New South Wales Supreme Court CITATION : McCann v By-Dezign Pty Ltd [2001] NSWSC 161 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 4570/00 HEARING DATE(S) : 13/03/01 JUDGMENT DATE : 13 March 2001 Robert McCann (P1) PARTIES : Pamela Denise McCann (P2) By-Dezign Pty Limited (D) JUDGMENT OF : Young J COUNSEL : T M Thawley (P) C Harris (D) SOLICITORS : The Law Firm of Solari's (P) MatthewsFolbigg (D) CATCHWORDS : CONTRACTS [7]- Whether contract- Agreement to settle litigation- Deed of release drafted- Whether exchange of deed condition precedent- Held it was. CASES CITED : GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 622 Masters v Cameron (1954) 91 CLR 353 DECISION : See para 21. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J TUESDAY 13 MARCH 2001 4570/00 - McCANN v BY-DEZIGN PTY LTD JUDGMENT 1 HIS HONOUR: This is an unfortunate dispute over what in this Court is a relatively small amount of money. It is an unfortunate dispute in that almost certainly the costs will far exceed the value of the original problem. 2 The plaintiffs sue for a declaration that Local Court proceedings brought against them by the defendant have been settled. 3 The background facts are that on 3 February 2000 the plaintiffs made a contract with the defendant for the defendant to do certain work in respect of a kitchen and laundry at premises at Swansea for the sum of $20,090.00. There were disputes over the quality of what was being done by the present defendant and the plaintiffs purported to terminate the contract. The defendant sued by a statement of liquidated claim out of the Local Court at Parramatta. The statement of claim recited the agreement of 3 February 2000, and noted that the agreement was to supply and install a kitchen. No particulars were given. 4 The plaintiffs craved leave to refer to the agreement at the hearing as though it were fully set out in the pleading. 5 No defence was ever filed in the Local Court proceedings, but the present plaintiffs provided a draft defence on 25 August 2000 in which they admitted the existence of a contract but stated that the agreement also included the supply and installation of a laundry. The defence claimed that the kitchen cupboards were of inferior quality and did not match the sample, were not of merchantable quality, and other alleged breaches. The present plaintiffs also indicated that they had a cross claim of $40,000.00. 6 However, a without prejudice letter accompanied the defence and cross claim making an offer of settlement which was open for seven days. Five days later a counter offer was put again on a without prejudice basis. The counter offer was that the deposit would be retained by the defendant, plaintiffs to pay additional $1500.00 and retain the cupboards that had been delivered, with each party to pay its own costs. The offer to be open for seven days. 7 On 31 August the plaintiffs' solicitors wrote the following letter (omitting formal parts): "We refer to your letter of 30th August and confirm that our clients accept the offer contained therein. Would you please prepare Deed of Release and submit it to us for signing by our clients which we will then have signed and forwarded to you together with a cheque for the balance." 8 The defendant's solicitors replied three weeks later enclosing a deed of release. On 26 September 2000 the plaintiffs' solicitors suggested six amendments to the deed. 9 Mr Thawley, who appeared for the plaintiffs, endeavoured to minimise the significance of these amendments by saying that they were minor, but at least some aspects of the amendments have significance. What was more significant is why someone would bother in an immaterial document to make even minor amendments if the document was not an essential part of the settlement. 10 On 28 September the defendant's solicitors appeared to have accepted the amendments and sent a duly amended deed of release. The deed was executed by the plaintiffs and their cheque was received by their solicitors on 9 October. Unfortunately, that was not soon enough as on 6 October the defendant's solicitor realised that she had made a mistake and withdrew the offer and put a fresh offer that the settlement sum be increased by a further $2000 and that the supplier retain the property and the cupboards. 11 On 9 October the plaintiffs, as I say, executed the deed and sent the cheque. There is no indication as to whether they knew about the withdrawal at that stage or not. On 10 October the defendant was advised that the plaintiffs had already used the cupboards in the renovation of their kitchen. 12 In these circumstances the plaintiffs filed their summons on 10 November 2000 for a declaration and for the necessary consequential order to carry the settlement into effect. 13 This sort of case arises, unfortunately, on a number of occasions in any year and when they do they are very awkward to decide. This is because the Court needs to consider the intention of the parties and often it has to do so from rather sparse material, very often correspondence between solicitors. 14 As is clear from Masters v Cameron (1954) 91 CLR 353, 360 and GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 622 and 631, there are at least four legal categories into which a situation such as the present fall: (1) The parties may have, even in the most informal way, reached finality in arranging all the terms of their bargain and intend to be immediately bound. (2) The parties may have got to that situation and both yet decided that there will be various condition precedents to their agreement being a binding contract. Usually the execution or exchange of formal documentation or the approval of their solicitors. (3) There can be a situation where they make a provisional contract. (4) There can be the situation where they have made a contract but they both anticipate that in due course that will be replaced by a further contract. 15 In the present case it seems that either the parties agreed to a settlement or else they agreed subject to the condition precedent that a deed of release would be entered into. There are factors that point either way. 16 To solve the problem one needs to focus intently on the plaintiffs' solicitors' letter of 31 August which I have already set out in full. Had it stopped at the end of the first paragraph it would be clear that there was a final acceptance of an offer and that there was a binding contract. However, it didn't stop there. It went on to say that there needed to be a deed of release. 17 Mr Thawley says that this was merely a mechanical matter. The parties were in the Local Court in Parramatta. There needed to be some formal documentation to be filed in that Court and that fact did not affect the final settlement of proceedings. 18 Mr Harris for the defendant, said that the correspondence showed the deed of release was considered by both parties to be a vitally important matter. The plaintiffs wanted a deed of release and not only did they want it, but they wanted to "cross every t and dot every i" because that was what their solicitor's letter of 26 September indicated. Furthermore, the plaintiffs did not give their cheque for the $1500 until it was too late. One would have expected that cheque to have been given immediately after 31 August, especially as they had no hesitation in affixing the cupboards to their property soon after 31 August. 19 As I have said, there are factors either way. As Mr Thawley says, the factors indicating that there was an immediate settlement include the fact that the words "without prejudice" disappear from the correspondence of the solicitors. These words were unnecessary anyhow in a chain of correspondence which commenced on a without prejudice basis, but their absence has some significance. Further, there is the fact that the cupboards were installed by the plaintiffs. The evidence is a little unsatisfactory here in that Mr McCann gave no evidence at all and Mrs McCann gave evidence in a rather desultory fashion, but it is a factor that tends in that direction. 20 On the other hand, the fact that the cheque did not come immediately after 31 August and there was an insistence on the deed and the form of the deed, fell the other way. 21 In my view, it is more likely than not that the deed of release was in all the circumstances of this case a condition precedent, and accordingly, the Local Court proceedings have not been settled. It thus follows that the present suit must be dismissed. 22 I dismiss the summons with costs. The exhibits to be returned. ***************** Last Modified: 03/15/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.