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AJ Lucas Operations Pty Ltd v Gladstone Area Water Board

 

[2015] QCA 287

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

AJ Lucas Operations Pty Ltd v Gladstone Area Water Board & Anor [2015] QCA 287

PARTIES:

AJ LUCAS OPERATIONS PTY LTD
ACN 087 777 633
(appellant)
v
GLADSTONE AREA WATER BOARD
(first respondent)
GLADSTONE REGIONAL COUNCIL
(second respondent)

FILE NO/S:

Appeal No 674 of 2015

SC No 9296 of 2013

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2014] QSC 311

DELIVERED ON:

18 December 2015

DELIVERED AT:

Brisbane

HEARING DATE:

4 August 2015

JUDGES:

Morrison and Philippides JJA and Ann Lyons J

Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER:

Appeal dismissed with costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT – WHETHER CONCLUDED CONTRACT – where the appellant and the respondents were negotiating to try and settle a dispute between them about the termination of a joint project for the construction of water and sewerage pipelines between Gladstone and Curtis Island – where the primary judge made a declaration that the parties had entered into a binding contract – where the appellant argues that the parties did not intend to be bound before the formal execution of the deed of settlement – where the appellant argues that no offer capable of acceptance was made by the respondents – where the appellant argues that the acceptance of the final offer by the CEO of the appellant was not on the precise terms of any earlier offer – where the appellant argues that the representatives of the respondents did not have authority to bind the respondents and could not have made an offer capable of acceptance by the appellant – whether there was an intention to be bound by the parties – whether an offer capable of acceptance was made by the respondents – whether there was a difference between the terms of the final offer and the earlier oral agreement – whether the parties entered into a concluded agreement

Corporations Act 2001 (Cth), s 127

Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647; [1908] HCA 88, considered

Cannon Street Pty Ltd v Karedis [2004] QSC 104, followed

GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, followed

Hopcroft & Edwards v Edmunds & Ors (2013) 116 SASR 191; [2013] SASCFC 38, considered

Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72, followed

Parker v Alessi [2011] NSWSC 947, considered

RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027, considered

VDMT Pty Ltd v Francher Pty Ltd [2009] QSC 351, considered

COUNSEL:

B O’Donnell QC, with D Macfarlane, for the appellant

J McKenna QC, with S Webster, for the respondents

SOLICITORS:

Vincent Young for the appellant

Minter Ellison for the respondents

  1. MORRISON JA:  I have had the considerable advantage of reading the draft reasons of Ann Lyons J.  I agree with those reasons and the order her Honour proposes.
  2. PHILIPPIDES JA:  I agree for the reasons stated by Ann Lyons J that the appeal should be dismissed with costs.

ANN LYONS J:

This appeal

  1. Between June and November 2012 representatives of the appellant company, AJ Lucas Operations Pty Ltd (AJ Lucas), and the respondent entities, the Gladstone Area Water Board and the Gladstone Regional Council (the Gladstone parties), were negotiating to try and settle a dispute between them about the termination of a joint project for the construction of water and sewerage pipelines between Gladstone and Curtis Island.
  2. Two settlement meetings were held on 16 November 2012.
  3. The major issue in contention during the six day trial was therefore whether a concluded agreement was ever entered into at any time on 16 November 2012.  The Gladstone parties consider that a concluded agreement was reached between the CEOs to settle all but some of those claims for $26.2 million at either the first meeting on 16  November 2012 or shortly after the second meeting on that day when the CEO of AJ Lucas signed a document and returned it by facsimile at 4.31 pm.  AJ Lucas considers that no concluded agreement was ever reached that day.
  4. On 19 December 2014, the primary judge made a number of orders including a declaration that “on 16 November 2012 the plaintiffs and the defendant entered into a contract on the terms of the document entitled ‘Deed of Settlement No 1’.”[1]  The Deed of Settlement No 1 (Deed) had been signed by Allan Campbell, the CEO of AJ Lucas, and sent by facsimile to the solicitor acting on behalf of the Gladstone parties at 4.31 pm that day.  In reaching that conclusion, the primary judge rejected the Gladstone parties’ primary case that a concluded binding agreement had been reached at the first meeting on the morning of 16 November 2012.
  5. AJ Lucas seeks to appeal some aspects of the primary judge’s decision arguing that the primary judge erred in declaring that the parties had entered into a binding contract on 16 November 2012, as neither party had demonstrated an objective intention to be immediately bound by the terms of the draft Deed on the transmission of the document by Allan Campbell.  It is further argued that both parties intended not to be bound by the terms of the draft Deed until the document was executed by their various authorised representatives.
  6. Pursuant to a Notice of Contention, the Gladstone parties contend that the primary judge should have found that the parties entered into a legally binding agreement at the conclusion of the first meeting held on 16 November 2012, rather than at the time the facsimile was sent to the solicitor acting for the Gladstone parties at 4.31 pm.
  7. The other declarations made on 19 December 2014 are not the subject of this appeal.

The primary judge’s decision

  1. The trial before the primary judge was a claim for declaratory relief by the Gladstone parties that they had entered into a contract with AJ Lucas to settle part of a dispute as outlined in the Deed.  None of the factual findings of the primary judge are fundamentally challenged on this appeal and the appeal relates only to legal consequences of the findings made by the learned primary judge.  A short history of the dealings between the parties can be conveniently summarised as follows.
  2. The Gladstone Area Water Board is a water authority under the Water Act 2000 (Qld) and its CEO is Jim Grayson.  The Gladstone Regional Council is a local government under the Local Government Act 2009 (Qld).  AJ Lucas is a building company and its CEO is Allan Campbell.  On 12 September 2011, the Gladstone parties entered into a contract with AJ Lucas pursuant to a formal instrument of agreement in relation to a joint project to provide water and sewerage pipeline infrastructure and access roads between Gladstone and Curtis Island.
  3. On 7 or 8 June 2012, the parties entered into a Deed of Termination[2] which brought the construction contract to an end on 8 June 2012.  The Deed of Termination provided that AJ Lucas’ claims, as set out in Schedule 2 of that Deed, survived the termination and were to be dealt with in accordance with the Deed of Termination.  That Deed then provided a regime by which the parties could attempt to settle their dispute by negotiations and, if the negotiations failed, there would be a reference to an expert panel for determination.
  4. On 8 June 2012, payment claim No 12 and the final payment claim No 13 had not been submitted.  On 14 June 2012, AJ Lucas submitted claim Nos 11 and 12 for work up to 25 May 2012.  On 15 June 2012, claim No 13 was submitted.  The Deed of Termination provided that the representatives of the parties would meet and negotiate in order to settle those claims.  The parties met on 12 July 2012 and a mediation was held between 27 and 29 August 2012 with a further meeting on 19 September 2012.  No agreement was reached.
  5. On 22 October 2012, the parties engaged an expert panel to provide an expert determination of the disputes between the parties.
  6. On 5 November 2012, Mr Grayson from the Gladstone parties sent an email to Mr Campbell from AJ Lucas indicating that it would be costly for the full scope of all the claims to be included in the expert determination process and set out a settlement offer of $25,074,918.62 for all of AJ Lucas’ claims under the Deed except for identified exclusions.  The letter noted that there was a preliminary conference of the experts on 19 November 2012 and he requested a formal response by Thursday, 15 November 2012.  A draft Deed of Settlement No 1 was attached to the email.  That draft Deed set out in a table what items were not to be resolved by the Deed.
  7. Between 7 November 2012 and 13 November 2012, there was a series of emails between Mr Grayson and Mr Campbell in relation to the proposed Deed, particularly in relation to a break-up of the offer amount and how the offer amount had been composed.
  8. Mr Peter Williams from AJ Lucas also became involved.  On 8 November 2012, Mr Grayson sent an email to Mr Campbell indicating that he required Mr Campbell’s explicit commitment that any agreement with Mr Williams would bind the company.  On 12 November 2012, Mr Grayson sent an email to Mr Williams declining to discuss matters until he received confirmation from Mr Campbell that any agreement with Mr Williams would bind AJ Lucas.  Mr Campbell subsequently sent an email to Mr Grayson declining to give the assurance but confirming that Mr Williams had authority to represent AJ Lucas.
  9. Further correspondence ensued on 13 November 2012 whereby Mr Grayson clarified a few errors in relation to the 5 November offer and then explicitly asked how an agreement could be reached that would bind AJ Lucas, noting that usually a CEO would participate in the discussions to ensure any agreement reached would be effective.  Mr Campbell responded on the same day indicating that “My suggestion, therefore, is that you, Peter [Williams] and I do this together.  Therefore, there will be no misunderstanding: unless lawyers play games.  This would give us both the best chance of reaching a quick conclusion.”[3]  When Mr Grayson suggested a meeting on 16 November, Mr Campbell replied “Peter [Williams] and I will be there.  Morning would be best – to give us time to do a deal and document it (emphasis added).”[4]
  10. On 16 November 2012, there was a meeting between Mr Grayson and Mr David Murchland on behalf of the Gladstone parties and Mr Campbell and Mr Williams on behalf of AJ Lucas.  The meeting was held at the office of the Gladstone Area Water Board at South Brisbane and lasted for more than three hours.  Three of the attendees made notes and some of the attendees wrote on a whiteboard which was in the room.  All of those in attendance gave evidence at trial and the primary judge made the following significant observation in relation to their evidence about the meeting:

[36]As might be expected, the attendees’ individual recollections differed.  Some of the differences are material; others are unimportant.  As to the matters of importance, there were five that stood out, in my view:

(a)first, whether there was any agreement that claims identified as item 7 and item 8 would be treated as coming within a claim identified as item 6;

(b)second, whether the red writing made by Mr Grayson on the white wall was made during the meeting;

(c)third, whether Mr Murchland and Mr Williams went over Mr Murchland’s handwritten changes to his copy of the 5 November draft deed and agreed to them for the purposes of reaching agreement before the first meeting ended;

(d)fourth, whether at the end of the first meeting Mr Campbell orally agreed to the deal reached on the basis of those agreed changes, so that a concluded agreement was reached, on those terms, or whether the first meeting concluded on the basis that the required changes to the 5 November draft deed were to be settled at the second meeting; and

(e)whether Mr Grayson said that he needed to get the approval of his board of directors.”[5]

The primary judge’s findings about the first meeting on 16 November 2012

  1. The primary judge found that whilst there were different versions of the conversations about items 7 and 8 and although there was some discussion about the scope of items 6, 7 and 8, he did not find that there was any agreement reached or expressed at the meeting that items 7 and 8 would be treated as being made in item 6.[6]
  2. The second finding was that the red writing made by Mr Grayson on the white wall was made by him at the first meeting and not afterwards.[7]  The primary judge considered that:

[43]… The contrary conclusion would require a finding that, at the least, both Mr Grayson and Mr Murchland mistakenly believed the contrary and have, as a result, reconstructed a substantially false version of the events of the first meeting. The alternative view is that both Mr Campbell and Mr Williams are mistaken in their failure to recollect Mr Grayson making that writing and what he said at the time of doing so. That is the view I prefer. Mr Campbell and Mr Williams would not have seen the photograph taken of the white wall until about seventeen months after the first meeting.”[8]

  1. The third finding made by the primary judge was that he did not find that Mr Williams and Mr Murchland went over Mr Murchland’s additions to the 5 November draft Deed and agreed that they were the changes to be made to the 5 November draft Deed before the first meeting ended.[9]  The primary judge accepted that Mr Murchland made notes and changes on his copy of the 5 November draft Deed, but was not satisfied that “the changes were agreed with Mr Williams and acknowledged by Mr Campbell as the agreement.”[10]  His Honour considered that the evidence of Mr Murchland that he showed the changes to Mr Williams “so that it was clear all of those changes were the changes that had been agreed to be made”[11] was a reconstruction because the agreed changes were not noted or initialled in any way and that aspect of Mr Murchland’s evidence was not contained in the summary of evidence which had been served before the trial.
  2. The primary judge also rejected Mr Grayson’s characterisation that at the first meeting, Mr Murchland and Mr Williams were writing in the revisions of the document that reflected the agreement that had been reached and that they had attended the premises of Minter Ellison for the purpose of inserting those revisions into the document.[12]  His Honour rejected that characterisation on the basis that if all that had to be done was to insert agreed amendments, then the mere typing task could have been done by sending a copy of the agreed changes electronically to someone to produce a fair copy.[13]  His Honour concluded: “The second meeting was clearly intended to be more than that.  In my view, it was for the purpose of documenting the matters that had been agreed at the first meeting, but not on the basis that it was a mere insertion of agreed revisions.”[14]
  3. His Honour also considered that if the changes had been agreed at the first meeting, it would seem unlikely that those changes “would not have been used as the agreed starting point for the discussion at the second meeting, but that is not how it proceeded, on balance, on the evidence given of that meeting.”[15]
  4. Ultimately, his Honour stated:

[50]Fourth, while I accept that Mr Campbell said at the conclusion of the first meeting that there was a deal or that he accepted the plaintiffs’ offer, I do not find that was in the context that the required changes to the draft deed had been agreed.  Instead, I find that that at the end of the first meeting on 16 November 2012, the expressed intention of the parties was that they had reached an agreement which was then to be reduced to a final written form at the meeting to take place at Minter Ellison at 2:30pm.  Their agreement was that Mr Murchland and Mr Williams were to go to Minter Ellison’s offices where the required changes would be made and the final Deed of Settlement produced for signing by Mr Campbell that afternoon.

[51]Fifthly, I reject the allegation that Mr Grayson said that he would take the final document to be signed by Mr Campbell back to his board for approval, or needed to do so” (emphasis added).[16]

  1. Pursuant to the Notice of Contention, the respondents argue in this appeal that a conclusion that a concluded agreement had been reached at the first meeting was not displaced by the fact that a formal document was to be prepared that contained subsidiary terms that were to be settled by their solicitors.  In this regard, reliance is placed on the history of the correspondence which made it clear that the purpose of the first meeting was to come to a concluded agreement whilst both CEOs were present.  The respondents argue that a restatement by the solicitors of the terms of the agreement in a more precise or expanded way did not mean that there was no intention to be immediately bound.
  2. The appellant argues that there was no intention to be immediately bound at any time on 16 November 2012 and that a concluded agreement was never reached at any point on that day.

Did Mr Campbell and Mr Grayson intend to be bound at the first meeting on 16 November 2012?

  1. As McHugh JA made clear in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd,[17] the decisive issue in relation to a determination as to whether there was an intention to be bound is whether such an intention can in fact be “objectively ascertained from the terms of the document when read in the light of the surrounding circumstances.”  Such surrounding circumstances include the conduct of the parties as well as the correspondence and other words used.  As Muir J stated in Cannon Street Pty Ltd v Karedis:

[108]Where, as is the case here, a binding agreement is alleged to have come into existence after oral and/or written communications between the parties over a period of time, the communications alleged to constitute the agreement must be considered in the light of the other exchanges and not in isolation.  Also, the question of whether a binding agreement has been concluded is not always capable of resolution by attempting to draw out of oral or written exchanges a discrete offer and acceptance” (citation omitted).[18]

  1. There is no doubt that at trial an important fact, which was manifest in the evidence before the primary judge, was that there had been a history of frustrated negotiations between the parties.  In this regard, the letter from Mr Grayson to Mr Campbell dated 9 October 2012 is significant.  In that letter, Mr Grayson stated:

“Your company has recently been represented by Mr Peter Williams in matters relating to its terminated contract with Gladstone Area Water Board and Gladstone Regional Council.

Mr Williams was presented as authorised to represent your company.

Notwithstanding reaching two separate agreements with Mr Williams, first at mediation and secondly for settlement of two court proceedings (regarding adjudication and security matters), I have been unable to formally conclude a written agreement with your company on either occasion.

In those circumstances it is unclear how I might continue to deal with Mr Williams.

Mr Williams’ authority appears constrained, for whatever reason.  He does not seem to have sufficient authority for practical purposes i.e. to allow matters to be concluded by agreement with AJ Lucas in relation to the dispute between us.

It would seem in our mutual interest to have clear lines of communication between appropriately authorised representatives.”[19]

  1. It is not disputed that Mr Campbell at all times had authority to bind the AJ Lucas companies.  He was the CEO and Executive Chairman of the company.  The letter of 9 October 2012 was not responded to and the appointment of the expert panel occurred on 22 October 2012.
  2. It seems clear from the evidence before the primary judge that there had been a real difficulty in converting a consensus between the parties into a final agreement because Mr Williams was not able to reach a conclusion which would bind AJ Lucas.  As counsel for the Gladstone parties pointed out, the expert determination was scheduled for November and with that date approaching it would be a very expensive process if things were not settled.  Clearly, the letter of offer dated 5 November 2012[20] was delivered against that background.  Indeed, that letter set out the history of dealings between the parties and the fact that whilst agreements had previously been reached with Mr Williams, they had not translated into concluded written agreements.
  3. In the 5 November 2012 letter, Mr Grayson specifically stated that it would be in their mutual interests to address this difficulty given the significant costs involved.  He referred in particular to the 19 September 2012 meeting where he considered there had been an agreement in principle to try and reach an all-up settlement of claims, excluding the extension of time claims, other heads of claim, some specific variations and the Gladstone parties’ counterclaims.  He also referred to the advice given by the expert panel on 15 October that they required the parties to use their best endeavours to narrow, refine and particularise the matters that remained in dispute.  In light of those matters, Mr Grayson addressed the following offer directly to Mr Campbell as Chairman of AJ Lucas:

Offer for Partial Settlement of Claims

The Principal offers that $25,074,918.62 excluding GST be recognised as due and paid to your Company in the final reconciliation of accounts for this matter, in consideration of all claims under the Deed of Termination excluding only:

1.Lucas’ Extension of Time claims

2.Lucas’ Other Heads of Claim

3.Lucas’ Variation claims in part

a.Claims AJL20, AJL35, AJL62, AJL64, AJL143 and AJLI68 (previously valued by Lucas at approximately $2.1 million) are excluded from settlement and no consideration for those claims is included within this offer.

b.Claim AJL12 is partly settled by this offer, but the offer excludes from settlement any claims by Lucas which exceed $1 million in relation to this claim.

c.Note that this offer reflects that subcontracts have been taken over by the Principal, with effects including that they supersede claims AJL29, AJL45, AJL50, AJL57 and AJL104 (previously valued by Lucas at approximately $1.4 million).

4.The Principal’s Claims

To my understanding, this offer is consistent with the agreements I believe were reached at mediation and on 19th September 2012. As such, I have instructed our solicitors to use the Deed of Settlement drafted following mediation as the basis for drafting a Deed to reflect this offer (to the extent that the draft Deed from mediation appeared to be accepted by your Company and its solicitors). The resulting draft Deed reflecting this offer is attached for your consideration, in the form of both a ‘clean’ copy and a ‘compare’ copy to the last draft following mediation.

I understand that the claims which would remain in dispute per items 1-3 above have been previously valued by your Company in the order of $28 million. Given this offer recognises $25 million for all of your claims excluding those at items 1-3 above, and given the cap of $53 million on your aggregate claims in the Deed of Termination, I note that this offer creates no new constraint on your maximum realisable claims.

You may be aware that a Preliminary Conference has been scheduled in Sydney on Monday 19th November 2012. I believe it is in our mutual interest that this meeting proceed on the basis of the narrowest set of claims we can agree are in material dispute. Accordingly, I would appreciate your formal response before 3pm AEDT on Thursday 15th November 2012 and this offer will remain open until that time.”[21]

  1. That offer was capable of being accepted until 3 pm, 15 November 2012.  Whilst there were references to the Deed of Termination and the Deed which had been drafted following the meeting on 19 September 2012, I note that there was no express requirement in that letter of offer dated 5 November 2012 that the parties would only be bound by the signing of the Deed.
  2. I consider that a fair reading of the 5 November 2012 document indicates that it was impliedly understood by the parties that whilst they might go through the formality of getting the Deed formally signed by all the parties, the very purpose of the offer was to get acceptance on the Thursday before the expert panel determination was to commence.  It would seem to me that once that acceptance had been provided, it was purely a matter of formality to get each of the boards to finalise the process.  I accept the force of the submission by counsel for the Gladstone parties that the significance of the 5 November 2012 letter is that it explains what followed on 16 November 2012.  Significantly, the letter of 5 November 2012 was a written offer by the Gladstone parties which was capable of acceptance in a quick and convenient way, leaving the formal execution until later.
  3. Furthermore, the subsequent emails which were exchanged between Mr Campbell and Mr Grayson from 7 November to 13 November 2012 are revealing and provide an important context to the events on 16 November 2012.  It would seem to me that those emails indicate that the purpose of Mr Grayson and Mr Campbell’s meeting on 16 November 2012 was to come to a concluded and legally binding agreement.  In particular, this is clear from the email of 8 November 2012 from Mr Grayson which stated:

“For the reasons outlined in my recent letters, before I commit more time dealing with Peter I require your explicit commitment that any agreement with him will bind Lucas.

This request is necessary given past dealings where his authority has been disavowed, I understand, by senior officers of AJL on matters concerning instructions to Mr Vincent.  This change of position has left GAWB exposed to its reliance upon Mr Williams authority, especially concerning instructions to Mr Vincent.”[22]

  1. That email was in response to an earlier email of 7 November 2012 from Mr Campbell to Mr Grayson in which he acknowledged the letter of 5 November 2012 and said that he had forwarded it to Peter Williams who was the “authorised representative in this matter”, and then continued:

“There is clearly merit in the approach you propose.  As it is a very complex matter (which we both acknowledge), we need to examine the documents carefully and digest them so that we can expeditiously achieve resolution of these matters.

Peter, like you, is also disappointed at the failure to document the agreement reached at the mediation (the subject of one of my previous communications).  I believe that you and Peter, without the posturing of lawyers, can reach agreement on the dollars and wording of these issues once you sit down together.  This is our intention.”[23]

  1. There was then further correspondence on 8 November 2012 between Mr Williams and Mr Grayson in relation to an explanation of the break-up of the offer and continuing requests from Mr Grayson in relation to Mr Williams’ authority to bind AJ Lucas.  On 12 November 2012, Mr Campbell had confirmed that Mr Williams was the authorised representative of the company and further stated:

“You will of course appreciate that we have internal governance processes (as I assume GAWB and GRC have) for the execution of deeds of settlement and other material contracts or instruments.  All care will be taken to avoid any misunderstandings should these processes be a condition precedent to any particular matter under discussion between the respective representatives”[24] (emphasis added).

  1. As noted earlier, following that email of 12 November 2012 an email was forwarded from Mr Grayson to Mr Campbell on 13 November 2012 in which he attached an updated draft Deed which addressed some discrepancies in the earlier offer of 5 November and made it clear that it superseded that version.  The email stated that the attachment reflected the intended offer.  Whilst the subsequent email from Mr Grayson on 13 November 2012 notes that there were some discrepancies in the draft Deed and he attached a new document which reflected the intended offer, it did not contain a requirement that there could be no acceptance without an exchange of counterparts.  It is notable, in my view, that there is simply no reference in the letter to a specific requirement that there be executed documents before the offer was considered to be accepted or that there was any condition precedent as alluded to by Mr Campbell in his email of 12 November 2012.  In my view, such a requirement was not stipulated and neither can it be implied from the history of the correspondence.
  2. Furthermore, in that email Mr Grayson indicated that he was aware that Mr Williams was the agent of AJ Lucas but was unclear as to the extent of the agency and “whether and how he is authorised to reach agreements that bind AJ Lucas.”[25]  He continued in the email that it was not an academic issue as he was concerned that on two previous occasions following mediation and following a meeting on 19 September 2012, agreements had been reached with Mr Williams but disavowed by AJ Lucas.  He further stated:

“Naturally, I appreciate that you have internal governance processes.  As you note, GAWB also has governance processes to follow, and indeed on this project they are quite significant.  As a consequence I have sought on a number of occasions to convey their nature and the impact this can have on my ability to respond rapidly to proposals.  These processes arise through my Board, as disclosed agent for Gladstone Regional Council, and by contract with the LNG Proponents who are the ultimate beneficiaries and funders of the infrastructure.  Nonetheless, as required, I have entered all negotiations and mediation with AJ Lucas with a clear understanding of my authorisation and have operated within that constraint.

My practical requirement is to understand how I can know that an agreement reached will bind AJ Lucas.  In a dispute such as this the CEO would usually participate in negotiations so that they can be effective.  In circumstances where you will not, especially to the background above, you must appreciate the need for clarity.  Accordingly, I ask again that you clearly advise how agreements can be reached that will bind AJ Lucas.”[26]

  1. Later that same day, Mr Campbell emailed Mr Grayson clearly indicating that he understood the sentiment behind the email and that he wanted a meeting between the two of them so that there were no misunderstandings and so that a “quick conclusion” could be reached by them.[27]  This was endorsed in the later correspondence when he said he wanted to “do a deal and document it.”[28]  It is also significant that the first meeting on 16 November 2012 involved Mr Campbell and Mr Grayson as well as Mr Williams and Mr Murchland.  The CEOs of AJ Lucas and the Gladstone Area Water Board were present and it was the first meeting where both CEOs had been present along with representatives of their organisations who had been closely involved in the negotiations and the dispute.
  2. It was not disputed at trial that, irrespective of Mr Grayson’s actual authority, there had been subsequent ratification by the Gladstone parties of the agreement that Mr Grayson had reached.  Irrespective of whether Mr Grayson had actual authority to bind the Gladstone parties at the time the negotiations were taking place, there is no doubt, in my view, that he conveyed to Mr Campbell that he actually had that authority and that at the first meeting he in fact purported to make a contract which was binding on the Gladstone parties.
  3. I agree with the primary judge’s conclusion that, construed objectively, the purpose of the meeting was so that a binding agreement could be reached between the CEOs.  I accept the submission of counsel for the Gladstone parties that the fact that Mr Campbell said words to the effect that “there was a deal” was powerful evidence that the very purpose of the two CEOs being in the room was to do precisely that, that is, “to settle the arrangement.”[29]  There was no requirement in any of the emails that any agreement reached at the meeting was subject to further documentation or the explicit approval of the various boards.  As counsel for the Gladstone parties argued, Mr Campbell was there “to do a deal, no suggestion of consciousness of anyone that they lacked authority to do a deal, no one discussing the conceptual possibility of a deed being signed by one party that would bind them but not someone else.”[30]
  4. I consider that there was a clear intention to be bound by both parties.
  5. The next question is whether, given that clear intention, a concluded agreement was actually reached at the first meeting.

The primary judge’s conclusion as to a binding contract at the first meeting

  1. As to the Gladstone parties’ argument that there was a binding agreement at the first meeting when Mr Campbell shook Mr Grayson’s hand and said “It’s a deal”, the primary judge indicated that the evidence of both Mr Campbell and Mr Williams was not that the words “It’s a deal” were used, but rather Mr Campbell had said he would accept the last offer made at that first meeting on 16 November 2012.[31]
  2. His Honour concluded that there was no dispute that at that point at the end of the first meeting the commercial negotiations were over in relation to the amount of money being offered to settle the various items, but it was agreed by both Mr Campbell and Mr Grayson that the legal representatives would go to the offices of Minter Ellison to document those changes.[32]  His Honour held:

“[101]In my view, analysed objectively, it is unlikely that they intended to be immediately bound at that point, whether or not agreement was reached as to the terms of the final document.  If they did intend to be immediately bound, what was the reason to get the document done that day and to get Mr Campbell to sign it as accepted?

[102]This conclusion is reinforced by the fact that Mr Campbell requested that the plaintiffs consider Mr Grace’s suggested additions to the document.  Accepting that Mr Campbell said that if the plaintiffs did not accept those suggestions he would sign the document anyway, that statement does not signify that the point of contract was already reached.  It is equally capable of being characterised as an assurance of Mr Campbell’s bona fides, in an environment where previously there had been considerable mistrust on both sides in the past.”[33]

Was there a concluded agreement reached at the first meeting?

  1. Whilst there was disputed evidence at trial in relation to what transpired on 16 November 2012 between the CEOs, the primary judge resolved those issues of fact and they are not disputed in this appeal.  It is clear that a new all-up figure was offered by the Gladstone parties in the amount of $26.2 million and there was then further discussion about some other claims that required special treatment which were resolved.  The primary judge found that Mr Grayson went to the whiteboard with a red pen and summarised in a few lines what claims were being settled and on what basis.  The claims were then divided up into one group that were to be compromised and the ones that required further documentation to resolve.  There were then five or six that were going to go to expert determination.  As counsel for the Gladstone parties argued in this appeal:

“It was pretty simple: a global sum of money, some settled, some not settled, some subject to further information.”[34]

  1. The primary judge held that after that had occurred, Mr Campbell had said at the end of the first meeting that “there was a deal or that he accepted the plaintiffs’ offer”.[35]  There was never any argument at trial from AJ Lucas that Mr Campbell did not have authority to bind AJ Lucas.  It is clear that the primary judge found that Mr Campbell was ready to sign a document then and there, but that Mr Grace from the AJ Lucas side had not been at the meeting and wanted some new words inserted into the agreement, however, no one at the meeting had seen those words.  It is at that point that the arrangement was made for the second meeting with all of the lawyers, together with Mr Murchland of the Gladstone parties and Mr Williams from AJ Lucas.
  2. It is clear that Mr Grace and Mr Landsberg were preparing a final document for the purpose of giving it to Mr Campbell so he could sign it that afternoon.  That signature had a purpose because it was the last thing that was contemplated as being required to finish what they had come to do.  In my view, whilst Mr Campbell was ready to sign at the first meeting, it was conditional on Mr Grace’s involvement later that day.  He stated that he wanted the meeting of the solicitors at Minter Ellison’s office to consider Mr Grace’s suggestions as to the final clauses that were to be inserted into the document.  Mr Grayson, however, had made it clear what he had offered on behalf of the Gladstone parties and his subordinates were to ensure that the wording of the final documents was in those terms.
  3. Despite the arguments from the respondents that a concluded agreement was reached at the first meeting, I consider that the primary judge’s analysis of the consequence of that first meeting was correct.  As the primary judge identified, if they did intend to be immediately bound why was there a meeting to get the document done that day and sent to Mr Campbell.
  4. I do not consider that a concluded agreement was reached at the first meeting, despite an intention by both parties to be bound as they entered into that meeting.
  5. I now turn to the question as to whether a concluded agreement was reached at the second meeting.

The primary judge’s finding about the second meeting on 16 November 2012

  1. There was then a second meeting on 16 November 2012 between 2.30 pm and 3.00 pm at the office of Minter Ellison.  It was attended by solicitors for the Gladstone parties, Mr Ross Landsberg and Ms Irina Stepanova (another solicitor from Minter Ellison), and Mr Murchland for the Gladstone parties and Mr Williams and Mr Grace for AJ Lucas.[36]
  2. The primary judge noted that Mr Landsberg “announced to the meeting that the purpose of the second meeting was to mark up changes to the document that had been agreed at the first meeting.”[37]  A number of versions of the draft Deed were made and discussed.  His Honour referred to the fact that at the second meeting:

[57]The parties to the second meeting agreed on an amended form for the draft Deed of Settlement (“final document”).  And at the end of the meeting, as Mr Landsberg recalled, the parties agreed that the final document was a version that Mr Williams and Mr Grace were prepared to send to Mr Campbell as a version that he should execute.”[38]

  1. The primary judge then referred to the evidence of the discussion between Mr Landsberg and Mr Grace about the execution of the final document and whether Mr Grace could execute the document under s 127 of the Corporations Act 2001 (Cth).[39]  Mr Grace indicated that he could not sign and stated that he would arrange for the company secretary of AJ Lucas to counter-sign the document on Monday.  Mr Grace and Mr Landsberg agreed that the counterparts would be exchanged at that time.  His Honour, however, rejected the allegation “that Mr Landsberg said that the approval of either of the plaintiffs’ boards of directors was required.”[40]
  2. It is clear that the final document was then sent by facsimile to Mr Campbell at the Brisbane Airport for his signature and return by facsimile and that the parties to the second meeting waited for him to do so.  It is also clear that Mr Campbell spoke to Mr Grace about the contents of the document, signed the document and sent it to Mr Landsberg at Minter Ellison by facsimile at 4.31 pm.
  3. The primary judge made specific findings about the purpose for which that final document was sent to Mr Campbell.  In this regard, he concluded that there was no agreement that the document was sent to Mr Campbell so that he could sign it as an offer by AJ Lucas which the Gladstone parties could then accept or reject.[41]  He stated that such a characterisation was “inconsistent with the parties’ oral exchange at the first meeting.”[42]  His Honour continued:

“[65]Mr Grayson said that Mr Campbell said at the first meeting that he was ‘happy to sign… as its prepared here…’, but requested that Mr Grace’s words (scil on Mr Grace’s draft deed) be inserted. Mr Murchland said that when Mr Grayson called Mr Landsberg to arrange the meeting at Minter Ellison, he said Mr Williams and Mr Murchland would be making changes to the 5 November draft ‘so that it can be signed by Mr Campbell that day.’ On Mr Murchland’s evidence Mr Campbell, Mr Williams and Mr Murchland were in the room when that call was made. Mr Grayson said, however, that Mr Campbell and Mr Williams were not present.

[66]In my view, the appropriate characterisation of the facts is that the final document was sent to Mr Campbell to sign and return as confirmation of acceptance on behalf of the defendant of the agreement made that day. That Mr Campbell might bind the defendant was the very reason that the plaintiffs, by Mr Grayson, required that Mr Campbell be at the first meeting in the first place.”[43]

  1. In making those findings, the primary judge acknowledged that there was an offer on the table capable of acceptance at the point the document was sent to Mr Campbell at the airport.  The primary judge explicitly rejected the submission from AJ Lucas that the signing of that document by Mr Campbell should be characterised as a counter-offer[44] which was not accepted before it was subsequently withdrawn on 19 November 2012 as follows:

“[69]In my view, that is not the only possible characterisation, or the correct characterisation, of the effect of the changes made between the terms of the final document and what was orally discussed or contained in the prior draft.  Assuming that the changes were material, they were agreed to at the second meeting between Mr Murchland, Mr Landsberg, Mr Williams and Mr Grace.  Mr Campbell and Mr Grayson had agreed at the end of the first meeting who would attend the second meeting and that the purpose of the second meeting was to make the changes necessary to give effect to the agreement reached at the first meeting so as to document the agreement.  Mr Grayson spoke to Mr Landsberg authorising his involvement in that process.  Mr Landsberg and Mr Murchland were delegated the task of doing so by Mr Grayson, so that the final document could be provided to Mr Williams (sic) [Mr Campbell] for his acceptance and signature.  It was not suggested that what was agreed at the second meeting was outside the scope of making changes necessary to give effect to the agreement reached at the first meeting so as to document the agreement.

[70]So far as any change to the 5 November draft deed might have altered its effect, there is no reason why sending the document to Mr Campbell for signature could not operate as an offer which was accepted by him on signing the document and returning it to Mr Landsberg.  Mr Campbell’s contemporaneous remark on the facsimile cover sheet he sent was ‘herewith executed deed’.  He continued that ‘original with me: - will send on Monday’.  In other words, he would send the original document on Monday to the plaintiffs.  Nothing in that language suggested that the signed final document was an offer being communicated by the defendant to the plaintiffs for the purposes of acceptance.  In my view, Mr Campbell’s action in signing and returning the final document was an acceptance of the plaintiffs’ offer of contract on those terms, in accordance with what had been discussed and proposed” (emphasis added).[45]

Events after 16 November 2012

  1. Before the expert panel convened on 19 November 2012, representatives of both Gladstone parties had signed a counterpart of the document.
  2. On 19 November 2012, Mr Landsberg and Mr Grace attended the scheduled preliminary conference before the expert panel.  At that point, the panel had not been informed that any of the claims which had been referred to expert determination had been settled.  Before the scheduled preliminary conference, however, Mr Grace informed Mr Landsberg that AJ Lucas wanted further wording added to the final document.  That request was refused and the Gladstone parties then commenced the current proceedings seeking a declaration that a legally binding agreement had been entered into on 16 November 2012.

The appellant’s arguments

  1. The arguments by the appellant that no concluded agreement was ever reached at any point on 16 November 2012 are multi-faceted.  Whilst the Grounds of Appeal are set out in the Notice of Appeal filed on 14 January 2015, it would seem clear that the argument before this Court is essentially that whilst an oral consensus had been achieved on the major issues in dispute at the first meeting on 16 November 2012, neither party had shown an intention to be immediately bound to that consensus by the end of the meeting on 16 November 2012, but rather had contemplated a drafting and review process.
  2. Counsel for AJ Lucas also argues that the draft Deed produced at the second meeting did not objectively constitute an offer by the Gladstone parties that they would immediately be bound to the terms of that draft Deed if it was executed by the CEO Mr Campbell and, accordingly, AJ Lucas was entitled on 19 November 2012 to withdraw any offer it might have made by signing and submitting the facsimile document on 16 November 2012.
  3. I shall adopt for convenience the synopsis of those issues in the written outline of argument for the respondents, as I consider it is a convenient summary of the real issues in contest in this appeal which are as follows:

(i)The parties did not intend to be bound before the formal execution of the Deed occurred.

(ii)No offer capable of acceptance was made by the Gladstone parties on 16 November 2012 and the faxed signed Deed by Mr Campbell at 4.31 pm was not an acceptance of anything and was, at most, an offer which was withdrawn before it was accepted.

(iii)The acceptance by Mr Campbell was not on the precise terms of any earlier offer.

(iv)Mr Grayson, Mr Murchland and Mr Landsberg did not have authority to bind the Gladstone parties and they could not therefore make an offer capable of acceptance by AJ Lucas.

  1. AJ Lucas in this appeal contends that the finding by the primary judge that Mr Grayson purported to make a binding contract on 16 November 2012 is erroneous as was the finding that the letter of 5 November 2012 constituted an offer that could have been accepted by some means other than the exchange of deed counterparts.  The appellant also contends that the findings that the drafting and sending of the Deed to Mr Campbell constituted an offer by the Gladstone parties that, if accepted by Mr Campbell, would create an immediately binding contract was erroneous.  Counsel for AJ Lucas argues that the cause of the error is the imprecise manner in which the primary judge considered the “agreement(s)” reached on 16 November 2012.
  2. In this regard, counsel for AJ Lucas attacks the use of the word “agreement” by the primary judge and argues that the primary judge at various times refers to “an agreement” reached at the first meeting, but that in his reasons, the judge does not distinguish between the use of the term “agreement” in the context of a “non-binding arrangement for future conduct”, a “consensus as to terms” and a “binding agreement” whereby the parties have demonstrated that they will be legally bound to particular terms.  Counsel for AJ Lucas argues that this distinction was always a critical one for AJ Lucas and relies on the decision of Higgins J in Barrier Wharfs Ltd v W Scott Fell & Co Ltd:[46]

“There is no contract unless the two parties mutually consented to be bound one to the other by one agreement. Moreover—though it ought to be superfluous to say it—it is one thing for two parties to settle what are to be the terms of an agreement, if it should be made; and quite another thing to make the agreement. I have found, in my experience, that the two processes are frequently confounded; and, if I may judge from some of the cases to which I have been referred by Mr. Starke, the confusion has not always been avoided even in the Courts.”

  1. Counsel for AJ Lucas argues that for paragraph [50] of the judgment to be read consistently with the finding that no binding contract was made at the first meeting, the reference to “agreement” in paragraph [50] has to be a reference to a non-binding oral consensus as to the terms.  But that where the word “agreement” appears for the second time in paragraph [50], it should be understood as referring to a non-binding arrangement as to the procedural steps the parties intended to take later that day to reduce the non-binding oral consensus to writing.
  2. Counsel for AJ Lucas also argues that the interchangeable use of the word “agreement” also appears in the critical paragraph [69] of the judgment and this paragraph should be read as a finding by the primary judge that the changes that were made to the draft Deed at the second meeting were changes that Mr Murchland, Mr Landsberg, Mr Williams and Mr Grace (but not Mr Campbell or Mr Grayson) considered were appropriate to give written effect to the oral consensus as to the terms that had been reached at the first meeting.  Furthermore, it is argued that Mr Grayson had authorised Mr Murchland and Mr Landsberg to complete this task on behalf of the Gladstone parties.  Finally, it is further argued that there had to be a finding that Mr Campbell for AJ Lucas signed the document as the jural act to signify that AJ Lucas was willing to be bound to the terms of the document.
  3. Counsel for AJ Lucas argues that this analysis demonstrates the principal error in the primary judge’s reasoning because whilst AJ Lucas may have signified that it would be bound by the terms of the document created at the second meeting by Mr Campbell’s act, the Gladstone parties have not performed any equivalent jural act so as to signify any similar acceptance by them to the terms of the particular document.
  4. Counsel for AJ Lucas argues that the primary judge concluded in paragraph [70] of the judgment that sending the facsimile to Mr Campbell on the afternoon of 16 November 2012 was the necessary jural act of the Gladstone parties.  That is, an offer by the Gladstone parties that if Mr Campbell signed that document, each of them would become immediately bound to the terms of the draft Deed although neither of the Gladstone parties’ representatives had executed the Deed as contemplated by that document.

Was an offer capable of acceptance made by the Gladstone parties on 16 November 2012 and was the faxed signed Deed by Mr Campbell at 4.31 pm acceptance?

  1. Counsel for AJ Lucas contends that the implicit finding that each of the parties would be immediately bound is erroneous for a number of reasons:

(i)neither Mr Murchland nor Mr Landsberg had the authority of either of the Gladstone parties to make a binding offer on behalf of their companies and that a lawyer does not usually have authority to bind his client.

(ii)the primary judge had already held that the second meeting was not just the insertion of agreed revisions into some earlier form of the draft Deed and further that this meeting also dealt with drafting issues that were not considered at the first meeting.  It is argued that, in those circumstances, if the document produced at the second meeting was an offer, it was an offer created by Mr Murchland and Mr Landsberg and not by Mr Grayson.

(iii)Mr Grayson had not delegated to Mr Murchland or Mr Landsberg the authority to make a binding offer on behalf of the Gladstone parties because (a) the evidence did not demonstrate any such delegation; (b) no such delegation was pleaded; and (c) Mr Grayson himself did not have the authority to make a binding offer on behalf of the Gladstone parties.  Counsel for AJ Lucas argues that there is a critical difference between authority to negotiate terms to an agreement and authority to bind a party to those terms once agreed.

(iv)It was inconsistent with the previous practice of the parties to signify their entry in this way given that there had been a history of exchange of deed counterparts or at least the execution by all parties of a written document.  AJ Lucas contends that the finding by the primary judge at paragraph [20] that the offer of 5 November 2012 was capable of acceptance without the exchange of deed counterparts is inconsistent with the fact that the draft deed was not only included with this correspondence it was expressly referred to as being “drafted to reflect the offer” and the offer letter asked not for acceptance but “a formal response”.

(v)It was inconsistent with the request by Mr Landsberg to Mr Grace that Mr Grace execute the draft Deed so as to satisfy the expressed attestation provisions which applied to AJ Lucas in the Deed and also inconsistent with the arrangement of solicitors made at the second meeting to exchange executed deeds on Monday morning.

(vi)The subject matter of the agreement made it unlikely that the Gladstone parties would have been agreeing to be bound to the terms of the document created at the second meeting by some process other than the attestation provisions contemplated in that document.

(vii)The internal processes of the Gladstone parties would not have been followed if the sending of the facsimile in fact constitute a binding offer by the Gladstone parties particularly when the first respondent’s Authorities and Delegations Manual provided that the settlement of any claims was subject to the approval by the Board and the board had not approved this document.

(viii)The nature of the Gladstone parties’ organisations made it inherently implausible that they would have been offering to become bound to the terms of the document without formal execution procedures being adhered to.

  1. Counsel for AJ Lucas argued that the primary judge’s finding that “Mr Campbell’s action in signing and returning the final document was an acceptance of the plaintiffs’ offer of contract on those terms, in accordance with what had been discussed and proposed”[47] for the first time deals in terms of offer and acceptance, but that the error had already been made and is not cured by a conclusion.  It is argued that the trial judge has erred by focusing on the question of whether Mr Campbell's facsimile could be considered as an act by the appellant that signified acceptance of an offer so as to create a binding contract rather on the anterior question of whether the Gladstone parties had in fact made any offer that they would be immediately bound to a contract should Mr Campbell sign and return the draft Deed.
  2. I now turn to those arguments as to why there was no offer capable of being accepted.

The primary judge’s conclusions in relation to the exchange of counterparts of a deed

  1. The primary judge had rejected the submission by AJ Lucas at trial that there was no concluded contract after Mr Campbell signed the final document because the parties only intended to be bound on the “exchange of executed counterparts” of the final document as a deed.  In this regard, the primary judge thoroughly analysed the six bases upon which this argument was put by counsel for AJ Lucas at trial and which are now essentially repeated on appeal.[48]
  2. The first basis for that submission was that the parties had a history of making contracts by the exchange of counterparts in the form of a deed.  The second was that the form of the final document itself and the form of the document offered earlier at the first meeting provided for execution by all parties as a deed.  The third basis was that a binding contract was not made at the first meeting.  The fourth basis was that counsel argued that the discussion at the second meeting ended with an agreement that the contract would be made by an exchange of counterparts on Monday, 19 November 2012.  The fifth basis was that the terms of the offer made by the Gladstone parties orally at the first meeting did not correspond precisely with the form of the final document signed by Mr Campbell on 16 November 2012.  The final basis for arguing that there was no concluded contract was that Mr Grayson, on behalf of the Gladstone parties, did not actually have authority to make the contract as provided for in the final document signed by Mr Campbell at 4.31 pm on 16 November 2012.
  3. In relation to the argument that there was a course of dealing between the parties by way of exchange of counterparts, the primary judge was satisfied that the history of prior contracts between the parties did not establish a course of dealing of contracts made “only” in that way.[49]  In this regard, particular emphasis was placed on the offer contained in the letter of 5 November 2012 which made no reference to the need for the exchange of counterparts.  Furthermore, reference was made to the email exchange between Mr Grayson and Mr Campbell between 5 November 2012 and 13 November 2012 which showed that the issue for Mr Grayson was that he wanted to deal with someone who would bind AJ Lucas which is why Mr Grayson dealt with Mr Campbell rather than Mr Williams.
  4. The primary judge was therefore satisfied that the fact that the Gladstone parties offered a draft Deed to reflect Mr Grayson’s offer of 5 November 2012 “did not mean that the offer was made on the footing that there would be no binding contract until there was an exchange of counterparts executed in the form of a deed.”[50]  I have already outlined in my reasons set out above my endorsement of that analysis and why that conclusion was correct.

The primary judge’s conclusion about execution by all parties as a deed

  1. In relation to the argument that because the contract had to be signed as a deed it therefore raised the question as to whether the parties intended to be bound prior to the execution of the Deed.  His Honour held:

“[96]However, whether or not it was intended that a deed might ultimately be executed does not answer the relevant question whether the parties were to be bound by a contract made before that step.  Nothing in law prevents parties from making a contract and being bound by its terms even though they intend that later the contract will be embodied in the form of a deed.  An example is Parker v Alessi.  In that case, Bergin CA (sic) [Bergin CJ] in Eq said:

‘The parties’ use of the language “we accept” and “glad to have this sorted”, in the context of their conduct in proceeding with the first loan from SCF soon after these emails, persuades me that they were content to be bound immediately by the terms they had agreed even though the formalisation of the contract by deed (which they both anticipated) was yet to occur: Masters v Cameron (1954) 91 CLR 353.’

[97]In the lexicon used for cases falling within the principle of Masters v Cameron, such an agreement is a “second class” case.

[98]In those circumstances, in my view, whether or not the parties were intending to be bound by a contract in the form of the Deed of Settlement, either in the form of the draft at the first meeting on 16 November 2012 or in the final form settled at the second meeting and executed by Mr Campbell on that day depends on the effect of their oral exchanges on that day.”[51] (citations omitted)

  1. I have already indicated that I do not consider that the correspondence establishes that the parties would only be bound once the formal exchange of counterparts contemplated by the Deed had occurred and that the primary judge was correct in his analysis in this regard.  Whilst counsel for AJ Lucas also argues that the decision of Parker v Alessi[52] referred to by the primary judge was factually different to the present case and needs to be read in the context of the particular facts, it is clear that in that case there was a finding by the trial judge that the parties were content to be bound immediately by the terms they had agreed even though the formalisation of the contract by deed which they both anticipated was yet to occur.  Such a finding of an intention to be bound immediately by the agreed terms was also open to the primary judge in this case.
  2. I agree with the conclusion by the primary judge that “Nothing in law prevents parties from making a contract and being bound by its terms even though they intend that later the contract will be embodied in the form of a deed.”[53]  As I have already identified, I do not consider that the objective evidence supports a conclusion that the parties would only be bound once the Deed was executed and I endorse the primary judge’s findings in this regard.

The agreement for exchange

  1. In relation to the argument by AJ Lucas at trial that the agreement for exchange of the Deed on Monday, 19 November 2012 negatived any intention to contract by Mr Campbell signing and returning the final document, the primary judge found that such an agreement for exchange was consistent with the form of the final document, being a Deed, which was to be executed in counterparts.[54]  His Honour further held:

“[106]In any event, there is nothing inconsistent with the arrangement for exchange and the plaintiffs’ case that a concluded contract was reached, on the footing that this is a second class Masters v Cameron contract.  That is, the parties intended to make a contract by Mr Campbell signing and returning the agreed final document but also intended that the Deed of Settlement would be executed in counterparts as a deed and those parts exchanged.

[107]These facts are distinguishable from a case where the parties agree to contract by an exchange of parts, in a context where the usual method of concluding the contract or ‘jural act’ is the fact of the exchange.  Thus, the description of the usual practice in a particular context for an ‘exchange of contracts’ in cases such as Commission for the New Towns v Cooper (GB) Ltd and Sindel v Georgiou does not answer the question in the present case whether the parties intended to be bound before the exchange of the counterparts of the deed.

[108]In my view, analysed objectively, the arrangement made between Mr Landsberg and Mr Grace for the exchange of counterparts of the Deed of Settlement on Monday 19 November 2012 was not intended to and did not have the effect that the parties were not to be bound upon Mr Campbell’s signature and return of the final document”.[55] (citations omitted)

  1. I agree with that conclusion.

Was there a difference between the terms of the final offer and the agreement at the first meeting?

  1. Another basis for AJ Lucas’ argument that there was no concluded agreement at any time on 16 November 2012 was that the terms of the document signed by Mr Campbell at 4.31 pm did not correspond to the oral agreement made at the first meeting.  Counsel for AJ Lucas submitted that the primary judge had found that there was no binding agreement at the first meeting and therefore argued that there could be no binding agreement because any offer made at the first meeting could not precisely correspond to the acceptance after the second meeting which made material changes to the Deed.  Counsel argued that the primary judge had in fact found that the second meeting “was for the purpose of documenting the matters that had been agreed at the first meeting, but not on the basis that it was a mere insertion of agreed revisions.”[56]  It is argued therefore that the terms in the document were only negotiated and drafted at the second meeting and therefore no offer capable of being ascertained at the first meeting could precisely correspond to the document produced at the second meeting.
  2. The primary judge noted that this had not been pleaded as a ground of defence and was not identified with any precision in the submissions at trial.[57]  His Honour noted, however, that AJ Lucas argued that the substance of the oral agreement at the first meeting differed from the 5 November 2012 offer in that, firstly, the quantum for the agreed valuation items had increased to $26.2 million, secondly, that claim items 9, 10 and 11 had been included as items that would be determined by expert determination (only to the extent that the amount claimed was greater than $750,000), and thirdly, that two further variation claims 104 and 29 had been added to the list of claims to be determined by the expert panel.[58]
  3. Counsel for AJ Lucas argues that this further shows the error in the primary judge’s reasoning.  I note, however, that the finding by the primary judge was in fact as follows:

“[112]That summary of the matters orally agreed at the first meeting may be compared with the terms of the final document.  In my view, there is no difference which leads to the conclusion that the terms of the final document did not correspond to the oral agreement made at the first meeting.”[59]

  1. Once again, I would endorse the primary judge’s findings in this regard.

Was there a concluded agreement at the second meeting?

  1. The next basis argued at trial to support the submission that there was no concluded contract was that Mr Grayson did not have authority to make the contract provided for by the final document on 16 November 2012.  Counsel for AJ Lucas had argued before the primary judge that Mr Grayson did not claim to have had authority to bind Gladstone Regional Counsel at the first meeting making it objectively unlikely that any statements he made should have been constituted as making a binding offer on behalf of both respondents.
  2. The primary judge considered that there were in fact two different concepts involved in the submission.  Firstly, whether Mr Grayson purported to make a contract which was binding on behalf of the Gladstone parties and secondly, whether he in fact had the relevant authority.[60]
  3. Whilst the primary judge was not satisfied in relation to Mr Grayson’s actual authority, his Honour concluded that there had in fact been ratification by the Gladstone parties as follows:

[119]Could Mr Landsberg’s email operate as a ratification of Mr Grayson’s authority on 16 November 2012? In Bolton Partners v Lambert a director of a company accepted an offer for an agreement for lease without actual authority. The other party withdrew from the contract, relying on an alleged misrepresentation. The board of directors later ratified the contract and the company sued on it. It was held that the ratification operated retrospectively to when the contract was made by the director.

[120]That ratification generally operates retrospectively has been accepted as ‘a well settled rule of common law’ as follows:

‘where a principal ratifies the earlier act of a person acting as agent without authority, the ratification relates back to the date of the unauthorised act, and the principal is bound as if the agent had had authority at the earlier time.’

[121]But the particular question about whether there can be ratification after withdrawal by the other contracting party is not so clear. As early as 1900, it was recognised in the House of Lords that Bolton Partners ‘presents difficulties’. The difficulty lies in the proposition that by definition an agent without authority does not bind his principal. If the principal is not yet bound, on what principle can the other party be bound so that they cannot withdraw, in a synallagmatic contractual relationship? In Davison v Vickery’s Motors Ltd (in liq), Isaacs J in the High Court clearly thought that Bolton Partners was wrongly decided on this point. The NSW Court of Appeal described Isaacs J’s criticism as trenchant in Hughes v NM Superannuation Pty Ltd.

[122]Had the defendant withdrawn from the contract embodied in the Deed of Settlement before 22 November 2012, on the pleadings there would have been a question whether Bolton Partners is not good authority that the plaintiffs’ ratification of the contract by Mr Landsberg’s email on 22 November 2012 bound the defendant. But the defendant in final submissions made it clear that it did not challenge the authority of Bolton Partners. Accordingly, I find that the plaintiffs ratified the contract made by Mr Grayson on the plaintiffs’ behalf, as previously considered.

[123]Accordingly, I find that on 16 November 2012 the plaintiffs and the defendant entered into a contract on the terms of the Deed of Settlement signed by Allan Campbell on behalf of the defendant and sent by facsimile transmission from Allan Campbell to Ross Landsberg at 4:31 pm.”[61] (citations omitted)

  1. Counsel for AJ Lucas argues that while the trial judge concluded that Mr Grayson did not have authority, he rejected the submission that the lack of authority could inform the question of objective intention to be bound.  Counsel for AJ Lucas argues that in doing so, his Honour contradicted the reasoning of McMurdo J in VDMT Pty Ltd v Francher Pty Ltd[62] where it had been held that the absence of authority made it less likely that a party's acts should have been seen objectively as intending to create a binding agreement.  It is argued that the lack of authority in the present case is a strong indication that the parties intended only to be bound by the proper execution and exchange of the deed.  I note, however, that McMurdo J in fact acknowledged that “Of course, individuals sometimes exceed their actual authority in purporting to conclude contracts” but considered that, in that case, it was unlikely because there was no particular urgency.[63]  In my view, the history of frustrated dealings in the present case was a significant factor and, as I have previously indicated, supports a finding of an intention to be bound prior to the execution and exchange of the Deed.
  2. In this regard, counsel for AJ Lucas also argues that the primary judge made a finding of a concluded agreement in circumstances where (a) there was no authority to agree from the Gladstone parties, (b) without those parties signing or exchanging a deed, and (c) without a counterpart executed and exchanged by AJ Lucas in accordance with s 127 of the Corporations Act 2001 (Cth).  Counsel for AJ Lucas argues that, despite those elements being present, both of the entities became legally bound to an agreement in respect of a commercial settlement in excess of $26 million as part of a larger ongoing dispute.  In this respect, counsel argues that the observations of Palmer J in RT & YE Falls Investments Pty Ltd v New South Wales[64] are relevant and in particular counsel relies on the following:

[54]… That is why parties negotiating a commercial agreement in contemplation of a formal contract will most commonly intend that there will be no concluded bargain at all unless and until they execute the formal contract – that is, the case will be in third category referred to in Masters v Cameron.”[65]

  1. I agree, however, with the submission of counsel for the Gladstone parties that it was clear what offer was on the table at the meeting on 16 November 2012.  It was the offer as set out in the amended draft Deed.  There was no reference to signing under s 127 of the Corporations Act 2001 (Cth) and no question was raised as to Mr Grayson’s authority to bind Gladstone Regional Council.  As counsel for the Gladstone parties pointed out, on Friday, 16 November 2012 Mr Grayson was still available and he could have signed a document if required, however, it was perfectly clear what offer was on the table and that it was Mr Campbell who accepted that offer.
  2. It is also important to remember that the Deed of Termination required the parties to try and settle the outstanding issues by means of mediation and that it did not require any formality as to how that agreement could be reached or how such an agreement was to be recorded.
  3. Counsel for AJ Lucas also challenges the trial judge’s finding that Mr Grayson purported to make an offer on behalf of the Gladstone parties to be immediately bound at any time on 16 November 2012 because any such offer must be capable of acceptance in the form in which it is made.  It is argued that the evidence demonstrates, and the trial judge accepted, that the parties did not reach any binding agreement at the end of the first meeting and, importantly, entered into a drafting process to attempt to reduce to writing the earlier oral consensus.  Counsel for AJ Lucas argued that if no binding agreement was reached at the end of the first meeting and if the parties were still free to disagree on the terms of the document during the second meeting, then any agreement reached on 16 November 2012 could only have been at the second meeting, which Mr Grayson did not attend.
  4. Counsel for AJ Lucas submits that a possible interpretation of paragraphs [50] and [69] of the judgment is that the primary judge found that the parties had not only reached an oral consensus of the major terms at the first meeting, but had also agreed, in a form of binding contract, to draft a written document reflecting those terms.  Such an agreement would be squarely within the third category identified by the High Court in Masters v Cameron.[66]
  5. Counsel for AJ Lucas argued that the finding[67] of a confirmation of acceptance of an agreement made earlier that day is circular and that either there was a binding agreement made earlier that day or there was not.  As the primary judge had already held there was no legally binding agreement at the first meeting, it is argued that it is not possible for the signing of the document later that afternoon to have created one.  Furthermore, it is not possible to argue that the document produced after the second meeting somehow constituted an oral offer made by Mr Grayson at the first meeting.
  6. Counsel for AJ Lucas also relied on the decision of Hopcroft & Edwards v Edmunds & Ors[68] where it was held that:

[69]Counsel recognised the difficulties in overcoming the ordinary expectation that, when parties go to the trouble and expense of having a formal document prepared for their execution, they do not intend to be bound until all parties have executed it.  In my opinion, counsel's recognition was correct.”[69]

  1. Counsel for AJ Lucas therefore argued that the act of Mr Campbell signing should not overcome the ordinary expectation and thereby bind all three parties by his signature alone.
  2. Counsel for AJ Lucas criticised the primary judge’s finding that:

[96]... whether or not it was intended that a deed might ultimately be executed does not answer the relevant question whether the parties were to be bound by a contract made before that step.  Nothing in law prevents the parties from making a contract and being bound by its terms even though they intend that later the contract will be embodied in the form of a deed.”[70]

  1. Counsel for AJ Lucas argued that the real issue is whether there was a binding agreement at all and that there was objective evidence which indicated that formal execution was required as the jural act because Mr Grace told Mr Landsberg that he did not have the authority to countersign it and that it would be countersigned by the company secretary over the weekend.  Furthermore, Mr Landsberg said the counterparts would be exchanged on Monday.
  2. Whilst the primary judge noted that such an exchange was consistent with the terms of the document being negotiated,[71] he rejected the submission that it negatived a concluded agreement from the second class of Masters v Cameron.[72]  I agree with that conclusion.
  3. The evidence at trial indicated that there were in fact two issues which prevented a concluded deal being made at the first meeting despite Mr Campbell being prepared to do so.  The first was that Mr Grace was not at the first meeting and it would seem he had been preparing some clauses about an ‘avoidance of doubt’ that he wanted included in a final document.  The second complication was that Mr Campbell could not stay any longer as he had to fly to Sydney.
  4. In my view, whilst the lawyers were tasked with finalising the document which was to be put to Mr Campbell, it was clear that they were discussing a discrete issue of wording in relation to one aspect of the deal.  It is clear that this was not one of the ‘big ticket items’.  The major issues had been agreed but Mr Campbell was not prepared to sign without Mr Grace being involved.
  5. Ultimately, the offer put reflected in its essential terms the deal made at the first meeting.  Mr Landsberg did not have to revert to Mr Grayson, as there was nothing which had changed that needed to be discussed.  The document sent to Mr Campbell was an offer and it was in fact accepted by him when he signed it.  That was the very point of it being sent to him.
  6. It was on that basis that the primary judge was satisfied that on 16 November 2012, AJ Lucas entered into a binding contract with the Gladstone parties in terms of the Deed signed and sent by facsimile at 4.31 pm by Mr Campbell.
  7. In my view, the conclusion reached by the trial judge was correct.  This was indeed a contract within the second category of Masters v Cameron.  I consider that the primary judge was correct in his analysis that an offer was in fact made by the Gladstone parties on 16 November 2012 which was capable of acceptance.  In particular, it is clear that a consensus had been reached about the major terms of the ‘big ticket items’ which were what the settlement figure was to be and what that figure covered.
  8. In my view, the appeal should be dismissed with costs.

Footnotes

[1] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311.

[2] For purposes of clarity, the Deed of Settlement is referred to as “the Deed” and the Deed of Termination as “the Deed of Termination”.

[3] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [32].

[4] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [32].

[5] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [36].

[6] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [40].

[7] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [43].

[8] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [43].

[9] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [44].

[10] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [44].

[11] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [44].

[12] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [45]-[46].

[13] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [46].

[14] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [46].

[15] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [49].

[16] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [50]-[51].

[17] (1986) 40 NSWLR 631, 634.

[18] [2004] QSC 104, [108].

[19] ARB 992.

[20] ARB 1022-1023.

[21] ARB 1023.

[22] ARB 1054.

[23] ARB 1054-1055.

[24] ARB 1062.

[25] ARB 1063.

[26] ARB 1063.

[27] ARB 1091.

[28] ARB 1095.

[29] T1-52 ll 38-44.

[30] T1-50 ll 34-37.

[31] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [99].

[32] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [100].

[33] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [101]-[102].

[34] T1-52 ll 20-21.

[35] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [50].

[36] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [52].

[37] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [53].

[38] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [57].

[39] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [58].

[40] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [59].

[41] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [64].

[42] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [64].

[43] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [65]-[66].

[44] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [68].

[45] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [69]-[70].

[46] (1908) 5 CLR 647, 650.

[47] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [70].

[48] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [71]-[72].

[49] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [79].

[50] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [84].

[51] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [96]-[98].

[52] [2011] NSWSC 947, [87].

[53] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [96].

[54] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [105].

[55] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [106]-[108].

[56] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [46].

[57] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [110].

[58] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [111].

[59] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [112].

[60] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [113].

[61] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [119]-[123].

[62] [2009] QSC 351, [31]-[32].

[63] VDMT Pty Ltd v Francher Pty Ltd [2009] QSC 351, [32].

[64] [2001] NSWSC 1027, [50]-[55].

[65] RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027, [54].

[66] (1954) 91 CLR 353, 361.

[67] See Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [66].

[68] (2013) 116 SASR 191; [2013] SASCFC 38.

[69] Hopcroft & Edwards v Edmunds & Ors (2013) 116 SASR 191; [2013] SASCFC 38, [69].

[70] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [96].

[71] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [105].

[72] Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd [2014] QSC 311, [106]-[107].

Close

Editorial Notes

  • Published Case Name:

    AJ Lucas Operations Pty Ltd v Gladstone Area Water Board & Anor

  • Shortened Case Name:

    AJ Lucas Operations Pty Ltd v Gladstone Area Water Board

  • MNC:

    [2015] QCA 287

  • Court:

    QCA

  • Judge(s):

    Morrison JA, Philippides JA, A Lyons J

  • Date:

    18 Dec 2015

Litigation History

Event Citation or File Date Notes
Primary Judgment [2014] QSC 311 19 Dec 2014 -
Notice of Appeal Filed File Number: 674/15 16 Jan 2015 SC9296/13
Appeal Determined (QCA) [2015] QCA 287 18 Dec 2015 -

Appeal Status

{solid} Appeal Determined (QCA)