Bell Scaffolding (Aust) Pty Ltd v Rekon Ltd & Anor

Commercial agreements should be construed, where possible, to preserve rather than defeat the bargain. Once an agreement has come into existence and the parties have performed it, uncertainty in future obligations will not ordinarily make the agreement unenforceable. The court may imply reasonable terms where necessary to make the bargain workable.

An obligation to purchase all future scaffolding stock was enforceable despite references to individual agreed prices, self-colour products and permitted manufacture of specials. Those expressions were construed in their commercial context. The obligation was not subject to an unstated condition precedent concerning the purchase of manufacturing equipment. Performance also made it unrealistic to deny an intention to create legal relations.

The claimant, an Australian scaffolding company, claimed damages from the defendants for breach of an August 2000 agreement concerning the hire and purchase of scaffolding. The claimant had acquired the relevant rights of its United Kingdom subsidiary.

The defendants argued that the obligation to purchase scaffolding from the subsidiary was uncertain, an unenforceable agreement to agree, unsupported by an intention to create legal relations, and conditional upon the purchase of manufacturing equipment. Further disputes concerned the scope of the obligation, causation of the subsidiary’s closure, quantum and a counterclaim for Scottish hire charges.

1. The August 2000 agreement created binding and enforceable obligations requiring Rekon and Alba to purchase scaffolding from Bell UK. The wording was to be construed in its commercial context and in light of the parties’ performance. The approach in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 supported a construction which made the agreement work.
2. Applying the principles stated in Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD [2001] 2 Lloyd’s Rep. 76, the references to approximately £12,000 monthly hire, individual agreed prices and future performance did not create fatal uncertainty. The relevant prices were those in Bell UK’s 24 August 2000 price list. The court would preserve the agreement and, if necessary, imply reasonable terms.
3. “Self colour” did not exclude galvanised or plated products. It meant that products would be supplied unpainted, with the usual finish for the item. The obligation extended to system scaffolding interchangeable with Kwikstage, including Climastage.
4. The exception for “specials” was limited. Steel boards, stage-board brackets and tie bars were standard components and remained within the purchasing obligation. The exception allowing Rekon to manufacture ledgers and transoms while existing stocks lasted did not extend to other components, although component parts could be purchased to use those stocks. The equipment-purchase provision was not a condition precedent and did not affect enforceability.
5. The defendants’ breaches did not cause or contribute to Bell UK ceasing trading. The purchasing obligation ended when Bell UK ceased trading on 30 November 2002. The counterclaim had a proper basis, and Bell Australia agreed on 21 October 2003 to discharge Bell Scotland’s debt to Alba by 48 instalments of AUD3,500.