Coyne v GSC Contracting Pty Ltd [2022] WADC 115

Introduction

This case, heard by the Western Australia District Court, considered whether oral agreements were made between the two parties to the proceeding and whether handing over a USB drive containing an electronically signed deed constituted a legally binding contract.

Mr Curtis, who was acting on behalf of GSC Contracting Pty Ltd (GSC), and Mr Coyne were engaged in the construction industry. Mr Coyne claimed GSC owed him $346,818.40 pursuant to an electronically signed written agreement (the 2019 Deed). Alternatively, Mr Coyne also claimed the benefit of three oral agreements from dealings between himself and Mr Curtis which preceded the 2019 Deed, namely the Profit Share Agreement, the First Fixed Payment Agreement and the Revised Fixed Payment Agreement (the Oral Agreements).

Facts/ Evidence

The Profit Share Agreement

In mid-2018, Mr Coyne shared an opportunity with Mr Curtis, for GSC to subcontract on a project for BHP which involved the decommissioning of mining camps and sale of the buildings (the Project). During June to December 2018, Mr Coyne assisted GSC with pricing and estimation works to successfully tender as a subcontractor for BHP’s contractor. Mr Coyne claimed he and Mr Curtis agreed to split the profits of the Project 50/50. GSC would pay Mr Coyne instalments when the Project became profitable. During April 2019 to April 2020, Mr Coyne submitted various invoices to GSC many of which were paid. Mr Curtis denied the agreement to split profits. He gave evidence that in early 2019 GSC entered an arrangement to pay Mr Coyne a monthly fee for management services rendered.

The First Fixed Payment Agreement

In August 2019, GSC stopped paying Mr Coyne’s invoices due to the Project’s profitability. Mr Coyne gave evidence that on 26 August 2019 he met with Mr Curtis and agreed to accept a fixed finder’s fee of $790,000 to be paid in monthly instalments plus 30% of the buildings sales proceeds for sales Mr Coyne arranged, in exchange for continuing to provide management services. On Mr Coyne’s evidence, Mr Curtis said, ‘put it on paper. Let me review it and we’ll take it from there’. Mr Curtis denied this meeting occurred.

The Revised Fixed Payment Agreement

Mr Coyne gave evidence that in a meeting with Mr Curtis on 9 September 2019, modifications were made to the First Fixed Payment Agreement. The fixed finder’s fee would now be $800,000, payments would commence two months later, and the initial payment would be $89,256, being the specific amount Mr Coyne required to complete a purchase of land.

The 2019 Deed

On 2 September 2019, Mr Coyne emailed Mr Curtis a draft deed prepared by his lawyers. After further negotiations, on 19 September 2019 Mr Coyne emailed the amended deed to Mr Curtis noting it would be backdated since GSC had already made the initial payment of $89,256. The key terms of the 2019 Deed were substantially the same as the Revised Fixed Payment Agreement. Mr Coyne gave evidence that there was a meeting in October 2019 during which Mr Curtis gave Mr Coyne a USB drive containing the 2019 Deed which was electronically signed by Mr Curtis on behalf of GSC. On 8 November 2019, Mr Coyne emailed a copy to his wife and executed the 2019 Deed with his wife as witness. There were no allegations of fraud or forgery against Mr Coyne. In oral evidence, Mr Curtis claimed that he did not recall receiving the email of 19 September 2019, he did not have the technical computer skills to electronically sign a document, and he first saw the signed 2019 Deed in his lawyer’s office.

Mr Curtis and GSC denied all the alleged agreements, instead claiming GSC paid Mr Coyne $528,462.85 pursuant to an oral agreement to pay Mr Coyne ‘$250,000 per annum plus 9.5%’ in monthly instalments to be the Project’s construction manager.

Issue/ Applicable legal principles

The issue at trial was whether the 2019 Deed or any of the Oral Agreements constituted a contract which legally bound the parties. The Court set out the legal principle for determining the existence of a contract:

The question to be determined is whether in the various conversations and actions relied on by the parties they reached a bilateral agreement and had the necessary intention to immediately create a legally binding contractual relationship.

The Court explained that this question is to be determined objectively. In this regard, consideration is often given to what a reasonable objective observer of the two parties would have concluded having regard to the relevant facts and circumstances, including their prior negotiations and subsequent conduct. Importantly, it is the person or organisation who alleges an oral agreement, in this case Mr Coyne, that has the onus of proving it.

The Court’s findings

Credibility of oral evidence

As noted above, much of the oral evidence of Mr Coyne and Mr Curtis directly conflicted so the Court gave greater weight to oral evidence that was corroborated by documents before making findings about the credibility of the witnesses. The Trial Judge had serious concerns about the ‘honesty, accuracy and reliability’ of Mr Curtis’ evidence for a range of reasons, including that Mr Curtis sought to minimise the assistance Mr Coyne provided to GSC during the tender process despite the existence of emails delivering his pricing and estimation works. Also, Mr Curtis gave explanations of the payments to Mr Coyne which were implausible and did not align with GSC’s claims and on one matter his evidence changed under cross-examination.

Were any of the Oral Agreements or the 2019 Deed a legally binding agreement?

The Court, after considering each of the Oral Agreements, was not satisfied that any of them constituted a contract as there was insufficient evidence that the parties intended to be legally bound. In particular, the Court found that a reasonable objective observer would have formed the view that at the meetings on 26 August 2019 and 9 September 2019, the parties were negotiating an agreement that was still vague, informal and not finalised.

However, the Court was persuaded that a reasonable objective observer of the parties would have formed the view that they intended to be legally bound by the 2019 Deed. Considering the credibility findings (discussed above), the Trial Judge generally preferred Mr Coyne’s oral evidence which was largely consistent with the documents in evidence. The Court commented that Mr Coyne’s account of the meeting on 26 August 2019, the subsequent preparation and negotiation of the deed and his explanation of obtaining the electronically signed 2019 Deed from Mr Curtis were plausible and persuasive. The Trial Judge rejected Mr Curtis’ claim that he did not have the technical ability to electronically sign a document.

The Court found that GSC owed Mr Coyne $346,818.60, which was the balance of the $800,000 fixed fee set out in the 2019 Deed, less the payments already made, being the initial payment of $89,256 and any payments made after the 2019 Deed had been signed, which totalled $453,181.60.

Compliance Impact

Parties must objectively demonstrate an intention to be legally bound for a contract to exist. Where oral evidence is relied on to establish an agreement, favourable credibility findings for key witnesses and documentation consistent with the oral evidence will be critical. This case demonstrates that generally it is easier to prove the existence of a contract where a signed written agreement exists. Organisations should ensure that all their contracts are in writing.