WILLIAMS v MARINE MINISTERIAL HOLDING CORPORATION

COUNSEL : V R W Gray - Appellant P E King/M J Watts - Respondent SOLICITORS : Koutsantoni & Associates - Appellant I V Knight - Respondent CATCHWORDS : CONTRACT - where option to renew - whether renewal could be inferred from conduct ; CONTRACT - conventional estoppel ACTS CITED : Maritime Services Act 1935 CASES CITED: Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 Eslea Holdings Limited v Butts (1989) 6 NSWLR 175 DECISION : Appeal dismissed with costs

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40594/98 CL 14352/89 MASON P SHELLER JA STEIN JA

In 1986 the appellant and the respondent entered into an contract under which the appellant agreed to supply anchored buoys for the use of the respondent. In return the respondent would allow the appellant to place advertising on the buoys The contract was of one year's duration, with provision for a renewal of the contract for a further five years if the respondent was satisfied with the operation of the buoys and an option for the appellant to renew for a further five years.

The agreement was not renewed after the one year period had expired. On two occasions the respondent's solicitors wrote to the appellant asking whether he wished to enter into a new contract, but received no reply. Despite the absence of any contract the respondent used the buoys on various occasions in 1987 and 1988.

At the end of 1988 the appellant and the manufacturers of the buoys, Fibreglass (A/asia) Pty Limited (Fibreglass), approached the respondent stating that they wished to try to make the original proposal work. The respondent agreed and a trial was conducted at Rushcutters Bay and a further trial was to be conducted off Shark Island. In February 1989 the respondent issued a media release stating that buoys would be placed around Sydney Harbour at known hazards under an agreement between the respondent and Fibreglass. Soon after the press release was issued, the Minister for Transport stated that as a matter of government policy there would be no advertising buoys deployed around Sydney Harbour. The respondent was under the control and direction of the Minister, pursuant to the Maritime Services Act 1935. Consequently, the respondent refused to execute the new agreement drafted by the appellant. The appellant commenced proceedings in April 1989, seeking specific performance, the offer of a further agreement and damages for breach.

The trial Judge found that the first contract came to an end in 1987 and that no further contract was entered into. He held that the conduct of the parties after the initial agreement had come to an end did not give rise to any contractual relation between the parties. The appellant appealed from this decision. The principal matter in issue on appeal was whether a further agreement had come into existence.

Held: By Sheller JA, Mason P and Stein JA agreeing: (1) The appellant's submission that the respondent was satisfied with the operation of the buoys and offered the appellant a further agreement, which he accepted, is untenable. It is true that the buoys remained with the respondent and were used from time to time. But the matter of decisive significance was the respondent's two letters asking the appellant whether he wished to enter into a new contract, which showed that the respondent was proceeding on the basis that there was no current contract. (2) The conduct of the parties indicated that no further agreement had been reached between the appellant and the respondent and that by the end of 1988 it was intended that if there was to be any agreement for the deployment of the buoys it would be between Fibreglass and the respondent. (3) The appellant's argument based on conventional estoppel was equally untenable. There was no assumption of the existence of a further agreement pursuant to the original contract adopted by the parties as the conventional basis of their relationship. The assumption of the parties was that there was no further agreement; Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 244-5 and Eslea Holdings Limited v Butts (1989) 6 NSWLR 175 at 186 referred to.

Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 Eslea Holdings Limited v Butts (1989) 6 NSWLR 175 ORDERS Appeal dismissed with costs.

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40594/98 CL 14352/89 MASON P SHELLER JA STEIN JA

WILLIAMS v MARINE MINISTERIAL HOLDING CORPORATION JUDGMENT

1 MASON P: I agree with Sheller JA. 2 SHELLER JA: On 5 December 1986 the respondent, then known as the Maritime Services Board of New South Wales (MSB), and the appellant, John Williams, entered into an agreement in writing whereunder he agreed to supply anchored buoys for the use of the MSB in accordance with certain specification outlines. The agreement provided that the MSB should have the right to determine the number of buoys to be used at any one time and would store, place and remove the buoys according to its own requirements. Mr Williams would be responsible for all maintenance and cost of replacements. He agreed before the commencement of the agreement to take out a public liability policy in the name of himself and the MSB as co-insureds for an amount of not less than $2 million. He had the right to enter into such arrangements for advertising on the buoys as he thought fit subject to obtaining the prior approval of the MSB as to type and content of such advertising. He agreed to pay to the MSB within one month of the end of each financial year 10 per cent of the total of gross advertising revenue for each financial year as disclosed in the audited figures supplied under cl 9 of the agreement. The unexpressed consideration was that MSB would permit Mr Williams to place approved advertisements on such of the buoys as the MSB used. 3 This appeal is about cl 14 of the agreement, which was as follows: "This Agreement shall commence on 5th December, 1986 and shall initially be of one year's duration. If the board is satisfied with the operation of the buoys after this time it shall offer Williams a further Agreement based on the terms herein but with such additions or amendments as the parties may agree for a period of five (5) years with an option for Williams to renew for a further period of five (5) years."

Clause 15 of the agreement provided for termination by either party giving to the other one month's prior written notice to that effect. 4 In an amended summons filed on 1 November 1989, Mr Williams sought specific performance of the agreement, the offer of a further agreement, and damages for breach. The summons explained the background to the agreement. 5 Mr Williams had approached the MSB and Captain Briggs, the Harbour Master in Sydney, with a proposal that he procure the building of large spherical fibreglass buoys with a view to the MSB deploying them on Sydney Harbour and its surrounding waterways to mark hazards or to assist in the control of shipping and to act as a vehicle for commercial advertising obtained by the appellant. The advertising was to be effected by the painting of advertising material on to the buoys. This approach by Mr Williams led to the making of the agreement. The initial one year period represented an experimental phase. 6 Although begun in 1989 the proceedings did not come on for hearing before Bruce J until 7 August 1995. The evidence continued over that week. On Friday, 11 August 1995 his Honour reserved his decision which he gave on 10 July 1998, nearly three years later. The principal matter in issue on this appeal was whether a further agreement as contemplated in cl 14 came into existence. 7 At the end of 1986 and during 1987 buoys were deployed at the start of the 1986 Sydney to Hobart Yacht Race and in January 1987 at the start of the BOC Race. In April 1987 Mr Williams surveyed Sydney Harbour and produced a list of possible sites for locating permanent buoys, though permanent buoys were not contemplated by the agreement. In August 1987 Mr Williams visited Captain Briggs to discuss the possibility of placing permanent buoys. Captain Briggs saw no objection and Mr Williams indicated that he would start approaching potential advertisers. No advertising was obtained until February 1989 when the ANZ Bank agreed to pay for advertising on one permanent buoy for a period of two years. 8 According to Mr Williams' evidence, when read with that of Captain Briggs, on 28 August 1987 John McAuley, an accountant, and the appellant had an informal meeting with Captain Briggs. Mr McAuley was a director and 25 per cent shareholder in Polanco Holdings Pty Limited (Polanco), a company which subsequently changed its name to Waterways Magazine and Maritime Company Pty Limited (Waterways). On that day he told Captain Briggs that Polanco had acquired some fifty safety markers for use on Sydney Harbour, together with the assignment of a contract between Mr Williams and the respondent in respect of those buoys. There was discussion about how further buoys would be made available. 9 Mr McAuley said to Captain Briggs that it would appear that Polanco was going to be required to invest more money in the acquisition of more buoys and that the company had already expended a considerable amount of money in relation to the fifty odd buoys it already owned. Accordingly it would be necessary for the MSB to consider the granting of a ten year contract to Polanco permitting the company to have all advertising rights on Sydney Harbour through the use of clearly specified advertising buoys and that no similar rights were to be given to other parties. Captain Briggs said he would discuss the matter with the MSB but it did not seem to be an unreasonable request. Mr McAuley said that perhaps what he should do was to organise to send to Captain Briggs some broad heads of agreement which then could be the subject of further discussion with the MSB with a view to formulating a final agreement between the parties. 10 On 31 August 1987 Mr Williams claimed to have written a letter to Captain Briggs in the following terms: "Following our meeting on Friday last [which was 28 August], we would like to confirm the following points arising from our discussions: 1. Twelve permanent marker buoys, with appropriate signage, will be ready for deployment as discussed with yourself and Cec Williams on September 9 [sic]. Signs will be double-sided and reflective. 2. We are now investigating fully the possibility of using balloons tethered to temporarily deployed buoys for major harbour events in order to increase the visibility and safety factors. We would like to introduce this system for the start of the 1987 Sydney-Hobart yacht race. 3. We would like to discuss with you as soon as possible a master plan for the deployment of the buoys at special events - a plan which will include the supply of extra buoys to your requirements. Planning would allow for assistance, where appropriate, from other organisations, including our own. 4. As discussed, the basic colour scheme for the buoys will be a bright orange equivalent to Pantone Matching System orange PMS 151; sponsors' names may appear, if necessary, upon a white roundel. 5. Our contract with the MSB has now reached the stage of confirmation for the 10-year period; we wish to extend the scope of the contract to cover all NSW waterways, and we would like a meeting with yourself and the appropriate MSB people to discuss the matter further. We look forward to working closely with you; the Bicentennial year will be one in which safety and crowd control will be of paramount importance." 11 In October 1987 Mr Williams suggested to Captain Briggs that in order to mark a shoal a buoy be moored on the eastern side of the entrance to Rushcutters Bay to test public acceptance of the proposed permanent buoy. Captain Briggs agreed to this positioning. Shortly afterwards Mr Williams had lunch with Captain Briggs and Mr McAuley who was then funding Mr Williams' operations. There was discussion about putting the agreement before the parties into a company name and the matter was left on the basis that an agreement would be produced between the solicitors for the parties and "then we [McAuley and Williams] can start chasing advertisers". The trial buoy was positioned at the entry to Rushcutters Bay, but no agreement was ever formalised. 12 In evidence was a note prepared by the MSB's solicitor on 2 October 1987 in the following terms: "1. The Marine Operations Service Manager's minute of 26th June 1987 is noted. 2. The papers on this file do not indicate whether Mr Williams has complied with Clause 11 and 12 of the Agreement and supplied the Board with figures for gross advertising revenue. Clause 13 provides for 10% of the gross advertising revenue to be paid to the Board within one (1) month of the end of the financial year. 3. The agreement is due to expire on 5th December 1987. If wished, there is provision, pursuant to Clause 14 of the Agreement for the renewal of the Agreement for a period of five (5) years with a further option for Williams to renew for a further five (5) years. 4. If the Agreement is to be renewed, some thought will have to be given as to whether or not any additions or amendments should be made, particularly in view of the Manager's minute of 26th June 1987. It is noted that the Agreement already provides in Clause 4 that Williams is to be responsible for all maintenance to the buoys and the cost of replacements. 5. If the Agreement is renewed, the Board will need to have evidence of the currency of Mr Williams' public liability policy. 6. If the Agreement is not [to] be renewed, Mr Williams, will have to be advised before 5th December 1987. 7. Please refer the file to the Harbour Master. I will need advice in terms of Clause 14 of the Agreement, as to whether or not the Board is satisfied with the operation of the buoys." 13 On 2 February 1988 Captain Briggs signed a notation at the bottom of the solicitor's note as follows: "It is considered that the buoys adequately meet the Board's requirements for crowd (spectator) control during special events and in particular to the satisfaction of the Harbour Master, Port of Sydney. Recommend that Agreement be renewed." 14 On 22 February 1988 the solicitor noted "a report might be furnished as to whether Mr J Williams has paid the Board any monies pursuant to Clause 13 of the Agreement." This brought the response that as the buoys had not displayed any advertising to date payment of monies to the MSB did not appear to be relevant at that time. 15 On 19 April 1988 the MSB's solicitors wrote to Mr Williams asking if he wished to enter into a new contract but received no reply. Again on 27 June 1988 the MSB's solicitors wrote to Mr Williams but again received no reply. He gave evidence that he did not receive either letter. Whether or not Mr Williams received these letters, they indicate that at the time they were written the MSB did not consider there was any current contract with him. The agreement of 5 December 1986 had expired on 5 December 1987. 16 In his reasons for judgment, Bruce J said: "However despite the absence of any contract the Board used the buoys at the start of the Sydney/Hobart Race on Boxing Day 1987, the arrival of the First Fleet Re-enactment Ships in Botany Bay in January 1988, the Australia Day Celebrations in Sydney Harbour on 26 January 1988, the Royal Australian Navy Bicentennial Race and the start of the Sydney/Hobart Race on Boxing Day 1988. It does not appear that there was any discussion in relation to any contractual relations between the parties nor was any advertising arranged. The evidence established that the Board wrote to Williams on two occasions in 1988 seeking to ascertain whether he wished to discuss entering into a further contract with the Board but received no reply. Captain Briggs said that he spoke to Williams on a number of occasions in 1988 seeking to ascertain his intentions in relation to any new contract but was told Williams was unable to take the matter any further. In my view the contract between the parties came to an end on 5 December 1987 and no further contract was entered into. The conduct of Williams after the end of the contract did not evince any intention to enter into new contractual relations in respect to crowd control buoys and there is no entitlement to seek damages for the fact that no such contractual relations were entered into." 17 On 29 November 1988 Mr Williams and R G (Bob) Peachey, the unpaid manufacturer of the buoys, visited Captain Briggs and informed him they wished to work together to try to make the original proposal work. There was apparently a dispute involving Mr McAuley as to the ownership of the existing buoys and Captain Briggs said that the dispute would have to be settled before the matter could go any further. 18 According to his own evidence, Mr Williams said: "Bob [Mr Peachey] and I have been talking and we are agreed to work together to make it work. He is out of pocket more than anyone so far. I don't mind if the contract is in his name. I am quite happy to assign my rights to Fibreglass."

Fibreglass was a reference to Mr Peachey's company Fibreglass (A/asia) Pty Limited (Fibreglass). Captain Briggs said: "The only problem is the dispute over ownership of the buoys with McAuley. If you can solve that, then I can't see a problem. We've got some big events coming up apart from the Hobart and I really need those buoys." 19 Statements were made about Mr McAuley's position and Captain Briggs said again: "Well you will have to settle that before you can go any further." 20 In January 1989 Captain Briggs informed Mr Williams that the MSB intended to use some of the buoys for crowd control during a series of 12 metre yacht races on Sydney Harbour. Mr Williams agreed. One of the yachts, skippered by Dennis Connor, involved in the race ran aground off Shark Island and Mr Williams agreed with the ANZ Bank that it would sponsor a permanent buoy for a period of two years at the site of the grounding. 21 On 4 February 1989 Mr Peachey under the letterhead of Fibreglass wrote to Captain Briggs advising that "we have now obtained title for the buoys from Waterways Magazine & Maritime Company Pty Limited" and enclosed a copy of a deed dated 21 December 1988 confirming this. The letter continued: "It would be appreciated if you could request the Board's solicitor to prepare an agreement with this company in accordance with that originally entered into with Mr John Williams. Either John Williams or myself will contact you shortly to discuss deployment of the permanently moored buoys ." (Emphasis added) 22 In the deed of 21 December 1988 Waterways relinquished any and all right title and interest in the buoys. Fibreglass acknowledged that on execution of the deed Waterways would terminate its insurance with QBE Insurance Limited in relation to the buoys and that Waterways would give notice of such termination to the respondent. Fibreglass agreed to arrange insurance for the buoys effective from the date of execution of the deed. 23 On 3 February 1989 the ANZ Group addressed a letter to Mr Williams "Marketing Consultant, Fibreglass (A/asia) Pty Limited" in the following terms: "SYDNEY HARBOUR SAFETY BUOYS In response to your letter of proposal I now confirm our telephone conversation that ANZ is pleased to sponsor the buoy on 'Dennis Connor Reef' for two years at a cost of $12,000. I look forward to liaising with you on the subject of publicity and signage on the buoy." (Emphasis added) 24 That day Mr Williams faxed a copy of the ANZ letter to Captain Briggs. On 8 February 1989 the MSB issued a media release headed "ANZ Bank Sponsors New Safety Buoy". Included in that media release were the following statements: "Under an agreement between the Maritime Services Board and a fibreglass manufacturing company, large buoys bearing warning signs would be installed at known hazards for the inexperienced around the harbour." "Captain Briggs said the MSB had entered an agreement where the manufacturer of the buoys, Australia Fibreglass Pty Limited, (sic) would seek sponsors to pay for their installation around the harbour and on other popular waterways. Water police and maritime authorities in other States and New Zealand had expressed interest in the scheme." 25 On the day that it was proposed to deploy the buoy where the yacht ran aground, the Minister for Transport stated that as a matter of new government policy there would be no advertising buoys deployed on Sydney Harbour. Section 3A of the Maritime Services Act 1935 provided that the MSB should, in the exercise and discharge of its powers, authorities, duties and functions be subject to the control and direction of the Minister. 26 On 28 February 1989 solicitors acting for Mr Williams wrote to the MSB tendering for execution by the MSB a copy of an agreement "which reflects the contractual arrangements between the Board and Mr Williams constituted by the written agreement dated 5 December 1986 as subsequently amended in oral discussion and by necessary implication." The solicitors said their client required the agreement be executed by the MSB no later than 10 March 1989. The draft followed the form of the written agreement mutatis mutandis. The MSB did not execute the agreement and Mr Williams began these proceedings by a summons filed on 4 April 1989. 27 Bruce J found that Mr Williams and the MSB entered into a contract in relation to crowd control buoys and that the terms of that contract were embodied in the document dated 5 December 1986. He said that the evidence established that the MSB wrote to Mr Williams on two occasions in 1988 seeking to ascertain whether he wished to discuss entering into a further contract with the MSB but received no reply. Captain Briggs said that he spoke to Mr Williams on a number of occasions in 1988 seeking to ascertain his intentions in relation to any new contract but was told that Mr Williams was unable to take the matter any further. The contract came to an end on 5 December 1987 and no further contract was entered into. In relation to the placement of permanent buoys both Mr Williams and Captain Briggs proceeded at all times on the basis that it was necessary for the Board to approve any contractual arrangements, and further, that the "trials" which were conducted at Rushcutters Bay and which were to be conducted with the ANZ Bank buoy did not give rise to any contractual relation between the parties. His Honour dismissed the summons and ordered Mr Williams to pay the costs of the MSB. 28 Mr Williams appeals from this decision on the following grounds: "The learned trial judge: 1. Failed to consider whether the contract between the Appellant and the Respondent dated 4 November 1986 [sic] had been renewed by the Appellant either orally or by conduct and whether the Respondent had accepted such renewal. 2. Failed to find that the contract between the Appellant and the Respondent dated 4 November 1986 [sic] had been renewed by the Appellant orally or by conduct or both and that the Respondent had accepted such renewal. 3. Failed to consider whether the Appellant and the Respondent had by conduct agreed to deal with each other on and after 5 December 1987 on the basis that the contract between the Appellant and the Respondent had been renewed and was in full force and effect for the term of five years from 4 December 1987 [sic]. 4. Failed to find that the Appellant and the Respondent had by conduct agreed to deal with each other on and after 5 December 1987 on the basis that the contract between the Appellant and Respondent had been renewed and was in full force and effect for the term of five years from 4 December 1987 [sic]. 5. Failed to consider whether the Respondent was estopped by its conduct on and after 5 December 1987 from denying that the Appellant had renewed the contract between the Appellant and the Respondent for the term of five years from 4 December 1987 [sic]. 6. Failed to find that the Respondent was estopped by its conduct on and after 5 December 1987 from denying that the Appellant had renewed the contract between the Appellant and the Respondent for the term of five years from 4 December 1987 [sic]." 29 Mr Williams attacked Bruce J's finding that Captain Briggs spoke to him on a number of occasions in 1988 seeking to ascertain his intentions in relation to any new contract but was told that he was unable to take the matter any further. It was, I think, correct to regard this as a finding by his Honour although on each occasion that he mentioned it, his Honour introduced the matter by saying "Captain Briggs said that he spoke to Williams." (Emphasis added). 30 Although Captain Briggs was cross-examined by Mr Williams' counsel, this part of his evidence was not directly called in question. Mr Williams sought to rely on other parts of the cross-examination to the effect that "the Contract" was not his concern and that he knew nothing about it. But these answers are consistent with Captain Briggs' evidence that he sought to ascertain Mr Williams' intentions in relation to any new contract and his evidence of the appellant's reply. It was open to Bruce J to make a finding that these interchanges took place. The attack on the finding should be rejected. 31 Mr Williams urged that a further agreement was made between the parties in accordance with cl 14 of the agreement of 5 December 1986. It was submitted that the MSB was satisfied with the operation of the buoys and offered him a further agreement which he accepted. To the extent to which the documents and witness evidence of discussions did not support this, it was said that the parties' conduct did. 32 I regard this submission as untenable. It is true that the buoys remained with the MSB and were used at various time for crowd control. But the matter of decisive significance is the Board's writing of two letters, one in April and the other in June 1988 asking Mr Williams whether he wished to enter into a new contract. Whether or not Mr Williams received these letters, whether or not the letters should be regarded as offers under cl 14 and whether or not the MSB was bound to make such an offer, the MSB on those occasions was proceeding on the basis that there was no current contract. 33 According to his own evidence by late 1988 Mr Williams was negotiating for a contract which as far as he was concerned could be in the name of Fibreglass. By early 1989 Fibreglass was writing to Captain Briggs advising that it had obtained title to the buoys and requesting that the MSB's solicitor prepare an agreement with Fibreglass in accordance with that originally entered into with Mr Williams. Either Mr Williams or Mr Peachey was to contact Captain Briggs to discuss deployment of the permanently moored buoys. Whether or not, as the media release suggested, MSB had made an agreement with Fibreglass, quite obviously any contractual intention was directed to making such an agreement, not to a further agreement under cl 14. In short, the conduct of the parties indicated that no further agreement had been reached between Mr Williams and the MSB and that by the end of 1988 it was intended that if there was to be any agreement for the deployment of the buoys it would be between Fibreglass and the MSB. 34 Mr Gray, who appeared for Mr Williams, bravely attempted to suggest that despite the 1989 correspondence, in truth the agreement referred to was between Mr Williams and the MSB. It is to be noted that in his amended summons the particulars of an alleged further agreement between him and the MSB place no reliance upon the events of early 1989. As Mr King, who appeared for the MSB, pointed out this was hardly surprising. It was the clearest evidence that the parties were proceeding on the basis that there was no current agreement between Mr Williams and the MSB for the deployment of the buoys. Instead what was proposed was an agreement between Fibreglass and the MSB, an idea Mr Williams appeared to be encouraging. 35 As an alternative basis for putting his case Mr Williams relied upon conventional estoppel. This was an equally untenable argument. There was no assumption of the existence of a further agreement under cl 14 adopted by the parties as the conventional basis of their relationship; compare Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 244-5; Eslea Holdings Limited v Butts (1986) 6 NSWLR 175 at 186. The assumption of the parties was that there was no further agreement. 36 It is unnecessary to consider the matters raised by the MSB in its notice of contention. In my opinion, the appeal should be dismissed with costs. 37 STEIN JA: I agree with Sheller JA. *******

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