Bushtown Holdings Pty Ltd & Carter v Conlan - [2000] WASC 137

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: BUSHTOWN HOLDINGS PTY LTD & CARTER -v- CONLAN [2000] WASC 137

CORAM: HEENAN J

HEARD: 11 MAY 2000

DELIVERED : 26 MAY 2000

FILE NO/S: CIV 1603 of 1998

BETWEEN: BUSHTOWN HOLDINGS PTY LTD
Plaintiff
AND
JOHN JAMES JOSEPH CONLAN
Defendant
(BY ORIGINAL ACTION)
AND
JULIE MAREE CARTER
Defendant to Counterclaim
(BY COUNTERCLAIM)

Catchwords:

Contracts - Formation of contract - Settlement of action - Alleged offer said to be no more than invitation to treat - Counter offer - Deed of Settlement contemplated

Legislation:

Nil

Result:

Accord and satisfaction not established.
No agreement to settle action.

Representation:

Original Action

Counsel:

Plaintiff: Mr P A Kyle
Defendant: Mr D L Jones

Solicitors:

Plaintiff: Kyle & Company
Defendant: Kuscevich and Associates

Counterclaim

Counsel:

Defendant to Counterclaim : Mr P A Kyle

Solicitors:

Defendant to Counterclaim : Kyle & Company

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Butler Machine Tool Co Ltd v Ex-Cello-O Corporation (England) Ltd [1979] 1 All ER 965
Clifton v Palumbo [1944] 2 All ER 497
Ellwood v Darling Downs Investments Pty Ltd (1987) 75 ALR 47
McGellin v Mount King Mining NL (1998) 144 FLR 288
Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555

HEENAN J: Pursuant to an order made by Master Sanderson on 8 November 1999 I am required to decide a preliminary issue "as to the accord and satisfaction comprised by the agreement between the parties to settle" this action.
Mr John Conlan is a shearer. In July 1994 he purchased two businesses engaged in the manufacture and sale of shearing and other rural clothing. In July 1995 he transferred the ownership of the businesses to a company called Bushtown Holdings Pty Ltd. He became a director of the company. Differences arose between him and Ms Julie Carter, the company secretary, who was also a director. In or about December 1997 Ms Carter took over the management of the company and Mr Conlan ceased to be involved in the conduct of its affairs.
On 5 March 1998 the company brought this action against Mr Conlan, seeking damages from him for alleged conversion of its moneys or, alternatively, for moneys had and received by him on its behalf. He defended the action and in turn counterclaimed against Ms Carter, pleading that he is entitled to ownership of all issued shares in the company.
On 8 September 1999, prompted by a comment of Mr Conlan's counsel to the effect that his client would not continue with the counterclaim if it were shown that the company was no longer viable, the solicitors for the company and Ms Carter wrote to Mr Conlan's solicitors enclosing profit and loss accounts for the years ending 30 June 1998 and 1999 respectively and a copy of a balance sheet of the company as at 31 August 1999. The balance sheet showed assets of $35,448.56 and liabilities of $55,992.32, the latter sum including an amount of $41,000 described as "loan by J M Carter". In the letter, after commenting that the loan was "comprised almost entirely of outstanding wages", the solicitors said,
"It will be clear to you from the accounts that the company has not been in a position to pay Ms Carter fully for managing the business. You have previously indicated that you accepted that she was entitled to be paid a salary and the amount allowed has been $1,000 per week. Having regard to the extent of Ms Carter's responsibilities and the fact that she has been managing and running the business entirely on her own since December 1997, we consider that to be an eminently reasonable sum."
The letter then referred to the comment of Mr Conlan's counsel which had prompted it and concluded by inviting his solicitors "to obtain instructions and, perhaps, discuss the matter further with us".
Mr Conlan's solicitors responded by letter dated 10 September 1999. In the letter, having described the balance sheet as unsatisfactory and of little value and having observed that various items on the 1999 profit and loss sheet were "out of kilter" with previous years, they commented that the salary paid to Ms Carter seemed "excessive on any objective examination". They went on to assert "If one accepts Ms Carter's reasonable wage as $30,000, and adding back the excessive or 'one off' deductions compared to previous years, the Company probably should have had a profit of $45,000 plus". The letter then reads as follows:
"Having regard to the Company having a profit of somewhere near $50,000.00 and having regard to the fact that Mr Conlan is very likely to get at least a half share in the Company back again (even at the risk of both parties being subject to an unwanted audit) our client repeats his earlier offers (Without Prejudice if not accepted). Mr Conlan will surrender any rights he has whatsoever with regard to the Company and Ms Carter for $15,000.00 and return of his personal belongings (shearing gear, etc) OR alternatively Mr Conlan will take over the Company for $10,000.00 (provided the situation is roughly as you have outlined it to be), which you allege is worthless, and get a release of Ms Carter's guarantees and any liability she has to the Company and she takes her Toyota (if not already sold). In both instances each party pays their own legal costs.
If this offer is not acceptable or similar settlement not negotiated, Mr Conlan wants to have his day in Court."
On 17 September 1999 the solicitors for the company and Ms Carter replied in these terms:
"We refer to your letter dated 10 September 1999.
Our clients, Bushtown Holdings Pty Ltd and Ms Carter accept your client's offer of settlement of the action on the basis that your client will take over the company for $10,000 and obtain a release of Ms Carter's guarantees of the company's obligations and that each party pays their own legal costs.
Ms Carter has already sold the Toyota motor vehicle so that is not an issue. She has no liabilities to the company of which she is aware but she accepts the undertaking of your client to obtain a release of any liability of which she is unaware.
The situation of the company is as set out in the Balance sheet enclosed with our letter dated 8 September 1999 although inevitably the bank account, debtors, creditors and stock on hand have and will continue to fluctuate as a result of day to day trading.
In the circumstances, may we suggest that you prepare a deed of settlement reflecting the terms of settlement and necessary procedural issues for our clients to consider.
The business must continue to trade pending completion of the terms of the settlement and Ms Carter will continue to ensure that that happens on the same basis as she has up to date. Nothing will be done to prejudice the company's position during this period.
You may care to inform us how long you think it will take to organise the release of Ms Carter's guarantee of the lease and what time frame you would envisage for hand over. Our clients would require payment of moneys payable to Ms Carter as a condition of the hand over.
In the interests of the company our clients would require that the terms of the settlement remain confidential to the parties until completion, except to the extent necessary to organise the release of Ms Carter's guarantees.
You would be aware that the Stay of the Order of the Master in the Supreme Court proceedings for production of Ms Carter's diaries to the Court for inspection expires on Monday. We seek your agreement to jointly notify the Court that the action has been settled in order that there be no question of Ms Carter being in breach of that Order. Would you please let us have a response on this point today? We would suggest that ultimately we file a Consent Order giving leave to both parties to discontinue their claim on the basis that there be no order as to costs."
On behalf of the company and Ms Carter it is pleaded that Mr Conlan's second, alternative, proposal contained in his solicitors' letter of 10 September was accepted by their solicitors' letter of 17 September, thereby constituting an agreement to settle the action on the following conditions:
(a)Mr Conlan would purchase and Ms Carter would sell to him all shares in the company for $10,000,
(b)Mr Conlan would arrange a release of Ms Carter from all guarantees of the company's obligations and would release her from any liability to the company,
(c)the claim and counterclaim would each be discontinued on the basis that each party bear its own costs, and
(d)the settlement be subject to the assets and liabilities of the company being approximately as set out in the balance sheet attached to the letter dated 8 September.
The main contention on behalf of Mr Conlan is that the letter of 10 September contained not an offer to settle the action but an invitation to treat. It repeated his earlier offers and provided two further, alternative, proposals setting out key conditions upon which terms of settlement could be negotiated finally but which did not deal with matters essential to acquiring a company or business. Such matters included the ownership of business names, restraint of trade on the part of the vendor and payment of overdue rent.
The earlier offers are contained in correspondence which was tendered at the trial. It shows that as early as 17 December 1997 Mr Conlan offered to settle on the basis that Ms Carter buy him out for $20,000 or that he buy her out for the same amount and discharge her guarantees. He made a similar, but more detailed, offer on 18 December 1997 proposing then that "every single issue between [the parties to the action] in relation to drawings, loans, claims and past dealings be absolutely settled by the above transactions with actual undertakings in the necessary (short) Deed to that effect". On 22 January 1998 he repeated the earlier offer and added a further, alternative, offer involving his joining Ms Carter in running the company until it could be sold with a division of funds between them on an equal basis. Further letters of 5 February 1998 and 18 and 19 May 1999 also contain such offers.
Although each of the offers states a specific price and some provide further details, in my opinion none of them contains sufficient to bind the parties immediately upon its acceptance. Each left a number of important matters to be discussed and agreed upon. As the correspondence shows, it was expected that at some future time the parties would enter into a deed embodying the terms of their contractual arrangement. Finally, the proviso in the letter of 10 September 1999 that "the situation is roughly as you have outlined it to be" clearly contemplates that Mr Conlan was reserving the right to investigate the affairs of the company more thoroughly before being bound to purchase it. I find that the letter contained not an offer to settle the action but merely an invitation to treat.
On behalf of the company and Ms Carter it is further pleaded that, if the letter of 10 September 1999 contained merely an invitation to treat, then the letter of 17 September 1999 contained a counter offer to settle the action on the terms already proposed together with the condition that on settlement Ms Carter be paid "moneys payable" to her (see the sentence in the third last paragraph of the letter of 17 September 1999, which I have underlined). It is pleaded that the counter offer was accepted by a letter of 24 September 1999 from the solicitors for Mr Conlan in which the following passage appears:
"This morning Mr Conlan contacted us and advised us that, subject to a satisfactory inspection of the Business and the Business Premises, he wishes to proceed with the settlement as referred to in recent correspondence, subject to the situation of the company being as your client has described."
It is arguable that the reference in the letter of 17 September to "moneys payable" to Ms Carter should be interpreted as including not only the purchase price of $10,000 but also the amount of $41,000 shown as a loan to her in the balance sheet of the company. If that were so, then the letter was posing a requirement of substance, of not just a procedural nature. But such an interpretation could not elevate what was merely a further step in negotiations to an offer or counter offer the acceptance of which would constitute a contract. In my opinion, the letter of 17 September, like the letter of 10 September, contained merely an invitation to treat.
As accord and satisfaction have not been established I conclude that there is no agreement to settle the action.