Bushtown Holdings Pty Ltd v Conlan - [2000] WASCA 334

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: BUSHTOWN HOLDINGS PTY LTD & ANOR -v- CONLAN [2000] WASCA 334

CORAM: STEYTLER J
PARKER J

HEARD: 23 OCTOBER 2000

DELIVERED : 7 NOVEMBER 2000

FILE NO/S: FUL 103 of 2000

BETWEEN: BUSHTOWN HOLDINGS PTY LTD
First Applicant
JULIE MAREE CARTER
Second Applicant
AND
JOHN JAMES JOSEPH CONLAN
Respondent

Catchwords:

Appeal - Application for leave to appeal - Contract - Offer and acceptance - Offer purportedly accepted subject to imposition of new condition - Purported acceptance in reality a counter offer - Counter offer not accepted - No contract came into being - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Representation:

Counsel:

First Applicant              :     Mr P A Kyle
Second Applicant          :     Mr P A Kyle
Respondent:     Mr D L Jones

Solicitors:

First Applicant              :     Kyle & Company
Second Applicant          :     Kyle & Company
Respondent:     Kusevich & Associates

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

Davies v Smith (1938) 12 ALJR 260
Grainger v Vindin (1865) 4 SCR (NSW) 32
Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498
Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 40

Case(s) also cited:

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Clifton v Palumbo [1994] 2 All ER 497
McGellin v Mount King Mining NL (1998) 144 FLR 288
Wilson v Lim [1989] WAR 285
Wing Luck Foods v Lim [1989] WAR 358

JUDGMENT OF THE COURT: This is an application for leave to appeal against the decision of a Judge of this Court.
In July 1994 the respondent, Mr John Conlan, purchased two businesses engaged in the manufacture and sale of shearing and other rural clothing. In July 1995 he transferred those businesses to the first appellant, Bushtown Holdings Pty Ltd. The directors of that company were himself and the second appellant, Ms Julie Carter.
Differences arose between Mr Conlan and Ms Carter. In about December 1997 Ms Carter took over the management of the company. On 5 March 1998, the company brought an action against Mr Conlan. It claimed damages from him for alleged conversion. It also claimed, in the alternative, that he had had and received company moneys. He defended the action and brought a counterclaim against Ms Carter claiming ownership of all issued shares in the company.
Attempts were made to settle the proceedings in September 1999.
On 8 September 1999 the solicitors for the appellants wrote to the solicitors for the respondent enclosing the company's balance sheet as at 31 August 1999 and its profit and loss statements for the years ended 30 June 1998 and 30 June 1999 respectively. The apparent purpose of the letter was to demonstrate that the company had no value as its business had not been profitable. The balance sheet disclosed that the company's assets were worth $35,448.56 and that it had total liabilities of $55,992.34. One of those liabilities was said to be a loan by Ms Carter to the company of $41,000. The letter of 8 September 1999 said, in that respect, that the loan was comprised almost entirely of outstanding wages calculated by reference to a wage of $1,000 per week.
The solicitors for the appellant responded by letter dated 10 September 1999. They asked for copies of the company's taxation returns and said that the balance sheet as presented was "particularly unsatisfactory and ... of little value". They said that there were, in the 1999 profit and loss statement for the company, a number of items which were "out of kilter" with previous years. The letter went on as follows:
"Having regard to Ms Carter paying herself $50,000.00, which seems excessive on any objective examination (remembering she queried wages to Mr Conlan of $500.00 per week), it seems strange that the Company with a much reduced turnover should require a Bookkeeper in addition to $3,080.00 of accounting assistance. [The company's accounts had shown bookkeeping fees of $3,245 as well as accounting fees.] A comparison of the 1999 figures with earlier years highlights many unusually high expenses, which conveniently reduce the nett profit of the Company.
...
If one accepts Ms Carter's reasonable wage as $30,000.00 and adding back the excessive or 'one off' deductions compared to previous years, the Company probably should have had a profit of $45,000.00 plus.
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.
... "
That letter was replied to by the appellants' solicitors by letter dated 17 September 1999. The material portion of their response reads as follows:
"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 the 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.
... "
On 23 September 1999 the respondent's solicitors wrote to the appellants' solicitors as follows:
"Thank you for your letter of even date.
We sent a copy of your letter of the 17^thSeptember 1999 to Mr Conlan, who is shearing in Victoria. We are awaiting his response before preparing any Settlement Deed. At this stage the matter could not definitely be said to be settled, however, indications from Mr Conlan are that settlement is likely.
... "
On 24 September 1999 the appellants' solicitors responded to that letter as follows:
"Thank you for your letter dated 23 September 1999.
To ensure that there is no misunderstanding, we reiterate that our letter dated 17 September 1999 contains an acceptance of the alternative offer of settlement contained in the third paragraph of page 2 of your letter dated 10 September 1999.
There is a binding offer and acceptance. For clarity of procedural matters, we suggest a deed of settlement but that does not affect the fact that a settlement has been agreed."
Finally, on 24 September 1999 the solicitors for the respondent wrote to the solicitors for the appellants as follows:
"We refer to previous correspondence in the above matter.
This morning Mr Conlan contacted us and advised 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.
Can we organise an inspection for Friday, 1^stOctober 1999 at 11.00am?
In the meantime, please supply a current list of Debtors, Creditors, stock, plant and equipment.
Yours faithfully"
This letter contained a postscript which read as follows:
"We have just received your letter of even date. Our offer was WITHOUT PREJUDICE and also 'provided the situation is roughly as you have outlined', ie. as per your client's provided financial statements. Mr Conlan needs to do an inspection to be satisfied that everything is as your client has stated and the writer is confident settlement will proceed if the inspection is satisfactory."
The appellants pleaded that this exchange of correspondence gave rise to a binding accord and satisfaction between the parties pursuant to which their dispute was settled. They alleged, firstly, that the exchange of correspondence on 10 September 1999 and 17 September 1999 gave rise to a "binding agreement of compromise". Next they alleged, as an alternative plea, that the letters dated 17 September 1999 and 24 September 1999 gave rise to a binding agreement pursuant to which the action had been compromised.
The respondent, in his pleading, denied that the letter of 10 September 1999 contained an offer to settle the action and asserted that it "contained no more than an invitation to treat". He pleaded, in the alternative, that if the letter did contain an offer to settle the action then it was rejected by what he said was a counter offer in the form of the letter of 17 September 1999. He denied that this counter offer was ever accepted so as to give rise to a binding agreement.
The question whether the action had been compromised in either of the ways contended for was referred to the learned trial Judge for decision as a preliminary issue.
His Honour concluded, firstly, that the respondent was right in his contention that the letter of 10 September 1999 contained only an invitation to treat rather than an offer to settle. His Honour said that the earlier offers referred to in the letter of 10 September were contained in correspondence which was tendered at the trial. This correspondence showed, he said, that as early as 17 December 1997 the respondent 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 said that the respondent made a similar, but more detailed, offer on 18 December 1997 and that 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. He mentioned that further letters dated 5 February 1998 and 18 and 19 May 1999 also contained such offers. His Honour went on to say:
"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."
His Honour went on to consider the alternative argument which had been advanced in reliance upon the terms of the letters dated 17 September 1999 and 24 September 1999. He said, in that respect:
"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."
The appellants appeal on seven grounds.
Grounds 1, 2, 4 and 5 take issue with the learned trial Judge's finding that the letter dated 10 September 1999 contained merely an invitation to treat and not an offer to settle.
Ground 3 contends that the learned trial Judge erred in law in admitting into evidence correspondence between the parties prior to the letter from the appellants' solicitors to the respondent's solicitors dated 8 September 1999, that correspondence being said to be irrelevant to the intention of the respondent as expressed in his solicitor's letter dated 10 September 1999 and inadmissible as to the meaning of that letter.
Grounds 6 and 7 dispute the learned trial Judge's finding that if the letter dated 10 September 1999 was merely an invitation to treat then so, too, was that dated 17 September 1999.
The respondent, on the hearing of the appeal, contended by his counsel that his Honour had made no mistake in the findings which he had made. He contended, in any event, that the terms of the appellants' solicitor's letter dated 17 September 1999 were such as to amount to a counter offer and that that counter offer was never accepted in such a way as to give rise to a binding agreement.
Having heard these respective contentions on the part of the parties we are not persuaded that this is an appropriate case in which to grant leave to appeal. Even if there is substance to those grounds which contend that the learned trial Judge erred in his conclusion that the letters referred to contained merely invitations to treat (and there is, we think, plainly no substance to ground 3, having regard for the fact that the letter dated 8 September 1999 specifically referred to, and repeated, the offers contained in the earlier correspondence referred to by his Honour), the appellants are left, in our opinion, with an insuperable difficulty in establishing that there was any binding acceptance of either of the alternative "offers" relied upon by them.
Their contentions in respect of the letter dated 10 September 1999 were premised upon a construction of it such that the words "Mr Conlan will take over the Company for $10,000.00" should be read as meaning that the latter offered to acquire the company, with all of its assets and liabilities, including the liability of $41,000 described as "loan by J M Carter", for an amount of $10,000 if its financial situation was "roughly as ... [the appellants' solicitors had] outlined it to be". Counsel for the appellant also contended that the reference, in the response dated 17 September 1999, to the fact that the appellants "would require payment of moneys payable to Ms Carter as a condition of the hand over" was a reference to both the purchase price of $10,000 and the loan in the sum of $41,000.
If that is the correct construction of the two letters, and no other was contended for (perhaps because this would raise the not inconsiderable spectre of uncertainty), then it seems to us that, if it be assumed that the letter of 10 September 1999 was intended to be an offer capable of acceptance by the appellants, that offer was not accepted. Rather, in requiring repayment of the loan made by Ms Carter as a condition of the handover, a matter of some significance which was not addressed in the letter dated 10 September 1999, the appellants sought to impose, in our opinion, a new condition notwithstanding that the letter purported to accept the offer. The prior correspondence had not addressed, at all, the question of when that loan might have been repayable. The appellants' solicitors had, in their letter dated 8 September and its attachments, done no more than raise the fact of its existence. The respondent's solicitors, in their letter dated 10 September, referred to it only for the purpose of saying that the amount of the loan was excessive because the wages which it reflected were unreasonably high and for the purpose of making their point that the bookkeeping fees of $3,245 appeared to be unjustified. Once it is accepted, as we think it must be, that the appellants sought to impose, if somewhat obliquely, a new condition on their acceptance of the respondent's offer, then it follows that this first exchange of correspondence could not give rise to any agreement of compromise. Rather, the letter dated 10 September, albeit expressed as an acceptance of the respondent's offer, amounted to no more than a counter offer. (Cf in this respect Grainger v Vindin (1865) 4 SCR (NSW) 32; Davies v Smith (1938) 12 ALJR 260; Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498.)
We are also of the opinion that no binding agreement of compromise thereafter came into being. That the respondent did not at once accept the appellants' counter offer is apparent from the terms of his solicitors' letter dated 23 September 1999 in which it is said in terms that "the matter could not definitely be said to be settled". Nor, in our opinion, did the respondent accept the counter offer by his solicitors' letter dated 24 September 1999. That letter records only that "subject to a satisfactory inspection of the Business and the Business Premises ... " the respondent wished to "proceed with" the settlement "subject to the situation of the Company being as ... described". Those words, when read together with the postscript to that letter, make it sufficiently plain, in our opinion, that the respondent did not then regard himself as bound by any agreement and did not propose to be bound by any agreement until such time as he had made the inspection to which his solicitors referred and had been satisfied by it. While it is difficult, so far as the postscript is concerned, to see why the fact that the earlier offer had been made "without prejudice" should have been thought to bear upon the question whether the offer was one capable of giving rise to a binding agreement if accepted or, for that matter, why the fact that performance of any such agreement was to be conditional upon "the situation" being "roughly as ... outlined" by the appellants' solicitors should have rendered the offer incapable of acceptance, the fact is that the respondent's solicitors did, as we read the letter dated 24 September 1999, inform the appellants' solicitors that the respondent did not regard himself as bound by any agreement and would not bind himself to any agreement unless and until he was satisfied of the matters to which they referred.
These conclusions are enough to dispose of the application. Because the appellants are unable to make out either of the agreements for which they contend, it follows, in our opinion, that no substantial injustice will be done by leaving the decision of the learned trial Judge unreversed (see Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 40 at 54 ‑ 55).

We consequently propose to dismiss the application for leave to appeal.