Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd
[2005] QSC 321
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- Unreported Judgment
- Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd[2005] QSC 321
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Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd[2005] QSC 321
Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd[2005] QSC 321
SUPREME COURT OF QUEENSLAND
CITATION: | Monarch Building Systems P/L v Quinn Villages P/L [2005] QSC 321 |
PARTIES: | MONARCH BUILDING SYSTEMS PTY LTD ACN 000 776 189 (plaintiff) v QUINN VILLAGES PTY LTD ACN 000 776 189 (defendant) |
FILE NO/S: | BS 2436 of 2001 |
DIVISION: | Trial Division |
PROCEEDING: | Claim |
ORIGINATING COURT: | Supreme Court, Brisbane |
DELIVERED ON: | 4 November 2005 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 26 October 2005 |
JUDGE: | de Jersey CJ |
ORDERS: |
|
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – CONTRACT IMPLIED FROM CONDUCT OF PARTIES – where there was no contractual document executed by both parties – where ultimate sticking point between the parties concerned the provision for liquidated damages in respect of delay – where plaintiff contended the parties’ intention was not to make a concluded bargain at all, unless and until they executed a formal contract – where defendant contended the parties’ conduct was consistent with being bound to a contract which did not include any effective provision for liquidated damages – whether the parties intended to be bound to the extent they had reached agreement Sale of Goods Act 1896 (Qld) African Minerals Ltd v Pan Palladium Ltd [2003] NSWSC 268 Alford & Ors v Ebbage & Ors [2004] QCA 283 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Eastgate Properties P/L v J Hutchinson P/L [2005] QSC 196 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110 Masters v Cameron (1954) 91 CLR 353 Meates v Attorney-General [1983] NZLR 308 Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 |
COUNSEL: | B Laurie for the plaintiff S Couper QC for the defendant |
SOLICITORS: | Simmonds Crowley & Galvin for the plaintiff Plastiras Meredith Mohr Lawyers for the defendant |
Introduction
- The plaintiff (“Monarch”) manufactures and supplies steel products for the building industry. In the year 2000, Monarch supplied such products for incorporation into a home unit development at Mount Coolum. The defendant (“Quinn”) was the developer. Quinn’s project manager was Global Construction Management Pty Ltd (“Global”).
- Monarch sues Quinn, on the basis of a quantum meruit, for the unpaid value of goods supplied. Monarch’s pleaded position is that between February and June 2000, it had unsuccessfully sought to negotiate with Quinn an agreement to cover the supply. On the other hand, Quinn pleads that a contract was in fact concluded in about March 2000, for the design, fabrication, supply and delivery of the goods, a contract “partly written, partly oral and partly implied”.
Determination of preliminary issue
- The pleadings raise a host of factual issues alleging non-compliance by Monarch with its obligations, and consequential losses to Quinn. On 28 January 2005 the court ordered that “there be a separate determination of the issues raised by paragraphs 6-10 of the Third Amended Defence Set Off and Counterclaim dated 23 December 2003 and paragraphs 4, 6 and 7 of the Reply and Answer dated 22 December 2004”, prior to the trial of all other issues.
- Paragraphs 6 to 10 of the Third Amended Defence and Counter Claim cover these matters: the allegation of the contract (para 6); its being partly written, oral and implied, particularizing the documents, conversations and bases for inference (para 7); the express terms of the contract (para 8); the application of the Sale of Goods Act 1896 (Qld) (para 9); and the consequently implied statutory terms (para 10).
- Paragraph 4 of the Reply and Answer denies the allegation there was a concluded contract, in response to the particulars in the defence. Paragraph 6 responds to para 8 of the defence, as to the alleged express terms of the contract. Paragraph 7 of the Reply and Answer admits that the products supplied were “goods”, but denies the applicability of the Sale of Goods Act because there was no contract.
- The issue for separate determination is therefore whether or not the parties reached a concluded contract, and if so, its terms.
The evidence
- Exhibit 1 contains the relevant documents. It was admitted by agreement. I heard short oral evidence from Mr Densley, a construction manager employed by Global; Mr John Speedy, a director of Global; and Mr Mark Speedy, then contracts administrator employed by Global. I accepted all that evidence.
The parties’ principal contentions
- Mr Couper QC appeared for Quinn, the party which contends there was a concluded contract. Mr Couper’s submission was that from early June 2000 or thereabouts, the parties had become bound to a contract which did not include any effective provision for liquidated damages in respect of delay. It may be they left that as an issue for further negotiation. Their conduct thereafter was consistent, he submitted, with their being bound in that way.
- Mr Laurie, who appeared for Monarch, put the case into the third category under Masters v Cameron (1954) 91 CLR 353, 360: “the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract”. That was intended to be a contract in the TC/CM1 form, but it was never executed by both parties. The ultimate sticking point concerned the provision for liquidated damages, upon which Quinn (through Global) insisted, but which Monarch rejected. As to the parties’ conduct, on which Mr Couper relied, Mr Laurie submitted it illustrated a mistaken subjective view of the position obtaining between the parties.
The law
- The relevant law is clear, and discussed comprehensively in some relatively recent decisions – by Muir J in Alford & Ors v Ebbage & Ors [2004] QCA 283 and Eastgate Properties P/L v J Hutchinson P/L [2005] QSC 196; by Einstein J in African Minerals Ltd v Pan Palladium Ltd [2003] NSWSC 268; and by the New South Wales Court of Appeal in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 176-9.
- In a case like this where there is no contractual document executed by both parties, the question is whether they nevertheless intended to be bound to the extent that they had reached agreement: “whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain” (Meates v Attorney-General [1983] NZLR 308, 377 per Cooke J). It is not essential that one be able to identify a discrete offer and a discrete acceptance, or the precise moment when a contract came into existence (Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110, 11, 117-8 per McHugh JA). The parties may agree to be bound now, “while deferring [even] important matters to be agreed later” (Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601, 619). In determining the intention of the parties in a case like this, that is, whether or not to contract, relevant circumstances may include prior negotiations and subsequent conduct (African Minerals Ltd, [30]).
The evidence: negotiations failing to lead to agreement
- It is necessary now for me to analyse the documentary material contained in Exhibit 1, and as necessary the oral evidence.
- On 21 March 2000, Global advised Monarch that Quinn accepted Monarch as the “successful trade contractor”, and referred to “formation of the trade contract”. Monarch responded the next day, saying that because it was supplying materials only, Global’s proposed trade contract was inappropriate. Monarch included its standard supply terms. But Global, which acted throughout as agent of Quinn, insisted on its contract, which was in the TC/CM1 form, and sent Monarch a copy on 4 April 2000.
- Monarch amended that contract in some respects, and sent the amended copy back to Global on 7 April 2000. The provision for the insertion of an amount per day for liquidated damages was left blank. Then on 14 April 2000, Global responded in detail to Monarch’s amendments, “clarifying our minimal [sic, presumably meaning minimum] requirement as opposed to your inserted notations”.
- On 18 April 2000 there was a discussion between Mr Warner, director of Monarch, and Mr Densley, Global’s construction manager. Mr Densley sent Mr Warner a fax the following day confirming what he said in his oral evidence were matters agreed the previous day. He concludes the fax with the sentence: “we trust this now finalises all contractual matters.”
- On the afternoon 19 April 2000, some further amendments were agreed between Mr Densley and Mr Warner. Mr Densley confirmed them by fax that day.
- On 17 May 2000, as confirmed by Mr Densley in his oral evidence, Global sent Monarch the latest amended version of the contract TC/CM1. Significantly, in that version Mark Speedy and Mr Densley had inserted amounts per day in respect of liquidated damages.
- Clause 2(a) of the “Conditions of Contract” made the following provision for liquidated damages:
“If the contractor fails to complete the Works, or any stage, by the date specified in the Schedule (or within any extended time approved in writing by the Construction Manager) the Contractor shall pay or allow by way of liquidated damages the sum stated in the Schedule for each day during which the Works or the relevant stage shall remain incomplete.”
- As dispatched by Global to Monarch on 17 May 2000, the completed related section of the Schedule, section (D), appeared in the following form: (see over)
![Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd [2005] QSC 321](/judgmentview/image?name=56955.001.png&id=56955)
“(D) * (i)ConstructionCommencement:__/__/20__ Completion--__/__/20__.
Period
- LiquidatedLiquidated Damages: $________________per day.
Damages
OR
*Staged Construction If in stages:
Stage 1. Commence:15/5/00.
Complete:15/7/00.
Liquidated Damages:$2,918 per day
Period & Liquidated
Damages
Stage 2. Commence:__/__/2000.
(Refer to Special Conditions)
Complete:__/__/2000.
(Refer to Special Conditions)
Liquidated Damages:$3,232 per day
![Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd [2005] QSC 321](/judgmentview/image?name=56955.002.png&id=56955)
Stage 3. Commence:__/__/2000.
Complete:__/__/2000.
Liquidated Damages:$____ per day
*Choose the one which is relevant to the contract works”
- Next day, and before Monarch had received that version, John Speedy, Global’s director, met with Mr Warner of Monarch. Mr Densley also was present. The Global representatives expressed concern that Monarch provide the materials as soon as possible. There was already a problem with delay. Mr Speedy was vehement in his expression of concern. But I accept that he did not assert that damages, or liquidated damages, would be payable.
- Having received the contract version in mid-May 2000, Mr Warner deleted the liquidated damages provisions and initialled the boxes in relation to Stages 1 and 2 in section (D) of the Schedule. He did not delete clause 2(a) of the Conditions. But obviously enough, absent amounts in the boxes in the Schedule, clause 2(a) could not actively operate. On 30 May 2000, Monarch sent the further amended version, which it had executed, back to Global, with a covering letter saying “the value of liquidated damages has never been part of the contract negotiations and has been assumed by Monarch as nil. Monarch does not accept this late inclusion.” On 2 June 2000, Mr Densley wrote to Monarch rejecting the changes. The letter said:
“The Vetting Meeting minutes of 13th January 2000 stated that and MBA TCM/CM1 Contract would be used for the contract. One of those conditions contained herein is liquidated damages. These clauses will not be excluded.”
Mr Densley attached “unblemished” copies of the relevant pages “for your correct notarisation”.
- The minutes of that meeting on 13 January 2000, which was attended by representatives of Monarch (“MBS”) and Global (“GCM”), read:
“GCM advised MBS that if they were to be the successful supply trade contractor, then the form of contract they would be signed to with the client would be the Queensland Master Builders Association Trade Contract for Construction Management known as TC/CM1. Accepted & Agreed by MBS.”
- On 5 June 2000, Mr Warner of Monarch wrote to Mr J Speedy saying that Monarch was not prepared to accept the inclusion of liquidated damages, a matter which Mr Warner referred to as an “important” matter. There was reference to an aspect of the supply of shop drawings, which was apparently not of contractual significance. The letter concluded: “I will take up the other outstanding contractual matters direct with John Densley.” Mr Densley’s oral evidence was that Mr Warner did not thereafter take up with him any “other outstanding contractual matter”.
- Mr Densley gave oral evidence that he made it clear to Mr Warner and other Monarch representatives at all stages of the negotiations “that the standard trade contract had to be agreed and signed by the parties”. His evidence was that Global at no stage conceded to Monarch “that liquidated damages did not form part of the contract”.
The evidence: the parties’ subsequent communications
- Quinn’s contention would be that from early June 2000 or thereabouts, the parties were contractually bound. The terms of the agreement were those of the form of contract sent to Monarch on 17 May 2000, but with the deletion of section (D) on page five of the Schedule (being the section concerning liquidated damages); that is, as reflected in Global’s letter to Monarch of 2 June 2000, save for Global’s insistence on the provision for liquidated damages.
- Mr Couper submitted that that conclusion is to be inferred from the parties’ subsequent conduct. I now proceed to analyse that conduct. It is convenient to deal with it chronologically.
- On 9 June Monarch submitted to Global a claim for a “variation” to the work required of it. Global’s response on 9 June was to reject the claim, asserting Monarch’s disregard of “contractual obligations towards the TC/CM1 Contract Annexure A, special conditions clause 24.11…”. There was no response from Monarch denying the applicability of that contract.
- On 22 June 2000, Monarch lodged another variation claim, seeking deletion of certain items “from our contract”. Global responded on 23 June seeking more detail. The letter is headed “Design & Supply TC/CM1 Contract No. 99Q/005-002”.
- On 28 June 2000, Monarch lodged “Progress Claim No 2”. (The first had been lodged on 28 May 2000.) The progress claim contains a “contract summary”, referring to the contract value, approved variations and the adjusted contract value, concepts obviously based on an acceptance of the existence of a contract between the parties.
- On 6 July 2000, Monarch wrote to Global. The letter says Monarch “is currently contracted to supply steel frames and trusses to the Coolum Fairways project, reference Design & Supply TC/CM1 Contract No99Q/005-002”. Monarch included bank guarantees for “fiv5% of the Contract Sum”, provided “in lieu of retention monies currently being withheld”. It is difficult to regard that letter, also, as other than an acceptance that the parties were then currently contractually bound.
- Global responded on 13 July 2000, rejecting the guarantees for a reason presently irrelevant, and concluding with reference to the contract “yet to be duly notarised in full, for which [sic] is required with urgency”. The point to be made is that both parties were apparently proceeding on the basis that a contract applied, the outstanding issue being execution. On the other hand, it may be said that Mr Densley, the author of that letter, probably had in mind execution of the document in the form finally proffered by Global, that is, including the liquidated damages amounts and all of the documents specified in the Schedule presented by Global as being relevant to “the Works”.
- On 17 July 2000, Monarch submitted a fourth variation claim. In its response the following day, Global invited Monarch to “refer to your TC/CM1 Contract”.
- Monarch submitted progress claim number three on 28 July 2000. Its form followed that of the previous claims.
- On 31 July 2000, Global gave Monarch “Contract notice” of delays, asserting Monarch’s non-compliance with clause 1A(i), (iii) and (v). Global reserved its rights to pursue Monarch for “all delay costs associated with your failure to provide materials”. I note that Global did not assert a right to liquidated damages as such. Monarch replied on 2 August 2000, challenging the contention that Monarch had been guilty of delay.
- On 4 August 2000, Global wrote to Monarch referring to the contract, and giving notice of suspension of Stage 2 works pending Quinn’s approval to proceed.
- On 8 August 2000, Global again raised with Monarch an issue of delay, saying that “your TC/CM1 Contract clearly stipulates that total supply for Stage 1 of the project was due for completion on 15th July 2000”.
- On 14 August 2000, Global informed Monarch of a reassessment of amounts due under the claims, asserting that the amount of Claim No 3 was excessive. Monarch replied on 17 August 2000 referring to the submission of an invoice “as required under our agreement … we will consider any reduced payment to be a breach of contract”.
- On 19 August 2000, Global gave notice of particular delays and reserved its right under clause 2A (sic) to pursue Monarch “for all delay costs”. That must be read as referring to clause 2(a) of the Conditions, the provision for liability to pay liquidated damages in instances of delay.
- Global wrote on 22 August 2000 in relation to the nature of payments under progress claims, referring to provisions of the contract.
- In a letter to Global of 23 August 2000, Monarch dealt with the issue of the execution of the contract:
“You have also stated that Monarch Building Systems has not signed the contract. I trust that you are aware that I have signed contracts on behalf of Monarch Building Systems which were submitted to your Project Manager on 30/5/00. Your version of the contract had been amended to align with our negotiated agreement, as advised to you in the letter covering the signed contract. It is therefore your company which has failed to sign a contract on behalf of your client and in contravention of State Legislation.”
It must be that Monarch was there referring to Global’s failure to execute the contract as ultimately amended by Monarch, that is, not only deleting the liquidated damages amounts in the Schedule, but also amending the list of documents said in the Schedule to be “relevant” to “the Works”.
- On 25 August 2000, Global wrote to Monarch referring to “[t]he lump sum contract agreement”, and asserting breach of contract by Monarch.
- On 31 August 2000, Monarch submitted Claim No 4 in the usual form. Claim No 5 was submitted on 28 September 2000. On 8 November 2000, Monarch’s solicitors demanded payment from Global of amounts said to be owing under the contract between Monarch and Quinn, asserting “a fundamental breach of the contract”.
- It remains to mention an aspect of the pleadings. Mr Laurie drew attention to the fact that in the Third Amended Defence, the defendant Quinn referred to the form of contract delivered in mid-May 2000 (the form including the liquidated damages amounts) as forming part of the “written” contract. On the other hand, as Mr Couper pointed out, the written material also includes reference to Monarch’s fax of 5 June 2000 in which Monarch rejected any liquidated damages provision. Of more arguable significance is the Counter Claim, so far as it includes a liquidated damages claim. Quinn pleaded clause 2 of the Conditions, and the amount for Stage 1 liquidated damages nominated in the Schedule, and there is a counter claim for $504,814 liquidated damages. In the end, these pleading matters should probably be seen largely as reflecting the pleader’s assessment of the contractual position, albeit a position no doubt enthusiastically embraced by Quinn as defendant. It was however a view of the matter expressed in the pleadings at a time distant from the particularly relevant events. Whether or not the parties were contractually bound is more reliably determined through a focus on those earlier events, and that is the way I proceed, while acknowledging the glaring inconsistency between the position now taken by Quinn, and its pleading.
The parties’ principal submissions
- Mr Couper would submit that the conduct of the parties from early June 2000 to at least September 2000 was consistent with their assumption they were contractually bound to an agreement “shorn of the liquidated damages provision”. Mr Laurie, however, pointed to their fundamental commitment to an executed contract in the form of TC/CM1, which would have included a liquidated damages clause, confirmed at the “Vetting Meeting” on 13 January 2000: because that was never executed, no binding contract arose and Monarch’s entitlement must fall to be assessed on the basis of a quantum meruit.
Analysis of the evidence
- By the end of the phase of negotiations, in early June 2000, the parties had not reached a binding agreement. Their clear mutual intention had been to execute a contract in the form TC/CM1. That had not occurred. The reason, or substantial reason, for that, was their disagreement over the specification of amounts in respect of a liquidated damages liability. The parties had expressed themselves plainly on that. On 2 June 2000, Mr Densley for Global informed Monarch that the liquidated damages clauses “will not be excluded”. On 5 June 2000, Mr Warner of Monarch informed Mr Speedy that Monarch would not accept those provisions.
- Quinn would contend, however, that a definable consensus between the parties may be inferred from their subsequent conduct. It is true that in their subsequent communications, each party proceeded on the basis there was a binding contract between them. Monarch submitted progress claims, claims for variations, and tendered bank guarantees in lieu of withheld retention monies, all concepts apt to a contract situation. Monarch’s letters refer to the TC/CM1 contract by number. So do communications from Global, and Global goes so far as to give formal notices purportedly under that contract. The reasonable inference is that the parties proceeded on the basis they were contractually bound.
- The difficulty is finding consensus as to the terms of that contract, and that difficulty stems from the circumstance that the liquidated damages issue was never resolved. It was an issue of apparent importance to the parties, on which they had made their divergent positions plain. Is there any reasonable basis to infer that they agreed to defer resolving that issue while in the meantime remaining bound to the rest of the terms which were agreed, or that they agreed to proceed on the basis that there simply would be no such provision?
- The most likely inference is that Global was assuming a contract including the liquidated damages Schedule amounts, whereas Monarch was assuming a contract which did not specify those amounts. There is, in short, no consensus to be inferred as to the content, in one important respect, of the assumed agreement.
- After the parties confirmed their divergent positions on this issue in early June 2000, nothing occurred from which one could reasonably infer either of the positions mentioned at the end of para [47] above.
- Most significantly, on 19 August 2000, Global informed Monarch that it was reserving its rights under the provision of the contract (clause 2(a)) which provided for liability to pay liquidated damages in respect of delay. That is consistent with a view in Global that a valuable right to liquidated damages could be asserted under the contract between the parties (“valuable” in the sense the entitlement under clause 2(a) was given legs by the specification of amounts in the Schedule).
- Also significant is Monarch’s letter to Global of 23 August 2000, complaining of Global’s failure to sign the contract which, amended to delete the liquidated damages amounts, Monarch had signed and submitted to Global on 30 May 2000. That is consistent with Monarch’s continuing contention that it was not bound to liquidated damages provisions capable of active application.
- Finally, there is Global’s letter of 13 July 2000 seeking urgent attention by Monarch to the signing of the contract, “yet to be duly notarised in full”. That is to be seen as Global requiring execution by Monarch of the contract including the liquidated damages Schedule amounts as inserted by Global.
- Plainly, not only had agreement not been reached on the position in relation to liquidated damages, but it remained a significant issue which had to be resolved before the contract could properly be executed. Execution was itself of apparent importance to the parties, as the correspondence just referred to confirms. Now it may be that if all matters were agreed, the lack of execution would nevertheless not necessarily have meant there was no binding contract, an observation I make in the context of Mr Laurie’s primary submission. But the reality is that because of the position in relation to liquidated damages, all relevant issues were not agreed.
- There is, additionally, no reasonable basis for an inference that the parties determined to proceed on the basis that having reached agreement on all other matters, those would, at least for the time being, combine to constitute a binding contractual landscape. The liquidated damages issue remained alive. It was not a case of agreeing to defer its consideration. It remained a live issue, indirectly emerging in the context of attempts into August 2000 to secure the execution of a contract.
- What then is to be drawn from the parties’ having proceeded on the apparent assumption or view that they were contractually bound? The eventual question is whether objectively, one infers from all relevant circumstances their intention to be bound, and to be bound to a particular contract. That the parties considered themselves contractually bound does not resolve this case. That is because one cannot answer the next question: to what particular contract were they bound? Once one acknowledges the apparent significance to the parties of the liquidated damages provision, their persisting failure to resolve their difference over that provision, and the effective role of that disagreement in forestalling full execution of the contract form, it is not possible to conclude that the parties bound themselves to a contract “shorn of the liquidated damages provision”.
- Mr Couper submitted that:
“if Mr Warner had given evidence…then accepted…that every week Mr Densley was claiming liquidated damages, it might have been different, but there is no evidence of that sort…one simply has a case where the last communication of substance about the terms of the contract is Mr Warner saying, ‘no liquidated damages’. …Thereafter both parties have proceeded on the basis that there is a contract.”
What that submission overlooks is that Global did in August expressly reserve its right to claim damages under clause 2(a), and that in communications in relation to the execution of the contract, each party inferentially required the other to sign a contract reflecting the former party’s position on liquidated damages – a requirement which could not be met because of the parties’ persisting disagreement on that matter. In that way the question of liquidated damages did, as I have said, remain a live issue.
- The feature that the parties apparently considered themselves contractually bound means of course that one strives to identify any basis on which they were. But factually there is no basis for a reasonable conclusion that Global had either abandoned its insistence on the liquidated damages provision, or agreed to defer consideration of it on the basis the parties were bound in the meantime. The position for which Mr Couper contends, while on one view commercially attractive, is simply not supported by the evidence, particularly where, as I have said, the liquidated damages question remained alive, at all relevant times, and held up the execution of the contract, itself a matter plainly of importance to the parties.
- Any entitlement in Monarch falls to be determined on the basis of a quantum meruit.
Determination
- My finding is that there was not a concluded contract between the parties as alleged by the defendant. Further hearing of the proceeding is adjourned to a date to be fixed. Costs are reserved. Liberty to apply.