The plaintiff, Woollahra Municipal Council (the Council), owns four commercial car parks: three in Double Bay in Cross Street, the Cosmopolitan Centre and Kiaora Lane and one in Bondi Junction in Grafton Street. Prior to March 2011, the defendant, Secure Parking Pty Ltd, previously known as S&K Car Park Management Pty Limited (Secure), managed the car parks at Cross Street, the Cosmopolitan Centre and Kiaora Lane pursuant to monthly contracts. It had been doing so since the operation of the Cosmopolitan Centre car park reverted back to the Council in July 2009 and the previous manager of the Grafton Street, Kiaora Lane and Cross Street car parks, Premier Parking Pty Ltd, went into voluntary administration in or about August 2009. Wilson Parking Australia 1992 Pty Ltd (Wilson) had been managing the Grafton Street car park on a monthly contract from about 16 November 2009.
On 22 November 2010, the Council put the management contracts for the four car parks out to tender. Tenderers were able to bid for the management contract for one or more of the car parks. The invitation to tender envisaged that the management contract for the car parks at Cross Street, the Cosmopolitan Centre and Grafton Street would each be for seven years with a seven year option. The invitation to tender for the Kiaora Lane car park was for a monthly contract pending redevelopment of the site. Following the redevelopment, the Council indicated that it would put management of that car park out to a separate tender.
Secure was the successful tenderer for the contract to manage all four car parks. In this proceeding, the Council claims that, upon its acceptance of Secure's tender on 15 March 2011, a contract came into existence between the parties on the terms set out in a draft management contract that had formed part of the tender documents, subject to a number of modifications. It contends that Secure repudiated that contract by refusing to sign the contract and perform it. Following Secure's refusal to perform the contract, the Council appointed Wilson as the temporary manager of the car parks and eventually, on 7 June 2012, it issued a new invitation for tender for the car parks, including the one at Kiaora Lane, once it had been redeveloped. The following day, the Council purported to accept Secure's repudiation of the contract with it and to terminate that contract.
Secure, Wilson and Care Park Pty Ltd each lodged tenders in response to the Council's new invitation to tender. The Council rejected all tenders and entered into negotiations with Wilson and Care Park. It eventually awarded the contract to Care Park. The Council claims as damages in this proceeding the difference between the income it has received and expects to receive under the temporary contracts with Wilson and the contract with Care Park and the amount that it says it would have received if Secure had performed the contract between the Council and it.
In the alternative, if no contract came into existence, the Council contends that Secure represented that if its tender was successful "its intention was to enter into an agreement to manage the Car Parks from 1 June 2011, or such a reasonable period thereafter," on terms of the agreement attached to the tender as varied by the parties (Amended Commercial List Statement, para 56). It contends that that conduct was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law (ACL) because Secure did not have that intention. The Council contends that, if Secure had not engaged in misleading or deceptive conduct, it would have treated Secure's tender as non‑conforming, with the result that, in accordance with reg 178(3)(e) of the Local Government (General) Regulations 2005 (NSW) (the Regulations), it would have been free to negotiate with all tenderers and other parties. It claims that, as a result, it lost the opportunity to negotiate with Secure a more favourable contract than the one it ultimately entered into with Care Park. It claims the value of that lost opportunity as damages.
In addition, the Council claims the wasted costs of the second tender, which are said to total $122,829.65 together with interest on that amount from 1 July 2012.
Secure for its part denies that a binding agreement came into existence between it and the Council at the time the Council accepted Secure's tender. According to it, the parties did not intend to create a binding contract at the time of acceptance of the tender and intended to negotiate the terms of the management contract following the award of the tender. In any event, it says the parties never reached agreement on certain essential terms of the contract, including the form of the security to be provided by Secure and the commencement date of the contract. It also says that the contract on which the Council sues is unenforceable because it varied the tender contrary to the requirements of reg 176 of the Regulations. Lastly, it says that, if there was a binding contract, the Council was not itself ready, willing and able to perform it and consequently was not entitled to terminate it.
In the alternative, Secure says that the Council engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive in contravention of s 18 of the ACL by failing to disclose that the proposal for the redevelopment of the Kiaora Lane car park included the construction of a car park having more than 400 parking bays in place of the existing car park of 110 bays. Secure contends that, had the Council disclosed that proposal, it would not have submitted the tender it did. Instead, it contends that it would have submitted a tender for a lower price and that tender would have been successful. On that basis, it claims that it is entitled to an order setting the contract aside. It also claims as damages the profit it says it would have earned on the contract arising from the acceptance of that tender.
Finally, in the alternative, Secure claims that the Council failed to mitigate its loss by putting the management contracts out for tender earlier than it did following termination of the arrangements (to use a neutral term) with Secure and by failing to accept subsequent offers made by Secure following the second tender to enter into contracts for the management of the car parks, admittedly on financial terms that were less favourable to the Council than those Secure had originally offered.
[3]
Factual background
As I have said, the Council issued its invitation to tender on 22 November 2010 and on that date published on its website the documents relating to the invitation.
The invitation to tender was divided into three sections. Section 1 set out the conditions of the tender. After providing some relevant background, cl 1.1 relevantly said:
As regards each of the Grafton Street Car Park, the Cross Street Car park [sic] and the Cosmopolitan Centre Car Park, the successful Tenderer/s will be required to enter into a management agreement with the Council for seven (7) years (commencing on a date as agreed between the Council and the successful Tenderer/s and including an option to renew term of the management agreement for another seven (7) years upon the terms and conditions of the attached Management Agreement (Management Agreement) with the Management Agreement/s being completed as provided in the document attached to Section 3 of this Invitation for Tender entitled "Completion of Management Agreement".
The Kiaora Lane Car Park is to be developed and the Council anticipates that construction will commence in mid 2011. Therefore, as regards the Kiaora Lane Car Park, the successful Tenderer will be required to enter into a management agreement with the Council on a monthly basis (commencing on a date as agreed between the Council and the successful Tenderer) upon the terms and conditions of the Management Agreement completed as provided in the document attached to Section 3 of this Invitation to Tender entitled "Completion of Management Agreement".
Clause 1.2 required all interested tenderers to register their details by email prior to a mandatory pre‑tender briefing that was to be held on 8 December 2010.
Clause 1.8 stated that the closing time for tenders was 2.30 pm on 16 December 2010. It also stated that tenders would not be accepted by email but may be submitted by facsimile.
Clause 1.12 stated:
All Tenderers must hold their total offer open for acceptance by the Council for a minimum period of ninety (90) days from the closing date for lodgement of Tenders.
A Tenderer may only withdraw a Tender by written notice to the Council.
Clause 1.14 relevantly provided:
Tenderers are deemed to have:
(a) …
(b) …
(c) examined all information relevant to the risk, contingencies and other circumstances having an effect on their Tender and which may be obtained by making reasonable inquiries;
(d) satisfied themselves as to the correctness and sufficiency of their Tender and that their Tendered prices cover the costs of complying with all the conditions of tender and of all matters and things necessary for the due and proper performance of the Manager's obligations under the Management Agreement;
(e) …
…
[4]
The tender indicated that Secure proposed installing Zeag car park access control equipment at Cross Street, Cosmopolitan Centre and Grafton Street. A table contained in the relevant section of the tender indicated that the equipment would be ordered in February 2011, that there was a delivery time of 8 to 12 weeks, that installation and commissioning would start on 1 May 2011 and take four weeks, resulting in a "1 June 2011 start".
The only other Tenderer was Wilson. It made two offers. The first purported to conform with the tender. In that offer, Wilson proposed the following guaranteed income:
Name of Car Park Amount
Grafton Street $224,000.00 per annum (excl of GST)
Cross Street $426,000.00 per annum (excl of GST)
Cosmopolitan Centre $120,000.00 per annum (excl of GST)
Kiaora Lane $54,000.00 per annum (excl of GST)
[5]
In a second offer, Wilson proposed a higher guaranteed income for Cross Street, the Cosmopolitan Centre and Kiaora Lane on the basis that Council would increase the casual parking rates at those car parks to amounts set out in Wilson's tender.
Both of Wilson's offers were subject to a condition that, on redevelopment of the Kiaora Lane car park site, the fees charged for the redeveloped car park would not be less than those charged at Cross Street and the Cosmopolitan Centre at that time and that the rates charged at that car park would remain equal to or greater than those charged at Cross Street and Cosmopolitan Centre for the term of the agreement. For that reason, neither offer complied with the tender.
On the day the tenders were received, the Council published a note setting out the guaranteed income offered by both tenderers (in the case of Wilson, on the basis that the casual parking fees would not be increased).
On 17 December 2010, Mr Windle wrote to Mr Wade confirming that the Council had received offers from Secure and Wilson and providing some information on the tender process.
On 24 December 2010, Mr Marolia sent Mr Wade and Mr Thornley a spreadsheet including the figures contained in the tender and asked them to complete the spreadsheet by including the amount of expected income to be derived from permanent and casual parkers together with any additional services to be supplied by Secure (such as car washing and retail sales). Mr Thornley returned that spreadsheet on the same day. The spreadsheet indicated that the total expected parking revenues from Cross Street were $1,450,531.00, from Kiaora Lane $280,671.00, from Grafton Street $698,123.00 and from the Cosmopolitan Centre $324,244.00. The expected income from the Cosmopolitan Centre included an amount of $80,455.00 as revenue from permanent parkers. That revenue had been included on the basis that there were some permanent parkers at the Cosmopolitan Centre, although the invitation to tender had stated that permanent parking was not permitted at that car park.
On 4 January 2011, Mr Bird circulated to those involved in evaluating the offers a draft report. In that report, Mr Bird observed that Secure's offer was superior financially than either of Wilson's offers. However, based on Secure's projected income and Mr Bird's estimate of expenses, he expressed concern "as to the contract viability from Secure [sic] perspective".
[6]
Was there a binding agreement between Secure and the Council?
The legal principles to be applied in answering this question are not in doubt. They were most recently summarised by Sackville AJA (with whom Macfarlan and Gleeson JJA agreed) in Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [59] - [63] in these terms:
[59] First, in Australia the "objective" theory of contract has been accepted: see, most recently, Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]. Consequently, in determining whether a binding contract has been concluded, the law is concerned not with the parties' subjective intentions, but with "the outward manifestations of these intentions": Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 428 (Mason ACJ, Murphy and Deane JJ). Thus what matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (per curiam); Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 at [40]-[41] (per curiam). In a case where the ordinary process of offer and acceptance has taken place, the court inquires as to what a reasonable person would infer or deduce from observing the exchanges between the parties: NC Seddon, RA Bigwood and MP Ellinghaus, Cheshire & Fifoot Law of Contract (10th Aust ed 2012, LexisNexis Butterworths) at [3.4].
[60] Secondly, it is not necessary, in determining whether a contract has been formed, to identify a precise offer or acceptance; nor is it necessary to identify a precise time at which an offer or acceptance can be identified: Ormwave Pty Limited v Smith [2007] NSWCA 210 at [68] and authorities cited at [68]-[75] (Beazley JA, Santow and Ipp JJA agreeing). The questions to be asked are:
"in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the [plaintiff] and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?"
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [81] (Heydon JA).
[61] Thirdly, an agreement that is incomplete will not give rise to an enforceable contract. As was said in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ):
"It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future."
[62] An alleged contract will fail for incompleteness if, even though the parties have used clear language, a term which is regarded as essential as a matter of law has not been agreed: J W Carter, Carter on Contract (2014, LexisNexis) at [04-120]. The principle was stated by Viscount Dunedin in May and Butcher Ltd v The King [1934] 2 KB 17 n at 21:
"To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties."
[63] If the parties have not agreed on all essential terms, for example because they have left one such term to be settled by future agreement, the contract is incomplete no matter what the parties themselves may think: G. Scammell and Nephew Ltd v H.C. and J.G. Ouston [1941] AC 251 at 260 (Lord Russell of Killowen); O'Brien v Dawson [1942] HCA 8; 66 CLR 18 at 37 (Willams J, Rich J agreeing); Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 170 (Tadgell J); Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19; 190 FCR 364 at [123]-[124] (Keane CJ); at [212] (Emmett J); at [223]-[227] (Finkelstein J) (an appeal to the High Court was allowed, but not on this point: Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486).
[7]
Was the Management Contract unenforceable for illegality?
Secure submits that the Management Agreement was illegal because it did not comply with reg 176(3) or reg 178(1) of the Regulations. It did not comply with reg 176(3) because it agreed to a variation of the guarantee without giving Wilson an opportunity to vary the guarantee offered by it in a similar way. It did not comply with reg 178(1) because it did not accept the tender but instead sought to vary it by specifying a commencement date.
In my opinion, neither of these matters amounts to a breach of the Regulations. The reason the Council sought to vary the guarantee was to ensure that it was for a reasonable amount having regard to the amount of the guaranteed income offered by Secure. Wilson's tender did not have the same or a similar characteristic because the amount of its offer of guaranteed income was less than half the amount offered by Secure. Both the varied Secure guarantee and the Wilson guarantee provided cover for approximately two months of guaranteed income. I have already explained why the Management Agreement proffered by the Council did not form part of the Council's acceptance. Consequently, there was no breach of reg 178(1).
In any event, a breach of the Regulations would not render the contract unenforceable: see Tonkin v Cooma-Monaro Shire Council [2006] NSWCA 50; (2006) 145 LGERA 48.
[8]
Did the Council engage in misleading or deceptive conduct?
Section 18(1) of the ACL provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
In characterising conduct as misleading or deceptive or as conduct which is likely to mislead or deceive, it is necessary to look at the conduct as a whole: see Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [109] per McHugh J; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [102] per Gummow, Hayne, Heydon and Kiefel JJ. The task is to determine whether the conduct when viewed as a whole has a tendency to lead a person into error. As French CJ explained in Campbell at [25]:
Characterisation [of conduct that is misleading or deceptive or likely to mislead or deceive] is a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error. It may be undertaken by reference to the public or a relevant section of the public. In cases of misleading or deceptive conduct analogous to passing off and involving reputational issues, the relevant section of the public may be defined, according to the nature of the conduct, by geographical distribution, age or some other common attribute or interest. On the other hand, characterisation may be undertaken in the context of commercial negotiations between individuals. In either case it involves consideration of a notional cause and effect relationship between the conduct and the state of mind of the relevant person or class of persons. The test is necessarily objective. (Footnotes omitted)
Silence may amount to misleading or deceptive conduct, but only if the person who is said to have been misled or deceived had a reasonable expectation that if the relevant matter existed it would be disclosed: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41 per Gummow J; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31; (2010) 241 CLR 357 at [18]ff. It is not necessary for the silence to be intentional: Owston Nominees No 2 Pty Limited v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193 at [228]; Green v AMP Financial Planning Pty Ltd [2008] NSWSC 1164 at [143]f; CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232; (2005) ATPR 42-042.
[9]
Was the Council entitled to terminate the contract?
Secure submits that the Council was not entitled to terminate the contract because it was not ready, willing or able to perform the contract itself: Foran v Wight [1989] HCA 51; (1989) 168 CLR 385. That was because the Council insisted on Secure executing the Management Agreement in the form included with Mr Marolia's email dated 15 March 2011. The short answer to this point is that the Council did not insist on execution of the agreement in that form. What the Council did in its letter dated 9 March 2012 is insist that there was a legally binding agreement resulting from the Council's acceptance of Secure's tender. It insisted on performance of that agreement. It maintained that performance could occur by execution of the Management Agreement in the form that it had provided previously. However, there can be no suggestion that the Council would not have been prepared to amend the terms of that agreement if it had been pointed out to the Council that the document did not accurately reflect the terms that had been agreed. It was clear that the Council was prepared to entertain changes to that document provided the changes were consistent with the agreement it maintained had been reached.
[10]
Damages
In support of its claim for damages, the Council relied on expert evidence from Ms Cristina Lynn, who is the managing partner of Parking and Traffic Consultants, a firm providing consulting services in relation to car park design, planning and traffic engineering services. I found Ms Lynn to be an excellent witness. She was obviously well qualified to express opinions on the expected income of car parks. She provided detailed and carefully reasoned reports. When some errors were pointed out in her reports, she readily made concessions where it was appropriate for her to do so. In cross-examination, she gave clear and plausible reasons for the conclusions that she expressed.
Ms Lynn calculated the Council's loss by calculating the income that the Council could have expected to earn from an agreement with Secure on the terms of the Management Agreement and deducting from that the income that the Council has earned and expects to earn from the temporary management agreements and the management agreement with Care Park that the Council actually entered into in relation to the car parks. Ms Lynn calculated future income on two bases. One was to build up a model of the expected revenue to be derived from each car park by taking each element that makes up that revenue and analysing it by reference to the circumstances relating to the individual car park (the "base estimates approach"). The other was to make predictions based on historical income (the "historical data approach"). Ms Lynn gave her estimate of damages on both bases. However, she expressed the view that the base estimates approach was "the preferred methodology" largely because "the past does not always reflect the future" and because the historical data approach could not be used in the case of a new car park. The base estimates approach produced a lower estimate of the Council's loss. Given the view expressed by Ms Lynn, the Council accepts that that is the appropriate method to use. Ms Lynn applied discount rates that had been given to her based on expert evidence given by an accountant, Mr Christopher Holland, to arrive at a lump sum amount representing the Council's loss on both bases.
Secure sought to challenge Ms Lynn's calculations in three ways. First, it relied on an expert report prepared by Mr Jason Daisley, who took issue with a number of assumptions and conclusions that Ms Lynn relied on in estimating the expected level of income that could be derived from the car parks. Second, Secure took issue with the discount rates proposed by Mr Holland, relying on an expert report prepared by Mr Brendan Halligan. Third, Secure relied on an expert report prepared by Ms Tamara Lindsay, an expert accountant, who identified what were said to be a number of errors in Ms Lynn's calculations.
[11]
Did the Council fail to mitigate its loss?
In its Commercial List Amended Response, Secure pleads that the Council failed to mitigate its loss by failing to submit the car parks for re-tender within a reasonable time and by not accepting any offers made by Secure on 20 March 2012 to enter into a contract with guaranteed income of $2,310,000.00 on certain terms or guaranteed income of $1,400,000 on different terms and by not accepting Secure's tender of 5 July 2012.
It made no written submissions on the failure to mitigate and Mr Rayment QC, who appeared for Secure, addressed the court only briefly on the subject when asked whether the defence was still relied on.
In my opinion, the defence based on a failure to mitigate must fail.
The Council did not delay unreasonably in putting out the Management Agreement out to a second tender. It sought to negotiate a contract with Secure within the framework permitted by the Regulations. It is to be expected that it would take some time for Council to formulate a new request for tender once it became apparent that no agreement would be reached. Moreover, there is no reason to believe that, had the Council put the management contract out to tender earlier, it would have obtained a better price.
It was not unreasonable for the Council to refuse to accept the offers made on 20 March 2012. Leaving aside the terms of the offers, it was reasonable for the Council to take the view that it was prevented by the Regulations from entering into a contract with Secure that was substantially different from the tender it had accepted, which both offers were.
Nor was it unreasonable for the Council to conclude that it should not accept Secure's tender. The evidence is that the Council rejected Secure's tender for three reasons. First, it was concerned to avoid a repetition of its recent experience with Secure. Second, it was concerned that it would be in litigation with Secure over the car parks and that that would make day to day management of the relationship between the Council and Secure difficult. Third, it was concerned that at a meeting on 16 March 2012 attended by Mr James, the General Manager of the Council, among others from the Council, and Mr Garth Matthews and Mr Wade from Secure, Mr Matthews made remarks that could be interpreted as suggesting the parties reach an arrangement to avoid the requirements of the Regulations. Secure took issue with these reasons. In particular, it submitted that it was a large organisation and it would be able to put in place arrangements so that those involved in the litigation would not be involved in the day to day management of the car parks.
[12]
The Council's case based on misleading and deceptive conduct
Having regard to the conclusions that I have reached, it is strictly speaking not necessary to consider the Council's alternative case. However, in the event that I am wrong, I should say something about it.
Clause 3 of Secure's offer, which it signed, relevantly stated "The Tenderer acknowledges that by responding to the Invitation to Tender, the Tenderer … accept all relevant terms and conditions pertaining to this Tender". One term of the tender was that, if its offer was accepted, Secure would enter into the Management Agreement on the terms identified in the request for tender. Consequently, by making the statement in cl 3 of its offer, Secure implicitly represented that, if its tender was accepted, it would enter into the Management Agreement on the terms identified in the request for tender. The Council submits that, at the time the offer was made, Secure did not intend to enter into a Management Agreement in those terms. Instead, it intended to negotiate the terms of the Management Agreement if its tender was accepted. That conduct was misleading or deceptive because it led the Council to believe that, if it accepted Secure's tender, Secure would enter into a Management Agreement in that form. The Council suffered loss or damage because of that conduct. That is because, if the conduct had not occurred, Secure would not have made an offer including cl 3. As a result, its offer would have been non-conforming. In those circumstances, the Council would have rejected all tenders and negotiated with Secure and Wilson for a management contract. Consequently, as a result of Secure's misleading and deceptive conduct, the Council lost the opportunity to negotiate a management contract with Secure.
The value of the Council's lost opportunity depends on the terms of the contract it could have negotiated. The Council submits that, if those negotiations had occurred before Secure discovered that it was proposed at the time that the Kiaora Lane car park would be replaced with a car park of approximately 500 spaces, Secure would still have agreed to pay a guaranteed income of $2,310,000 per annum. Alternatively, it submits that Secure would have agreed to pay a guaranteed income of $1,800,000. That submission is based on evidence given by Mr Garth Matthews who says in his affidavit evidence that "it is likely that Secure would have offered a guaranteed income of between $1,700,000 to $1,800,000 across the four car parks had I been aware that the Kiaora Lane redevelopment would result in more than 400 car spaces at the time of preparing Secure's response to the 2010 tender". Mr Matthews also gave evidence that Secure would have offered $1,400,000 in guaranteed income if it had been aware of the redevelopment of the Kiaora Lane car park, the fact that the Council would not permit permanent parkers in the Cosmopolitan Centre car park and would not have permitted Secure to convert permanent unreserved parkers to permanent reserved parkers at the Cross Street car park. That evidence is consistent with the offers made by Secure on 20 March 2012.
[13]
Orders
The Council is entitled to judgment in the sum of $5,339,592 together with interest on that amount at the prescribed rate from 1 July 2011 and to judgment in the sum of $122,829.65 together with interest on that amount at the prescribed rate from 1 July 2012.
Accordingly, there should be judgment in favour of the plaintiff in the sum of $6,940,811.41.
The First Cross-Claim Cross-Summons should be dismissed.
The defendant should pay the plaintiff's costs of the proceedings.
[14]
Amendments
02 June 2016 - Paragraph numbering corrected and symbol inserted to paragraph 62.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 02 June 2016
Parties
Applicant/Plaintiff:
Woollahra Municipal Council
Respondent/Defendant:
Secure Parking Pty Ltd
Legislation Cited (4)
Australian Consumer Law Local Government (General) Regulations 2005(NSW)
Clause 1.15 stated that the Council could consider, accept or reject any tender which did not comply with the conditions of tender. It also set out the criteria by which the Council would evaluate tenders and stated that:
In evaluating Tenders, a comparative analysis of all Tender responses will be conducted based on the Tender requirements and the selection criteria.
Clause 1.16 relevantly provided:
Tenders will be determined in the Council's absolute discretion on the basis of the proposal that in Council's opinion best satisfies the evaluation criteria stated in Clause 1.15 and is most advantageous to Council. Neither the highest priced tender nor any tender will necessarily be accepted.
The Tender Evaluation Panel, at its discretion, may recommend to the Council not to accept any Tender. In this case, notice in writing will be given to all Tenderers indicating termination of this Invitation for Tender and the tender process.
Clause 1.17 stated:
Notification of acceptance of any Tender will be given by a formal letter from the Council.
Clause 1.18.5 provided:
Whilst the Council has taken every effort to ensure the accuracy of information provided in this Invitation, respondents must rely on their own investigations and enquiries. The Council accepts no responsibility for any ambiguity, discrepancy or error in this Invitation.
Section 2 of the Invitation to Tender set out various Tender Schedules to be completed by each Tenderer. Schedule A set out the terms of the tenderer's offer. The Tenderer was required to complete in cl 1 the guaranteed income that the tenderer would provide in respect of each car park and sign the offer. Clauses 2, 3 and 4 were in the following terms:
2. In consideration of the Council undertaking to take into consideration this Tender, the Tenderer agrees that this Tender shall remain open for acceptance by the Council for ninety (90) days from the closing date for lodgement of the Tenders.
3. The Tenderer acknowledges that it has fully investigated and informed itself as to the nature, location and suitability of the Premises and has in no way relied on any information provided by the Council in the preparation of this Tender.
4. The Tenderer acknowledges that by responding to the Invitation for Tender, the Tenderer understand and accept all relevant terms and conditions pertaining to this Tender.
Schedule B contained a conflicts of interest declaration. Schedules C and D required the Tenderer to provide information concerning its business history, other contracts and relevant referees. Schedules E and F required the Tenderer to provide information concerning new car parking equipment it intended to install and any other additional capital expenditure it intended to make. Schedule G contained a checklist to be completed by Tenderers.
Section 3 of the Invitation to Tender contained three attachments. The first, referred to as 3.1, set out how the Management Agreement would be completed. It provided:
3.1.1 Following the Council's acceptance of any Tender, the Management Agreement will be completed with insertion of the following:
● the name of the successful Tenderer as the Manager of each Car Park;
● the relevant information in the Information Table; and
● the name of the Senior Executive in relation to the Manager within the meaning of clause 1.1 of the Management Agreement.
The Council will then provide to the successful Tenderer/s the Management Agreement/s completed with the relevant detail referred to in this Item 3.1.1.
3.1.2 The successful Tenderer/s must within fourteen (14) days after the date of the Council's written notification of acceptance of a Tender, agree on a commencement date for the Management Agreement, sign the Management Agreement and deliver to the Council the signed Management Agreement together with evidence of the insurances and the initial Bank Guarantee required under the Management Agreement.
Section 3.2 had a heading "Management Agreement" but was otherwise blank. The actual Management Agreement was behind section 3.3. It had a watermark on each page saying "DRAFT". Certain parts of the agreement required completion including the "Information Table" at the beginning of the agreement, which identified the car parks to which the agreement related, the commencing and expiry dates of the agreement, the guaranteed income and the parties' bank account details. The draft also contemplated that the equipment to be installed by the successful tenderer would be described in the agreement.
The agreement set out in the Information Table the management fee that was payable by the Council, which was $1,000 per month for each of the car parks other than the Cross Street car park. The management fee in respect of it was $1,500 per month.
Relevantly, cl 7 of the agreement provided that the manager must deliver to Council a Bank Guarantee "as security for the performance of the Manager's obligations under this Agreement". "Bank Guarantee" was defined in cl 1.1 to mean:
[A]n irrevocable and unconditional undertaking without an expiry date in a form reasonably acceptable to Council by a bank licensed under the Banking Act 1959 (Cth) and carrying on business in Sydney requiring the bank to pay:
(a) the Initial Bank Guarantee Amount during the first year of the Management Period; and
(b) the Bank Guarantee Amount during the second and subsequent years of the Management Period,
on demand by one or more requests without reference to the Manager and despite any notice or direction given by the Manager not to pay the same.
The initial bank guarantee was stated to be for $25,000.00 in respect of Grafton Street, $110,000.00 in respect of Cross Street, $10,000.00 in respect of the Cosmopolitan Centre and $10,000.00 in respect of Kiaora Lane car park.
Clause 7.2(a) of the agreement provided:
For each year during the Management Period after the first, the Bank Guarantee Amount is the amount that is the greater of:
(i) the Initial Bank Guarantee Amount; and
(ii) the highest Permanent Parking Fees received by the Manager in any 3 Months during the previous year.
Section 3.3 set out information concerning the historical ticket breakup. Relevantly, that attachment contained the following statement:
Permanent parking and early bird parking is not permitted in the Cosmopolitan Centre Car Park.
The statement in relation to permanent parking was repeated in cl 4.2(a)(v) of the agreement, which contained an acknowledgement by the manager in relation to the Cosmopolitan Centre car park that:
[I]t is aware that no permanent parking is permitted in this Car Park without the prior written approval of the Council's Representative which may be given or withheld at the absolute discretion of Council;
For the purpose of the tender, the Council established in about November 2010 a tender assessment panel consisting of Mr Zubin Marolia, the Manager - Property & Projects, Mr Adrian Bird, an external Parking Consultant engaged by the Council, and Mr David Byatt, a Purchasing Coordinator employed by the Council. In addition, Mr Les Windle, who is the Manager of Governance at the Council, was involved with the tender and fulfilled the role of Probity Officer.
On 23 November 2010, Mr Josh Thornley, who is and was at the time the Business Development Manager for NSW/ACT of Secure, sent an email to the Council registering Secure's interest in tendering. Mr Thornley and Mr Christopher Wade, who was at the time General Manager for NSW & ACT of Secure, attended the pre‑tender meeting held on 8 December 2010.
Mr Marolia distributed a copy of the minutes of the meeting held on 8 December 2010 to the attendees, including Mr Thornley and Mr Wade. The minutes included the following points:
● Several prior enquiries were made regarding the number of car parking spaces available at each location. To our knowledge, the total car parking spaces are as follows, however tenderers should check these details themselves.
○ Cross Street - 396
○ Kiaora Lane - 110
○ Cosmopolitan Centre - 78
○ Grafton Street - 150
…
● Zubin Marolia explained that Kiaora Lane car park is only on a month to month basis due to the proposed Woolworths re‑development. Negotiations are currently underway and it is anticipated that construction will commence in July 2011, however a Development Application has not yet been submitted. In any event, the car park operator will be given at least two months [sic] notice to vacate.
Secure submitted its tender on 16 December 2010. The tender included a signed version of Schedule A setting out the tender offer. Secure included in Schedule A the following guaranteed income in respect of each car park:
Name of Car Park Amount
Grafton Street $575,000.00 per annum (excl of GST)
Cross Street $1,250,000.00 per annum (excl of GST)
Cosmopolitan Centre $235,000.00 per annum (excl of GST)
Kiaora Lane $250,000.00 per annum (excl of GST)
The tender evaluation panel met on 6 January 2011 and, following that meeting, a meeting was arranged with Secure on 2 February 2011 to discuss its tender response.
Mr Bird and Mr Marolia prepared a list of issues to be discussed at the meeting on 2 February 2011. The meeting was attended by the tender panel, and Mr Windle on behalf of the Council and Mr Chris Wade, Mr Adam Cotter, Mr Peter Seales and Mr Tony Johnson from Secure. Mr Marolia made some handwritten notes on the list of issues during the meeting and Mr Bird prepared a typed written record of the meeting. Mr Wade also made some handwritten notes during the meeting.
During the meeting, Mr Wade said that Secure did not want to start paying "rent" (meaning the guaranteed income) until its new equipment was installed. There was some debate about that and Mr Wade was asked how long it would take to install the new equipment. He replied that it would take approximately 16 weeks. There was also a discussion of what would happen at Grafton Street. Mr Marolia said that the Council would have to give Wilson one month's notice and that there would be difficulties in installing new equipment whilst Wilson still had control of the car park. Mr Wade replied that Secure could commence in Grafton Street within four weeks, but that it did not want the rent to start until the new equipment was installed.
During the meeting a representative from Secure asked whether it was possible to install the old equipment from the Cosmopolitan Centre in the Kiaora Lane car park. Mr Marolia replied that the Council did not care if Secure wanted to use that equipment at Kiaora Lane until it was redeveloped.
Also during the meeting it appears there was some discussion about whether Secure expected to collect any revenue apart from revenue from permanent parking. No one attending the meeting can recall that part of the conversation. However, Mr Bird's note of the meeting records "Secure are expecting to sell so advised we will need to look at the sales value and increase the level of bank guarantee. Secure advised a handling fee of 10%".
During the meeting, either Mr Marolia or Mr Byatt asked the Secure representatives whether they understood the numbers contained in the financial spreadsheet that Mr Thornley had emailed on 24 December 2010. Mr Wade replied that he would check them and get back to the Council. Mr Bird followed up that issue with Mr Wade by email on 7 February 2011 and, on 10 February 2011, Mr Wade sent to Mr Marolia an email saying "[W]e have reviewed the proposal and stand by our figures".
Mr Bird still had concerns whether Secure properly understood the financial consequences of its offer. On 14 February 2011, Mr Marolia sent an email to Mr Wade proposing a second meeting and attaching an amended spreadsheet based on the spreadsheet that had been prepared by Secure. The spreadsheet made some adjustments to Secure's spreadsheet. In particular, it deleted the income shown for permanent parkers at the Cosmopolitan Centre car park.
Mr Wade and Mr Thornley met members of the tender evaluation panel on 16 February 2011. At that meeting, the spreadsheet was discussed. Mr Wade said that, although Secure had initially misunderstood the cashflows shown in the spreadsheet, it could manage the business on the tender submitted.
Mr Wade also raised a number of questions concerning the terms of the Management Agreement. According to Mr Thornley, Mr Marolia said "There are technically no options on the management agreement", by which Mr Thornley understood Mr Marolia to be saying that the terms of the Management Agreement could not be changed.
One of the issues discussed concerned the bank guarantee. On that issue, Mr Wade says in his affidavit evidence that there was a discussion between him and Mr Marolia to the following effect:
I said words to the effect of,
"Secure does not provide a bank guarantee. It is a direction from our board of directors. All we can offer is a performance bond."
Mr Marolia responded with words to the effect of "No. We can only accept a bank guarantee and as per the tender."
I said "We cannot offer a bank guarantee."
There was further discussion and Mr Marolia said "We'll have to look at that later."
In his affidavit evidence, Mr Marolia denies Mr Wade's version of the discussion. According to Mr Marolia, the only issue that was discussed concerning the guarantee was the amount of the guarantee, which he said had to be for the amounts set out in the Management Agreement.
Mr Marolia prepared some typewritten minutes of the meeting. Mr Marolia's minutes record:
Deposit of Bank Guarantee was mentioned and it will be as per Management Agreement.
Mr Wade took some handwritten notes of the meeting. Those notes include the following entry:
BG - no.
The reference to "BG" appears to be a reference to "bank guarantee".
In cross‑examination, Mr Marolia maintained that the discussion concerned the amount of the bank guarantee. He said, however, that he "wasn't interested" in the change and did not recall its precise nature and that he was "too focused on the big figure that they had submitted". At one point, Mr Marolia gave the following evidence:
Q. What do you say the change was?
A. I think it was more to do with the amount, or something like that. More than any particular - and even if it was a performance thing at the time, I mean, I was in no position to have said anything. It would be - have to go through our lawyers, who would say, yeah, it's part - it's the same thing, don't worry about it, or whatever.
Later, though, Mr Marolia says that Mr Wade "wanted to change the dollars".
Mr Marolia accepts, however, that he said something to the effect that he would look at the issue later.
I accept Mr Wade's evidence when he says he raised the question of a security bond. Mr Wade gave evidence that Secure's initial position in any new tender negotiations was that it did not provide a bank guarantee. He said that it would not do so without board approval. According to him, Secure had a facility with the ANZ Bank through which it could provide bank guarantees. That facility was for $16,485,000 and, at the time, was drawn to an amount of approximately $15,000,000. Secure had another arrangement with Hannover Re through which it was able to offer performance bonds. According to Mr Wade, Secure was keen to reduce the number of bank guarantees that had been issued at its request, and in doing so no doubt reduce the amount it had to keep on deposit in support of the guarantees.
Mr Wade's evidence is supported by evidence given by Mr Garth Mathews, the joint CEO of Secure. According to Mr Mathews, he instructed Mr Wade only to offer a performance bond.
The evidence given by Mr Wade and Mr Mathews that Secure was keen to avoid having to give bank guarantees and that it would only do so with board approval strikes me as plausible and I accept it. It was natural in those circumstances for Mr Wade to raise the issue with the Council. Mr Marolia's evidence is equivocal on the subject. It is not plausible that Secure would have raised the question of the amount of the guarantee. Secure was seeking something in relation to the guarantee that both Mr Wade and Mr Marolia's notes suggest was refused by the Council. There is no suggestion that Mr Wade was seeking to reduce the amount of the guarantee. The only issue that had been raised about the amount of the guarantee was the possibility of increasing it to take account of extra revenue that Secure might earn through sales. It appears from Mr Bird's notes that that issue had been raised at the meeting on 2 February 2011. It is hard to believe that Mr Wade would have raised that issue at the later meeting or that, if he had done so, the Council would have refused Mr Wade's request. Mr Marolia concedes that he was not focussed on the issue and says that, at the time, he was more concerned with satisfying himself that Secure understood the financial consequences of its offer and was prepared to stand by it. In contrast, it was a significant issue for Mr Wade. It is to be expected in those circumstances that Mr Wade would have a better recollection of what was said.
On the other hand, I accept Mr Marolia's evidence that he did not treat it as a significant issue at the time and that he was more focused on other things. Mr Marolia concedes that he said that he would look at the issue later, which is consistent with the evidence given by Mr Wade.
The Council submitted that the court should not accept Mr Wade's account of the discussion concerning the guarantee for three reasons. First, it submitted that, to Mr Wade's knowledge, Secure had the capacity to provide a bank guarantee and would do so if necessary. Mr Wade accepts that he would not have knowingly made a misrepresentation to the Council. Consequently, he could not have said that Secure was only willing to provide a security bond. Second, the Council submitted that Mr Wade gave inconsistent evidence about the length of the conversation concerning the bank guarantee and did not suggest that he explained to the Council why Secure was unwilling to provide a guarantee, which is something that might have been expected if Mr Wade had really raised the issue. Third, as I will explain shortly, roughly two weeks later, the Council did raise the amount of the guarantee with Secure and Mr Marolia sent an email to Mr Wade confirming that Secure had agreed to an increase in the amount of the "Bank Guarantee" to cover two months guaranteed income. Mr Wade never took objection to the reference to a "Bank Guarantee".
None of these matters is sufficient to cause me to reject Mr Wade's evidence. I accept that Secure would, with board approval, have offered a bank guarantee for the amount then required by Council as a last resort. But it is common for parties to exaggerate their position in negotiations; and that is what I think Mr Wade did when he said that Secure would not provide a bank guarantee. It is likely that Mr Marolia understood that. As to the Council's second point, inconsistent evidence about the length of the discussion says little about its topic; and I think little can be inferred from the fact that Mr Wade did not give evidence that he explained why Secure wanted to provide a security bond. Mr Wade may have assumed that Mr Marolia understood the advantages of a security bond from Secure's point of view. On the other hand, Mr Marolia had no interest in an explanation because he was focussed on other things. As to the third point, Mr Wade and Mr Thornley's failure to say anything in response to Mr Marolia's reference to a Bank Guarantee subsequently reveals little about what was discussed at the earlier time, although it is relevant to the significance that the Council might have understood attached to the issue.
Another issue raised at the meeting on 16 February 2011 was the commencement date of the contract. On that issue, Mr Marolia's file note records the following:
Secure intended to pay rent from date of installation of equipment. Current payments to remain until equipment is installed and agreement commences.
That note is consistent with Mr Wade's note on the subject, which reads:
Start date ➔ when the equipment is installed
Mr Marolia circulated by email copies of the minutes he prepared to Mr Thornley and Mr Wade on 17 February 2011. Neither took issue with the minutes. From the Council's point of view, it is to be expected that if there was a serious issue in relation to the provision of a bank guarantee, Mr Wade or Mr Thornley would have followed up those emails with a request for Mr Marolia to reconsider his position in relation to the bank guarantee and some explanation of why he should do so. Neither did.
On 28 February 2011, Mr Marolia sent an email to Mr Wade concerning the bank guarantee. After observing that Secure was required in accordance with the draft Management Agreement to provide a bank guarantee totalling $155,000.00, Mr Marolia said:
In order to minimise the risk exposure to Council, we will require the bank guarantees to be equivalent to 3 months Guaranteed Income submitted in you [sic] tender. Accordingly, should Council decide to appoint S&K as the preferred tenderer, we require your agreement to amend Item 12, initial bank guarantees from S&K as follows:
Grafton Street: $143,750
Cross Street: $312,500
Cosmopolitan Centre: $58,750
Kiaora Lane: $62,500
Total $577,500
Please let me know asap if you are in agreement as the Management Agreement cannot be altered after the report to Council has been submitted.
Mr Wade replied the same day saying:
I would like to advise that industry standard for surety is 1 month.
We are happy however to agree a Performance Guarantee Bond for the amount of 2 months.
On the same day, Mr Marolia replied:
Thanks Chris, I will put a requirement of 2 months Bank Guarantee ($385,000) in my report to Council.
On 4 March 2011, Mr Marolia and Mr O'Hanlon submitted a report to the Council's Corporate & Works Committee recommending that Council accept the tender from Secure and that "the initial bank guarantees in the Management Agreement be amended for all the car parks, to two (2) months Guaranteed Income submitted by [Secure]". That recommendation was accepted by Council at a meeting held on 14 March 2011.
On the following day, Mr Marolia met with Mr Wade and Mr Thornley and told them that Secure's tender had been successful. At the end of the meeting, Mr Marolia gave them two copies of the Management Agreement to be signed together with a letter from Gilbert + Tobin, the Council's solicitors, explaining the changes that had been made. Following the meeting, Mr Marolia sent Mr Wade and Mr Thornley an email enclosing electronic copies of the letter and agreement. The email said:
Further to our meeting earlier this morning, as requested I attach the following:
a. Letter explaining changes to draft contract provided to tenderers; and
b. the revised agreement incorporating the changes referred to in the letter.
The Agreement has been amended only to reflect the Council resolution passed last night.
1. That Council accept the tender received from S & K Car Park Management Pty Ltd for a seven year term with an option to renew for a further seven years for:
a) the management of Cross Street, Double Bay car park for a minimum guaranteed income of $1,250,000 per annum excluding GST plus 50% of surplus fees;
b) the management of Cosmopolitan Centre, Double Bay car park for a minimum guaranteed income of $235,000 per annum excluding GST plus 50% of surplus fees; and
c) the management of Grafton Street, Bondi Junction car park for a minimum guaranteed income of $575,000 per annum excluding GST plus 50% of surplus fees;
2. That Council accept the tender received from S & K Car Park Management Pty Ltd for a month to month basis for the Kiaora Lane, Double Bay car park for a minimum guaranteed income of $250,000 per annum excluding GST plus 50% of surplus fees.
3. That the initial bank guarantees in the Management Agreement be amended for all the car parks, to two (2) months Guaranteed Income submitted by S & K Car Park Management Pty Ltd.
4. That the Management Agreement list the mandatory capital equipment specified by S & K Car Park Management Pty Ltd, to ensure that all the proposed works are carried out and there is no disadvantage to Council.
It is this email that the Council contends amounted to acceptance of Secure's offer embodied in its tender. The Council does not contend that Secure's offer was accepted at some later time.
The agreement attached to the email differed from the draft attached to the invitation to tender in a number of respects. The items in the Information Table were completed to show the commencement date for all four car parks to be 1 June 2011 and the expiry date (other than Kiaora Lane) to be 31 May 2018. The monthly amounts of guaranteed income were also inserted together with the GST inclusive amounts of the initial bank guarantee amount for each car park together with the Council's and Secure's bank account details. A number of other incidental changes were made to the agreement and, in particular, to the clauses dealing with the bank guarantee to make it clear that the guarantee was two months and to provide for increases in the guarantee amounts by reference to increases in the Consumer Price Index. One other change that was made was to amend cl 8.2(b) so that it no longer referred to the number of parking bays in any of the car parks but instead required Secure to inform the Council in writing at the commencing date of the total number of parking bays for each car park.
Mr Wade replied to that email on 16 March 2011 saying:
I have forwarded this to our solicitors for review/ comment. I have requested this as a priority for them, and will forward any comments through once received.
Mr Marolia replied to that email later that day saying:
Thanks for getting this underway. Just for your information, this process should have been done during the tender stage as the Tendering Regulations will not allow any changes to the agreement unless they were highlighted during the tender process and approved by the Council Committee.
On 21 March 2011, Mr Marolia sent Mr Wade a formal letter confirming that Council had accepted Secure's offer at its meeting on 14 March 2011 and repeating the terms of the Council's resolution.
On 4 April 2011, Woods & Day, Secure's solicitors, sent Gilbert + Tobin a letter setting out 91 proposed changes to the Management Agreement. Gilbert + Tobin replied to that letter on 8 April 2011 saying that Secure's offer had been accepted, with the result that a contract was in force and that the Council was not in a position to consider substantial amendments to the agreement. There was further correspondence between the parties' representatives and a meeting between Woods & Day and Gilbert + Tobin on 9 May 2011 and between Mr Wade, Mr Thornley, Mr Marolia and Mr Windle on 17 May 2011, at which many of the changes were discussed. Although the Council was not prepared to agree to substantive changes, it was prepared to discuss changes that did not alter the substance of the agreement. It is apparent from a schedule prepared by the parties that agreement was reached on many of those issues. Included among the items agreed was agreement in principle on the provision of a performance bond in place of a bank guarantee provided the insurer which issued the performance bond was acceptable to the Council.
Following the meetings, there was further correspondence between the parties concerning a number of outstanding substantive issues. There was also a further meeting on 8 June 2011 between Mr Marolia and Mr Tom O'Hanlon, the Director of Technical Services with the Council and Mr Marolia's superior, and Mr Wade, Mr Thornley and Mr Brett Mathews, a joint CEO of Secure. At that meeting, the question of the Kiaora Lane redevelopment came up and Mr O'Hanlon referred to the fact that it was proposed as part of that redevelopment to build a car park for in excess of 400 cars. The representatives from Secure attending the meeting were caught by surprise by that information. Secure says, and I accept, that that was the first occasion on which it realised that the new Kiaora Lane car park would have in excess of 400 bays. Also at that meeting, there was a discussion concerning whether Secure could increase the ratio of permanent reserved to permanent unreserved parking bays at the Cross Street car park. Mr Marolia told Secure that it could not. The position Secure took was that those two matters, in particular, fundamentally changed the basis on which Secure had tendered because they changed the expected income that could be derived from the Cross Street car park.
There was further correspondence and meetings between the parties but no resolution of the impasse. On 7 March 2012, the Council gave notice terminating the monthly Management Agreements relating to the Cross Street, Cosmopolitan Centre and Kiaora Lane car parks. On 9 March 2012, the Council wrote to Secure in the following terms:
As stated in previous correspondence to you it is Council's position that a legally binding Management Agreement relating to the above Car Parks has been on foot since Council notified Secure (formerly, S&K Car Park Management Pty Limited) of its acceptance of Secure's tender dated 16 December 2010. Council first notified Secure of its successful tender on 15 March 2011.
Council considers that Secure's continual refusal to acknowledge the existence of a legally binding agreement between Council and itself as a repudiation of the Management Agreement.
Notwithstanding that Council is not required by the Management Agreement to do so in the circumstances of a repudiation, Council gives notice that unless Secure returns an executed version of the Management Agreement provided to Secure on 15 March 2011 on or before 29 March 2012 and performs its obligations under that Agreement, Council intends to accept Secure's repudiation, terminate the Management Agreement and sue Secure for any loss suffered by Council as a result of Secure's repudiation. Council will also re-tender for the management of the Car Parks.
Secure responded to that letter on 20 March 2012 by putting forward two proposals. Both involved substantial changes to the Management Agreement. The Council replied in a without prejudice letter dated 26 March 2012. It maintained that Council could not consider either proposal because both represented such significant changes to the Management Agreement that they would require a new tender process. The letter went on to indicate the changes that the Council thought that it could agree to. However, there was no resolution and in April 2012 the Council entered into an agreement with Wilson to manage Cross Street, Cosmopolitan Centre and Kiaora Lane car parks. On 7 June 2012, it issued an invitation to tender in relation to the car parks and on 8 June 2012, it notified Secure that it accepted Secure's repudiation of the Management Agreement and gave notice of its termination.
The new invitation to tender contemplated that Tenderers would share the income from the Cross Street, Cosmopolitan Centre and Grafton Street car parks with the Council, would pay the Council a guaranteed minimum and would be paid a fixed management fee - which was the same as the structure of the previous invitation to tender. However, it contemplated that Tenderers would be paid a fixed fee for managing the new Kiaora Lands car park (as the car park replacing the Kiaora Lane car park was known) once it was complete, and tenderers were invited to specify the amount of the fee. As I have said, Secure, Wilson and Care Park each submitted tenders. The Council resolved on 22 October 2012 not to accept any of the tenders. It then entered into negotiations with Wilson and Care Park and ultimately signed a contract with Care Park in December 2012. Under that contract, Care Park agreed to pay the Council a guaranteed annual income for the Grafton Street, Cross Street and Cosmopolitan Centre car parks of $925,000 and the Council was obliged to pay Care Park a monthly management fee of $2,000 in respect of the Grafton Street and Cross Street car parks, $1,000 in respect of the Cosmopolitan Centre car park and $1,958 in respect of the Kiaora Lands car park, once it opened. The agreement is for a period of 8 years. It commenced on 12 March 2013. Prior to that date, and following entry into the contract with Care Park, the Council entered into temporary management agreement with Care Park for the management of the car parks prior to commencement of the 8 year contract.
To these may be added four other relevant points.
First, the fact that the parties contemplate that they will enter into another, more formal contract does not necessarily mean that an agreement they have reached does not have contractual force. Two classes of case where that is the position were identified in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360. One is where the parties have reached an agreement but intend to restate it "in a form which will be fuller or more precise but not different in effect". Another is where the parties have reached a binding agreement "but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document". A third was explained in these terms by Knox CJ, Rich J and Dixon J in Sinclair, Scott & Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 at 317:
… one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.
See also Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628 per McLelland J; G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634 per McHugh JA with whom Kirby P and Glass JA agreed.
Second, an offer that prescribes a means of acceptance will not necessarily be treated as mandatory. The question is one that depends on the intention of the offeror, objectively ascertained. However, in the absence of a clear indication of a contrary intention, it would not be reasonable to construe a provision specifying the means of acceptance as excluding the giving of notice by other equally expeditious means which do in fact result in the actual receipt of the notice by the offeror: see Spectra Pty Ltd v Pindari Pty Ltd [1974] 2 NSWLR 617 at 623 per Wootten J. See also Tooheys v Blinkhorn [2008] NSWSC 499 per White J at [81].
Third, where the contract is said to be constituted by an offer and acceptance, the acceptance must match the offer precisely. In some cases, it is not always easy to determine whether that condition has been met. The acceptance may mis-describe the offer, but nonetheless intend to be an acceptance of it. As Gibbs J explained in Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192 at 201:
[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 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. … 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.
As J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, 2007, LexisNexis Butterworths, point out (at 54), citing J B Rogers Ltd v Harry Lesnie Ltd (1927) 27 SR (NSW) 427, another example is where
[A] reference to an additional term should be read as a proposal for the modification of the agreement, but that the maker of the statement intends to be immediately bound whether or not the modification is agreed to be the other party.
Fourth, the parties' conduct must be understood in the context of the legal framework that governs that conduct: see Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 at [154] per Murphy JA. In this case, that legal framework includes the Regulations. Regulation 176 of the Regulations relevantly provides:
(1) At any time before a council accepts any of the tenders that it has received for a proposed contract, a person who has submitted a tender may, subject to subclause (2), vary the tender:
(a) by providing the council with further information by way of explanation or clarification, or
(b) by correcting a mistake or anomaly.
(2) Such a variation may be made either:
(a) at the request of the council, or
(b) with the consent of the council at the request of the tenderer, but only if, in the circumstances, it appears to the council reasonable to allow the tenderer to provide the information or correct the mistake or anomaly.
(3) If a tender is varied in accordance with this clause, the council must provide all other tenderers whose tenders have the same or similar characteristics as that tender with the opportunity of varying their tenders in a similar way.
(4) A council must not consider a variation of a tender made under this clause if the variation would substantially alter the original tender.
Regulation 178 of the Regulations relevantly provides:
(1) After considering the tenders submitted for a proposed contract, the council must either:
(a) accept the tender that, having regard to all the circumstances, appears to it to be the most advantageous, or
(b) decline to accept any of the tenders.
(1A) …
(2) A council must ensure that every contract it enters into as a result of a tender accepted by the council is with the successful tenderer and in accordance with the tender (modified by any variation under clause 176). However, if the successful tender was made by the council (as provided for in section 55(2A) of the Act), the council is not required to enter into any contract in order to carry out the requirements of the proposed contract.
(3) A council that decides not to accept any of the tenders for a proposed contract or receives no tenders for the proposed contract must, by resolution, do one of the following:
(a) postpone or cancel the proposal for the contract,
(b) invite, in accordance with clause 167, 168 or 169, fresh tenders based on the same or different details,
(c) invite, in accordance with clause 168, fresh applications from persons interested in tendering for the proposed contract,
(d) invite, in accordance with clause 169, fresh applications from persons interested in tendering for contracts of the same kind as the proposed contract,
(e) enter into negotiations with any person (whether or not the person was a tenderer) with a view to entering into a contract in relation to the subject matter of the tender,
(f) carry out the requirements of the proposed contract itself.
(4) If a council resolves to enter into negotiations as referred to in subclause (3) (e), the resolution must state the following:
(a) the council's reasons for declining to invite fresh tenders or applications as referred to in subclause (3) (b)-(d),
(b) the council's reasons for determining to enter into negotiations with the person or persons referred to in subclause (3) (e).
It is apparent from these regulations that, before the Council accepted Secure's tender, Secure could vary the tender (including at the Council's request) but only by correcting a mistake or anomaly that did not substantially alter Secure's original tender. If the Council accepted Secure's tender it had to enter into a contract in accordance with the tender (as varied). The Council could only accept a tender or decline to accept any tender. If, but only if, it chose the latter course, it could enter into negotiations with any person with a view to entering into a contract in relation to the subject matter of the tender.
It was not suggested that Secure was ignorant of the Regulations or that, if it was, the Regulations should be ignored for the purpose of ascertaining the objective intention of the parties.
Secure puts its case that no binding agreement came into existence in various ways. One focuses on the negotiations between the parties. Secure points out that the Management Agreement that formed part of the tender documents was described as a "Draft". It points out that it proposed various changes to the agreement during the discussions that followed submission of its tender and that agreement was not reached on all of those changes during those discussions. It also points out that, at the time the Council purported to accept its offer, the Council itself proposed additional changes to the Management Agreement. Those changes were not agreed by Secure and a number of further changes that were proposed by it were not agreed by the Council. Put in this way, Secure seeks to characterise the tender process as a series of negotiations that never led to a concluded agreement because the parties never reached agreement on all its terms.
Second, Secure submits that the purported acceptance of its tender on 15 March 2011 did not comply with cl 1.17 of the tender conditions. The Council did purport to serve a formal letter of acceptance on 21 March 2011. However, the Council does not rely on that letter.
Third, Secure submits that the Council's acceptance did not match Secure's offer. Secure treats the Council's acceptance as including the contract attached to the email dated 15 March 2011, and it points out that that contract departed from the draft Management Agreement in a number of respects. However, even if the acceptance is confined to the Council resolution, it submits that the Council's acceptance did not match the offer, principally because the acceptance was acceptance of a bank guarantee covering two months of guaranteed income whereas the offer was an offer for a security bond for that amount. Put another way, agreement was never reached in relation to the terms of the guarantee.
Fourth, Secure submits that the draft agreement contemplated that the parties would reach agreement on the commencement date. No agreement was ever reached. Instead, the Council simply inserted a commencement date in the contract of 1 June 2011. It is not entirely clear whether Secure's complaint in this respect is that the contract was void for uncertainty because the commencement date had to be agreed (a point originally raised in para 34 of its Amended Commercial List Response) or whether the complaint is that the acceptance included a commencement date of 1 June 2011 that had not been agreed.
In my opinion, the first way that Secure puts its case that there was no binding agreement mischaracterises the nature of the negotiations between the parties following the lodgement of Secure's tender on 16 December 2010. The conditions of the tender and the Regulations set out a formal process by which an offer was to be made by Secure, considered by the Council and either accepted or rejected by it. It was clear from the terms of the invitation to tender that if an offer was lodged conforming to the invitation to tender, that offer had to remain open for 90 days. The parties contemplated that if the offer was accepted by the Council then the parties were obliged to enter into a Management Agreement on the terms identified in cl 3.1.1 of Section 3 of the tender. Leaving aside the question of the commencement date, it is apparent that a Management Agreement completed in accordance with cl 3.1.1 would deal with all the essential terms of the agreement between the parties relating to the management of the car parks. The fact that the Management Agreement that formed part of the tender documents was described as a "Draft" conveyed nothing other than that fact - namely, that in order to become a final agreement, the agreement needed to be completed with certain information that would be identified from the tenderer's offer and the Council's acceptance of that offer. The word "Draft" could not have been understood in the context as indicating that the terms of the Management Agreement were open to negotiation following acceptance of the tender. That was neither contemplated by the terms of the tender nor permitted by the Regulations.
In order to have the Council consider its tender, Secure had to accept the terms of the invitation to tender. When it did so by signing the terms of the Tenderer's offer it accepted an obligation to complete the Management Agreement in accordance with cl 3.1.1 if its offer was accepted.
Following lodgement of the tender, it was open to the parties to negotiate changes to the terms on which Secure's offer was made. However, any changes could only be made in accordance with reg 176 of the Regulations. The negotiations between the Council and Secure must be understood as negotiations to change the terms of the offer contained in Secure's tender in accordance with reg 176. They were not a series of offers and counter offers that formed part of the process of negotiating the terms of a contract relating to the car parks. Nor could they be regarded as discussions concerning the terms of the proposed contract that left some matters unresolved and to be dealt with later. If the parties could not reach agreement on particular matters, then the consequence of their failure to agree was that there would be no variation to the tender to be considered by Council in accordance with the conditions of tender and the Regulations. In the absence of that agreement, Secure may have been entitled to withdraw its tender in accordance with the conditions of tender. But absent withdrawal, the offer contained in its tender remained open for acceptance by the Council. The fact that particular issues raised by Secure were unresolved in the sense that the parties did not reach agreement in relation to them was irrelevant to the question whether an offer remained on foot that was capable of acceptance by the Council.
On 14 March 2011, the Council resolved to accept Secure's offer, and passed two other resolutions relevant to the tender. The Council submits that it communicated that acceptance on 15 March 2011 when Mr Marolia sent Mr Wade and Mr Thornley an email setting out the terms of the resolution together with a copy of the completed Management Agreement that he had handed to them earlier that day. Secure submits that the completed Management Agreement formed part of the acceptance and clearly did not match the offer. The Council does not dispute the second limb of this proposition, but does the first. In view of the Council's concession, it is not necessary to consider whether the form of the Management Agreement proffered by the Council reflected the agreement of the parties.
In my opinion, the amended Management Agreement did not form part of the Council's acceptance or purported acceptance of Secure's offer. The act of acceptance was the resolution by Council. That resolution made no reference to the form of the Management Agreement that was subsequently given to Secure. The fact that Mr Marolia chose to include a copy of the Management Agreement (in response to a request from Secure) in the email in which he communicated the terms of Council's acceptance does not mean that the Management Agreement became part of the acceptance. If the Management Agreement did not accurately reflect the terms of any agreement that arose from acceptance of Secure's offer, it was open to Secure to seek amendments to it. It was also open to Secure to renegotiate some of the terms of any agreement that arose on acceptance of its offer, as it sought to do. However, neither of those matters meant that the Council's acceptance did not correspond to Secure's offer. Similarly, the fact that the parties were unable to reach agreement on changes to the Management Agreement does not affect the answer to the question whether the Council's purported acceptance gave rise to a binding contract at the time it was communicated.
In my opinion, cl 1.17 of the conditions of tender should not be read as setting out the exclusive means by which acceptance could occur. The conditions of tender specifically stated that the tenders would not be accepted by email. If the Council intended the same rule to apply to its acceptance, it is to be expected that the conditions of tender would have said so. Here, the acceptance was in writing. It was "formal" in the sense that it recorded a formal decision by resolution of the Council to accept the tender. It was actually received by Secure. In my opinion, that was sufficient to constitute a valid acceptance.
In relation to Secure's third argument, I have already dealt with it insofar as it relies on the submission that the Management Agreement formed part of the acceptance. That still leaves the question of the bank guarantee. The argument in relation to the bank guarantee appears to have two limbs. The first is that the parties did not reach agreement on the form of the security to be provided by Secure in the email exchange on 28 February 2011. The second is that the Council purported to accept a form of security (a bank guarantee for an amount that equalled the guaranteed revenue for two months) that was clearly not offered by Secure. What Secure offered was a security bond for that amount.
I do not accept either of these propositions. The first question is whether the parties agreed to a variation of the terms of Secure's tender. In my opinion they did; and the variation that they must be taken to have agreed to was one that involved a bank guarantee for two months of guaranteed revenue. It is true that Mr Wade said in his email that Secure would be prepared to agree to "a Performance Guarantee Bond" for that amount. However, it is clear from Mr Marolia's response that he interpreted that statement as agreeing to an increase in the bank guarantee. He told Mr Wade that he was proceeding on that assumption and Mr Wade did nothing to correct Mr Marolia's misunderstanding. Looking at the correspondence objectively, Mr Wade attempted to reintroduce the notion of a performance bond, Mr Marolia did not accept that condition and Mr Wade permitted Mr Marolia to proceed on the basis that the requirement was not essential. In doing so, he conveyed the impression that a bank guarantee was acceptable to Secure. Mr Marolia acted reasonably in proceeding on that basis. The question of the bank guarantee had been raised previously by Mr Wade. Mr Marolia, no doubt conscious of reg 176 of the Regulations, resisted any changes to the terms of the tender. Mr Marolia's minutes of the meeting on 16 February 2011 made Council's position on the guarantee clear. If that position was a serious problem for Secure, it is to be expected that it would have raised the issue again, particularly in light of the fact that Mr Marolia said that he would look at the issue later. The fact that Secure did not suggests that it was not a critical issue. When Mr Marolia raised the question of an increase in the guarantee, Mr Wade's response focussed on the amount of the guarantee. He said that it was normal to offer a guarantee of one month's guaranteed income, but that Secure was prepared to offer two. It was reasonable of Mr Marolia to read the reference to "a Performance Guarantee Bond" as a reference to a bank guarantee in circumstances where Mr Marolia had previously said that the security had to be in the form set out in the draft Management Agreement, Secure had not followed up the issue, Mr Wade's email did not clearly state that Secure would agree to two months but only if the Council agreed to a performance bond in place of a guarantee, and Mr Wade did not seek to correct Mr Marolia's misunderstanding when he replied to Mr Wade's offer of two months.
As to the second point, on the conclusion I have reached the Council's acceptance clearly matched Secure's offer in relation to the bank guarantee. However, even if that conclusion is wrong, in my opinion, the acceptance still matched the offer. For the reasons I have given, if the parties did not reach an agreement on an increase in the security, the effect of that is that they did not agree to a variation of the tender. That still meant that, in accordance with the tender conditions and the Regulations, there was an offer available to be accepted by the Council. The question, then, is whether the Council accepted that offer. In my opinion, it did. Under the Regulations, the Council had a choice. It could accept a tender or it could reject all tenders. It could not make a counter-offer. Absent clear language, it must be taken to have elected to adopt one of the two options open to it. Looking at the matter objectively, it seems to me that it elected to accept the offer that was open to it. The first two resolutions of the Council are clearly expressed as acceptance of Secure's tender. Resolution 3 does not purport to qualify that acceptance. Rather, it states a proposal or intention of the Council. That proposal or intention was to seek to amend the Management Agreement in the way identified. For the reasons I have given, a proposal or intention to seek to vary an agreement does not mean that an agreement has not already come into force. That happened as a result of resolutions 1 and 2 and the communication of those resolutions to Secure.
As I have said, it is not entirely clear how Secure now puts its case in relation to the commencement date of the Management Agreement. However, it is apparent from Mr Marolia's and Mr Wade's file notes that the parties agreed that the agreement should commence once the new equipment had been installed, although they did not fix on an actual date that reflected that agreement. Consistently with the conditions of tender, they left that date to be determined if and when the tender was awarded to Secure. In that context, when the Council inserted a commencement date in the contract of 1 June 2012 it was to be understood as proposing that date. It was open to Secure to propose some other date which better reflected the agreement the parties had reached. If the parties could not reach agreement on that issue, a reasonable commencement date consistent with the agreement of the parties could be determined by the court. The agreement was not uncertain in that respect. And the fact that the Council proposed a commencement date was not inconsistent with the offer made by Secure. Rather, it was consistent with the Council's obligations following acceptance of that offer.
It is not disputed that, between 22 November 2010 (and earlier) and 15 March 2011, the Council published various documents on its website, including a number of press releases, that gave information concerning the redevelopment of the land on which the Kiaora Lane car park was situated, including the proposal to construct a public car park with 500 spaces. The proposal also received significant coverage in the press.
Both Mr Wade and Mr Thornley say that they looked at the Council's website, but neither found that information. Mr Wade says that he searched the website several times between March and June 2011 for about five minutes on each occasion and found nothing, although he does not say what searches he conducted. Mr Thornley says that, soon after he received the invitation to tender, he searched the Council's website for more information in relation to the Kiaora Lane development. He says that he looked at the page containing Major Development Applications and the Tenders page. He also says that he conducted a search using the search function offered by the website for the term "Kiaora Land development". In each case he found nothing.
There is no evidence that Secure sought any information from the Council about what the proposed redevelopment involved. Mr Wade does say that at a meeting on 17 May 2011 he asked Mr Marolia what was happening with the Kiaora Land development and that Mr Marolia replied with words to the effect of "you should do your own research". Mr Marolia says that he does not recall the conversation, but does not deny that it occurred. In any event, it occurred well after the Council had accepted Secure's tender.
As part of its tender, Secure included a business plan. The business plan contained a "competitor analysis" and a "SWOT [Strengths, Weaknesses, Opportunities and Threats] analysis" in respect of each of the car parks situated in Double Bay. In each case, the competitor analysis said:
No major car park operator has been identified in the area and the nearest major marking areas as competitors are situated in Potts Point and Bondi Junction.
In each case, the SWOT analysis under the heading "Opportunities" said:
No new car parks being developed in the area
Mr Bird and Mr Marolia read the business plan for the purpose of preparing the list of issues that formed the basis of the discussion on 2 February 2011, although Mr Marolia said that he did not focus on the SWOT analysis. When cross-examined, Mr Marolia accepted that, when reading the statement under the heading "Opportunities" in the witness box, it was apparent that Secure had not appreciated that it was proposed at the time to build a 500 bay car park in place of the Kiaora Lane car park.
Secure does not in its submissions identify precisely what disclosure it says should have occurred. The Council had, of course, disclosed on its website the relevant information. Although Secure did not find that information, it was not difficult to find. One path was from a link at the top of the home page entitled "Building and Development" to a page with a link "Development rules (LEP DCPs etc)". On that page was a link to a page "Draft LEP Amendment No 67 - Kiaora", which contained links to a number of documents disclosing the proposal to redevelop the Kiaora Lands to include a 500 space car park. Another simpler path was from a link at the top of the home page entitled "News" to a page headed "Kiaora Lands Redevelopment" which disclosed the proposal to include a 500 space car park in the redevelopment. Why Mr Thornley chose to follow a link to Development Approvals, when he knew that none existed in relation to the Kiaora Lane development is not clear.
Implicit in Secure's submissions is that it had a reasonable expectation that the Council would disclose in the invitation to tender the proposal to redevelop the Kiaora Lands to include a 500 space car park or that it would do so in response to Secure's tender.
I do not accept that it did. So far as the invitation to tender is concerned, the invitation made it clear that Tenderers were to make their own enquiries. The information was not directly relevant to the tender because, as the invitation made plain, the car park was being redeveloped and, once redeveloped, was being put out to separate tender. The information was relevant to an assessment of the competitive threats that an operator of the two other car parks would face. But a great deal of additional information was also relevant to that question and it is to be expected that different tenderers would assess that information differently. Particularly in light of what the invitation to tender said, Secure could not have had a reasonable expectation that the Council would disclose all information relation to the competitive threats or economic viability of the Cross Street and Cosmopolitan car parks. Moreover, the Council did disclose the proposal to redevelop the Kiaora Lane car park in the invitation to tender and it did make available on its website current information relating to that redevelopment. It was open to Secure to ask about the redevelopment at the pre-tender or post-tender meetings it had with the Council. Secure had no reason to assume that the redeveloped car park would have the same number of spaces as the existing one. Consequently, it is to be expected that if the number of spaces it had was significant to it and it had not been able to ascertain the information from its own enquiries, it would have asked about that matter before submitting its tender.
As to disclosure in response to Secure's tender, if it was apparent to the Council that Secure had submitted its tender on the basis of a false assumption, then Secure could have had a reasonable expectation that Council would correct that assumption. Secure points to the material in its market analysis as demonstrating that it was labouring under a misapprehension concerning the number of car spaces in the redeveloped car park and to Mr Marolia's concession that that appeared to be the case from the SWOT analysis. However, I am not satisfied that the Council appreciated that at the time it considered the tender. I accept Mr Marolia's evidence that he paid little attention to the SWOT analysis at the time. As he pointed out, that was largely of significance for Secure. Despite Mr Marolia's concession, the statement that "No new car parks being developed in the area" was not clear. It was obvious to Secure that the Kiaora Lane car park was being redeveloped, and in that context the reference to "new car parks" appears to be a reference to entirely new car parks rather than the redevelopment of existing ones. It is apparent from the evidence that different views could be taken on the likely effect on the Cosmopolitan Centre and Cross Street car parks of a larger Kiaora Lane car park. It appears that Mr Marolia thought that the redeveloped car park would have a minimal impact. That was not an unreasonable view. The redeveloped Kiaora Lane car park would have to cater for additional traffic that was likely to be generated by the redevelopment. It was on the opposite side of New South Head Road to the other car parks, and there was a question of how willing drivers would be to cross New South Head Road to park. The Council had published a considerable amount of information about the redevelopment on its website; and it might reasonably have expected that anyone interested in the information would be able to locate it. Consequently, I do not think that it was obvious from what Secure said that it was labouring under a misapprehension concerning the proposed number of bays in the redeveloped car park. It follows that I do not think it could be said that Secure was misled by the Council's failure to say something in response to Secure's tender.
Having regard to the conclusions I have reached, it is not necessary to address the question whether Secure is entitled to recover any damages for misleading or deceptive conduct. Moreover, it is not possible to address that question sensibly in the event that I am wrong. The parties did not make submissions on the issue. Secure did seek to lead evidence from Mr Daisley in relation to that issue. However, except to the extent that the evidence related to Secure's costs, that evidence was rejected. Consequently, there was no evidence before the court concerning Secure's projected income on the assumption that the Council had not engaged in misleading or deceptive conduct. Consequently, there was no evidence from which the court could be satisfied that Secure would have earned a profit on that basis.
I rejected substantial parts of Mr Daisley's report on the basis that many of the opinions he expressed were largely unsubstantiated conclusions. It is also apparent that Mr Daisley did not have the same level of qualifications and experience as Ms Lynn. For those reasons, less weight can be placed on the opinions Mr Daisley did express. Nonetheless, as will become apparent, Secure sought to challenge Ms Lynn's assessment of the Council's damages on the basis of a number of the opinions expressed by Mr Daisley or on the basis that the court should not accept Ms Lynn's evidence without qualification.
Shortly before Ms Lynn and Ms Lindsay were due to give evidence, they met and prepared a joint report in which they agreed the differences between them in relation to both Ms Lynn's base estimates approach and historical data approach. It also became apparent that the different discount rates advocated by Mr Holland and Mr Halligan did not make a large difference to the assessment of damages, and the parties sensibly agreed to compromise the difference in the discount rates. As a result, adopting the base estimates approach, the parties agree that, on the figures agreed between Ms Lynn and Ms Lindsay, the Council's loss is $5,339,592 as at 1 July 2011 (Ms Lynn calculated damages as at 1 June 2011, but she and Ms Lindsay agree that the dates are immaterial).
Secure submits that that figure should be discounted to take account of a number of factors. It accepts that, on the evidence, the result is "imponderable" and submits that the factors are best dealt with by discounting the estimated loss by 20 per cent to 30 per cent.
Before dealing with the specific issues raised by Secure, one general point should be made. Secure submits that Ms Lynn has over-estimated the Council's damages because she has under-estimated the revenue that the Council can expect to receive under the agreement with Care Park. Various reasons are given, but a number concern the way in which the car parks are currently managed. For example, consistently with evidence given by Mr Daisley (much of which was rejected), Secure submits that the revenue from the car parks could be increased by conducting a properly targeted advertising campaign, although Mr Daisley never described the nature of the campaign or its costs. Nor did he explain on what basis it could be said that such a campaign would increase the number of customers using the car parks. Those points aside, the question must be whether Care Park will engage in an advertising campaign, either because it was in its own interests to do so or because it was under a contractual obligation to do so.
Ms Lynn assumes that there will be some changes to the operation of the car parks which will improve the revenue derived from them. However, generally, she took the actual results obtained by Care Park in relation to matters such as customer numbers and hours parked and made projections based on those numbers. That appears to be the most reliable way of predicting the results that Care Park is likely to achieve. In part, Secure's case is that, if Care Park did things differently it could achieve better results. However, it offers no reason why Care Park is likely to do things differently. A number of Secure's points in relation to damages fail at that general level.
In its final written submissions, Secure points out that Ms Lynn adjusted the projections in respect of the Cross Street car park by increasing the number of "early bird" parkers (that is, all day parkers who arrive before a specified time and leave after a specified time). She did so on the basis that Care Park ought to be able to increase the numbers by undertaking some promotional activities. Secure complains that Ms Lynn made no adjustment to the past actual revenue figures in respect of any of the car parks for the fact that "operation was lax". However, it does not explain why any adjustment should be made to past figures. The actual revenue figures reflect the actual income earned by the Council. The Council was not managing the car parks. It is possible that Care Park was in breach of its Management Agreement by failing to manage the cark parks in a proper and businesslike manner. But in that case, Secure's complaint must be that it was open to the Council to make a claim against Care Park, that the claim had prospects of success and the costs of bringing it would be justified having regard to the likely recovery, with the result that the Council failed to mitigate its loss by not bringing such a claim. No such case was ever advanced.
Secure points out that Ms Lynn gave evidence that she often advised clients that they could improve revenue by 5 to 15 per cent by improvements in marketing and equipment. That was said to provide a sufficient basis for assuming that revenue at the car parks would increase by 5 to 15 per cent, with the result that the Council's damages claim should be reduced by that amount. This submission suffers from the flaw that I have already identified. In addition, it is plain from Ms Lynn's reports and her cross-examination that she gave careful consideration to whether steps could be taken to improve the revenue from the car parks and made adjustments where she thought it was appropriate to do so. Her adjustment to the number of early bird parkers at the Cross Street car park is an example. Secure criticises Ms Lynn for not making adjustments to the figures for the Grafton Street car park on the basis that the car park was already full. It points out that that evidence was challenged by Mr Daisley. However, as Ms Lynn pointed out, the real question was whether the car park was full at peak times. In each case, Ms Lynn gave plausible explanations for the approach that she took. I accept those explanations.
Ms Lynn was criticised for not assuming an increase in the number of permanent parkers at the Cross Street car park and for assuming that there would be no permanent parkers at the Cosmopolitan Centre. In relation to Cross Street, Ms Lynn had used the most recent figures and she pointed out that in order to assume an increase it would be necessary to give some consideration to where those parkers would come from. In relation to earlier figures where the numbers were higher, she pointed out that there had been a considerable change in economic circumstances and people's willingness to pay from permanent parking spaces. In relation to the Cosmopolitan Centre, it was Council's policy to stop permanent parking at that car park and the agreement made it clear that the manager could not assume that permanent parking would be permitted. Having regard to those matters, it seems to me reasonable for Ms Lynn to proceed on the basis that she did.
Secure sought to make something of the fact that the Grafton Street car park, which had previously operated with a boom gate, was operating under a "pay and display" system, which was open to abuse. It was submitted that Ms Lynn had not properly taken into account that fact in her projections because she had failed to take account of the additional revenue that could be earned if a boom gate system was reinstalled. There is a question whether that is an appropriate assumption to make. In any event, as Ms Lynn pointed out, the way she forecasted revenues was on the basis of physical cars present multiplied by a price. Consequently, if some parkers were not paying, her projected revenues based on the Care Park contract were inflated, with the result that the Council's damages were reduced. Again, in my opinion, the approach that Ms Lynn took was reasonable.
Ms Lynn was also criticised because she only undertook limited surveys of the number of cars parked in each car park (other than Kiaora Lane). The surveys were conducted on Thursday 8 August 2013 at 8.00 am, 12.30 pm, 5.30 pm and 8.00 pm, Saturday 10 August 2013 at those times and Monday 12 August 2013 at those times other than 8.00 pm. However, Ms Lynn's calculations were not based on those surveys alone. Ms Lynn expressed the view that, although limited in number, the surveys were sufficient "to provide evidence to support the historical data previously reviewed and observations during a site visit on Wednesday 4th September 2013". In my opinion, it was reasonable for Ms Lynn to rely on the data that she had and, particularly given the expense, to conduct a limited survey to check those data. I do not think that her report can be criticised for taking that approach.
It follows that I am not satisfied that any reduction should be made to Ms Lynn's estimate of the Council's damages.
There is no reason why the Council should not recover the costs of the second tender. The Council would not have incurred those costs if Secure had complied with its contractual obligation. It is not disputed that those costs are $122,829.65.
The Council claims interest on its primary damages claim from 1 July 2011 at the prescribed rates. It also claims interest on the sum of $122,829.65 from 1 July 2012 on the basis that that is the average for the date of incurring those costs.
There is no reason why the Council should not have interest on the sum of $5,339,592.00 from 1 July 2011. Council commenced preparing the documentation for the second tender in about mid March 2012 and issued the tender on 7 June 2012. It entered into an agreement with Care Park in December 2012, following a resolution to reject all tenders on 22 October 2012. It is reasonable to calculate interest from an average date. Slightly more than half the costs were incurred before 1 July 2012. On that basis, in my opinion, it is reasonable to calculate interest from 1 July 2012.
In my opinion, it was reasonable for the Council to conclude that it did not want to do business with Secure. It was reasonable of the Council to take the view that Secure had breached its contract and, in particular, had not approached the tender process in a way that might have been expected of it. Even if the day to day management of the car parks could be undertaken by persons unconnected with the litigation, the litigation and its results were likely to cause considerable friction between the Council and Secure, which would make it difficult to deal with more significant issues, such as increases in the fees to be charged at the car parks. For those reasons, I do not think the Council failed to mitigate its loss by not accepting Secure's tender.
In my opinion, if the Council's contract case had failed, then its case based on s 18 of the ACL would also fail. The reason for that is that, in the context, I do not think that the statement made in cl 3 of the conditions of tender was anything more than a representation that Secure agreed to be bound by its contractual obligations arising from the tender documents. As Mason P said in Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290 at [169] in relation to s 52 of the Trade Practices Act 1974 (Cth) (the predecessor to s 18 of the ACL):
Why should the parties be found or presumed to have intended more by what they expressly represented and understood? Of course, s 52 goes beyond intentionally misleading or deceptive conduct, but it does not follow that the innocent party understood or relied upon anything more than the express representations and the usually adequate consequences stemming from breach of them stemming from the law touching the mutually chosen regime, ie contract.
It was Secure's position that the terms of the tender did not require it to enter into the Management Agreement on the terms identified by Council immediately. If it was wrong about that, as I have found it was, then the Council was entitled to enforce the terms of the agreement or terminate it for breach. If it was correct in that view, because for one reason or another acceptance of its tender did not give rise to a binding agreement, I do not think that by agreeing to cl 3 it was representing that it would do something that it was not contractually obliged to do.
If I am wrong in that conclusion, I would assess the Council's damages by assuming that there was a 50 per cent chance that Secure would have discovered that the redevelopment of the Kiaora Lane car park would involve the construction of a car park with at least 400 spaces. The likelihood is that, if Secure had discovered that fact before entering into the agreement, it would have agreed to offer a guaranteed income of $1,800,000. However, it would also be necessary to discount the damages by 10 per cent to take account of the possibility that Secure and the Council would not reach agreement on the terms of a Management Agreement.
As to the chances that Secure would have discovered that the redevelopment of the Kiaora Lane car park would involve the construction of a car park with at least 400 spaces before reaching agreement, that information was readily available throughout the period that Secure and the Council would have been negotiating the terms of the Management Agreement. The negotiations would have been conducted on a somewhat different basis from those that actually occurred and it is possible that any time during the course of them that Secure could have raised the question of the Kiaora Land development in a way that led to disclosure of the proposed number of car parks. For that reason, I think it is appropriate to assume a 50 per cent chance that Secure would have discovered the true position before the agreement was finalised.
As to the assumption that the guaranteed income would be $1,800,000, that assumes that the Council would have agreed to permit permanent parkers in the Cosmopolitan Centre car park and would have permitted Secure to convert permanent unreserved parkers to permanent reserved parkers at the Cross Street car park. There is little doubt that the Council would have agreed to the second of these requirements. It is unclear whether the Council would have agreed to the first. However, any risk that it would not have agreed is adequately taken into account by discounting the damages by 10 per cent to allow for the possibility that no agreement would be reached.
As to the 10 per cent, it is apparent from the negotiations that actually occurred between the Council and Secure that there were a large number of issues that had to be negotiated. On the other hand, it seems clear that many of those issues had already been agreed. It was obvious that Secure was keen to obtain the management rights to the car parks. It was equally obvious that the Council was keen to reach an agreement with Secure because Secure's offer financially was substantially more attractive than any other offer. Consequently, although there was some risk that the parties would not be able to reach agreement, I think that that risk is small.