Cleary v Masterton

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

JUDGMENT 1 HIS HONOUR : The plaintiffs are solicitors of this Court who practise under the name of Walsh & Blair at Wagga Wagga. They were sued by the defendant in connection with a problem that arose out of an estate. The defendant also sued persons closer to the estate as second defendants. Those proceedings were number 5485/93 in this Division. 2 In May of 1998 discussions took place between the solicitors for the three sets of parties. Those discussions produced a settlement between the present defendant, Mrs Masterton, and the second defendants in the earlier proceedings. Messrs Walsh & Blair contend that Mrs Masterton also settled the proceedings against them on the basis that the claim would be discontinued, each party would pay their own costs and that Mrs Masterton would execute a deed of release. Mrs Masterton denies that there was any such agreement and Walsh & Blair have sued for specific performance. 3 The evidence has been given by two solicitors, employed by Phillips Fox at the time of the settlement negotiations, who appear to have been instructed by LawCover and because of that act for Walsh & Blair. The solicitors say that on about 20 May 1998 after discussions with Mrs Masterton's then solicitors it appeared to everybody that the probability of settlement was high. 4 On 25 May 1998 Mr Boyd, Mrs Masterton's former solicitor, rang Phillips Fox and asked whether they had instructions to settle, and was told that LawCover were agreeable to settlement, Walsh & Blair had not yet given instructions, but there should not be a problem. The proposed settlement would be on the basis of a discontinuance of the action and that all parties enter into a deed of release and pay their own costs. Mr Boyd replied, "That seems fine, it looks like we have settled." 5 On the same day Phillips Fox sent Mr Boyd a letter which referred, for some reason or other, to a conversation on 20 May, and said: "We advise our client is prepared to bear its own costs of the proceedings on the basis that: • Your client's claim against our client is discontinued; • The parties execute a Deed of Release in favour of our client; • There is no order as to costs. Our client's offer will remain open until 23 June 1998. This offer is made strictly without prejudice but on condition that you are advised ... Calderbank v Calderbank ..." It will be noted that there seems to be a shift from mutual releases to a release of Walsh & Blair. 6 The matter was listed for call over on 1 June 1998 and on 29 May 1998 the solicitors had a conference and Mr Boyd said: "The matter is settled as far as I am concerned. I am happy with your fax and I agree to the matter being stood over for six weeks to allow settlement documentation to be prepared. I will ring the second defendants' solicitors to see if they are happy with these arrangements and get back to you." 7 Later that day he did ring back and indicated that the second defendants in proceedings 5485/93 were agreeable to the matter being stood over for six weeks. 8 The Phillips Fox solicitor said she would have her colleague mention the matter on 1 June on that basis, but Mr Boyd then said: "My client may now only settle with the second defendants and I am still considering the position with respect to the first defendant." 9 The Phillips Fox solicitor made no comment about that utterance. 10 While those considerations were going on there was correspondence which does not really fit in nicely with what was being said between the lawyers. 11 On 28 May 1998 Mr Boyd wrote to Phillips Fox confirming that his client consented to a disposal of the matter along the lines proposed in Phillips Fox's letter of 25 May, and said that he was awaiting reception of the deed of release at Phillips Fox's earliest convenience. 12 On 5 June he again wrote to Phillips Fox saying that he had not received the deed of release: "As soon as that document has been sent my client will execute same and will be returned to you fairly shortly in the hope that this matter can be resolved in all it's [sic] aspects by 13 July, 1998." Presumably that was the date to which the matter had been stood over. 13 A new solicitor then took over the matter at Phillips Fox. He sent a draft deed of release and a draft deed of notice of discontinuance to Mr Boyd by fax on 18 June 1998. With respect, although the deed was not the best example of the drafter's art, it certainly fell within the description of a deed of release. However, there could be legitimate debate as to some of its provisions. 14 On 1 July 1998 Mr Boyd told Phillips Fox that he had ceased to act. Thereafter Mrs Masterton represented herself. 15 Mrs Masterton has filed an affidavit, which contains a letter from Mr Boyd to her of 1 June 1998, which notes her instructions only to settle against the other defendants and then says: "The Solicitors acting on behalf of Walsh and Blair are also hopeful that you will discontinue your case against them and they are prepared to withdraw and seek no Order as to costs if you do likewise. I note you have instructed me that you feel that they are responsible for some of the loss you have suffered and you should be able to extract damages from them. I appreciate your point but ... " 16 Mr Boyd then gave advice as to why Mrs Masterton would be wise to settle, which advice she rejected. 17 On 1 July, according to exhibit PX01, Mr Boyd wrote to the Legal Aid Commission that Mrs Masterton wished to pursue the action against Walsh & Blair. The letter stated that in view of the offer of settlement which had been made by Phillips Fox and the solicitors acting for the other defendants, Mrs Masterton's claim would be quite speculative and therefore he had ceased to represent her because she had declined to accept his reasonable advice. 18 On that material I am asked to say that there is a settlement of the former proceedings which should be specifically enforced. 19 If it be the fact that Mr Boyd actually settled the case with Phillips Fox even though Mrs Masterton had told him not to, then under the principle of Harvey v Phillips (1956) 95 CLR 235 there may still be a contract to settle the action because ordinarily the solicitor on the record is presumed to have authority to settle. Accordingly, I do not need to direct my mind to that aspect of the case. 20 The matter that I need to consider is whether there is a binding contract to settle. 21 In all cases of this nature, the court starts by looking at the various possibilities which were outlined by the High Court in Masters v Cameron (1954) 91 CLR 353, 360. In that case the High Court said that there were three categories of agreement and it was necessary to look at the intention of the parties, as manifested by their actions, as to which of the categories a particular fact situation fell into. 22 (1) There could be an informal contract which was intended by the parties to be immediately binding; in effect a provisional contract which was intended to be replaced by a more formal contract later; 23 (2) There could be an arrangement which would only become contractual if a condition were fulfilled; 24 (3) There could be the situation where although the parties had agreed on the major matters, such as price or property, there were so many aspects still remaining to be considered that the parties would not have intended to have been bound at all. 25 In G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 (an appeal from McLelland CJ in Eq reported at (1986) 40 NSWLR 622) the Court of Appeal said there was actually a fourth category, that is where the parties had entered into a fully binding contract even though they intended in due course to supplement it or replace it by a contract containing additional terms. This is known as the fourth category of Masters v Cameron and it is into that class or, alternatively, the first or second classes that Mr Curtin, counsel for Walsh & Blair, says this present case falls. 26 In Jameson v Central Electricity Generating Board [1999] 1 All ER 193, the House of Lords introduced additional consideration into the case where the contract is one of settlement of litigation. 27 The judgment of Lord Hope, who gave the leading judgment, says that one has always to analyse settlement contracts which have not been fully implemented to see whether as soon as the contract was made there has been a discharge of the cause of action subject to an implied resolutive condition, which would render the settlement void ab initio if the condition was not satisfied, or whether there is a settlement which is only to come into effect when a condition precedent is performed (see p 207). 28 Accordingly, even if a plaintiff in this sort of case shows the court that there was a contract under the second head of Masters v Cameron, attention must then be paid to whether the condition is a condition precedent or subsequent. If it is a condition precedent, then it must be shown that it either occurred or has not occurred due to no fault on behalf of the plaintiff. 29 One has got to look at the intention of the parties, though in this case the intention of Mrs Masterton must be looked at through the actions of Mr Boyd. That has a few problems in that what Mr Boyd said and what he wrote are not necessarily consistent, and it may well be that Mr Boyd was unduly optimistic in what he said to Phillips Fox, hoping that his client would take his advice. However, all I can do is to look at the communication between the parties to see whether there was a contract. 30 Phillips Fox's letter of 25 May is not the clearest example of an offer which can simply be accepted. The proposition is not directly put as an offer of settlement, but merely what LawCover is prepared to do to facilitate settlement negotiations with the plaintiff and the other defendants. 31 This is understandable in all the circumstances because it would appear that what Mr Boyd was doing, as would have been understood by the Phillips Fox lawyers, was trying to settle with the main defendants in proceedings 5485/93, the estate defendants, but he could not do that unless he knew that LawCover were prepared to walk away from the proceedings and pay their own costs. 32 However, even if one takes, as I do, the letter of 25 May as an offer to settle by Walsh & Blair, the offer certainly does focus on there being a deed of release and a discontinuance. 33 I note as a side comment that although the conversations between the solicitors were in the terms of mutual releases, the offer in the letter is only for a release of Walsh & Blair. 34 What then was the response? The formal response from Mr Boyd was on 28 May that: "My client consents to a disposal of the matter along the lines proposed". 35 I think this is too mealymouthed to be an acceptance. It is really a conditional acceptance. But even if it is an acceptance, as a matter of law it seems to me that it falls into the category of merely indicating that the principal terms are agreed to, but there will not be a contract until the formal deed of release is agreed to and signed. 36 Mr Curtin, in his submissions, which I think, with respect, covered everything that could be said on behalf of the plaintiffs, put that it was consistent that there was no mention of the words "subject to" a deed of release being sealed, as one would expect. I take this point and have weighed it in the balance with the other matters. 37 Then there is the letter of 5 June which, in the light of correspondence with the client, must again reflect Mr Boyd's optimism that his client would eventually take his advice, but this letter too focuses on the client executing the deed of release so that "this matter can be resolved in all it's [sic] aspects by 13 July". It seems to suggest it has not yet been resolved. 38 There was no response from Phillips Fox. It would seem that there was no response from Phillips Fox because the former solicitor had got on to other things and the new solicitor had not yet commenced his employment, otherwise I would have thought that there was some significance in the fact that there had been no contradiction of what Mr Boyd said. 39 Litigation in the Supreme Court is a serious matter and settlement of that litigation is a serious matter. If parties have brokered a deal whereby there is to be a deed of release and a discontinuance, the parties, to my mind, intend as a general rule that there is no contract until that release has been delivered and exchanged and the notice of discontinuance is at least signed. There may be in any particular set of circumstances some other intention manifested, but I think that is the general rule. 40 In the instant case, the parties had not reached that point. Accordingly, it seems to me that this is in the third category of Masters v Cameron, that there was to be no contract until the formalities had been completed. 41 Even if I were wrong on this and had to look at the matter exposed in Jameson's case, in my view, the contract would have been subject to a condition precedent, rather than a condition subsequent. 42 It is not a case, as was Jameson, where the settlement was to be consummated by the payment of money, rather it was to be consummated by documentation, and it is more likely than not that the intention was that this would be a condition precedent. 43 Accordingly, having fully considered the submissions made by Mr Curtin and the evidence filed on behalf of the plaintiffs, as well as that of the defendant, I am not satisfied that the matter was settled. 44 Before concluding, I should note that because I have found that there was no concluded contract, I do not have to consider either the ordinary rules as to whether I should in my discretion order specific performance or the special considerations involved where the court is asked to enforce an agreement to settle litigation in the court; see eg Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528. 45 Thus, the present summons must be dismissed with costs.

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