The question of the coincidence of offer and acceptance
65 To my mind this is the critical issue in the appeal. It relates to the effect of Mr Grant inserting into the blank space designated for "SRN/HIN" at the top right hand side of the front side of the second rights acceptance form, the number I003002997. According to Mongoose and the primary judge, the effect of so doing was that there was a lack of correspondence between the subject matter of the offer and the subject matter of the acceptance: that is, whereas Mongoose offered to purchase 55 million rights in respect of which no SRN had been allocated, Redowood purported to accept 55 million rights the subject of the SRN applicable to its original 84 million rights in respect of which the offer to acquire had already been accepted. The issue, therefore, was whether the insertion of the SRN into the second rights acceptance form had the effect contended for.
66 It is trite law that offer and acceptance must precisely correspond and that any departure by the acceptance from the terms of the offer results in the purported acceptance being ineffective. The primary judge set out the relevant principles in [84] and [85] of his judgment. Commonly, offer and acceptance fail to correspond where the offeree in purporting to accept the offer attempts to restate the terms of the offer in such a way that, whether mistakenly or otherwise, it fails to reflect accurately what was originally offered. Unless it can be reasonably established that the offeror ignored any such restatement as a misdescription, the failure to accept exactly what was offered results in the purported offer being cast as a counter-offer and there is no acceptance of the offer. However, where an offeree in error misdescribes what is being offered, the misdescription is not fatal if it is clear that the offeree really intended to accept the terms and conditions contained in the offer.
67 In Carter v Hyde (1923) 33 CLR 115, the High Court considered the question of correspondence between offer and acceptance. Carter offered to sell the lease, licence and furniture of a hotel to Hyde. The offer was made on 1 February such that the furniture, the subject of the offer, was that which was in the hotel as at that date. On 22 April, Hyde's personal representatives purported to accept the offer. However, their acceptance was said to be tainted in that it expressly related to the furniture in the hotel as determined by an inventory dated 22 April. Accordingly, in purporting to accept the offer, Hyde's personal representatives were said to have misstated the terms of the offer they were accepting. Carter argued that this amounted to a counter-offer which he was not bound to accept.
68 It was held that the offer and acceptance did coincide. The misdescription was to be treated as an error which was not enough to have affected a reasonable person's understanding of the acceptance as being a full and unconditional acceptance of the offer. This was because the acceptance, although misdescribing the furniture the subject of the offer, also stated that it referred to the offer made on 1 February. Higgins J held that the reference to the inventory dated 22 April was a mere misdescription of the offer which was otherwise clearly identifiable and identified, namely, the offer of 1 February. It was that which was expressly accepted.
69 His Honour tested the matter in the following way (at [133]):
"The best way, perhaps, to test this is by supposing the position to be reversed, by supposing Carter to be seeking to enforce the contract against Hyde's executors: could Hyde's executors deny successfully that they had 'accepted' the 'option'? In my opinion, they could not; the option, identified, was accepted although in one respect it was misdescribed; as if one said 'I offer you the horse Bucephalus for £100' and the other replied 'I accept the horse Bucephalus 16 hands high for £100' and the horse was actually 15 hands high."
70 The High Court in Quadling v Robinson (1976) 137 CLR 192 further considered whether a purported acceptance can still be characterised as an acceptance notwithstanding that (at least seemingly) it involved a misdescription, or qualification, of the original offer. In that case a lease contained an option enabling the lessees to purchase a farm the subject of the lease. The granting of the option was conditional upon two factors: firstly, that requisite government approval be granted and, secondly, that a deposit be paid within one month of the exercise of the option. The offerees (i.e. the lessees) in purporting to accept the offer stated they would pay the deposit upon receipt of the governmental approval. It was argued that this amounted to a variation of the terms of the option and that the lessees were essentially stating that they would not comply with the one month timeframe where the approval was not forthcoming.
71 The Court held that a reasonable recipient of the notice of exercise would have regarded the statement about payment of the deposit as merely a statement of intention and not a declaration that the lessees would not pay at an earlier date if the option required it. At 201 Gibbs J observed:
"However, it is not always easy to determine whether the purported exercise of an option should be understood as attempting to vary the terms of the option or as intending to accept its terms without modification, notwithstanding that they may have been misdescribed, or notwithstanding that the grantee of the option may have indicated that he intends to perform the contract in a manner for which the terms of the option do not provide. Thus although a notice misstates the terms of the option which it purports to exercise, it may nevertheless amount to an unqualified and unconditional exercise of the option: see Carter v Hyde . On the other hand, if the grantee of an option sets out his own erroneous understanding of the option, and then purports to exercise the option as so understood, there will (speaking generally) be no effective exercise of the option … It must of course depend upon the proper construction of the document by which the grantee purports to exercise an option whether it amounts to an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option."
72 In the present case, the second rights acceptance form faxed by Ms Ooi to Mr Grant on 11 February 2003 invited acceptance of the offer to acquire the 55 million rights referred to therein. The designated space for the SRN was left blank, no doubt because it was then understood that an SRN had not been allocated by ANL in respect of that parcel. Subject to the stockbroker point, it was common ground that if Mr Grant had left the SRN blank, there would have been a valid acceptance of the offer. The reason for this, it would seem, is that in the absence of an SRN the reference to the 55 million rights would need to be identified from the surrounding circumstances known to both parties at the time the document was faxed to Mr Grant. Those circumstances were that the 55 million rights were those which Redowood had recently acquired and were different from the 65,087,000 rights which had been the subject of the first rights acceptance form received by ASX-Perpetual on 10 February 2003. The 55 million rights were also those identified in the Buy Contract Note which had been faxed to ASX-Perpetual by Mr Grant earlier on 11 February 2003.
73 There is no doubt that Mongoose's offer was to acquire the 55 million rights recently purchased by Redowood. It inserted that number in the designated space for the number of rights in respect of which the offer to acquire could be accepted. The second rights acceptance form faxed back a few hours later to ASX-Perpetual by Mr Grant did not alter that figure. It quoted an SRN which was incorrect. In my opinion the position is no different from the example given by Higgins J in Carter. That example was:
"I offer you the horse Bucephalus for £100', and the other replied 'I accept the horse Bucephalus 16 hands high for £100' and the horse was actually 15 hands high."
74 To adopt and adapt that example to the present case, Mongoose offered to acquire 55 million ANL rights at $0.01 per right. Redowood replied that it accepted the offer for 55 million ANL rights SRN I003002997 for $0.01 per right. Like the horse Bucephalus, the 55 million rights the subject of the offer and acceptance did not have the SRN inserted by Mr Grant into the second rights acceptance form, but (ultimately) a different SRN. Nevertheless, there was correspondence between what was offered to be purchased, namely, 55 million ANL rights and what was accepted, namely, the offer to sell the same number of rights. Importantly there was no alteration to the number of rights inserted by ASX-Perpetual into the form. Thus, in my opinion, the primary judge erred in concluding that there was insufficient correspondence between offer and acceptance.
75 In the foregoing circumstances, it could not be suggested (nor was it) that Redowood was attempting to alter the terms of the offer: it only had 55 million rights to sell and that number was what Mongoose was prepared to purchase. Furthermore, it would be difficult to posit coherently a sensible construction whereby Redowood's mistake or misdescription could be considered a counter-offer. That would have involved Redowood counter-offering to resell to Mongoose rights which it had already, to the knowledge of both parties, acquired.
76 There is something distinctly unappealing about the argument advanced by Mongoose that it understood the acceptance to be an attempt by Redowood to accept Mongoose's offer to purchase rights which offer had already been accepted. In Carter the High Court stated that what must be determined is whether a reasonable recipient of the acceptance would have regarded it as corresponding to the offer or whether they would have taken the acceptance to be qualifying the original offer such that it would amount to a counter-offer or, at any rate, not an unconditional acceptance of that which was originally offered. Thus Isaacs J (at 126), referring to the circumstance where the offeror had not objected to the offeree's purported acceptance (bearing in mind that in Carter the acceptance was personally delivered), observed:
"In those circumstances the appropriate question is that of Romer J in Jones v Daniel , namely 'Now what would anybody when he received that letter fairly understand to be the meaning of it?' and I add, of course, 'in the circumstances of its receipt'. His own attitude shows that he understood it, and I think reasonably so, as adding nothing to the conditions."
77 In Quadling, Gibbs J determined upon a reasonable construction of the acceptance that it did not purport to introduce or vary any terms. Accordingly, the determinative issue for present purposes is the reasonable construction of the acceptance: what was the offeror (Mongoose) entitled to make of it?
78 Mongoose would be entitled to succeed if it could be shown (or if Redowood was unable to establish to the contrary) that it was a reasonable construction of the second rights acceptance form to treat it as being an acceptance of an offer to acquire rights which had already been the subject of a previous acceptance. Redowood on the other hand, was required to demonstrate that the insertion of an incorrect SRN, which was mutually treated as referring to the rights previously the subject of a valid acceptance, while being a misdescription or mistake, was not such as to entitle or enable Mongoose reasonably to consider that Redowood was attempting to vary or alter its offer to acquire the 55 million rights the subject of the Buy Contract Note. In my opinion, Redowood has so demonstrated.
79 The conversation between Mr Grant and Ms Ooi boiled down to two salient points: firstly, that Redowood had already accepted Mongoose's offer in respect of the 65,087,000 rights being the balance of its original entitlement; and secondly, that Redowood had recently acquired a further 55 million rights which it desired to sell to Mongoose. The reference in the second rights acceptance form to those 55 million rights was settled between the parties as being a reference to the rights identified both in the conversation between Mr Grant and Ms Ooi and confirmed in the Buy Contract Note which, at her request, had been forwarded to her after the conversation earlier on 11 February 2003. By not altering the figure of 55 million which had been inserted by ASX-Perpetual into the second rights acceptance form and by completing, signing and returning the form after altering the name and address of the offeree and initialling the alternation, Redwood was, on the face of the document, accepting Mongoose's offer with respect to those 55 million rights.
80 The SRN inserted into the document by Mr Grant was obviously incorrect and known to be so because it was common ground that the rights the subject of that SRN had already been the subject of the first rights acceptance form. To construe the second rights acceptance form as giving the SRN precedence over the reference to the unaltered number of 55 million leads, in my respectful opinion, to an absurdity that Redowood could not reasonably have intended and Mongoose could not reasonably have understood. Accordingly, in my opinion there was correspondence between offer and acceptance.
81 I have not hitherto referred to the following well-known statement of Mason J in Codelfa Constructions Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 where his Honour said:
"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract where language is ambiguous or susceptible to more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although as we have seen, if the facts are notorious knowledge of them will be presumed."
82 In Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 76 ALJR 436 at 445 [39], Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in a joint judgment, made reference to several decisions of the House of Lords delivered since Codelfa where their Lordships may have taken a broader view of the admissible "background" than was taken in Codelfa but without making reference to Codelfa itself.
83 In their learned article, "Interpretation, Good Faith and the 'True Meaning' of Contracts: The Royal Botanic Decision" (2002) 18 Journal of Contract Law 182 at 187, Professors J W Carter and A Stewart make reference to the English cases referred to by Mason J in Codelfa as establishing that evidence of surrounding circumstances is admissible in all cases not just in those cases in which there is ambiguity. Their Honours in Royal Botanic Gardens thought it unnecessary to determine whether this was so and, if so, which view was to be preferred. Until such a determination was made, Codelfa was to be followed. After referring to a passage from the speech of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381 at 1383-4 cited by Mason J in Codelfa (at 348-9), the learned authors note:
"In effect, these cases establish a very simple point. The process of interpretation cannot begin until the context in which the words in the document were used has been identified. Moreover, since virtually every word in the English language is susceptible to more than one meaning, if it is not first put in context, the 'exception' to which Mason J referred in Codelfa must apply in virtually every case … It is hardly surprising that trial courts usually pay little more than lip-service to the requirement of 'ambiguity'. In practice, evidence of context is virtually always received and relied upon with a minimum of fuss."
84 In Trawl Industries of Australia Pty Limited v Effem Foods Pty Limited (1992) 27 NSWLR 326 at 358, Clarke JA after referring to Codelfa and the requirement that the language of the contract be ambiguous before extrinsic evidence can be admitted in aid of the construction of the terms of the written contract, observed (at 358) that:
"[i]n many, if not most, cases in which the court is seeking to construe a particular term or terms of a contract there would be sufficient uncertainty as to the meaning of the relevant term as to enable the admission of evidence of surrounding circumstances. This was recognised by McHugh JA, as he then was, in Manufacturer's Mutual Insurance Limited v Withers (1988) 5 ANZ Insurance Cases 60-853 at 75,343. There his Honour said:
'… few, if any, English words are unambiguous and not susceptible to more than one meaning or have a plain meaning. Until a word, phrase or sentence is understood in light of the surrounding circumstances, it is rarely possible to know what it means'. "
85 In Pacific Carriers Ltd v BNP Paribas (2004) 78 ALJR 1045, the High Court was concerned to construe some letters of indemnity. The nature of the obligations undertaken by BNP who signed and transmitted the letters of indemnity to the appellant (Pacific), depended, so the Court in a joint judgment said, upon the meaning of the documents. At 1050 [22], their Honours observed:
"The case provides a good example of the reason why the meaning of commercial documents is determined objectively: it was only the documents that spoke to Pacific. The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP and the purpose and object of the transaction. In Codelfa Constructions Pty Limited v State Rail Authority of New South Wales , Mason J set out with evident approval the statement of Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:
'In a commercial contract it is certainly right that the court should know the commercial purpose of a contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating' . "
86 In the present case, the genesis of the transaction and its commercial purpose were known to both parties. Redowood was originally entitled to 84 million ANL rights and had accepted Mongoose's offer in respect of 65,087,000 of those rights by completing, signing and returning the first rights offer acceptance form on 11 February 2003. Because it had then acquired a further 55 million rights, Redowood through Mr Grant enquired of Ms Ooi of ASX-Perpetual as to how Redowood could accept the offer for those rights. Upon faxing to ASX-Perpetual at Ms Ooi's request a copy of the Buy Contract Note with respect to those further 55 million rights together with a copy of the Entitlement and Acceptance Form with respect to the original 84 million rights, ASX-Perpetual faxed to Mr Grant the second rights acceptance form with respect to the 55 million rights. That document was then signed, alterations made to correct the name and address of the vendor and faxed back to ASX-Perpetual within hours of its receipt.
87 In the foregoing circumstances, it was known and understood to both parties that what Mongoose was offering to purchase was 55 million rights the subject of the Buy Contract Note and what Redowood accepted was that offer. It was also known that the offer to acquire the rights the subject of the SRN which Mr Grant had inserted into the second rights acceptance form, had already been validly accepted by the signing and return by Redowood of the first rights acceptance form.
88 In my opinion, even accepting what has been referred to as the narrow view in Codelfa, there was at least some ambiguity or uncertainty as to which 55 million ANL rights were the subject of the second rights acceptance form signed by Redowood and faxed back to ASX-Perpetual. That uncertainty was resolved by reference to the mutual knowledge of the parties as to the identity of those 55 million rights and to the fact that they were different to the 65,087,000 rights which had already been validly accepted on 10 February. In these circumstances, on its true construction the second rights acceptance form as completed, signed and returned to ASX-Perpetual related to the same 55 million rights which were the subject of the offer to acquire that same number of rights contained in the same form faxed by ASX-Perpetual to Mr Grant on 11 February 2003. There was, therefore, complete identity and correspondence between offer and acceptance.