New South Wales Supreme Court CITATION : Baltimore Technologies Pty Ltd v McDougall [2000] NSWSC 798 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3226/00 HEARING DATE(S) : 26 July 2000 JUDGMENT DATE : 26 July 2000 PARTIES : Baltimore Technologies Pty Limited (P) Rod McDougall (D) JUDGMENT OF : Hamilton J COUNSEL : Dr A S Bell (P) R Dick (D) SOLICITORS : Gilbert & Tobin (P) Phillips Fox (D) CATCHWORDS : CONTRACTS [144] - General contractual principles - Discharge, breach and defences to action for breach - Accord and satisfaction - Construction of terms as to costs of agreement for compromise. DECISION : Defendant ordered to pay plaintiff's costs on indemnity basis. Summons dismissed. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J WEDNESDAY, 26 JULY 2000 3226/00 BALTIMORE TECHNOLOGIES PTY LIMITED v ROD McDOUGALL JUDGMENT HIS HONOUR: 1 There is an agreement to settle these proceedings and that settlement is a sensible one which reflects credit for good sense on both the parties. Unfortunately, as sometimes happens, as we all know, in the course of the settlement of difficult and complicated proceedings there is a misunderstanding as to the effect of the terms. This misunderstanding relates to costs. It is contended on the plaintiff's part that the effect of the agreement upon its proper construction is that the costs should be quantified and paid before the proceedings are dismissed. The opposing view put on behalf of the defendant simply is that there is a firm agreement that the summons be dismissed, insofar as it is not satisfied by orders, and with an order that the defendant pay the plaintiff's costs of the proceedings on an indemnity basis. 2 The material that has been laid before me as to the agreement is three letters that passed between the solicitors between 21 and 25 July 2000, both days inclusive, and four telephone conversations which took place between Ms Healy, as solicitor for the defendant, and Mr Pomeroy, as solicitor for the plaintiff. Three of those telephone conversations occurred yesterday afternoon, 25 July 2000, and the last this morning, 26 July 2000. 3 By the first letter of 21 July 2000 Ms Healy wrote to the plaintiff's solicitors saying that she was "instructed to make the following open offer in full and final settlement of these proceedings". There followed six numbered paragraphs, the last two of which were as follows: "5 Our client to pay the plaintiff's costs incurred to date. 6 Summons to be dismissed." Mr Pomeroy replied on 24 July 2000 setting out proposed orders in four paragraphs and indicating that they constituted a firm offer that would remain open until 10 am on 25 July 2000, at which time it would lapse. Paragraph 2 was to the effect that the defendant was "to pay our client's costs of these proceedings on an indemnity basis." Paragraph 4, by reference to the relevant paragraph of Ms Healy's earlier letter, agreed to the dismissal of the summons. The last letter on 25 July from Ms Healy to Mr Pomeroy contained the following: "2 Our client is willing to pay your client's costs, but not on an indemnity basis." And in paragraph 4 it was noted that there was to be an order to dismiss the summons. 4 Ms Healy has given oral evidence before me this morning of the telephone conversations that took place. She sought firm information as to the amount of the costs, and the final situation as presented to her was that the costs were "pretty much $30,000" but with four additional comparatively small specified items, including one, this being July 2000, relating to the GST. After that she rang back in the third telephone conversation yesterday and the following passed: HEALY: "We have instructions to pay indemnity costs but we want the clock to stop ticking. Please ring Dr Bell at once." POMEROY: "I'll do that." In cross examination Ms Healy said that she believed that it was in that conversation that there was a question as to how the defendant was to get his computer back, to which she said words to the effect that after court the defendant could go down to Gilbert & Tobin's office and sort those matters out. 5 Dr Bell has vigorously pressed on me that the constant use of the words "to pay" costs rather than a reference to undergoing an order for costs and the order in which the payment of the costs and the dismissal of the summons appear initially in the letter of 21 July 2000, but also in subsequent letters, mean that, upon the proper construction of the contract, the costs were to be finalised and paid before the compromise was perfected by the dismissal of the summons. I can see the basis upon which Dr Bell makes that submission, which is certainly not a contemptible one. However, looking objectively at the letters and the conversations that occurred, in my view there was no sufficient discussion or stipulation that would lead the objective observer to believe that there was the agreement contended for as to the time of payment of the costs, and the proper construction to be put on the words of the letters and conversations is simply that the defendant was, upon dismissal of the summons, to undergo an order for costs on an indemnity basis. That, in my view, is the term as to costs of the settlement, to which both parties are bound. The defendant will be ordered to pay the plaintiff's costs to date on an indemnity basis and the summons is dismissed. …o0o… Last Modified: 09/27/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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