Lerama Pty Ltd v Wortho Pty Ltd - [2008] NSWSC 1307

CITATION: Lerama Pty Ltd v Wortho Pty Ltd [2008] NSWSC 1307

HEARING DATE(S): 2 December 2008

JUDGMENT DATE :
2 December 2008

JURISDICTION: Equity

JUDGMENT OF: Hamilton J

DECISION: Entered consent order as to costs ought be set aside or varied.

CATCHWORDS: EQUITY [68] – General principles – Mistake – Effect on contracts – Mistake connected with subject matter of transaction – Compromise of litigation – Error in provision as to time of payment of costs – Reasonable solicitor likely to be aware of mistake – Orders embodying error set aside.

LEGISLATION CITED: Conveyancing Act 1919 s 88K

CATEGORY: Procedural and other rulings

CASES CITED: Bartlett v Coomber [2008] NSWCA 100
Lewis v Combell Constructions Pty Limited (1989) 18 NSWLR 528
Mohamed v Farah [2004] NSWSC 482
Newmont Yandal Operations Pty Limited v The J Aron Corporation & The Goldman Sachs Group Inc [2007] NSWCA 195
Taylor v Johnson (1983) 151 CLR 422

PARTIES: Lerama Pty Limited (P)
Wortho Pty Limited (D)

FILE NUMBER(S): SC 1999/08

COUNSEL: L Gor (P)
J F Kildea (D)

SOLICITORS: Thomson Playford (P)
Thompson Norrie (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

TUESDAY, 2 DECEMBER 2008

1999/08 LERAMA PTY LIMITED v WORTHO PTY LIMITED

JUDGMENT

1 HIS HONOUR: This case concerns whether the Court ought allow the enforcement of an agreement that was come to in settlement of proceedings for the creation of an easement under s 88K of the Conveyancing Act 1919 (“the CA”). The provision of the CA most relevant to these proceedings is s 88K(5):

“(5) The costs of the proceedings are payable by the applicant, subject to any order of the Court to the contrary”.

2 The plaintiff and the defendant in this case negotiated over some period for the settlement of the proceedings. In the early part of the negotiations the proposals that passed to and fro contained provisions for the grant of an easement and separate provisions for the payment of compensation and of costs. It was clear in those early drafts that the costs would be payable immediately or within some short time of the making of the orders incorporating the agreement.

3 That provision could not be said for to have flowed into the final agreement, because there was a substantial break in the negotiations when the plaintiff threatened to discontinue the proceedings. The draft notice of discontinuance that it put forward, not surprisingly, contained a provision for the payment of the defendant’s costs by the plaintiff, which one would expect to be there, both under s 88K(5) and under the discontinuance rules.

4 Negotiations then resumed and further draft consent orders were put forward by the defendant’s solicitor which contained the following provision as to both compensation and costs:

“(4) On delivery to the plaintiff of the executed plan of easements and s 88B Instrument as set out in Order 3 above, the plaintiff shall pay to the defendant compensation some of $17,500 together with the sum of $19,300…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] NSWSC 1307
Decision Date: 2 December 2008

CaseChat Overview and Summary

The case of Lerama Pty Ltd v Wortho Pty Ltd involved a dispute between two parties, Lerama Pty Ltd and Wortho Pty Ltd, in which the latter sought rectification of a written compromise of their litigation. The compromise was intended to settle the proceedings, but Wortho Pty Ltd argued that there was a mistake in the provision regarding the payment of costs, which they claimed was due at an earlier date. Wortho Pty Ltd sought to rectify the compromise, arguing that the mistake was significant and affected the subject matter of the transaction.

The legal issues before the court revolved around the effect of a mistake on the contract, specifically whether the error in the provision as to the time of payment of costs constituted a material mistake that would warrant rectification. The court had to consider whether the mistake was such that it rendered the compromise agreement voidable and whether it was reasonable to assume that a competent solicitor would have noticed the error.

The court determined that the error in the provision for the payment of costs was a material mistake, and the compromise agreement was thus voidable. The court reasoned that the error was significant enough to affect the subject matter of the transaction and that it was reasonable to assume that a competent solicitor would have noticed the mistake. Consequently, the court set aside the orders that embodied the error, effectively rectifying the compromise agreement to reflect the correct terms as originally intended by the parties.

The final orders of the court rectified the compromise agreement to reflect the correct terms as originally intended, thereby correcting the error in the provision regarding the payment of costs. The court's decision underscored the importance of careful drafting in legal agreements and the potential consequences of mistakes, particularly when they affect the fundamental terms of the contract.

Orders