Practice and procedure - Originating process - Appropriateness of originating summons - Disputed questions of fact - Evidence - Construction of documents

Local government - Contracts - Acceptance - Condition precedent - Registration of builder

Local government - Contracts - Tendering process - Fairness - Remedies

Builders' Registration Act 1939 (WA) s 4(1)

Local Government (Functions and General) Regulations 1996 (WA)

City of Belmont v Link Interiors Pty Ltd & Anor; unreported; SCt of WA; Library No 980545; 23 September 1998

City of Belmont v Link Interiors Pty Ltd, unreported; SCt of WA; Library No 990114; 12 March 1999

Homestyle Pty Ltd v City of Belmont & Anor [1999] WASCA 59

Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558; (1997) 146 ALR 1

Mason v Schuppisser (1899) 81 LT 147

Pratt Contractors v Palmerston North City Council [1955] 1 NZLR 469

Smith v Chadwick (1882) 20 Ch D 27

St John Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267

Willow Grange Pty Ltd & Anor v Yarra City Council, unreported; SCt of Vic; 7427 of 1997 (BC 9706481)

1 In February and March 1998, the plaintiff called for expressions of interest for tenders for refurbishment of the plaintiff's administration building ("the Works"). Because the Works were expected to cost more than $50,000, the plaintiff had to comply with the provisions of Part 4 of the Local Government (Functions and General) Regulations 1996 (WA). The advertisement published by the plaintiff invited "suitably qualified and experienced builders" to register their interest in the Works. Twenty expressions of interest were received and letters were sent to four of those twenty parties inviting them to tender. Each of those four tendered for the Works, and the first defendant's price was the second lowest of those tenders. The lowest tender, by a small amount, was from BCG Construction, now trading as Homestyle, the second defendant. After an analysis of the tenders and interview of representatives of BCG Construction and the first defendant, and after examination of the responses of BCG Construction and the first defendant to requests for additional information, Council officers recommended that the first defendant be awarded the tender.

2 At the Council meeting at which this recommendation was discussed, during the course of public question time, a solicitor for the group to which BCG Construction belongs, asked a number of questions concerning the Works, including the question, "Is Link Interiors Pty Ltd a registered builder and what is their registration number?" In fact, the first defendant was not at that time a registered builder. In the form of tender submitted by the first defendant, there was a space for "tenderers registration/licence number", which the first defendant had filled by inserting "BLDRS# 10219 (G RAIN - SUP'T)". The registration number was that of a Mr Rain, an employee of the first defendant. As a result of that discussion during question time, the motion carried by the plaintiff's Council in relation to the Works was as follows:

"That because of their greater demonstrated experience in undertaking multiple-staged refurbishment projects of the magnitude required, Link Interiors Pty Ltd be awarded the tender for the refurbishment of the Council Administration Building in accordance with the tender specifications and for their tendered price of $2,987,300, subject to their confirmation that they are either registered builders or using a registered builder to undertake works which would require registration and that Council's solicitors advise that Council has complied with the law relating to local government tenders in Western Australia."

3 The letter sent to the first defendant by the plaintiff by facsimile on 12 May 1998 did not quite reflect the terms of the motion. It advised:

"I am pleased to advise that at last night's Ordinary Council meeting it was resolved to award the tender for the Council Administration Building refurbishment to Link Interiors in accordance with the tender specification and for your tender price of $2,987,300, subject to confirmation that you are a registered builder and subject to Council obtaining legal advice that all relevant laws and regulations have been adhered in awarding the tender.

We request your confirmation of the builders registration matter ASAP, while we seek the necessary legal advice.

I hope to be in touch with you again in the near future."

4 On 13 May 1998 the plaintiff received information that the first defendant was not registered under the Builders' Registration Act 1939 (WA) ("the Builders' Registration Act"). On 19 May 1998, the plaintiff received advice from its solicitors that it might be possible for the first defendant to become registered under the Builders' Registration Act but that if it was not registered at "the time in question" then by reason of s4(1) of the Builders' Registration Act, it would not be lawful for the first defendant to enter into a contract with the plaintiff for the Works. On 28 May 1998 the plaintiff sent to the first defendant a letter expressing the view that there was no contract between the parties, but seeking the first defendant's comments. On 29 May 1998 the first defendant sent to the plaintiff a letter advising (correctly) that the first defendant's application for registration pursuant to the Builders' Registration Act had been approved. That letter was received by the plaintiff on 2 June 1998. Registration had been effected on 28 May 1998.

5 Because of the dispute as to whether there is an enforceable contract between the plaintiff and the first defendant, the plaintiff issued an originating summons pursuant to O58 r10 of the Rules of the Supreme Court 1971 (WA). The defendant named in that summons was the first defendant, and it was in the following terms:

"1 Pursuant to Order 58 Rule 10 of the Supreme Court Rules, a declaration as to the true construction of the documents associated with a proposed contract between the City of Belmont and the Defendant for the City of Belmont Administration Building refurbishment.

2 In particular and without prejudice to the generality of 1, a declaration whether on the true construction of the documents and in the light of the circumstances and the relevant law:

2.1 The tender by the Defendant for the contract for the carrying out of the City's Administration Building refurbishment was a tender which the Council of the Plaintiff is able to accept; and

2.2 Whether the resolution of the Council of the Plaintiff at its meeting of 11 May, 1998 amounted to an acceptance of the Defendant's tender conditional upon the Defendant becoming registered as a builder under the Builders Registration Act 1939; and

2.3 Whether the Defendant's tender and the Council's resolution of 11 May, 1998 together with the relevant tender documents became a contract between the Plaintiff and the Defendant upon the Defendant becoming a registered builder on 28 May, 1998, or at any other time."

6 Should there not be a contract between the plaintiff and the first defendant, and should the plaintiff be unable to accept the first defendant's tender, it appeared then that it was possible, although not inevitable, that the plaintiff might accept the lowest tender, that of BCG Construction. That entity, then using the name Home Style Pty Ltd ("Home Style"), applied to be joined as a party to the plaintiff's application. Master Sanderson took the view that BCG Construction or Home Style Pty Ltd had not a sufficient interest in the question of whether a contract existed between the plaintiff and the first defendant to be joined, but might well have an interest in the question of whether, if there were no contract, the first defendant's tender was one which it was open to the plaintiff to accept. He therefore rejected the application and referred for determination, in effect as preliminary issues, those issues set out at par 2.2 and par 2.3 of the originating summons.

7 I heard argument on those preliminary issues in February 1999 and determined them in March 1999 by finding that the plaintiff's facsimile of 12 May 1998 did amount to acceptance of the first defendant's tender conditional upon the first defendant becoming registered and that the first defendant's tender, the plaintiff's facsimile of 12 May 1998 and the first defendant's letter of 28 May 1998 together with the tender documents did become a contract between the plaintiff and the first defendant by at latest 14 July 1998.

8 Also in March 1999, Home Style filed a notice of motion for leave to appeal from the interlocutory decision of Master Sanderson and from the decision which I made.

9 In May 1999, the Full Court heard the appeal and in June 1999 published reasons, the broad thrust of which was that Master Sanderson had been in error in ordering that preliminary questions be heard in the absence of Home Style and that it therefore followed that not only Master Sanderson's decision should be set aside but that, Home Style not having been heard before me, my decision too must be set aside. There was then in July, an order by Master Sanderson requiring that the issues raised in the originating summons be heard and determined on the basis of affidavit evidence filed on behalf of the plaintiff and the first and second defendants. The first defendant then gave notice of its intention to abide by the decision of the court. It appeared before me to advise of this intention, but took no part in argument.

10 As a result of this unfortunate sequence of events, the matter comes back before me apparently for determination of all of the questions raised by the originating summons. I should note that it seemed to me somewhat odd that the matter should come back before me, rather than before another Judge who would have the considerable advantage of approaching the matter afresh and who would not be subject to any unconscious tendency either to seek to justify my earlier reasoning, or to "bend over backwards" in favour of the party previously not heard. However, although I raised this matter with the parties, both the plaintiff and the second defendant were content to argue the matter before me. No objection was taken on behalf of the first defendant.

11 When the matter came on for hearing before me, the second defendant submitted that on proper analysis of the questions posed, the originating summons either did not fall within the scope of O 58 r 10 of the Rules of the Supreme Court or that even if it did, it would in any event be inappropriate in the exercise of my discretion for me to determine the matter. Counsel relied upon two unreported decisions of Olney J, they being: Hamersley Iron Pty Ltd v Hancock, unreported; SCt of WA (Olney J); Library No 5195; 23 December 1983 and Kingsview Nominees Pty Ltd v De Crespigny, unreported; SCt of WA (Olney J); Library No 7090; 13 April 1988.

12 In each of those decisions, Olney J made a number of observations concerning the originating summons procedure, which I would respectfully adopt. In Hamersley Iron, his Honour observed that:

"The procedure contemplated by the rule is one appropriate to cases where there is no disputed question of fact and where the court has before it an instrument the construction of which is capable of determination by reference to the instrument itself (emphasis supplied). In my view, the authority of the court is to make a declaration of right and not to declare the construction of the instrument. If it were otherwise, the court's order would be in the nature of an advisory opinion. The rule contemplates that the court will determine the construction of the instrument as a preliminary to it declaring the rights of the parties."

13 His Honour noted that in the case before him the matter had proceeded by the taking of the very substantial amount of evidence both in affidavit form and viva voce and with extensive cross-examination. All of those matters suggested to his Honour that proceeding by way of originating summons was inappropriate and that a writ issued in the ordinary manner would have been a more appropriate way of proceeding. His Honour observed that the course which had been taken was not calculated to lead to a precise identification of the issues and that he did not share the belief of the parties that the central issue was "sufficiently defined in the originating summons and the affidavits". In view of the fact that the entire matter had been before him, including significant cross-examination of witnesses, his Honour, in the end took the view that there was sufficient material to enable him to determine the construction of the disputed clause of the contract and to make an appropriate declaration and he proceeded to do so.

14 In the Kingsview case, his Honour had put before him a substantial number of documents which were said jointly to comprise the relevant agreement or "instrument". He was not convinced that any one or combination of them comprised a deed or written instrument for the purpose of the rule. In any event, his Honour held that as a matter of discretion he should decline to enter on the task of declaring the true construction of the documents, since it appeared to him that to reach any conclusion upon the issues raised in the originating summons would require the court to find the existence of implied terms, and that before that could be done it would be necessary for the entire factual context in which the contracts were made to be examined, which was inappropriate in the proceedings before him.

15 With those observations in mind, I turn to the originating summons in this case. Paragraph one is, on its face, an inappropriate question, since it does not attempt to identify in any way the construction issue or issues which might arise. Nor does it identify what the relevant documents "associated" with the proposed contract might be. However, the parties seem always to have proceeded on the basis that the real questions in issue were those set out in par 2, and it is not necessary to spend more time on par 1.

16 So far as par 2 is concerned, the first problem which appears is that it seeks a declaration not only on the true construction of the documents, but on their construction "in the light of the circumstances". The circumstances are not identified with precision, and it appears that there are significant differences between the parties as to what the relevant circumstances might be. Taking each of the subsidiary questions in sequence, it appears to me that there emerges from the argument of the second defendant at least one potential factual "circumstance" in respect of each question, which in fairness to the second defendant it should have the opportunity of arguing in the context of a trial at which issues have been identified with precision and in the course of which relevant evidence has been given and has been tested if necessary by cross-examination on behalf of the second defendant.

17 Taking them in order, the factual questions which may arise in relation to each of the relevant subparagraphs at par 2 are as follows. I do not intend that it be understood that this list is exhaustive, but in each case I have identified what seems to me to be the most significant factual issue.

18 In relation to this matter, the second defendant asserts that the plaintiff was unable to accept the first defendant's tender because to do so would be a breach of the duty of fairness which it owed to all tenderers. This duty was said to have two aspects. The first was that it was said to be unfair to other tenderers to consider a tender from an unregistered builder, when on the proper construction of the tender documents only registered builders were invited to tender. I do not at present see this as involving much in the way of factual dispute. However, so far as the second defendant in particular is concerned, it was also, as I understood it, the submission, which was only broadly sketched before me, that the second defendant in particular had been treated unfairly because an assessment of the desirability of its tender had been based in part upon information provided by third parties which was inaccurate or in relation to which officers of the Council had formed the wrong impression and which the second defendant had been unable to contradict. It was also suggested that the plaintiff had improperly and misleadingly given the second defendant the impression that at the time at which it interviewed the second defendant it was intending to award the tender to either the first or second defendant, while the view later expressed by officers of the plaintiff was that it had no obligation to award the tender to any person.

19 There are considerable obstacles in the way of this argument succeeding, it seems to me. Counsel for the second defendant freely conceded that he was unable to find any authority for the proposition that a breach of the obligation of fairness in the course of the tendering process had the result that the resulting tender was void, rather than merely giving the unsuccessful tenderer a remedy in damages. However, it does appear to me to be unfair to the second defendant to consider those issues in the absence of an adequate factual basis for the argument.

20 This seeks to inquire whether the "resolution" of the Council of the plaintiff amounted to an acceptance of the first defendant's tender upon certain conditions. The resolution itself was of course oral. Presumably it was in due course embodied in a written instrument, being a Council minute. However, the letter sent to the first defendant purporting to advise of the terms of the resolution did not, as has been pointed out before, accurately reflect the terms of the resolution. The question arises as to what "instrument" is to be considered. Issues may arise as to the authority of the writer of the letter to communicate in those terms, and as to the contractual force, if any, of a document which misstates the resolution of a body which ordinarily records the results of its deliberations by way of minutes.

21 While this on its face seeks to inquire whether the resolution together with certain documents "became a contract", closer analysis suggests that there is a factual issue involved here too. The second defendant submits that if one assumes that, on a proper construction of the documents, the condition referred to in par 2.2 was a condition precedent to formation of contract, an issue would arise as to whether it was the type of condition which enabled a party such as the plaintiff to withdraw from the transaction prior to fulfilment of the condition. There then arises a question of construction of a number of documents, and in particular the construction of the letter of 28 May 1998 in which the plaintiff expressed to the first defendant the view that there was no contract between the parties (although inviting the first defendant's "comments" on this proposition).

22 I observed in my previous reasons for decision that I did not appear to have the entirety of the correspondence before me. It appears to me that a consideration of the question of whether there was a purported withdrawal from the transaction may well depend upon a consideration of the entire factual matrix, including not only the correspondence between the parties, but evidence as to any conversations which may have taken place, and cross-examination in relation to them.

23 In relation to each of the subparagraphs of par 2, there is of course a further difficulty that documents which are said to comprise the relevant instrument or instruments are never identified with precision; the reference to "the documents" in the opening of words par 2 appears to be more than a reference to the particular "documents" identified by the subparagraphs (to the extent that they are identified). This reference appears to be more in the nature of an invitation to trawl through the entirety of the correspondence with a view to finding some contractual document or combination of documents.

24 There are other objections by the second defendant to the form of the question posed by the originating summons, but I think it is fair to say that these go to infelicities in drafting rather than objections of a fundamental nature, and it is not in my view necessary to consider them.

25 Notwithstanding the view which I have reached about the appropriateness of the originating summons procedure, I have given anxious consideration to the question whether I ought not, in any event, to determine some of the issues which appear to be raised by the originating summons.

26 The plaintiff submits that it is of the utmost importance to it that the issues between itself and the first defendant be determined at the earliest possible time. It points to the fact that this action has been on foot for 2-1/2 years and that if it is not determined the plaintiff will still be in the position where it will be unable to undertake renovation of its administrative offices without incurring the hazard of potential action by either the first or the second defendants (or both). It also suggests that the second defendant should have raised issues concerning the appropriateness of the originating summons procedure at an earlier time. It does appear to me that it would have been open to the second defendant to have raised before the Full Court the question of whether an originating summons was an appropriate procedure in any event. However, strictly, it was not at that stage a party to the proceeding and only became a party as a result of the order of the Full Court. It therefore seems to me unlikely that the Full Court would have found it necessary to entertain argument on this point at that stage. Had the second defendant been made a party to these proceedings at an earlier time, it may be that it would have raised the issues before now. Nor do I think that it is relevant that the second defendant had the opportunity either to adduce its own affidavit evidence or to require deponents to attend for cross-examination. In my view, such a course might well have exacerbated the difficulties created by the originating summons by broadening the field of factual inquiry, without any more precise identification of the issues.

27 While I appreciate the difficulty of the plaintiff's position, it appears to me that this cannot be decisive. If there is a real possibility that it would be unfair to the second defendant to answer the questions posed, because the inappropriateness of the procedure adopted has led to an imprecise identification of issues and an absence of an appropriate factual matrix, then any decision on the summons would be open to question and the result would be yet greater delay.

28 I would only add, as a result of a submission which was made by the plaintiff during the course of argument, that I am conscious that the course which seems to me the proper one to take will have the result that I do not express a view either confirming or departing from the views which I expressed in the earlier decision of March 1999 which has been set aside. It should not be thought by any party that that decision is to be relied on for any purpose. It has been set aside because it was made without hearing a person with a real interest in the proceedings. That person has raised questions which were not raised before me in the previous argument, and has raised other questions in a way in which they were not raised in the previous argument. As an example, the question of possible withdrawal from any contract prior to fulfilment of a condition was one pressed by the second defendant on this occasion. The second defendant also argued that it would be wrong to regard the plaintiff's facsimile of 12 May 1998 as an "acceptance" of a tender, since the facsimile purported to impose conditions and did not therefore correspond with the offer made in the tender. No doubt a close consideration of the argument would throw up many other examples. The result is that - unfortunately, after the passage of such an amount of time - the questions raised by the originating summons remain unanswered.

29 In my view, therefore, the originating summons must be dismissed.