PRESTON ERECTION PTY LTD v SANDMAN HOLDINGS PTY LTD (formerly known as SGB BROOKER PTY LTD) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CLARKE, MEAGHER and HANDLEY JJA 11 June 1991, 25 June 1991 [1991] NSWCA 226 CONTRACT — OFFER AND ACCEPTANCE — COUNTER OFFER — LOSS OF CHANCE Clarke, Meagher and Handley JJA The appellant sued the respondent for breach of an agreement to sell scaffolding equipment to the appellant. The respondent denied the contract and the loss claimed to flow from the alleged breach. The action was heard by his Honour Judge Shadbolt who found that a contract did exist, broadly in the terms contended for by the appellant, but was not satisfied that any loss flowed as a consequence of the breach of that contract. He found a verdict for the defendant respondent. It has not been submitted in this Court, and apparently was not submitted in the court below, that the finding that there had been a breach of contract necessitated a verdict for the appellant albeit for nominal damages. What the appellant has submitted in this court is that his Honour was in error in his conclusion on the question of loss. For its part the respondent has filed a notice of contention seeking to uphold the judgment upon the basis that the finding that there was a contract between the parties whereby the respondent promised to sell scaffolding equipment to the appellant was itself erroneous. Accordingly, two issues arose for consideration in the appeal; the first being whether the appellant established the contract on which he sued and the second being whether, upon the assumption that the contract had been made out, the appellant established that loss flowed from the breach of that contract. It is convenient to deal with the issue raised by the notice of contention first. In its statement of claim the appellant pleaded an agreement, partly oral and partly in writing concluded on or about 25 June 1982. Although his Honour found that an offer to purchase the equipment had been made by the appellant, and accepted by the respondent, he was of opinion that both the offer and acceptance were quite distinct from the discussions which occurred on 25 June 1982 although the sale price had been fixed at that time. His Honour did not, however, identify with any particularity the terms of the offer, who made it or the manner in which it was communicated. Nor did his Honour identify the manner in which the offer was accepted. Accordingly, it is necessary to examine the evidence which was given in the trial on this issue. According to Mr Preston, a director of the appellant, he spoke with a representative of the respondent on 25 June 1982 indicating that he would like to supplement his stock of Anglok scaffolding from stock which the respondent had. According to him he said: "The condition of the sale would be that you sell me the whole lot, namely the 3,000 standards and all the other components to make a proper scaffold." 2 UNREPORTED JUDGMENTS He was, however, then asked for a purchase order and he gave one which was written out in his handwriting. That order concerned the purchase of 500 Anglok standards, 200 transoms and 100 intermediate transoms. The purchase order read in part: "WE TO HAVE FIRST PREFERENCE ON THE PURCHASE OF 3,000 ANGLOK STANDARDS FOR THE NEXT 6 MTHS AT $11 EA. WITH ALL BOLTS ESTIMATED QTY 3,000 TRANSOM $13.00 EA INT TRAM $13.00 EA 2400 LED (meaning Ledger) $15.00 EA ALL OTHER ITEMS NEGOTIABLE." The price for the components ordered was $9,600 and this was duly paid and the equipment taken by the appellant. The next relevant occurrence was the statement in a letter written by Mr Preston to the respondent on 25 November 1982 to the following effect: "We expect to swap these standards as per our agreement, and also we may purchase the remaining 3,000 standards. We request your reply on how many suitable standards are left and delivery time." (The reference to a swap concerned complaints being made by the appellant as to the quality of the goods initially supplied.) In its reply of 1 December the respondent relevantly stated: "We advise that approximately 3,000 standards are available for purchase. We would stress, as was stressed in our initial discussion, that purchase of the above equipment is entirely your responsibility. The same conditions would apply, as applied to your first purchase...... Should you wish to purchase further material, please do not hesitate to contact the writer." On 14 December 1982 the appellant replied placing an order for "the remaining 3,000 standards and sufficient ledgers, transoms and inter transoms to suit 3,000 standards. A reply is required to organise the necessary arrangement for this purchase." On 21 December 1982 the appellant wrote requesting a reply to its purchase order and on 12 January 1983 the respondent advised that the standards were no longer available for sale in Australia. We should add to this recital of the evidence that on 28 June 1982 the respondent, when confirming in writing its oral quotation of $11 per standard, stated: "We also agree to the sale price of further 9 ft Anglok standards ex UK to be at $11 ea and to be in lots of no less than 200. This price is to be maintained for 6 months from the above date." Mr Miller QC, who appeared for the appellant, submitted that the letter of 1 December 1982, when read in the context of the letter of 28 June 1982 fixing the price for the period of six months, constituted an offer which was accepted by the appellant placing an order on 14 December 1982. In short, the combination of these two letters, seen in the light of the earlier events, constituted a contract binding the respondent to supply 3,000 standards and sufficient other equipment to suit that number of standards. We interpose the observation that counsel for the respondent submitted that the reference to the supply of sufficient other pieces of equipment to suit 3,000 standards created a degree of uncertainty which was incompatible with the view UARESTON ERECTION PTY LTD v SANDMAN HOLDINGS PTY LTD (formerly known a8 SGB BROOKER PTY LTD) (Clarke, Meagher and Handley JJA) that a contract had been concluded. There is some substance in this point but it can conveniently, in the light of our conclusion on the substantial question raised, be put to one side. We are unable to agree with the submission that the terms of 1 December 1982 letter were such that upon the appellant subsequently lodging an order for 3,000 standards and associated equipment the respondent became bound to meet that order. As we see it when the respondent advised that it had approximately 3,000 standards available for purchase it was responding to the request which had earlier been made and which had been accompanied by a statement to the effect that the appellant might wish to purchase the remaining standards. Although Mr Preston had said in his initial order in June that his company was to have first preference on the estimated quantity of 3,000 standards that statement, even if agreed to by the respondent, did not impose an obligation upon the respondent to sell the standards to the appellant if it did not wish to sell them. The grant of a first preference is not the grant of an option. It is no more than the grant of a right of first refusal should the respondent wish to sell the equipment to other persons. (See generally MacKay v Wilson, 17 SR 315, per Street J at 325.) It follows that the earlier grant of first refusal did not require that the letter of 1 December be understood as doing any more than responding to an inquiry. Counsel for the appellant sought to meet this difficulty by relying upon the conversation of 25 June 1982. In his submission the statement in the letter of 1 December, when understood in the light of that conversation, constituted a clear offer to sell 3,000 standards to the appellant at a price of $11 per standard. We do not think this submission can be accepted. In the June purchase order the appellant noted that there were an estimated quantity of about 3,000 standards. This order was followed by the respondent's letter which advised an acceptance of a sale price of $11 each for the standards which price was to apply in respect of any sale during the ensuing six months. In this context we do not think that the statement in June, any more than the terms of the purchase order, altered the nature of the 1 December letter. The only offer which was made was that contained in the letter of 14 December which was not accepted by the respondent. Accordingly, a contract never was concluded. We should add that the respondent also submitted that, even if the letter of 1 December was capable of being regarded as an offer, the order placed on 14 December 1982 did not only relate to standards but included ledgers etc. and was, in substance, a counter offer. In view of the conclusion we have reached on the substantial point it is unnecessary to take time with this submission. We would conclude that his Honour erred in deciding that a contract had been concluded whereby the respondent was bound to sell 3,000 standards to the appellant. For this reason the appeal should be dismissed. In the circumstances the argument concerning damages can be dealt with shortly. His Honour noted that the appellant claimed that significant profits were lost as a consequence of the respondent's breach of contract. The case it propounded was that if the standards, and associated equipment, had been delivered then it would have been able to earn significantly greater hiring fees in the period following January 1983. His Honour also observed that there was evidence in support of the conclusion that there were other types of scaffolding available on the market which the appellant could have purchased and thereby have gained the profits it claimed to have lost. 4 UNREPORTED JUDGMENTS In the normal course, as his Honour said, the measure of damage would be the difference in cost to the innocent purchaser resulting from the need to purchase substitute materials. The appellant, however, led no evidence to the effect that other types of scaffolding would have cost him more and therefore could not rely on damages of this nature. Even if it be assumed, contrary to the evidence, that the appellant established that it could not purchase substitute materials on the market its claim for loss of profits failed for want of proof. No more was shown than that systems scaffolding, of which Anglok was an example, was more in demand with builders to whom the appellant hired scaffolding than the tube and fitting scaffolding which the appellant already had. The defect in proof was that there was no evidence that this factor led to any diminution in the appellant's profits. Although Mr Preston said at one stage that the appellant had to forego hiring contracts because it did not have the scaffolding he failed to produce evidence of any contract foregone. In any event, he later said that he had not purchased Anglok at an auction he attended because it was too expensive and the appellant's contracts were all fulfilled with tube and fitting scaffolding in "the long run". His Honour found Mr Preston's evidence, on this aspect of the case, difficult to follow and unacceptable. Although his Honour did not see the case as one in which the witness was "deliberately falsifying the situation" he was of opinion that Mr Preston's perception of his case led to his evidence being tailored in such a manner as to destroy it of any utility. In the light of the conflicting and unsatisfactory evidence his Honour regarded the case as one in which it had not been proved that any loss had been sustained. It was also implicit in this finding, and in his Honour's reference to Howe v Teefy, 27 SR 301, that the appellant had not established that the breach of contract which his Honour found had occurred deprived him of an opportunity or chance of making additional profits. It is, in our opinion, a straightforward case in which the claim for damages failed for want of satisfactory proof. The appeal should be dismissed with costs. Counsel for the Appellant: GTW MILLER QC and M GALVIN Counsel for the Respondent: NC HUTLEY and DR PRITCHARD Solicitors for the Appellant: MD NIKOLAIDIS and CO Solicitors for the Respondent: BAKER and McKENZIE