R & A Cab Co Pty Ltd v Rutty & Ors
[2007] VSC 62
•2 March 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No 6904 of 2004
| R & A CAB CO PTY LTD | Plaintiff / Appellant |
| v | |
| KATHLEEN RUTTY | First Defendant |
| EDGAR GEORGE RUTTY | Second Defendant |
| HORIZON SYNERGY PTY LTD | Third Defendant |
| LINDSAY KOTZMAN | Fourth Defendant / Respondent |
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JUDGE: | WARREN CJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 March 2007 | |
DATE OF JUDGMENT: | 2 March 2007 | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 62 | First Revision |
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Contracts – accord and satisfaction – accord executory – accord executed – deed of settlement – whether consideration for compromise was promise of performance or performance itself
Contracts – construction and interpretation – whether time of the essence
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I W Upjohn | John Matthies & Co |
| For the Fourth Defendant | Mr P Ehrlich | Schetzer Brott & Appel |
HER HONOUR:
The plaintiff instituted proceedings in the Supreme Court alleging various matters, but in particular with respect to the fourth defendant, alleging negligence in failing to lodge a caveat to protect the plaintiff's interests as a purchaser of land.
The plaintiff and the fourth defendant entered into a deed of settlement settling the matter between those parties. The pertinent terms of the deed of settlement provided that the fourth defendant promised to pay the plaintiff, and the plaintiff accepted, the sum of $150,000 within seven days of exchange of executed parts of the deed. Subject to the payment of that settlement amount, the plaintiff agreed to release the fourth defendant. There was a further provision in the deed that the plaintiff directed the settlement sum to be paid by a cheque or cheques payable to the plaintiff's solicitors. Otherwise the deed of settlement made no provision with respect to time.
On the basis of the affidavit material before me, it appears that the exchange of executed parts of the deed occurred on or about 31 July 2006. Accordingly, under the deed, the payment was due on or before 7 August 2006.
It transpired that on 4 August 2006 the solicitors for the fourth defendant delivered to the plaintiff's solicitors a cheque in the sum of $146,500 under cover of a letter. The letter simply noted the enclosure of the cheque and did not provide any explanation or description as to the shortfall from the specified settlement sum of $150,000. Three days later, the solicitors for the fourth defendant wrote to the plaintiff in the following terms:
"We have been instructed by our client that he spoke to you on Friday 4 August 2006 in relation to payment of the balance of settlement moneys and the fee issue. He has instructed us that you will send us a letter to confirm that the plaintiff will accept the sum of $146,500 in full and final settlement of this matter. Please confirm that this is correct."
On 9 August 2006, the solicitors for the plaintiff replied, informing the solicitors for the fourth defendant that the plaintiff had not agreed to the reduction and required that the full amount be paid according to the terms of the settlement. However, the letter of the plaintiff's solicitors made no reference to time generally or set a specific time when the balance of $3,500 was to be paid.
Subsequently, on 24 August 2006, the fourth defendant itself wrote to the plaintiff's solicitors, cataloguing a series of complaints and grievances with respect to the history between the plaintiff and the fourth defendant. Ultimately, the letter concluded with an assertion that the fourth defendant had an equitable right of set-off with respect to the balance of $3,500 due under the terms of settlement against those moneys owed to the firm.
There was no issue between the parties that the set-off claimed was not contemplated by the terms of settlement. There was also no issue between the parties that, in so far as moneys may have been owing by the plaintiff, they were in fact not owing by the plaintiff but rather by another entity, a company known as Australvic Property Management Pty Ltd.
After the letter of 24 August 2006, other steps occurred between the parties with respect to the Supreme Court proceedings. However, on 27 September 2006, the solicitors for the plaintiff wrote to the fourth defendant itself in the following terms:
"We note that the terms of settlement with your firm were conditional on payment. Payment of the settlement sum has not been made. Accordingly, we have been instructed to advise that the plaintiff withdraws from all settlement discussions and will now proceed with its claim solely against the fourth defendant. The moneys thus far paid will be brought to account at trial as a partial recovery of the damages sustained."
Thereafter, on 29 September 2006, the fourth defendant wrote to the plaintiff's solicitors, enclosing a cheque in the sum of $3,500 in full and final settlement of the terms of settlement. On 29 September 2006, the plaintiff's solicitors replied by way of returning the cheque and rejecting the tender.
The issue before the court today arises from an application for a permanent stay of the proceeding brought by the fourth defendant before a master. Orders were made by a master on 9 February 2007 granting a permanent stay of the proceeding. The plaintiff brings the present summons in the nature of an appeal against the orders of the Master. Hence, pursuant to Order 77 of Chapter 1 of the Rules, the matter proceeds by way of a hearing de novo before me.
The first matter to be considered is the nature of the agreement between the plaintiff and the fourth defendant with respect to the deed of settlement. In my view, it amounted to what is conveniently described by Phillips J in Osborn v. McDermott:[1]
"Where there is an accord and satisfaction, the agreement for compromise may be enforced, and indeed only that agreement may be enforced because ex hypothesi the previous cause of action has gone. It has been satisfied by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise of other benefit."
This distinction between accord and satisfaction was noted and cited with approval in Baxter v Obacelo Pty Ltd.[2]
[1][1998] 3 VR 1 at 8.
[2](2001) 205 CLR 635 at 658.
It is well established that, if a creditor has requested not merely a promise of payment of money but the performance of that act of payment, then, until the payment takes place, the creditor's agreement to compromise his cause of action is not supported by consideration and consequently unenforceable. The accord, it is said, is an accord executory only. The further consequence follows that, if the accord is executory only, the creditor may still sue on the original cause of action. Although the parties have agreed to compromise that cause of action, such an agreement is not enforceable and the debtor cannot prevent the creditor abandoning the agreed compromise. If, on the other hand, the accord is executed, the consideration, be it promise or act, has been provided, the creditor can in general no longer rely on the original cause of action since he has agreed, by the binding accord, to forgo that original cause of action and replace it with the satisfaction provided: see Greig and Davis.[3] The learned authors also note that whether in a particular case an accord requires an act by the debtor in satisfaction or merely his promise is clearly a question of the construction of the particular agreement in the light of all the circumstances; but it would appear that generally the courts lean in favour of construing the agreement as requiring performance, rather than a promise in consideration for the compromise.
[3]DW Greig and JLR Davis, The Law of Contract (1987), 1184-85.
The second pertinent issue to be considered in this matter is whether time was of the essence of the deed of compromise. Clearly, time was not stipulated as being of the essence in the agreement. However, a time for compliance was stipulated. The question then arises as to the proper construction of the acts that occurred after 7 August 2006 when the payment was due. For the purposes of lawful termination, unless time is of the essence of the contract, a party will not be held strictly to a contractual promise as to the time of performance. This rule has no application to a provision in the contract which expressly makes performance conditional upon the happening of a specified event. As observed by Kitto J in Tropical Traders Ltd v Goonan:[4]
"It is a strong thing to place upon a few days' indulgence in respect of instalments payable during the course of a contract a construction which means that, in relation to the time for completion of the payment of purchase price, a stipulation that time shall be of the essence may be regarded as abandoned."
In Mehmet v Benson,[5] Barwick, CJ said the following:
"Therefore, the failure to pay an instalment precisely on the due date gives the defendant a right to terminate the contract unilaterally. But for this right to be available to the defendant, the understanding of the parties as to the essential nature of the time for payment of the instalments must be maintained. If the party entitled to insist on the essential quality of the stipulated time leads the other party to understand that its essentiality is not being maintained, time for payment will cease to be essential without some further circumstance, such as a proper notice in that behalf, apt to restore its essential quality. The loss of the essential quality of the time for payment may thus happen by the party entitled to rescind doing some act inconsistent with his insistence on the essential quality of time."
[4](1964) 111 CLR 41, 42.
[5](1965) 113 CLR 295, 303.
In the present case, time was not stipulated by the plaintiff, and indeed there was a course of correspondence calling for payment without specification as to a time for compliance. It is to be noted, in Loughridge v Lavery,[6] that Adam, J said:
"However, repudiation or renunciation of a contract by one party does not of itself operate to rescind it. It puts the other party to his election to treat the contract as at an end or as still subsisting."
Here, it is apparent from the course of conduct and correspondence between the parties that the plaintiff resolved, indeed elected, to view the deed as subsisting on and after 7 August 2006. In effect, the plaintiff affirmed the deed of settlement and thereafter, in my view, was not entitled to terminate for delay without first giving notice requiring performance within a new specified time. There are various authorities in this respect.[7] In the present matter, no such notice was ever served. Of course, repudiation of a contract is a matter to be handled and managed strictly in accordance with the law.[8]
[6][1969] VR 912.
[7]See Carr v JA Berriman Pty Ltd (1953) 89 CLR 327.
[8]See Shevill v Builders Licensing Board (1982) 149 CLR 620, 633.
It follows that the third significant point to be considered in this matter was the conduct of the plaintiff with respect to purported termination. Of course, refusal to perform a contract on the basis of what might be described as unjustifiable interpretation of a contract[9] may amount to repudiation.[10] However, before termination occurs - in this case with respect to the plaintiff - the courts have recognised that an attempt should be made to persuade the party to give an opportunity for reconsideration.[11]
[9]See Cheshire and Fifoot, Law of Contract, (8th ed, 2002), [21.11].
[10]See DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423.
[11]See DTR Nominees Pty Ltd v Mona Homes Pty Ltd, (1978) 138 CLR 423, 431-432.
Applying the authorities to this matter, therefore, in my view it is apparent that time was not of the essence of the deed of settlement. In accordance with the authorities, it behoved the plaintiff to stipulate a time for new or fresh compliance with the deed of settlement. That not having occurred, it was open to the fourth defendant to pay the balance of the amount owing; in effect, provide the tender that it did. In my view, the allegation of the fourth defendant with respect to set-off and the related issues ultimately became a red herring in the dispute between the two parties.
Accordingly, it follows, in my view, that the relief sought by the fourth defendant is made out, pursuant to Order 23 of Ch 1 of the Rules, and it is appropriate that the proceeding brought by the plaintiff be stayed. Accordingly, it further follows that the appeal brought by the plaintiff against the Master's order should be dismissed.
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