Soufflet Beheer v AWB Ltd (ACN 081 890 459) [2006] FCA 51 (8 February 2006)

CONTRACT – whether two writings were an offer and acceptance – whether there was accord and satisfaction – whether forbearance to sue was consideration – no contract formed because of absence of consideration

Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation (1995) 62 FCR 289 cited
Pacific Carriers Ltd v BNP Paribas (2004) ("Pacific Carriers") [2004] HCA 35; 218 CLR 451 cited
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 cited
Osborn v McDermott [2001] VSCA 94; [1998] 3 VR 1 cited
Bartlett v Mouncey [1998] FCA 418 cited
Murphy v Timms [1987] 2 Qd R 550 referred to
Newton v State Government Insurance Office (Qld) [1986] 1 Qd R 431 referred to

SOUFFLET BEHEER v AWB LTD (ACN 081 890 459)

VID 587 OF 2002

KENNY J
8 FEBRUARY 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 587 OF 2002

BETWEEN:	SOUFFLET BEHEER APPLICANT
AND:	AWB LTD (ACN 081 890 459) RESPONDENT
JUDGE:	KENNY J
DATE OF ORDER:	8 FEBRUARY 2006
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 587 OF 2002

BETWEEN:	SOUFFLET BEHEER APPLICANT
AND:	AWB LTD (ACN 081 890 459) RESPONDENT

JUDGE:	KENNY J
DATE:	8 FEBRUARY 2006
PLACE:	MELBOURNE

1 On 18 June 2004, the applicant, Soufflet Beheer, filed a Further Amended Application and, at trial on 20 June 2005, a Third Further Amended Statement of Claim. By this application and pleading, the applicant made a claim for payment of a debt, alternatively, damages for breach of contract. The applicant abandoned earlier claims involving estoppel, waiver, unconscionability and the Trade Practices Act 1974 (Cth). The applicant’s claim is for the Australian Dollar equivalent of USD421,380.22.

2 The parties were largely in agreement about the facts relevant to the applicant’s claim. They disagreed, however, as to whether, by reason of these facts, a compromise agreement was reached whereby the applicant agreed to accept a sum of USD421,380.22 and respondent agreed to pay that figure. For the reasons that follow, I find that no agreement was reached and the application, as contained in the Further Amended Application, should be dismissed.

3 The original application in this proceeding was filed on 11 September 2002 by Soufflet USA Inc ("Soufflet USA"). Soufflet USA was a wholly owned subsidiary of Soufflet Beheer.

4 By deeds of assignment, Soufflet USA, assigned to its parent, Soufflet Beheer, its "right, title and interest in the debt" the subject of this proceeding and all of Soufflet USA’s "right, title and interest in the choses in action" the subject of this proceeding. There is no dispute as to the applicant’s standing.

5 Soufflet Beheer is incorporated in the Netherlands. Soufflet Beheer is part of the Soufflet group of companies, which are involved in the international grain business. Major decisions concerning the Soufflet Group’s business are generally taken by Soufflet Négoce which is located in France.

6 The respondent, AWB Ltd ("AWB"), is a publicly listed company incorporated in Australia. It is a grains marketer and exporter.

7 The applicant’s claim relates to a charter party (the "Charter Party") entered into by Soufflet USA and AWB. Under this Charter Party, AWB agreed to charter a vessel to Soufflet USA to carry wheat from the United States of America to Egypt. The applicant contended that AWB breached the Charter Party because it did not complete loading within the specified time. The applicant claimed that Soufflet USA incurred significant losses as a result of that breach.

8 Soufflet USA lodged a claim for payment of USD439,557.83 with AWB. This amount covered losses incurred as a result of the alleged breach of the Charter Party together with incidental charges Soufflet USA believed it was entitled to under the Charter Party.

9 The applicant claimed that AWB offered, in a fax dated 3 August 1999, to compromise Soufflet USA’s claim for USD421,380.22 and that Soufflet USA accepted this offer of compromise. The applicant contended that this correspondence constituted an accord and satisfaction of Soufflet USA’s claim, alternatively, an account stated between the parties.

10 AWB accepted that it entered into a Charter Party with Soufflet USA. It also admitted that loading was not competed within the time specified by the Charter Party. AWB did not admit that it was liable under the Charter Party.

11 AWB’s case was that its fax of 3 August 1999 was not an offer capable of acceptance. AWB contended that any response to that fax could not be an acceptance and there was no intention to enter into legal relations.

12 In support of its case, the applicant relied on the witness statements of Jean-Marc Philouze made on 19 June 2003 and 6 May 2004 and adopted as correct at trial. Mr Philouze was chief of operations for Soufflet Négoce from 1997 to 2000. The applicant also invited the Court to take judicial notice of the contents of certain marine dictionaries and glossaries.

13 The respondent relied on the witness statements of Rohitha Welmillage made on 11 August 2003 and Nicholas Simon Swales made on 21 April 2004, which were also adopted as correct at trial. Mr Welmillage was a chartering officer employed by AWB. He was the author of AWB’s fax of 3 August 1999. Mr Swales is a retired shipbroker. AWB put forward Mr Swales as an expert witness on the meaning of the terms ‘Vessel’s Final Accounts’ and ‘Final Accounts’ within the shipping industry.

14 The parties also relied on an Agreed Statement of Facts. The matter was heard on 20 and 21 June 2005. There was cross-examination of all deponents.

15 The evidence disclosed that, on about 3 February 1999, Soufflet USA entered into a contract (the "Holding Contract") by which Soufflet USA agreed to sell to Holding Company for Rice and Flour Mills ("Holding Company") 55,000 metric tons of hard red winter wheat at a price of USD131.00 per metric ton C&F Free Out. It was a term of this contract that the wheat was to be shipped between 5 March 1999 and 15 March 1999. The Holding Company contract also provided that up to eight days delay was acceptable provided that Soufflet USA make certain allowances to Holding Company to be deducted in the invoice from the contract price.

16 On 19 February 1999, Soufflet USA entered into a contract (the "Concourse Contract") with Concourse Grain LLC ("Concourse Grain") for the supply of the wheat to be provided to Holding Company. This contract required Soufflet USA to pay carrying charges and interest if it was unable to take delivery of the grain by 15 March 1999.

17 On 18 February 1999, Soufflet USA entered into a Charter Party with AWB with respect to a vessel to be nominated by AWB. The Charter Party was in writing and included the following terms:

18 The Panamax Star was delayed in reaching the loading port. Further delays occurred when it arrived at the port. These were attributable in some part to mechanical problems. The vessel did not berth until 25 March 1999 and commenced loading that day. Loading was completed on 28 March 1999 and the Panamax Star departed for Egypt on that date.

19 On 15 and 18 March 1999, Soufflet Négoce, as agent for Soufflet USA, wrote to AWB informing it that the delay in berthing of the Panamax Star was resulting in Soufflet USA incurring carrying charges and penalties imposed by the Egyptian buyer. These letters stated that Soufflet USA intended to hold AWB responsible for these costs.

20 On 25 March 2005, Holding Company agreed to extend the period for the shipment of wheat by Soufflet USA under the Holding Contract. In return, Soufflet USA agreed to reduce the price of the wheat by 3.5%. Accordingly, the price under the Holding Contract was reduced from USD131.00 per metric ton free out to USD126.42 per metric ton free out.

21 On 29 March 1999, Concourse issued an invoice to Soufflet USA which included carrying charges of USD114,278.63 and interest of USD21,365.99.

22 Also on 29 March 1999, AWB issued an invoice to Soufflet USA for USD525,864.98 under the Charter Party. According to the Charter Party, 95% of this amount (USD499,571.73) was payable within 5 banking days of signing or release of the bill of lading.

23 In response to this invoice, Soufflet USA paid AWB only USD105,275.51. Soufflet USA deducted USD394,296.22 from the amount claimed by AWB. Soufflet arrived at this figure by deducting the USD135,744.62 it paid to Concourse for carrying charges and interest and by deducting the reduction in price it agreed to under the Holding Contract (USD258,551.60).

24 On 1 April 1999, AWB sent a fax to Soufflet USA demanding the payment of the USD394,296.22. The fax stated that if "there is then a claim on us relating to this shipment, it will be dealt with as a separate issue". Later on the same day, Soufflet USA paid AWB USD374,082.75. This was the amount requested by AWB minus a USD20,213.47 overage payment.

25 On 22 April 1999, Soufflet USA issued to AWB (but did not immediately send to AWB) Debite (sic) Note AR-0806 in the amount of USD394,296.22 representing the carrying charges, interest and the reduction in the price of wheat that had been incurred as a result of the late arrival of the Panamax Star.

26 On 27 April 1999, the Panamax Star discharged its cargo of wheat at El Dekheila in Egypt. Holding Company received 56,850.268 metric tons of wheat.

27 On 11 May 1999, Soufflet USA issued a freight account to AWB in the amount of USD45,261.61, expressly reserving its rights under Debite Note AR-0806. The freight account was calculated as follows:
Charter Fees: 56,850.268 MT x USD9.25 = USD525,854.98
Less:
Despatch at load port = USD18,334.03
Despatch at discharge port = USD53,220.83
Overage premium per Lloyd’s scale = USD20,213.47
Payments already made to AWB = USD479,358.26
Balance Due = USD45,261.61

28 On 28 June 1999, Soufflet Négoce, as agent for Soufflet USA, sent AWB Debite Note AR-0806 and the freight account of 11 May 1999. The covering letter stated:

"Please find hereby Soufflet USA claim for USD394,296.22 plus freight balance for USD 45,261.61.

You will find complete file with all the contracts, the amendments on L/C with the refaction [sic, reduction] of 3.5 pct, the carrying charges assessed by our supplier, you will also find different correspondence with seller, buyer, agent and with yourself.

We thank you to pay Soufflet USA the full amount, as vessel was very late and was not ready to load."

29 On 3 August 1999, AWB responded by fax to Soufflet Négoce’s letter of 28 June 1999. AWB’s fax read, in full, as follows:

"We would refer to your letter of 25th [sic, 28th] June addressed to our Michael Watson – on the subject Vessel’s final accounts.

We have checked the figures in Souffle [sic] USA Claim and would only disagree with the Load Port Despatch calculation.

Please see attached, our own Laytime computation, which please go through and confirm your concurrance [sic] for us to proceed with the balance settlements of this Vessel-account.

In this, we have deducted Laytime only during the period the Vessel was actually disabled with her Main Engine problems. All other time – ie. waiting for Loading Berth, shifting etc. – should count since the vessel had arrived, NOR given/accepted and laytime had already commenced."

30 Soufflet Négoce replied to AWB’s fax by telex on the same day, in the following terms:

We consider our despatch calculations as correct because vessel was not able to go to berth when called by elevator because of engine breakdown so that he lost his turn.

Nevertheless this fact [sic] we would accept your calculation for despatch at load in view of our relations if you order the payment of the balance of our claim.

Please confirm order of payment to Soufflet USA so that we can settle this file."

31 AWB did not respond to this communication for approximately 6 weeks. During that time, Soufflet Négoce’s sent numerous telexes to AWB seeking payment of USD421,380.22. On 16 September 1999, AWB replied by fax stating that "there has been a misunderstanding thru our Fax of 3rd August". AWB stated that it had only intended to refer to the laytime calculations and that it continued to reject the claim covered by Debite Note AR-0806.

32 On 21 September 1999, AWB wrote again to Soufflet Négoce stating that the claim covered by Debite Note AR-0806 was time barred under Clause 36 of the Charter Party. AWB also stated that it was not liable for the claim under Clause 37 of the Charter Party because the problems with the vessel were beyond AWB’s control.

33 Mr Swales gave evidence that the terms ‘Vessel’s Final Accounts’ or ‘Final Accounts’ are used in the shipping industry to mean "the adjustment of amounts due between the Owners and the Charterers under the charter party". He stated that the expressions ‘Vessel’s Final Accounts’ or ‘Final Accounts’ are "not used to refer to claims for damages or other unliquidated sums which one party may claim from the other party". Mr Swales’s evidence was heard subject to an objection by the applicant who claimed it was inadmissible because the relevant terms are not technical terms or terms of art.

34 In the event the applicant’s objection was overruled, Mr Philouze gave evidence in its support that, in his experience, "a vessel’s final accounts are those comprising and dealing with the total amount of the final figures payable as between charterers and owners to allow a file to be closed". He disputed Mr Swales’s claim that the term has a more limited meaning.

35 The expert evidence in this case was not particularly persuasive. On cross-examination, Mr Swales was equivocal about whether the terms had any technical meaning beyond their meaning in ordinary English. At one point, he was asked if the relevant expressions were technical terms or just ordinary terms. Mr Swales replied "Well, I mean, they are terms with a meaning whether they’re technical or ordinary. I mean, they were – they mean exactly what they say."

36 Further, although Mr Swales’s evidence was designed to support the proposition that the terms ‘Vessel’s Final Accounts’ and ‘Final Accounts’ are used as terms of art, Mr Philouze’s evidence showed that this is not always the case. Mr Philouze also had extensive experience within the industry. His evidence was that the terms are employed within the shipping industry in conformity with their ordinary meaning.

37 Considering this evidence, I am not satisfied that ‘Vessel’s Final Accounts’ or ‘Final Accounts’ are used exclusively, or even customarily, as terms of art. In light of this, I find that the expert evidence provides no special guidance to constructing the documents at issue in this case: see, e.g., Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation (1995) 62 FCR 289 at 296-297 per Hill J. Accordingly, I sustain the applicant’s objection to Mr Swales’s evidence and will exclude all of the expert testimony concerning the meaning of ‘Vessel’s Final Accounts’ or ‘Final Accounts’.

38 The applicant contends that the exchange of 3 August 1999 gave rise to a binding contract to compromise, for an amount of USD421,380.22, being Soufflet USA’s claim for losses arising out of the delay in berthing and loading of the Panamax Star. In the applicant’s submission, AWB’s fax of that day is an offer and Soufflet Négoce’s immediate reply is an acceptance.

39 The applicant contends that Pacific Carriers Ltd v BNP Paribas (2004) ("Pacific Carriers") [2004] HCA 35; 218 CLR 451 articulates the approach the Court should take in this case. In Pacific Carriers, letters of indemnity were provided by the seller of a cargo of lentils to facilitate the delivery of the cargo without the production of a bill of lading. The letters were executed by both the seller and its bank. The High Court held that, considering all the surrounding circumstances, a "reasonable reader in the position of [the buyer] would have understood the document as a bank endorsed absent bills of lading indemnity, and would have understood that the bank was undertaking liability as an indemnifying party to support the liability undertaken by [the seller]": Pacific Carriers at 463 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

40 In reaching this conclusion, the High Court emphasised that what is important is not the subjective intention of the author of a commercial document such as a letter of indemnity. Rather, "construction ... is to be determined by what a reasonable person in the position of [the buyer] would have understood them to mean": Pacific Carriers at 462 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. This will require consideration of the surrounding circumstances of the transaction known to the parties and the purpose and object of the transaction, as well as the text of the relevant documents.

41 The applicant submitted that, when the text of AWB’s fax of 3 August 1999 is considered in light of the surrounding circumstances, a reasonable reader would understand it to be an offer to compromise all the claims made by Soufflet USA. Moreover, under Pacific Carriers, the subjective intent of the author of the fax (Mr Welmillage) is irrelevant to its meaning and legal effect.

42 The applicant claims that a number of factors support its view. These allegedly include:

(a) In letters dated 15 and 18 March 1999, Soufflet Négoce expressly informed AWB that Soufflet USA intended to hold AWB liable for costs incurred as result of the delay in loading the vessel.

(b) Further notice of Soufflet USA claims was provided on 29 March 1999 when Soufflet USA deducted its delay related costs from its first payment to AWB.

(d) Thereafter, consistent with the course proposed by AWB, Soufflet USA submitted its claim for delay on 28 June 1999. The covering letter clearly referred to both the costs caused by delay and the freight balance. In particular, the applicant contended, "The evident purpose and object of the 28 June 1999 letter was to seek to finalise matters between AWB and Soufflet USA with respect to the charter of the Panamax Star".

(e) AWB said nothing, before the letter of 28 June 1999 and, indeed, prior to 16 September 1999, to indicate that it would dispute Soufflet USA’s entitlement to recover from AWB the losses caused by the delay.

(f) As AWB’s response letter of 3 August 1999 addresses itself to the "Soufflet USA claim",a reasonable reader would assume that AWB was addressing the claim for USD394,296.22 in respect of the delay, and the freight balance.

(g) AWB’s letter then states "and [AWB] would only disagree with the load port despatch calculation", indicating that AWB disputed only the load port despatch calculation.

(h) AWB’s letter concludes with the request to Soufflet USA to "go through and confirm your concurrance [sic] for us to proceed with the balance settlements of this Vessel account", indicating to the reasonable reader that an agreement will be reached if Soufflet USA concurs with AWB’s load port despatch calculation.

43 The applicant also claimed that there are important omissions from AWB’s letter of 3 August 1999. In particular, the applicant noted that the letter does not say that AWB was only responding to part of the claim made in the 28 June 1999 letter. Similarly, it did not say that AWB disputed the claim for delay related costs and did not foreshadow any future correspondence from AWB regarding that matter.

44 Considering all these factors, the applicant submitted that a reasonable reader would have understood AWB’s letter as an offer to pay all Soufflet USA’s claims save only for Soufflet USA’s load port despatch calculation. Accordingly, in the applicant’s submission, it was an offer capable of immediate acceptance.

45 Further, the applicant contended that this offer was immediately accepted via Soufflet Négoce’s telex of 3 August 1999. The applicant denied that this reply was a conditional acceptance or counter-offer, as the respondent maintained. The applicant noted that the 3 August 1999 reply does not alter any terms of AWB’s purported offer. Further, the applicant argued that an agreement was reached even though the parties had not discussed the terms of mutual releases, provisions for default in payment or confidentiality. In the applicant’s submission, these terms were not necessary to an agreement being concluded.

46 AWB accepted the applicant’s broad approach to the construction of the relevant documents in that it agreed that the Court should consider how a reasonable reader would construe the documents in light of all the surrounding circumstances. AWB contended, however, that AWB’s fax of 3 August 1999 was not an offer capable of acceptance.

47 AWB argued that the text of the fax and the surrounding circumstances would not have led a reasonable reader to conclude that AWB was agreeing to pay Soufflet USA’s damages claim. Further, and more fundamentally, AWB argued that AWB’s fax was not an offer of accord and satisfaction because there was no consideration.

48 Like the applicant, AWB pointed to a variety of factors in support of its construction of its fax. AWB noted that the fax made no direct reference to the damages claim or Debite Note AR-0806. It submitted that it would be highly unlikely that it would have accepted Soufflet USA’s damages claim without specifically referring to it. AWB noted that the damages claim was far greater than the freight balance (in 1999 the damages claim amounted to well over AUD500,000). Thus, in AWB’s submission, a reasonable reader would have expected some discussion of the damages claim in any communication purporting to accept it.

49 AWB also suggested that, as of 3 August 1999, Soufflet USA’s damages claim faced at least two significant hurdles. First, in AWB’s submission, it was barred by clause 37 of the Charter Party which provided that "the Carrier shall not be liable for loss or damage occasioned by causes beyond his control" including mechanical difficulties. Secondly, and more seriously, the damages claim became time-barred on 27 July 1999 under clause 36 of the Charter Party. AWB contended that, in these circumstances, any offer to pay Soufflet USA’s damages claim would have been an unexpected windfall. Accordingly, had AWB chosen to pay the time-barred claim (to maintain good business relations, for example) it could have been expected to refer to the claim more directly. AWB also relied on clause 16 in support of the contention that damages for the losses occasioned by the delay were not recoverable under the Charter Party.

50 Furthermore, AWB relied on the language of its 3 August 1999 fax. It contended that the statement "we have checked the figures in Soufflet USA Claim and would only disagree with the Load Port Despatch calculation" does no more than present information concerning calculations and should not be construed as an offer. Similarly, AWB argued that the sentence stating "Please see attached, our own Laytime computation, which please go through and confirm your concurrance [sic] for us to proceed with the balance settlements of this Vessel-account" indicates that the author expected further discussion and negotiations concerning the account.

51 AWB claimed that, in its fax of 1 April 1999, it placed Soufflet USA on notice that it intended to deal with the damages claim as a separate issue from others arising under the Charter Party. In AWB’s submission, this provided the reader of its fax of 3 August 1999 with further reason to doubt that, in addition to discussing the freight balance, the fax accepted the damages claim.

52 As already indicated, AWB argued that the applicant’s submissions suffered from a fundamental flaw. This flaw is that its fax of 3 August 1999 presents no consideration that could underlie an offer of accord and satisfaction. AWB cited McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at 183-185 per Dixon J, with whom Rich and McTiernan JJ agreed, for a classic statement of the law concerning accord and satisfaction:

"The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The distinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one. ... An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed."

Applying these principles, for there to have been an immediate accord and satisfaction, AWB must have offered a promise in place of Soufflet USA’s cause of action. In AWB’s submission, its fax cannot be construed as an offer of a promise because it merely discusses calculations under a pre-existing contract.

53 During argument, AWB elucidated this point with the following example. Suppose a barrister agrees to charge $100 per hour. Subsequently, the barrister sends her instructing solicitor a $1,500 account stating that she worked for 14 hours. The solicitor might reply "I calculate that 14 hours should be $1,400". At that point, suppose the barrister says "I accept your offer of $1,400". In AWB’s submission, no contract would have been formed. The solicitor’s communication was simply an inquiry about what was properly owed under the contract. If the solicitor were to later discover that the barrister had not worked 14 hours as claimed, but 10, he could hardly be bound by an earlier ‘offer’ to pay $1,400.

54 In summary, the solicitor was not offering to accept the barrister’s claim in exchange for a $100 reduction in the account; rather the solicitor was trying to establish what his true obligation was under the pre-existing contract. Similarly, in AWB’s submission, AWB was not offering to accept Soufflet USA’s damages claim in exchange for a reduction in the freight balance. Rather, AWB was simply disagreeing with Soufflet Négoce’s calculation of the freight balance. There was no offer of compromise regarding the freight balance because AWB was only offering to pay what it claimed was the correct amount. AWB submitted that these considerations undermine any claim that AWB was requesting a reduction in the freight balance as consideration for it accepting the damages claim.

55 In AWB’s submission, once it is accepted that it was not asking for a reduction in the freight balance as consideration, its fax cannot be construed as an offer because it does not ask for any other consideration. The only other candidate for consideration is forbearance from suing. AWB rejected the possibility that the fax requests forbearance as consideration. On this interpretation, the fax would, so it submitted, effectively say no more than "AWB accepts Soufflet USA’s damages claims and will pay it". That would not be an offer. AWB observed that, if upon receiving an account, someone says "I have received the account and I’ll pay it", that person can hardly be thought to have made an offer to enter into a new contract compromising the claim in the account.

56 Finally, AWB contended that, even if its fax was an offer seeking accord and satisfaction, Soufflet Négoce’s reply was not an acceptance of such an offer. This was because, so AWB submitted, the reply is expressed as being conditional on AWB ordering payment of the balance of Soufflet USA’s claim. AWB submitted that the use of the future tense in the expression "so that we can settle this file" is consistent only with the view that no agreement had been reached.

57 This dispute is akin to a problem constructed for law students’ final exam in contracts. In essence, the Court is called upon to determine whether two written documents are, respectively, an offer and an acceptance. And, as one sometimes finds in the hypotheticals constructed for examination purposes, the purported ‘offer’ in this case is not an offer because there is no consideration.

58 Before analysing the key documents, it will be helpful to review the distinction between accord and satisfaction and accord executory. Phillips JA (with whom Winneke P and Charles JA agreed) provides an excellent outline of the relevant principles in Osborn v McDermott [2001] VSCA 94; [1998] 3 VR 1 ("Osborn"). As Phillips JA explains, the fundamental distinction between accord executory and accord and satisfaction is that "the former does not operate to discharge existing rights and duties unless and until the accord is performed, whereas the latter operates as a discharge immediately the accord (or agreement) is achieved": Osborn at 7-8. Accord and satisfaction is the compromise of an existing cause of action in return for a promise while accord executory requires that something be done before the cause of action is compromised.

59 Somewhere between accord and satisfaction and accord executory "is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance": Osborn at 10. Accord and conditional satisfaction would be reached if a creditor agreed to forebear from suit for 30 days and to discharge the cause of action if the debtor paid a compromise amount within that time: see Bartlett v Mouncey [1998] FCA 418.

60 The applicant contended that the consideration, from Soufflet USA, was the relinquishment of its full claim ($439,557.83 for both the damages claim and the freight balance) in exchange for a lower amount ($421,380.22 for the damages claim and a reduced freight balance). In the applicant’s submission, the contract was a paradigmatic example of accord and satisfaction.

61 The problem with this view is that AWB was not asking Soufflet USA to make a concession when it submitted a different load port calculation. Rather, AWB was merely claiming that, under the pre-existing Charter Party, it owed a different amount than that claimed by Soufflet USA. As AWB correctly submitted (see [52]-[55] above), this was not a request for a new agreement supported by new consideration.

62 This can be further illustrated with the following example. Suppose that on 5 August 1999, AWB had written to Soufflet USA claiming that it had discovered that the demurrage had also been miscalculated. Presumably, Soufflet USA would have replied that, as a new contract had been formed on 3 August 1999, the issue of demurrage was closed. In my view, that response would be untenable as AWB’s fax of 3 August 1999 demonstrates no intention to depart from or supplant the original Charter Party.

63 The situation would be different if AWB had accepted that Soufflet USA’s calculations were correct but had nonetheless requested a reduction in the freight balance. In that case, it would have been seeking a new agreement. Similarly, suppose the solicitor from AWB’s hypothetical (at [53] above) asked the barrister to accept a reduced fee because the client was of limited means, in return for payment on an earlier date that that originally agreed. This request would be an offer because it goes outside the terms of the original contract and it would specify consideration capable of supporting the new agreement. In contrast, AWB’s claim about load port despatch did not go outside the terms of the Charter Party.

64 For these reasons, I find that AWB’s statement about the freight balance calculation was not an ‘offer’ for a new agreement with new consideration. The issue of the freight balance calculation must be considered as independent from any agreement by AWB to pay the damages claim. This means that the only other candidate for consideration is forbearance by Soufflet USA from suing on its damages claim. Although forbearance can be consideration in some cases, it is a very poor candidate here.

65 Forbearance is sometimes exchanged for security: see, e.g., Murphy v Timms [1987] 2 Qd R 550 at 551 per Kneipp J (with whom Vasta J agreed) and 556 per Connolly J (holding that forbearance to sue by a creditor at the express or implied request of a guarantor is sufficient consideration to support a guarantee). Also, forbearance might be consideration where quantum is uncertain. For example, a claimant might forbear to sue in exchange for an insurer accepting liability: see Newton v State Government Insurance Office (Qld) [1986] 1 Qd R 431 at 444-5 per McPherson J. In that situation, the insurer benefits by avoiding costly litigation while quantum is investigated and negotiated. This case is different. The applicant claims that AWB acknowledged both liability and quantum with respect to the damages claim. According to the applicant, AWB bound itself, without more, to pay the damages claim in full. If the applicant were correct, then, Soufflet USA would have exchanged its damages claim for AWB’s unqualified promise to pay the exact same claim. This is inherently unlikely.

66 At best, the exchange of 3 August 1999 could be construed as an accord executory. Assuming that AWB’s fax did admit liability on the damages claim on AWB’s behalf, then the reply from Soufflet Négoce states that the claim will be discharged if AWB pays it. This is scarcely sufficient to constitute a new agreement. For one thing, AWB’s supposed ‘acceptance’ does not vary the terms or effect of Soufflet USA’s damages claim. There is thus no consideration to support a new agreement: there could only be a statement of intent on AWB’s part to pay the claim.

67 Overall, I find that, even if AWB’s fax of 3 August 1999 were taken as admitting liability on the damages claim, there would be no consideration to support a binding agreement. Accordingly, no contract was formed and Soufflet USA’s contact claim must be dismissed.

68 For the reasons given above, I find that AWB’s fax cannot be construed as an ‘offer’, which, if accepted, could give rise to contractual obligations. This is sufficient to defeat the applicant’s claim. I would also reject the applicant’s claim on the basis that the reasonable reader would not have concluded that, by the fax, AWB was accepting the damages claim.

69 I reach this conclusion mostly on the basis of the text of the fax and the circumstances known to the parties. The key sentence of AWB’s fax - "We have checked the figures in Souffle USA Claim and would only disagree with the Load Port Despatch calculation" (emphasis added) – addresses only whether the figures in the claim have been correctly calculated. At best from the applicant’s perspective, the fax was ambiguous as to whether it was accepting the damages claim. It does not expressly state that AWB accepts all the claims made against it, including the damages claim. The statement "confirm your concurrance [sic] for us to proceed with the balance settlements" indicates that the author is only asking for a reply concerning the calculations and anticipates further dialogue. It tends against the proposition that the fax should be construed as an offer to conclude a deal by accepting a substantial damages claim.

70 The fax (like many of the communications in this case) was written very sloppily. It would have been patently clear to any reasonable reader that the fax was not composed with much care. In this circumstance, a reasonable reader should have hesitated to conclude that the fax made a major concession merely by indirect implication.

71 As AWB emphasised, its fax of 3 August 1999 does not refer directly to the damages claim. If AWB were accepting the damages claim in this fax, it was unusual that it did not refer to the claim directly, given its size and nature. If AWB was accepting the damages claim, it would reasonably be expected that it would do so distinctly and that the fax would refer to the claim expressly. Bearing in mind that the damages claim was the far bigger, and potentially more contentious, of the claims for payment outlined in the letter of 28 June 1999, it was unlikely that AWB would accept the damages claim without expressly and directly referring to it.

72 The parties disagreed about whether the damages claim would have faced significant hurdles under the Charter Party. I need not consider this dispute in detail. It is sufficient to say that a reasonable reader familiar with the circumstances known to the parties (such as the terms of the Charter Party) would be aware that the damages claim was more likely to be contested by AWB than matters affecting the freight balance. This is because the damages claim was very much larger than any other item that AWB was being called on to pay and was less straightforwardly related to the Charter Party. This consideration provides further support for the conclusion that a communication accepting the damages claim would be expected to refer specifically to that claim.

73 When all of these factors are considered, I find that a reasonable reader would not conclude that, by its fax of 3 August 1999, AWB was accepting liability on the damages claim (as well as its quantum). I accept that some factors (such as those outlined by the applicant at [42] above) militate in the other direction. The other considerations to which I have just referred outweigh these factors and lead me to conclude that AWB’s fax of 3 August 1999 said nothing about the damages claim against AWB. This provides an alternative ground for dismissing the applicant’s contract claim.

74 AWB contended that, if its fax were construed as an offer, then Soufflet Négoce’s reply was not an acceptance. Having found that no offer was made on 3 August 1999, it is unnecessary to consider this issue.

75 The applicant’s claim for breach of contract should be dismissed with costs.

I certify that the preceding seventy five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Counsel for the Applicant:	Ms W Harris

Solicitor for the Applicant:	Dibbs Barker Gosling

Counsel for the Respondent:	Mr P J Riordan SC with Mr H N G Austin

Solicitor for the Respondent:	Blake Dawson Waldron

Date of Hearing:	21 June 2005

Date of Judgment:	8 February 2006

Federal Court of Australia

Soufflet Beheer v AWB Ltd (ACN 081 890 459) [2006] FCA 51 (8 February 2006)