Contracts - Offer and acceptance - Agreements contemplating execution of formal document - Whether concluded contract - Intention to be bound disclosed by the language employed by the parties.

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353; Rossiter v Miller (1878) 3 App Cas 1124; Sheehan v Zaszlos [1965] 2 Qd R 210; Powell v Jones [1968] SASR 394, referred to.

Workers Compensation - Entitlement to and liability for compensation - Contracting out and discharge of claims - Deed of release for lump sum in settlement of extinguishment of worker's entitlement under the Workers Compensation and Rehabilitation Act 1998 and common law rights.

Workers Rehabilitation and Compensation Act 1988 (Tas), ss133(3), 86(1)(c).

Judgment Number: [1999] TASSC 139

1 This is an appeal from a determination of the Workers Rehabilitation and Compensation Tribunal ("the Tribunal") that the appellant's rights to payment of compensation have been extinguished by a settlement effected by him, or his solicitor on his behalf, on 24 December 1997.

2 The appellant ("worker") has been in receipt of weekly payments of compensation which were terminated pursuant to the Workers Rehabilitation and Compensation Act 1988 ("the Act"), s86(1)(c). The matter was referred to the Tribunal but prior to a hearing, negotiations took place with a view to settlement. On 15 December 1997 at a conference between the parties, the employer offered to settle the worker's entitlements under the Act for $3,000 "all in". Subsequent to that meeting, a counter-offer was made on behalf of the worker to accept $10,000 "all in". This was in turn rejected by the employer, but a further offer by him was made for settlement not only of entitlements under the Act, but of the worker's common law rights for the sum of $8,000 "all in". In a telephone conversation with Mrs Mills, acting on behalf of the employer, and Mr Collinson, acting on behalf of the worker, the latter accepted that offer and confirmed that this would be in exchange for a full Release. The learned Commissioner found that there were discussions at this time that the settlement moneys would be set out in the Release to reflect $7,000 by way of damages and $1,000 for legal costs. It was also agreed that a Deed of Release would be sent to Mr Collinson to be executed by the worker. During January 1998, endeavours were made by Mrs Mills to effect this agreed settlement but on 24 February 1998 she was advised by the solicitor for the worker that the worker had changed his mind about settlement and had briefed another solicitor. The learned Commissioner expressed himself satisfied that during these discussions in December 1997, the solicitors for the parties intended that the settlement in the sum of $8,000 "all in" was to include any outstanding entitlements of the worker in respect of both workers compensation and damages at common law. He was satisfied that the parties did not expressly address whether or not they would be bound by this agreement prior to the execution of the Deed of Release or what would occur if the worker failed to execute the deed. Mrs Mills gave evidence that she believed that an agreement had been reached and the Deed of Release would merely formalise such agreement in a written form. Mr Collinson stated that he believed that at the conclusion of his discussion with Mrs Mills on 24 December, a deal had been struck and agreement reached as to settlement. However, he did not contemplate what would occur if the worker did not execute the Deed of Release. When he was advised by the worker that he did not wish to proceed to the settlement, Mr Collinson believed that the worker might well be forced to go through with the agreement and that due to the professional situation in which that placed him, he recommended to his client that he seek alternate legal advice. The learned Commissioner found that it had been clearly agreed between the parties that the worker would not receive the agreed settlement money until he had signed the Deed of Release.

3 The worker gave evidence that after advice from Mr Collinson and based upon his recommendation, he did instruct Mr Collinson to accept the offer made on 24 December 1997. He said, however, that he remained unhappy about the offer and continued to consider his position, deciding to change his mind after receiving medical advice about the likelihood of future medical attention. The learned Commissioner said that he was satisfied that although the worker was given proper detailed advice as to the effect a settlement in the terms arranged would have upon him as far as the future action in respect of his injury was concerned, he was not given specific advice as to the effect of verbally accepting the claim and that the worker, given the advice that he was given and his lack of understanding of such matters, considered that he could change his mind at any time up until he signed the Deed of Release. The learned Commissioner found further that at the conclusion of the discussion on 24 December, Mr Collinson believed that he had negotiated a settlement of his client's workers compensation referral in terms that it included a release by his client of any common law rights and that at the conclusion of the verbal discussion on 24 December 1997, there were no other essentials of the contract or terms of it that needed to be agreed upon or further negotiated.

4 In the well known case of Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, the Court consisting of Dixon CJ, McTiernan and Kitto JJ said, at 360 - 361:

"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller (1878) 3 App Cas 1124 when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation."

At 361 - 362, they referred again to Rossiter v Miller (supra) and to Lord O'Hagan's words, at 1149:

"Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made."

5 In the present case, the solicitors for each party had ostensible authority to bind their respective clients to an agreement and as the learned Commissioner found, there was nothing further to be negotiated. Mr Collinson had express authority from his client to accept the offer. It is submitted that because he did not mentally address the issue of whether the worker had any right to withdraw his acceptance and because the worker believed that he could do so prior to signing the Release, the parties were never ad idem; but as the Court said in Masters v Cameron (supra) at 362:

"The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape."

In my view, the uncommunicated reservation the worker may have had that he had the right to change his mind before signing and exchanging the Release does not affect the intention disclosed by the language the parties employed. In Sheehan v Zaszlos [1965] 2 Qd R 210 at 213, the members of the Court of Appeal referred to the statement that the question "depends on the intention disclosed by the language the parties have employed" and said that they would add the words "or inferred from their conduct".

6 In Powell v Jones [1968] SASR 394 at 397, Bray CJ referred to one category of case "where what at first sight looks like an enforceable contract turns out not to be one", namely:

"2 The parties may have made their agreement subject not only to the preparation but also to the execution of a formal document. In such a case, then, even though everything has in fact been agreed, either party may withdraw before the execution of such a document; eg Coope v Ridout (1921) 1 Ch 291. Their intention must be taken to be that until such execution each of them has a locus poenitentiae."

Coope v Ridout (supra) was a case where an offer to purchase freehold land at a specified price was made, "subject to title and contract". Negotiations followed with a draft contract being prepared containing all material terms agreed to in the discussions and correspondence. The draft was endorsed by the vendor with the words "It seems to be all in order". When the vendor refused to complete, the purchaser brought an action for specific performance; but the Court of Appeal held that the condition contained in the offer required that a written contract be formally entered into before it became binding. In the present case, the agreement to settle did not require any further documentation before it became binding, although, as in the case of a binding contract for the sale of land, the parties contemplated the execution of a further document to give full effect to the bargain already made and the exchange of monetary consideration therefor. So, too, in Powell v Jones (supra) the parties who had agreed to give and take a lease, the offer stating "Agreement for Tenancy or Lease to be in terms and to contain such special clauses as the landlord may require", were held to have an enforceable contract to take a lease of the premises.

7 Reliance was placed by the worker on the wording of the Release submitted to his solicitors for execution by him. It was submitted that the deed was expressed to operate so as to release the employer, whereas, had there already been a binding agreement prior to the deed being executed and the money paid over, there would have been no need for any reference in the deed to the worker releasing the employer. This involves a misconception. The parties had agreed all terms of the settlement on 24 December and the Deed of Release was drawn in such a way as to give effect to that agreement. In my view, there was a binding verbal agreement as at 24 December and no locus poenitentiae was ever contemplated. Although the formal extinguishment of the worker's rights was to be evidenced by the execution and delivery of the Release in exchange for the settlement moneys, there was already a binding settlement in which those rights were extinguished within the meaning of the Act, s133(3). The appeal is dismissed.