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Allens Arthur Robinson

Constructive knowledge – 11 April 2001

In brief: AAR research assistant Sean Richardson gives a brief summary of legislation, recent cases and pending cases in the construction area.

Cases

Abram v American Express International Inc [2001] FCA 292 (23 March 2001)

PRACTICE AND PROCEDURE - discovery - where there has been apparent compliance with an order for discovery, but the intended result of the order has not been achieved.

Abram was an American Express card holder who, upon making several small purchases in 24 hours, had a further purchase declined. With regards to discovery, Hely J had directed Abram to notify American Express of any categories of documents which Abram wished to have discovered. One of the classes sought by Abrams was:

"Memos, letters, minutes of meetings, faxes, e-mails, written instructions, computer records, computer instructions, computer program code, archived records - dealing with the planning, roll out or implementation and enforcement of the rule or situation where following 5 small purchases using an American express card within the same day or 24 hours or a short period of time, the American express card would be declined authorisation until the member contacts American express to restore the card to enable it to be used to make further purchases." [Emphasis added by Hely J]

American Express admitted that there was a procedure (Out Of Pattern Spending or OOPS procedure) which was similar to that described in bold print above, although not exactly as described. American Express later asserted that they had no documents matching the above description.

Held: Per Hely J: "At the directions hearing on 10 August 2000 I decided that documents which go to the implementation of the OOPS procedure, ... are adjectively relevant to the claim which the applicant makes. The fact, if it be a fact, that the respondent's procedures may not be described with complete accuracy by the rubric "5 small purchases using an American Express card within the same day or twenty four hours or a short period of time" does not alter that conclusion". Although the list of documents provided was technically in compliance with the discovery order, it was prepared on a false premise. New order for discovery made.

Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61

Contract - Offer and acceptance - Whether letter constituted contractual offer to vary existing contract and create new contract between parties - Where language of offer ambiguous - Assessment of mutually known facts re contractual background and shared beliefs of parties - Whether conduct partially conforming to letter of offer constituted implied acceptance - Mutually understood purpose of offer - Whether response to offer was rejection of it - Whether response to offer merely constituted posturing and negotiation

Contract - Consideration - No immediate or guaranteed increase in earnings - likelihood of future increases in earnings

Remedies - Restitution - Doctrine of unjust enrichment - Discussion about controversy and debate in Australia surrounding development of doctrine and its applicability to claims in contract

Held: The forms of measurement used in a pre-contractual letter from the respondent Council to the appellant before the second contract, are not admissible since they do not demonstrate the genesis of the second contract nor identify the "meaning of a descriptive term".

The parties' own opinions about the meaning of contractual terms are not relevant to the construction of those terms, although they may be relevant to the question of whether the parties intend to create legal relations.

The letter was treated as an offer at trial and it was too late for the appellant to deny that the respondent Council had contractual intent at the appeal.

In assessing whether the letter of offer was accepted, it is necessary to determine precisely the terms of the offer. Since the contractual language in the letter of offer is ambiguous, mutually known facts relating to the contractual background are admissible, as are the shared beliefs of the parties as to their rights.

To be an implied acceptance of an offer, conduct must be "of such a character as necessarily to lead to the inference on the part of the defendants that the agreement had been accepted on the part of the plaintiffs and was to be acted upon by them". This is a question of fact, to be examined in context. By its conduct (charging for receipt of liquid waste at the rate specified in the letter of offer), the appellant was taking the proposed benefits from the respondent Council's land. Viewed in this context, the appellant unequivocally accepted the letter of offer by its conduct.

Where a party to a contract is likely to increase its earnings because of that contract, although such increase is not immediate or guaranteed, this benefit counts as consideration.

Discussion by Mason P & Heydon JA about the current level of disagreement and controversy surrounding the doctrine of unjust enrichment in Australia and whether restitutionary remedies should be available for breaches of contract.

Equuscorp Pty Ltd v Malcolm and Ors [2001] VSC 66

Practice and procedure - Notices to Produce issued in connection with security for costs application - where party seeking security and production had established by solicitor's affidavit the existence of four unsatisfied charges against the other party - where documents sought were standard financial documents.

Held: it is not necessary, to avoid the stigma of "fishing", that a party already be in possession of some evidence before issuing a Notice to Produce, but rather that there is a prior pleading which raises issues for which the evidence sought by the process would be relevant. Summonses seeking to set aside or strike out the Notices to Produce dismissed.

McCann v By-Dezign Pty Ltd [2001] NSWSC 161

Contracts - whether contract - agreement to settle - Deed of release drafted - whether exchange of deed condition precedent - where offer to settle had been accepted - where one party's solicitor realised offer of settlement contained error and withdrew prior to exchange of final Deed of release.

Held: In response to offer of settlement, plaintiff's solicitors had written "We refer to your letter of 30th August and confirm that our clients accept the offer contained therein ... Would you please prepare Deed of Release and submit it to us for signing by our clients which we will then have signed and forwarded to you together with a cheque for the balance." This was evidence that there was no intention to be immediately bound and that exchange of Deed of release was condition precedent to settlement: Masters v Cameron (1954) 91 CLR 353 and GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 622 referred to.

Mitchell v Pattern Holdings Pty Limited [2001] NSWSC 199

CONTRACTS - contract for purchase of strata unit "off the plan" - vendor contracted "to make all reasonable efforts to procure the registration by the Registrar General of the Strata Plan" - termination clause if strata plan not registered within twelve months - vendor must fulfil obligation to make all reasonable efforts to secure registration before acting on termination clause - CONTRACTS - sale of unit in proposed strata plan - draft strata plan attached - contract required registration of strata plan "substantially in accordance with attached draft" - Council required reduction in the size of the balcony of the penthouse unit on plan - whether then substantially in accordance with draft - ESTOPPEL - whether facts sufficient to establish representation relied on and conduct based on representation.

Held: In relation to contract, due to decrease in size of one balcony of 10 square metres, the approved strata plan was not "substantially in accordance with" the plan attached to the contract. Therefore the defendant was entitled to terminate as per the termination clause. With regards to estoppel, the defendant's actions were consistent with a relationship between vendor/developer and purchaser while the contract is on foot. Representations which plaintiff sought to rely on (that plaintiff purchaser owned the unit & that the defendant developer/vendor would not rely on termination clause) were not made out.

Morrow v chinadotcom [2001] NSWSC 209

Stay of proceedings - stay pending resort to contractual dispute resolution - whether contractual provision sufficiently certain. - Court ordered mediation - whether Court should order mediation over opposition of party - relevant considerations discussed.

Held: Regarding stay of proceedings for arbitration, the dispute in question was covered by the contractual dispute resolution clause. However the clause lacked certainty as to procedure and process and was therefore invalid. It was then considered whether the Court should order mediation against wishes of one party, despite the invalidity of the dispute clause: "The clearly stated preference of one party to continue with the litigation which that party sees as the most appropriate means of dispute resolution must cause a Court to think very carefully before compelling what, on the face of things, may well turn out to be an exercise in futility attended by delay and expense."

Application for stay dismissed.

Smithkline Beecham plc v Alphapharm Pty Ltd [2001] Federal Court of Australia 271

Practice and procedure - preliminary discovery - offer by respondents to make discovery of documents - whether sufficient information provided - information contains trade secrets - extent to which information should be kept confidential - where material sought to be discovered included documents and a sample of a patented substance.

Held: There is a limit to the discovery to which an applicant is entitled under O 15A of the Federal Court Rules. The object is to disclose what is sufficient to permit the applicants to establish whether the elements of a cause of action are made out & to plead sufficient particulars to support a claim. Discovery was ordered, with discovered documents/results of tests on samples to be confined to applicants' solicitors, counsel, patent attorneys, any independent expert retained to perform tests or advise on patent infringement and one director of the applicant who could decide whether to commence proceedings.

South Australian Financing Authority v Bank of New Zealand [2001] SASC 24

Procedure - discovery and interrogatories - discovery and inspection of documents - orders for further and better discovery - interlocutory proceedings - whether documents sought were relevant to the matters in issue - where claim of negligence - where defendant denied duty of care - where defendant sought to show plaintiff was experienced in the type of transaction in question and sought discovery of documents from the plaintiff relating to earlier transactions.

Held: the question of duty of care turns upon the terms of the contractual and other arrangements between plaintiff and defendant in this particular case. The plaintiff's actions in relation to separate transactions of a similar type are not relevant to the existence of a duty of care as between plaintiff and defendant. Application for further & better discovery dismissed. 

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Legislation

Building and Construction Industry Security of Payment Regulation 2001 (NSW)

Gaz 57 of 23 Mar 2001 p. 1439

Provides: Each person or body that is a body regulated by APRA, within the meaning of the Australian Prudential Regulation Authority Act 1998 of the Commonwealth, is prescribed for the purposes of the definition of recognised financial institution in section 4 of the Building and Construction Industry Security of Payment Act 1999.

Background: According to S 3 of the Building and Construction Industry Security of Payment Act 1999:

'(1) The object of this Act is to ensure that any person who carries out construction work (or who supplies related goods and services) under a construction contract is entitled to receive, and is able to recover, specified progress payments in relation to the carrying out of such work and the supplying of such goods and services.

(2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment in circumstances where the relevant construction contract fails to do so.'

Section 4 relevantly provides: 'recognised financial institution means a bank or any other person or body prescribed by the regulations for the purposes of this definition.'

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Pending cases
Native title

North J of the Federal Court has remarked that the future of native title law is in the hands of the High Court. Judgment is currently pending in the Mirruwong-Gajerrong case.

Insurance

In the High Court of Australia: FAI General Insurance Company Pty Ltd v Australian Hospital Care Pty Ltd (B23/2000)

Date heard: 17 November 2000. Judgment reserved.

Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ.

Insurance - whether s 54 Insurance Contracts Act 1984 (Cth) operates when insured does not give notice during period of policy of an occurrence of which insured becomes aware during that period and which may subsequently give rise to claim for breach of professional duty by reason of any negligence - whether Court of Appeal erred in holding that FAI Insurance Co Ltd v Perry (1993) 30 NSWLR 89 survived Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652.

Appealed from Qld CA. (1999) 153 FLR 448.

Negligence

In the High Court of Australia: Tepko Pty Ltd & Ors v Water Board (S36/2000)

Date heard: 21-22 November 2000. Judgment reserved.

Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ.

Negligence - negligent misstatement - circumstances in which liability for negligent misstatement arises - whether duty of care can arise where information or advice as to costs of certain work communicated by public authority to plaintiff and where works form part of development proposed by plaintiff to knowledge of authority.

Appealed from NSW CA.

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