C & V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd

Judgment

MEAGHER JA: I agree with White JA.
WHITE JA: This is an appeal from orders of the District Court (Montgomery DCJ) (C&V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd [2019] NSWDC 220).
The appellant (plaintiff in the court below) operated a structural steel supply and installation business. The respondent (defendant in the court below) operated a building and construction business and was the builder for the construction of 55 units situated in O'Riordan Street Mascot known as Futura Apartments Mascot.
The appellant filed a summons seeking leave to appeal. It was common ground that leave to appeal was not required. An extension of time for the filing of the notice of appeal was not opposed. Leave was given to the appellant, and the appellant was directed, to file the "further amended draft notice of appeal".
The appellant alleged that by an email sent at 6.20pm on 13 April 2015 the respondent accepted the appellant's formal offer to supply 1,000 angles and plates in the ratio of 20:80 at a price of $44 per plate and to provide welding services for the installation of 1,000 plates (and angles) at $128 per plate (and angle) and agreed to pay the appellant $2,000 for preliminaries and $2,000 for a site establishment fee. The appellant alleged that the respondent breached the agreement by failing to make payment of moneys due under it and on 18 May 2015 purported unlawfully to terminate the agreement. The appellant alleged that the purported termination was an unlawful repudiation which it accepted. It sued to recover $101,708.80 plus GST.
On 3 June 2019 the primary judge dismissed the appellant's claim and gave judgment for the respondent.
The primary judge explained that plates and angles were different types of metal joiners that are sometimes referred to as "clips" or "connections" used to secure pre-cast concrete panels.
In its defence the respondent pleaded that the email sent at 6:20pm on 13 April 2015 (which the appellant alleged was the respondent's acceptance of its offer) was instead a counter-offer to pay $44 for each angle and plate supplied and $128 for welding services. It alleged that the parties reached agreement on 14 April 2015, but did not agree upon the number of plates and angles to be supplied and installed because the parties were agreed that until pre-cast drawings were received they would be unable to determine the quantity required.
The primary judge rejected the respondent's claim that the appellant had accepted its counter-offer of a piecework contract at a price per plate (Judgment [101], [106] and [110]). His Honour also rejected the appellant's contention that its offer was for a lump sum contract for the supply and installation of 1,000 plates and angles (Judgment [107]). Instead, the primary judge found that although the appellant's formal quotation had been accepted by the respondent, that quotation was based on an estimate of the number of plates and angles to be supplied and the pricing was subject to variation following availability of workshop drawings and specifications for construction (Judgment [107] and [111]).
The primary judge held that there was an implied term that each party was obliged to negotiate a variation of price in good faith (Judgment [121]). The primary judge held that if agreement as to variation on price were not reached, notwithstanding negotiations to attempt to agree a variation of price were undertaken by both parties in good faith, neither party would be in breach and the parties might have mutual rights of termination (Judgment [123]).
The primary judge held that, in any case, the appellant was not entitled to refuse further performance of the contract on the respondent's failure to pay an amount demanded by the appellant (which his Honour noted had not fallen due for payment when the appellant refused further performance). The primary judge noted that the 14-day period for payment stipulated in the appellant's progress claim had not expired when the appellant gave notice of refusal to perform the contract. The primary judge held that the giving of that notice was a breach of an implied term that the parties were obliged to negotiate a variation of the contract in good faith if the number of units to be supplied materially changed from that which had been estimated.
Neither party had contended for that implied term.
The primary judge held that the respondent was entitled to terminate the contract on 18 May 2015 following the appellant's cessation of performance.
The principal issue on the appeal is, on the proper construction of email communications between the parties, what were the terms of a contract entered into for the supply by the appellant of plates and angles and their installation? The question is what the email communications would objectively demonstrate to a reasonable businessperson (Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]).
The appellant submits that the respondent agreed to the supply and installation of 1,000 plates and angles at a price it quoted on 10 April 2015 and further agreed to pay fees of $2,000 for "preliminaries" and $2,000 for "site establishment" as provided for in its quotation of 10 April 2015. The respondent submits that it only agreed to pay the price quoted by the appellant for the supply and installation of angles and plates per piece.
The respondent's submission is correct.
It was not in dispute that in November 2014 the respondent was engaged by Longton Property Group to design and construct the FUTRA Apartments Building Project in Mascot. The appellant was the supplier of steel fabrication, engineering and installation to the building and the construction industry (Judgment [19] and [20]). Mr Mario Pizzolato was its sole director and shareholder (Judgment [19] and [20]).
Not all of the parties' relevant communications were provided to this court. It was common ground that communications referred to in the judgment but not otherwise provided to this court could be taken to be as described by the primary judge.
The primary judge recorded that on 9 April 2015 Mr Ross Mangione, the Contracts Administrator of the respondent, Hamilton & Marino Builders, asked the appellant, C&V Engineering, to quote for two jobs, one of which, FUTRA, was "the project" (Judgment [22]).
It was not in dispute that at this time the final engineering design was not finalised (Judgment [24]). Design drawings provided to Mr Pizzolato did not state a quantity of connections that would be required. The primary judge said (at [25]): "It is common ground that such engineering design drawings showing fixation by plates and/or angles throughout the remainder of the building were not available. The significance of this point is that the Defendant requested the Plaintiff to quote in the absence of workshop drawings or engineering design drawings showing locations and specifications for installation of the plates and angles throughout the remainder of the building."
The primary judge recorded that on 9 April 2015 at 10:01am Mr Pizzolato sent an email suggesting that works be executed on an hourly basis plus cost of each connection, plate and angle (Judgment [26]). There was a meeting between Messrs Mangione and Pizzolato at 8:00am on 10 April 2015. The primary judge held, and it is not contested on appeal, that neither knew which connections would require plates and which connections would require angles, nor the locations at which plates or angles would be required. The quantities were to be confirmed (Judgment [28]-[33]).
The primary judge found that at the meeting at 8:00am on 10 April 2015 between Messrs Mangione and Pizzolato they went through some drawings and marked up the floor plan and together made notes on the drawing roughly where the plates were going to be. They both established a quantity per level and came up with an estimate (Judgment [38]-[39]). The primary judge found that Messrs Pizzolato and Mangione "jointly participated in a process of pooling their individual expertise to arrive at an estimate of only such accuracy as the information upon which it was based permitted", and "... the parties were mutually aware that they were communicating on the basis of an estimate so arrived at, and further, that only by reference to workshop drawings and engineering design; when they became available, could the actual quantities of plates and angles be known." (Judgment [40]).
At 9:58am on 10 April 2015 Mr Pizzolato sent an email to Mr Mangione and others (including a Mr Matt Thompson of Hamilton & Marino). In that email Mr Pizzolato said: "In regards to the precast connection plates and angles at your earliest convenience send through precast panel drawings so that we may finalise quantities. However in the meantime approximate quantities as touched up this morning; B1 to B3 (3 floors), only to lift shaft, @ 12-15 connections per floor = 36 to 45 GF to Roof (13 floors) @ 65 - 75 connections per floor = 881 to 1020. Therefore total requirement (at this point in time) = 881 to 1020. The ratio between angles and plates, lets [sic] assume 20:80 which will enable us to start procuring some of the angles and plates. I suggest, with your consent, to get 50% of the plates/angles underway and we can finalise in due course. That way connectors are ready for when you start installing precast panels. ... I'll be able to advise approximate cost of angles and plates later today. The installation component, due to many unknowns, as previously advised best on hourly hire. However we can provide an indication of time to weld each bracket. Added benefit of us being up the road I'll waive the travel time." (WB 306-307)
At 10:07am on 10 April Mr Thompson replied to Mr Pizzolato's email saying: "Thanks for your advice below, we don't do any works on hourly rate, can you please estimate the time to do one stitch plate and simply times it by the number of plates, this way we can lock in a total price for the project. You might weld one off in your factory to see how long it takes and then you can give me a locked in price, we just don't do hourly rates as day works kill projects."
At 10:11am Mr Pizzolato asked Mr Thompson to share the rate that Hamilton & Marino was currently paying. Mr Thompson replied at 11:39am and said that they did approximately "6-8 plates a day fully welded, 200 x 300 plate at a cost of $75 hr when we break it back down to hourly rate, we are paying approx $44 per plate from our panel supplier in Melbourne."
Mr Pizzolato queried the figures and said that the figure of $44 appeared very low. The primary judge said (Judgment [45]) that by his email at 1:22pm Mr Thompson clarified that the $44 rate was for supply of the plate and that the cost of installation per plate regularly paid by Hamilton & Marino was $100 equating to a total cost per plate supplied and installed of approximately $144 give or take some welding rods etc.
At 2:29pm on that day Mr Mangione sent an email to Mr Pizzolato saying: "Please are you able to provide a quote per plate based on the estimated quantities as discussed today. As per Matt Thompson's email, we cannot commit to hourly rates due to lack of control. Once we review your quotation we can discuss the finer details."
At 2:56pm Mr Pizzolato responded. He wrote: "Hi Ross, Thanks for the clarification, much appreciated. Yes you'll have price per angle/plate very shortly (heads up as a means to demonstrate our genuineness in developing a harmonious relationship I'll match the rate for the angle/plate of $44 each + GST as suggested by Matt) You'll have installation component very shortly as we're bouncing a few ideas around within the office. So if you could flick over a confirmation email giving us the green light on the angles and plates (1000 of ratio 20:80) we can take care of the rest. The only next hurdle will be payment terms and deposit; we generally require 10% deposits with full balance prior to delivery. We only offer 14 day credit terms upon establishing track record. Thanks again for the clarification, we look forward to getting these angles and plates underway for you."
No confirmation email as sought in the fourth paragraph of the email was provided.
At 3:00pm Mr Thompson sent an email to Mr Pizzolato and to Mr Mangione stating "Mario, we would like an install price per one before we place an order for material." This was in accordance with Mr Thompson's earlier email at 10:07am asking for a locked in price for welding of one plate that could then be multiplied by the number of plates to give a total price for the project. It was not known how many plates and angles would be required.
At 4:28pm on 10 April 2015 Mr Pizzolato sent an email to Messrs Thompson and Mangione enclosing his "proposal relating to the supply and welding of pre-cast angles and plate for the Futra Apartment project." The proposal was headed "Investment Offer". Mr Pizzolato wrote: "Further to your request for quotation, we are pleased to submit our offer for the supply, fabrication, delivery and site welding of the Precast Angle/Plate Connectors located at Futra Apartments Mascot project."
In its proposal C&V Engineering stated: "Your investment offer for us to execute the works is as follows: Item QTY Description Value (Each) 1 1000 of Angle LP02/Plate LP01 (Ratio 20:80) $44.00 Site Welding of Angle/Plate 2 Including welding consumables $128.00 Including platform ladders to access MISCELLANEOUS ITEMS Overall Preliminaries $2,000.00 Overall Site Establishment $2,000.00

Please note: ● Prices offered ex GST and based on full package being awarded ● This offer is valid until 25 April 2015, after which is subject to rise and fall and is reliant upon material prices prevailing at time of order, value of purchase order, receipt of final engineer drawings, review of defined specifications and other reasons such as terms and conditions agreed upon."

Attached to this proposal were C&V Engineering's standard terms and conditions. These included terms of payment relevantly as follows: "Please read these terms and conditions of quotation carefully, as in the event of acceptance of this quotation they will be binding upon you. It is C&V Engineering Services (C&V) policy to strictly enforce its terms of business in the event of any dispute. ... (3) Work will not proceed until written confirmation and acceptance of our quotation and terms and conditions is received. ... (7) Terms of Payment 1. If the customer does not have an existing credit agreement with C&V, then the customer shall remit payment to C&V as follows: i) 10% On placement of order (non refundable) ii) 30% On receipt of workshop drawings iii) 50% Prior to delivery iv) NIL On delivery v) 10% On completion (subject to credit approval, otherwise full payment required prior to delivery) ... 4. The contract sum may be varied due to increases occurring in the prime costs of materials and labour. Prices are subject to change pending materials prices at time of order, value of purchase order, receipt of final engineering drawings, review of detailed specifications and other reasons such as terms and conditions agreed upon. ... (26) The acceptance of this quotation by the customer acknowledges acceptance of the terms and conditions of quotation [hereon]. Modification of these terms and conditions in any form does not apply unless expressly accepted in writing by C&V. These terms and conditions of quotation are to be attached by way of annexure to any sub-contract, contract or works agreement entered into and will be deemed to form part thereof."
On Saturday, 11 April 2015 Mr Thompson wrote to Mr Pizzolato saying: "We're happy to lock in a price per plate as per your quote. Please note though that it may be 800 plates or more. I notice you allowed for 1,000, I don't want the quantity to affect the price."
On Monday, 13 April 2015 at 11.51am Mr Pizzolato sent an email to Messrs Thompson and Mangione in which he noted that: "... until we receive pre-cast drawings for the higher levels [of the building] we are essentially flying blind. Just so you're aware we only have pre-cast panel drawings relating to the lift shaft required to basement levels. We have based access, i.e. platform ladders, on these drawings."
At 6:20pm on Monday, 13 April 2015 Mr Mangione wrote as follows: "Hi Mario, As discussed, please consider this email as your instruction to proceed with the supply and installation (welding as per structural engineers requirements) of the angles/plates as required for the precast panels associated with FUTRA Apartments and as per the rates noted in your quotation attached. I will issue a formal Purchase Order tomorrow once your details have been set up in our system." (Emphasis added.)
No purchase order was issued (Judgment [61]).
The respondent pleaded that Mr Mangione's email of 6.20pm on 13 April 2015 was a counter-offer that was accepted by Mr Pizzolato in an email dated 14 April 2015 at 9:18am to Messrs Thompson and Mangione. That email was not included in the documents provided on appeal, but is extracted in the primary judge's reasons (Judgment [62]). It appears from those reasons that Mr Pizzolato thanked Messrs Mangione and Thompson for their email of 6:20pm on 13 April 2015 and advised "I'll get the plates and angles underway asap".
Mr Mangione's email of 13 April 2015 at 6:20pm (para [36]) accepted the rates quoted by Mr Pizzolato and said that those rates would apply to the "angles/plates as required ...". It did not convey the respondent's acceptance of the appellant's offer to supply and install 1,000 angles and plates. Neither party knew how many angles and plates would be required. The parties were working on the best estimate that could be arrived at of total quantities being required, being between 881 and 1,020 as estimated by Mr Pizzolato on 10 April 2015 (9:58am) and Mr Thompson's response of 11 April 2015 (para [34]) that it "may be 800 plates or more" (emphasis added). That is an objective background fact that is capable of bearing upon the meaning of the parties' correspondence. He asked that the pre-cast panel drawings be forwarded so that he could finalise quantities. But they did not become available before the contract sued on was made.
The primary judge found that Mr Mangione's email at 6:20pm on 13 April 2015 was an acceptance of Mr Pizzolato's offer (Judgment [114]), but concluded that the "terms of the contract expressed in the Offer rendered pricing to be subject to variation following availability of workshop drawings and specification for construction." (Judgment [111]).
His Honour said: "The parties' common intention was to contract immediately on pricing with provision for variation upon engineering design in workshop drawings and specifications." (Judgment [114])
This was not a construction advanced by either party. His Honour dealt with an apprehended objection that a contract in those terms would be void for uncertainty because the price had not been agreed by saying that it was an implied term that each party was obliged to negotiate any variation in price in good faith and to do all that was necessary on its part to enable the other party to have the benefit of the contract for the whole of the Project. (Judgment [121]).
This reasoning was cogently attacked by Mr Campbell who appeared for the appellant. Mr Sheldon for the respondent did not seek to defend it.
Mr Pizzolato's formal offer must be understood in the context of the respondent's negotiating position. The respondent had previously rejected Mr Pizzolato's proposal that the installation component be priced on an hourly rate. He was asked to provide a quote per plate based on the estimated quantities (Mangione email 10 April at 2:29pm). Mr Thompson had said at 10:07am that "We don't do any works on hourly rate". He asked that Mr Pizzolato do "one stitch plate and simply times it by the number of plates, this way we can lock in a total price for the project". He said: "You might weld one off in your factory to see how long it takes and then you can give me a locked in price, we just don't do hourly rates as day works kill projects."
Mr Sheldon emphasised that nowhere in the offer does it stipulate a contract sum, notwithstanding that the attached terms and conditions contemplated that there could be a "contract sum" (clause (7.4)). Instead, the offer stipulated a "value" (that is, price) for the supply of "each" angle and plate and for the welding of each angle and plate. The offer stipulated a quantity of 1,000 and noted that the price offered was "based on full package being awarded."
Mr Campbell submitted that the primary judge was wrong in construing the offer as not describing a "lump sum contract" and submitted that as the primary judge had found that the offer had been accepted by Hamilton & Marino's email of 6:20pm on 13 April 2015, the contract arising from acceptance of the offer necessarily required a finding that Hamilton & Marino had agreed to purchase and pay for the installation of 1,000 units at the stipulated price. Otherwise there would be no contractual means for determining the price payable for a lesser number of units to be supplied (Brooker Industries Pty Ltd v Wilson Parking Pty Ltd (1982) 149 CLR 600 at 604; [1982] HCA 5; Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695).
That argument might have had some force had Hamilton & Marino simply stated that it accepted C&V Engineering's offer of 10 April 2015. It did not do so. Mr Sheldon correctly submitted that on the proper construction of the offer it was not an offer to supply and install 1,000 angles and plates, but to supply and install angles and plates at a price of $172 with a stipulation that that price was based on an "award", that is, an order, for 1,000 angles and plates. There was no such award.
On 11 April 2015 Mr Thompson reiterated that the respondent was happy to lock in a price per plate. The respondent's "acceptance" at 6.20pm on 13 April 2015 was for the supply and installation of angles and plates "as required".
Consistently with its earlier position, Hamilton & Marino accepted the rates noted in the quotation with those rates to be applied to "the angles/plates as required ...". The rates quoted by Mr Pizzolato were based upon the full package of 1,000 units being awarded. Hamilton & Marino did not agree to order 1,000 units.
Contrary to the primary judge's finding, Mr Mangione's email at 6:20pm on 13 April was not an acceptance of C&V Engineering's "Offer", but a counter-offer to pay for the "angles/plates as required at the rates set out in the 'Offer'". The context made clear that "required" referred to a need of the builder for a number of plates that had not yet been finalised and communicated. Mr Mangione's email of 13 April at 6:20pm did not correspond with Mr Pizzolato's offer. It attempted to vary that offer by adding a new term (Heydon on Contract, Lawbook Co. 2019 at [2.300]). As pleaded in Hamilton & Marino's defence, that counter-offer was accepted on the following day and by performance.
Hamilton & Marino did not file a notice of contention and initially accepted that its email at 6:20pm on 13 April was an acceptance of C&V Engineering's formal offer. But that was on the basis that the offer was not for the supply of 1,000 angles and plates. Mr Sheldon ultimately maintained that that email was a counter-offer that was accepted the following day. Mr Campbell correctly accepted that it was open to Hamilton & Marino to maintain this position.
The primary judge said (at [113]): "The reality was that before 15 May 2015, the method of construction, in order for it to proceed above ground, was not available to the parties because it was pending engineering development. Commercial reality is highly supportive of the proposition that persons in commercial construction, in those circumstances, would not contract a fixed price for supply and installation of the connections in a significant high rise construction whilst 'flying blind'."
The basis for this assumption is not self-evident. No doubt in many construction contracts the quantity of goods to be supplied or installed would be expected to affect the price. In this case, as the plaintiff's damages claim made plain, the profit for the appellant in respect of each component was independent of the number of pieces and angles supplied and installed. The respondent's contention does not give an unbusinesslike result and there is no warrant for ignoring or overriding the plain meaning of "as required".
In May 2015 the relationship between the parties broke down after it became apparent that the number of plates/angles required would be substantially smaller than anticipated.
On 4 May 2015 Mr Pizzolato forwarded a payment claim for $25,596.32. It included claims for $4,400 for the supply of plates and angles and $12,800 for welding, being 10 per cent of the quote for the supply and installation of 1,000 plates and angles. This was in reliance on clause 1(i) of C&V Engineering's terms and conditions (10 per cent on placement of order (non-refundable)). It also claimed $2,000 for preliminaries and $2,000 for site establishment. Curiously, it made additional charges of $3,960 being 90 per cent of $44 for 100 plates and angles supplied to that date and $691.20 for the welding of six plates and angles. That was not in accordance with the quotation. Payment was said to be due in 14 days (i.e. 18 May).
On Friday, 15 May 2015 at 2:09pm Mr Mangione emailed Mr Pizzolato saying the following: "Hi Mario, I tried to contact you today however I was unsuccessful. We have confirmation of a revised quantity of plates required for our Project at FUTRA Apartments, Mascot. Based on our advice from our design team, we will require approx…. 150 plates to be supplied and welded, not 1000 as you had previously incorrectly estimated. Please review your quotation and resubmit in accordance with the revised quantity. Based on the revised quantity, please also see attached you [sic] confirmed Progress Certificate 001 in relation to your claim issued on 1/5/2015, for the works/materials supplied and carried in April 2015. Please be aware that we believe there to be a reduction in preliminaries and site establishment based on the revised quantities, and require confirmed costs in-line with proposed works to assess value. Please feel free to contact me on the below details to discuss."
Hamilton & Marino agreed to pay $5,380 being $4,600 for the supply of 100 plates and angles at $46.00 each and welding of six plates and angles at $130 each. The increased prices of $46 and $130 (instead of $44 and $128) reflected an inclusion of a proportion of preliminaries and site establishment costs.
On Friday, 15 May 2015 at 2:38pm Mr Pizzolato sent an email to Mr Mangione in the following terms: "Ross, Thanks for your email. In regards to the quantities that was discussed with yourself prior to submitting a quotation and further confirmed by you upon accepting our quotation, so unsure how you blame us for "incorrectly estimating them" Regardless whether the quantities increase or decreases, HMB instructed us to proceed with our quotation (1000 of) on the 13/04/2015, so with that in mind we had already ordered a further 400 of plates last week which are due to arrive end of next week. These will need to be paid as the quoted rate irrespective if the quantities have changed or not In regards to prelims and site establishment unsure how you come to the conclusion these are not payable or are to be reduced due to revised quantity. The invoiced amount remain payable in its form and we rely on clause (7)1.i) of our quotation which states the following (7) Terms of Payment 1. If the customer does not have an existing credit agreement with C&V, then the customer shall remit payment to C&V as follows: i) 10% On placement of order (non refundable) ii) 30% On receipt of workshop drawings iii) 50% Prior to delivery iv) NIL On delivery v) 10% On completion (subject to credit approval, otherwise full payment required prior to delivery) In the meantime, due to non-payment to date our company will be unable to attend site and continue site welding. Please action payment immediately, without deduction, failure in doing so may lead to adverse action (which is not where we want it to go) Please refrain from calling me as I'm not interested in discussing the above until our account is paid in full"
The primary judge correctly characterised this email as a refusal by the appellant to perform further work and a repudiation of its contract with the respondent.
On Monday, 18 May 2015 Mr Peter Karavelatzis of Hamilton & Marino replied to Mr Pizzolato as follows: "Mario, please cease all works associated with our Mascot project."
The primary judge correctly characterised this email as an acceptance of the appellant's repudiation that terminated the contract.
The appellant ordered 400 plates in anticipation of supplying the same, but conceded that its claim for damages in respect of those plates so ordered depended on the success of its principal claim that the respondent was required to take and pay for 1,000 units (T70). There was no evidence that the 400 plates ordered by the appellant (or such of them as were not supplied to the respondent) were worth less to the appellant than what it paid for them.
An issue on appeal was whether the primary judge erred in not permitting the appellant to adduce late evidence to seek to make good its damages claim. I am not persuaded that his Honour erred, but the question does not arise as the claim fails in any event.
For these reasons, although not for the reasons given by the primary judge, I agree with the primary judge's conclusion that the contract did not require Hamilton & Marino to pay for 1,000 plates and angles. The appeal should be dismissed with costs.
MCCALLUM JA: I agree with White JA.

At a glance

Court

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Judgment (8 paragraphs)

Cases Cited (5)

Cited By (1)