Reported Decision : (2006) Aust Contract Reports 90-244 New South Wales Court of Appeal CITATION: ICTA Investments Pty. Ltd. trading as Jolly Roger & Anor. v. GE Commercial Corporation (Australia) Pty. Ltd. & Anor. [2006] NSWCA 290 HEARING DATE(S): 8 September 2006 JUDGMENT DATE: 2 November 2006 JUDGMENT OF: Hodgson JA at 1; Tobias JA at 61; Young CJ in Eq at 68 DECISION: See pars.58-60 of judgment CATCHWORDS: CONTRACT - Offer and acceptance - Equipment rental agreement - Whether defendant's offer accepted by plaintiff - Whether offer could be accepted by conduct - Whether communication of acceptance necessary - Whether contract made otherwise than by offer and acceptance. Brambles Holdings Limited v. Bathurst City Council [2001] NSWCA 61, 53 NSWLR 153 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Georgoulis v Mandalinic [1984] 1 NSWLR 612 CASES CITED: Integrated Computer Services Pty. Limited v. Digital Equipment Corporation (Australia) Pty. Limited (1988) 5 BPR 11,110 L'Estrange v. Graucob Limited [1934] 2 KB 394 Latec Finance Pty. Limited v. Knight [1969] 2NSWR 79 Mandalinic v GIO [1983] 1 NSWLR 598 Northstate Carpet Mills Pty Ltd v B R Industries Pty Ltd [2006] NSWSC 1057 Water Board v. Moustakas (1988) 180 CLR 491 ICTA Investments Pty. Ltd. trading as Jolly Roger - 1st appellant PARTIES: Donald Steven Raice - 2nd appellant GE Commercial Corporation (Australia) Pty. Ltd - 1st respondent D. Huber, Local Court Magistrate - 2nd respondent FILE NUMBER(S): CA 40635/05 Mr. J. Horowitz for the appellants COUNSEL: Mr. P. Newton for 1st respondent Submitting appearance for 2nd respondent Horowitz & Bilinsky, Sydney for appellants SOLICITORS: Kemp Strang, Sydney for 1st respondent Crown Solicitor's Office, Sydney for 2nd respondent LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): ED14232/04 LOWER COURT JUDICIAL OFFICER: Malpass, AsJ LOWER COURT DATE OF DECISION: 11 July 2005 LOWER COURT MEDIUM NEUTRAL CITATION: Not available IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40635/05 ED 14232/04 HODGSON JA TOBIAS JA YOUNG CJ in EQ Thursday 2 November 2006 ICTA INVESTMENTS PTY. LTD. & ANOR. V. GE COMMERCIAL CORPORATION (AUSTRALIA) PTY. LTD. & ANOR. Headnote FACTS ICTA owned a nightclub and sought finance from GE through a finance broker, Auswest, to upgrade to its lighting equipment. At Auswest's offices on 30 August 2002, Mr. Raice, one of the directors of ICTA, signed an equipment rental agreement and other documents (including a guarantee by Mr. Raice) and permitted these to be forwarded to GE. Without communication to ICTA or Mr. Raice, GE then paid the supplier for the lighting equipment (which had already been delivered to ICTA prior to signing). Shortly afterwards, ICTA returned the equipment and informed Auswest (which in turn informed GE) that it did not wish to proceed with the transaction. However, GE used a direct debit authority to continue to collect rental payments for some time. In the Local Court, GE successfully sued ICTA and Mr. Raice for money allegedly owing under the agreement, and ICTA and Mr. Raice unsuccessfully appealed that decision to the Supreme Court. A further appeal by ICTA and Mr. Raice to the Court of Appeal raised the following issues: (1) Whether the signing of the rental equipment agreement by Mr. Raice was an offer requiring acceptance by GE; (2) Whether GE could accept that offer by conduct; (3) Whether GE could only accept that offer by communication to ICTA and Mr. Raice; (4) Whether a contract was made otherwise than by offer and acceptance. HELD (allowing the appeal) (1) The primary judge was incorrect to hold that the equipment rental agreement was a binding contract. The signing of documents by Mr. Raice and permitting them to be given to GE amounted to a contractual offer and could not be an acceptance to any previous offer from GE since the terms differed. (2) GE could not accept the offer merely by its conduct i.e. paying the supplier for the lighting. The equipment rental agreement contained a clause stating that nothing prior to execution had any effect, GE had not executed it and the document also contained blanks as to the obligations of both parties. Furthermore, ICTA had not satisfied one requirement under the agreement and GE had not communicated waiver of this requirement to it. (3) Since there is no substantial evidence or circumstances to suggest departing from the ordinary rule requiring communication of acceptance, GE could only accept the offer by communicating its acceptance to ICTA and, since it did not do so, the equipment rental agreement was not binding. (4) Furthermore, since there was no evidence of other conduct by the parties manifesting an intention to be bound by the terms of the documents, no contract came into existence on some basis other than offer and acceptance. ********** IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40635/05 ED 14232/04 HODGSON JA TOBIAS JA YOUNG CJ in EQ Thursday 2 November 2006 ICTA INVESTMENTS PTY. LTD. & ANOR. V. GE COMMERCIAL CORPORATION (AUSTRALIA) PTY. LTD. & ANOR. Judgment 1 HODGSON JA: On 30 November 2004, Magistrate Huber gave her decision in proceedings in which the first respondent (GE) sued the appellants (ICTA and Mr. Raice) for money said to be owing under an equipment rental agreement. The Magistrate gave judgment for GE against ICTA and Mr. Raice in the sum of $60,000.00 and professional costs as agreed or assessed. 2 ICTA and Mr. Raice appealed to the Supreme Court from that decision; and on 11 July 2005, Malpass AsJ dismissed their summons and ordered them to pay GE's costs. 3 ICTA and Mr. Raice applied for leave to appeal from the decision of Malpass AsJ, and on 13 April 2006 Handley and Santow JJA granted leave to appeal, limited to the following issues: (i) Whether the signing of the form of hiring agreement by the appellants was a contractual offer. (ii) If so, whether there was any evidence that the respondent had accepted that offer and communicated its acceptance to the appellants. (iii) Whether a hiring contract came into existence between the parties on some other basis. 4 At the hearing of the appeal, the Court was told that a liquidator had been appointed to ICTA on 5 June 2006. By letter dated 13 June 2006, the solicitors who previously acted for both ICTA and Mr. Raice advised the liquidator that the appeal was listed for hearing on 8 September 2006, and that they were prepared to continue with the appeal on behalf of both appellants on the basis that Mr. Raice would pay the fees and that no fees would be payable by ICTA. In the event, the liquidator did not instruct them to appear for ICTA and did not appear at the hearing; so only Mr. Raice was represented on behalf of the appellants. CIRCUMSTANCES 5 ICTA owned a nightclub in Newcastle called The Jolly Roger. Mr. Raice was one of its directors, and it was managed by his nephew Mr. Petrich. 6 On 29 July 2002, a quotation to upgrade The Jolly Roger's lighting equipment was provided by Lighten Up Productions (Lighten Up) quoting rental finance of $63.64 per week (ex-GST) based on a 60-month term. 7 ICTA then made a finance application to Auswest Financial Services Pty. Limited (Auswest) dated 2 August 2002 and signed by Mr. Raice, and this was submitted to GE. GE gave approval advice dated 7 August 2002 to Auswest, giving the amount as $17,727.27 and the term as 60 months, and specifying a number of conditions, including the guarantee of Mr. Raice and confirmation of real estate ownership via rate notices. 8 On 9 August 2002, Mr. Travis Hargreaves (a director of Auswest) hand-delivered to Lighten Up a number of documents for collection by ICTA, including an equipment rental agreement showing a rental term of 48 months. 9 On 15 August 2002, ICTA gave Auswest a cheque for $286.00, this apparently being the amount of the first month's rental under that proposed agreement. 10 On 22 August 2002, Mr. Travis Hargreaves received from Lighten Up documents signed on behalf of ICTA; but Mr. Greg Hargreaves (father of Mr. Travis Hargreaves and a manager of Auswest) noticed they had not been correctly executed. 11 On about 23 August 2002, Mr. Raice contacted Mr. Greg Hargreaves and said they were going ahead with the finance and purchase of the equipment, but that he wanted the purchase price reduced; and on or about 29 August 2002, the documents were amended to reduce the purchase price of the equipment (and the amount to be financed) to $13,000.00. 12 On 30 August 2002, there was a meeting between Mr. Raice and Mr. Travis Hargreaves. By this time, the lighting equipment had already been delivered and installed in ICTA's premises. Mr. Raice said he wanted a shorter rental period, and said he would go with Mr. Hargreaves to Auswest's offices to sign up. According to Mr. Travis Hargreaves, he then said to Mr. Raice: OK. Once you have signed the documents we will send them to GE for settlement. GE will then pay Lighten Up and notify Auswest that the supplier has been paid. Is that ok? According to Mr. Hargreaves, Mr. Raice replied: "Yes. That's ok". 13 At Auswest's office, Mr. Raice signed a number of documents, including documents described as a rental equipment agreement, a guarantee, a delivery acknowledgement, a direct debit request and a GE commercial rental application. 14 The equipment rental agreement document provided for a term of 36 months, at a monthly rental of $445.38. The commencement date and first payment date were blank. The document identified the subject goods (the lighting equipment) and identified GE as the owner. The document had provision for execution by GE. Relevant clauses are cls.5.2, 6(a), 13.1, 14.3, 17.2, and the definition of costs in cl.18. 5.2 If you obtain the goods on a date prior to the commencement of the term, you must comply with your obligations under this agreement from that date. In addition to other amounts payable by you, you must also pay rent for each day from and including the date you obtain the goods to the date the term commences, calculated as one day's proportion of the total rent instalment. 6 You indemnify us against liability, loss or costs (including on account of funds borrowed, contracted for or used to fund any amount payable by us in connection with our purchase of the goods or this agreement and consequential or economic loss) we suffer or incur in connection with: (a) our exercising a right under this agreement, or you or any person who gives a security not doing what you or that person should have done under this agreement or the security (including if you fail to comply with and return the goods in accordance with clauses 9.1(a) to (c)); 13.1 We may, in our own right or as attorney under clause 13.2: (a) do anything which should have been done by you under this agreement but which we consider you have not done properly; (b) complete or correct any details in the Particulars or any other document connected to this document (including a direct debit authority), or amend such document to reflect or give effect to the terms of this agreement which were agreed between you and us; and (c) sue for and recovery any claims for loss or damage in relation to the goods under any insurance or otherwise, compromise any such claim in your name and/or ours, and give effectual releases and receipts in respect of any such claim. 14.3 We may give you a certificate regarding any matter concerning this agreement including the rental rate, any amount payable by you to us, or the extent of our entitlement to a full input tax credit for GST paid in respect of any matter contemplated by this agreement. The certificate is sufficient evidence of the matter or amount. 17.2 This agreement constitutes the entire agreement between the parties in connection with the goods. All terms, conditions, provisions and arrangements (if any) prior to the execution of this agreement have no effect. 18. … Costs includes charges and expenses; and costs, charges and expenses in connection with legal and other advisers on a full indemnity basis; and repossession, storage, repair and inspection of the goods. 15 The guarantee document left blank the date of the rental agreement which was guaranteed and also the date of the guarantee. Clause 1.2 provided as follows: 1.2 The guarantor unconditionally and irrevocably indemnifies us against any liability or loss we suffer or costs we incur in connection with the whole or any part of the amounts guaranteed by the guarantor not being recoverable under cl.1 from the guarantor for any reason, including, because of any legal limitation, disability or incapacity affecting the debtor, or any other fact or circumstance. The indemnity in this clause 1.2 applies irrespective of whether the transactions relating to the amounts guaranteed or any of them are void, voidable, avoided, released, disclaimed or whether or not any of the matters referred to in this clause 1.2 were or ought to have been within our knowledge. 16 The delivery acknowledgement document advised in the alternative that all equipment had been delivered or installed, or that satisfactory arrangements for this had been made, without saying which one was the case. 17 The direct debit request document identified ICTA's bank account, but did not identify the agreement between ICTA and GE, payments under which were authorised, and did not identify any amounts or times when money was to be debited. 18 The commercial rental application document identified ICTA's director as Mr. Raice, and gave the real estate value as $1.3 (presumably $1.3 million). 19 It appears that at no time did Mr. Raice or ICTA provide Auswest with the difference between $286.00 and $445.38. 20 After the documents had been signed, Mr. Raice was given a document by Mrs. Caroline Hargreaves, the wife of Mr. Greg Hargreaves. This document was headed "Tax Invoice", and was in the following terms: Please find enclosed documentation relating to your recently approved Equipment Operating Lease (Rental/Buy Agreement). Kindly carry out the functions as indicated below; 1/ SIGN AND INITIAL DOCUMENTS ONLY WHERE INDICATED, HAVE SIGNATURES WITNESSED (if APPLICABLE). 2/ COMPLETE DETAILS FOR DIRECT DEBIT AUTHORITY (COMPULSORY) 3/ PLEASE ALSO SUPPLY THE FOLLOWING DOCUMENTATION:- PLEASE PROVIDE CONFIRMATION OF PROPERTY OWNERSHIP ( IE A COPY OF YOUR RECENT RATES NOTICE 4/ ATTACH A CHEQUE FOR $445.38 MADE PAYABLE TO: ' AUSWEST FINANCE ' FOR THE FOLLOWING:- 1ST RENTAL PAYMENT $445.38 (incl GST) 5/ RETURN ASAP BY ENCLOSED COURIER BAG We will then arrange to pay the supplier and advise them to dispatch your equipment. **** PLEASE NOTE **** DOCUMENTS MUST BE RETURNED WITHIN 14 DAYS OF APPROVAL, OTHERWISE APPROVAL WILL LAPSE AND A SERVICE FEE WILL APPLY. Should you have any queries relating to the attached documents or this transaction generally please contact this office immediately. 21 Mr. Raice was not given any copy of the documents he had signed. 22 Some time between 30 August 2002 and 3 September 2002 there was a conversation between Mr. Greg Hargreaves and Mr. Raice, in which Mr. Hargreaves said that a rates notice was required to confirm his property ownership, to which Mr. Raice replied that all his property was in his wife's name. Mr. Greg Hargreaves then passed this on to Mr. Len Stubbings at GE, who said GE would waive the requirement of a rates notice. 23 On 3 September 2002, an invoice dated 8 August 2002 for $13,000.00 for the lighting equipment was faxed by Lighten Up to GE. A GE note of 3 September 2002 (Blue 56) waived the requirement of a rates notice, and there was another GE document of the same date (Blue 57) signing off on the settlement, and noting the receipt of a cheque for $510.38 from Auswest (being the first month's rental of $445.38 and another $55.00 which has been called a document fee). This document authorised disbursements of $13,000.00 to Lighten Up and $910.00 to Auswest; and $13,000.00 was paid to Lighten Up on that day. 24 On 6 September 2002 (a Friday), Mr. Raice spoke by telephone to Mr. Greg Hargreaves, and said he did not want to proceed with the contract, and would confirm by fax on Monday. According to Mr. Hargreaves, he passed this information on to Mr. Craig McGilvray at GE. 25 On 9 September 2002, Mr. Raice sent a facsimile to Auswest confirming that he did not wish to proceed; and according to Mr. Greg Hargreaves, he faxed a copy of this to Mr. McGilvray, which Mr. McGilvray acknowledged by telephone. 26 On about 12 September 2002, the equipment was returned by ICTA to Lighten Up, and it was collected by Mr. Greg Hargreaves. 27 Despite the events of 6, 9 and 12 September 2002, there was no communication from or on behalf of GE to ICTA; and GE used the direct debit authority to collect $445.38 from ICTA's bank account on 3 October 2002, 4 November 2002, 3 December 2002 and 3 January 2003. 28 According to Mr. Raice, he was alerted to this by his accountant in about January 2003, and he stopped the direct debits. GE gave notice that it terminated the agreement on 2 May 2003. 29 In its Statement of Liquidated Claim dated 30 May 2005 brought in the Local Court against ICTA and Mr. Raice, GE made the following allegation as to the making of a contract: 4. By agreement in writing made on or about 3 September 2002 (" the Rental Agreement ") the plaintiff and the first defendant, the plaintiff agreed to rent to the first defendant the Goods in consideration of which the first defendant agreed to comply with all the terms of the Rental Agreement Particulars (a) The terms of the Rental Agreement are contained in a document entitled Equipment Rental Agreement/Tax Invoice, which was signed on behalf of the first defendant by the second defendant on or about 29 August 2002. (b) A document referred to in subparagraph (a) above was sent to the plaintiff under an application form from the first defendant to the plaintiff signed on behalf of first defendant by the second defendant. (c) On 3 September 2002, the plaintiff accepted the terms of the Rental Agreement. It claimed $12,663.04 plus interest and indemnity costs. 30 The following appeared in ICTA's Defence: (a) The First Defendant does not admit paragraph 4(a) and further says that: 4a.1. The document entitled Equipment Rental Agreement I Tax Invoice was signed by the first defendant on 6 September 2002. 4a.2. The rental agreement was rescinded orally on 6 September 2002 and in writing on 9 September 2002 by the First Defendant. 4a.3. The First Defendant never supplied the Plaintiff's agent Auswest Finance with a copy of a recent rates notice. This is stipulated in the document entitled "Tax Invoice" dated 30 August 2002, which was served on the First Defendant on 6 September 2002 as a condition which must be met before the supplier is paid and the goods are dispatched. 4a.4. The First Defendant did not supply the Plaintiff's agent, Auswest Finance with a cheque for $445.38 at the time of signing the document entitled Equipment Rental Agreement/Tax Invoice. This is stipulated in the document entitled Tax Invoice, dated 30 August 2002, which was served on the First Defendant on 6 September 2002, as a condition which must be met before the supplier is paid and the goods are dispatched. (b) The First Defendant denies paragraph 4(b). (c) The First Defendant denies paragraph 4(c). ICTA's Defence also claimed that it never had possession of the goods subject to the rental agreement. ICTA also put on a cross-claim for $2,067.52 plus interest, being the $286.00 paid on 15 August 2002 and the four monthly instalments of $445.38 each. 31 Mr. Raice's Defence (put on by the same solicitors) did not admit the making of any contract. 32 At the hearing before the Local Court, evidence on behalf of GE was given by Greg, Travis and Caroline Hargreaves, and by Mr. Bird, an employee of GE. Mr. Bird was not involved in any way in the transaction, and he gave evidence that the file had been lost, and that it was GE's practice not to sign such agreements itself. There was no evidence called from Mr. McGilvray or Mr. Stubbing. 33 The Magistrate rejected ICTA's defences based on Mr. Raice's not reading the documents (relying on L'Estrange v. Graucob Limited [1934] 2 KB 394), and rejected ICTA's denial of receipt of goods and ICTA's claim that the documents were not signed until 6 September 2002. On the question of whether a contract was made, she said this: The defendants argue that the plaintiff has not proved a fundamental requirement that is that the agreement was signed by the plaintiff. Therefore the defendant argues there is nothing before the Court which shows that the plaintiff acknowledged that it was ever bound by the agreement, that is that it accepted the terms and conditions of the agreement, that is that there was a contractual agreement between the parties. This argument must fail. It is clear from the evidence that the plaintiff paid for the goods and that the agreement was binding when the goods were paid for. The evidence of Mr Bird makes it clear as to why the relevant documentation was not before the Court. Further it is clear from Mr Bird that General Electric accepted the terms and conditions of the agreement. 34 She gave judgment for the amount claimed plus costs of about $50,000.00, so that the judgment was for $60,000.00 being the limit of the Local Court's jurisdiction. ASSOCIATE JUDGE'S DECISION 35 An appeal lay from the Local Court on an error of law, or with leave on a question of mixed law and fact. Leave was not given, and relevantly to this appeal the Associate Judge said this: 17 Primarily, the focus of the challenge was directed to two questions. The first question concerned error in finding that a contract had been made between the parties. It was said that any acceptance of what is described as being an offer by ICTA was not communicated. The second is that there was error in rejecting the defence that there was a condition precedent to the making of a contract which had not been satisfied. 18 I now turn to the first of the two questions. Whether or not it was argued in its present form before the Magistrate is somewhat unclear. In dealing with what was put to her, the Magistrate observed as follows:- The plaintiff terminated the equipment rental agreement by serving notice on the defendant on or about 5 May 2003. The defendants argue that the plaintiff has not proved a fundamental requirement that is that the agreement was signed by the plaintiff. Therefore the defendant argues there is nothing before the Court which shows that the plaintiff acknowledged that it was ever bound by the agreement, that is that it accepted the terms and conditions of the agreement, that is that there was a contractual agreement between the parties. This argument must fail. It is clear from the evidence that the plaintiff paid for the goods and that the agreement was binding when the goods were paid for. The evidence of Mr Bird makes it clear as to why the relevant documentation was not before the Court. Further it is clear from Mr Bird that General Electric accepted the terms and conditions of the agreement. [Tr 30.11.04 p3] 19 In her judgment the Magistrate later observed as follows:- The plaintiff argues the defendant signed the equipment rental agreement and about this there is no dispute be it either 30 August or 6 September 2002. On executing the agreement clause 17.2 comes into effect thereby extinguishing any terms and conditions, provisions and arrangements if any prior to the execution of the agreement. The plaintiff further argues that even if clause 17.2 did not exist, applying the principles set out in Suttor v Grenover (?) [sic]: "Where the event in question is one which cannot occur without default on the part of one party to the contract the position is clear. The provision is then construed as making the contract not void but voidable. Only the party who is not in default can avoid it and he may please himself as to whether or not he does." The plaintiff's argument has merit. [Tr 30.11.04 p4] 20 I am not satisfied that what was argued on this question demonstrates error on the part of the Magistrate. She had before her a document (the written agreement) that had been executed by ICTA. She found that a binding agreement had been made between the parties. It appears that she may have regarded that document as being the agreement made between the parties or the writing that comprised the terms of such agreement. I do not consider that there was error in so doing. 21 Perhaps, I should digress to mention that the document was partially incomplete. However, its terms gave GE authority to complete any blanks. 22 If the conduct of the parties is to be viewed in terms of offer and acceptance (which has been described as "classical theory"; see Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 97326), she could have regarded the return of the executed material as an acceptance by ICTA of an earlier offer. 23 The evidence before the Magistrate and what appears in her judgment suggests that the thrust of the case on this question before her may have been somewhat different. Her judgment makes no mention of any question of communication of acceptance. It expressly mentions other questions that were argued. Apart from the question of whether the agreement was signed by GE, there was also mention of, inter alia, the issue as to when the rental agreement was signed by the second plaintiff and as to whether the equipment had been received by ICTA. 24 If the question of communication was not raised in the Local Court hearing, I consider that it should not be allowed to be ventilated in this appeal. It was a matter which could have been expected to give rise to further evidence and further submission. LATEC FINANCE PTY. LIMITED V. KNIGHT 36 The facts of the present case have some similarity to those in Latec Finance Pty. Limited v. Knight [1969] 2NSWR 79. Mr. Horowitz for Mr. Raice relied on that case, and Mr. Newton for GE sought to distinguish it. 37 In that case, the defendant was approached by dealers in television sets, who sought to sell him a television set. On 12 September 1958, a television set was installed and the defendant signed an offer of hire purchase addressed to the plaintiff, and paid £27 deposit. Clause 14 of the offer was in the following terms: 14. This offer shall be irrevocable for a period of seven days from the date hereof but shall not be binding upon you until the memorandum of acceptance endorsed hereon shall have been signed by you and the provisions of this clause shall not be affected or prejudiced by reason of any prepayment of any money by me or the delivery of the goods or any part thereof to me and any such delivery shall pending acceptance as aforesaid be deemed merely pro forma and conditional. 38 The plaintiff in fact signed a memorandum of acceptance on 19 September 1958, but did not communicate this to the defendant. 39 In early November 1958, the defendant contacted the dealers; and on 6 November 1958 they took away the television set, substituted another one, and told the defendant that his deposit would be transferred to this second television set. The second television set was returned to the dealers in December 1958. 40 The defendant paid no more instalments, after paying the £27. In 1965, the plaintiff sued him for instalments under the alleged hire purchase agreement, and recovered judgment in the District Court. The defendant appealed to the Court of Appeal. Jacobs JA, with whom Sugarman and Walsh JJA agreed, gave these reasons for upholding the appeal: His Honour concluded that either no communication or acceptance was necessary, or that there was a knowledge of acceptance by the defendant which could be implied or inferred from the circumstances. I do not think that there was any evidence from which it could be inferred that the defendant knew of the acceptance by the plaintiff. This is not a case where a hirer or offeror retained goods for such a significant length of time that from his very enjoyment of them it could be inferred that he knew the agreement was accepted and had become finally binding between the parties. Here it is true that a few weeks passed, but when account is taken of the nature of the goods, of the length of time, of the fact that no instalments were paid, and, I think, very importantly, of the fact that the goods were returned to the dealer who had acted as agent for the hire-purchase company, then I do not think that knowledge of the acceptance which would bring the agreement into full force and effect can be implied or inferred. The question therefore is, whether on the true construction of the offer, and in particular cl.14 of the offer, any communication of acceptance was necessary. I am of the opinion that it was. The ordinary rule is that a contract is not made, that an offer is not accepted, until the acceptance of the offer has been communicated. If the parties, as they are entitled to do, wish to vary this rule such an intention must be made clear in the offer. The variation may, generally speaking, take either of two forms. It may provide for the acceptance by the doing of an act, which may be done without any relation to communication. The well-known example of this appears in Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256; [1891-4] All E.R. Rep. 127. Secondly the offer may provide expressly or impliedly for acceptance to be communicated in a particular manner, so that acceptance is deemed to have been communicated when that manner is adopted, whether or not the communication is actually received. A common case of this kind is found in the sufficiency of an acceptance by post if the offer is made by post. Upon the plaintiff's submission, the present case falls into the former category, so that the actual communication of acceptance is by the terms of the offer made unnecessary, provided that the act is performed of executing the acceptance clause in the document. One would indeed expect clear language to support such a view, and the reasons therefor are well expressed by Lord Denning, M.R., in the case of Robophone Facilities Ltd. v. Blank, [1966] 3 All E.R. 128, at p. 131; [1966] 1 W.L.R. 1428, at p.1432. There the Court was dealing with an offer, which included a cl.14 in these terms: "This agreement shall become binding on the company only upon acceptance thereof by signature on their behalf." Lord Denning said: "It is clear that that document, although called an agreement, was only an offer. It could be revoked by Mr. Blank at any time before it was accepted by the plaintiffs: see Financings Ltd. v. Stimson, [1962] 3 All E.R. 386. In order to become binding, someone duly authorized would have to sign it as accepted on behalf of the plaintiffs: and, moreover, their acceptance would have to be communicated to Mr. Blank. The general rule undoubtedly is that, when an offer is made, it is necessary, in order to make a binding contract, not only that it should be accepted but that the acceptance should be notified: see Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256; [1890-94] All E.R. Rep. 127, at p. 130 per Lindley, L.J.; Entores Ltd. v. Miles Far East Corporation, [1955] 2 All E.R. 493, at p. 497; [1955] 2 Q.B. 327, at p. 336, per Parker, L.J. Clause 14 does not dispense with the necessity of notification. Signing without notification is not enough. It would be deplorable if it were. The plaintiffs would be able to keep the form in their office unsigned, and then play fast and loose as they pleased. Mr. Blank would not know whether or not there was a contract binding them to supply or him to take. Just as mental acceptance is not enough: see Felthouse v. Bindley [1862] 11 C.B.N .S. 869, nor is internal acceptance within the company's office." It may be noted that the terms of the clause in that case, although not dissimilar from those in the present cl.14, did not contain the earlier part of the clause now being considered. It is true that the words which are used by Lord Denning were obiter dicta, but it also would seem that Harman, LJ., ([1966] 1 W.L.R. at p. 1438) took the same view. The clause 14 in the present case says that until the signing of the memorandum of acceptance the offer shall not be binding on the plaintiff. The actual words are, "upon you". It may be possible to read into these words an implication that the offer will be binding on the plaintiff when the memorandum of acceptance has been signed. This would be a somewhat unusual result, but in any event it would not suffice in the present case. It would be necessary to go further and say that there must be implied that thereupon an agreement arising from the offer would be binding on the defendant. Such a construction makes the words "upon you" superfluous, and I do not think that such a construction can be adopted. It may be said that the clause is framed on the assumption that the offer is binding on the defendant for seven days, and that this explains the presence of the words "upon you"; but there are difficulties in this approach. First the earlier sentence in the clause does not say that the offer is binding, but only that it is irrevocable for seven days; and secondly, if reliance is placed on this earlier sentence in the clause in order to construe the second sentence, then it would follow that the acceptance must be made within seven days, otherwise the offer should be regarded as withdrawn. Only in this way can one explain the words "upon you" and at the same time make the effect of the clause as a whole that an agreement is binding on both parties without actual communication. Again I would say that this requires a lot to be read into the agreement. There is a considerable difference between a condition that an offer is irrevocable for seven days and saying that it expires at the end of seven days. It seems to me that there is a proper field of operation for the clause simply as it stands. The purpose of the provision is to nominate an essential step in the procedure of acceptance, so that it can never be claimed by a hirer that a contract is in existence so long as the memorandum of acceptance is not signed. So regarded, the clause is intended as a protection to the vendor against claims of contractual liability and is not intended as a right to the vendor to accept other than by the ordinary procedures which involve communication of the acceptance. I would compare in this regard the decision in Newlands v. Argyll General Insurance Co. Ltd., [1959] S.R. (N.S.W.) 130, though it is to be noted that the clause there in question did make it clear that the signature of the memorandum of acceptance would cause the offer to become a binding contract. That clause used the words "binding contract", thereby making it clear that both parties would be bound. It seems to me that this is just what the clause now being considered does not do, and that it should not be so read as unnecessarily to depart from the general rule. SUBMISSIONS 41 Mr. Horowitz submitted that the documents signed on 30 August 2002, in particular the equipment rental agreement document, amounted to an offer to GE; and that this offer was not such as could be accepted by conduct, such as payment of $13,000.00 to Lighten Up. Accordingly, any acceptance by GE had to be communicated to ICTA. The offer was withdrawn on 6 September 2002 before acceptance; so there never was a contract between ICTA and GE. This position was confirmed by the circumstance that blanks in the document were never filled in, by GE's failure to sign the document, by cl.17.2 of the document, and by the "tax invoice" document. 42 Mr. Newton submitted that the point about non-communication of acceptance was not open on appeal, because it had not been taken in the Local Court; and he submitted that the case would have been conducted differently had this point been taken. 43 Next, Mr. Newton submitted that the conduct of the parties between 2 August 2002 until the payment of $13,000.00 to Lighten Up was such that an objective bystander would say that a contract between ICTA and GE had come into existence. 44 In any event, Mr. Newton submitted, the payment was acceptance of an offer made by ICTA by signing and submitting the documents. The conversation between Mr. Raice and Mr. Travis Hargreaves showed that acceptance by payment to Lighten Up was contemplated. The blanks in the documents were no problem: GE had authority to fill in the blanks, and cl.5.2 provided in substance that payment should date from the time the goods come into possession of the hirer. The "tax invoice" was not a GE document, and could not impact on the question whether the offer was accepted. The Latec case was distinguishable having regard to the different terms of the documents. 45 Mr. Newton also submitted that cl.17.2 became operative only upon execution of the agreement, and did not prevent an agreement on the terms alleged by GE coming into existence without execution: lack of execution meant only that other terms could form part of the agreement. 46 Finally, Mr. Newton submitted that, even if a contract was not made between GE and ICTA, Mr. Raice's guarantee, by cl.1.2, indemnified GE against any loss from the transactions. DECISION 47 In my opinion, the point about acceptance of ICTA's offer was squarely raised by ICTA's defence: acceptance was alleged in the Statement of Claim, and specifically denied in the Defence. The Magistrate's judgment does not indicate that the point about communication of acceptance was clearly taken before her; but no narrow or technical view should be taken of what was raised at first instance: Water Board v. Moustakas (1988) 180 CLR 491 at 497. Having regard to the pleadings, it was plainly open for ICTA to take the point in final submissions before the Magistrate. In my opinion, it is unrealistic to think that, had this happened, there would have been any significant difference in the way the case was conducted before her. 48 In my opinion, it is impossible to regard GE as bound by any agreement prior to 3 September 2002. Its approval of 7 August 2002 was on different terms, and subject to conditions including confirmation of real estate ownership via a rates notice. There was no consent by GE to the changed terms prior to 3 September 2002, and no waiver of the requirement of a rates notice until 3 September 2002. The signing by Mr. Raice of documents on 30 August 2002 could not be considered an acceptance of any offer from GE, or otherwise considered as the making of a contract. The signing of the documents and permitting them to be given to GE did amount to an offer, and the question is whether this offer was accepted, or whether a contract otherwise came into existence. 49 An offer can convey to the offeree that the offer may be accepted by action rather than communication of acceptance. The question then is whether this was so in this case. 50 In support of a contention that the offer could be accepted by action, namely payment of Lighten Up, there are the following factors: the goods had already been installed at ICTA's premises; Mr. Travis Hargreaves gave evidence that he said to Mr. Raice that, when the documents had been submitted to GE, GE would pay Lighten Up; and it can be contended that the blanks in the document were not relevant, because GE had authority to complete the blanks and the documents did provide for payment from the time of receipt of the goods. 51 However, in my opinion these considerations are substantially outweighed by the following contrary considerations. The equipment rental document signed by Mr. Raice provided for execution by GE, and cl.17.2 stated that nothing before execution of the document had any effect: accordingly, GE could not reasonably suppose, on the basis of its own documents, that payment alone would amount to acceptance and give rise to a binding contract. Next, without completion of the blanks in the document, there was no document determining what conduct by ICTA in relation to payment of instalments would amount to a breach of the contract. Next, the waiver of the requirement of a rates notice was never communicated to ICTA. There was nothing in the documents and, apart from the matters referred to in par.[50], nothing in the circumstances, to suggest departure from the ordinary rule requiring communication of acceptance. In so far as GE sought to rely on Mr. Travis Hargreaves' statement, there was no evidence that that statement was made by him as agent for GE or was conveyed to GE; and if Auswest was GE's agent, then the "tax invoice" document would have conveyed to Mr. Raice, on behalf of GE, that the offer would not be accepted without compliance with its conditions, including provision of the rates notice and of a cheque for $445.38 (or at least, the difference between this amount and the $286.00 previously provided). 52 I accept GE's submission that cl.17.2 does not absolutely preclude the existence of an agreement that includes the written terms of the equipment rental agreement document; but the making of any such agreement must be seen as negating at least the second sentence of cl.17.2. And it is true that cl.17.2, requiring execution, is not so explicit as cl.14 in the Latec case; but in the Latec case, there was in fact execution by the owner, and what was lacking was merely communication. In my opinion, there is no relevant distinction between the present case and Latec. 53 A contract could conceivably have been made by actions sufficiently manifesting an intention of both parties to be bound by the terms of the documents, without necessarily amounting to an offer and acceptance: cf. Integrated Computer Services Pty. Limited v. Digital Equipment Corporation (Australia) Pty. Limited (1988) 5 BPR 11,110; Brambles Holdings Limited v. Bathurst City Council [2001] NSWCA 61, 53 NSWLR 153. However, in my opinion there was no evidence of any such conduct in this case, prior to the revocation of the offer on 6 September 2002. 54 Accordingly, in my opinion, no contract came into existence between ICTA and GE, and the findings to the contrary by the Magistrate and the Associate Judge were errors of law. 55 As regards the guarantee, cl.1.2 purports to indemnify GE against any loss in connection with amounts guaranteed not being recoverable by GE, irrespective of whether the transactions relating to these amounts are void. However, the amounts guaranteed are amounts payable by ICTA to GE; and if there was no agreement, there are no such amounts. The reference to an indemnity applying, even if the transactions are void, cannot overcome this fundamental obstacle to recovery under the guarantee. 56 For those reasons, in my opinion the appeal should succeed. 57 This result could be seen as unreasonable, when it appears that ICTA accepted goods, requested GE to pay for them and, after GE had paid for them, tried to get out of paying GE by returning the goods and by denying that the goods had been supplied. However, it should be noted: (1) that GE wished to take the benefit of extensive written terms, highly favourable to it, without ever executing those terms itself (as they required), without ever completing the terms by filling in blanks which would determine what the contract required of ICTA, without ever communicating to ICTA that it had accepted ICTA's offer or that it had paid for the goods, and without taking any steps to ensure that ICTA or the guarantor had a copy of even the printed terms of the documents (let alone a copy showing execution by GE and filled-in blanks); and (2) that when GE was told, three days after it had paid for the goods, that ICTA did not wish to proceed, it did not communicate with ICTA to suggest that this was too late, and did nothing to seek to forestall the return of the goods, but simply took advantage of the direct debit document to continue to collect money for itself without disclosure to ICTA. GE offered no reasonable explanation for this extraordinary course of conduct. ORDERS 58 The Notice of Appeal seeks the following orders: 1. That the orders of Associate Justice Malpass made on 11 July 2005 in Supreme Court Proceedings 14232/04 be set aside, and in lieu thereof the following orders be made: (i) The appeal to the Supreme Court by the Appellants against the orders made by Magistrate Huber on 30 November 2004 in Local Court Proceedings 5582/03 is allowed; (ii) The orders made by Magistrate Huber on 30 November 2004 in Local Court Proceedings 5582/03 are set aside, and in lieu thereof judgment is entered against the First Respondent: (a) in favour of the First Appellant in the amount of $2,067.52, with interest and costs; and (b) in favour of the Second Appellant, with costs. 2. That the First Respondent pay the Appellants' costs of Supreme Court Proceedings 14232/04. 3. That the First Respondent pay the Appellants' costs of this appeal, including the application for leave to appeal. 59 At present, I see no reason why these orders should not be made, notwithstanding the non-participation of ICTA in the hearing of the appeal. 60 I would direct Mr. Raice to submit short minutes of order (including interest appropriately calculated) within 7 days; and if GE wishes to contest them, it should provide written submissions within 7 days, to which Mr. Raice can reply by written submissions within a further 7 days. 61 TOBIAS JA: I have had the benefit of reading in draft the judgments of Hodgson JA and Young CJ in EQ. I agree with their Honours that the appeal should succeed and with the orders proposed by Hodgson JA for the reason he has given. I also acknowledge the further observations of Young CJ in EQ. 62 However, I wish to add the following observations to those referred to by Hodgson JA in [57] of his judgment. First, the form of the rental agreement proffered by the first respondent contemplated that it was to form the whole of the agreement between the parties. Second, the document further contemplated that it would not only be completed but would also be validly executed whether under seal or by a duly authorised officer of the company before it became contractually binding upon both parties. Third, each party was entitled to have in its possession as and from the time the rental agreement became a legally binding contract, a completed copy of the document duly executed by the other party. 63 The evidence of Mr Bird, an officer of the first respondent, and referred to by Hodgson JA in [32] of his judgment, was that the company received approximately 65,000 such rental agreements per annum and that it would not be economical to have a manager sign, complete and return each one to the renter (Blue 2/330 P-Q). This was so notwithstanding that the first respondent charged the renter a documentation fee of $65 (Blue 2/334 J). Such a somewhat cavalier attitude says little for the first respondent's consideration of its renters. 64 Renters are, apparently, required to sign a "take it or leave it" template document containing a large number of printed terms and conditions in small font: all of which are favourable to the company and many of which place onerous obligations upon the renter. And yet it is apparently all too administratively difficult for the first respondent to complete a copy of the document, sign it so that it becomes contractually bound, and return it to the renter so that he or she may have the opportunity of reading and attempting to understand its conditions and the various permutations and combinations of circumstances in which the renter may, in many cases inadvertently, find him or herself in breach of its terms with all the advantages that vests in the company and the disadvantages imposed upon the renter. 65 If the first respondent wishes to conduct its business affairs in this manner, then it must accept the risk of a finding, as in the present case, that its renter is not contractually bound to it. 66 Finally, I would particularly endorse the remarks of Hodgson JA in [57(2)] of his judgment that in the circumstances referred to and, in particular, in the absence of any explanation, the first respondent's conduct in continuing to collect rental payments pursuant to the direct debit authority without disclosing that it was doing so to either appellant in circumstances where it had been told, three days after it had paid for the goods, that the appellants did not wish to proceed with the transaction. Such conduct was indeed extraordinary and, if I may respectfully add, bordering on the unethical. 67 It follows, in my opinion, that both as a matter of principle as well as upon the merits, the appellant must succeed in having the primary judge's orders set aside. 68 YOUNG CJ in EQ: I agree with Hodgson JA but wish to make a few additional comments. 69 I was concerned that the decision in Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 was now almost 40 years old and the principles espoused in it have been modified by the effect of later decisions. 70 As far as I can see, the case has only once been referred to in a subsequent reported case, namely by Yeldham J in Mandalinic v GIO [1983] 1 NSWLR 598 at 611. That decision was actually reversed by the Court of Appeal reported as Georgoulis v Mandalinic [1984] 1 NSWLR 612, but the present point was not affected. 71 In Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, the Latec case was not cited to the Court nor referred to in any of the judgments. McHugh JA gave the leading judgment for the majority. Samuels JA agreed and Kirby P came to the same conclusion by a slightly different route. The case was between a property developer and an architect, the property developer having part of his code of behaviour that he would never sign a contract. However, with his consent the architect did a considerable amount of work for the developer and McHugh JA said at 535 that the ultimate issue is whether a reasonable bystander would regard the conduct of the offeree including his silence as signalling to the offeror that his offer had been accepted and that was sufficient. He said at 534: "The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror. After a reasonable period has elapsed, silence is seen as a rejection and not an acceptance of the offer. Nevertheless, communication of acceptance is not always necessary. The offeror will be bound if he dispenses with the need to communicate the acceptance of his offer … Nevertheless, the silence of an offeree in conjunction with the other circumstances of the case may indicate that he has accepted the offer … ". 72 These thoughts were picked up by Allsop J in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, 525 when giving the judgment of a Full Court of himself, Drummond and Mansfield JJ. He said that the essential question in this sort of case is "Whether the parties' conduct including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract." 73 With respect, his Honour seems to coalesce the view of McHugh JA that one can infer acceptance by a long course of subsequent dealings with the other doctrine revived by McHugh JA in this Court in Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110 that modern lawyers and people of commerce need not constrict their thinking in the formation of contract to mechanical notions of offer and acceptance, but this is of no moment in the instant case. See also the decision of the Full Court of South Australia in Dover Fisheries Pty Ltd v Bottrill Research Pty Ltd (1994) 30 IPR 360, 370 and following. 74 I dealt with these matters recently in the Equity Division in Northstate Carpet Mills Pty Ltd v B R Industries Pty Ltd [2006] NSWSC 1057. 75 Having seriously considered the more recent cases, I do not consider that they neither reject what Jacobs JA said in the Latec Finance case nor do they provide in the present situation any reason for finding for the respondent. ********** 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.