Lance Hume Hull v David Wayne Smith
[2013] NSWDC 78
•30 May 2013
District Court
New South Wales
Medium Neutral Citation: Lance Hume Hull v David Wayne Smith [2013] NSWDC 78 Hearing dates: 20-21 May 2013 Decision date: 30 May 2013 Before: Mahony SC DCJ Decision: Verdict for the Defendant
Catchwords: Compromise of proceedings; whether agreement enforceable Legislation Cited: Uniform Civil Procedure Rules
Civil Procedure Act 2005
Succession Act 2006Cases Cited: Calderbank v Calderbank (1975) All ER 333
Hadley v Baxendale [1843-60] All ER Rep 461
Lewis v Combell Constructions Pty Limited (1989) 18 NSWLR 528Category: Principal judgment Parties: Lance Hume Hull - Plaintiff
David Wayne Smith - DefendantRepresentation: J Anderson - Plaintiff
V Hartstein - Defendant
Farrell Lusher
Armstrong Solicitors
File Number(s): 12/204392 Publication restriction: Nil
Judgment
The Plaintiff's Claim
The plaintiff claims damages for breach of contract allegedly made between his solicitor, Mr Peter Smith, and another solicitor, Mr Phillip Davis, on behalf of the defendant, David Wayne Smith. In paragraph 7 of his Statement of Claim, the plaintiff has pleaded that the parties agreed that "in consideration of the payment by the defendant to the plaintiff of the sum of $75,000 the plaintiff would not appeal from the judgment in the proceedings".
The "proceedings" are identified in paragraph 1 of the Statement of Claim as proceedings No. 2011/52466 in the Supreme Court of New South Wales. Those proceedings, which were brought by the NSW Trustee and Guardian ("the Trustee") sought determination by inquiry of the identity of the next of kin of Warren Scott Smith who had died intestate between 15 and 30 September 2008. On the death certificate of Warren Scott Smith, the plaintiff had been nominated as the father of the deceased. Apparently, that information had been provided by the defendant to an undertaker employed by the defendant.
The defendant was the son of Warren Scott Smith, and he had a half brother, Daryl Smith. As the deceased died intestate, his estate, which for probate purposes was in excess of $600,000, would pass to the plaintiff if he could establish paternity. If not, the whole of the estate would pass to the defendant and his half brother.
The Supreme Court Proceedings
The Trustee brought proceedings pursuant to Rule 54.3 of the UCPR seeking an order for determination, by inquiry, as to the identity of the persons entitled to succeed to the estate of the deceased. The plaintiff in these proceedings was the first defendant, and it is not in dispute that David Wayne Smith as second defendant was appointed to represent the interests of the siblings of the half blood of the deceased for the purpose of those proceedings. There was also no dispute that there were only two brothers of the half blood of the deceased.
Those proceedings were heard before Hallen AsJ on 14 and 15 September 2011 and his Honour delivered his judgment on 12 October 2011. His Honour held that paternity was a matter of status, and in this case the status of paternity conflicted with the factual reality of what occurred. His Honour held that the first defendant (the plaintiff in these proceedings) was not the deceased's father and accordingly made the following orders:
"1. Upon inquiry, it is determined the persons entitled on intestacy to succeed to the estate of Warren Scott Smith who died between 15 and 30 September 2008, are the second defendant, David Wayne Smith and his half brother Daryl John Smith.
2. The plaintiff is authorised to distribute his estate accordingly."
During the course of the proceedings there had been negotiations conducted between Counsel for the first defendant and Counsel for the second defendant in an endeavour to resolve matters concerning the distribution of the estate. Those negotiations did not resolve the matter, however, they involved Counsel for the Trustee being approached for an estimate of the Trustee's costs in the proceedings. The clear and reasonable inference is that those negotiations concerned distribution of the estate, between the plaintiff, the defendant and his half-brother.
Mr David Smith had, as a protective measure, commenced proceedings pursuant to the Succession Act 2006 for provision for him out of the estate in the event that Mr Hull was found to be the father of the deceased and therefore entitled to the estate ("the FPA claim"). Whilst the proceedings were commenced, no process was served on Mr Hull, who was not a party to them.
Mr Hull, on 16 November 2011, served the other parties to the proceedings with a Notice of Intention to Appeal the judgment of Hallen AsJ. Further settlement negotiations took place between his solicitors and those of Mr David Smith culminating in two telephone conversations which took place on 23 January 2012 which are alleged to give rise to a binding agreement which is the subject of these proceedings.
The Defence
The defendant denies that there was an agreement as alleged or any agreement at all and further denies that there was any repudiation as pleaded by the plaintiff in paragraph 8 of the Statement of Claim.
The defence further pleaded:
"5(e) Daryl John Smith was and is a disabled person and lacked capacity;
(f) The interests of Daryl John Smith were and are represented by the NSW Trustee and Guardian;
(g) In accordance with the judgment of Hallen AsJ the deceased estate is to be divided as to 50% to the defendant and 50% to Daryl John Smith;
(h) In order to settle the matter the defendant's solicitor entered into negotiations with the plaintiff's solicitor and it was agreed that if the NSW Trustee and Guardian would pay from the 50% of the deceased estate that was to be paid to Daryl John Smith the sum of $37,500, then the defendant would pay from his 50% share of the deceased estate the sum of $37,500 to the plaintiff making a total sum of $75,000.
(i) When the plaintiff sought the agreement of the NSW Trustee and Guardian that $37,500 be paid from Daryl John Smith's 50% share of the deceased estate, the NSW Trustee and Guardian refused to do so;
(j) As a result of the NSW Trustee and Guardian's refusal there was no concluded agreement between the plaintiff's solicitor and the defendant's solicitor as alleged in the Statement of Claim or any agreement at all."
The Plaintiff's Evidence
What follows is a summary of the evidence which is prepared without the benefit of a transcript. The areas of contention were few. The plaintiff relied on two affidavits of his solicitor, Peter Wayne Smith, sworn on 16 May 2013 and 20 May 2013. In the first of those affidavits Mr Smith set out the background of the matter and relevant matters concerning the trial and the plaintiff's decision to appeal the judgment delivered by Hallen AsJ. The affidavit annexed various correspondence concerning settlement negotiations commencing with a letter from the plaintiff's solicitors to Messrs Bartier Perry on behalf of the defendant dated 17 November 2011. The defendant's solicitors sought and the plaintiff agreed to an extension of time for the plaintiff to file his Notice of Appeal until 27 January 2012. The significance of that was that that date was outside the time limited by the UCPR for filing the Notice of Appeal.
By letter dated 13 January 2012 the defendant made an offer to the plaintiff in an open letter to "settle all proceedings for $35,227". The letter was expressed to be in accordance with the principles of Calderbank v Calderbank (1975) All ER 333. On the copy of that letter annexed to the affidavit of Mr Peter Smith at annexure L is some handwriting which he identified as his note of a conversation that he had with Mr Philip Davis of Messrs Bartier Perry on 23 January 2012. It read:
"Put $75,000 incl Hull and us."
Mr Peter Smith gave evidence that a second conversation took place on 23 January 2012 in which he and Mr Davis agreed to settle the matter for $75,000 inclusive of costs. Mr Smith had no note of that conversation, however, an email sent by him to the plaintiff on 23 January 2012 at 2:26pm confirmed settlement to his client in those terms.
Thereafter, the parties corresponded as to how the settlement was to be put into effect. By letter dated 24 January 2012 the plaintiff's solicitor suggested "the best way to achieve that settlement is to:
"(1) Not Appeal Hallen J's decision.
(2) You serve a copy of your Family Provision Act proceedings and we file a Notice of Appearance and Terms of Settlement in those proceedings.
(3) The terms would include an agreement not to appeal the Hallen J proceedings.
That should tie up all loose ends."
By letter dated 24 January 2012 the plaintiff's solicitors had also advised the Trustee of the settlement. On 31 January 2012 the Trustee wrote to the plaintiff's solicitors in which the Trustee set out a number of barriers to the proposed manner of implementing the settlement between the plaintiff and defendant. They included:
"(1) The Trustee would be the appropriate defendant in the Family Provision proceedings.
(2) Mr Hull could not be joined to those proceedings as he was not an eligible person.
(3) Any settlement which adversely effected the interests of the estate generally would need the consent of the Trustee and approval of the Court."
The Trustee was not persuaded that the proposed settlement was in the interest of Daryl John Smith or that the Court would either grant an extension of time in which to file the Notice of Appeal (which was by now out of time) or approve settlement of the Appeal proceedings on the terms set out in the plaintiff's letter dated 24 January 2012.
The plaintiff's solicitors replied to that letter on 2 February 2012 (annexure P to the affidavit of Mr Smith). The letter stated:
"It's always been our client's position that he only wanted some provision from the estate and, if he had been successful in the Court of Appeal, then we thought there was a reasonable argument available to him that the other beneficiaries ought to have brought the Family Provision Act proceedings at the same time as the next of kin proceedings and they ought to have been argued together ...
If your office intends to stand in the way of that compromise, then we will seek instructions to file the Appeal and ask for leave to extend time."
By further letter to the defendant's solicitors dated 14 February 2012 (annexure Q), the plaintiff's solicitors stated:
"From what the Trustee says, it appears that that sum will have to come initially from David Smith's share.
We are uncertain why the Trustee took offence at our negotiations because their Counsel was well aware of the negotiations during the course of the hearing and indeed obtained an outline of the Trustee's costs, including his fees, to enable those negotiations to proceed."
The plaintiff's solicitors in that letter gave notice that they would proceed to file a Notice of Appeal and probably institute separate proceedings to enforce the settlement (i.e. these proceedings).
By letter dated 28 February 2012 (annexure R) the defendant's solicitors advised that they did not agree that the settlement sum should come only from their client's share of the estate, (i.e. that of David Smith) and, inter alia, that their "continuous position has been that any sum to settle this matter must come from the estate on an equal basis, being equally from our client and Daryl Smith".
By letter dated 29 February 2012 the plaintiff's solicitors did not take issue with that statement.
The plaintiff then applied to extend time for filing a Notice of Appeal. That application came on for hearing on 18 June 2012 before Young AJA. The application was dismissed on the basis that his Honour held that the Appeal had no reasonable prospects of success. That decision effectively extinguished the plaintiff's claims on the estate.
Mr Peter Smith was cross-examined on his affidavits. It was put to him that he knew, by virtue of the judgment of Hallen AsJ that David Smith was representing the interests of Daryl Smith in the proceedings, which he acknowledged. It was also put that he knew that any settlement that concerned Daryl Smith's interests required approval pursuant to s 75 of the Civil Procedure Act 2005, to which he replied:
"I did not turn my mind to it. I realised that some time after the matter was settled."
Mr Peter Smith acknowledged that the Trustee, having been the plaintiff in the proceedings below, was a necessary party to any Appeal. Mr Peter Smith was asked about his Calderbank letter dated 17 November 2011, and said that he wanted to settle everything between the parties. He said,
"I wanted an end to it all the Supreme Court and Court of Appeal proceedings."
It was further acknowledged by Mr Peter Smith that he knew, because of the involvement of Counsel for the Trustee, in earlier negotiations, that the Trustee would have to be involved in any settlement of the matter.
In respect of the relevant conversations on 23 January 2012, there was no issue that the solicitors agreed on the sum of $75,000 inclusive of costs to settle it. Further, it was not in issue that in both conversations neither solicitor referred to the money being paid from the estate.
It was the plaintiff's case that David Smith personally was to pay the $75,000 to the plaintiff. It was put to Mr Peter Smith that Mr Davis on behalf of the defendant had been negotiating all along on the basis that monies were to be paid from the estate, with which he disagreed.
Further, it was put that Mr Peter Smith knew that monies were to be paid from the estate and that was the reason why he wrote to the Trustee the very next day on 24 January 2012. Mr Peter Smith's explanation for that letter was that he wrote "simply as a courtesy".
Mr Peter Smith gave evidence that he knew that the Trustee would be the defendant in any Family Provision Act proceedings as it was the administrator of the estate, however, he regarded the settlement as a modest settlement and when it was put to him again that he knew that the monies were to come from the estate, his answer was:
"No. It was to come from David Smith."
When asked about the "loose ends" that he had referred to in his letter, it was suggested to him that one such loose end was that the Trustee would have to be part of the settlement negotiations, to which he answered:
"No I didn't see it that way."
Mr Peter Smith explained his correspondence with the Trustee following 23 January 2012 as "bringing the NSW Trustee and Guardian up to date". When it was put to him that the money had to come from the estate, he answered:
"I didn't care where the money came from."
It was further put to him that he wanted to persuade the Trustee so that the money would be paid from the estate, to which he answered:
"If it came from the estate, so be it."
Mr Peter Smith denied that he knew that the consent of the Trustee was necessary. He again stated:
"I didn't care where the money came from. If it came from the estate, so be it."
When asked about the letter he wrote to the Trustee on 2 February 2012 (annexure P), Mr Peter Smith said that he wrote that letter to persuade the Trustee to go along with the settlement.
Mr Peter Smith denied knowing when he was negotiating with Mr Davis on behalf of the defendant that it was the defendant's position that any settlement should come from the estate on an equal basis from the shares of David Smith and Daryl Smith. He adhered to his earlier evidence that he had only corresponded with the Trustee because "it had to be informed and that's why I informed them". His evidence was to the effect that by contacting the Trustee he was attempting to facilitate the settlement.
In relation to the letter he wrote on 29 February 2012 to the defendant's solicitors (annexure S), he acknowledged (at paragraph 2) that in the Supreme Court proceedings David Smith had acted as Daryl Smith's representative. In the same letter he had not contested the contention of the defendant's solicitor that the defendant's continuous position had been that the settlement monies must come from the estate on an equal basis.
In respect of his letter to the Trustee dated 29 February 2012, which referred to Counsel's advice, he was suggesting a deed and providing for settlement of the proceedings upon the following terms:
"(a) Payment to our client of the settlement monies from the estate;
(b) Mutual releases in respect of any or all claims; and
(c) (If required by the administrator) judicial advice approving the settlement pursuant to s 63 of Trustee Act."
It was put to Mr Peter Smith that this was always the position, that is, that the Trustee was a necessary party, to which he replied:
"No. We had resolved the matter. I was just looking for ways of assisting everyone and facilitating the agreement."
Mr Peter Smith acknowledged that the content of paragraph 35 of his affidavit sworn on 16 May 2013 to the effect that he had refrained from filing a Notice of Appeal within the prescribed time because he believed the matter had been concluded between the plaintiff and defendant, was incorrect in that the time for filing a Notice of Appeal expired on 10 January 2012.
Finally Mr Peter Smith was questioned about the letter he wrote to the Trustee on 27 March 2012 (annexure X) suggesting, on Counsel's advice, a tripartite agreement and an application by the administrator to seek judicial advice pursuant to s 63 of the Trustee Act. It was put to him that that suggestion was based on his view that three necessary parties to the agreement would be the plaintiff, the defendant and his half brother and the Trustee, to which he answered that it had "become apparent that Bartier Perry and the Trustee would not live up to the agreement".
The Defendant's Evidence
The defendant tendered a tender bundle comprising 20 separate tabs which, over one objection, became exhibit 1 in the proceedings (see separate judgment for ruling on evidence). The defendant called his solicitor, Mr Philip Davis, to give evidence.
Following the plaintiff's solicitors letter dated 17 November 2011, Mr Davis had sought instructions from his client by letter dated 13 January 2012 (exhibit 1, tab 10b). That letter discussed the offer made by the plaintiff's solicitor and included the following:
" ... we recommend that you consider allowing up to $80,000 to be paid from the estate and Mr Hull's legal costs and disbursements as well as separate payment to Mr Hull if a counter offer is made."
Mr Davis had taken notes of his various telephone attendances on 23 January 2012. They appear at exhibit 1, tab 10c. The first took place at 11.31am which recorded Mr Smith's offer on behalf of the plaintiff of "all up $75,000".
At 11.34am he recorded that he spoke to his client David Smith who agreed with the proposal. Mr Davis recorded Mr Smith as saying:
"Take it and run, more than happy
Ecstatic with it.
Not worth haggling further."
At 11.37am Mr Davis recorded that he spoke to Mr Peter Smith, the inference being that the offer was accepted. He recorded that a deed of arrangement and release was to be prepared by Mr Peter Smith.
Finally, at 11.39am Mr Davis recorded that he spoke to Counsel representing the defendant, Mr Alun Hill.
Mr Davis gave evidence in chief that he received the plaintiff's solicitor's letter dated 24 January 2012 (annexure N) and spoke to Mr Peter Smith on 27 January 2012. His file note of that conversation appeared at exhibit 1, tab 10d which recorded:
"Disc. mechanics of settling.
We haven't served notice on NSW T&G re FPA claim and don't want to do it now.
Preferred route is a deed by which first and second defendants drop any FPA claim and agree to distribute as discussed. He will send deed next week."
A further telephone conversation took place between Mr Davis and Mr Peter Smith on 15 February 2012. The conversation took place at 9.10am, before Mr Davis had received Mr Peter Smith's letter dated 14 February 2012 (annexure Q). His notes of that conversation were as follows:
"Referred him to s 75 of CPA which presume NSWT&G are relying on.
We are of similar mind, need to decide now to persuade NSWT&G
I will talk to AH (Mr Alun Hill) and he will talk to JA (Mr Anderson of Counsel)"
After receiving the letter from Mr Peter Smith dated 29 February 2012 (annexure S), Mr Davis phoned Mr Peter Smith on 1 March 2012 at 12.33pm. His file note was as follows:
"Told him we have no objection to deed of settlement and judicial advice by NSW Trustee (option 1).
He has written to NSW Trustee with some suggestions and is awaiting to hear if they agree."
Mr Davis was cross-examined about the defendant's request for an extension of time for the plaintiff to file his Notice of Appeal. He agreed that the purpose was to allow the defendant to obtain advice from Mr Hill of Counsel on the prospects of success of the Appeal.
It was put to Mr Davis that his letter dated 13 January 2012 to the plaintiff's solicitors (annexure L) referred in terms to "our client", meaning David Smith, who was not the administrator of the estate. Mr Davis agreed that if the proposed Appeal was successful then the plaintiff would receive the whole of the estate, and it was against that "set of facts" that the defendant's offer was made on that day.
Mr Davis was also asked about the telephone conversations that he had on 23 January 2012. It was suggested that those conversations confirmed the agreement between the solicitors of the sum of $75,000 including costs, and that Mr Peter Smith would draft the deed of arrangement and release to give effect to the settlement. Mr Davis disagreed.
The Defendant's Submissions
Learned Counsel for the defendant submitted that no concluded agreement was made by way of the two relevant telephone conversations between Mr Peter Smith, solicitor, and Mr Davis, solicitor on 23 January 2012. Whilst there was agreement as to the amount of the settlement, a necessary third party to any agreement was the Trustee. There are a number of reasons for this, namely:
(1) The estate was to pay the money.
(2) That was within the contemplation of Mr Davis on 13 January 2012 when he wrote to his client (exhibit 1, tab 10b).
(3) Mr Peter Smith knew, or ought to have known, that that was the position.
The last proposition was made out by subsequent correspondence in which Mr Peter Smith had made that acknowledgement (eg. letters from the plaintiff's solicitors dated 2 February 2012 to the Trustee, 14 February 2012 and 29 February 2012 to Messrs Bartier Perry, particularly paragraph 4 thereof, letters dated 29 February 2012 and 27 March 2012 to the Trustee).
It was submitted on behalf of the defendant that it was confusion on behalf of both Mr Peter Smith and Mr Davis as to the basis upon which they were negotiating which resulted in no contractual terms being agreed. The Trustee was a necessary party given it was the administrator of the estate, it was a party to the Appeal and pursuant to s 75 of the Civil Procedure Act any settlement required approval of the Court. There was therefore no certainty of parties or the terms of the contract that the plaintiff was now trying to enforce. One indication of that was Mr Peter Smith's evidence that he did not care where the money came from.
Further, both parties attempted to persuade the Trustee that the agreement between them should be resolved by way of a deed consented to by the Trustee. The defendant always required that the payment be made by way of a distribution of the estate.
The defendant also submitted that when Mr Peter Smith referred to "all the proceedings", he was referring to both the Supreme Court proceedings and the FPA proceedings, which he knew had been commenced, notwithstanding that his client was not a party to them. It was submitted that Mr Peter Smith's evidence that he did not know that the Trustee had to be involved in the settlement could not be accepted. His explanation that he informed the Trustee of the settlement only "as a matter of courtesy" could also not be accepted given his request of the Trustee in terms, "Do you have any requirements?"
The letter written by Mr Peter Smith on 24 January 2012 to the defendant's solicitors (annexure N to his affidavit) was entitled "Estate late Warren Scott Smith". In that letter he referred to what he thought was "the best way to achieve that settlement" as set out in paragraph 14 above. His conclusion "that should tie up all loose ends" was indicative that there was no concluded agreement between the parties. Further indicators that there was no concluded agreement were:
(1) Mr Peter Smith did not make a note that it was a concluded agreement following the telephone conversation on 23 January 2012 at 11.37am.
(2) Mr Peter Smith referred to the agreement in his letter dated 20 March 2012 as his client's "attempts to resolve this matter" and also as a "proposed settlement".
(3) He conceded that paragraph 35 of his affidavit was incorrect.
(4) The Notice of Appeal, at that time, was two weeks out of time.
It was submitted on behalf of the defendant that pursuant to s 73 of the Civil Procedure Act it was open to the plaintiff to file a Notice of Motion in the Court of Appeal proceedings seeking the requisite relief in relation to the compromise or settlement of the proceedings. That course was not followed.
In respect of damages, it was acknowledged that the sum of $75,000 was agreed between the solicitors for the parties and if the plaintiff's claim was upheld, then Mr David Smith would be held personally liable for payment of that amount pursuant to a binding contract. Otherwise, it was submitted that the costs of the Court of Appeal proceedings as claimed by the plaintiff in these proceedings, were not recoverable as Young AJA had already dealt with that by making orders in those proceedings.
The Plaintiff's Submissions
The plaintiff submitted that the evidence established, as at 23 January 2012, the parties by their solicitors were in no doubt that they had reached an agreement to settle the matter. The plaintiff submitted that the defendant had, by its letter dated 13 January 2012 to the plaintiff's solicitors (annexure L to the affidavit of Mr Peter Smith), made an open offer to settle the matter without any reference to the estate. The expression used in that letter "our client" could only refer to Mr David Smith. The defendant had requested a delay to the filing by the plaintiff of a Notice of Appeal until 27 January 2012 to enable the defendant to consider its position. That proposal was agreed to by the plaintiff on 3 January 2012 which provided a context for the settlement offers that followed thereafter.
It was further submitted that the reference by Mr Peter Smith to "tying up loose ends" was consistent with his evidence that he did not care where the money came from. Mr Peter Smith was ambivalent about how the proceedings were to be resolved.
During the trial I had raised with the parties the application of the decision of Justice Finlay in Lewis v Combell Constructions Pty Limited (1989) 18 NSWLR 528. Learned Counsel for the plaintiff sought to distinguish Lewis on the basis that a clear mistake was made by the solicitor for the plaintiff, of which the defendant's solicitor ought to have been aware. In Lewis, the plaintiff had been relieved of the consequence of the mistake made by his solicitor and it was on that basis submitted that the decision could be distinguished.
It was submitted that Mr Davis had no power to negotiate on behalf of the estate and the letter that he wrote to the plaintiff's solicitors dated 13 January 2012 (annexure L) contained an offer made on behalf of his client who was Mr David Smith. The plaintiff also submitted that the email sent by Mr Peter Smith to his client on 23 January 2012 (annexure M) was clear evidence that a settlement had been concluded.
In respect of damages, Counsel for the plaintiff submitted that there was no challenge to the agreed amount of $75,000. Relying on the principle in Hadley v Baxendale [1843-60] All ER Rep 461, he submitted it was reasonably within the contemplation of the parties that if the defendant repudiated the agreement the plaintiff would prosecute his Notice of Appeal. If the plaintiff was in time to Appeal, he would not have required leave and the Appeal would have been considered on the merits. The plaintiff had an obligation to mitigate his loss by applying for an extension of time and the adverse costs orders were a foreseeable consequence of that application. The effect of the orders made by Young AJA was that the plaintiff was liable for the respondent's costs of the extension application and therefore those costs were recoverable. The total claim, including interest, came to $119,089.73.
Submissions in Reply
In submissions in reply, Counsel for the defendant referred the Court to a letter written by Mr Peter Smith to Messrs Bartier Perry dated 14 February 2012 in which he stated:
"From what the Trustee says, it appears that that sum will have come initially from David Smith's share."
It was submitted that statement made it clear that it was not Mr Peter Smith's understanding at the time the alleged agreement was made that the funds would come from David Smith's share of the estate. The only reasonable inference was that Mr Peter Smith thought that the money for the settlement would come from both shares, i.e. from David and Daryl Smith, and that this was the same understanding that Mr Davis had of the matter.
The Trustee had been involved in prior negotiations during the course of the proceedings before Hallen AsJ, and Counsel for the Trustee had indicated the Trustee's costs.
It was further submitted that Lewis v Combell Constructions Pty Limited did apply on the basis the mistake in these circumstances was made by Mr Davis, but also probably by Mr Peter Smith and that the plaintiff was now trying to take advantage of that mistake. In the interests of justice, in accordance with the principle in Lewis v Combell Constructions, that should not be allowed to happen. Further, the post contractual correspondence made it clear that Mr Peter Smith thought Mr Davis was negotiating on behalf of both David and Daryl Smith and that the Trustee was necessarily involved.
It was submitted that Mr Davis as solicitor for the defendant did not have power to bind the estate which could only be done by the Trustee as administrator. As the Trustee had to be involved there could be therefore no enforceable contract between the parties as Mr Davis had no power to bind the estate. If he turned his mind to it, Mr Peter Smith knew, or ought to have known that as well.
Findings of Fact
Having regard to all of the evidence I make the following findings of fact:
(1) Following the delivery of judgment by Hallen AsJ on 12 October 2012, the plaintiff filed and served a Notice of Intention to Appeal. The time for filing the Notice of Appeal expired on 13 January 2012.
(2) During the hearing of the proceeding before Hallen AsJ, negotiations had taken place between Counsel for the plaintiff and Counsel for the defendant to resolve that matter, with the knowledge of the Trustee and its Counsel. Those negotiations proved fruitless. Had they been successful, any settlement would have had to have been accepted by the Trustee, and approved by the Court pursuant to s 75 of the CPA, given that Mr Daryl Smith was an incapable person.
(3) The defendant sought from the plaintiff an agreement to not file its Notice of Appeal prior to 27 January 2012, to provide the defendant with the opportunity of obtaining advice from his Counsel in respect of the prospects of any Appeal brought by the plaintiff.
(4) By agreeing to that extension of time, the plaintiff was taking himself out of time for filing his Notice of Appeal. The agreement did not bind in any way the Trustee.
(5) The plaintiff's solicitors had, following the judgment of Hallen AsJ, requested the Trustee not to distribute the estate. The plaintiff's solicitors had then served on the Trustee the Notice of Intention to Appeal on 16 November 2011.
(6) Following the agreement to settle on 23 January 2012, the plaintiff's solicitors wrote to the Trustee by letter dated 24 January 2012 asking whether the Trustee had "any special requirements and/or would you comment in relation to our proposed method of settlement".
(7) The defendant's offer made by letter dated 13 January 2012 was in response to an offer made by the plaintiff's solicitors by letter dated 17 November 2011 to settle "all proceedings for the sum of $75,000 plus agreed costs of $45,000".
(8) The defendant's solicitor's letter to his client on 13 January 2012 made it quite clear that any settlement monies were to be paid from the estate. His letter to the plaintiff's solicitors, however, omitted any such reference.
(9) The two telephone conversations between Mr Peter Smith and Mr Davis on 23 January 2012 must be seen in that context. Both solicitors referred to the sum of $75,000 as being inclusive of costs without reference to where the money was to come from to satisfy the defendant's obligation pursuant to the agreement.
Determination
The only proceedings to which both plaintiff and defendant were a party to at the time the conversation took place, were the proceedings that had been concluded before Hallen AsJ and the proposed Court of Appeal proceedings manifested in the plaintiff's Notice of Intention to Appeal. The Trustee was a party to those proceedings and its consent was required for any settlement of it. Further, the approval of the Court would have been required pursuant to s 75 of the CPA.
What was in the contemplation of the parties during the previous negotiations was that any payment made to the plaintiff would be paid out of the estate. That was the relief which the plaintiff was seeking in the proceedings before Hallen AsJ and in his proposed Appeal in the Court of Appeal. His solicitor stated that it had always been his position that he only wanted some provision from the estate (see paragraph 17 above).
As of 13 January 2012, when he made a counter offer on behalf of the defendant to the plaintiff's solicitors, Mr Davis was aware that the monies, as far as the defendant was concerned, were to be paid out of the estate. He said so in his letter to his client of the same date. This was the assumed basis on which he was negotiating.
To the extent that he omitted any reference to that fact in his letter to the plaintiff's solicitors dated 13 January 2012, or in his two telephone conversations with Mr Peter Smith on 23 January 2012, that omission was a mistake on his part. As a prudent solicitor, he should have outlined the basis upon which the parties were negotiating. That he did not, was merely reflective that it was a continuation of the process that had commenced during the proceedings before Hallen AsJ, and was therefore subject to the same parameters.
In any event, Mr Peter Smith, acting for the plaintiff, could not have reasonably formed the opinion that the defendant was offering to be personally liable to pay the settlement sum. Immediately after the settlement, he sent an email to his client outlining the terms of the settlement. The next day, however, he wrote to the Trustee asking for its requirements.
Mr Peter Smith gave evidence that he merely wanted to facilitate the settlement of the matter as an explanation for the correspondence that followed between his firm, the defendant's firm and the Trustee. I do not accept his evidence in that respect, nor do I accept his evidence that "he didn't care where the money came from". Nor do I accept his evidence set out in paragraph 30 above, to the effect that he did not believe that the Trustee had to be involved in the settlement. By these findings I do not mean that he was deliberately misleading the Court. Rather, he could not have reasonably held these beliefs, had he turned his mind to the issues in question prior to reaching the agreement with Mr Davis.
The file note referred to in paragraph 47 above confirms that on 27 January 2012 Mr Peter Smith and Mr Davis agreed "to distribute as discussed", which could only mean distribute from the estate.
I find that Mr Peter Smith knew that the sum was to be paid from the estate of the late Warren Scott Smith. That was the reason for him to prepare a deed and his insistence that the settlement ended all proceedings. His client was not, and could not have been, a party to the FPA proceedings, not being an eligible person. The effect of Hallen AsJ's judgment was that unless his client was successful on Appeal, his rights against the estate were extinguished. Mr Peter Smith was also aware that the time for filing a Notice to Appeal expired on 13 January 2012 and hence his desire to facilitate the settlement on behalf of his client.
To the extent that an agreement was reached between Mr Peter Smith and Mr Davis on 23 January 2013 that the proceedings were to be settled for a payment of $75,000 inclusive of costs, on the basis that Mr David Smith was thereby personally liable for the payment of that sum, that agreement was reached on the basis of the mistake of Mr Davis referred to above and to give effect to it would be to allow the plaintiff to benefit from that mistake when in fact it was not the agreement that his own solicitor had contemplated, given the context in which the discussions took place. Mr Peter Smith ought to have been aware that the Trustee, as plaintiff in the proceedings, and as a respondent to any appeal, would have to consent to any settlement, and that such settlement would require the approval of the Court.
I find that the reasoning of Finlay J in Lewis v Combell Constructions Pty Limited applies here. To enforce the settlement agreement as a judgment against the defendant would be to work an injustice. Like Lewis, this settlement agreement is founded on an obvious mistake made by at least one party to the settlement, and probably both.
In any event, the agreement could not be regarded as a concluded agreement when it required the consent of the Trustee and the approval of the Court.
For the above reasons, I find that no enforceable agreement was concluded between the solicitors on 23 January 2012. I therefore find that the plaintiff's claim must fail, and there will be a verdict for the defendant entered in these proceedings.
Orders
I make the following orders:
(1) Verdict for the Defendant.
(2) The Plaintiff is to pay the Defendant's costs of the proceedings.
(3) The exhibits are to be returned forthwith.
(4) The parties are to be granted liberty to apply on 7 days notice in respect to any special costs order.
Decision last updated: 30 May 2013
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