Monsour Pty Ltd v Amos - [2009] FMCA 742

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MONSOUR PTY LTD v AMOS

[2009] FMCA 742

BANKRUPTCY – Bill of costs action – scope and nature of review by the Court of a decision by a Taxing Officer – accord and satisfaction – effect of the applicant’s negotiation of the cheque.

Bankruptcy Act 1966, s.52
Bill of Exchange Act 1909 (Cth), s.26(2)(b)
Bills of Exchange Act 1909 (NZ), s.21(2)(b)
Cheques Act 1986 (Cth)
Federal Magistrates Court Rules 2001 (Cth)

Amos v CitiBank (unreported, Supreme Court of Queensland, McPherson and Davies JJA and Ambrose J, 28 March and 10 May 2006)
Bagnell v National Tobacco Corporation of Australia Ltd (1934) 34 SR (NSW) 421
Cachia v Westpac Financial Services Limited [2003] FCA 817
Croft v Lumley (1858) 6 HL Cas 672; (1858) 10 ER 1459
Custom Credit Corp Ltd v Gray [1992] 1 VR 540
Foakes v Beer (1884) 9 App Cas 605; [1981-5] All ER Rep 106
Godecke v Kirwan (1973) 129 CLR 629
Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd [1981] 2 NZLR 322
Kirkland v Lindisfarne Landscape Ltd [1985] 2 NZLR 534
May and Buthcer v The King [1934] 2 KB 17
McMahons (Transport) Pty Ltd v Ebbage (1999) 1 Qd R 185
Mercantile Credits Ltd v Comblas (1982) 40 ALR 75
Mercantile Credits Ltd v Harry [1969] 2 NSWR 248
Meehan v Jones (1982) 149 CLR 571; [1982] HCA 52
M & K Pipelines & Council of the Shire of Noosa (unreported, District Court of Queensland, Robin J, 23 December 1993)
Perry v Comcare (2006) 150 FCR 319; [2006] FCA 33
Pinnel’s Case (1602) 5 Co Rep 117a; (1602) 77 ER 237
R v Clarke (1927) 40 CLR 227
Re Nudgee Bakery Pty Ltd’s Agreement [1971] Qd R 24
Spala v St George Wholesale Finance Pty Ltd and Others (1999) 95 FCR 359
Seymour CBD Pty Ltd v Commonwealth Bank of Australia [1999] QSC 101
Stein v Blake [1996] AC 243 at 251
Stook v Taylor (1880) 5 QBD 569
Neonbrook Pty Ltdv Thusi Pty Ltd [1999] 1 Qd R 429

Applicant:

MONSOUR PTY LTD

Respondent:

EDWARD AMOS

File Number:

BRG 244 of 2006

Judgment of:

Burnett FM

Hearing dates:

4, 11 and 12 February 2009

Date of Last Submission:

12 February 2009

Delivered at:

Brisbane

Delivered on:

6 August 2009

REPRESENTATION

Counsel for the Applicant:

Mrs Hodge

Solicitors for the Applicant:

McInnes Wilson Lawyers

Counsel for the Respondent:

Mr Cooke

Solicitors for the Respondent:

Keller Nall & Brown

ORDERS

That the application be dismissed.
That costs be reserved.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 244 of 2006

MONSOUR PTY LTD

Applicant

And

EDWARD AMOS

Respondent

REASONS FOR JUDGMENT

The respondent is a well known and active litigant in courts in Queensland. He is familiar with the tactics and some of the tricks in litigation. From his experience he has developed considerable knowledge. However as this case demonstrates it can be that a little knowledge can be a dangerous thing.
On 18 May 2007 he was ordered to pay the costs associated with his successful defence of a creditor’s petition issued by Monsour Pty Ltd (the applicant) on 19 April 2006. The applicant filed a bill of costs on 21 June 2007. It was drawn in the sum of $21,183.90. The respondent was unhappy with the bill and so it was referred to a Registrar of the Court for assessment by him. An estimate was provided in accordance with court rules which estimate was in turn subject to objection by the respondent. Ultimately following a formal assessment process the bill taxed out at $19,934.28. However, that sum does not reflect entirely upon the subject matter of the application because of inclusion of an additional sum for costs incurred which followed the respondent’s objection.
The respondent filed a notice of motion on 27 October 2008 seeking review of the Registrar’s final costs assessment decision. The issue in contention on the review application concerned the characterisation of the applicant’s banking of a cheque forwarded to him by the respondent. The respondent contended the circumstances gave rise to an accord and satisfaction. The applicant denied that allegation. If the respondent is correct the sum due is fixed in the sum of $4,291.50. In that event there was probably no need for any assessment. If not the costs due total $12,419.40 together with other costs giving a total now of $19,954.28.
By letter dated 11 April 2007 written by the applicant’s solicitors to the respondent’s solicitors the applicants offered to accept, on a short form basis, without need for assessment, costs of $4,291.50 in respect of the creditor’s petition. Omitting formal parts the letter stated:
“We refer to the creditor’s petition (the petition) filed on behalf of our client on 19 April 2006 and set down to be heard this morning, 11 April 2007.
Having regard to your client’s affidavit filed 1 December 2006 deposing to insolvency [sic], we confirm our client will consent to the petition being dismissed on the basis that your client pay our client’s costs fixed at $4,291.50.”
There was no response received to that correspondence and on 11 April 2007 the creditor’s application was dismissed by me save for costs with the application for costs being adjourned for hearing to 2 May 2007. Following hearing on that day judgment was delivered on 18 May 2007 ordering that the respondent pay the applicant’s costs of and incidental to the creditor’s application including reserved costs, to be assessed. A bill was subsequently prepared and the initial assessment of costs was provided in the sum of $17,297.76. It was forwarded by the Court to each party’s solicitors in early September being approximately 10 September 2007.
On 21 September 2007 the respondent’s solicitors wrote to the applicant’s solicitors in the following terms:
“We refer to your letter of 11 April 2007 (copy herewith for convenience).
We now enclose herewith bank cheque for $4,291.50 in full and final payment of your client’s costs in relation to the petition.”
On 27 September 2007 the applicant’s solicitors wrote to the respondent’s solicitors, inter alia:
“We refer to your letter dated 21 September 2007 enclosing a bank cheque in the amount of $4,291.50 purported to be payment in “full and final payment” of our client’s costs in relation to the creditor’s petition.
We note that the amount in that cheque is calculated on the basis of our “without prejudice” letter dated 11 April 2007. Obviously, that offer was rejected by your client, which culminated in the judgment of Burnett FM on 18 May 2007, whereby your client was ordered to pay our client’s costs of and incidental to the application including any reserve [sic] costs as well as the costs of the costs argument itself.
Further, you have received taxing officer Berry’s estimate of $17,397.46 dated 10 September 2007 in respect of these costs.
Your client’s attempt to accept the April offer is simply silly. The difference between our offer and the ultimate order does highlight the uncommerciality of your client’s continued taking of speculative points, with little or no legal merit.
We will hold the bank cheque for $4,291.50 in part payment of the amount due in respect of the costs estimated by Taxing Officer Berry. Under no circumstances does retention of these monies constitute a waiver of our client’s entitlement to the entire amount of costs in accordance with the Taxing Officer’s estimate.
- -
We will take immediate enforcement steps if satisfactory arrangements for payment are not made by 7 October 2007.”
On 28 September 2007 the respondent’s solicitors replied:
“Your client’s offer of 11 April 2007 to accept payment of $4,291.50 costs is not conditional on acceptance by a specified time nor does it lapse by a specified time.
Your client is not entitled to retain the bank cheque without accepting the terms upon which it was offered.
Unless the bank cheque is returned to us by 2.00pm on Monday 1 October 2007 we will treat your retention of it as evidence of the admission by your client that it has accepted the bank cheque pursuant to the terms of the letter which accompanied it of 21 September 2007.”
The respondent’s solicitors retained the bank cheque. Although there was further correspondence between them that correspondence merely restated and further articulated the respective positions adopted by each of the applicant and the respondent.
Upon the initial reassessment preceding the Registrar’s reasons of 21 July 2008, and the subsequent reconsideration preceding the reasons dated 29 September 2008 the respondent contended that the applicant’s acceptance of the cheque constituted an accord and satisfaction. On both occasions the Registrar rejected those contentions. By the respondent’s amended notice of motion[1] the respondent seeks a review of the Registrar’s determination of that issue against him.
[1] The amendment went only to form arising by reason of a typographic error.

Scope and Nature of Review

Federal Magistrates Court (FMC) Rule 21.11 provides for taxation of costs by application of the scale of costs set out in schedule 2 to the Federal Court Rules. FMC Rule 1.05(2) and (3)(b) provides that where the FMC Rules are insufficient the Court may apply the Federal Court Rules with appropriate modification. The FMC Rules do not provide a comprehensive taxation process. Accordingly that part of Order 62 of the Federal Court Rules as is appropriate is adopted. In particular order 62 Rule 44 provides for a review by the Court of a decision by a Taxing Officer.
Although the judgments of the Federal Court are divided on the question concerning the nature of a review from a Registrar’s taxation the better view now appears to be that expressed by Hely J in Cachia v Westpac Financial Services Limited [2003] FCA 817. In that decision His Honour stated:
“[21] When exercising its functions under O62 r44 the Court is not, in the strict sense, entertaining an appeal from the taxing officer. It is reviewing his/her taxation: Western Australian Bank v Royal Insurance Co (1908) 7 CLR 385 at 388; Raybos Australia Pty Ltd v Tectran Corp Pty Ltd (1987) 62 ALJR 148, 150. Nevertheless Toohey J said in the latter case that where what is involved is the review of discretionary items in the widest sense of the term, involving no question of principle, then the applicable test is that enunciated in Schewppes and adopted by Kitto J in Australian Coal & Shale Employees Federation. In Martin v Commonwealth Bank of Australia (1995) 14 Leg Rep 10 Toohey J again said that those were the principles to be applied when reviewing a taxing officer’s decision. Where the question is one of the exercise of discretion by the taxing officer, the Court is reluctant to interfere, but will do so in a proper case.
[22] In Sanders v Snell (No 2) (2000) 174 ALR 53 at 56 Kirby J held that the review contemplated by O71 r89(1) of the High Court Rules (cf O62 r11 of the Federal Court Rules) is not a hearing de novo of the decision of the Court’s taxing officer and that the ordinary principles governing the review of administrative decisions, and in particular, those in the nature of decisions concerning practice or procedure apply. Kirby J adopted the statement of Jordon CJ in Schewppes’ as a correct formulation of applicable principles.”
It follows a review is not a hearing de novo. Accordingly, “what is involved in a review” of a decision will depend upon the nature of the decision and the ground on which it is sought to be impeached.[2]
[2] At [24].
In paragraph 2 of the amended notice of motion the respondent identified six matters upon which it contended the reconsideration ought to be reviewed.
The essence of the respondent’s initial objection and subsequent challenges to the Registrar’s decisions are that the Registrar failed to find that an accord and satisfaction had arisen in circumstances where there had been a tender of a cheque for a lesser sum which cheque was said to have been accepted by the applicant with a reservation of its rights. The alleged error in the Registrar’s determination was said to flow through to the final assessment.
The matter is not one that calls for an exercise of discretion but rather the application of principle. Accordingly it is apposite that the decision be reviewed and if appropriate the decision be interfered with; Cachia v Westpac Financial Services Limited (supra) at [18].
Ground 2(a) of the notice of motion identifies six discrete bases upon which it is contended the Registrar’s orders ought to be set aside. The first basis of error alleged is merely an error in the application of principle concerning whether or not the circumstances gave rise to an accord and satisfaction; the second is that the Registrar erred in failing to apply section 27 of the Cheques Act 1986 (Cth) (the Cheques Act); the third ground contends there was an error in part in finding “no contract between the parties”; the fourth alleges error in finding “insufficient consideration in this case”; the fifth alleges error by the Registrar in assessing costs as no fixed sum could be assessed given the dispute; and finally the Registrar erred in his calculations.
In her submissions Counsel for the applicant adopted a piecemeal approach addressing each of those matters discretely. While this approach was not inappropriate the real issues between the parties can be condensed into an examination of the application of principles of accord and satisfaction to the dispute between them and to a consideration of the applicant’s contentions concerning the Cheques Act. Addressing those issues will provide an answer to the issues identified in the dispute. Accordingly I adopt that approach.

Accord and Satisfaction

The essence of accord and satisfaction was noted by Robin QC DCJ in M & K Pipelines & Council of the Shire of Noosa (unreported, District Court of Queensland, Robin J, 23 December 1993) where at page 15 of his judgment quoting from Wilston on Contracts (3^rd) 1855 His Honour noted the general rule:
“If the creditor refuses to receive the check in full satisfaction and yet takes it, either he must have assented to the terms, or the debtor must have assented to the creditor’s refusal, for the voluntary giving of the check by one, and the taking of it by the other, if neither misunderstood the words that were spoken, necessarily indicate assent. It becomes a question of fact what the bargain was to which they assented.
So if the debtor laid down the check and departed, saying, “If this is taken, it is full satisfaction,” (and similarly if the debtor sends the check with a like notice), and the creditor takes it, saying nothing, his taking will be equivalent to an expression of assent to the offer, whatever his mental intent.
If he shows by some act or word, not brought home to the debtor at the time that he takes the check, that his intention is not to treat the debt as satisfied, he should still be regarded as assenting to the terms of the debtor’s offer, for under the circumstances the debtor has reason to suppose that the taking of the check is a manifestation of assent.
It may be supposed, however, that as soon as the check is taken notice is promptly given to the debtor that it is not taken as satisfaction. It is impossible to find the ordinary elements of a bargain in such a case. There is not only no mutual assent mentally, but there is no expression mutual assent.
The debtor is promptly made entirely aware of the creditor’s intention, which is to convert the check. But the creditor is not allowed to assert his tortious conversion, though the effect of such a ruling is to fix upon him a bargain to which he never purported to assent.
Even in such a case, therefore, the debtor may treat the exercise of dominion as an acceptance in spite of the creditor’s manifested intention not to accept.
The ancient nature of this doctrine is best exemplified by the following quaint quotation from a celebrated classic decided almost four centuries ago:
“Always the manner of the tender and of the payment shall be directed by him that maketh the tender or payment, and not by him that accepteth it.””
This principle is primarily relied upon by the respondent. It has its basis in Pinnel’s Case[3] and later in Croft v Lumley[4].
[3] (1692) 5 Co Rep 117a; (1692) 77 ER 237.
[4] (1858) 6 HL Cas 672; (1858)10 ER 1459
From that expression the issue to be determined is therefore the intention of the tenderer. This is largely a question of fact which in this case concerns the nature of the ‘offer’.
Essentially the respondent contends that the offer was conditional. If it was, he contends that the established principles require a careful examination of the applicant’s behaviour to see if there had been a acceptance of the ‘offer’ particularly acknowledging the caveat preventing the applicant simply rejecting the offer (by counter-offer or otherwise) and retaining the cheque and claiming the balance due, even if the creditor contends the principal sum is disputed. However this approach is subject to there being an ‘offer’.
It is well settled that “a concluded contract is one which settles everything that is necessary to be settled by agreement between the parties”. May and Butcher v The King [1934] 2 KB 17 at 21; Godecke v Kirwan (1973) 129 CLR 629. Unsurprisingly there appear to be few authorities dealing directly with the question of formation of agreements arising from uncertain offers. More often difficulties tend to arise later on once the contract has been concluded as to what the agreement may mean: Meehan v Jones (1982) 149 CLR 571; [1982] HCA 52.
However the difficulty here arises at the point of formation. Insofar as terms are concerned it is well settled that if the words used, although clear in their meaning, are incapable of being applied to the facts an agreement will fail for uncertainty: Mercantile Credits Ltd v Harry [1969] 2 NSWR 248; Re Nudgee Bakery Pty Ltd’s Agreement [1971] Qd R 24; Custom Credit Corp Ltd v Gray [1992] 1 VR 540; Mercantile Credits Ltd v Combles (1982) 40 ALR 75.
Although these cases are distinguishable because they concern the approach to cases of uncertainty of provisions within extant contracts there is no reason in principle why such an approach ought not to apply to the construction of an offer made pre-contract. That is, if the offer is one which is plain in its expression but is incapable of being applied to the facts it too must fail and cannot be capable of acceptance.[5]
[5] See for instance discussion concerning the efficacy of an offer made in the context of a Calderbank offer made as to costs in a proceeding in Perry v Comcare (2006) 150 FCR 319; [2006] FCA 33 at [49] to [55] per Greenwood J.
In his submissions counsel for the respondent contended the accord provided for in the letter of 21 September 2007 and its terms were “simple”. He contended: “The second paragraph (of the letter of 21 September 2007) set up an offer and refers to the terms that were set out in the previous offer of 11 April 2007. It is those terms of the previous offer, but more particularly the amount of $4,291.50, that the respondent’s solicitors relied upon.” Accordingly it was submitted: “The tendering of the cheque of $4,291.50 is therefore conditional on the acceptance of the terms (being the terms contained in the previous offer of 11 April 2007)”.[6]
[6] Respondent’s submissions filed 16 January 2009 at paragraph 3.
In the present case it is difficult to see how the terms of offer of 11 April 2007 could have been incorporated into the offer made on 21 September 2007. To start with at the time of the April offer the underlying application had not been determined or let alone the manner in which costs would follow from the determination of that application. At the time when the September offer was made, purportedly incorporating the April offer, the terms of the April offer were no longer able to be accepted because in the meantime the court had determined the principal application being the creditor’s petition and furthermore determined the matter of costs by the making of a costs order. The prospect of the April offer being open for its return as a counter offer moving from the respondent to the applicant had closed because of the intervening court orders. Clearly if there had been no intervening court orders it would have been open for the respondent in its September offer to in effect counter offer to pay $4,291.50 in exchange for the applicant not proceeding with its creditor’s petition and agreeing to accept that sum on account of costs. In that event there may have been something in the respondent’s argument that the offer remained open ended and thereby was available for acceptance any time to the point of its withdrawal. However by reason of the intervening events that could not be.

In my view the respondents offer failed for uncertainty and it follows the cheque was presented unconditionally.
This is significant because the respondent’s contention continued that the applicant’s solicitor’s letter of 27 September 2007 advising they intended to hold the cheque as part payment constituted a counter offer to the respondent’s September offer which was immediately rejected by the respondent in their letter of 28 September 2007. The respondents contend that upon that basis their agreed September offer remained open for acceptance and it was later accepted by their conduct.
The respondent particularly relies upon the decision of the New Zealand High Court in Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd[7].
[7] [1981] 2 NZLR 322.
In Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd (supra) a dispute existed between a customer and supplier in respect of the quality of goods delivered. The customer forwarded a cheque “in full settlement” of the account. The cheque was for an amount which was less than the amount the supplier considered it was owed. Despite that matter the supplier banked the cheque and provided no communication to the customer that the cheque was only accepted on account. It subsequently delivered statements claiming for the balance owing. Proceedings by the supplier against the customer were initially successful but on appeal that finding was reversed. The Court (comprised of a single judge) determined that given the condition upon which the cheque was sent was recorded in writing and delivered to the supplier contemporaneously with the cheque and given the cheque was then banked and its proceeds credited to the account of the supplier the events constituted an irretrievable manifestation of assent by the supplier to the condition imposed by the appellant. Thereby those circumstances gave rise to an extinguishment of the debt by accord and satisfaction.[8] In Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd (supra) Mahon J closely examined principles concerning accord and satisfaction and noted in summary:
“In the case where a cheque is sent by a debtor for an amount smaller than the amount of the creditor’s unliquidated or disputed claim, and where the debtor makes it clear that the cheque which he sends is offered only on condition that it is taken on full payment, and where the creditor retains and banks the cheque, then his acceptance of the cheque is conclusive evidence of his assent to the conditions upon which the cheque was sent. So what really matters, irrespective of his intent, is the conduct of the creditor.”[9]
[8] At 333.
[9] At 331.
While His Honour’s remarks are consistent with those principles enunciated in the latter decisions of Australian courts referred to below, as is apparent from an examination of those authorities, the application of the principle is readily distinguishable in this case on its facts. First in that instance there was an efficacious offer. Furthermore in that case the debtor did not notify his dissent from the terms of the offer until well after he had accepted the proceeds and banked them.
In argument the applicant cited McMahons (Transport) Pty Ltd v Ebbage[10] a decision of the Court of Appeal, Queensland. (The facts in Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd (supra) were similar to but, critically, materially distinguishable from the facts in that case).
[10] [1999] 1 Qd R 185.
In McMahon’s (Transport) Pty Ltd v Ebbage (supra) receivers for the company wrote to the landlord enclosing a cheque in respect of outstanding rentals. The correspondence provided it enclosed the cheque for rental and the cheque was “in full and final satisfaction of all claims” the landlord might have against the receiver with respect to the premises. The letter provided the cheque could only be accepted on that basis and if not it must be returned. The landlord replied saying it did not accept the basis upon which the cheque was sent and that he proposed at the end of one week to negotiate the cheque. At first instance it was not accepted that the circumstances gave rise to an accord.
In upholding the decision of the trial judge in finding no accord Pincus JA within Davies JA and Dowsett J agreed stated:
“…I, like the primary judge, prefer to follow those in which the Court has rejected the offeror’s assertion that there has been an accord; I do so on the basis that the question is whether there is a contract and that the answer to that question is that there is none, because in general the law does not allow the imposition of an obligation in contract to be achieved by a stipulation that it shall be deemed to be imposed if the prospective obligor performs a stipulated act (other than one by way of express assent to the terms proposed), or does nothing as in Felthouse v Bindley (1862) 11 C.B.(N.S.) 869; 142 E.R. 1037.”
This decision has significance in this instance because given there was no efficacious offer in this case. This instance presents as an analogous case to the circumstances considered in McMahon’s (Transport) Pty Ltd v Ebbage (supra). That is, absent any agreement, the law does not recognise and enforce an obligation deemed to be imposed if the prospective obligor performs a stipulated act (in this case by retaining the cheque).
In McMahon’s (Transport) Pty Ltd v Ebbage (supra), Pinnel’s Case (supra) was cited in argument although not expressly commented upon in the judgment. It is worth noting in passing at this point that concerning the delivery of cheques and their acceptance in this context, Pincus JA observed at page 196:
“…there may be another question, namely whether the property in the cheque passed, as it was proffered on a condition which the profferee would not accept; but that issue has not been raised, the lawfulness of the banking of the cheque being unchallenged.”
That issue having been raised by the respondent in this case is addressed below.
A possible point of distinction between that case and this is that in McMahon’s (Transport) Pty Ltd v Ebbage (supra) the cheque in question was a bank cheque. It was of some significance to the court that it was open to the creditor to stop payment of the cheque, but it did not, once the debtor informed it of its intention to ignore the condition. However the fact that the cheque here was a bank cheque does not bear upon the principle. The court noted at 195:
“The same principle is involved if one postulates that some other sort of property, say, cash – is sent on the basis that if the person to whom it is sent keeps it or spends it, he is to be taken to be bound by certain stipulations, as a matter of contract”.
In my view the better view is the view of the Court of Appeal in McMahon’s (Transport) Pty Ltd v Ebbage (supra) which then comprised both a former member and a current member of the Federal Court of Australia, this Court’s supervising court. While the Court of Appeal’s decision does not strictly bind this court it is particularly persuasive as a decision of an Australian Full Court particularly given its composition as noted above.
Amos v CitiBank (unreported, Supreme Court of Queensland, McPherson and Davies JJA and Ambrose J, 28 March and 10 May 2006) was also cited in argument. It was a case where the debtor (who is the respondent in this application) contended to be in dispute in respect of a sum due pursuant to a hire purchase agreement. A sum of $4,866.31 was claimed to be due. The debtor forwarded a letter outlining the basis of his dispute to which he attached a cheque for $1,200 “in full and final payment of the sum of $4, 866.31”. The letter was received at the creditor’s head office which in accordance with its daily practice in dealing with incoming mail detached the cheque from the letter and banked it immediately. Some eighteen days later the creditor averted to the correspondence and caused a cheque for $1,200 to be forwarded back to the debtor. Despite this the debtor contended there had been an accord and satisfaction. He contended that on an objective basis a contract had been concluded. Although this case is readily distinguishable on its facts, particularly because in Amos v Citibank (supra) the creditor returned the cheque once it realised the error in its acceptance of the cheque, the views expressed by McPherson JA are helpful. His Honour noted at [6]:
“At least in Australia, it is clear that a person who performs an act which is specified as the price of a reward offered is contractually entitled to the reward only if, in doing the act, he knew of and relied on that offer.”
This approach has long been accepted as the appropriate approach. In Bagnell v National Tobacco Corporation of Australia Ltd[11] the appellant, Bagnell, was an employee who was summarily dismissed and given one week’s pay in lieu of notice. His letter of termination had enclosed with it a cheque in payment of the pay in lieu of notice. Bagnell refused to accept the notice but accepted the cheque without prejudice to his rights. He subsequently commenced proceedings for wrongful dismissal which proceedings were defended on the basis of an alleged accord and satisfaction. The Court accepted the question to be determined as whether the facts proved in evidence were such as to preclude the applicant as a matter of law from disputing that he accepted the cheque on the footing on which it was tendered.[12] Ultimately the Court found that as a matter of fact the respondent had admitted liability as to some amount and that Bagnell, by accepting the amount without prejudice, was not precluded from disputing the fact that he had accepted it in satisfaction or discharge of his claim. Of particular significance to the Court in its analysis was its observation by way of contrast, that “The position would be different, if, in a case where the existence of any liability was disputed, money was tendered in settlement, accompanied by a denial of liability and on the terms that it was not to be retained unless the alleged liability was admitted not to exist”.[13]
[11] (1934) 34 SR (NSW) 421.
[12] At 426.
[13] At 427.
Generally, each of those authorities remains consistent with the principles articulated by Wilston on Contracts. The particular point of significance being that in each of the authorities relied upon in support of the respondent’s case relies upon the existence or non-existence of an agreement and the retention of a cheque contrary to the terms of such agreement.
Finally in passing, reliance was placed upon observations in R v Clarke (1927) 40 CLR 227 in particular at 244 where, adopting Langell on Contract, 2nd edition at 988, Stark J said that in his opinion:
“…the true principle applicable to this type of case is that unless a person performs the conditions of the offer, acting upon its faith or in reliance upon it, he does not accept the offer and the offeror is not bound to him”.
Those observations are particularly apposite to the case now before the court. In this case the offer purported to be made by the respondent was not an offer and accordingly was a nullity. It follows the cheque was forwarded unconditionally and so in accepting the cheque the applicant did not accept anything subject to terms and accordingly can be bound to nothing in respect of his disposition of it. In my view no accord and satisfaction arose.

Was the debt unliquidated?

In this case no dispute existed as to liability; the only dispute existed as to quantum. The applicant’s bill was filed on 21 June 2007. It was endorsed buy the Registrar for assessment pursuant to O 62 r 46 ( a process of expedited assessment) and a direction issued that the taxing officer make an estimate in compliance with that order by 25 July 2007.
In fact the taxing officer informed the parties of his estimate pursuant to O 62 r 46(3)(a) by estimate dated 10 September 2007. It is apparent that the estimate came to the attention of both parties shortly after that date as was noted in the correspondence of 27 September from the applicant’s solicitor to the respondent’s solicitor. By O 62 r 46(3)(c) the respondent had 21 days from the date of issue of the estimate to file its notice of objection. This occurred on 1 October 2007.
In the absence of objection the debt does not crystallize into an enforceable order until after 21 days. However until that time (and in the absence of a notice of objection) it has effect as a provisional order which will be made final in the absence of objection by operation of O 62 r 46(3)(ca) and O 62 r 45 which provide that the estimate becomes a certificate and in turn the certificate becomes an order.
The issue is whether or not the assessment pending expiration of the objection period was a liquidated sum. The respondent submits it is not. He contends it is merely an ‘estimate’ and thereby lacks that degree of definition required to satisfy the requirement for a liquidated sum.
It is apparent from the terms of O 62 r 46 (3) that the estimate does in fact constitute an estimate of the approximate total without making any determination of individual items. The respondent’s submissions however do not advance the argument as to the status of that ‘estimate’ as it pends conclusiveness between the time of its initial provision and it clearly becoming a liquidated amount upon the effluxion of 21 days without objection. For instance why would it not immediately become a liquidated sum if a party advised it did not intend to object? Although as a matter of strict law it had not become due in those circumstances the fact of the other party’s concession would afford it such status.
It appears the situation presents as one of mixed fact and law. Unfortunately neither party was able to assist with the provision of authority to assist on this point.
However authorities dealing with the concept of debt in the context of set-off do appear to provide some assistance. In Stooke v Taylor (1880) 5 QBD 569 at 575 Cockburn CJ stated that in the context of a plea of set-off under statutes it was “…available only where the claims on both sides are in respect of liquidated debts, or money demands which can be readily and without difficulty ascertained.”
It follows that each demand must be capable of being liquidated or ascertained with precision at the time of pleading or as Lord Hoffman expressed it in the judgment in Stein v Blake [1996] AC 243 at 251, they must be “…either liquidated or in sums capable of ascertainment without valuation or estimation.”
Prior to the Registrar’s estimate there only existed a claim for costs which was not capable of ascertainment without valuation or estimation. However once the Registrar’s estimate was provided there did exist , subject to timely objection, a sum ‘capable of ascertainment without valuation nor estimation’ as that matter had been attended to by the Registrar’s estimation. While prior to objection the estimate may have been potentially construed as a debt in futuro it was still a liquidated sum by definition and would have remained so until the creditor had notice of the debtor’s intention to object of the passing of 21 days without objection.
In my view, during this transient phase the question of whether the estimate has the status of an unliquidated or liquidated amount is a mixed question of fact and law. The Registrar’s estimate is a liquidated sum. However until the 21 days have elapsed without the respondent having filed a notice of objection, the estimate cannot transform from an estimate to emerge as a certificate and thereby into an order capable of enforcement without more. During this transitory phase it is always open to demonstrate that the transformation will not take place and the estimate will be challenged despite the formal steps not having been undertaken. For instance an offer of compromise may be made from which it can clearly be inferred the estimate is subject to challenge, even if that formal step has not been yet taken. If proper objection is made then the estimate ceases to be capable of being computed by reference to it without investigation.
In that sense the dispute over the bill in this case was only pregnant. However the creditor was unaware of the pregnancy with the debtor keeping to himself the prospect of dispute. The costs had been assessed, subject to estimate and each of the parties had been informed of the estimate. However, at the time the cheque was forwarded by the respondent to the applicant the estimate had not been put into dispute or raised the prosect of dispute.
At the time of these events it was arguably the case that there was no dispute. The respondent had not lodged an objection of the Registrar’s estimate nor put the applicant on notice that he intended to do so such that, for instance, an estoppel might be alleged. At the time the cheque was forwarded it was not the case that to some extent the obligations remained, even in part, executory on both sides. The applicant had the benefit of an estimate and the respondent potentially had an obligation to pay the sum estimated, subject to any objection he had in mind to pursue. It might be considered that in making his September offer the respondent was flagging the prospect of filing an objection to the Registrar’s estimate. However as a matter of fact I do not accept it was so. The September offer reflected the sum nominated by the applicant in its April offer. It was not serendipitous that the respondent nominated that sum. It was significantly less than the estimate. It bore no relationship to it. Further it was significantly less than the sum ultimately assessed at $12,419.40 and likewise bore no relationship to it. Indeed having lost on the estimate and recognising the advantage in the sum earlier nominated by the applicant the respondent was keen to settle on those earlier terms.
However none of that reflects any dissatisfaction with the estimate. If anything it confirms that the respondent recognised the estimate reflected the more likely outcome on costs and thus there was the imperative to renew the old offer. Clearly, had he intended to flag an objection to the estimate by making an offer he would have nominated any other sum than the sum initially offered by the applicant. In my view the sum nominated by the respondent in his September offer does not evidence dissatisfaction with the estimate. It was opportunistic and reflected a concern that the estimate reflected a probable outcome even if he made objection. As a matter of fact I find that the September offer did not foreshadow an objection to the estimate at the time it was made. It follows that at the time of the forwarding of the cheque the debt was not in dispute and remained a liquidated amount.
It is well settled that in law the consideration for discharging of an indebtedness in a particular sum cannot consist of a promise to pay, or the payment of, a lessor amount of money: Foakes v Beer (1884) 4 App Cas 605. Accordingly I am also satisfied on this basis that the applicant was entitled to accept and deposit the cheque without prejudice to its rights to recover the balance outstanding.

The effect of the applicant’s negotiation of the cheque

Finally the respondent contends that in any event the creditor may be estopped from asserting that he can qualify his acceptance of the cheque. He relied upon observations by Vautir J in Kirkland v Lindisfarne Landscape Ltd [1985] 2 NZLR 534; Mahon J in Homeguard Products (NZ) Limited v Kiwi Packaging Limited (1981) 2 NZLR 332; and M & K Pipelines Pty Ltd v Council of the Shire of Noosa & Anor (Unrpt 23 December 1983, Robin DCJ) at page 17.
Additionally the respondent relied upon section 27 of the Cheques Act which provides:
“27. Drawing or indorsement may be shown to be ineffective
Subject to section 28, the delivery of a cheque by the drawer or an indorser may be shown to have been conditional, or for a special purpose only, and not in order to issue the cheque or transfer it by negotiation, as the case may be.”

Section 27 is formerly section 26(2)(b) of the Bill of Exchange Act 1909 (Cth) and is by its terms similar to section 21(2)(b) of the Bills of Exchange Act 1909 (NZ).
In Homeguard Products (NZ) Limited v Kiwi Packaging Limited (supra) Mahon J stated at 333:
“The terms of delivery of the appellant’s cheque fall within section 21(2)(b) of the Bills of Exchange Act 1908 as being “conditional, or for a special purpose only, and not for the purpose of transferring the property in the bill”. It therefore follows that the property in this cheque could not pass to the respondent until it complied with the conditions. By banking the cheque and then repudiating the condition the respondent, in my opinion, converted the cheque. Thus it might be said that the respondent is precluded from asserting any right to disclaim the condition and to treat the cheque only as a payment on account, for it could only adopt that course by committing against the appellant the tort of conversion.”
The respondent submitted that the court must therefore look to the covering letter enclosing the cheque to ascertain “what is the purpose for payment”.[14]
[14] Respondent’s submissions at page 6, paragraph [16]
However in this regard the respondent has confused purpose with outcome. The outcome sought was “full and final payment of the (appellant’s) costs in relation to petition.” However the purpose of the cheque was to purportedly accept an offer contained in the applicant’s April letter with the desired outcome being the discharge of the applicant’s costs order.
In his submission Counsel for the respondent proceeded to submit:
“That purpose is full and final payment of your client’s costs as costs in relation to the petition.”
The manner in which the respondent employed the word “purpose” was to mean “objective” or “goal”. However that use is not consistent with the language in Homeguard Products (NZ) Limited v Kiwi Packaging Limited (supra) or other authority which has considered the term “special purpose” as provided for in section 27 of the Cheques Act.
The basis for the respondent’s Counsel’s submissions is the remark of Mahon J in Homeguard Products (NZ) Limited v Kiwi Packaging Limited (supra) at 333 that:
“The terms of delivery of the appellant’s cheques fall within [section 27] of the [Cheques Act] as being “conditional, or for a special purpose only, and not for the purpose of transferring the property in the bill”.
Respectfully his submission takes Mahon J’s comments out of context. The context in which Mahon J used the term “purpose” is in part expressed by the sentence following the sentence the respondent’s Counsel relied upon. The following sentence proceeded:
“It therefore follows that the property in this cheque could not pass to the respondent until it complied with the condition”.
In my view the meaning of the word “purpose”, as advanced by the respondent, is in fact the antithesis of that which Mahon J intended to convey. A clear explanation of what His Honour intended is found in the opening sentence of the relevant paragraph on page 333 where he stated:
“…the respondent in this case had no legal right to bank the cheque without accepting the condition upon which it was sent”.
Such an approach appears consistent with other instances where courts have been called upon to consider the conversion of cheques which have been provided conditionally or for a special purpose. See Spala v St George (1999) 95 FCR 359 at 378 – 384; Seymour CBD Pty Ltd v Commonwealth Bank of Australia [1999] QSC 101; Neonbrook Pty LtdvThusi Pty Ltd [1999] 1 Qd R 429.
It follows that in the absence of a condition the cheque was presented unconditionally. Given it was received unconditionally it was open to be negotiated without prejudice to any other right.
In this case for reasons I have earlier addressed I am satisfied that there was no efficacious offer extant. Given the cheque was forwarded in support of a non-efficacious offer it was by default forwarded unconditionally. It follows that this case was not the kind referred to Mahon J in HomeguardProducts (NZ) Limited v Kiwi Packaging Limited (supra) (of a “simple and familiar case… of a disputed debt where the debtor sends a cheque for a lesser sum on condition that it be accepted in full settlement”)[15]. Here the respondent, perhaps being too clever by half, tendered the cheque in purported acceptance of an offer that was no longer capable of acceptance or by way of counter offer which was meaningless and not capable of being accepted by the applicant. In my view the applicant’s negotiation of the cheque did not prejudice its rights and it was open to be accepted by it on account only.
[15] At 333.

Conclusion

The respondent contends that the Registrar was in error in rejecting his claim and thereby miscalculated the costs due. He raised three grounds which incorporated the matters discretely raised in paragraph 2 of the notice of motion:
a)An offer was made by the applicant which offer was accepted by the respondent. Alternatively the respondent’s offer constituted an offer accepted by the applicant: I reject those submissions as there was no offer by the applicant available for acceptance. The respondents offer was meaningless in the circumstances and was not capable of giving rise to contract. The respondents forwarding of its cheque was in those circumstances unconditional.
b)The Registrar’s estimate was not a liquidated sum as the respondent intended to make objection within the time permissible under the rules: I reject that submission for until objection is made under the rules the Registrar’s estimate constitutes a sum capable of computation without investigation it being a sum ascertained with precision at the material time. As a matter of fact the respondent’s intention to dispute the claim and make objection under the rules was not brought to the applicant’s attention prior to the delivery of the cheque.
c)The respondent’s cheques were given to the applicant subject to condition pursuant to Section 27 of the Cheques Act 1986: Given my finding that the cheques were presented unconditionally s.27 does not assist the respondent.

Orders

It is ordered,
a)Application dismissed.
b)Costs reserved.

I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Burnett FM

Associate: Beverley Schmidt

Date: 6 August 2009