Brookfield Australia Investments Limited v Lucas Stuart Pty Limited

Supreme Court of NSW|2012-09-13|Before: Stevenson J, Young J, Beazley JA, Mason P, Ipp JA

EX TEMPORE Judgment 1The plaintiff, Brookfield Australia Investments Limited, seeks damages from the defendant, Lucas Stuart Pty Limited, in relation to a contract between them pursuant to which Lucas agreed to construct for Brookfield two residential flat buildings, eight townhouses and a cottage in Concord. 2Relevantly, Brookfield makes a "Doors and Windows Claim", a "Cracking Claim" and a "Roofs Claim" against Lucas. 3On 20 April 2012 the matter was set down for hearing on 10 September 2012, that is, last Monday, with an estimate of four to five days. On 4 May 2012 that hearing date was vacated and all issues (apart from a cross-claim between Lucas and an insurer) were referred to Mr Steven Goldstein pursuant to Uniform Civil Procedure Rules 2005 ("UCPR") r 20.14 for enquiry and report. I have been told that the matter has been set down before Mr Goldstein for seven days. The reference will commence Monday 17 September 2012.

Has the "Roofs Claim" settled? 4There have been negotiations to settle the proceedings. Dispute has arisen as to whether the "Roofs Claim" has been settled. Brookfield seeks a declaration pursuant to s 73 of the Civil Procedure Act 2005 that the Roofs Claim has been settled on the following terms: - (a)the defendant will pay the plaintiff $505,010 on or before 24 September 2012; (b)the defendant will release the plaintiff from all claims for release of retention monies with respect to the Roof Claims (if any); and (c)each party will bear its own costs of, and incidental to, the Roof Claims.

The relevant principles 5There is little or no dispute between the parties as to the principles that govern this matter. They were summarised by Beazley JA (with whom Mason P and Ipp JA agreed) in Boreland v Docker [2007] NSWCA 94 at [28] to [44] and in Carter on Contract, vol 1 at [03-210]. 6The relevant principles are that an offer and acceptance must precisely correspond. "Any variation in the effect of an offer and not merely a material or important variation, prevents the contract being formed" (see Carter on Contract at [03-250], cited with approval by Beazley JA in Boreland). Any departure from the offer means that a counter-offer is made and the offer is rejected.

Offer in respect of the Roofs Claim 7On 7 September 2012, Lucas made an offer ("the Offer") in respect of the Roofs Claim as follows: - (a)Lucas will pay Brookfield $505,010 in full and final settlement of the Roofs Claim; (b)Lucas will release Brookfield from all claims for the release of retention moneys; and (c)each party will bear its own costs in respect of the Roofs Claim. 8The Offer is in the same terms as the alleged settlement, except that the alleged settlement specifies 24 September 2012 as the date by which the $505,010 was to be paid. As will emerge below, that aspect of the matter is not controversial. 9Other offers were made at the same time as the Offer. An offer was made in respect of the Cracking Claim for $220,217, in respect of the Doors and Windows Claim for $5,000 and the matter overall for $525,000. Lucas accepts that the offer relating to the Roofs Claim could be accepted separately from the other offers.

Did Brookfield accept the Offer? 10On 10 September 2012, a settlement conference took place. Mr Frank Hicks of Counsel attended the settlement conference on behalf of Brookfield and Mr Martin Luitingh of Counsel attended on behalf of Lucas. Solicitors and representatives of the parties also attended. 11The question is whether, during the settlement conference, Mr Hicks accepted the Offer on behalf of Brookfield. 12Brookfield's solicitor, Ms Denise Wright, has sworn an affidavit giving an account of what happened at the settlement conference. Her account is based upon notes she made during the conference. There is little or no dispute about Ms Wright's account of what happened. Lucas's solicitor, Mr Graham Maher, and Lucas's Group General Counsel, Mr Terrence Grace, have sworn affidavits in which they express disagreement on some minor aspects of Ms Wright's recollection of events. Before me today counsel were agreed as to the manner in which the relevant, albeit rather small, controversy between those witnesses' recollections should be resolved. 13There is no dispute that, early in the settlement meeting, it was agreed that were the Offer to be accepted, Lucas would pay $505,010 within 14 days.

First Purported Settlement 14During the settlement meeting the following exchange took place: - "Mr Hicks: Provided you pay the roof offer of $500,000 within 14 days, you can expect that that will be accepted by [Brookfield]. To make it clear about the offers we are talking about, the first offer made on 5 September for $525,000 is rejected. The offer made on 7 September in relation to the roofs claim, subject to a 14 day payment arrangement, is accepted. We will want a deed to reflect that and we will want to rely upon the amount paid in so far there's an issue about costs. By this I mean the rule which I believe is 42.34 which provides for costs consequences if you recover less than $500,000. Mr Luitingh: You have to put that proposal in writing for me to understand what you're saying. It's a qualification to our offer". 15In my opinion, what Mr Hicks said on this occasion was not an acceptance of the Offer. Mr Hicks was saying that if Lucas agreed to pay the $505,010 referred to in the Offer "within 14 days" then Lucas "can expect that it will be accepted by Brookfield". Although, later in his statement, Mr Hicks said that the Offer "is accepted", those words must, in my opinion, be read in the light of those earlier in the passage. However, what was said in this first conversation gives some colour to what was said in the next conversation to which I now turn.

Second Purported Acceptance 16Later in the settlement conference the following exchange took place: - "Mr Hicks: We accept the offer that you will pay us the $505,000 and release us from all claims including retention claims and all variations. Each part will bear its own costs. Subject to payment within 14 days. And if on the balance of the issues there is an argument over costs and our total recovery, then our total recovery would include the $505,000. We are just trying to be very clear about our position and that this is what we would do. Mr Grace: We understand the impact of what you're saying but we have not contemplated it. The offers were drafted in such a way to resolve the matter and not because we think there was liability. Mr Hicks: If you want to, I can go and draft a clause right now so you can understand it, which we would put in the deed." 17The first three sentences of Mr Hicks's first statement, taken alone, amount to an acceptance of the Offer. Mr Walton SC, who appeared for Lucas, accepted that this was so, so far as it went. 18However, Mr Walton submitted that what Mr Hicks said thereafter shows that, in truth, there was no acceptance of the Offer because the purported acceptance constituted by the first three sentences became subject to two conditions.

Conditions? 19The first condition was that the parties enter a deed. 20The second condition was that the proposed deed contain the condition that Brookfield be able to rely on the receipt of the $505,010 proposed in the Offer for the purposes of UCPR r 42.34, if there was to be an argument about costs. 21Lucas submitted that Brookfield thereby required an "additional condition" concerning UCPR r 42.34 (as to any potential costs order) and stipulated that that condition was to be embodied in a deed to be executed by the parties. 22UCPR r 42.34 provides that a costs order ordinarily will not be made in favour of a successful plaintiff who recovers less than $500,000 unless the court is satisfied that the proceeding in this Court, rather than in the District Court, was warranted. 23Mr Hicks's reference to "the deed" was a reference to what he had said during the first purported acceptance. 24At that stage, in my opinion, Mr Hicks was not stating that the deed contain a provision about reservation of rights about costs. What he said was: - "We will want a deed to reflect that [i.e., acceptance of the Offer to be paid within 14 days] and we will want to rely upon the amount paid insofar as there's an issue about costs." (emphasis added) 25On a fair reading of those words, Mr Hicks was not proposing that the deed contain anything about the reservation of rights concerning costs. In my opinion he was doing no more than proposing that the payment of the amount of the Offer within 14 days be subject to a deed. 26During what I have called the second purported acceptance, when Mr Hicks referred to any "argument over costs" he was, it seems to me, referring to such argument as might ensue in relation to the issues outstanding following his acceptance of the Offer. These were the issues associated with the Doors and Windows Claim (subject to the offer of $5,000) and the Cracking Claim (subject to the offer of $20,217). Those figures suggest Mr Hicks had every reason to be concerned about the implications of UCPR r 42.34, so far as concerns continued litigation, if it were to be confined to the Doors and Windows Claim and the Cracking Claim; especially I would add if that were to take place over seven days. 27In my opinion Mr Hicks was doing no more than foreshadowing that Brookfield may wish to argue for a costs order in relation to the remaining claims, even if Brookfield recovered less than $500,000 in relation to those claims. He was not, in my opinion, cavilling with the proposition in the Offer that Brookfield and Lucas should pay their own costs of the Roofs Claim. Indeed, he said, in terms, that "each party will bear its own costs". 28Nor was Mr Hicks seeking to add a condition concerning UCPR r 42.34 to the proposed agreement. Indeed, he was not calling for any response from Lucas about this matter at all. None was sought, or called for. Mr Hicks was simply, and candidly, foreshadowing a submission that Brookfield might make, in the future, and in relation to the other two claims. As he said, "We are just trying to be very clear about our position and that this is what we would do". 29However, he was proposing that there be a deed. Mr Walton accepted during argument that the mere fact that Mr Hicks was proposing a deed would not, alone, have constituted a counter-offer. 30I think that concession was well made. It is true that there was not, in terms, an element of the Offer that there be a deed. However, the Offer did, in my opinion, contemplate that, were it to be accepted, a document would be prepared to record its terms. Thus the Offer stated, as one of its elements, that Lucas "will release" Brookfield from "all claims for release of retention monies". In my opinion, it was implicit in that statement that a document would be prepared to set out the precise terms of that release. 31In proposing a deed, Mr Hicks was stating that which would be implied by the law arising from the terms of the offer, namely, that it would be documented in some formal manner. 32The relevant principle is set out in Carter on Contract at [03-250]: - "Acceptance will be effective if it sets out expressly what would be implied by law in the absence of express agreement." 33The learned authors refer to Turner, Kempson & Co v Camm (1922) VLR 498 at 502. There Irvine CJ, (with whom McArthur and Macfarlan JJ agreed) proceeded on the basis that a response to an offer that did not "introduce any new terms, but only such terms as would reasonably follow consequentially on the agreement" was not a rejection of the offer. 34The learned authors of Carter on Contract also refer to Lark v Outhwaite [1991] Lloyd's Rep 132 at 139 where Hirst J said that: - "Statements which are not intended to vary the terms of the offer, or to add new terms, do not vitiate acceptance even where they do not precisely match the words of the offer, if the term merely makes express what would otherwise be implied." 35My attention was drawn during argument to a similar observation made by Young J (as his Honour then was) in Howe v Connell (Supreme Court of New South Wales, 25 September 1997, unreported) where his Honour, referring to Stevenson v McLean (1880) 5 QBD 346 said: - "It seems to me that if the 'counter-offer' merely goes to the machinery of working out what was meant by the offer, it is on the same plight as a request for information." 36Accordingly, in my opinion, Mr Hicks's proposal that there be a deed did not, in itself, prevent the Offer from being accepted. 37It is true that Mr Hicks also proposed that a "draft clause" concerning the UCPR r 42.34 issue be included in the deed. However, in my opinion, a fair reading of what Mr Hicks said shows that he was not proposing such inclusion as a condition of the settlement. 38Having foreshadowed the argument Brookfield might make concerning UCPR r 42.34, Mr Hicks said: - "If you want to, I can go and draft a clause right now so you can understand it, which we would put in the deed." (emphasis added) 39I read these words to mean that Mr Hicks proposed that the "clause" would only go in the deed if Lucas wished it to happen, and then only to record what Brookfield might do in the future. The proposal did not call for Lucas to do anything more than, perhaps, indicate whether it wanted the clause included. It did not convey any condition of the settlement for Lucas to respond to. For those reasons, my opinion is that the statements made by Mr Hicks about the "clause" to go in the deed did not prevent the Offer being accepted. 40Mr Walton submitted that the conversations which followed from those I have set out above, cast light on the situation in a manner which should cause me to hesitate to reach these conclusions. 41Those conversations were: - "Mr Luitingh: If an acceptance of the roof offer, if the matter then proceeds, it can do so without the roof issue, the trial will be shortened and there may be some benefits to that. But what we want to explore is whether we can resolve the whole of the matter. Surely, you have a total figure in mind? [Later] Mr Hicks: We will take the $505,000 roof offer unequivocally. Forget about everything else. And we want $620,000 in relation to the balance of the claims, and we get to keep the retention monies. Mr Luitingh: Can you explain the $620,000? [Mr Hicks then explained that figure] Mr Luitingh: OK I will get back to you. [Later] Mr Luitingh: My client is not disposed to go to $1.2 million. In terms of our offer the value of the retention monies is $200,000 not $100,000. My client is only interested in a global settlement and I will need to fight hard to get them to increase their offer. Mr Hicks: Are you withdrawing your offer? That offer was made and accepted. Mr Luitingh: No. Your client rejected our offer by making a counter offer which was not accepted. Mr Hicks: My client did not put a counter offer. As far as they are concerned the offer was accepted." 42In my opinion, they do not affect the conclusion to which I have come.

Conclusion 43In my opinion the Roofs Claim issue was settled on 7 September 2012 and I make the declaration in paragraph 2 of the Notice of Motion. Lucas must pay Brookfield's costs of the Notice of Motion. 44I make the following orders: - (1)Pursuant to s 73 of the Civil Procedure Act 2005, I declare that the claims made by the plaintiff against the defendant detailed in items 47 and 48 of the Schedule of Claims annexed to the Amended List Statement (the Roofs Claim) have been settled on the following terms: - (a)The defendant will pay the plaintiff $505,010 on or before 24 September 2012; (b)The defendant will release the plaintiff from all claims for the release of retention monies with respect to the Roofs Claim (if any); (c)Each party will bear its own costs of and incidental to the Roofs Claim. (2)I order that the defendant pay the plaintiff's costs of the Notice of Motion of 11 September 2012.

Amendments 09 January 2013 - corrected paragraph numbering Amended paragraphs: 43 onwards 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: 09 January 2013

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