Stekovic v Radovanovic

Supreme Court of NSW|2023-11-28|Before: McGrath J

INTRODUCTION

This case involves a dispute between family members over the alleged settlement of an underlying dispute over the distribution of proceeds from the sale of a property located in Queanbeyan, New South Wales.
The plaintiffs, Milivoj Stekovic and Jovanka Stekovic, are married. Jovanka is the sister of the defendant, Goran Radovanovic. Because the dispute involves a family group, for convenience I will use the first names of each member of the family without meaning any disrespect to them.
The property is located at 8 Donald Road, Queanbeyan, New South Wales.
By the summons filed 21 December 2022, Milivoj and Jovanka seek declarations and orders for specific performance of an alleged agreement with Goran in June 2022 to settle the underlying dispute, which occurred through the exchange of letters marked "without prejudice save as to costs" between their respective solicitors.
The resolution of the dispute requires the application of the long-standing principles established in Masters v Cameron (1954) 91 CLR 353 and the subsequent authorities that have considered those principles.
Milivoj and Jovanka contend that a binding agreement was made. Goran contends to the contrary.
The underlying dispute is not before me for any determination.
For the reasons set out below, I have determined that Milivoj and Jovanka should succeed because the parties intended to be immediately bound upon their solicitors' acceptance of a counter offer made by Goran's solicitors.

EVIDENCE

The plaintiffs relied on the following evidence: 1. affidavit of Angela Allison Backhouse affirmed 14 December 2022; and 2. affidavit of Jovanka Stekovic sworn 4 August 2023 (paragraphs 6 to 45 inclusive were not read).
The defendant relied on the following evidence: 1. affidavit of Goran Radovanovic affirmed 13 July 2023 and the exhibit to that affidavit (paragraphs 4 to 9 and 16 inclusive were not read); 2. affidavit of Goran Radovanovic affirmed 22 August 2023 and the exhibit to that affidavit; and 3. affidavit of Goran Radovanovic affirmed 27 November 2023.
Mr A Davis appeared as counsel for Milivoj and Jovanka instructed by Chamberlains Law Firm. Ms L Collaris appeared as counsel for Goran instructed by Warlows Legal. I am grateful to counsel for the efficient and effective presentation of the case.

LEGAL PRINCIPLES

The Court of Appeal in Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 recently summarised the legal principles relevant to whether an agreement between parties was binding at [64]-[68], as follows: 64 Whether parties intend to create binding legal relations is ascertained objectively, that is, by determining whether a reasonable person in the position of the parties would have taken them to have intended to contract. The presence (or absence) of that intention is fact-based, to be found in all the circumstances, including by drawing inferences from their words and their conduct in making their agreement. In ascertaining their intention, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract: Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 at [69] ("Sagacious"); Allen v Carbone (1975) 132 CLR 528 at 532; [1975] HCA 14; Hospital Products v United States Surgical Corp (1984) 156 CLR 41 at 61 (Gibbs CJ); [1984] HCA 64 ("Hospital Products"); Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 ("ABC"); Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369] (Allsop J); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [25]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [38], [40]; Mount Bruce Mining v Wright Prospecting Pty Ltd (2015) 25 CLR 104; [2015] HCA 37 at [110]-[113]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]. 65 There is a type of case illustrative of the requirement for parties to intend to effect legal relations where, whether they are bound, turns on whether they intended to be bound immediately (by an oral agreement or an informal written one) or did not intend to make a concluded bargain unless and until they executed a formal instrument. This category of cases is often referred to as a Masters and Cameron after the leading decision in Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72 in which the High Court identified the following three categories of such cases: first, where the parties reach finality in arranging all the terms of their bargain and intend immediately to be bound but propose to have the terms restated in a form which would be fuller or more precise but not different in effect; second, where the parties have agreed upon all the terms of their bargain and intend no departure from or addition to their agreed terms but have made performance of one or more of the terms conditional upon the execution of a formal contract; and third, where they do not intend to make a concluded bargain at all unless or until they execute a formal contract. 66 Subsequent cases have spoken of a fourth category, namely, where parties enter into an immediately binding agreement on certain specified terms and on such other terms as are either subsequently agreed by the parties or able to be determined by the Court: Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 627; Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 at [25]; Sagacious at [67]; Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123 at [69]. 67 The existence of matters of importance on which the parties have not reached consensus in their informal agreement will render it less likely that they intended immediately to be bound before the execution of a formal document. That the terms have not been fully or well stated is material to whether a contract has been made. The more important the term, the less likely it is that the parties will have left it over for future decision, but there is no legal obstacle which prevents the parties agreeing to be bound now while deferring important matters: Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd [1995] NSWCA 166; (1995) 7 BPR 14,551 at 14,579; ABC at 548; Sagacious at [73]; Feldman v GNM Australia [2017] NSWCA 107 at [60]-[61]. 68 Regard may be had to the parties' subsequent communications and other conduct to assess whether it was in their contemplation that they were not to be bound until all the essential preliminaries had been agreed to or until the formal contract had been drawn up embodying all the matters incidental to the transaction: ABC at 547-8 and the authorities cited there; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]; Howard Smith and Co Ltd v Varawa (1907) 5 CLR 68 at 78; [1907] HCA 38; B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9,147 at 9,155; Sagacious at [99].
In factual circumstances very similar to those in this case, in Narayan v Narayan [2022] NSWSC 1685, Kunc J at [9]-[11] helpfully summarised the applicable principles as follows: 9 I gratefully adopt and apply this summary of the applicable principles by Halley J in the Federal Court in Wong v Wong [2022] FCA 78: 27 The principles governing whether parties have entered into a binding and enforceable agreement, where terms have been agreed and those agreed terms will be dealt with in subsequent formal documentation, are well settled. 28 The High Court in Masters v Cameron (1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ) identified the following categories of cases in which parties have agreed on terms, but also agreed that those terms will be dealt with by subsequent formal documentation: (a) a case 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; (b) 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; and (c) a case in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. 29 In the first two categories there is a binding contract, but in the third there is not: Masters v Cameron at 360-1. 30 In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 4 NSWLR 622, McLelland J made the following observation at 628: There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich J and Dixon J, in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317, namely, "…one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms". 31 The Masters v Cameron classifications are no longer, if there ever were, applied as strict categories into which such cases must fall: Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605 (Pavlovic) at [69] (Beazley P), citing Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at 105. 32 Rather, as McHugh JA stated in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634: … the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 638; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 ay 332-334, 337. 33 The relevant principles were recently summarised by Sackville AJA (with whom Macfarlan and Gleeson JJA agreed) in Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 (Mushroom Composters) at [59]-[63]: 59 First, in Australia the "objective" theory of contract has been accepted: see, most recently, Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]. Consequently, in determining whether a binding contract has been concluded, the law is concerned not with the parties' subjective intentions, but with "the outward manifestations of these intentions": Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 428 (Mason ACJ, Murphy and Deane JJ). Thus what matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (per curiam); Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 at [40]-[41] (per curiam). In a case where the ordinary process of offer and acceptance has taken place, the court inquires as to what a reasonable person would infer or deduce from observing the exchanges between the parties: NC Seddon, RA Bigwood and MP Ellinghaus, Cheshire & Fifoot Law of Contract (10th Aust ed 2012, LexisNexis Butterworths) at [3.4]. 60 Secondly, it is not necessary, in determining whether a contract has been formed, to identify a precise offer or acceptance; nor is it necessary to Wong v Wong [2022] FCA 78 13 identify a precise time at which an offer or acceptance can be identified: Ormwave Pty Limited v Smith [2007] NSWCA 210 at [68] and authorities cited at [68]-[75] (Beazley JA, Santow and Ipp JJA agreeing). The questions to be asked are: "in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the [plaintiff] and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?" Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [81] (Heydon JA). 61 Thirdly, an agreement that is incomplete will not give rise to an enforceable contract. As was said in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ): "It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future." 62 An alleged contract will fail for incompleteness if, even though the parties have used clear language, a term which is regarded as essential as a matter of law has not been agreed: J W Carter, Carter on Contract (2014, LexisNexis) at [04-120]. The principle was stated by Viscount Dunedin in May and Butcher Ltd v The King [1934] 2 KB 17 n at 21: "To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties." 63 If the parties have not agreed on all essential terms, for example because they have left one such term to be settled by future agreement, the contract is incomplete no matter what the parties themselves may think: G. Scammell and Nephew Ltd v H.C. and J.G. Ouston [1941] AC 251 at 260 (Lord Russell of Killowen); O'Brien v Dawson [1942] HCA 8; 66 CLR 18 at 37 (Willams J, Rich J agreeing); Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 170 (Tadgell J); Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19; 190 FCR 364 at [123]-[124] (Keane CJ); at [212] (Emmett J); at [223]-[227] (Finkelstein J) (an appeal to the High Court was allowed, but not on this point: Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486). 34 The acceptance must correspond with the offer and must be clear and unqualified, and will fail to take effect if it attempts to vary the offer or add new terms: Lark v Outhwaite [1991] 2 Lloyd's Rep 132 (Lark) at 139 (Hirst J); Precision Pools Pty Ltd v Commissioner of Taxation (1992) 37 FCR 554 at 560 (Spender J); see also Wong v Wong [2022] FCA 78; 14 Ltd v Lucas Stuart Pty Ltd [2012] NSWSC 1130 at [34] (Stevenson J); Quadling v Robinson (1976) 137 CLR 192 (Quadling) at 201 (Gibbs J). 35 Whether a communication accepts the terms of an offer without modification, or instead varies its terms, is a question of construction: Quadling at 201. 36 Amendment of an offeror's offer by the offeree in a material respect is a counteroffer, not acceptance: Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) (2009) 255 ALR 632; [2009] FCA 522 (Olivaylle) at [23] (Logan J); see also Outer Suburban Property Ltd v Clarke [1933] SASR 221 (Outer Suburban Property) at 225-6 (Angas Parsons and Napier JJ). 37 However, a variation in the alleged acceptance which favours the offeror is not treated as a material variation: Ex parte Fealey (1897) 18 LR (NSW) 282 (Ex parte Fealey) at 290 (Owen J, BG Simpson J agreeing); Boreland v Docker [2007] NSWCA 94 (Boreland) at [76]-[78] (Beazley JA, with whom Mason P and Ipp JA agreed); see also Quadling at 197 (Barwick CJ) and 201 (Gibbs J). 38 Normally an apparent variation in the acceptance of the terms in the offer, or the introduction of some additional term, will prevent the purported acceptance from being an acceptance. Instead, if it relates to the subject matter of the offer, it may be a counter-offer, operating as a rejection of the original offer, revocable at any time before its acceptance but capable of creating a contract if the original offeror accepts it: see Mulcaire v Newsgroup Newspapers Ltd [2012] Ch 435; [2012] EWHC 3469 (Mulcaire) at [27] (Sir Andrew Morritt C). 39 A reply which propounds a new term is not an acceptance: Jackson v Turquand (1869) LR 4 HL at 312; R A Brierley Investments Limited v Landmark Corporation Limited (1966) 120 CLR 224 at 233-4 (Barwick CJ, Kitto and Windeyer JJ); see also Grainger v Vindin (1865) 4 SCR (NSW) 32." 10 Mr Mishra also relied on these observations of Pembroke J in Jennings v Jennings [2015] NSWSC 1826 (leave to appeal refused in Jennings v Jennings [2016] NSWCA 29): 18 In Howe v Connell (unreported; Supreme Court of NSW, Young J, 25 September 1997), Young J (as he then was) made this observation: Generally speaking, settlements in litigation are intended to be final as soon as the barristers or solicitors involved shake hands - whether they do that physically or notionally over the telephone. The reasonable litigator on the Bondi bus would think that as soon as the legal representatives have reached an agreement as to the principle on which the matter is to be settled then the cause of action has been converted into the new contractual right. Accordingly the situation is one where the first category of Masters v Cameron applies, that is that there has been final mutual assent but the people who are to draw up the formal agreement have power to set it down but not alter its terms. However, the present case is more like the fourth category of Masters v Cameron, which was enunciated by McClelland CJ in Eq in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628, that there is an immediate binding of the parties by the terms upon which they have agreed, whilst they expect that a further contract will be made in substitution for that first contract. 19 I do not suggest that there is a general rule. Each case will depend on its own facts. But it is reasonable to say that the approach described by Young J is one which often applies. This is all the more so in this case, where the agreement has arisen out of a Court supervised mediation at which the parties were represented by lawyers and which was attended with a degree of formality and structure. The purpose of the mediation was to bring about a concluded agreement between the parties." 11 To similar effect, Sackville AJA said in Jingalong Pty Ltd v Todd [2015] NSWCA 7 at [78] (Meagher and Leeming JJA agreeing): "The context in which the Settlement Agreement came into existence suggests that the parties intended to enter into a binding and immediate agreement". The "context" to which his Honour was referring was that the settlement agreement in that case had been entered into at a mediation.
In Manny v Rose [2022] NSWSC 1671, Ball J at [27] said that the question of whether the parties reached an agreement of either category as outlined by Masters v Cameron is to be decided objectively. That is, it is to be decided by reference to what the parties' words and conduct would be reasonably understood to convey, not upon their actual beliefs and intentions: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34]. The words and conduct, taken in context, must show that the parties intended to be bound by their agreement, not simply that they had reached agreement on the terms: Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA at 326, 329.
In Narayan, Kunc J at [14]-[18] made the following additional observations about the contractual context provided by Calderbank correspondence: 14 I have referred in [10] and [11] above to authorities which support the conclusion that the fact that an agreement has been made in the context of a mediation to settle litigation can be (not must be, given the possibility of clear textual indications otherwise) an important contextual matter favouring the finding of an intention to be contractually bound immediately. In my respectful opinion, that analysis applies with even greater force to Calderbank correspondence for at least three reasons. 15 First, Calderbank offers are well understood by the legal profession to be a flexible and less formal (than offers of compromise under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) means of attempting to bring litigation to an end. There is a real forensic, economic and strategic imperative in knowing with certainty whether or not litigation has been brought to an end by the acceptance of a Calderbank offer. While theoretically possible, a Calderbank offer that did not have immediate binding effect upon acceptance, but depended upon whether or not a formal document was ultimately agreed would, in the experience of the Court, be highly unusual, not least because such a thing would be inimical to how and why such offers are generally made. As the next reasons demonstrate, such a Calderbank offer makes very little sense given how they are used and the legal principles which apply to them. 16 Second, it is a hornbook proposition that an offeror obtaining a better result at trial than the offer does not have an automatic costs consequence (unlike, generally, offers of compromise), but goes to the Court's discretion as to costs. The inquiry which informs (but does not necessarily dictate) the exercise of the Court's discretion is whether the offeree's rejection (in which I include non-acceptance) of the offer was not unreasonable in all the circumstances. That inquiry can be complex even in what might be termed the usual situation of the offeree's conduct being assessed against the terms of an offer and a particular point in time when it could have been accepted. 17 A Calderbank offer which required consensus on the terms of a later deed to bring about a binding settlement would depart from the perceived advantages of such an offer in at least two respects in relation to the inquiry as to the offeree's conduct: (1) It would make it easier for the unsuccessful offeree to say their rejection of the offer was not unreasonable, because it was unknown how long it would have taken to agree the terms and what those final terms might have been. (2) Assuming parties embarked on trying to negotiate a formal deed, the inquiry would become far more complex, and less predictable in its outcome, because if they could not come to agreement, the Court would have to consider the conduct of the negotiations and the positions of the respective parties. 18 Third, one of the advantages of a Calderbank offer is its flexibility in being able to be made with a short period of time being specified for its acceptance, but recognising that the reasonableness in the circumstances of that period of time will be a factor in its efficacy. This is to be contrasted with UCPR reg 20.26(5)(a), which requires a minimum of a 28 day acceptance period for offers made two or more months before the trial date. This is another example of why it is to be expected that a Calderbank offer will be made with the intention of certainty that a binding settlement is reached upon acceptance of the offer.
I agree with Kunc J's reasoning on the context provided by Calderbank correspondence in the objective assessment of whether the parties intended to be bound by an alleged agreement contained within it.

SALIENT FACTS

Before dealing with the relevant correspondence in June 2022 between the respective solicitors which is central to the dispute I am determining, it is necessary to set out some of the details of the events leading to the alleged settlement.
From June 1999 to November 2020, Goran was the sole registered proprietor of the property.
On 6 July 2020, contracts for the sale of the property by Goran to Trinity Law Pty Ltd for consideration of $675,000 were exchanged, with settlement scheduled for 9 October 2020.
On 2 October 2020, Chamberlains sent a letter to Baker Deane & Nutt setting out in detail the basis on which Milivoj and Jovanka claimed an equitable interest in the property arising from the alleged agreement between Milivoj, Jovanka, George Radovanovic (the father of Jovanka and Goran), Bogdanka Radovanovic (the mother of Jovanka and Goran, wife of George), Goran and Gordana Radovanovic (former wife of Goran) to develop the property for the benefit of all of them.
The letter contained a demand that by no later than 5pm on 7 October 2020: Baker Deane & Nutt provide us with an undertaking that you will withhold the settlement proceeds from the sale of the property (less mortgagee payment and selling cost) in your trust account pending the resolution of this dispute.
The letter further states that in the event that the proposed undertaking was not accepted, Chamberlains had instructions to register a caveat over the property to protect their clients' interests. The letter concluded by proposing a mediation conference to be held between the parties in an effort to reach a resolution of the dispute.
On 6 October 2020, Milivoj and Jovanka lodged a caveat on the title of the property claiming a beneficial interest in the property arising from a "[v]erbal agreement between the caveators and registered proprietors to hold the property on trust for the benefit of the caveators", which was dated at 13 July 1999.
Milivoj, Jovanka and Goran then reached agreement to enable settlement of the sale of the property to occur, with Milivoj and Jovanka agreeing to withdraw the caveat if the net proceeds of sale of the property were retained by the conveyancing solicitors, Baker Deane & Nutt, pending the resolution of their claim to have an interest in the property.
On 13 October 2020 at 1:53pm, the solicitors acting for Goran at the time (North Herring Lawyers) sent an email to the solicitors acting for Milivoj and Jovanka (Chamberlains) which attached a letter to Chamberlains which stated: To enable the settlement to proceed, I am instructed that my client agrees to the net proceeds of sale being retained by Baker Deane & Nutt Lawyers, in their trust account, pending the resolution of the dispute between our respective clients.
The letter concluded by asking Chamberlains to seek instructions from Milivoj and Jovanka to take immediate steps to withdraw the caveat.
On 15 October 2020 at 12:34pm, Baker Deane & Nutt sent an email to Chamberlains asking whether Milivoj and Jovanka agreed to the proposal contained in North Herring's letter of 13 October 2020.
On 15 October 2020 at 12:43pm, Chamberlains sent an email to Baker Deane & Nutt, copied to North Herring, confirming that Milivoj and Jovanka consented to the proposal contained in North Herring's letter of 13 October 2020 and that they were in the process of removing the caveat over the property.
On 13 November 2020, settlement of the sale of the property occurred and the net proceeds of sale of $546,409.17 were placed in the trust account of Baker Deane & Nutt, where they presently remain.
On 23 May 2022, North Herring sent an email to Chamberlains attaching a letter dated 23 May 2022 referring to their previous correspondence in relation to the monies held in the Baker Deane & Nutt trust account and stating: I am instructed to put your client on notice that following the expiration of 14 days from the date of this letter, namely 6 June 2022, my client intends to instruct Baker, Deane & Nutt Lawyers to release those funds to him. If your client intends to make any claim in relation to those monies, they should do so by 4pm on 6 June 2022.
On 30 May 2022, Chamberlains sent two letters by email to North Herring.
The first letter was an open letter which set out the history of the dealings between the parties since the sale of the property had been settled on 13 November 2020, noting that the amount of $546,409.17 remained in the trust account of Baker Deane & Nutt. The letter stated that their clients reserved the right to seek appropriate injunctive relief to prevent the dissipation of those funds and proposed that the parties engage in mediation "prior to the commencement of litigation to mitigate the risk that the proceeds become dissipated by legal fees".
The first letter requested that North Herring confirm before 5pm on 3 June 2022 that their client was prepared to attend a mediation conference as proposed and concluded by stating: We note that, counsel has been briefed to settle a draft statement of claim with respect to our clients' interest in the proceeds of sale of the property, however, we are awaiting your confirmation that resolution can be explored through mediation before proceeding to give instructions to counsel for the statement of claim to be settled and for us to file same.
The second letter was marked "Without Prejudice Save as to Costs". Under the first heading "Our Clients' Claim", it set out the alleged basis on which Milivoj and Jovanka claimed an equitable interest in the property, stating that they had instructions to prepare a summons and affidavit evidence with a view to commencing proceedings and confirming that counsel had been briefed.
The second part of the second letter is headed "Calderbank Offer" and is in the following terms: 2.1 In the interests of resolving this matter, we are instructed to again make the following final offer: (a) Your client authorises Baker Deane & Nut to pay to our clients an amount out of (sic) $233,500 from the amount currently held in their trust account, comprising of: (i) $225,000 (being one third of the sale price of the Property); plus (ii) $500 (being the initial deposit paid by our clients for the purchase of the Property); plus (iii) $8,000 (being reasonable reimbursement for the considerable contributions, both monetary and labour, which our client expended towards improvements and upkeep to the Property). (b) The parties enter into a Deed of Settlement and Release which includes standard provisions surrounding: (i) Mutual releases from all claims to the extent permitted by law; (ii) Mutual non-disparagement; (iii) Mutual confidentiality. (c) The parties will each bear their own costs relating to the Deed of Settlement and Release and the dispute. 2.2 The above offer represents a further commercial compromise by our clients and is made purely on a commercial basis in the interests of resolving this matter expeditiously without the need to expend any further costs and expenses involved in Court proceedings. 2.3 This offer is made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and will remain open for acceptance until 5.00pm on 3 June 2022 after which time it will lapse and no further offers will be made.
On 3 June 2022 at 10:53am, North Herring sent an email to Chamberlains which attached a letter dated 2 June 2022 marked "Without prejudice, save as to costs" which referred to the letters of 30 May 2022 from Chamberlains and relevantly stated: I refer to your letters of 30 May 2022 upon which I have sought instructions. In particular, I refer to your clients Calderbank offer made at paragraph 2 of your "without prejudice" letter of that date. I am instructed to reject that offer. However, I am also instructed to make a counteroffer in the hope that proceedings can be avoided as follows: 1. My client will authorise Baker Deane & Nutt to pay to your clients from the funds held an amount of $225,000.00; 2. The parties enter into a Deed of Settlement and Release which will include standard provisions surrounding: a. Mutual releases from all claims to the extent permitted by law; b. Mutual non-disparagement; c. Mutual confidentiality; and d. That the parties each bear their own costs relating to the dispute, including the preparation and execution of the Deed and Settlement and Release. So that your clients have the opportunity to seek advice in relation to the above offer, I am instructed that my client will not take any step in relation to the funds held by Baker Deane & Nutt. I am instructed to provide you with further reasonable written notice should those instructions change
On 3 June 2022 at 11.44am, Chamberlains sent an email to North Herring which was headed "Without Prejudice save as to costs" which relevantly stated: We refer to your without prejudice letter of 3 June 2022 and are instructed to accept the counteroffer contained therein. Please provide the Deed of Settlement and Release for our clients' consideration at your earliest convenience. Should you have any questions, please do not hesitate to contact our office.
On 10 June 2022 at 10:34am, Chamberlains sent an email to North Herring headed "Without Prejudice save as to costs" which relevantly stated: We refer to your without prejudice letter of 3 June 2022 and our clients' accept (sic) of the counteroffer contained therein as set out below. Please confirm when our clients can expect to receive the Deed of Settlement and Release for their consideration.
On 24 June 2022 at 9:14am, Chamberlains sent yet another email to Herring North headed "Without Prejudice save as to costs" which referred to a telephone conversation between Antonia Tahhan of Chamberlains and Rebecca Wakefield of Herring North on 16 June 2022 in which Ms Wakefield advised that the Deed of Settlement would be issued to Chamberlains early in the week commencing 20 June 2022. The email stated that the Deed of Settlement had not been received and asked for confirmation when they could expect to receive it for their clients' consideration.
On 24 June 2022 at 12:32pm, North Herring sent an email to Chamberlains stating that they were finalising a draft which they were to send to their client for his consideration over the weekend (i.e. 25-26 June 2022) and they would forward it to Chamberlains early the following week.
On 1 July 2022 at 10:11am, Chamberlains sent an email to North Herring marked "Without Prejudice save as to costs" which stated: Could you please provide an update on this matter as it has now been 4 weeks since our clients accepted the offer set out in your without prejudice letter of 3 June 2022. Our clients are motivated to finalise this matter expeditiously.
On 7 July 2022 at 11.42am, Chamberlains sent an email to North Herring asking to be provided with "an update as to the status of the Deed of Settlement".
On 7 July 2022 at 1:16pm, North Herring sent an email to Chamberlains, which said "The draft deed is still with my client. We are chasing him today".
On 18 July 2022 at 11:24am, Chamberlains sent an email to North Herring asking "[h]ave you been able to obtain instructions from your client with respect to the draft Deed of Settlement?".
On 25 July 2022 at 8:44am, North Herring sent an email to Chamberlains in the following terms: I have spoken with Mr Radovanovic last week and he has advised that he does not intend to sign the draft Deed of Settlement. In those circumstances, I have ceased acting for Mr Radovanovic, who has advised that he will seek new representation.
On 5 August 2022 at 2.46pm, Chamberlains sent an email to the new solicitors acting for Goran (Warlows), the saliently parts of which were: We act for Mr Milivoj and Mrs Jovanka Stekovic. I am instructed by North Herring Lawyers that their former client, Mr Goran Radovanovic, has instructed your firm to act for him in relation to the above-mentioned matter. Please confirm your firm holds instructions to act for Mr Goran Radovanovic as a matter of urgency.
On the same day at 4.43pm, Warlows responded by email to Chamberlains in the following manner: We hold instructions to act however we have only received carriage of the matter in the last couple of days. We anticipate being in a position to engage with knowledge about this matter in the next week.
On 22 August 2022, Chamberlains sent a letter to Warlows marked "Without Prejudice", which set out the background to the dispute and the allegedly "binding and enforceable agreement" and demanded that "Goran instruct Baker Deane & Nutt to immediately transfer from their trust account the amount of $225,000.00 into our firm's trust account" by 4:00pm on 26 August 2022, failing which they were instructed to immediately commence proceedings to enforce the alleged agreement.
On 21 December 2022, these proceedings were commenced.

SUBMISSIONS

Milivoj and Jovanka submitted that, according to an objective appraisal of the clear, certain and concise words used by the parties in their correspondence of 2 and 3 June 2022 and absent any contemporaneous material to properly assert that the parties did not intend to be bound immediately, the parties clearly intended to be bound immediately by the offer and acceptance, consistent with the facts and principles set out in Masters v Cameron. They submitted that the present case came within the first, second or the so called fourth categories added to Masters v Cameron by the decision in Baulkham Hills Private, being one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.
In addition, Milivoj and Jovanka identified the post-contractual conduct of the parties (up until the point when Goran's former solicitors stated on 18 July 2022 that he did not intend to sign the Deed of Settlement) as consistent with a binding agreement having been reached, insofar as the post-contractual language of both parties did not raise any issue as to the acceptance or seek to assert that the matter was anything other than a concluded agreement. They said that there was no engagement in further negotiation or in exploring the terms, and no queries or observations raised. They relied on the terms of the letter of 18 July 2022 as indicative of Goran's former solicitors holding the view that a binding agreement had been formed because by ceasing to act they were clearly in conflict with Goran.
Milivoj and Jovanka embraced the reasoning of Kunc J in Narayan in relation to the Calderbank nature of the communications on 30 May, 2 and 3 June 2022 as providing the contractual context supportive of the immediately binding nature of the agreement formed from it.
Goran submitted that the court is unable to conclude that the parties had entered into a binding and enforceable contract in circumstances where a key term of substance was yet to be agreed, being to whom the balance of the funds held by Baker Deane & Nutt, after the payment of $225,000 to Milivoj and Jovanka, would be paid. Goran contended that this placed the present case into the third category in Masters v Cameron, being "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".
Goran submitted that, upon a proper construction of the letter dated 2 June 2022 from North Herring to Chamberlains, the agreement between the parties was conditional on the execution of the deed of settlement and release and, accordingly, as the condition remains unfulfilled, the agreement is not binding and enforceable. Goran urged me to find that these communications were like the first category of those described in Godecke v Kirwan (1973) 129 CLR 629, Walsh J at 638-639 citing Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, Parker J at 288-289: …if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.
It was pressed by Goran that even though the correspondence was not expressed to be "subject to" the deed of settlement, I should nevertheless treat it as having the same effect.
Unsurprisingly, Milivoj and Jovanka relied on the same passage from Godecke to contend that the present case fell into the latter category described in it.
Goran also submitted that the letter of 2 June 2022 does not expressly state that the parties intended to be immediately bound and, in the absence of evidence of the surrounding circumstances which would imply that they did, the conclusion ought to be that they did not enter into a binding and enforceable settlement.
Goran contended that the facts in the present case were not anywhere similar to those which were dealt with in Baulkham Hills Private which gave rise to the fourth category because in that case the parties had expressly stated in their correspondence that the written responses would be legally binding until they were superseded by a formally binding agreement. Goran pointed to the fact that no such express indications were given in the communications of 30 May, 2 and 3 June 2022 by the solicitors, when one would have expected that they would be there.
Goran submitted that the proposal in the open letter of 30 May 2022 from Chamberlains was for mediation and there was nothing in the circumstances of the case which indicated that there was any urgency in the matter requiring the parties to be bound immediately, because if the settlement fell through because the deed of settlement was not signed the parties could have proceeded on to the mediation that had been proposed.
In relation to the considerations expounded by Kunc J in Narayan in relation to the Calderbank nature of the communications on 30 May, 2 and 3 June 2022, Goran submitted that none of them could be considered to be Calderbank offers as they were written before any proceedings had been commenced and the Calderbank principles are limited to cases where proceedings are already on foot. Goran contended that proceedings were not even imminent because the open letter of 30 May 2022 was an invitation to mediate the dispute. Further, Goran suggested that the counter offer of 2 June 2022 could not be considered to be a Calderbank offer because it does not expressly state that it is, and to be such a Calderbank offer it must expressly state that a special costs order will be sought.
Goran also sought to distinguish this case from the facts in Narayan which was a case in which the parties had reached a clear agreement about all of the terms of the settlement, whereas the parties in the present case had not reached agreement on the release of the balance of the funds.

DETERMINATION

Applying the relevant principles outlined above to the facts of this case, in my view there was a clear objective intention of the parties to be immediately bound by the agreement expressed in the counter offer contained in the North Herring letter of 2 June 2022 and the acceptance of that counter offer in the Chamberlains email of 3 June 2022.
My reasons for this conclusion are as follows: 1. Establishing the objective intention of the parties involves looking at the words that were used in each of the counter offer and the acceptance in their context. 2. The general context for the consideration of the language used in the counter offer and acceptance was the dispute between Milivoj and Jovanka on the one hand and Goran on the other hand over the alleged interest of Milivoj and Jovanka in the property, the registered proprietor of which was solely Goran. By setting out the basis of their claim in Chamberlains' letter of 2 October 2020 and lodging the caveat on the title of the property on 6 October 2020, Milivoj and Jovanka indicated the seriousness of their intention to maintain their position in that dispute. Goran initially agreed in the North Herring letter of 13 October 2020 that the net proceeds from the sale of the property were to be held in trust pending the resolution of the dispute but by 23 May 2022 he determined that he intended to instruct his solicitors to release the funds to him on 6 June 2022. This indicated that he also intended to maintain his position in the dispute in an earnest way and would be acting swiftly to obtain all of the funds in trust for himself. 3. The specific context for understanding the words that were used in the communications of 2 and 3 June 2022 is that the course of correspondence was consistently marked "without prejudice save as to costs" (commonly referred to as a Calderbank offer), commencing with the offer made in the letter of 30 May 2022 from Chamberlains, the rejection of that offer and the counter offer made in the North Herring letter of 2 June 2022 and the acceptance of the counter offer contained in the email of 3 June 2022 from Chamberlains. It is abundantly clear that by marking the germane communications in this way that the parties were attempting to finally settle serious claims that had been made for which there were serious responses given without the need to resort to court proceedings. By use of the words in the marking, each side was expressly indicating that they were attempting to bring the dispute to an end without incurring further and likely significant legal costs by putting the other side at risk of having to pay those costs in the event that the Calderbank offer made was not accepted but a less favourable outcome obtained in the prospective proceedings. As observed in Narayan by Kunc J at [14]-[18], the contractual context created by a Calderbank offer is one that lends itself to a finding of an intention to be contractually bound immediately, and not to be left to the manner in which some further formal step (such as the execution of a deed of settlement) may or may not be ultimately agreed. 4. On the topic of Calderbank offers, I reject Goran's submission that a Calderbank letter cannot take effect as such if it is sent prior to the commencement of proceedings. From research conducted within a compressed space of time, there are at least three decisions of this court where a Calderbank offer has been given effect in proceedings even though it was made prior to the commencement of those proceedings (Ofria v Cameron (No 2) [2008] NSWCA 242, Beazley and Ip JJA and Handley AJA at [27]; Lowe v Lowe (No 3) [2015] NSWSC 1800, Kunc J at [4], [39]-[48]; Re Ahmed & Associates (Aust) Pty Ltd [2021] NSWSC 631, Black J at [3] applying Ofria). As stated in Ofria at [27], a Calderbank letter sent in advance of proceedings would, if accepted, obviate the need for the proceedings and "should be given as much weight, if not more, than an offer made in the course of pending proceedings". In my view, the letters of 30 May 2022 and 2 June 2022 could clearly have taken effect as Calderbank offers because they were marked "without prejudice save as to costs" and contained offers indicating an intention to settle the whole of the dispute between the parties in the hope that proceedings would be avoided. 5. I also reject Goran's submission that an offer cannot be regarded as a Calderbank letter unless it expressly states that a special costs order will be sought by the party sending it. There is no such requirement before a party can rely on an offer within the Calderbank principles. In Lowe, Kunc J at [66] observed that in law even the absence of an express reference to Calderbank or a statement of "without prejudice save as to costs" does not mean that an offer will not have an effect on costs. Technical approaches should not be taken to determining whether a Calderbank offer has been made: Giller v Procopets (No 2) [2009] VSCA 72 at [13]. It will always depend on the offeror's intention as revealed by the terms of the offer: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194, Ipp JA (with whom Mason P and McColl JA agreed) at [27]. 6. Turning to the actual words used in the first critical communication, the counter offer in the letter of 2 June 2022 not only contains the "without prejudice save as to costs" marking but it also expresses "the hope that proceedings can be avoided" before setting out the enumerated proposed terms on offer, about which I observe the following: 1. The first proposed term is that "[Goran] will authorise Baker Dean & Nutt to pay to [Milivoj and Jovanka] from the funds held an amount of $225,000" (emphasis added). The use of the word "will" creates the unqualified expression of intention of the future event of payment. 2. The second proposed term is "[t]he parties enter into a Deed of Settlement and Release which will include standard provisions surrounding" the matters listed in sub-paragraphs (a)-(d) (emphasis added). Again, this is an unqualified expression of intention of the future event of entering into a Deed of Settlement and Release containing the standard provisions. The objective intention from the language used is that the parties have agreed that there will be a Deed of Settlement and Release and that it will include mutual releases, mutual non-disparagement, mutual confidentiality and each party bearing their own costs. In other words, the parties had already agreed the contents of the Deed of Settlement and Release if the counter offer was accepted. There is no language used which suggests that upon acceptance the agreement would be superseded by the Deed of Settlement and Release which would contain additional but not yet agreed terms. The language is more akin to the terms of the agreement being recorded in the Deed of Settlement and Release rather than being effected by it. To paraphrase the expressions used in Godecke, I consider that the contemplated execution of the Deed of Settlement and Release was "a mere expression of the desire of the parties as to the manner in which the transaction already agreed will in fact go through". 3. The objective intention to be immediately bound by an acceptance of the counter offer is also supported by the language which appears immediately after the two enumerated terms of the counter offer. It says: So that your clients have the opportunity to seek advice in relation to the above offer, I am instructed that my client will not take any step in relation to the funds held by Baker Dean & Nutt. I'm instructed to provide you with further reasonable written notice should those instructions change. 1. This suggests that if the counter offer was to be accepted, no step would be taken by Goran in relation to those funds other than what was agreed, but if it was not accepted, the funds might be paid to Goran on his instructions. Treating those words as though they carry no intention to be immediately bound upon the acceptance of the counter offer would mean that Milivoj and Jovanka remained at constant risk that the funds might be disbursed to Goran until such time as the Deed of Settlement and Release was finalised and executed. This does not appear to have been the intention of any party. 1. The second critical communication is the acceptance in the email of 3 June 2022 which is also marked "without prejudice save as to costs" and contains the simple expression that Chamberlains were "instructed to accept the counter offer contained therein". This language is unequivocal and unqualified. Nothing new or additional to what was contained in the terms of the counter offer is suggested by these words. Although the following words "[p]lease provide the Deed of Settlement and Release for our clients' consideration at your earliest convenience" gives rise to the notion that there was some further consideration to be given by Milivoj and Jovanka, to my mind that was merely to ensure that the Deed of Settlement and Release accurately recorded the terms contained in the counter offer without abrogation or addition to them. 2. Contrary to the submissions made on behalf of Goran, the parties had not left a key term of substance yet to be agreed. In the letter of 13 October 2020, the proposed terms on which Baker Deane & Nutt held the net proceeds of sale of the property in their trust account was "pending the resolution of the dispute between our respective clients", which was accepted in the Chamberlains email of 15 October 2020. In my view, the counter offer and acceptance on 2 and 3 June 2022 respectively definitively did constitute "the resolution of the dispute between [the] respective clients" because it expressly provided for "[Goran] to authorise Baker Deane & Nutt to pay to [Milivoj and Jovanka] from the funds held an amount of $225,000" and for there to be a release by Milivoj and Jovanka of "all claims to the extent permitted by law" against Goran. In other words, the balance of the monies left in the trust account were then free for Goran to authorise Baker Deane & Nutt to release them to him or at his direction. The terms of the counter offer make it clear that Goran was the person with authority over the Baker Deane & Nutt trust account, not Milivoj and Jovanka. It would make commercial nonsense for Milivoj and Jovanka to still have the ability to control the release of the balance of those funds after they had received $225,000 and released all claims to the balance. 3. In my view, the post-contractual communications are consistent with there being a binding settlement having been reached with the acceptance of the counter offer on 3 June 2022. Chamberlains were consistently requesting for the Deed of Settlement and Release to be provided to them by North Herring. None of the responses to those requests suggested any lack of agreement by Goran. No further negotiations were being contemplated, pressed or held in any of that correspondence. No queries were raised until the point at which Goran refused to sign the Deed of Settlement and Release.

CONCLUSION

For these reasons, I consider that Milivoj and Jovanka are entitled to a declaration that an immediately binding settlement agreement arose between them on 3 June 2022 with the acceptance of the terms of the counter offer made on 2 June 2022.
The parties are to consult and attempt to agree short minutes reflecting these reasons, including any claim for specific performance of the agreement, any claim to interest up to the date of judgment, and costs and provide them to my Associate by email within 7 days. If the parties are unable to agree on the proposed orders by that time, I will determine those orders on the papers after allowing the parties a short period of time to provide me with any further evidence and submissions (of no more than 2 pages, 1.5 spacing, 12 font).

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: 29 November 2023

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