Mohamed v Farah

[2004] NSWSC 482

CITATION:	Mohamed v Farah [2004] NSWSC 482
HEARING DATE(S):	21/05/04
JUDGMENT DATE:	4 June 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Leave to plaintiff to withdraw accepted offer of compromise
CATCHWORDS:	PROCEDURE - offer of compromise - whether acceptance faxed to offeror's solicitor was properly served - whether acceptance actually coming to offeror's solicitor's notice after business hours on last day was effective acceptance - offer affected by mistake of offeror's solicitor - recipient of offer did not know of mistake - whether offeror may withdraw offer despite acceptance - whether wholly contractual matter - relevance of litigation context and court's functon of ensuring just result
LEGISLATION CITED:	Evidence Act 1995 - s.160 Ritchie's Supreme Court Procedure (NSW) - para 22.5.1 Supreme Court Rules 1970 - Parts 7, 9, 22
CASES CITED:	Easyfind (NSW) Pty Ltd v Paterson (1987) 11 NSWLR 98 Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823 Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528 Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 QdR 140 Pino v Prosser [1967] VR 835 Scanruby Pty Ltd v Caltex Petroleum Pty Ltd [2001] NSWSC 411 Taylor v Johnson (1983) 151 CLR 422 Waitemata City Council v MacKenzie [1988] 2 NZLR 242 Young v Combe (unreported, NSWSC, Hodgson J, 29 July 1993)
PARTIES :	Makram Mohamed - Plaintiff Lorraine Marion Farah - Defendant
FILE NUMBER(S):	SC 3535/03
COUNSEL:	Mr J R Wilson SC - Plaintiff Mr C M Simpson - Defendant
SOLICITORS:	Back Schwartz Vaughan - Plaintiff L Rundle & Co - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY, 4 JUNE 2004

3535/03 – MAKRAM MOHAMED v LORRAINE MARION FARAH

JUDGMENT

The proceedings and the present application

1 In these proceedings, the plaintiff seeks, by summons filed on 30 June 2003, a declaration that the plaintiff and the defendant entered into a binding agreement in the terms set out in a document annexed to short minutes of order filed in earlier proceedings between the parties (being 4234 of 2001), a declaration that the defendant is in breach of the agreement, an order that the defendant specifically perform the agreement, an order that the defendant pay to the plaintiff the sum of $163,838 and, in the alternative, an order that the defendant pay damages.

2 On 23 March 2004, the plaintiff’s solicitors signed, in relation to the present proceedings (that is, the proceedings commenced by the summons filed on 30 June 2003), a document headed “Offer of Compromise”. The content of the document was as follows:

“The Plaintiff offers to compromise the claim in the following manner:-
1. The Plaintiff is prepared to accept the sum of $90,000 plus costs in settlement of the matter herein.
This offer is made in pursuant to Part 22 of the Supreme Court Rules.
This offer shall remain open for 28 days.
A copy of this document has been served on the Solicitors for the Defendant.”

3 This document was sent to the defendant’s solicitors with a covering letter. It is common ground that the defendant’s solicitor received it on 25 March 2004. It is also common ground that the defendant has purportedly accepted the offer of compromise.

4 By his amended notice of motion heard by me on 20 May 2004, the plaintiff seeks

(a) leave to withdraw the offer of comprise dated 23 March 2004; and
(b) a declaration that the defendant has not validly accepted that offer of comprise.

5 The plaintiff’s case is, in essence, that service of the purported acceptance of the offer of compromise was not good service, with the result that there was no effective acceptance; that, even if there was good service, it was effected at a time when the offer of compromise was no longer open for acceptance; and that, in any event, the circumstances are such that any valid acceptance was so affected by mistake on the part of the plaintiff’s solicitor that the court should allow the plaintiff to withdraw the offer despite that acceptance.

Correspondence following the offer of compromise

6 The claims the plaintiff seeks to agitate through his notice of motion must be approached in the light of the communications that occurred after receipt of the offer of compromise by the defendant’s solicitor on 25 March 2004.

7 On 6 April 2004, the defendant’s solicitors wrote to the plaintiff’s solicitors as follows:

“So that our client may properly consider the Offer of Compromise can you please let us have before our conference with Counsel this Thursday and up to date estimate of your costs breaking it up into counsel’s fees, solicitor’s fees and disbursements.”

8 The plaintiff’s solicitors replied on 8 April 2004 that costs and disbursements to date were $14,000 inclusive of GST. A breakdown of this figure was provided by a second letter of the same date in response to a telephoned request.

9 On 13 April 2004, the defendant’s solicitors wrote to the plaintiff’s solicitors seeking a particular confirmation. Their letter was as follows:

“We refer to your offer of compromise of $90,000 plus costs. We should be pleased if you would confirm this morning whether this figure is in full satisfaction of your client’s claim to distribution. You will recall that the Summons claims $163,838 which would seem to be the maximum amount that would be payable to your client.”

10 The plaintiff’s solicitors replied the following day, 14 April 2004:

“We refer to your facsimile of yesterday and advise the offer is made on the basis of a payment to our client of the sum of $90,000 plus costs as nominated in addition to and clear of the distribution made to date in the sum of $12,334.”

11 The defendant’s solicitors wrote to the plaintiff’s solicitors on 15 April 2004 communicating a counter-offer:

“Thank you for your letter of 14 April 2004. We are instructed to offer a sum of $90,000 inclusive of costs to be paid within 7 days of final orders and to be paid in addition to the $12,334 already paid to your client.
We should be pleased if you would obtain your client’s instructions.”

12 By letter dated 20 April 2004, the plaintiff’s solicitors conveyed their client’s rejection of the counter-offer.

13 On 22 April 2004, the defendant’s solicitors wrote to the plaintiff’s solicitors as follows:

“Our client instructs us to accept the terms of your offer of compromise dated 23 March 2004.
Please let us have the appropriate consent orders. Will you notify the Court that the matter has settled.”

This letter was sent by fax to the plaintiff’s solicitors’ fax number on the date it bore.

14 Also on 22 April 2004, the plaintiff’s solicitors wrote to the defendant’s solicitors. That letter was sent by post and was received on 23 April 2004. Its terms make it clear that it was written before, and without knowledge of, the defendant’s solicitors’ letter of acceptance also dated 22 April 2004 and faxed on that day. The plaintiff’s solicitors’ letter was as follows:

“We refer to previous correspondence in this matter and to the recent settlement negotiations. We may have provided insufficient particularisation of the basis upon which the offer was placed and so to make it clear we note that the offer to settle for $90,000 plus costs relates to our client’s share of the first distribution of the Estate as notified in your letter of 23 January 2003. Our client reserves his right to 30% of the final distribution in accordance with the agreement reached and terms of the Will.”

15 On 23 April 2004, the defendant’s solicitors faxed two letters to the plaintiff’s solicitors. The first was as follows:

“We refer to your letter of 22 April 2004 which crossed in the post with our fax of 22 April 2004. Your letter is not correct. You sued for $163,838 which was the total your client would be entitled to.
Your offer of compromise was $90,000 plus costs. We clarified this with you in our letter to you of 13 April 2004 and your reply of 14 April 2004. We accepted your offer of compromise in our letter of 15 April 2004 and 22 April 2004. You are now asking for something quite different.
We enclose herewith copy correspondence referred to. This correspondence will be placed before the Court on the issue of costs if your client proceeds on this different basis.”

The second letter read:

“Further to our letter of even date as the matter has been concluded the acceptance of your offer of compromise will be proceeding in accordance with Part 23 rule 4 of the Supreme Court Rules.
We will advise the position to the Court at the pre-trial hearing on Thursday 29 April 2004.”

16 The plaintiff’s solicitors wrote to the defendant’s solicitors on 23 April 2004 as follows:

“We refer to your facsimile message of today. We are of the view that the offer of settlement had expired prior to your purported acceptance of it on 22 April 2004.”

The 2001 proceedings and the partial distribution

17 It is necessary to refer next to the nature of proceedings 4343 of 2001 and their subject matter. They are the earlier proceedings between the parties that, on the view of matters the plaintiff takes and asserts in the present proceedings, resulted in a binding compromise the effect of which was that the defendant was required to pay the plaintiff $163,838. The essential features of the settlement reached by the parties in the 2001 proceedings were that probate of a will of the late Dora Bertha Moore should be granted to the defendant and that the plaintiff should receive 30% of the net estate of the deceased. The plaintiff and the deceased had maintained a relationship of some kind in the years before the deceased’s death and the plaintiff had, with the deceased’s consent, had access to moneys belonging to her, including moneys in her bank account.

18 Probate of the will in question was in due course granted to the defendant and she took steps to administer the estate. On 23 January 2003, the defendant’s solicitors sent to the plaintiff’s solicitors a letter which enclosed a document described as a “scheme of first distribution” of the estate. That document ascribed a value of $694,901.98 to the net assets of the estate, including what was described as “Amount held by Makram Mohamed (contingent asset)” of $107,666. The document then identified $400,000 (out of the total $694,901.98) as “Amount of first distribution” and allocated this among beneficiaries. Allocated to the plaintiff, Makram Mohamed, was “30% distribution - $120,000.00” but deducted from that was the “contingent asset” of $107,666.00, leaving a balance of $12,334.00.

19 It appears that the “scheme of first distribution” was carried into effect by distributing to the beneficiaries the respective sums allocated to them, but with the payment to the plaintiff limited to the balance item of $12,334.00. The defendant, as executrix, apparently proceeded on the basis that the “contingent asset” of $107,666 was (or might be) recoverable by the estate from the plaintiff, in whole or in part, on account of moneys owing by the plaintiff to the deceased. This indebtedness was said to arise from the circumstance that the plaintiff had had access to the deceased’s funds during her life and from the existence of unresolved questions as to the manner of application of some of those funds by the plaintiff. Because it was regarded, for the purposes of the first distribution, as an amount recoverable by the estate from the plaintiff, the sum of $107,666 was treated as both an addition to the estate’s assets and an offsetting deduction from the plaintiff’s participation in the distribution of the initial $400,000.

Calculation of the $163,838 claimed in these proceedings

20 The sum of $163,838 which, in the present proceedings, the plaintiff says should be paid to him by the defendant represents a 30% share of the estate after both allowance for the $12,334 already received and elimination of the “contingent asset” of $107,666 both as an accretion to estate assets and as a retention against the plaintiff’s distribution.

21 With the “contingent asset” disregarded, the value of the estate assets is $587,235.98 (ie, $694,901.98 minus $107,666), so that a 30% share is $176,170.79. Deduction from this of the $12,334 already paid leaves a balance of $163,836.79 (rounded, apparently, to $163,838). The plaintiff considered that to be his due, as against the estate, and framed his summons in the present proceedings accordingly.

22 Implicit in the plaintiff’s contention that he is entitled to a further $163,838 in satisfaction of his 30% of the estate is the proposition that some suitable explanation for the expenditure of $107,666 of the deceased’s money by the plaintiff means that there is no debt of that sum owing by the plaintiff to the estate.

Ms Dwyer’s confusion about the two amounts

23 There were, at different times and in different ways, two distinct sums in contention between the parties. First, there was the sum of $107,666 that the defendant, as executrix, said represented moneys of the deceased in respect of which the plaintiff had failed to account or explain. Second, there was the sum of $163,838 that the plaintiff said was his due by way of the balance of his 30% share of the estate. It is the latter that the plaintiff seeks to recover in these proceedings.

24 The partner in the firm of solicitors acting for the plaintiff who had carriage of matters for him at all material times is Ms Dwyer. She deposed in her affidavit of 4 May 2004 to having taken instructions from the plaintiff concerning the making of the offer of compromise. She says in her affidavit:

“At the time of taking instructions I was of the mistaken belief that the sum of $107,666 was the amount in dispute in the proceedings. In fact the amount of $107,666 was the amount which the Defendant alleged that my client either removed from the deceased’s bank account without authority as the expenditure of which had not been properly explained.”

25 Ms Dwyer was tested on this in cross-examination. She confirmed that she had been under a misapprehension as to the amount in contention in the proceedings ($163,838) and had confused it with the amount to which the allegations of failure to account or explain related ($107,666). Ms Dwyer also explained that, in consultation with the plaintiff, she had assembled information which she believed could provide a proper explanation of the application of some $92,000 of the deceased’s money by the plaintiff. The details were recorded in the form of a statutory declaration made by the plaintiff.

26 There was produced and tendered a document identified by Ms Dwyer as her handwritten note made at the time of taking instructions from the plaintiff concerning the offer of compromise. It records Ms Dwyer having had a conversation with the plaintiff on 23 March 2004, being the date of the offer of compromise. The first part of the note refers in abbreviated form to a number of matters obviously relevant to showing how moneys of the deceased had been applied by the plaintiff. It may be inferred that these matters were explored with a view to the plaintiff’s making good his claim to a 30% share of the estate assets without any reference to the “contingent asset” of $107,666 that had been taken into account when the first distribution was calculated and made. Evidence that no such “contingent asset” existed – or that it was much less than $107,666 - would play a significant role in the proceedings.

27 At the bottom of Ms Dwyer’s note, there appears “107,666 + costs” followed immediately on the same line by “$90,000 + costs”.

28 These last-mentioned notations made by Ms Dwyer confirm, in my view, that a figure of $107,666 was in her mind when, in consultation with her client, she formulated and recorded the figure of “$90,000 + costs” which, later on the same day, became the subject of the offer of compromise conveyed by her to the defendant’s solicitors. I am satisfied that, when $90,000 plus costs was selected as the amount to be the subject of the compromise, Ms Dwyer was under the impression that any compromise at that figure would be a compromise of a claim of $107,666, not a claim of $163,838. It is also likely that the figure of $90,000 was chosen because of the information that had been assembled with a view to providing an explanation of the expenditure of $92,000 of the deceased’s money by the plaintiff for proper purposes.

The defendant’s solicitors’ reaction

29 Upon receiving an offer by the plaintiff to settle for some 63% of the plaintiff’s claim (ie, $90,000 plus costs of $14,000 in respect of a claim of $163,838), the solicitors for the defendant were obviously concerned to be certain that the offer meant what it appeared to say. To that end, they wrote to the plaintiff’s solicitors on 13 April 2004 pointing out that “the summons claims $163,838” and that this “would seem to be the maximum amount that would be payable to your client”. Those observations were made in the context of an initial reference to “your offer of compromise of $90,000 plus costs” and a request for confirmation that that was proposed “in full satisfaction of your client’s claim to distribution”, that, of course being the subject matter of the proceedings. The defendant’s solicitors clearly implied, without saying so expressly, that they considered it surprising that the plaintiff should be willing to accept $104,000 (being $90,000 plus costs of $14,000) in satisfaction of the claim of $163,838 made in the summons – or, at least, sufficiently surprising that confirmation as to the plaintiff’s real intentions should be sought.

30 The fact that the defendant’s solicitors raised this matter in the clear way they did, by means of their letter of 13 April 2004, coupled with the confirmation conveyed by the plaintiff’s solicitors’ letter of 14 April 2004 (Ms Dwyer still being under the relevant misapprehension), must mean that the defendant’s solicitors did not act in any unconscientious way to take unfair advantage of what they knew (or should have known) was a mistake. Indeed, they did not know (and ought not to have known) that the offer was affected by mistake. Their apparent suspicion that there may have been a mistake on the plaintiff’s side had caused them to make inquiries. The reply was in terms that reassured them there had been no mistake. But I am satisfied that that reply was affected by the same mistake.

31 By the time the defendant’s solicitors purported to accept the offer of compromise on their client’s behalf, they had taken steps to clarify that the offer meant what it said in the context of a claim for $163,838 and had received that confirmation. They were entitled to assume that the confirmation was given on the basis of a full appreciation of the facts and the significance of the offer by the plaintiff’s solicitors and their client.

The rules of court

32 The matter has been approached by the parties on the footing that the offer of compromise was, as it stated, made in accordance with Part 22 of the Supreme Court Rules 1970. That being so, they recognise, by implication, that the provisions of the rules have effect in relation to their contractual conduct. One obvious example of this is found in Part 22 rule 5 which allows a party who has accepted an offer to withdraw the acceptance in certain circumstances. Another example is the stipulation in Part 22 rule 3(6) that makes an unaccepted offer incapable of being withdrawn during the period for which it is expressed to be open. These provisions change what would be the ordinary legal results of contractual conduct.

33 As is observed at paragraph 22.5.1 of Ritchie’s Supreme Court Procedure (NSW):

“The rules make clear that the offer of compromise is a wholly procedural device”.

I am satisfied that the parties approached the matter at all relevant times – and, indeed, approached the notice of motion - on the basis that the offer was “a wholly procedural device” and that the rules of court played a part in determining the effects of their conduct in relation to it.

Allegedly defective service of acceptance

34 The plaintiff contends that the defendant’s purported acceptance of the offer of compromise was not effective because the letter of acceptance, being the defendant’s solicitors’ letter of 22 April 2004, was not served in accordance with the rules.

35 The method of accepting an offer of compromise is dealt with in Part 22 rule 3(5):

“An offeree may accept the offer by serving notice of acceptance in writing on the offeror …”

36 The reference here to “serving” is accepted as bringing into play the rules as to service contained in Part 9. It is also accepted that, because the case at hand is not one in which “personal service” is made necessary by the rules, all the methods of service stated in Part 9 rule 4(1) are available.

37 The defendant’s solicitors letter of 22 April 2004 was faxed to the fax number at the plaintiff’s solicitors’ office on that day. Only one provision within Part 9 rule 4(1) contemplates service by fax. Part 9 rule 4(1)(e) refers to a situation

“where the address for service of a person to be served is the office of a solicitor and the solicitor adds to that address the solicitor’s name and ‘will accept service to fax number’ together with the solicitor’s facsimile transmission number.”

In such a situation, Part 9 rule 4(1)(e) says that a document “may be served”:

“… by transmitting to that number the information contained in the document by a means that reproduces, in the hands of the recipient, that information as it appears in the document.”

38 The reference in Part 9 rule 4(1)(e) to “the address for service of a person to be served”, is, in the case of a plaintiff, the “address for service” that is, in conformity with Part 7 rule 2(1)(e), “subscribed to” the originating process or, if the address for service originally specified is afterwards changed consistently with Part 9 rule 6(4), the substituted address. Where, as here, a person is represented by a solicitor, the person’s address for service must be, in accordance with Part 9 rule 6(3), the office of the solicitor or, if the solicitor has another solicitor acting as agent, the office of the agent.

39 The plaintiff’s summons filed on 30 June 2003 contains the following under the heading “Plaintiff’s address for service”:

“c/- Back Schwartz Vaughan
Solicitors
Level 4
75 Elizabeth Street
SYDNEY NSW 2000
DX 110 SYDNEY”

There was thus no specification of a fax number in the way referred to in Part 9 rule 4(1)(e), with the result that that rule did not operate to cause transmission of the defendant’s solicitors’ letter of 22 April 2004 to a fax machine at the plaintiff’s solicitor’s office to be service conforming with Part 9 rule 4.

40 It is contended by the defendant that, even if this be so, it does not follow that the acceptance by means of the faxed letter is devoid of all effect and is simply to be disregarded. As Mr Simpson of counsel for the defendant pointed out, Part 9 rule 4(1) specifies ways in which a document “may be” served. In addition, Part 22 rule 3(5) specifies the way in which an offeree “may accept” an offer of compromise. Neither provision, in terms, rules out of account all conceivable methods of communicating written material not mentioned in it. If there is clear compliance with the specifications as to how service and acceptance “may” be effected, no further question arises. But if there is not clear compliance, it cannot be said to follow, as a necessary corollary, that there has been neither service nor acceptance.

41 In using the words “may be” and “may accept”, Part 9 rule 4(1) and Part 22 rule 3(5) exhibit the same approach as is found in s.109X of the Corporations Act 2001 (Cth) where the words are “may be served”. It was held in Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 (and has been confirmed on several occasions since: eg, Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 QdR 140) that that provision is facultative only and does not operate in an exclusive way. I am satisfied that this is true also of Part 9 rule 4(1) and part 22 rule 3(5).

42 It is not disputed that the content of the defendant’s solicitors’ letter of acceptance was printed out on the fax machine at the plaintiff’s solicitors’ office on 22 April 2004 and thereby came to the notice of the plaintiff’s solicitors, as the defendant’s solicitors intended that it should. In those circumstances, the defendant embraces the proposition that, to use words of McInerney J in Pino v Prosser [1967] VR 835 at 838, it would be “remarkable to the point of absurdity” that someone who admits to having received a document “should be held not to have been served”.

43 That absurdity makes it impossible, in my view, to accept that, because a mode of communication other than those envisaged by the facultative and non-exclusive provisions of Part 9 rule 4(1) and Part 22 rule 3(5) was employed, the content of a document that clearly came into the possession of the plaintiff’s solicitors and to their notice should be treated, for the purposes of determining the parties’ rights and liabilities, as if it was simply non-existent. As Young J said in Howship Holdings, when dealing with a question of service on a company:

“The ultimate question is whether the document was received by the addressee within the twenty-one days. If it is, then in my view no matter how it got to the addressee the addressee has been served within twenty-one days.”

44 In Parklands Blue Metal, Helman J said, after referring to Howship Holdings:

“To ignore the admission of receipt, and, it should be noted, service, of the documents of the kind before me in this case would be artificial in the extreme. I therefore conclude that service of the statutory demand and the accompanying affidavit occurred when, on behalf of the applicant, it was admitted that it had taken place, ie, on 31 January 2003.”

45 For these reasons, I find that the defendant’s solicitors’ letter of acceptance was served on the plaintiff’s solicitors (and accordingly on the plaintiff) when its content came to the attention of the plaintiff’s solicitors following facsimile transmission of it on 22 April 2004. I further find that, on the evidence as to the time of despatch and the time at which Ms Dwyer received the print-out of the content of the letter from the fax machine at her end, the time of service was shortly after 6 pm on 22 April 2004.

Had the period for acceptance expired?

46 The offer of compromise contained the following words:

“This offer shall remain open for 28 days.”

It also contained these words:

“This offer is made pursuant to Part 22 of the Supreme Court Rules.”

47 Part 22 rule 3(3) says:

“An offer may be expressed to be limited as to the time it is open to be accepted but the time expressed shall not be less than 28 days after it is made.”

48 Part 22 rule 1A(1) makes it clear that an offer is “made” to a party by “serving a notice of the offer” on the party. The minimum permissible period referred to in Part 22 rule 3(3) is therefore the period of 28 days from the time of service. The offer communicated by the plaintiff’s solicitors did not define the point from which the period of 28 days to which it referred was to be computed. But, given the statement that the offer was made pursuant to Part 22, the intention must have been to specify the minimum period of 28 days permitted by Part 22 rule 3(3). The time of service of the offer of compromise therefore marked the point from which time was to be computed.

49 The offer of compromise was served by post in conformity with Part 9 rule 4(1)(c). Under s.160 of the Evidence Act 1995, an article sent by prepaid post to an address in Australia is presumed to be received on the fourth working day after posting, unless the contrary is proved. In the present case, it is not disputed (and may be taken to have been proved) that the postal article was received on 25 March 2004. That must therefore be regarded as the date of service from which the 28 days for acceptance are to be calculated.

50 On the footing that the offer was intended to remain open for the period of 28 days specified in the rules of court as the minimum permitted period, it must be taken to have been intended that the method of computing time should be the method those rules prescribe in Part 2 rule 2(2):

“Where a time of one day or a longer time is to be reckoned by reference to a given day or event the given day or the day of the given event shall not be counted.”

51 In the present context, the day thus identified as the day not to be counted is 25 March 2004, being the day on which the offer was served and therefore made. On that basis, the first of the 28 days was 26 March 2004. The last of the 28 days was accordingly 22 April 2004 and it was open to the defendant to accept on 22 April 2004.

52 The plaintiff then points to Part 9 rule 4(1)(a), one of the provisions dealing with the ways in which a document “may be served”. That particular provision deals with service by “leaving” a copy at the “proper address” of the relevant person. Such a “leaving” is within the provision only if it occurs “between the hours of nine in the morning and five in the afternoon …”. By reference to that provision and a more general (but unexplained) proposition that documents of importance should only be served during normal business hours, the plaintiff says that acceptance by fax received by the plaintiff’s solicitors at their office shortly after 6 pm on 22 April 2004 should not be regarded as an acceptance within the time for acceptance allowed by the offer.

53 I do not accept that submission. There is no basis in the rules themselves for regarding the 9 am to 5 pm limitation as relevant to anything but the specific (and, for present purposes, quite irrelevant) situation under Part 9 rule 4(1)(a) with which it is expressed to be concerned. Nor is any cogent reason advanced for regarding the conclusion of ordinary business hours as the point at which a day ends for purposes such as the present. Every day continues up to the point which divides it from the next. It cannot be suggested that, if one party to proceedings chances upon the other in the street at 10 pm or 11 pm on a particular day and gives him or her a document, the document should be regarded as either not given at all or given otherwise than on that day. In Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823, the High Court accepted that a notice exercising an option given to the grantor personally at his home at 6pm on the last day for exercise was “sufficient notice”, although the attempted exercise of the option was, for other reasons, incomplete.

54 My conclusion on this aspect of the submissions is that the letter of acceptance which was faxed by the defendant’s solicitors to the plaintiff’s solicitors on 22 April 2004 and, having been printed out on the fax machine at the plaintiff’s solicitors’ office so that it came to the notice of the intended recipient there shortly after 6 pm on that day, became effective at that time. I am satisfied that the acceptance was complete before the expiration of the period stipulated for acceptance, being the end of 22 April 2004.

The effect of mistake

55 The conclusions I have reached on the procedural questions concerning the duration of the offer of compromise and the steps taken to accept it mean that, subject to any effect of the mistake on the part of the plaintiff’s solicitors, an enforceable agreement of compromise was constituted by offer and acceptance. It is to the implications of the mistake that I now turn.

56 Mr Simpson submitted that the question whether the plaintiff should now be allowed to resile from the compromise is to be approached according to contractual principles. He referred me to the decision of Young J in Easyfind (NSW) Pty Ltd v Paterson (1987) 11 NSWLR 98. In that case, the solicitor for one party agreed to a settlement under a mistake as to the meaning and effect of one of the terms. Young J found that counsel for the other party neither induced nor deliberately cloaked the mistake. His Honour applied ordinary contractual principles as enunciated in Taylor v Johnson (1983) 151 CLR 422 in deciding that the agreement should not be set aside. According to those principles, the party under the relevant misapprehension will be held to the contract unless the other party, knowing or having reason to know that there is some misapprehension, engages deliberately in a course of conduct designed to inhibit discovery of it.

57 If these principles were applied in the present case, as they were in Easyland (NSW) Pty Ltd v Paterson, the plaintiff would not succeed in his contention that the compromise should not be allowed to stand. This is because of my finding that, although the plaintiff’s solicitor was under a misapprehension as to the sum at issue in the proceedings, the defendant’s solicitors did not act in any unfair way to take advantage of a mistake of which they knew or should have known.

58 Mr Wilson SC, who appeared for the plaintiff, submitted that the Easyland case and the approach taken in it ought not to be determinative in the present case. In his submission, considerations beyond ordinary contractual principles are at work where the subject of agreement is compromise of court proceedings. The court’s jurisdiction to supervise its proceedings in the interests of justice have a central part to play.

59 The only provision of the rules of court concerning withdrawal of an offer of compromise made under Part 22 is Part 22 rule 3(6):

“An offer shall not be withdrawn during the time it is open to be accepted, unless the Court otherwise orders.”

This rule does not apply here. The period of 28 days for which the offer was open to be accepted has expired. It is clear, nevertheless, that the court may allow the party by which the offer was made – or, for that matter, the party by which it was accepted – to withdraw from the compromise constituted by acceptance and that this may be done at any time. Cases where the court has granted relief of this kind are relied upon by Mr Wilson on behalf of the plaintiff. They are referred to at paragraph 22.3.1 of Ritchie’s Supreme Court Procedure (NSW) and include Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528, Young v Combe (unreported, NSWSC, Hodgson J, 29 July 1993) and Scanruby Pty Ltd v Caltex Petroleum Pty Ltd [2001] NSWSC 411.

60 The principle applied by Finlay J in Lewis v Combell Constructions was stated by him as follows:

“What I perceive to be the relevant principle in the category of cases into which this matter falls is that in an appropriate case, especially before judgment is made, the overriding interests of justice and the court's concern over its own procedure may mean that the court will not enforce a contract. Of course, contracts made during the court's process to settle, if they are bona fide and not affected by any error, will normally be enforced. But I repeat my previous observation that whenever parties agree to a compromise of litigation they do so subject to the procedures of the court which include the possibility that the court may consider it unjust to enforce the terms of settlement or that it is in the interests of justice that the matter proceed to trial.

In my view the overriding principle with which the court is here concerned is the interests of justice in all the circumstances.”

61 In Lewis v Combell Constructions, the solicitor for the plaintiff communicated orally an offer to settle at $227,000 but, when reducing the offer to writing, he mistakenly inserted a figure of $127,000. There was later an oral withdrawal of the offer and, as Finlay J found, both solicitors at that point had it in mind that the offer was $227,000. His Honour’s other relevant findings were recorded by him as follows:

“That the defendant's solicitors have not been shown to have been
aware that the figure of $127,000 was a mistake although they did
contemplate that it may have been a mistake.
That a reasonable solicitor in the position of the solicitors for the
defendant, with knowledge of the same facts, would have considered the figure of ‘$127,000’ was likely to have been a mistake and in consequence would have drawn that matter to the attention of the solicitors for the plaintiff.”

62 Applying the principle I have already quoted, Finlay J directed that judgment not be entered in terms of the offer of compromise. In doing so, he cited with approval a passage in the judgment of Casey J (with whom Cooke P and Bisson J agreed) in Waitemata City Council v MacKenzie [1988] 2 NZLR 242 at 249:

“…I am disposed to accept that the Court in an action taken for that purpose does have an inherent jurisdiction to set aside a sealed consent order obtained without authority or as a result of a mistake if the interests of justice require it. While there are obvious reasons for upholding the indefeasibility of such orders, it seems unnecessary to go to the extreme limit of regarding them as absolutely inviolate (apart from the 'slip rule'); to do so could transform procedures designed to further the ends of justice into
instruments of injustice or oppression. So long as the rights of others have not been materially prejudiced, I can see no virtue in the formal operation of sealing sufficient in itself to constitute a bar to any prospect of restoring the parties to the position they should have been in all along.
Whatever the grounds for seeking to set aside the order, the ultimate question is whether such a step is called for in the interests of justice, having regard to all the circumstances of the case.”

63 Finlay J observed that the relevant principle “may be more extensive than thought by judges in earlier cases”. One of the two earlier cases expressly mentioned is Easyfind (NSW) Pty Ltd v Paterson (above). The clear message is that the question whether a contractual compromise affected by mistake should be enforced is to be judged by reference to considerations beyond the parties’ contract and its status and effect under the law of contract. The court’s inherent jurisdiction to regulate its processes and procedures so that injustice is avoided may override the parties’ agreement.

64 The decision in Lewis v Combell Constructions Pty Ltd was referred to with approval in both Young v Combe (above) and Scanruby Pty Ltd v Caltex Petroleum Pty Ltd (above). In the latter case, Palmer J expressly approved and adopted the statement of principle by Finlay J set out at paragraph [60] above. These later cases are of relevance because it was recognised in each that an offer of compromise might be withdrawn after acceptance. But the circumstances differed somewhat from those before me in that withdrawal was seen to be justified by new circumstances arising after the offer was made rather than by mistake at the time of formation of the agreement.

Conclusions on the mistake issue

65 I have already stated findings of fact relevant to the mistake issue. Ms Dwyer was labouring under a mistake about the amount claimed by the plaintiff in these proceedings when she took instructions from the plaintiff as to the offer of compromise, formulated the offer and submitted it to the defendant’s solicitors. She was labouring under the same mistake when, on 14 April 2004, she replied to the defendant’s solicitors’ letter of 13 April 2004 seeking clarification. The defendant’s solicitors, suspecting there may have been a mistake, took steps, by means of the 13 April 2004 letter, to seek clarification. Having done so, they did not act in any unconscientious way to take unfair advantage of a mistake of which they knew or should have known when they subsequently accepted the offer.

66 In these circumstances, the things that must be proved in order to have a contract set aside for unilateral mistake in accordance with Taylor v Johnson (above) have not been proved. Equity will not intervene, according to general principles, to grant relief to the mistaken party.

67 I am, however, satisfied that this is a case in which the court cannot allow the compromise to stand. The plaintiff has invoked the jurisdiction of the court in an attempt to vindicate a right he considers himself to have against the defendant. The defendant, for her part, has entered an appearance and the parties, through their legal representatives, have embarked upon the ordinary steps directed towards obtaining adjudication by the court. The offer of compromise was made and accepted in the course of those events but is affected by unilateral mistake. Had the plaintiff and his solicitors realised that the offer to accept in full settlement a sum of $90,000 plus costs related to a claim of $163,838 rather than a claim of $107,666, the offer would not have been made. Enforcement of that compromise in this case would not represent a just result of the kind the court is bound to impose in determining every dispute it is called upon to adjudicate. As the New Zealand Court of Appeal said in Waitemata City Council v MacKenzie (above),procedures designed to further the ends of justice cannot be allowed to become instruments of injustice or oppression. I am of the opinion that it would be unjust to enforce the apparent compromise rather than allowing the controversy to proceed towards trial as if the offer had not been made and accepted.

Disposition of application

68 A declaration that the defendant has not validly accepted the offer compromise cannot be made.

69 The plaintiff has, however, made out an entitlement to relief ensuring that the compromise will not be enforced. I therefore make order 1 in the amended notice of motion. I also direct, as Finlay J did in Lewis v Combell Constructions Pty Ltd, that judgment not be entered in terms of the plaintiff’s offer of compromise dated 23 March 2004.

70 I shall hear the parties on costs at a time to be fixed.

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Last Modified: 06/07/2004