Supreme Court New South Wales Medium Neutral Citation: Mealey v Power [2015] NSWSC 1678 Hearing dates: 10 November 2015 Date of orders: 10 November 2015 Decision date: 10 November 2015 Jurisdiction: Equity Before: Pembroke J Decision: Summons dismissed Plaintiff to pay defendant's costs Catchwords: CONTRACT – offer and acceptance – whether oral communication constituted an offer capable of acceptance WITNESSES – credibility – inutility of demeanour as a primary tool – importance of contemporaneous notes and objective facts - probabilities Cases Cited: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187 Humphris-Clark v Lazaridis [2010] NSWSC 318 Masters v Cameron (1954) 91 CLR 353 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd [1999] HCA 3 at [88]; (1999) 160 ALR 588 at [88] Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 Category: Principal judgment Parties: Christopher Mealey - plaintiff Linda Power - defendant Representation: Counsel: I R Coleman SC with R O'Brien – for the plaintiff A Rogers – for the defendant Solicitors: Jack Rigg Solicitors – for the plaintiff Mitry Lawyers – for the defendant File Number(s): 2015/224041 Judgment 1. The issue in this case is whether an offer was made and whether it was capable of acceptance. The issue is not a Masters v Cameron (1954) 91 CLR 353 issue. The only question is whether, in the context of communications between solicitors, a statement by one solicitor should be properly characterised as an offer, or whether that communication, when properly characterised in its context, was more in the nature of an invitation seeking to elicit a higher offer from the other party. The legal principles are well-established. In determining a question as to whether an agreement has come into existence, the Court seeks to ascertain the objective intention of the parties, being: The intention that a reasonable person with knowledge of the words and actions of the parties communicated to each other and the knowledge that the parties have of the surrounding circumstances would conclude that the parties have concerning the subject matter of the alleged contract. 1. See Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at [655] per Campbell JA; Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [11] per Gleeson CJ, Gummow and Hayne JJ; Humphris-Clark v Lazaridis [2010] NSWSC 318 at [31]. 2. The context in which the disputed communications occurred was a personal injury action in the District Court of New South Wales between the defendant as the plaintiff in those proceedings and the plaintiff as one of the defendants. It was a slip and fall case in which the defendant suffered personal injuries. The plaintiff was apparently a cleaner who was said to have been one of the persons responsible for the state of affairs which caused the plaintiff to slip and injure herself. I heard evidence from the three solicitors involved in the communications and had the benefit of seeing each of them in the witness box. Each was cross-examined on their affidavits and each gave evidence to the best of their ability. I should add that further evidence was given by the wife of one of the solicitors. 3. Conventionally, the demeanour of the witnesses in the witness box is a factor to be weighed in the balance in assessing the probabilities. But significant allowance must be made for the confusion which witnesses often bring to the witness box, the apprehension that they exhibit, the natural fallibility of memory, the carelessness and loose language with which some people are genetically or culturally imbued and the degree to which some witnesses have carefully rehearsed and convinced themselves of the correctness of their evidence. All of those matters are relevant in this case, but what matters most is usually the proper construction of such contemporaneous notes and documents as may exist, and the probabilities that can be derived from those notes and any other objective facts. In State Rail Authority of New South Wales v Earthline Constructions Pty Ltd [1999] HCA 3 at [88]; (1999) 160 ALR 588 at [88], Kirby J reiterated these well-known concerns as follows: There is a growing understanding, both by trial judges and appellate courts, of the fallibility of judicial evaluation of credibility from the appearance and demeanour of witnesses in the somewhat artificial and sometimes stressful circumstances of the courtroom. Scepticism about the supposed judicial capacity in deciding credibility from the appearance and demeanour of a witness is not new. In Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The Palitana), Atkin LJ remarked that 'an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour'. 1. See also Fox v Percy (2003) 214 CLR 118 at 128 [30] – [31]; [2003] HCA 22; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 348 (Samuels JA); and Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187 at [16] – [31] (Ipp JA). 2. In this case, the oral evidence of the witnesses revealed inconsistencies and mistakes in the affidavits, especially on the part of Mr Mitry and Ms Needham, who were called on behalf of the defendant. On the other hand, Mr Williams, who was called on behalf of the plaintiff, was at least superficially, a far better witness. However, I am not persuaded that Mr Williams' account is the preferable one. I do not think, when weighed against the objective facts and some of the contemporaneous documents, that it accords with the probabilities. At the time of the relevant communications, Mr Williams was at home on a Friday afternoon. The District Court case was due to start on the Monday. It was his practice to go home early on Fridays. He had two young, recently born children and he was enthusiastic about the prospect of settlement of Monday's case. I think that what has occurred is that Mr Williams has overreacted to the communications that occurred and misconstrued them in a way that a reasonable person with knowledge of the words and actions of the parties communicated to each other would not have done. 3. A few things are clear. Earlier in the afternoon, an offer of $50,000 was put by Mr Williams on behalf of the plaintiff. The plaintiff (the defendant in the District Court proceedings) offered to settle the District Court claim for $50,000, inclusive of costs. A conference call took place involving Mr Mitry and Ms Needham on behalf of the defendant and Mr Williams on behalf of the plaintiff. Mr Mitry and Ms Needham were at an office in the city. Mr Williams, as I said, was at home. His wife was present but not necessarily in the same room as he was for all of the conversation. In any event, she was not paying particular attention to his conversation and was otherwise occupied with matters relating to their children. There is little doubt and no real controversy that at some point in the conversation, Mr Mitry said, '50 might do it for Dr Power, but another $20,000 would help out me and counsel. Otherwise, there is not much left for our fees.' 4. There was cross-examination about whether Mr Mitry or someone else said that the figure of $70,000 was made up of $50,000 plus $10,000 for counsel and $10,000 for Mr Mitry's firm. It does not really matter. The gist of the communication to Mr Williams was that his offer was unlikely to be accepted, but another $20,000 might make it sufficiently attractive. 5. In truth, unknown to Mr Williams, Mr Mitry did not have instructions to put an offer of $70,000. The question however is whether, properly construed, his language should be taken as amounting to such an offer. I do not think so. There is no doubt that at some stage during the conversation, Mr Mitry mentioned the figure of $70,000. His evidence in the witness box was unsatisfactory about that and at one stage, in a letter, even denied having mentioned $70,000. But as matters emerged and the evidence settled down, it was clear that he had mentioned the figure of $70,000. The clear inference from the conversation and the words he used, in my view, is that he was saying that $50,000 was too low and that any offer would need to be at least $70,000. But it was also clear - and should have been clear to Mr Williams - that, properly construed, Mr Mitry was doing no more than fishing for a higher offer. There was no promise that his client would accept $70,000. 6. He was trying to get Mr Williams to increase the offer on the table. This is, to some extent, corroborated by the contemporaneous notes of Ms Needham. At 2.22pm, she made a file note which said, among other things, 'Their offer is up to $50,000'. I should say that Ms Needham was not a perfect witness and was clearly apprehensive. But she was obviously assiduous and was trying to do her best in the witness box and I infer that she was a careful and cautious solicitor in connection with this matter. It happened to be the first settlement of a civil claim in which she had been involved. She worked closely under Mr Mitry's supervision and did not advance the negotiations in any sense on her own part. At 3.14pm she made a file note after calling counsel and referred in the file note to 'Mealey's offer'. At 4.59pm, immediately after the three-way telephone conversation between her, Mr Mitry and Mr Williams, she recorded these words 'Will Mealey offer higher than $50,000? He will get instructions'. 7. At 5.12pm, she wrote a file note in which she said, 'Call LP [Linda Power]. re-discuss Mealey's offer'. Her file note went on to say, 'They say it's nowhere near what they want. They want to know our advice.' None of those communications are consistent with the characterisation of Mr Mitry's communication with Mr Williams as having constituted the making of an offer (or counter-offer) of $70,000. On the other hand, Mr Williams' first file note in relation to this matter, which he made at home, confirms that he was to get instructions from Mr Mealey. It also contains the words 'counter-offer $70,000', but in the overall context which I have endeavoured to explain, I think those words represent no more than Mr Williams misconstruction of what was being proposed by Mr Mitry. 8. I am afraid to say that Mr Williams' misconstruction has its foundation in his enthusiasm to seek to resolve the case for his client prior to the hearing on the Monday. Shortly afterwards, later that afternoon, he wrote to Ms Needham and said that he was unable to get instructions from Mr Mealey and was unable to enter into 'any further negotiations'. He did not say that he was unable to accept the counter-offer of $70,000. I think the situation was far less concrete than that. On the following morning, however - the Saturday morning - he did get instructions from Mr Mealey and responded with an email that said that he was instructed to 'accept your offer of settlement, as proposed, at $70,000'. This, however, no doubt reflects not just his own enthusiasm, but the desire of Mr Mealey to resolve the litigation at that price if they could. Unfortunately, Mr Mitry had never, in my view, made an offer capable of acceptance. 9. Mr Williams then sent a text to Ms Needham saying, 'We accept your offer of $70,000', to which she replied in a studied and non-committal way. Her response was, 'Yes, email received. Thank you. I will speak to everyone on our side.' This is a natural response from an intelligent junior solicitor in a situation where there has clearly been a breakdown in communications and consequent confusion. It is consistent, in my view, with Ms Needham - and any reasonable person in her position – having recognised that the situation was troubling and that a statement that was not originally intended to be an offer had been treated as such by Mr Williams. 10. A few hours later, after speaking to Mr Mitry, Ms Needham wrote to Mr Williams to say, politely, 'To clarify, our discussion on Friday was not a counteroffer, but rather an invitation to seek instructions from your client to increase his offer.' I think this is an accurate description of what occurred. I do not think that there was anything disingenuous or artificial in what she said in that letter. Mr Williams was naturally upset and described it as 'wrong, disingenuous, and self‑serving' but I do not think that that was a fair or appropriate description. 11. I have had the benefit of considering all of the evidence and seen four of the witnesses in the witness box. The picture presented to me is broader and more carefully refined than that which was available to Mr Williams at the time, and I have reached a different view. I do not think the evidence of Mr Williams' wife adds anything significant. In substance, she said that she heard Mr Williams talking about $50,000 and $70,000, and that she heard him saying that he would get back and 'let you know what he says.' In her affidavit, she also attributed to her husband the words 'but I have an obligation to put your offer to him, so I will,' but I do not place much reliance on her studied use of the words 'your offer.' As I said, she was not paying close attention at the time. She was not alive to the issues. And I do not think that those words, on the balance of probability, are an accurate reflection of precisely what was said or the language that was used. 12. I mentioned that Mr Mitry and Ms Needham were not, at a superficial level, as good as witnesses as Mr Williams, but as their evidence emerged, and as they settled into the witness box, each faced up to the realities of the evidence, the documents and the probabilities, and a clear picture emerged. This is not a case where anyone has fabricated their evidence. It is much more a case where Mr Williams has misconstrued the communications that were made to him and then convinced himself that his construction is the correct one. 13. Mr Williams was, no doubt, seeking to do the best for his client, but what happened is what frequently happens in these cases. And an experienced solicitor, with knowledge of the words and actions of the parties at the time, would not, in my view, have construed the language of the conversation between Mr Mitry and Ms Needham and Mr Williams as giving rise to a counteroffer in the sum of $70,000 capable of acceptance. What it conveyed was that Mr Mitry was seeking to elicit a higher offer from Mr Williams in that amount, and that if such a higher offer were elicited, he would then get instructions. He may have also conveyed that he thought such a figure would be accepted, but there was no clear promise to that effect, and that could not be assumed. 14. In those circumstances, the result must be that the summons should be dismissed and the plaintiff should pay the defendant's costs. ********** 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: 11 November 2015