Capricornia Electricity Board v John M Kelly (Builders) Pty Ltd [1991] QSCFC 75 [1992] 2 Qd R 240

1 in: the supreme court of Queensland VO ) FULL COURT BEFORE: Mr. Justice Shepherdson Mr. Justice Williams Mr. Justice de Jersey BRISBANE, 18 JULY 1991 Appeal No. 85 of 1990 20 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter , Court Reporting Bureau.) BETWEEN : 20 THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent -and- JOHN M. KELLY (BUILDERS) PTY . LTD. (Defendant) Appellant 30 40 JUDGMENT MR. JUSTICE SHEPHERDSON: I will ask my brother Williams to be deliver the first judgment. MR. JUSTICE WILLIAMS: In my opinion the appeal should dismissed with costs. I publish my reasons. MR. JUSTICE SHEPHERDSON: I would ask my brother de Jersey 40 to read the second judgment. 50 MR. JUSTICE DE JERSEY: I would dismiss the appeal with costs to be taxed for reasons which I now publish. MR. JUSTICE SHEPHERDSON: I agree that the appeal should be dismissed with costs to be taxed for the reasons given by my brother de Jersey. I publish short reasons. The order of the Court then is: the appeal is dismissed with costs to be taxed. 60 60 G214— Govt. Printer, Qld. l [1991] QSCFC 75 -- 1 of 39 -- tC c V/0 76 IN THE SUPREME COURT OF QUEENSLAND FULL COURT Appeal No. 85 of 1990 BETWEEN : THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent AND: JOHN M. KELLY (BUILDERS) PTY . LTD. (Defendant) Appellant SHEPHERDSON J WILLIAMS J de JERSEY J Reasons for judgment delivered by Shepherdson, Williams and de Jersey JJ on 18th July, 1991. Shepherdson J agreeing with the reasons of de Jersey J. All concurring as to the order. "APPEAL DISMISSED WITH COSTS." -- 2 of 39 -- IN THE SUPREME COURT OF QUEENSLAND Appeal No. 85 of 1990 Before the Full Court Mr Justice Shepherdson Mr Justice Williams Mr Justice de Jersey BETWEEN: THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent - and - JOHN M. KELLY (BUILDERS) PTY . LTD. (Defendant) Appellant JUDGMENT - SHEPHERDSON J. Delivered the 18th day of July, 1991 CATCHWORDS Counsel: Mr. Gotterson Q.C. with for the Defendant Appellant V. Copely Q.C. with A. S. Mellier for the Plaintiff Respondent Solicitors: Cooper Grace & Ward for the Defendant Appellant Connolly Schirmer & Batts for the Plaintiff Respondent Hearing Dates: 15th, 16th May, 1991 -- 3 of 39 -- IN THE SUPREME COURT OF QUEENSLAND Appeal No. 85 of 1990 BETWEEN: THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent - and - JOHN M. KELLY (BUILDERS) PTY . LTD. (Defendant) Appellant JUDGMENT - SHEPHERDSON J. Delivered the 18th day of July, 1991 I agree that this appeal should be dismissed with costs for the reasons given by my brother de Jersey. I would add that the construction placed on s. 251 (10) (e) of the Electricity Act 1976 (as amended) may cause added cost to Electricity Boards relying on its provisions. However, the remedy lies in the hands of the legislature and, if that particular sub-section is to be amended, the draftsman may find guidance from the comments on selective tender procedure in the reasons for judgment of my brother Williams . -- 4 of 39 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT Appeal No. 85 of 1990 Before the Full Court Mr. Justice Shepherdson Mr. Justice Williams Mr. Justice de Jersey BETWEEN: THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent AND: JOHN M. KELLY (BUILDERS) PTY. LTD. (Defendant) Appellant JUDGMENT - G.N. WILLIAMS J. Delivered the Jay of July, 1991. CATCHWORDS : Contract - powers of Electricity Board to enter into contract considered - Electricity Act ss. 102, 129, 251, 252 considered - procedure of registering tenderers considered - held contract enforceable - whether non-compliance with statute rendered contract unenforceable considered. Counsel: Mr. R.W. Gotterson Q.C. and M. Conrick for Appellant. Mr. K. Copley Q.C. and A. Mellick for Respondent. Solicitors: Cooper Grace & Ward for Appellant. Connolly Schirma & Batts for Respondent. Hearing date: 15th and 16th May, 1991 -- 5 of 39 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT Appeal No. 85 of 1990 BETWEEN ; AND: THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent JOHN M. KELLY (BUILDERS) PTY. LTD. (Defendant) Appellant JUDGMENT - G.N. WILLIAMS J. Delivered the day of July, 1991. For reasons which he gave the learned trial Judge ordered the specific performance of an agreement in terms of which the respondent agreed to sell to the appellant two parcels of land for $1.75 million. In so doing he overruled the appellant's contentions that the respondent had no power to enter into the agreement or alternatively that the respondent was in breach of a condition of the agreement entitling the appellant to rescind. On.the appeal the appellant argued that the learned trial Judge erred in rejecting each of those defences. This was not the usual simple contract of sale and it is necessary to record some essential background facts. At all material times the respondent was an Electricity Board constituted pursuant to Division II of Part III of the Electricity Act 1976-1989 ("the Act"). For some time prior to 1987 it had been the registered proprietor of a number of parcels -- 6 of 39 -- 2 of land situated in Bolsover Street and Alma Street, Rockhampton. The land fronting Bolsover Street was described in the contract as Lot 2 on R.P. 600141 being the whole of the land contained in Certificate of Title Vol. 622 Folio 183 and Lot 1 on R.P. 619349 being the whole of the land contained in Certificate of Title Vol. 387 Folio 103. As at October 1987 the headquarters building of the respondent was erected on the latter site. From about early 1985 the respondent was interested in acquiring a new building as its headquarters. There were seen to be a number of ways in which that object could be achieved. A new building could be erected on one of the sites owned by the respondent fronting either Bolsover Street or Alma Street; or the building could be erected on some other site in the Rockhampton area. In order to offset construction costs, depending on where the new building was erected, some or all of the existing parcels of land owned by the respondent could be sold; one possibility was that the building contractor might take the surplus land in part payment for the construction costs. From the outset the respondent was aware that there were constraints imposed on it by the Act, and it realised that care had to be taken to ensure that the proposal ultimately accepted complied with the terms thereof. At all material times the Queensland Electricity Commission ("the Commission") was responsible for administering the Act, and as early as 15th July, 1986 the respondent wrote to the Commission informing it of its proposals and seeking advice or approval with respect thereto. General approval to the respondent ' s proposals was given by the Commission in a letter dated 5th August, 1986; the letter did -- 7 of 39 -- 3 observe that "meticulous care" should be taken in implementing the final proposal to ensure that there was no infringement of the statutory provisions . Section 102 of the Act constituted the respondent a "body corporate" which was "capable in law of . . . taking, acquiring, holding, dealing with and disposing of real and personal property". Section 129 conferred powers, functions and duties on the respondent which are generally associated with the supply of electricity to consumers; it is not necessary to refer to those powers in detail, but note should be taken of (u) which empowers the respondent to "do such incidental or consequential acts and things as may be necessary or expedient for the exercise and performance of its powers, functions and duties." Finally in this regard reference should be made to cl. 4 of Schedule II to the Act; it confers on the respondent the power to do what is necessary for "the provision of an office". Again it is not necessary to refer to other provisions found in that clause. In the light of all that there can, in my view, be no doubt that the respondent had the power to own land and dispose of it, and to enter into a contract for the construction of its office premises. Part VII of the Act is headed: "Contracts by and Authority for Works of, Electricity Boards". The sub-sections of s. 251 relevant for present purposes are the following: "(1) An Electricity Board may enter into any contract for any of the purposes of this Act applicable to an Electricity Board. (2) A contract entered into by any Electricity Board shall be made as follows:- -- 8 of 39 -- 4 (b) A contract that, if made between private persons, would by law be required to be in writing signed by the parties, may be made in writing signed by the General Manager; • » • (3) A contract so made as aforesaid shall be effectual in law and shall bind the Electricity Board and all other parties thereto and may be varied or discharged in the manner in which it is authorised to be made. (8) Before an Electricity Board attempts to dispose of land pursuant to a provision of this section ... it shall offer it to the Minister for Lands for acquisition on behalf of the Crown in right of the State or a Crown instrumentality, . . . (9) Before any contract - (a) for the execution of any work ... to the amount of $20,000.00 ... or more; (c) for the sale of land is entered into by any Electricity Board, it shall, three weeks at least before entering into the contract, notify its intention to make and invite tenders for the contract by public notice published in such newspaper or newspapers and in such manner and to such extent as in the opinion of the Electricity Board will ensure that the notification of intention to enter into a contract is likely to be seen by as many people as possible who are likely to tender. (10) The procedure referred to in sub-section (9) may be dispensed with - (a) where the Commission certifies that an emergency exists or special circumstances exist; (b) where the General Manager of the Electricity Board is satisfied that there is only one source of supply for the goods that are the subject of the proposed contract or, alternatively, that every likely supplier in Australia has been invited in writing to tender; (e) where tenders for a particular project are being invited by the Electricity Board from registered tenderers who were so registered by the Electricity Board pursuant to an advertisement inviting such registration; (11) (a) In respect of a sale of land ... an Electricity Board may, in lieu of complying -- 9 of 39 -- 5 with sub-section (9), comply with this sub section. (b) An Electricity Board may sell any land . . . by public auction or private contract, but no such sale shall be made by private contract unless and until the land or surplus goods or materials have been offered for sale by public auction and not sold. (13) Subject to this Act, an Electricity Board may accept the tender that on the view of all the circumstances appears to it to be the most advantageous, ... or the Electricity Board may decline to accept any such tender." Section 252 requires a Board to obtain the approval of the Commission before entering into any contract exceeding in value the amount of $250,000.00, or, in the case of a sale, before accepting a tender obtained pursuant to s. 251(9) other than the highest tender conforming with the specification in the tender documents issued. Against that background the respondent proceeded as follows . On 7th, 9th and 12th July, 1986 it caused an advertisement to be placed in a local newspaper under the hand of its General Manager; other newspapers also carried that advertisement. - The relevant terms for that advertisement for present purposes were the following: "New Administration Building - Rockhampton Registration of Interest. The Capricornia Electricity Board invites interested parties to register their interest in the development of a new Head Office building in Rockhampton. This building is envisaged to comprise not less than 6,000 square metres of useable floor area exclusive of car parking. General information on the Board's intentions on this project are available on request from the Manager . . . Registrations of interest should outline the company organisation, details of incorporation, and demonstrate: -- 10 of 39 -- 6 architectural and structural design skills and experience appropriate to modern office buildings; project management skills which will be required to be maintained through the construction period; cost and time consciousness relating to building projects. II The General Information available to all prospective registrants the following was the most critical siection thereof: "Organisations interested in entering into an arrangement are to submit proposals containing sufficient detail for initial assessment based on: architectural and structural design skills and experience appropriate to modern office buildings; project management skills which will be required to be maintained through the construction period; cost and time consciousness relating to building projects. On the basis of this information the Board will determine a short list of up to five (5) organisations who will be invited to proceed to Stage 2. The Board reserves the right to accept or reject any expression of interest without assigning any special reason therefore." The document then set out a "Schedule of Alternative Schemes". Therein a number of proposals were mooted either for construction on the Alma Street land, or some other site in the Rockhampton district; the various proposals could be incorporated with transfer of the Alma Street property to the builder as part payment. The Schedule then went on: "Each of the above proposals may include a further alternative to allow for the transfer of the Board's Bolsover Street properties to the developer as part payment." -- 11 of 39 -- 7 In consequence of those advertisements some 41 organisations registered interest, including J.M. Kelly (Project Builders) Pty. Ltd. - hereinafter referred to as "Project Builders". From the 41 who registered an expression of interest, the consultant architect appointed by the respondent "prepared a short list of nine developers whom he considers would be satisfactory as the constructors of the proposed new Administration Building." At its meeting on 26th August, 1986 the respondent considered that submission and in turn decided that five developers, including Project Builders, should be invited to submit detailed designs and proposals. The respondent wrote to the Commission on 29th August seeking its approval of the selection of organisations who were being invited to tender, but the Commission by its letter of 22nd September, 1986 pointed out that it was not part of its function to comment on that decision. But in that letter the Commission did indicate that it was satisfied that the respondent was observing the provisions of s. 251 (10) (e) of the Act in proceeding as it proposed. By letter dated 5th November, 1986 the respondent advised each of the five selected tenderers, including Project Builders, of the position. Those organisations were told a "Design Brief" would be forwarded when available. In fact the design brief was sent to each of the five under cover of a letter dated 12th February, 1987. Tenders were to be lodged by 27th March, 1987. The letter informed the prospective tenderers that, if unsuccessful, the respondent was "prepared to pay to the developer a contribution towards the expenses incurred in the preparation of his submission such contribution to be limited to -- 12 of 39 -- 8 the sum of Eight thousand dollars ($8,000.00) per developer." Relevantly Appendix "B" to the design brief detailed alternative proposals based on the transfer to the successful tenderer of the Bolsover Street properties in part payment of the construction price. Each of the organisations invited to tender submitted at least one proposal; Project Builders in fact submitted five alternative proposals each with a separate price. It is interesting to note that in the summary of tenders prepared by the respondent it described the tenderer simply as J.M. Kelly. The only tenderer who indicated that it would consider purchase of the Bolsover Street properties was Project Builders. On 16th April 1987 the respondent wrote to the Commission asking it to formally approach the Minister for Lands in accordance with the provisions of s. 251(8). The lands referred to in that letter were the two parcels fronting Bolsover Street. The letter said it enclosed "valuations which comprehensively described the lands and improvements thereon and place a combined value of $2.25 million on the properties." The tenders were considered at a meeting of the respondent held on 28th April, 1987. The architect on that occasion furnished a recommendation that two of the proposals should not receive further consideration. In consequence a resolution was passed that .those two tenderers should be notified that their submissions would not receive further consideration and $8,000.00 should be paid to each to offset design costs. It was further resolved that there be further consideration given to the remaining three tenders . The matter was then taken up at the meeting of the respondent on 13th May, 1987. A further report -- 13 of 39 -- 9 on the remaining tenders was tabled, and it was resolved that one of the remaining three should be deleted and that tenderer also paid $8,000.00. That left the tender from "J.M. Kelly" and a tender from Kern Konstruction. There was a deal of discussion concerning the "tender of J.M. Kelly". Finally it was resolved that there be agreement in principle "that the lowest tender, i.e. that of J.M. Kelly (Scheme D), on the Fitzroy and Alma Street site, for a firm lump sum price of $7,050,600.00 ... be proceeded with." By letter dated 16th June, 1987 Project Builders informed the respondent that it "would now confirm our offer" to purchase the two Bolsover Street properties for $1.75 million. The letter also referred to the Alma Street site, but that is not relevant given what happened. The respondent notified the Commission of its decisions under cover of a letter dated 24th June, 1987. It stated that the Board had "selected a submission by J.M. Kelly (Builders) Pty. Ltd." which was the lowest priced tender. It also stated that negotiations were taking place with the preferred tenderer for the purchase of "existing C.E.B. land and buildings surplus to the Board's reguirements ." The offer to acguire the two Bolsover Street properties for $1.75 million was discussed at the meting of the respondent on 30th June, 1987. A sub-committee recommended that those offers should be accepted. The minutes of the respondent record the following resolution: "That it be recommended to the Queensland Electricity Commission that, subject to negotiations with the preferred tenderer for payment arrangements acceptable to the Board, and subject to a valuation by the Department of the Valuer-General indicating that the negotiated sale price is satisfactory, the acceptance -- 14 of 39 -- 10 by. the Board of the offer by the preferred tenderer to purchase the premises owned by the Board at 152 and 156 Bolsover Street, Rockhampton, for not less than $1,750,000.00 be approved." The next relevant step was taken by the Board on 24th August, 1987 when it forwarded a telefax to the Commission setting out details of the proposal accepted by the respondent. It showed the appellant as the successful tenderer with a construction price of $7,050,600.00, and proceeds of sale of the Bolsover Street properties (paid at stage of practical completion of the new building) as $1,750,000.00, leaving an overall project cost (after other items were brought into account) of $7,590,600.00. Throughout that document the only reference was to the appellant. The Commission responded by letter dated 1st September, 1987 giving the Commission's approval to the respondent to "enter into two contracts with J.M. Kelly (Builders) Pty. Ltd." to construct the building for $7,050,600.00, and to sell the Bolsover Street lands for $1,750,000.00. Then by letter dated 29th September, 1987 the Commission noted that the construction contract would be with Project Builders and not the appellant. Under cover of a letter dated 22nd October, 1987 the respondent forwarded to the Commission copies of each contract; that for the design and construction of the new building with Project Builders, and that for the acquisition of the Bolsover Street land with the appellant. Approval for the respondent to enter into those contracts was given by the Commission in its letter of 6th November, 1987. It will be seen from the above resume of facts that there appears to have been confusion at various stages between the -- 15 of 39 -- 11 appellant and Project Builders. They were found by the learned trial Judge to be "associated companies" and that was conceded during argument on appeal . It would seem that the involvement of the two separate companies was at the sole request of those controlling and benefiting from the activities of the J.M. Kelly companies . On 28th October, 1987 the contract in question for the acquisition of the Bolsover Street properties was executed. Forthwith upon the execution thereof the purchaser was to pay a deposit of $5,000.00, and the balance of purchase price was to be paid "upon the expiration of" two calendar months from the date notice of practical completion of the new administration building was given under the contract relating thereto. The learned trial Judge found that by agreement between the parties the completion date was extended until 6th February, 1989. No challenge was made to that finding on appeal. It is only necessary that I refer to cl. 22 of that contract in detail; it provided: "The Vendor warrants that all provisions of 'The Electricity Act, 1976-1980' which affect this sale and purchase (and in particular the provisions of Section 251 of such Act) have been complied with and that all necessary approvals required to be obtained by the Vendor pursuant to the said Act have been obtained." I mention that the construction agreement was executed on 29th October, 1987 between Project Builders and the respondent. No further reference need be made to that agreement; construction was apparently completed in accordance with the terms thereof. The construction contract made no reference to the other dealing with the sale of the Bolsover Street land; but the contract of sale was made subject to and conditional upon the -- 16 of 39 -- 12 execution of the construction contract and Project Builders bringing the new administration building to the stage of practical completion. It would seem to follow that pursuant to the construction contract the respondent was obliged to pay Project Builders the full contract price, and then pursuant to the contract of sale the appellant was obliged to pay to the respondent the full purchase price of the land. The argument on appeal proceeded on the basis that the full price pursuant to the construction agreement had in fact been paid. Strictly therefore in terms of the executed agreements the value of the Bolsover Street land was not set off against the construction cost. On 6th February, 1989 (the date of settlement according to the finding of the learned trial Judge) the appellant's solicitors wrote to the respondent's solicitors informing them that the appellant was "not prepared to proceed with settlement unless proper evidence is produced that the provisions of the above Act (and particular s. 251 thereof) have been complied with". The letter stated that it seemed to the solicitors that the section referred to had not been complied with. It was then asserted that in those circumstances the contract was "void and our client has no obligation to proceed to completion." The respondent's solicitors replied by letter of 9th February, 1989 maintaining that the contract was legal and valid. Enclosed with that letter were letters of 10th June, 1987 from the Commission; of 9th June, 1987 from the Land Administration Commission to the Commission; and of 8th February, 1989 from the Commission. In the last of those letters the Commission purported to certify that approval to entering into the two contracts "was granted on -- 17 of 39 -- 13 the understanding that special circumstances existed in regard to the sale of the two Bolsover Street properties and therefore the provisions of s. 251(10) (a) of the Electricity Act 1976-1986 had effect and obviated the need to comply with the provisions of s. 251(9) of that Act." In a further letter from the respondent's solicitors to the appellant's solicitors of 7th March, 1989, the latter were supplied with copies of various documents said to evidence the respondent's assertion that s. 251 was complied with. The learned trial Judge considered that there had not been compliance with either sub-ss. (9) or (11) of s. 251. Clearly he was correct in so concluding. Tenders were not called by public notice either for the construction of the building or the sale of the lands and therefore sub-s. (9) was not complied with. There was no attempt to sell the land by public auction and therefore sub-s. (11) was not complied with . Indeed so much was conceded by the respondent. Its case at trial, and on appeal, was that it was able to bring itself within the dispensing provisions of sub-s. (10) (a) or (e) . The appellant did not concede that sub-s. (10) applied where the transaction involved the sale of land. In my view there is no validity in that argument. Whilst sub-ss. (9) and (11) each specifically refer to a procedure which may be followed where sale of land is involved, sub-s. (10) by its terms says that the requirements of sub-s. (9) may be dispensed with if one of the conditions specified therein is satisfied. In those circumstances, as a matter of statutory construction, I am of the view that sub-s. (10) may apply to a transaction which involves the sale -- 18 of 39 -- 14 of land, or indeed which relates solely to the sale of land, by a Board. The learned trial Judge held that para, (a) was not available to the respondent because it required the certification to be given prior to the contract being entered into. That such was intended can be readily appreciated when one looks at the wording of sub-s. (9). It applies "before any contract" is entered into, and the dispensation referred to in (10) (a) must therefore relate to that point of time. Here the Commission did not purport to certify prior to October 1987 that "special circumstances" existed though it may well then have been of that view. It purported to so certify only by its letter of 8th February, 1989, but in my opinion it was then too late to do so. I agree with the learned trial Judge in concluding that the respondent cannot rely on para, (a) of sub-s. (10). But the position with respect to para, (e) is, in my view, more complex. The learned trial Judge concluded that there had not been implementation of the (10) (e) procedure because "all" of those who registered an interest were not invited to tender. The learned trial Judge noted that the respondent was "selective" in deciding that only five should be asked to tender. He was certainly correct in making that finding. He went on: "But it is not enough that the Board's arrangements conform to the spirit of the legislation. And because not all 'registered tenderers' were asked to tender, the letter of Section 251 has not been satisfied." He noted also that the respondent's proposal had to answer the description "particular project" before (e) would be enlivened, but he did not expressly decide whether or not that -- 19 of 39 -- 15 requirement was met on the evidence. He went on to say: "Sub-section (10) (e) envisages that where there are expressions of interest by more than one 'registered tenderer' , all those registered tenderers must be invited to tender. The mischief to which sub-section (9) and (10) (e) are directed cannot be adequately addressed unless such an interpretation of paragraph (10) (e) is adopted." He had previously defined the "mischief" by observing that the "evident intent of Section 251 is to assure, in the public interest, the integrity and fairness of decisions by Electricity Boards to dispose of land and to enter into other contracts of the classes specified." Finally it should be noted that the learned trial Judge also specifically adverted to the fact that the agreement for sale was made with someone who was not a registered tenderer; it appears to me that he would have found non-compliance with para, (e) on that point alone . Critical questions for determination on this appeal are whether or not the learned trial Judge was correct in construing para, (e) and in applying it to the facts. It is true that there is no proper basis for implying words such as "some or all of" before the words "registered tenderers" in para, (e); but for the same reasons there is no warrant for implying the word "all" there. If tenders must be invited from all those who registered pursuant to the advertisement then that must be the consequence of the words actually used in the context in which they are found. Absent other considerations, a reference to "registered tenderers" would normally mean all of those who were so -- 20 of 39 -- 16 registered. But the context here is important and must be analysed more closely . If the procedure in para, (e) of sub-s. (10) is adopted then the procedure referred to in sub-s. (9) may be dispensed with. The procedure laid down in sub-s. (9) is as follows: (i) tenders are invited (called) by the Board causing advertisements to be made in such manner and to such extent as would ensure that notification of intention to enter into a contract is likely to be seen by as many people as possible who are likely to tender; (ii) tenders are lodged in response to that advertising based on information generally available to all who are interested; ( iii ) tenders are accepted or rejected by the Board in accordance with sub-s. (13). In other words the procedure provided for in sub-s. (9) is designed to obtain directly actual tenders for the Board's consideration from as many people as possible who are minded to submit a tender. If para, (e) of sub-s. (10) is construed in the way accepted by the learned trial Judge then the procedure would be as follows : (i) an advertisement would call for persons interested in being invited to tender for a particular project to register their interest with the Board; (ii) the Board would then invite all of the persons who so registered to submit a tender based on information made available by the Board to them; -- 21 of 39 -- 17 (iii) the Board could then accept or reject such tenders as were in fact received in accordance with sub-s. (13). If that is so, then one may well ask what is the significance or relevance of the preliminary step of registration; the same practical result is achieved by following the simpler procedure provided for by sub-s. (9). Looked at in that light it seems rather nonsensical to provide that by taking the purposeless additional step of registering interested persons the simpler procedure referred to in sub-s. (9) is dispensed with. But there is a significance given to para. (e) of sub-s. (10) if that paragraph is read as providing for the following procedure : (i) an advertisement would call for persons interested in being invited to tender for a particular project to register their interest with the Board; (ii) the Board would then investigate the registrants and determine which of them, if any, had the capacity to perform the work in question and was otherwise a suitable tenderer; (iii) the Board would then invite a number from the registrants who satisfied those criteria (the selected group) to submit tenders based on information made available by the Board to them; (iv) the Board could then accept or reject a tender received in accordance with sub-s. (13). That could well be described as a selective tender procedure. The reasons for adopting such a procedure in certain cases are obvious. Ordinarily an unsuccessful tenderer must bear the cost -- 22 of 39 -- 18 of tendering; in many large projects, particularly where the tenderer is to some extent responsible for design, such costs could be considerable. It could well be that the cost of preparing a tender would deter some potentially suitable and otherwise interested tenderers from making a submission. To overcome those factors the proprietor will sometimes offer to recompense unsuccessful tenderers thus ensuring tenders are received from the best possible sources. In order to limit the extent of its exposure to unsuccessful tenderers, the owner in that situation generally adopts a selective tender procedure. The alternative construction of para, (e) would permit that to be done; here the respondent was minded to pay unsuccessful tenderers a not insignificant amount ($8,000.00) to help defray the expenses involved in submitting a tender. Such a selective tender procedure is recognised in the area of construction law. In Brooking "Building Contract" (First edition) the topic is referred to in para. 2.1. The learned author there says that "tenders may be sought either from contractors generally or from selected contractors"; he goes on: "If the contract is put out to public ('open') tender, any interested contractor may bid. The system of inviting tenders on the open market has been much criticised by builders, who contend that it leads to unreasonable price cutting and to the acceptance of unrealistic bids from builders who are unlikely to complete the work in a satisfactory way. In addition, it has been said that the open tender system is wasteful, in that the cost of preparing large numbers of unsuccessful tenders must be reflected in the general cost of building. The alternative to putting a contract out to public tender is the calling of tenders from selected contractors only. Where tenders are to be called from selected builders only, the selection may be made in various ways. The architect may put forward half a dozen names to the proprietor who will often wish to add to the list of contractors known to him. A public invitation may be made to -- 23 of 39 -- 19 builders who desire to be invited to tender to register with the architect and tenders are then obtained from a number of those contractors who have registered." A statement to similar effect is found in Bailey "Construction Law in Australia" at 22. It is true that in neither instance was the author addressing public works contracts. There is also some recognition of that practice in para. 798 of Vol. 3 of Halsbury (Third edition). In the Fourth edition of Halsbury (Vol. 4 paras. 1149-50) there is a discussion of public works contracts in the light of the directives issued by the Council of Ministers of the European Community dealing with the awarding of such contracts. Those directives provide for an "open procedure" by which any interested contractor may tender and a "restrictive procedure" by which contractors may tender only if invited to do so by the authority awarding the contract. In the latter situation the authority is to select those invited to tender on the basis of information given at the time of registering the request to participate. Observations such as those are not determinative of the proper construction of para. (e). But it is significant, in my view, that apart from s. 251 there is a recognition in construction law of a difference between an open tender procedure and a restricted or selective tender procedure. Further, there appear to be well recognised circumstances in which it is considered preferable to adopt a selective tender procedure as opposed to an open tender procedure. Given that background one can consider whether or not the intention of the legislature was to provide for an open tender procedure in s. 251(9) and for a selective tender procedure in s. 251(10) (e). -- 24 of 39 -- 20 Ultimately, in my view, it is important to recognise that, if all who register pursuant to an advertisement made pursuant to para, (e) must be invited to formally tender, there is no effective difference between sub-s. (9) and sub-s. (10) (e); all the latter would do in those circumstances is add an additional, but pointless, step into the procedure. If sub-s. (10)(e) is construed as providing a selective tender procedure then it is meaningful in the context, and there is a readily recognisable reason for providing that if it is adopted there should be a dispensation from complying with the procedure laid down in sub-s. (9). The real question becomes whether or not the paragraph can reasonably bear the construction favouring a selective tender procedure. As I have stated previously the paragraph must be read in the context in which it is found in s. 251. Doing that I prefer the construction which would give full effect to the paragraph as an alternative procedure to that laid down in sub-s. (9). Given the context I have come to the conclusion that such a construction is reasonably open. The learned trial Judge correctly, in my view, identified the "mischief", to which the sub-sections are directed - the importance of, in the public interest, assuring the integrity and fairness of contractual decisions made by Electricity Boards. But, in my view, those considerations may be satisfied if a selective tender procedure is adopted. Any interested party may register an interest. The terms of the advertisement (including general information on the project made readily available by the Board) must ensure that the specific procedure to be followed is -- 25 of 39 -- 21 known to all. Here it was made known that a short list of five organisations would be prepared from those who registered an interest. There is no question here but that tenders submitted were received from those five organisations on a fully competitive basis. In those circumstances I am of the view that the "mischief" may be overcome by the implementation of a proper selective tendering system. It follows that I am of the view that the learned trial Judge misconstrued para, (e) . The procedure adopted by the respondent in my view complied with the requirements thereof, notwithstanding that not all "registered tenderers" were invited to submit a tender. When one looks at the material in the record relating to the "design brief" with respect to which tenders were invited, there is no doubt that the tenders were "for a particular project". It does not matter that a number of alternative proposals were put forward by the respondent. In the context the expression "particular project" is used to exclude from the operation of the selective tender procedure, contracts, for example, for the general supply of an undisclosed quantity of material over a lengthy period of time. If the contract for construction and the contract for sale of land in this case were made by the respondent with the registered tenderer whose tender was accepted there would be no doubt but that the requirements of s. 251 (10) (e) had been satisfied. In that event the respondent was not obliged to comply with the requirements of sub-s. (9). But in fact the registered tenderer was Project Builders, the entity with whom -- 26 of 39 -- 22 the respondent contracted for the construction of the building. The appellant was not a tenderer . Does that mean that there has not been compliance with para, (e) because the contract for the sale of land was with the appellant. There is a certain unreality, at least in a commercial sense, in saying that "Project Builders" was entitled to the benefits (profits) from its contract with the respondent, but its associated company, the appellant, could take the point that it was entitled to avoid its obligations under the interdependent contract to purchase land. In a real sense the appellant was the nominee of Project Builders to enter into a contract which was collateral to or interdependent with the principal construction contract the subject of the selective tender procedure employed by the respondent. In those circumstances non-compliance with para, (e) on the ground of identity of the contracting parties is not established. I would therefore conclude, contrary to the views of the learned trial Judge, that there was compliance in all respects with s. 251(10) (e). In consequence no ground is established for concluding that entering into the contract of sale of the land was beyond the power of the respondent, or that the contract was invalid by operation of s. 251. If, however, I am wrong in the construction I prefer with respect to s. 251(10) (e) I would conclude that the contract was specifically enforceable for the reasons given by the learned trial Judge and by my brother de Jersey in this Court. I have had the advantage of reading what de Jersey J. has written on the question whether or not non-compliance with s. 251 made the -- 27 of 39 -- contract unenforceable. I agree with all that he has said on that point. I also agree with what he has said specifically with respect to the arguments of the appellant based on cl. 22 of the contract. I agree that the appeal should be dismissed with costs. 23 -- 28 of 39 -- IN THE SUPREME COURT OF QUEENSLAND Appeal No. 85 of 1990 Before the Full Court Mr. Justice Shepherdson Mr. Justice Williams Mr. Justice de Jersey BETWEEN : THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent AND : JOHN M. KELLY (BUILDERS) PTY. LTD. (Defendant) Appellant JUDGMENT - de JERSEY J . Delivered the 18th day of July, 1991 CATCHWORDS : Counsel: Mr. Gotterson Q.C. for the Defendant Appellant V. Copley Q.C. with A.S. Mellier for the Plaintiff Respondent Solicitors: Cooper Grace & Ward for the Defendant Appellant Connolly Schirmer & Batts for the Plaintiff Respondent Hearing date: 15th, 16th May, 1991 -- 29 of 39 -- IN THE SUPREME COURT OF QUEENSLAND Appeal No. 85 of 1990 BETWEEN : THE CAPRICORNIA ELECTRICITY BOARD (Plaintiff) Respondent AND : JOHN M. KELLY (BUILDERS) PTY . LTD. ( De fendant ) Appellant JUDGMENT - de JERSEY J. Delivered the 18th day of July, 1991 The learned trial Judge decreed the specific performance of a contract dated 28th October, 1987, by which the respondent agreed to sell its land at Bolsover Street, Rockhampton to the appellant for $1.75 million. The contract was due for completion by 6th February, 1989 (an extension to that date having been agreed upon), but the appellant declined to complete. The learned Judge rejected the two defences upon which the appellant relied in resisting specific performance. They were, first, that because the contract was not made in compliance with s. 251(9) or (10) of the Electricity Act, it was unenforceable; and secondly, that the appellant was not obliged to complete the contract because of the respondent's breach of cl. 22, which was an essential term. In this Court, the appellant challenged his Honour's rejection of both those defences . As to the first matter, the respondent is an Electricity -- 30 of 39 -- 2 Board constituted pursuant to the Electricity Act, and s. 251 of that Act regulates the manner in which it may enter into contracts for the sale of land such as this. Sub-sections 9 to 11 are particularly relevant, and I will set them out. "(9) Before any contract - (c) for the sale of land is entered into by an Electricity Board it shall, three weeks at least before entering into the contract, notify its intention to make and invite tenders for the contract by public notice published in such newspaper or newspapers and in such manner and to such extent as in the opinion of the Electricity Board will ensure that the notification of intention to enter into a contract is likely to be seen by as many people as possible who are likely to tender. (10) The procedure referred to in subsection (9) may be dispensed with - (a) where the Commission certifies that an emergency exists or special circumstances exist; (e) where tenders for a particular project are being invited by the Electricity Board from registered tenderers who were so registered by the Electricity Board pursuant to an advertisement inviting such registration; (11) (a) In respect of a sale of land ... an Electricity Board may, in lieu of complying with the subsection (9), comply with this subsection. (b) An Electricity Board may sell any land ... by public auction or private contract, but no such sale shall be made by private contract unless and until the land ... (has) been offered for sale by public auction and not sold. " The respondent did not comply with sub-s. 9 or sub-s. 11. -- 31 of 39 -- 3 At the trial, it sought unsuccessfully to rely on sub-s. 10. The learned Judge held that sub-s. 10(e) was not satisfied because the respondent did not invite tenders from all tenderers who had responded to an advertisement for expressions of interest; and he held that the Commission's written certification as to the existence of "special circumstances" was insufficient for the purposes of sub-s. 10(a) because it did not precede the contract. This is a convenient point at which to recite briefly the facts relating to those matters. The respondent wanted to build additional office accommodation in Rockhampton. Because much of the initiative in working out suitable proposals was to be left to the tenderers, the respondent took the view that the usual tendering process under the Act would be too rigid. It therefore decided not to call for tenders in the usual way, but to invite "expressions of interest". The respondent would then ask those who had submitted the most attractive proposals to put in tenders. The respondent called for interested persons to register their interest, by three separate advertisements in July, 1986, and there were 41 responses. Five of those who responded were invited to tender. (Persons registering their interest were able to obtain a document headed (ex. 16) headed "General Information on the Board's Intentions", and in that document the respondent had made it clear that it would seek tenders from only five of those who responded .) Concerned that it might not be complying with s. 251, the -- 32 of 39 -- 4 respondent took up that matter with the Queensland Electricity Commission. Acting in good faith, the respondent fully disclosed its intentions to the Commission. By letter of 22nd September, 1986 the Commission endorsed the respondent's proposed procedure, expressing the view that it did comply with s. 251(1)(e) . The respondent ultimately accepted a tender by J.M. Kelly (Project Builders) Pty. Ltd. (one of the five chosen companies) to construct the building for $7 million. Part of that tenderer' s proposal was the appellant' s purchase of the land which is the subject of this contract. (The possibility of such a purchase had been mentioned in the call for registration of interests.) On 1st September, 1987, the Commission approved the respondent's entry into contracts with the appellant. The subject contract with the appellant is dated 28th October, 1987. On 8 th February, 1989 the Commission wrote to the respondent saying that that approval bad been granted on the understanding that special circumstances existed, so that sub-s. 10(a) applied, with no need for compliance with sub-s. 9. That is the certification which the learned Judge held insufficient because it was made subseguently to the respondent's' entering into the contract, and I agree with that conclusion. I revert to the question of the proper construction of subs. 10(e). I agree with the learned Judge's conclusion that to satisfy that paragraph, the Board had to invite tenders from all registered tenderers, registered that is by the Board -- 33 of 39 -- 5 on the basis of the response to the call for registration of interest. The words "some or all of the" do not precede the reference to "registered tenderers" in para. (e). I do not think that the paragraph sanctions the Board's selecting from those who have registered an interest, some only to be the persons to be invited to tender. The natural meaning of the paragraph is made clear if one reads in the words "all of the" before "registered tenderers". But I emphasise that I consider that that is the natural meaning without one's having to read in those words. The learned Judge said that such an interpretation properly took account of the "mischief" to which the sub-sections are directed, presumably the achievement of impartial treatment for all persons who may be interested in tendering, and the avoiding of a preliminary selection (pre-tender) from interested parties perhaps on the basis of insufficient information. Accepting for the sake of argument that that was the mischief to be avoided, then those problems would be avoided on this construction of the paragraph. I appreciate that in calling for expressions of interest, the Board made it clear that it may invite tenders only from some of those who responded. But the question remains whether it was entitled to do that, in conformity with sub-section 10(e), and I have reached the conclusion that it was not . Having held that the respondent failed to comply with s. 251(9) and (11), and that sub-s. (10) was not satisfied, the learned Judge went on to hold that that non-compliance did not make the contract unenforceable. He said, first, that -- 34 of 39 -- 6 there was no reason to doubt the respondent ' s power to enter into the contract, that being accorded by s. 102(1 )(b). The defect was confined to the manner in which it did so. As to the significance of that deficiency, he pointed to the absence from the Act of any prescription of the consequences of a failure to comply with such requirements, save the general criminal sanction (s. 419) (as to which see Doug Rea Enterprises Ptv. Ltd, v. Hvmix Australia Ptv. Ltd. (1987) 2 Qd.R. 495, 506). By contrast, the Act does specify that non-compliance with other requirements avoids consequent agreements: s. 172(2) and (3). The draftsman could easily have made similar provision as to invalidity for non-compliance with s. 251, but has not done so, and I should say that I regard this as of great significance. The Judge then referred to a number of practical matters tending to support the view that a contract should not be considered unenforceable in the event of non-compliance with s. 251: the absurdity of such a result were the non-compliance to arise, say, from seeking tenders from 40 but not 41 of the registrants, or if the Commission - prior to contract - formed the view that the "special circumstances" referred to in sub-s. 10(a) existed, but inadvertently failed to certify in writing to that effect. He concluded that one could not discern, "from the language of the Act or a consideration of its objects", a prohibition on the subject contract. Mr. Gotterson Q.C., who appeared for the appellant, submitted that the learned Judge did not properly apply A.B.C. v . Redmore Ptv . Ltd . (1989) 166 C.L.R. 454. His Honour -- 35 of 39 -- 7 referred to that decision merely as authority for the proposition that in determining the consequence of non-compliance with statutory requirements, one should look to the legislative intent discernible from the language of the immediately relevant provisions in the context of the whole Act. There was nothing objectionable about that. Mr. Gotterson's submissions focused on the words of s. 251(9), "Before any contract ... is entered into". Those words, in setting a temporal sequence, are not in my view determinative of the result of a failure to comply with the specified procedure. He also submitted that compliance with the prescribed steps was essential to the existence of the power to contract . One notes however that the power to dispose of land emerges from s. 102 (1 ) (b) ( iii). See also s. 129(u). Section 251 merely regulates the exercise of that power. He then referred to the location of s. 251(9) within the Act. It occurs amongst other provisions regulating the manner of contracting. The power to dispose of land is, as I have said, in another part of the Act, and it is not correct to say, as was submitted, that Part VII - where s. 251 is located - includes the sections conferring the relevant power . Mr. Gotterson also submitted that sub-ss. 10 and 11 would be unnecessary were non-observance of sub.s. 9 not to vitiate the contract. Providing alternative procedures to meet the same object may perhaps be seen as emphasising the importance of achieving that object. On the other hand, providing alternatives may itself be an indication that no particular method is critical. Those matters aside, however, this -- 36 of 39 -- 8 feature alone does not mean that non-observance of the mechanism invalidates the contract. Mr. Gotterson relied on Hunter Bros, v. Brisbane City Council (1984) 1 Qd.R. 328, where non-compliance with the Council' s tendering procedure resulted in the invalidity of the resultant contract. Notwithstanding the prohibition in the statute or by-law, the question of the validity of the contract entered into contrary to such a prohibition falls to be determined by reference to legislative intent, expressly declared or implicit. In that case, Connolly J. concluded that compliance with the precise procedure was mandatory. Here, for reasons I think compelling, His Honour took a different view. I respectfully adopt the learned Judge's reasoning in relation to-the first defence. The second defence relied on by the appellant in resisting specific performance is based on cl. 22 of the contract, which is in these terms: "The vendor warrants that all provisions of 'The Electricity Act 1976-1980' which affect this sale and purchase (and in particular the provisions of s. 251 of such Act) have been complied with and that all necessary approvals required to be obtained by the vendor pursuant to the said Act have been obtained." Having concluded that the respondent did not comply with s. 251 of the Act, the learned Judge had to determine whether cl. 22 was art essential term, such that the appellant could rely on the breach for a determination of the contract. The question he asked (while mentioning D.T.R. Nominees Ptv. Ltd, v. Mona Homes Ptv. Ltd. (1978) 138 C.L.R. 423) was -- 37 of 39 -- 9 whether the appellant would have entered into the contract if not assured of performance of the respondent's promise that s. 251 had been satisfied. He acknowledged the importance of that promise in minimising the risk of challenge to the contract prior to the appellant's obtaining an indefeasible title on registration following settlement. Supporting a view that cl. 22 is a condition, is the circumstance that a breach would ordinarily sound only in nominal damages. But His Honour identified three "countervailing factors": that the language of the clause is "the language of warranty"; that by contrast, another provision of the contract makes it "subject to and conditional upon" certain matters (cl. 1B), and yet another gives an express right of termination in certain circumstances (cl. 12); and that the protection given by cl. 22 had no apparent relevance after the registration of a transfer. As to the first matter, Mr. Gotterson referred to Oscar Chess Ltd. v. Williams (1957) 1 W.L.R. 370, 374 where Denning L.J. distinguished between the ordinary and technical meanings of "warranty". His Honour's point was nevertheless of some . relevance. He has not given it decisive significance - neither would I. The learned Judge also referred to the statement in Ankar Ptv. Ltd, v. National Westminster Finance (Australia) Ltd. (1987) 162 C.L.R. 549, 556 to the effect that where "other considerations are finely balanced", one should not be "too ready" to construe a term as a condition, because there is a "preference for a construction that will encourage performance -- 38 of 39 -- 10 rather than avoidance of contractual obligations". Mr. Gotterson submitted that his Honour did not properly apply the principle referred to in Ankar. The contention was that the "preference for a construction that will encourage performance rather than avoidance of contractual obligations" requires the performance by the plaintiff of its obligations, including the obligation in cl. 22, and precludes the avoidance by the plaintiff of its contractual obligations. Taken to that point, the contention rather begs the question. The important qualification expressed in Ankar in that "other considerations be finely balanced". Mr. Gotterson's contention was founded on the feature that damages for breach of the obligation under cl. 22 could never be an adequate sanction. I do not consider the circumstance that breach could attract only nominal damages means that the relevant considerations are not "finely balanced". There are other relevant considerations, as referred to in His Honour's analysis. I regard the second of His Honour's "countervailing factors" - that the contract accords an express right of termination in one case (cl. 12) and in terms makes it "subject to and conditional upon" certain matters in another (cl. 1B) - as of great significance. In the end there is, for the reasons given by the learned Judge, the "fine balance" which gave operation to the approach suggested by Ankar. I adopt the learned Judge's reasoning with respect to the second defence. I would therefore refuse the appeal with costs to be taxed . -- 39 of 39 --