Paynter Dixon Queensland Pty Ltd v The Ayr Anzac Memorial Club Inc

[2002] QDC 227

DISTRICT COURT OF QUEENSLAND

CITATION:	Paynter Dixon Queensland Pty Ltd v The Ayr Anzac Memorial Club Inc [2002] QDC 227
PARTIES:	Paynter Dixon Queensland Pty Ltd (ACN 060 951 162)

Plaintiff/Applicant

The Ayr Anzac Memorial Club Inc

Defendant/Respondent

FILE NO: 

328/01

PROCEEDING: 

Application to rescind contract

DELIVERED ON: 

23 July 2002

DELIVERED AT: 

Townsville

HEARING DATE: 

15 July 2002

JUDGE: 

CF Wall QC DCJ

ORDER: 

1.	Contract rescinded
2.	Plaintiff pay defendant’s costs of application to be assessed on a standard basis unless otherwise agreed
3.	The Plaintiff’s solicitor repay to the plaintiff, all the costs which the plaintiff has by paragraph 2 hereof, been ordered to pay

CATCHWORDS: 

CONTRACT – OFFER AND ACCEPTANCE –
RESCISSION FOR MISTAKE

PRACTICE – OFFERS TO SETTLE offer to settle by plaintiff’s solicitor - solicitor for defendant knew or ought to have known that there was an error – solicitor for the defendant did nothing to point out the mistake – wh equity will relieve against terms of agreement – wh contract voidable for mistake

Cases referred to:
Taylor v Johnson (1983) 151 CLR 422 – app
Hartog v Colin & Shields (1939)3 KB 566 – app
Lowe v Harrington (1997) FLC 92-747 – app
Deputy Commissioner of Taxation v Chamberlain
(1990) 93 ALR 729 – app
Roach v B &W Steel Pty Ltd (1991) 23 NSWLR
110 – app
Lewis v Combell Apptructions Pty Ltd (1989) 18
NSWLR 528 – app

Legislation referred to:
Uniform Civil Procedure Rules, r 708

COUNSEL: 

M.Ambrose – plaintiff/applicant M. Drew – defendant/respondent

SOLICITORS: 

Roberts Nehmer McKee for the plaintiff/applicant
Connolly Suthers for the defendant/respondent

DISTRICT COURT
CIVIL JURISDICTION

JUDGE C F WALL QC

No D328 of 2001

PAYNTER DIXON QUEENSLAND PTY LTD	Plaintiff/Applicant
ACN 060 951 162
and
THE AYR ANZAC MEMORIAL CLUB INC	Defendant/Respondent
TOWNSVILLE ..DATE 23/07/2002

JUDGMENT
HIS HONOUR: This is an application to set aside or rescind a contract constituted by
correspondence between the solicitors for the parties to this action written on behalf
of their respective clients. The solicitors for the plaintiff are Deacons, and the
solicitor there handling the matter is Mr Mark Dillman. The solicitors for the
defendant are Connolly Suthers, and the solicitor there handling the matter is Mr
Greg Humphries.

Letters between the parties were sent by post and facsimile. It is necessary that I set out, in some detail, the correspondence which passed between the parties.

On the 6th of February 2002 Connolly Suthers wrote to Deacons in the following terms:

"We enclose herewith, by way of service upon you, formal Offer to Settle (6

February 2002).

In terms of whether or not it accepts the Offer, would you be good

enough to have your client consider the following matters:-

1.          The settlement sum referred to in the formal Offer of Settle is

calculated as follows:-

(a) $179,400.00 (refer letter your client to our

client dated 25 March 1999)

less;

(b) $ 80,000.00 (already paid by our client to

your client) less;

(c)	$ 2,000.00	building approvals;
(d)	$ 5,000.00	(review of tenders) less;
(e)	$ 2,000.00	(landscape architect)
$ 90,400.00
2.	It is our client's position that your client in not	entitled to any

payment in respect of the first or second	agreements as a consequence of your
client's failure to	obtain Council approval in respect of the building works

referred to in paragraphs 2 and 3 of our client's Defence;

3 As a consequence of such failure, our client says that your client

has failed to comply with the precise terms of whatever contractual relationship then existed between our respective clients, and accordingly is not entitled to

payment in accordance with the terms of the "agreements";

4. In terms of the second agreement, your client alleges that same

is partly in writing and partly oral,	and oral aspect of the agreement being a
telephone Bradley Oates (of our client) on or about 14 September	conversation between Ronald Petersen (of your client) and

1999; Mr Oates

denies the terms of that conversation as	alleged by your client, and accordingly
there will be a significant issue as to credit at the trial of these	proceedings,
which issue in our view is likely to be	determined against your client
(particularly in view of	the fact that whereas the terms of the first agreement

were confirmed in writing by our client, the second agreement was not, such

failure on the part of our client	to do so in terms of the second agreement
suggesting that	our client never contracted with your client in the terms

alleged by your client);

5. Our client has already paid to your client, in terms of the first

agreement, the sum of eighty thousand dollars ($80,000.00);

6. If our client's position in respect of the first and second

agreements be accepted by the Court (that is, that your client is unable to recover

any moneys from our client as a consequence of the failure to obtain from the

Council the building approvals in question), then it would follow that our

client should not have paid to your client the eighty thousand dollars ($80,000.00) it

has done so; if the proceedings are to continue, then our client will be filing

and serving a counterclaim, claiming from your client repayment of the eighty

thousand dollars ($80,000.00) in question;

7. In terms of the third agreement, your client has significant

difficulties in so far as it alleges work	done in November 1998 in respect of a
contract formed in	September 1999;

8. If the proceedings are to continue, and because of the manner in

which our client has pleaded it Defence,	your client will be obliged to disclose
precisely what	work it did in terms of both the first and second

agreements, and to ascribe a reasonable value to such work.

Would you please refer to your client the formal Offer to Settle enclosed herewith, together with a copy of this letter, and advise as to your client's instructions in due course. Would you also please advise, if the proceedings

are to be settled, whether your client is able to make available to our client all

plans and drawings prepared by your client in relation to the Club.

We look forward to hearing from you."

The defendant's Offer to Settle, dated the 6th of February 2002, was in the following terms:

"OFFER TO SETTLE

TAKE NOTICE that the Defendant hereby offers to pay to the Plaintiff, in full
and final satisfaction of the proceedings, the sum of ninety thousand four
hundred dollars ($90,400.00) ("the settlement sum") and costs of the action
on the standard basis to the date of acceptance including the cost of the court
attendances, correspondence, discharges and other acts, matters and things
necessary to give effect to the terms hereof in full settlement of the Plaintiff's
claim herein.

This Offer to Settle is made in accordance with Part 5 of Chapter 9 of the of fourteen (14) days after the date of service hereof.

This Offer to Settle is for payment as follows:-

(a) the settlement sum within fourteen (14) days of acceptance of this

Offer by the Plaintiff;

(b) costs within fourteen (14) days of agreement thereon or the issue of an order of the assessment thereof;"

In his affidavit filed on the application, Mr Dillman, in paragraph 3, deposes as follows:

"3. Upon receipt of the letter and formal Offer to Settle from Connolly them to Neil Southwell, the Finance Director in the employ of the Plaintiff and he instructed me to respond to the correspondence I receive from Connolly Suthers in the following manner:

(a) amongst other things, to advise Connolly Suthers in writing that the

Defendant's Offer was not acceptable to the Plaintiff;

(b) serve a formal Offer to Settle the Claim on the Plaintiff in the sum of

$211,600.00 plus costs; and

(c) write a further "without prejudice" letter to Connolly Suthers indicating that
notwithstanding the terms of the formal Offer to Settle, the Plaintiff would be
prepared to settle the Claim for $174,000.00 inclusive of costs in the event
that the Offer was accepted within 7 days and the settlement sum paid within
14 days."

On the 15th of February 2002, Deacons replied to the letter from Connolly Suthers in the following terms:

"We acknowledge receipt of your letter dated 6 February 2002 enclosing your

client's formal Offer to Settle.

Your client's offer is not acceptable to our client.

As we have said previously, it is a nonsense to suggest that our client is not comprised in the first agreement in or around July 1999. At that time, your client advised our client that it wanted to proceed with the work agreed to be performed under the second agreement.

entitled to payment in respect of either first or second agreement as a
consequence of its failure to obtain building approvals.

Our client advised your client that in those circumstances it would be silly to obtain a building approval in respect of the works required to be performed pursuant to the first agreement at any time other than at the same time as which building approval was obtained in respect of the works required to be

performed pursuant to the second agreement. The reasons are apparent
from the designs.

In or about January 2000 your client advised our client that it no longer wanted to proceed with the works required to be performed under the second agreement, after our client had substantially completed them, and that it was not certain it would even proceed with the works required to be performed under the first agreement.

Notwithstanding those matters, on 29 February 2000 our client wrote to your client requesting advice as to when your client would like the revised stage 1 documentation, that is the documents required to be produced under the first agreement, completed for tendering and council approvals. Your client did

not respond other than to advise our client at a later stage that it did not
intend proceeding with any of the work at all.

Furthermore, as we have said, our client is in a position now to apply for building approvals and is prepared to do so in the event that its outstanding fees are paid. Your client's argument "whole of contract" argument, given that your client's failure to instruct our client to continue with the work following our client's correspondence of 29 February 2000, is simply not sustainable.

We note your comments in respect to the second agreement and your Mr Oates denial that he instructed our client to proceed. It seems rather curious to us, given the significant nature of our client's quote, contained in its letter to your client of 14 September 1999, that your client did not immediately inform our client that it had not given our client instructions to proceed with the work referred to in that letter when our client forwarded to your client the results of the work it undertook pursuant to the second agreement. Indeed, there is ample evidence of the fact that your client proceeded to instruct our client in respect of the works required to be performed under the second agreement after this event notwithstanding that it did not confirm in writing its acceptance of our client's quote.

We are confident, having considered the evidence in our client's possession that our client will win the credibility argument to which you refer, in light of the existence of that correspondence and the course of events.

We do not agree with your comment in relation to the 'Third Agreement'. That term is used as a term of art and in fact relates to two separate agreements entered into in November 1998 and September 1999.

Our client acknowledges your client has paid it $80,000.00. However, that sum together with the sum for which your client is offering to settle the matter goes nowhere near our client's break even point for the work it has undertaken in connection with the project. For our client to break even it will have to recover in excess of $195,000.00 in addition to the amount already paid.

In the circumstances we have been instructed to make a counter offer on behalf of our client and enclosed our client's Offer to Settle bearing the same date as this letter."

The plaintiff's Offer of Settlement was in the following terms:

"OFFER OF SETTLEMENT

Rule 353

TAKE NOTICE that the Plaintiff offers to settle this claim pursuant to the

Uniform Civil Procedure Rules, Chapter 9, Part 5.

The terms of the offer are as follows:

1.          that the Defendant pay to the Plaintiff the sum of $211,600.00 within 14 days of the date of acceptance of this offer; and

2.          that the Defendant pay the Plaintiff's costs of and incidental to these proceedings to be taxed.

This offer is open for acceptance by the Defendant for a period of 14 days from the date of service hereof."

A second letter was sent by Deacons to Connolly Suthers dated the 15th of February
2002 and this letter forms the basis of the present dispute between the parties. It is

in the following terms:

"Notwithstanding the formal offer enclosed in our without prejudice letter of
even date, our client is prepared to settle its claim for the sum of $74,000.00
inclusive of costs in the event that this offer is accepted within 7 days and the
settlement sum paid within 14 days from that date.

Whilst our client maintains its position, it acknowledges that it will incur significant costs in proving its claim and for that reason, and that reason alone, is prepared to settle for a sum somewhat less than that set out in the formal offer, which will be relied on at the trial when the issue of costs is raised in the events that this offer is not accepted and the matter proceeds to trial."

In relation to this letter, Mr Dillman, in his affidavit, paragraphs 5 and 6, deposes as follows:

"5. Notwithstanding my instructions to make a further Offer of $174,000
inclusive of costs on the same day, I caused a letter to be forwarded to
Connolly Suthers by facsimile in error indicating that the Plaintiff was
prepared to settle its Claim for the sum of $74,000.00 inclusive of costs in the
event that the Offer was accepted within 7 days and the settlement sum paid
within 14 days from that date. Exhibit "MRD3" to this affidavit is a true copy of
my second "without prejudice" letter to Connolly Suthers dated 15 February

2002.

6. My second "without prejudice" letter to Connolly Suthers dated 15 date, was sent in error and without instructions."

By facsimile dated the 19th of February 2002, Connolly Suthers wrote to Deacons in the following terms:

"We refer to your one page without prejudice letter of 15 February 2002, the

content of which letter is as follows:

'PAYNTER DIXON QUEENSLAND PTY LTD -v- AYR ANZAC
MEMORIAL CLUB INC

Notwithstanding the formal offer enclosed in our without prejudice letter of even date, our client is prepared to settle its claim for the sum of $74,000.00 inclusive of costs in the event that this offer is accepted within 7 days and the settlement sum paid within 14 days from that date.

Whilst our client maintains its position, it acknowledges that it will incur significant costs in proving its claim and for that reason and that reason alone is prepared to settle for a sum somewhat less than that set out in the formal offer which will be relied on at the trial when the issue of costs is raised in the event that this offer is not accepted and the matter proceeds to trial.'

We are instructed by our client to accept that offer, and we do so by virtue of this letter.

A bank cheque for the settlement sum will be with you within 14 days of the date of this letter."

As to this, Mr Dillman deposes in paragraph 8 of his affidavit as follows:

"8. I did not see the facsimile from Connolly Suthers dated 19 February 2002 until 20 February 2002 at which time I realized the error in my second "without prejudice" letter of 15 February 2002 and on that date, I caused a facsimile

transmission to be forwarded to Connolly Suthers"

The faxed letter from Deacons to Connolly Suthers dated the 20th of February 2002 is in the following terms:

"I refer to your facsimile dated 19 February 2002.

I was out of the office for the majority of yesterday and did not see the facsimile transmission until this morning.

Obviously our without prejudice offer of 15 February 2002 contained a typographical error. Why would our client off to settle by accepting a sum less than that which your client was prepared to pay (see your client's formal offer dated 6/2/02.

Our client did not instruct us to make that offer, will not accept a cheque for that sum, nor will it settle for that sum.

Our client's offer is to settle for the sum of $174,000.00 provided acceptance is communicated in 7 days and payment received in 14 days.

Please let us have your client's response to the above."

Connolly Suthers wrote to Deacons on the 20th of February 2002, the following letter, which was faxed and couriered:

"Further to our letter dated yesterday (copy enclosed) and in accordance with
the terms of settlement requiring payment within 14 days we enclose a bank
cheque made payable to your trust account for the amount of $74,000.00.
Please acknowledge receipt.

Please forward a notice of discontinuance for our signature. We will file it in the District Court and advise you of the date of filing in due course."

In reply to the Deacons' facsimile of the 20th of February 2002, Connolly Suthers faxed a letter to Deacons on the 21st of February 2002 in the following terms:

"We refer to your facsimile transmission of 20 February 2002.
We regard the matter as settled."

On the 27th of March 2002, Deacons wrote to Connolly Suthers in the following terms, so far as is relevant:

2. Taylor v. Johnson

"As we advised in our fax to you dated 20 February 2002, the offer contained
in our fax of 15 February 2002 was put in error.

It follows that the offer was put without authority and in circumstances where our client did not have any intention to enter into a legally binding agreement on that basis.

In the circumstances we believe that the settlement is not binding.

In the circumstances, we return the material forwarded to us under cover of your letter dated 20 February 2002."

In paragraph 10 of his affidavit, Mr Dillman deposes as follows:

"10. I have not released the bank cheque to the Plaintiff because the Plaintiff is not prepared to accept that sum in settlement of the Claim and the cheque has not been banked."

Further correspondence then ensued between the solicitors, each contending for the correctness of their respective positions. The correspondence referred to establishes a contract. There was an offer which was accepted.

Mr Dillman was not required for cross-examination and there was no suggestion that he did not, in fact, make a mistake in describing the amount as $74,000 as opposed to $174,000. The issue effectively was whether Mr Humphries knew or ought to have

known that he was mistaken.

The authorities referred to by the parties establish the following propositions for the purposes of the present case:

1.          A unilateral mistake alone on the part of the plaintiff is not enough to set aside

the contract.

In (1983) 151 CLR 422 at 432 the majority said: for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension."

Taylor v. Johnson

3. Discussion in the judgment about this proposition, and a consideration of the authorities supporting it, indicate that what is required to be established before the contract will be set aside is at least awareness on the part of the defendant, to use the context of the present application, of the plaintiff's mistake; belief on the part of the defendant that the plaintiff was probably mistaken; knowledge on the part of the defendant that the plaintiff was mistaken and doing nothing to point out the mistake. It is sufficient if one party knows or ought to know that the other party is or might well be mistaken. If the evidence permits an inference to be drawn that the defendant

knew the plaintiff was under some serious mistake or misapprehension about the
settlement sum, the further inference that the defendant deliberately set out to ensure
that the plaintiff did not become aware of that mistake will plainly follow.

4. The decision in Hartog v. Colin & Shields (1939) 3 King's Bench Division 566

is not inconsistent with the proposition just referred to notwithstanding that it falls
within the subjective rather than the objective theory category of decisions. For
present purposes the decision establishes that if the defendant could not reasonably
have supposed that the plaintiff's offer expressed the plaintiff's real intention and
must have known it to have been made by mistake, the resulting contract will be set
aside. That seems to me to be commonsense. The editorial note below the
headnote expresses the principle in this way: "An intending purchaser is not
permitted to "snap up" an offer which he knows to have been made by mistake."

5. The proposition stated in was narrowly stated in terms sufficient reasonable inference that nothing short of the conduct described in that passage would entitle a person to relief on the ground of unilateral mistake."

to dispose of the case. I agree with the view of the Full Court of the Family Court of

6.          Where "one party unwittingly makes a clerical or arithmetical error and the

other party takes advantage of it" that is "just a shabby trick and indubitably
unconscionable." A case of such nature includes one where there is "error in
transcription. Where a clerical or arithmetical error is apparent to the other party at
the time of the agreement, or even where it is made known to that party after the
agreement promptly and before that party has altered its position, equity will relieve
against the terms of the agreement." Deputy Commissioner of Taxation v.
Chamberlain (1990)93 ALR 729 at 741.

7.          It is "unconscionable for one party to take advantage of an obvious and

material mistake of another." Roach v. B & W Steel Pty Ltd (1991) 23 NSWLR 110 at
114.

8.          If a reasonable solicitor in the position of the defendant's solicitor, with

knowledge of all the facts, would have thought that the offer by the plaintiff's solicitor was likely to have been a mistake, he is obliged to draw the matter to the attention of the plaintiff's solicitor and if he does not, the contract will be liable to be set aside.

Lewis v. Combell Constructions Pty Ltd (1989) 18 NSWLR 528. See also Lowe v.
Harrington supra at pages 84,093 to 84,094.

In the present case the material amply satisfies me that the contract is voidable for mistake and ought to be set aside. It is easier to draw inferences favourable to the plaintiff and adverse to the defendant because the defendant's solicitor did not file an

affidavit or give evidence.

In my view the defendant's solicitor would, as a result of the correspondence immediately preceding it, and the defendant's own offer to settle which was then still open to acceptance, have been aware that the offer of $74,000 inclusive of costs, was a mistake. He should have said as much to the plaintiff's solicitor or at least inquired of that solicitor about it. The acceptance of the offer in these circumstances amounted to a deliberate attempt to ensure that the plaintiff's solicitor would not become aware of the mistake until it was too late.

The inference is irresistible that the defendant's solicitor knew that the offer made by the plaintiff's solicitor did not express that solicitor's real intention and knew that it had been made by mistake. No solicitor offered $90,400 plus costs, would make a counter offer of $74,000 inclusive of costs, and if he did, the other solicitor, unless he was insensibly obtuse - and Mr Humphries is not that - would clearly know he had made a mistake. It would be unconscionable, in my view, to permit the contract which came into being as a result of the acceptance of such an offer, to stand. It clearly must be set aside. The defendant's solicitor here "snapped up" an offer he knew to have been made by mistake, and his client should not be permitted to take advantage of that mistake. The plaintiff's solicitor made a clerical mistake. The defendant's solicitor knew a mistake must have been made. It was obvious, and it matters not that it may not have been obvious how the mistaken figure had been arrived at. In my view the plaintiff is entitled to an order setting aside the contract.

As to costs, the plaintiff has sought an indulgence as a result of the mistake of its solicitor. That mistake has led to the present application and has caused the defendant to respond to it. That mistake was due to the negligence of its solicitor in not checking that the amount stated in the letter dated the 15th of February 2002 was correct before the letter was sent. In my view the plaintiff should pay the defendant's costs of the application but an order should be made under Rule 708 that the plaintiff's solicitor repay to the plaintiff those costs.

I make the following orders:

1.          That the contract between the plaintiff and the defendant constituted by the

letter from Deacons to Connolly Suthers dated the 15th of February 2002, and the
letter from Connolly Suthers to Deacons dated the 19th of February 2002, be
rescinded.

2. That the plaintiff pay the defendant's costs of the application filed on the 19th of June 2002 to be assessed on a standard basis unless otherwise agreed.

3. That the plaintiff's solicitor, Deacons, repay to the plaintiff, all the costs which the plaintiff has by paragraph 2 hereof, been ordered to pay.

...

HIS HONOUR: At the request of the parties I direct the Registrar to place in a sealed envelope the application filed on the 19th of June 2002, all of the material filed in support of that application, the current file index, the outlines of argument of the parties, the transcript of the proceedings on the 15th of July 2002, this judgment and the orders I have made. That envelope is not to be opened before judgment is given in the action unless I order otherwise. I direct that an amended index for the file be prepared containing no reference at all to this application, the material filed in support of it, this judgment and these orders. The intent of these directions is that the Judge hearing the action have no knowledge of the offers to settle made by the parties.

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Postscript

On the 27th of May 2003 the proceeding was discontinued.