Nesci v Nesci [2005] WASC 65

Supreme Court of WA|2005-04-27|Before: Mr P, Hodgson J

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NESCI -v- NESCI [2005] WASC 65

Practice and procedure - Action for partition or sale of land - O 24A offer by plaintiff to sell his half interest in land to defendant - O 24A offer based on offer by third party to purchase whole of the land - Before O 24A offer accepted third party increased amount of its offer to purchase land - Application by plaintiff to withdraw O 24A offer - Principles to be applied - Whether O 24A offer can be withdrawn after acceptance - Relevant principles

Cumper v Pothecary [1941] 2 KB 58

Garner v Cleggs (a firm) [1983] 1 WLR 862

Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528

Mohamed v Farah [2004] NSWSC 482

Scanruby Pty Ltd v Caltex Petroleum Pty Ltd [2001] NSWSC 411

Young v Combe, unreported; SCt of NSW (Hodgson J); 29 July 1993

Martin-Smith v Woodhead [1990] WAR 62

1 MASTER NEWNES: This is an application by the plaintiff for leave to withdraw an offer of compromise made under O 24A of the Rules of the Supreme Court.

2 The plaintiff and the defendant are brothers. They are the registered proprietors of the land known as Lot 22 Great Northern Highway, Muchea. Lot 22 was created by the subdivision of an area of land left to them and their brother Vincenzo by the will of their late father.

3 On 20 June 2004 Mr Graham, one of two partners in a business known as Douglas Stockyards & General Engineering ("Douglas Stockyards"), wrote to the plaintiff and the defendant offering on behalf of Douglas Stockyards to purchase the land for the sum of $130,000. In his letter, Mr Graham said that "they", apparently meaning his partner and himself, had a pre-approved bank loan to purchase a property for the business. They wished to approach the local authority to obtain approval to conduct their business on the land but to do so they required the signatures of the plaintiff and the defendant. Mr Graham said in the letter that if the brothers signed the application, and Shire approval was obtained, Douglas Stockyards "will be putting in a cash offer for $130,000 with no clauses."

4 Mr Graham confirmed, by letter of 12 November 2004, the interest of Douglas Stockyards in purchasing the property for $130,000. In the letter he reiterated that Shire approval would be needed to operate the business from the property and that that approval would need to be obtained before Douglas Stockyards purchased it.

5 The plaintiff wished to sell the land to Douglas Stockyards but the defendant did not. For reasons it is unnecessary for present purposes to go into, the defendant also disputes that the plaintiff is beneficially entitled to a half interest in the land.

6 On 13 January 2005 the plaintiff commenced these proceedings under s 126 of the Property Law Act, seeking partition of the land or, alternatively, a sale in lieu of partition. An appearance was entered on behalf of the defendant on 27 January 2005.

7 Shortly after these proceedings were commenced, Mr Graham informed the plaintiff that Douglas Stockyards was prepared to make an unconditional offer to purchase the land for $130,000. Mr Graham confirmed that advice in a telephone conversation with the plaintiff's solicitor on 31 January 2005. He reiterated it in an affidavit sworn on 1 February 2005 and filed in the action on 4 February 2005. That affidavit was served on the defendant's solicitors on or about the latter date.

8 On 1 March 2005 the plaintiff, by his solicitor, served on the defendant's solicitor an offer to compromise the action by offering to sell his half interest in the land to the defendant for the sum of $65,000, settlement to be within 42 days of service of the offer. The offer was expressed to be made under O24A. Pursuant to O 24A r 3(3), the offer remained open and could be accepted by the defendant within 28 days of service of it.

9 On 3 March 2005 the defendant's solicitors acknowledged receipt of the offer and said that the defendant was willing to accept it on the condition either that two concrete tanks, which the defendant said had been removed from the property, were returned or the selling price of the property was reduced by $1000. The plaintiff did not accept that proposal.

10 The defendant's counteroffer did not, of course, affect the time within which the O 24A offer made by the plaintiff was open for acceptance by the defendant: O 24A r 3(7).

11 On about 5 March 2005, Mr Graham had a conversation with the plaintiff. Mr Graham asked the plaintiff how the court action was going. The plaintiff told him that he had made an offer to the defendant to sell his interest in the land to the defendant for $65,000, being half of the amount for which Mr Graham and his partner had offered to purchase the land. He told Mr Graham that the defendant had made an offer to purchase his (the plaintiff's) interest. Mr Graham said he was prepared to increase his offer to purchase the land to $150,000.

12 At that time the plaintiff's solicitor was away from work undergoing medical treatment and subsequent convalescence. On his return to work on 14 March, he was informed by the plaintiff of the conversation with Mr Graham and requested by the plaintiff to inform the defendant of the increased offer. The plaintiff's solicitor telephoned the defendant's solicitor that day and told him of the increased offer. He then wrote to the defendant's solicitor confirming the increased offer and saying that "all prior offers made by our client to settle the abovementioned action are hereby withdrawn and we will now endeavour to seek confirmation of Mr Graham's new offer".

13 The plaintiff's solicitor wrote to Mr Graham the same day and on 17 March 2005 received from Mr Graham a letter dated 14 March saying "we are prepared to offer an additional $20,000 to purchase Lot 22 Great Northern Highway, Muchea, making the total purchase price $150,000 as discussed with Mr A Nesci on 5 March 2005".

14 On 24 March 2005, the defendant's solicitors wrote on behalf of the defendant to the plaintiff's solicitors accepting the offer made by the plaintiff under O 24A.

15 The plaintiff now seeks the leave of the Court to withdraw that offer.

16 It was not in issue that under O 24A r 3(6) the Court may order that a party may withdraw an offer during the time that is open to be accepted. It was further contended on behalf of the plaintiff that an order may be made nunc pro tunc after the offer sought to be withdrawn has purportedly been accepted.

17 I did not understand the defendant to contend that acceptance of the offer before an order had been obtained under O 24A r 3(6) prevented the Court from making such an order. In circumstances such as the present, I do not consider that the acceptance of the offer would have that effect.

18 It is, I think, clear that the question of the withdrawal of an offer made under O 24A is not to be determined on ordinary contractual principles. The offer is made under the rules of Court and acceptance of an offer made under O 24A is an agreement made subject to the procedures of the Court, including the procedure by which the offeror may be permitted to withdraw the offer: see Cumper v Pothecary [1941] 2 KB 58 at 67; Garner v Cleggs (a firm) [1983] 1 WLR 862 at 871; Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528; Scanruby Pty Ltd v Caltex Petroleum Pty Ltd [2001] NSWSC 411. The overriding principle with which the Court is concerned is the interests of justice and the rules are to be applied so as to promote the attainment of justice between the parties, not to frustrate it: see Lewis v Combell Constructions Pty Ltd (supra) at 538; Scanruby Pty Ltd v Caltex Petroleum Pty Ltd (supra) at [18]; Mohamed v Farah [2004] NSWSC 482 at [67].

19 It has been held in New South Wales, in respect of a rule in similar terms to O 24A, that the fact that the offer has been accepted does not prevent the Court making an order permitting the offeror to withdraw it: Lewis v Combell Constructions Pty Ltd (supra); Scanruby Pty Ltd v Caltex Petroleum Pty Ltd (supra).

20 In my view, the position is the same in Western Australia. There is nothing in O 24A which expressly requires that leave be obtained prior to acceptance of an offer and, in my view, it could not have been intended that it was necessary to obtain such an order before acceptance of the offer. The requirement to obtain an order permitting the withdrawal of an offer contemplates that an application has to be made which, on ordinary principles, would have to be served on the other party and which normally would involve some time passing before it was actually heard and determined by the Court. If the withdrawal of an offer were not possible after it had been accepted the benefit of rule (6) would largely be rendered nugatory. Any application to withdraw an offer could readily be thwarted by an offeree by the simple expedient of accepting the offer before the application to withdraw it came on for hearing.

21 The defendant was notified before acceptance that the plaintiff "withdrew" the offer. The acceptance was delivered some 10 days later. In circumstances where the offeree has been informed, before acceptance, that the offeror withdraws the offer, I do not think that a subsequent acceptance of the offer puts it beyond the power of the court to permit the offer to be withdrawn.

22 It is unnecessary in the present case to consider what the position would be if the offer had been accepted before the defendant received any notification that the plaintiff sought to withdraw it. I might say, however, that I do not see why that would put it beyond the power of the Court to permit the offer to be withdrawn, although the question of prejudice to the defendant would plainly be a relevant consideration on an application in those circumstances.

23 It is therefore necessary to turn to the question of whether the plaintiff should be permitted to withdraw the offer.

24 It was submitted on behalf of the plaintiff that an offer may be withdrawn where there has been a sufficient change in circumstances since the offer was made as to make it just that the offeror be permitted to withdraw it. Counsel for the plaintiff argued that in the present case there had been such a change in circumstances, in that the fundamental basis upon which the O 24A offer had been made had changed with the increased offer by Douglas Stockyards.

25 The defendant submitted that no proper reason had been made out for permitting the offer to be withdrawn. Order 24A specifically provided that an offer must be open for a period of not less than 28 days. The objective of the rule would be undermined unless the offeror was committed to the offer for the 28 day period in all but the most exceptional circumstances. It was submitted on behalf of the defendant that there were only three circumstances in which an offer could be withdrawn. Where there was a bona fide mistake, a change of circumstance beyond the control of the offeror or a change in the law. There was not a relevant change of circumstances simply because evidence had subsequently become available which the offeror considered improved his position. In the present case, all that had changed was that a prospective purchaser had indicated that he would be prepared to pay a greater amount for the land than he had initially indicated. That was not sufficient to justify the offer being withdrawn.

26 The research of counsel and my own research have not disclosed any decisions in Western Australia dealing with the principles to be applied on an application to withdraw an offer under O 24A. In Civil Procedure in Western Australia, the learned author says (at par 24A.3.1A) the following:

"A party must show a proper reason for leave to withdraw his or her offer while it is still open for acceptance. It is suggested that it must be of a similar nature to the reasons which would have supported leave to withdraw a payment into court, such as an offer made by a virtue of a bona fide mistake ... or an offer which reflected a position reasonably taken when the full facts could not be known ... or an offer which reflected a position taken before the law was changed ...."

27 I respectfully agree with the approach suggested by the learned author.

28 The leading authority in relation to the withdrawal of a payment into Court is Cumper v Pothecary (supra), where the Court of Appeal, in an oft cited passage, said (at [70]):

" ... we think it is desirable to say that it must not be thought that a defendant who has paid a sum into court is entitled as of right to resile from that step. He must, in our opinion, show that there are good reasons for his application - for instance, the discovery of further evidence which puts a wholly different complexion on the case, as in Frazer & Haws Ltd v Burns (1934) 49 Ll L Rep 216 and Williams v Boag [1941] 1 KB 1, or a change in the legal outlook brought about by a new judicial decision, as in the present case, and there may be others. Having once put a valuation on the plaintiff's case, the defendant ought not to be allowed to alter it without good reason ... Apart from matters such as fraud or mistake affecting the original payment, [the court] should consider whether there is sufficient change of circumstance since the money was paid in to make it just that the defendant should have an opportunity of withdrawing or reducing his payment."

29 That case has been followed in New South Wales, in relation to the comparable rule to O 24A, in Young v Combe, unreported; SCt of NSW (Hodgson J); 29 July 1993, which in turn was referred to with approval in Scanruby v Caltex Petroleum (supra).

30 In my view, the question in this case is whether there has been such a change of circumstances since the offer was made as to make it just that the plaintiff should be permitted to withdraw his offer.

31 It was submitted on behalf of the plaintiff that in the present case the entire premise or substratum of the plaintiff's offer had changed by the subsequent increase in the amount that Douglas Stockyards was prepared to pay for the land. The O 24A offer was made, and quite obviously made, on the basis that Douglas Stockyards was prepared to pay an amount of $130,000 for the land. The plaintiff's offer was precisely half of the purchase price then offered by Douglas Stockyards. After the O 24A offer was made, Douglas Stockyards increased its offer to purchase the land to $150,000. Accordingly, it was submitted, the premise upon which the plaintiff made the offer under O 24A thereupon fundamentally changed, giving rise to a material change in circumstances which made it just to allow the plaintiff to withdraw his offer.

32 It was submitted that there was no question of prejudice to the defendant by permitting the plaintiff's O 24A offer to be withdrawn. The defendant had purported to accept the offer after he had been informed of the increased offer by Douglas Stockyards and after he had been informed that the plaintiff withdrew the O 24A offer.

33 It was argued on behalf of the defendant that all that had changed after the offer was made was the available evidence as to the price that a prospective purchaser might pay for the land. In that respect it was significant that no offer capable of acceptance had actually been made by Douglas Stockyards. Douglas Stockyards had simply said that offers in the specified amounts would be made.

34 I should note that, on the evidence, the amount of the proposed offers by Douglas Stockyards significantly exceed the value of the land as assessed by a valuer in February 2004 and it seems that Douglas Stockyards is willing to pay a premium for the land because of its particular value to its business.

35 In the course of argument, counsel for the plaintiff made it clear, however, that the application did not turn on the identity of the prospective purchaser, but on the increase in the sum for which the land could be sold. He said that the plaintiff's position would be no different if, instead of Douglas Stockyards, some other purchaser willing to pay $150,000 had emerged during the 28 day period. It would be equally just to allow the plaintiff to withdraw the offer. As I understood the plaintiff's contention, that would be the case even if that purchaser only emerged after the O 24A offer had been accepted by the defendant, provided it was within the 28 day period.

36 On the facts of this case there has not, in my view, been a sufficient change in circumstances to justify an order under O 24A r 3(6). The plaintiff has made an offer on the basis of the information available at the time as to the value that a particular purchaser was prepared to pay for the property. He was not misled by the offeree as to the market value of the land, nor was any information relevant to his offer overlooked by him or withheld from him. All that has happened is that, within the 28 day period, and before the offer was accepted by the defendant, a further proposal has been made by the prospective purchaser, from which it appears that the land might realise a somewhat greater sum - in the order of some 15% more - than the plaintiff had thought would the case.

37 It is in the nature of land that its value and the price that prospective purchasers, or even a particular prospective purchaser, may be prepared to pay for it are not necessarily static or certain. The relatively modest increase in the amount that Douglas Stockyards has indicated it is prepared to pay for the land is not a sufficient change in circumstances to make it just to allow the plaintiff to withdraw the offer.

38 It follows that I would dismiss the application. I will hear the parties on the question of costs.

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