Mereworth Property Pty Ltd v Mereworth Pastoral Pty Ltd

Judgment (4 paragraphs)

[1]

ex tempore JUDGMENT (revised)

The only issue to be decided in these proceedings is whether the parties entered into a binding settlement agreement to settle other proceedings in this Court.
Those other proceedings concern a 2022 put‑and‑call option deed, that, inter alia, gave the plaintiffs a call option over a lot to be created by registration of a plan of subdivision of land in Berrima, New South Wales. The issue in those proceedings is whether the period of the call option had been extended or not.
The parties engaged in settlement communications culminating in the correspondence, the subject of these proceedings.
On 24 November 2023, the plaintiffs' solicitors received a without prejudice letter from the defendant's solicitors containing an offer to settle the primary proceedings, stated to be "open for acceptance in writing by 4pm on 1 December 2023". That offer was not accepted, and on 5 December 2023, the plaintiffs made a counteroffer and sought "acceptance of the above terms by no later than 5pm on Wednesday, 6 December 2023".
The offer to which these proceedings relate was made by the defendant on 7 December 2023 by a solicitor's letter.
Relevantly, that letter provides in part: 1.2 Our client is content to accept the majority of the terms proposed in your email, with certain modifications. 1.3 For clarify [sic], we set out the terms on which our client is prepared to proceed below: (a) Your clients' nominee, Silicon Highlands Pty Ltd ATF the Silicon Highlands Trust (ACN 665 796 878), will purchase the Property on the terms of the contract at Annexure A to the Option Deed amended and completed as follows (Contract): [Subparagraphs (i) to (viii) described in general terms a series of different amendments to the contract for sale annexed to the Option Deed.] (b) Your clients will, as a continuing obligation, and to the fullest extent permitted by law, unconditionally and irrevocably indemnify our client from and against all losses, costs, damages, and liabilities that our client incurs or suffers directly or indirectly from or in connection with any breach or default by the purchaser of or in respect of the Contract; (c) Your clients, upon acceptance of this offer, will: (i) pay (or cause the purchaser to pay) the deposit of 5% of the purchase price; (ii) pay the sum of $138,471.07; (iii) pay a contribution of $125,000 towards our client's legal costs; (iv) serve on our client the Contract, in duplicate, duly executed by the purchaser; and (v) if the Contract is executed under a power of attorney, serve on our client a copy of the power of attorney. (d) The payments required by (c) above are to be made by electronic funds transfer to the following trust account … (e) Subject to, and within 14 days after, receipt by our client of all of the things referred to at (c) above, our client will execute and exchange the Contract. (f) Within 7 days after exchange of the executed Contract, the parties will lodge with the Court consent orders: (i) vacating the orders made on 25 August 2023; and (ii) dismissing the proceedings with no order as to costs. (g) At or before completion of the Contract, or immediately upon demand by our client in the event that the Contract does not complete, your clients will cause the replacement Caveat to be withdrawn. (h) With effect from exchange of the Contract, all claims between the parties in relation to the Call Option Deed and the transactions contemplated by it (save for any claim to enforce the terms of this settlement) will be released and forever discharged. 1.4 This offer is open for acceptance in writing by 4pm on 11 December 2023, after which it will lapse.

Proper construction of the offer

A contract is formed when the parties objectively intend to be bound: Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 at [64] (Bell CJ, Hammerschlag CJ in Eq and Adamson JA).
Where questions of formation arise concerning a written agreement, they are resolved by reference to construction of the documents constituting the offer and potential acceptance, including, where relevant, conduct: Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [84] (Beazley P) and [124] (Basten JA, Gleeson JA agreeing); Lawrence v Ciantar [2020] NSWCA 89 at [114] (Bathurst CJ, Meagher and Gleeson JJA agreeing).
The meaning of the settlement offer "must be ascertained by reference to what a reasonable person would have understood the language … to convey": HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634 at [19] (Meagher JA and Ball J), citing Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).
Regard is had to the circumstances addressed by the settlement offer in its context, also considering its aim and purpose: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47] (French CJ, Nettle and Gordon JJ).
Applying those well‑known principles, I consider that the 7 December offer was an offer which was capable of being accepted merely by doing so in writing within the stipulated time. Once accepted, as it was, the contract that had been formed required the plaintiffs to do each of the things set out in subparagraphs (i) to (v) of paragraph 1.3(c) thereafter.
The parties agree that it is unnecessary for the Court to determine whether those steps must have been carried out within a reasonable time after acceptance. However, it is likely that that would be the proper construction. Further, the parties do not require the Court to determine whether the plaintiffs did in fact comply with the requirements of paragraph 1.3(c) within a reasonable time, namely, it is not necessary to determine what a reasonable time is in this context.
The very clear language of paragraph 1.4 provides the way in which the offer could be accepted and only required "writing". It makes no reference to acceptance requiring compliance with the matters in paragraph 1.3(c). Neither does paragraph 1.4 adopt the language the parties had used in the option deed concerning the valid exercise of the option. I consider that, had paragraph 1.3(c) set out the requirements for acceptance, then paragraph 1.4 would either not have been included or would have referred back to paragraph 1.3(c). I do not accept that there would have been a need for acceptance in writing if the defendant required other significant acts, such as payment of money and provision of an amended and executed contract in order to accept the offer.
A key issue is the meaning of the word "upon" in paragraph 1.3(c). The parties accept that it is, as Mr O'Brien expressed it, an "elastic term" that may mean before, at the time of, after, immediately after, or within a reasonable time. I consider here the proper construction is that "upon" means after. I reject the defendant's submission that the conclusion in Brien v Dwyer (1978) 141 CLR 378 (Brien v Dwyer) is apposite here, and that the analysis in that case supports the defendant's construction. Every contract must be construed on its own terms, and Brien v Dwyer concerned a different situation, namely, the formation of a contract for the sale of land, and the timing of when a deposit was required to be paid. There was also an issue in that case concerning the vendor's right to terminate, because of the alleged late payment of the deposit. In this case, the situation concerns whether a settlement offer has been accepted, even though that offer does contemplate the completion of the separate contract for the sale of land.
I was also taken to the decision of the High Court in Bowman v Durham Holdings Pty Ltd (1973) 131 CLR 8, which also was a case concerning the construction of the effective exercise of an option. A phrase was used that payment of a relevant sum needed to occur "upon the exercise of the option". The High Court in that case determined that the deed did not require that payment should occur simultaneously with the exercise of the option when read in context. Because what is being construed here is a settlement contract, I do not consider there is necessarily direct application of that decision to the facts here, but it does provide an example of a situation where, in a land transaction, the word "upon" was construed to mean "after", as the plaintiffs submit here.
I also do not accept the defendant's submission that the parties did not intend the uncertainty that may arise if the word "upon" is given the meaning of "after". The concept of reasonable time, for example, is frequently encountered in the context of various agreements where no time for performance is specified, and it provides little uncertainty for parties. Again, I note that at no point in time has the defendant asserted that the plaintiffs have taken more than a reasonable time after the acceptance of the offer on 11 December to complete the matters specified in paragraph 1.3(c).
I further consider there are matters within the 7 December offer letter that support this construction. I accept the plaintiffs' submission that the defendant's obligation under paragraph 1.3(e) to execute a counterpart of the contract for sale was "[s]ubject to … receipt by our client of all the things referred to at (c)". The inclusion of that qualification on the defendant's obligation would have been unnecessary if the defendant was already protected from being required to perform if the requirements in paragraph 1.3(c) were preconditions to formation.
Further, within the letter, in other situations, the offeror has been very precise with the timing of certain events, including, for example, reference to 14 days in paragraph 1.3(e), and other provisions concerning other timeframes. That has not occurred in relation to paragraph 1.3(c).
I also consider the plaintiffs' construction accords with commercial common sense. Subparagraphs 1.3(a)(i) through to (viii) of the offer describe the general effect of a series of different amendments to be made to the contract for sale. I do not accept that all of those amendments were necessarily straightforward and could be dealt with immediately, or that those amendments dealt with all matters. For example, there was a question as to whether the undated standard form for the contract for sale ought to have been employed.
While I note that on 14 December 2023, the defendant's solicitor acknowledged that "your clients accepted the offer on 11 December 2023," because of the other reasons above, I think it is unnecessary to decide whether this acknowledgment bears any real significance on the question of construction of the letter of offer.

At a glance

Court

Decision date

Before

Source

Judgment (4 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (9)