Elcos Australia Pty Ltd v James Hardie Building Services & Technologies Ltd [1999] QSC 27

IN THE SUPREME COURT OF QUEENSLAND Brisbane BETWEEN: AND: ELCOS AUSTRALIA PTY LTD A.C.N. 062 322 187 No. 402 of 1995 Plaintiff JAMES HARDIE BUILDING SERVICES & TECHNOLOGIES LIMITED A.C.N. 000 067 541 Defendant REASONS FOR JUDGMENT-CHESTERMAN J Judgment delivered 23 February 1999 CATCHWORDS: CONTRACT-whether "time for payment" was an essential term- whet�er agreement was enforceable despite want of consideration - whether contract was induced by economic duress. Cc,.· . -r-:" ,\1 :aun,eLt for i.he plairntff Mr P Freeburn for the defendant Solicitors: Gadens Lawyers for the plaintiff Corrs Chambers Westgarth for the defendant Hearing Date: 15 and 16 February 1999 [1999] QSC 27 -- 1 of 20 -- / . ( "'-- " 2 ( IN THE SUPREME COURT OF QUEENSLAND Brisbane BETWEEN: AND: ELCOS AUSTRALIA PTY LTD A.C.N. 062 322 187 No. 402 of 1995 Plaintiff JAMES HARDIE BUILDING SERVICES & TECHNOLOGIES LIMITED A.C.N. 000 067 541 Defendant REASONS FOR JUDGMENT - CHESTERMAN J Judgment delivered 23 February 1999 The plaintiff claims against the defendant moneys which it categorises as damages for breach of contract, or as due pursuant to contract or by way of restitution. The plaintiff carried on business as an electrical contractor. The defendant carried on business in a larger way as a builder and builder's supplier. In 1994 Leda Design and Construction Pty Limited ("Leda") was developing two shopping centres, one at Capalaba and the other at Browns Plains, for an associated company. It contracted with the defendant for the provision of fire, electrical, hydraulic and air-conditioning plaintiff to supply, deliver and install certain items of electrical work at the two shopping centres.I The plaintiff performed the work but claims that it has not been paid all that is due to it. Not long before it went into liquidation in mid-1995 it issued proceedings in this court claiming $1,308,977 in respect of work done at the Capalaba Shopping Centre and $692,270 in respect of work at Browns Plains. -- 2 of 20 -- 2 3 The action has been placed on the supervised case list and the parties are working towards a mediated outcome. The court has made directions to assist that process which recently came to an impasse. The plaintiffs claims are, principally, if not entirely, for amounts said to arise as variations to the work the specified subject matter of each contract. The dispute between the parties concerns whether the claimed variations are in truth additional to the original scope of works or whether they, or some of them, were included in the original contracts. To the extent that work additional to the contract has been done, the value of it is disputed. 4 Part of the preparation for the mediation has been the compilation of reports by quantity surveyors dealing with each claimed variation and setting out the rival contentions in respect thereof. This procedure broke-down in relation to some of the claimed variations for the Browns Plains Shopping Centre. The defendant claimed that the parties had made a separate agreement by which the plaintiff had been paid an agreed amount of money by way of a compromise of its claim for variations. Accordingly, the defendant contended the plaintiff could no longer pursue that part of its claim and that the respective experts should not have to undergo the tedium or incur the costs of preparing a report dealing with the variations which had been the subject of the c) compromIse. 5 The parties could not agree upon whether there had been a compromise or what they c) the question whether there had been a compromise binding on the parties in respect of part of the plaintiffs claims in this action should be tried as a separate issue pursuant to O.39r.12. 6 I directed the parties to exchange a statement of contentions of fact and law on which each relied as the basis for their respective positions. This direction was ignored, but happily the parties conferred with a view to identifying what divided them and what precise issues the court should determine. They are: -- 3 of 20 -- 7 8 3 "(a) Was an agreement reached on 3 October 1994, and (so far as is relevant) what were its terms? (b) Was an agreement reached on 15 November 1994, and (so far as it relevant) what were its terms? (c) Was the $450,000 paid in November 1994 pursuant to either of those agreements? (d) Was it a term of the 3 October 1994 agreement that the $450,000 had to be paid by 10 October 1994 and, if it was not, the agreement would be of no effect? (e) Did Elcos accept the $440,069 pursuant to either of the agreements or did Elcos receive that sum otherwise than in satisfaction and discharge of variations claims? (f) Were the agreements of 3 October 1994 and/or 15 November 1994 voidable as agreements exacted by economic duress? (g) If 'yes' to (f) did Elcos rescind or avoid those agreements?" Despite the formulation of the first issue it was common ground that a compromise agreement was made between the parties on 3 October, 1994. Attention focused on the terms of the agreement. 3 October, 1994 was a Monday. It was the day on which the shopping centre was finally completed and handed over to the owner. The subcontract between the plaintiff and the defendant had been a little casually be performed by the plaintiff for its price of $3,420,000. It was not contested that the defendant's project manager, Mr Carpenter, did direct the plaintiff, who was represented on site and at the hearing by Mr Barnes to carry out additional items of work. Mr Barnes' evidence was that to complete the additional work in time to enable the handover to occur on 3 October, 1994, the plaintiff had to increase its workforce and extend the hours of overtime worked by its employees -- 4 of 20 -- 10 11 12 13 4 so that the cost of carrying out the extra work was greater than it would have been without that constraint of time. Throughout September, 1994 Mr Barnes became concerned at the delays being experienced in obtaining payment for the performance of contract works and, in particular, variations. On 15 September, 1994, Mr Barnes wrote to Mr Maguire, who was the defendant's branch manager, expressing concern that variation work to a value of $500,000 had been completed but only a token amount of $27,450 had been paid. Mr Barnes complained that the plaintiff was experiencing "extreme financial pressure as a direct result of non-payment". He went on: "We cannot continue on this path and request an interim payment pending formalisation of our variation submissions." Mr Carpenter referred Mr Barnes' letter on to Leda, and himself supported the request for an interim payment "as the distress to (the plaintiffs) business is very real". On 26 September, 1994, Mr Barnes wrote to Mr Maguire to express his: "... extreme disappointment when the site meeting of 23 September.. convened for the specific purpose of expediting approver and payment of directed variations ... did not achieve the essential objectives .... " The letter continued: "Present indications are that James Hardie expect Elcos to complete all of the r,~ove ~~Tithol}t~ ...: prosp~ct of. payment ,.,./~",,~vPU~J 'y.rc)yis,h,10,.~Cr\Tice" Y91lL."".:,. 'iequirertlents,' (jUT suppliers~' suhcdrttraCtors;'efuployees arid staff must be'paicC':'.':':';·" this payment is an essential prerequisite to meeting our commitments ... and servicing your requirements ... we believe we have funded this project far beyond any reasonable expectations you may have." Mr Barnes concluded by requesting payment of 80 per cent by value of claimed variations on or before 28 September. -- 5 of 20 -- 14 15 ( 5 On that day, 28 September, 1994, Mr Carpenter replied to Mr Barnes in unaccommodating and, perhaps, belligerent terms. He rejected Mr Barnes' request. However, Mr Maguire wrote to Leda on the same day: "James Hardie are dissatisfied with your lack of resolve in approving variations to the contract some for additional work. Leda have failed to meet their undertakings in relation to time to respond to our variations. At the present moment James Hardie have nearly $M1.5 of unapproved variations James Hardie subcontractors have in good faith, been carrying out an enormous amount of extra work in addition to their already large work load in order to get Leda's shopping centre open on time. Two subcontractors, E1cos ... have contacted us to say in no uncertain terms that they are in financial difficulties due to non-payment of variations on this project ... James Hardie are not prepared to prop up subcontractors out of their own funds for legitimate variation claims and will in accordance with out subcontract with yourselves only pay to subcontractors moneys received from Leda for that purpose .... " By this time Mr Barnes was becoming extremely concerned for his company. It had performed a substantial amount of work which he regarded as additional to the contract but had not been paid. His attempts to obtain payment, or some definite promise of payment had been rebuffed. Mr Barnes approached Mr Ell who spoke for Leda in an effort to break the deadlock. They met in a hotel on the evening of Saturday 1 October. Mr Barnes took with him documents to each variation were assembled in chronological order with respect to each claim. The variations contained within the volumes were limited to those executed on or before 1 September, 1994. The amount claimed to that date was $626,889. Mr Ell displayed no great interest in the detail, but after some discussion he offered Mr Barnes $450,000 in satisfaction of all claims for variations carried out on or before 2 October, 1994. That date was chosen -- 6 of 20 -- 16 17 19 20 6 presumably because the plaintiff was working over the week-end, and 3 October was the date on which the shopping centre was to be completed and handed over to Leda. After the meeting Mr Barnes contacted Mr Maguire. By arrangement the three met at the defendant's site office at Browns Plains on 3 October. The meeting lasted for about half an hour at the end of which, Mr Maguire penciled in a site book the terms of the accord the three men had reached. It is headed "continuation of meeting with TEll, D Barnes and B Maguire 3 October 1994". Having referred to "Browns Plains Shopping Centre" Mr Maguire wrote: "$450,000 all up payment up to and including all SI up to and including 2110 1994. Providing that variations in these variations are not in the original scope of works. Does not include the cinema contract. Includes for fortnightly payments on Capalaba Shopping Centre (need to check September claim). Release of bank guarantees after JHE&C reissue invoices for new amounts. All parties to take back invoices against variations to date. Cinema contract hope to conclude on Wed. 12/10/94 SEQEB. Deposit to be reimbursed from Leda to JHE&C and then to Elcos subj ect to check." The document was signed by Mr Ell, Mr Maguire and Mr Barnes. The site book contained three copies of each site memorandum or instruction. That is, there was in respect of each original document a duplicate and triplicate produced by carbon paper. The three originals (top copy, duplicate and triplicate) are in evidence and are in the terms I have just set out. the top right-hand comer of this document there appear these further words: "It was stated by Leda that this would be concluded by 711 0/94 if so JHE&C will conclude Mon. 10/10/94." The initials "JHE&C" describe the defendant. The plaintiffs submissions centre upon the additional notation. It accepts that on 3 October, 1994 the parties made an agreement by which the plaintiffs claims for payment for ()!"-~_/ c) -- 7 of 20 -- 7 variations were compromised on terms that the defendant agreed to pay $450,000 which the plaintiff would accept in full satisfaction of all its claims for extras requested by the defendant on dates up to and including 2 October, 1994. 21 The plaintiff contends that the additional notation constituted a further term of the agreement to the effect that the defendant promised to pay the $450,000 on or before 10 October, 1994. It is common ground that payment was not made until 15 November. The plaintiff submits that failure to pay on or before 10 October has nullified the agreement which is no longer binding on it. It is therefore free to claim in the action against the defendant the full value of its variations. 22 The starting point is to determine whether the notation formed part of the contract. The top copy was signed before Mr Maguire made the extra note. Mr Barnes' evidence was that the words were written at the meeting in response to a request from him for certainty as to the date of payment. Mr Barnes thought that Mr Maguire wrote the additional words on the copy from the site book given to him i.e. Barnes, but this is clearly not right. Mr Maguire thought that he had made the notation some time after the meeting when he was approached by Mr Barnes who requested to be paid by the 10th. Mr Maguire surmised that Mr Barnes had, in the meantime, ( spoken to Mr Ell and received an assurance that the money would be forthcoming within the and was not part of the agreement. He said that had it been part of the agreement he would have included it in the signed document. Mr Maguire cannot recall on what document he made the additional notation, but thought that he had taken two photocopies of the original and given one each to Mr Ell and Mr Barnes. He disputed writing the extra words on the duplicate or triplicate in his book at the meeting. The production of those carbon copies show him to have been right in that recollection. -- 8 of 20 -- 8 23 As a matter of inference Mr Maguire must have written the words on the photocopy he gave to Mr Barnes. Neither party could produce the document which contains Mr Maguire's original notation. 24 Although I was urged by the plaintiffs counsel to disbelieve much of Mr Maguire's testimony, it seemed to me that both he and Mr Barnes endeavoured to give a truthful account of their discussions and dealings concerning the Browns Plains contract and the plaintiffs requests for payment. Both men have left the employment of their respective companies and have had other things to occupy their minds since 1994. Their recollections were to some extent affected by the passage of time and the clutter of intervening business, but I did not think that either of them sought to be other than frank. Mr Barnes had a greater emotional attachment to his former company's case, but nevertheless I thought his evidence entirely honest. 25 I do though accept Mr Maguire's version of events. The existence of the three leafs none of which bear the notation suggests strongly that the addition was not made until after the meeting. Moreover, there is force in the point that had it been agreed at the meeting and added then Mr Maguire would have had it initialled. He was clearly conscious that a large and contentious claim had been settled and was keen to have a record of the terms of the agreement signed by all parties. I find that the agreement to compromise did not include the term that " :2aYl1}~~t:V9'.lld;t;~:,i:n<:,q~, liy.19 qctolx~~; ,.,'.".. . .' 1 ." , .' ~ r• .'t.,- " .. '1)· 1 '" ., ," . >,;." 26 Even if this view were wrong the plaintiffs case would not be advanced. The additional term, if it were such, would not in my view amount to a condition precedent to the existence of the contract. This is for the reason that it is not expressed to be a condition, nor is there anything about the wording to suggest that the contract was in any way contingent. It is an unlikely construction that a contract will not exist until a date after that on which agreement as to c·....-II -- 9 of 20 -- 27 28 29 9 respective obligations has been reached, especially when the event on which the contract depends for existence is the subject of one of those obligations. The agreement imposed immediate obligations on the plaintiff and the defendant, for example the withdrawal of invoices and the obtaining of the release of the bank guarantee. Such a consideration led Gibbs CJ in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 541 to conclude that a condition in a contract for the sale of land was not one precluding the agreement coming into existence until the satisfaction of the condition. Mason J at 552 pointed out: "Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with a mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion. " In my view the contract read as a whole did not compel that conclusion. On the contrary, had the notation been a term it would not have been a condition upon which depended either the Nor do I think that term would have been an essential one allowing the plaintiff to rescind the contract when payment was not made by 10 October. By s.62 of the Property Law Act 1974 contractual stipulations as to time are not essential unless equity would have regarded them as such. To have that character the parties must agree that time is essential, or there must be something about the subject matter of the contract or the circumstances surrounding its making which shows that time is to be essential or it must appear by necessary implication from other, -- 10 of 20 -- 30 31 10 terms that the parties regard a time as essential. The parties did not agree that time was essential. There is nothing in the express terms of the agreement which necessarily gives rise to such an implication. There is nothing about the subject matter of a promise to pay money which indicates that the time at which payment is to be made is essential. Indeed, experience is to the contrary. The only circumstance pointed to by the plaintiff is that it was financially embarrassed by the defendant's and Leda's delays in processing its claims, while in the meantime it incurred additional costs in labour and materials to perform the variations. It may be accepted that the plaintiffs was pressed financially and that both the defendant and Leda knew of its straitened circumstances. In my opinion this is not enough to make the date by which payment is promised an essential term ofthe contract. As Stephen, Mason and Jacobs JJ pointed out in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431: "... the quality of essentiality depends ... on a judgment which is made of the general nature of the contract and its particular provisions, a judgment which takes close account of the importance which the parties have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances. " A term is essential if its non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all- per Fletcher Maulton LJ in Wallis and Pratt 11 October, 1994 the plaintiff would have been deprived of substantially the whole of what it bargained for. 32 A promise to pay money where that is the predominant consideration for a contracting party's promises, is no doubt an essential· term, but in mercantile contracts where goods or services are bought for money, the time by which the money is to be paid is not normally regarded as essential. See for example Decro-Wall International S.A. v Practitioners in, c c- )", ..J -- 11 of 20 -- .( \ 33 35 11 Marketing Ltd (1971) 1 WLR 361 at 368, 374 and 380; Road Show Entertainment Pty Ltd (1997) 42 NSWLR 462 at 477-478. The principle finds expression in s.13(1) of the Sale of Goods Act 1896. But even if all of this were wrong the plaintiff would not be at liberty to treat the agreement of 3 October as not binding on it. Breach of an essential term gives the innocent party the right to rescind, but unless and until that step is taken the contract remains on foot. The plaintiff never took that step. On the contrary it continued to assert the continued existence of the contract and the obligation imposed by it on the defendant to pay the sum of $450,000. I will deal with the evidence when considering whether the October agreement was repudiated. Another difficulty in the plaintiffs path is that the notation, even if it were a term of the contract, would have, on its true construction, made the defendant's obligation to pay conditional upon its having been paid by Leda. There was some debate about the terms of the subcontract between the plaintiff and the defendant particularly as to whether the latter was obliged to pay for work done by the plaintiff before it had been paid by Leda in respect of the plaintiff's work. Mr Maguire asserted that the contracts were "back to back" by which he meant that the terms of the defendant's contract with Leda were incorporated into the subcontract with the plaintiff at least to the extent they were applicable, and that, more particularly, the terms of payment were Mr Barnes objected to any such assertion and pointed to some correspondence that was exchanged in April 1994. By letter of 12 April the defendant confirmed the adjusted contract price and said "payment terms will be for 48 hours from the time James Hardie received payment from Leda Constructions each month". Mr Barnes replied that the plaintiff "not being privy to negotiations between Leda and James Hardie are unable at this stage to accept 'back to back' contact conditions". This, however, overlooks the fact that on 17 March, 1994 Mr Klenner, the, -- 12 of 20 -- 36 37 38 12 plaintiffs contracts manager, wrote to the defendant as part of the contract negotiations and "confIrmed payment terms will be 48 hours from the time James Hardie received payment from Leda Constructions, generally on the last Friday of each month". There is no doubt that Mr Barnes appreciated that Mr Ell controlled the purse strings and that the timing of payments to the plaintiff was determined by Leda. It was for that reason that he fIrst approached Mr Ell on 1 October to obtain a commitment for payment and settlement of the amount outstanding. It was only after he had reached agreement with Mr Ell that he contacted Mr Maguire to arrange the 3 October meeting and the formalisation of the arrangement. When the money had not been paid by 10 October, Mr Barnes wrote to Mr Ell on 19 October, 1994. He referred to discussions the two had had on 18 October and confirmed the "following agreement" "The previously agreed additional amount of $450,000 ... will be paid in full on or before 24 October 1994 ... please· acknowledge acceptance by signing below and return asap." Mr Ell did not appear to have replied but this letter indicates two things. The first is that the plaintiff did not regard the contract as at an end by reason of non-payment by 10 October. The second is that Mr Barnes understood that before the plaintiff could be paid by the defendant it had to receive the money from Leda. Only after Mr Ell had failed, for a second time, to pay and to threaten to withdraw the plaintiffs workforce from the Capalaba Shopping Centre. He said: "Elcos agreed to lesser a sum of money on the basis of a quick settlement to be paid on or before the 10/10/94. Mr Terry Ell of Leda has continually failed to honour his nominated payment dated." It is clear that the plaintiff regarded the primary obligation to pay to be that of Leda. If the notation had any contractual effect it would have been that Leda promised to pay theI () -- 13 of 20 -- 39 13 defendant by 7 October, 1994 and if that happened it would in turn pay the plaintiff by 10 October. So understood the defendant's obligation to pay would have been conditional upon it first being paid by Leda. The contingency did not happen and the defendant's obligation did not become unconditional. In the circumstances it would not have been in breach by not paying on or before 10 October. On 15 November, 1994 the defendant had been paid by Leda and was in a position to pay the plaintiff. Mr Maguire arranged for Mr Barnes to attend his office and there presented him with a letter for signature. The letter was in these terms: "This serves to establish an agreement between Elcos Australia Pty Limited and James Hardie Engineers and Contractors for the finalisation of the account for the Electrical services, including variations, for the above project (excluding Cinema Complex). Elcos Australia Pty Limited accept $440,069.00 as being the final sum payable for the works completed up to and including October 2, 1994. This agreement is subject to the following: 1. In the event that a major tenant seeks credit for specification works not performed or work deleted from the specification, and this money has not been previously credited to James Hardie Engineers & Contractors by Elcos Australia Pty Limited, then Elcos Australia Pty Limited will credit same against monies owing or reimburse James Hardie Engineers &- Contractors if insufficient monies are held. 2. In the event that a major tenant variation is rejected or its value reduced by the major tenant and the rejections orredu~tions are foundto be coiltractU:11 \vdrks' betWeell j ~mes Hardil;Erigirie~rs' ~na Contr~cto~s ~rid Elcos Australia Pty Limited, the Elcos Australia Pty Limited will credit same against monies owing or reimburse James Hardie Engineers & Contractors if insufficient monies are held. 3. Complete all your contractual obligations in accordance with Set 7 documents and if it is found that items of work have not been completed then this work will be completed or at James Hardie Engineers and Contractors choice an agreed deduction value from the various contract components will apply. -- 14 of 20 -- 40 41 14 4. It is further agreed that Elcos Australia Pty Limited will make no further claims against the main contract andlor Variations prior to October 2, 1994." The letter clearly represented an attempt by the defendant to vary the agreement of 3 October and to include new terms that had the potential to disadvantage the plaintiff. Mr Barnes was understandably upset and initially refused to sign. He may have left Mr Maguire's office in anger. He may also have scribbled on a copy of the letter his protest at being compelled to sign as a condition of receiving the cheque. There is no doubt that Mr Maguire imposed that requirement. Eventually Mr Barnes did sign and was paid. The plaintiff submits that the events of 15 November constitute a repudiation of the agreement of3 October, or that the agreement of 15 November was induced by economic duress. These points may be dealt with shortly. 42 I am not satisfied that Mr Maguire's attempts to improve the defendant's position amount to a repudiation of the earlier agreement. I think it more likely that Mr Maguire's subjective view was that he was simply tidying up the contractual "loose ends" after the Browns Plains construction had come to an end. He was no doubt endeavouring to ensure that the duties his :1s.1t may there is,no douht tb.afth(fdefen¢a.n~ viasnot:~ntit!ed unilafer~;lJy:tojmpose addition:al: . . .' .' .... ';":' '!,.<; '~'. ,1', "- ,.1',' ".;~~'_.: ....~~ obligations on the plaintiff. However, I see nothing in the letter of 15 November or even in Mr Maguire's insistence that Mr Barnes sign it before passing over the cheque as constituting a repudiation of the agreement of3 October. 43 As Lord Wright remarked in Ross T Smyth & Co Ltd v TD Bailey. Son & Co (1940) 3 All ER 60 at 71-2: -- 15 of 20 -- 44 45 "--- / ( ."--. / 46 15 "... repudiation of a contract is a serious matter, not to be lightly found or inferred ... mere honest misapprehension, especially if open to correction, will not justify a charge of repudiation." To similar effect are the remarks of Lord Wilberforce in Woodar Ltd v Wimpy Ltd (1980) 1 WLR 277 at 283: "Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform a contractual obligation." I think it likely that if it had been pointed out to Mr Maguire that his actions were legally indefensible he would have yielded. But whether this is so or not is immaterial. The repudiation of a contract, unless accepted, is something "writ in wind and water". It is, I think, clear from subsequent events that both men regarded the agreement of 3 October as being efficacious. Certainly Mr Barnes did. Far from accepting the October agreement as having been set at nought, he wrote to Mr Maguire on 17 November, 1994 to complain about his conduct and to assert: "... it is our wish to resolve this matter in compliance with the agreement 3 October, we extend to yourselves 'in good faith' the opportunity to rectify your non-compliance with the 3 October 1994 agreement by: 1. The immediate and unconditional withdrawal of the conflicting James Hardie ... document 15 November 1994; 2. The immediate payment of a}l o~tstanding m!)ney,s d~taile~ under o.ur . ~':U..:S;.I;~~: .. 't5.l.,oveinbel 19;<',; .. .' ". Should you not take out this offer we advise that: 1. Notwithstanding your agreement or otherwise to withdraw your document 15 November 1994 as stated we reject your document and condemn the manner in which you sought to implement same; 2. All outstanding moneys due to ourselves will accrue interest at the rate of 18 per cent per annum compounded at 6 monthly intervals .... " On 30 November, Mr Barnes wrote again to Mr Maguire: -- 16 of 20 -- 47 48 16 "We reject your attempts to vary the agreement of the 3 October 1994. We will pursue compliance with the terms of this agreement and our entitiement to payment for completed original and varied subcontract works." On 17 July, 1995 the plaintiff issued its specially endorsed writ commencing this action. It claimed a net amount of $209,556. Part of the process of computing that figure was the allegation that $450,000 had been payable pursuant to an agreed variation settlement. The material leaves me in no doubt that the plaintiff elected not to rescind the October agreement but to remain bound by it and to insist that the defendant perform its part of the contract. 49 The plaintiff does not need to reply upon economic duress to be quit of the 15 November agreement. This is an uncertain area of the law and the criteria for determining whether conduct inducing agreement amounts to "illegitimate pressure" are imprecise. It is clear that the plaintiff was experiencing cash flow problems in the months of September, October and November 1994, though Mr Barnes testified that it was not in dire financial straights, and did not have liquidity problems. These descriptions are very general. The evidence established that in July 1994 the plaintiff had an operating profit of about $660,000 from which it declared a dividend of $443,000. It repaid loans of about $60,000 and had a share portfolio worth about $700,000. When it went into liquidation at the insistence of the directors in July 1995, it was said to have in its turn, exerted pressure on the defendant by withdrawing its labour force from the Capalaba project. This material might tend to suggest that the doctrine of economic duress had no application to the negotiation for the 15 November agreement for the reasons explained by Kirby P, in Equity Corp Finance v The Bank of New Zealand (1993) 32 NSWLR 50 at 107 and 109. c) -- 17 of 20 -- 17 50 The reason why it is not necessary to consider the question further is that the letter of 15 November does not constitute a binding contract. The plaintiff received no benefit from its terms. It was given payment of $450,000 but that was a debt due and owing pursuant to the earlier agreement of 3 October. No consideration moves to the plaintiff to support the obligations imposed on it by the November arrangement. It is therefore unenforceable. 51 For completeness sake, I should mention that the amount actually paid was not $450,000 but $440,069. The reason is that when the final contract price was adjusted to take account of items deleted from the work required to be done by the plaintiff it had received by way of progress pa~ents more than the adjusted sum. This amount was notionally repaid by the plaintiff upon receipt by it of the cheque which represented the amount of $450,000 less the over payment. 52 The issues put before the court concern the making, performance and existence of the October and November contracts. The court was not asked to construe the agreement and I have not done so. The point about this is that the parties may be at odds as to the variations the claims for which were to be satisfied by the payment of $450,000. It is common ground that there were variations not included in the description "all SI up to and including 2/10/94" but the plaintiff now claims about $256,000 for additional costs in performing some of the variations that are compromised because counsel were confident they could reach agreement once the court's opinion was known on the question of the compromise. I express no opinion on this point. If counsel's optimism is misplaced the court can be asked to make another adjudication on the construction of the agreement. 53 I determine the issues submitted by the parties as follows: -- 18 of 20 -- 18 (a) Agreement was reached between the plaintiffand defendant on 3 October, 1994 to compromise the plaintiffs claim for variations. The agreement did not contain a term that payment would be made on or before 10 October, 1994. (b) No agreement was reached on 15 November, 1994, the purported contract being unenforceable for want of consideration. (c) The sum of $450,000 paid on 15 November, 1994 was paid pursuant to the agreement of 3 October, 1994. (f) The agreement of 3 October, 1994 was not induced by economic duress. As no contract came into existence on 15 November, 1994, it is not necessary to determine whether the defendant exerted economic duress to obtain Mr Barnes' signature to the letter of that date. (g) The plaintiff did not rescind or avoid the agreement of 3 October, 1994. 54 Issue (e), whether the plaintiff accepted the sum of $440,069 pursuant to either the 3 October or 15 November agreement was not argued. There is nothing in the material to suggest that it did not accept the money, which it insisted the defendant pay, pursuant to the 3 October agreement. and the defendant. I further declare that by the agreement the payment of $450,000 compromised all variations claimed by the plaintiff in respect of site instructions "including plans, letters and directions having the effect of directing a variation" given on or before 2 October, 1994 . 56 I direct that within 7 days the defendant's solicitors deliver to the plaintiffs solicitors a list of the variation claims it contends were compromised by the agreement and that within 14 days the plaintiffs solicitors respond by delivering a list of the variations submitted by the , {-. i ~) -- 19 of 20 -- 1\ 57 58 19 defendant which it contends are not compromised by the agreement, and a statement of its reasons for so contending. I order that the further hearing of the action be adjourned to a date to be fixed. I order that the defendant's costs of and incidental to the hearing on 15 and 16 February, 1999 be taxed and paid by the plaintiff. -- 20 of 20 --