ARA was at liberty to insert any price that it pleased in the schedule, and thereupon conclude a binding contract. It is improbable in the extreme that McConnell Dowell intended to be bound to whatever ARA might insert in the schedule. That is reinforced by the circumstance, to which I have adverted, that the rate of charges for variations does not appear to have been the subject of any prior discussion: it is objectively improbable to a very high degree, that ARA would have been authorised to insert whatever figures they pleased in that respect, without the subsequent approval of McConnell Dowell.

17 It is, to my mind, quite improbable, viewed objectively, that the parties would have intended that McConnell Dowell be bound by a contract in which the blanks would be completed by ARA and returned, without execution by McConnell Dowell and before it had seen what ARA had inserted in the blanks.

18 In my view, consistently with the normal way in which written contracts are made, there was, objectively, no intention that the parties be bound before both of them had executed and communicated their execution to the other. It follows that there was no binding and enforceable agreement made up to and including 2 June 2011, and there is no suggestion that any was made after that date.

19 There will be judgment for the defendant, with costs.

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Decision last updated: 16 November 2011