Supreme Court New South Wales Medium Neutral Citation: The Owners Strata Plan No 76502 v Waterpoint Shepherds Bay Pty Limited [2015] NSWSC 1129 Hearing dates: 7 August 2015 Decision date: 07 August 2015 Jurisdiction: Equity Division - Technology and Construction List Before: McDougall J Decision: Declare that there is a binding agreement to settle litigation. Order defendants to perform. Catchwords: CONTRACT – offer to settle litigation – time – where defendant made a 'walk away' offer, open for 28 days – where that offer accepted on 28th day – whether relevant that time of acceptance was later than time of offer – common law position on taking fractions of days into account CONTRACT – offer to settle litigation – counter-offers – where, before acceptance, plaintiff inquired of the defendant whether it might be able to get a better offer – whether that inquiry amounted to a counter-offer such that the initial offer was rejected CONTRACT – offer to settle litigation – where offer stated to be 'on terms requiring each party to pay its own costs of the proceedings' – whether the phrase 'on terms' incorporated an expectation that further terms were to be negotiated – where, after acceptance, defendant sought to require execution of a deed of release – where no mention of such a requirement in initial offer – usual expectation that a competent solicitor will specify in detail the terms on which an offer is made – result that a deed of release was not required Legislation Cited: Interpretation Act 1987 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: La Forrest v Ford [2001] QCA 455 Category: Principal judgment Parties: The Owners – Strata Plan No 76502 (Plaintiff) Waterpoint Shepherds Bay Pty Limited (First Defendant) Billbergia Pty Limited (Second Defendant) Representation: Counsel: J Knackstredt (Plaintiff) J Crittenden (Solicitor) (First and Second Defendants) Solicitors: Doyle Edwards Anderson Lawyers (Plaintiff) Jane Crittenden Lawyer (First and Second Defendants) File Number(s): 2013/137922 Judgment (ex tempore – revised 7 august 2015) 1. HIS HONOUR: The plaintiff is the Owners Corporation of a strata title development at Meadowbank. The defendants were, respectively, the developer and builder. The plaintiff sued the defendants for alleged defects in construction. Background 1. There was a dispute resolution process followed through which did not in itself achieve a resolution of the dispute. However after that process had been engaged in, and as part of the course of preparation for a final hearing, the defendants' solicitor Ms Crittenden sent to the plaintiff's solicitor Mr Anderson by email a letter forwarding an expert witness's report. 2. That letter stated, among other things: I am instructed to reject your client's settlement offer of $100,000 inclusive of costs in full and final settlement of the matter. My client has offered to consent to a discontinuance of the proceedings on terms requiring each party to pay its own costs of the proceedings. This offer shall remain open for a period of 28 days from the date of this letter. 1. It is common ground that the 28th day from the date of that letter was 1 June 2015. 2. On 6 May 2015, Mr Anderson spoke to Ms Crittenden. Mr Anderson enquired: Would your clients be willing to put something like the $25,000 that they previously offered to settle the case? 1. Ms Crittenden said: I will find out and come back to you. 1. On 26 May 2015, Mr Anderson sent an email to Ms Crittenden referring to the conversation, setting out its substance, and enquiring whether she had instructions in respect of it. 2. Not having heard anything further, Mr Anderson emailed Ms Crittenden again, at 3:32pm on 1 June 2015. That email referred to the letter of 4 May 2015 and then stated: I am instructed that my client will accept the offer. I will prepare and send to you a Notice of Discontinuance for you to sign and return to me. 1. Ms Crittenden replied, 10 minutes later, saying "Thank you Greg." 2. On 2 June 2015 Ms Goodwin, a solicitor in the employ of Mr Anderson's firm, sent an email to Ms Crittenden attaching a Notice of Discontinuance. Ms Goodwin asked that, if the notice were acceptable, Ms Crittenden sign and return it so that it could be signed for the plaintiff and filed. 3. The Notice of Discontinuance that was attached did not refer to each party's paying its own costs. 4. In a letter of 2 June 2015, Ms Crittenden replied by email to Mr Anderson. She specified that the Notice of Discontinuance should include a term saying that each party should pay its own costs. Ms Crittenden also forwarded a draft Deed of Agreement and Release "for your client's approval". 5. On the same day, Ms Goodwin returned an amended Notice of Discontinuance to Ms Crittenden which deed set out, as the "terms of discontinuance that each party should pay its own costs." 6. Ms Crittenden thanked Ms Goodwin for that document, and enquired "whether the Owners Corporation approves the deed". 7. The next day, 3 June 2015, Mr Anderson replied stating that the offer "has been accepted and is now binding between the parties". He noted that the offer "made no mention of a Deed of Release". He asked for the Notice of Discontinuance to be signed and returned. 8. Ms Crittenden's reply, which was repeated in her submissions before me today (she appearing for the defendants, although her conduct in relation to the matter could be thought to be in question as she herself was a witness), stated: "The offer was to discontinue the proceedings on terms requiring each party to pay their costs. I did not specify the form in which the discontinuation was to be recorded. The deed I have sent to you records the agreement to discontinue and also includes mutual releases for the benefit of the parties. If your client won't sign a deed to record his terms of the discontinuation proceedings my client will apply for the proceedings to be dismissed with an order that your client pay their costs." 1. There was thereafter further correspondence in which each party reasserted its position. In the course of that correspondence, Ms Crittenden made a further offer which specified that the defendant would settle on terms of the Deed of Release and Notice of Discontinuance referred to in earlier correspondence. That was rejected. Nonetheless, it is apparent from Ms Crittenden's affidavit that on "a without prejudice basis", Mr Anderson suggested some amendments to the proposed deed. He made it plain in doing so that he did not have instructions, but was sending the revised draft "to see if your clients will agree to the changes" on the basis that if they did he would recommend (to his client) that it should sign the deed. The parties' submissions 1. The plaintiff's point is simple. It says that there was a binding agreement for settlement reached on 1 June 2015, when the email accepting the terms of the letter of 4 May 2015 was sent. The plaintiff accepts that the draft Notice of Discontinuance sent by its solicitors on 2 June 2015 did not give effect to the term that each party should pay its own costs. Nonetheless, the plaintiff says, the Notice of Discontinuance that it sent later on 2 June did comply with that term. 2. The plaintiff submits that the events that happened after 1 June have no bearing on the question of whether, objectively, a binding contract for settlement was reached on 1 June 2015. 3. Ms Crittenden's submissions, for the defendant, basically encompassed three propositions. The first proposition was that the 28 day period specified for acceptance of the offer had expired by the time the email of 1 June 2015, in terms accepting it, was sent. The second proposition was that the offer had been made "subject to agreement on terms", and that the full terms remained to be agreed. The third proposition was that the discussions on 6 May confirmed in the email of 26 May amounted to a counter-offer. 4. The defendants also rely on the fact that there had been a continuation of negotiations in relation to the deed as some evidence that there was no binding agreement for settlement reached. Did the offer lapse without acceptance? 1. The first proposition on which the defendants rely can be disposed of very simply. It is correct to say that the email making the offer, or more accurately forwarding the letter in which the offer was made, was sent at 3:04pm on 4 May 2015. It is equally correct to say that the email accepting the offer was sent at 3:42pm on what (as I have said) is agreed to be the 28th day "from the date" of the letter of 4 May 2015. 2. Ms Crittenden's submission is that the 28 day period expired at 3:04pm on 1 June 2015, the 28th day. I do not agree. The general proposition, in relation to time, is that the law does not take account of fractions of a day. That proposition is reflected, in relation to statutes and in relation to the Uniform Civil Procedure Rules 2005 (NSW) by s 36 of the Interpretation Act 1987 (NSW) and UCPR r 1.11. In terms, those statutory provisions are not relevant except insofar as they give effect, in a statutory way, to the attitude of the common law. 3. Mr Knackstredt of Counsel, who appeared for the plaintiff, referred to the decision of the Court of Appeal of the Supreme Court of Queensland in La Forrest v Ford [2001] QCA 455. That case concerned almost indistinguishable facts, except that the period for acceptance of the offer was seven rather than 28 days from the day on which it was made. 4. Thomas JA (with whom McMurdo P and Cullinane J agreed) discussed the question of time at [22] to [28] of his reasons. He referred to, and extracted passages from, relevant authorities on the point. He concluded that, on the authorities as they stood: An offer that was said to be open for acceptance for a specified number of days from the date of its making produces the result that the period expires at the end of the seventh full day after receipt of the document. 1. In my view his Honour's reasoning is both (if I may say so) entirely correct and directly applicable to the facts of this case. 2. I conclude that the 28 days for acceptance of the offer expired at the end of (that is to say, a fraction of time before midnight on) 28 June 2015. It follows that the acceptance was within time. Terms yet to be resolved? 1. As I have noted, Ms Crittenden submitted that the offer was "on terms" and that the terms remain to be agreed. I do not accept that submission. 2. That submission might be correct if there was some general description following the specification of the "terms", or some clear indication that a mutually satisfactory Deed of Release was required before the settlement could become binding. However, the offer specified that the settlement was for discontinuation "on terms requiring each party to pay their own costs of the proceedings". There is nothing to be done, to give effect to a contract formed on acceptance of that offer, other than proffer a Notice of Discontinuance that contains the requisite term as to costs. 3. The Court is entitled to expect that a competent solicitor, representing his or her client's interests, will in making an offer of settlement (or, for that matter, in responding to an offer of settlement) specify in detail the terms on which the offer is made. In this case, there being no reason shown not to apply the presumption, I think that the better view of the offer is that it was self-contained, and did specify the whole of the terms that were offered. 4. It follows that the email of 1 June 2015 was capable of accepting the offer, so as to give rise to a binding contract (I shall return to the question of alleged counter-offer). 5. If that conclusion be correct, then it follows that the concluded agreement was made on 1 June 2015 when the email of acceptance was sent. It follows further that what was done and said thereafter could not change the position unless it demonstrated either a mutually agreed variation to the terms of the agreement that (by hypothesis) had been made or repudiatory conduct on the part of one party or the other. 6. Ms Crittenden did not submit that the matter could be analysed either in terms of variation or in terms of repudiation. Had she done so, I would not in any event have accepted the submission. 7. It is plain that Ms Goodwin, when she first sent a draft Notice of Discontinuance, did not prepare it so as to give effect to the requirement that each party should pay its own costs. It is equally clear that when Ms Goodwin sent the second part of the Notice of Discontinuance, she did. The fact that, in between those two drafts, Ms Crittenden (correctly) insisted on the terms as to costs and (incorrectly) insisted on the execution of the Deed of Agreement and release, cannot undo that position. 8. Nor, in my view, can it be the case that the belated attempt by Mr Anderson to resolve the matter on a commonsense basis by giving consideration to the terms of the draft deed, evidences either variation or repudiatory conduct. Mr Anderson had made clear his client's position that a binding agreement for settlement had been reached, and that his client was willing to perform it. In the circumstances, his email of 12 June 2015 offering amendments to the deed, clearly headed as it was "without prejudice", cannot be regarded as either retracting or detracting from his client's primary position. 9. Accordingly, as I have said, I do not regard the events that occurred after 1 June 2015 as undoing the effect of any agreement that had been concluded on 1 June 2015. Counter-offer? 1. That leaves for resolution the question of the alleged counter-offer. 2. It is plain that if an offer is made by one party to another to enter into contractual relations, a counter-offer by the other party will be taken to be an implied rejection of the first offer, so that (if the counter-offer be rejected) the first offer does not remain open for acceptance. There is no need to cite authority for that very basic principle of contract law. 3. It is thus necessary to give some attention to the terms of what was said to be the counter-offer. Mr Anderson did not say that his client did not or would not accept, or rejected, the offer that had been put on 4 May 2015. Nor, in my view, did he in terms put a counter-offer. What he did was make an enquiry as to whether an offer, that apparently had been held out previously, might be re-put. That is confirmed both by the terms of the conversation and by the terms of the email of 26 May 2015. Ms Crittenden has not said that the evidence given by Mr Anderson as to the terms of the conversation was anything other than correct. 4. In my view, in the context of this case, an enquiry as to whether a different proposal might still be available, does not amount either to a rejection of an offer that had previously been put or to a counter-offer. It is in effect a tactic not unfamiliar, and often seen, in negotiations when one party, having received an offer, enquires (without rejecting the previous offer or making a counter-offer) whether some other position might be available. 5. Accordingly, I do not think that there was made a counter-offer which had the effect of rendering unavailable for acceptance the offer of 4 May 2015. 6. To the extent that it may be relevant, it would appear to be clear that Ms Crittenden initially had the same view. Her response to the email accepting the offer was "Thank you Greg". The next email, in relation to the draft Notice of Discontinuance, did not say in terms that there was yet no contract. Rather, it indicated that she required not only the terms as to costs to be included in the Notice of Discontinuance, but also further terms, to be the subject of the draft Deed of Agreement and Release. Conclusion and orders 1. For those reasons the plaintiff is entitled to the relief sought by it in its notice of motion filed on 26 June 2015. I make a declaration in terms of prayer 1 of the notice of motion. I make an order in terms of prayer 2. I direct the defendants to execute and return to the plaintiff's solicitors within 14 days of today a Notice of Discontinuance in the terms of Annexure B to that notice of motion. I order the defendants to pay the plaintiff's costs of the notice of motion. I direct that the exhibits be handed out. ********** 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. Decision last updated: 12 August 2015