Smith v Woods
[2014] VSC 646
•18 December 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 00767
| KENNETH EDWIN SMITH as Executor of the Estate of GREGORY JOHN WOODS (Deceased) | Plaintiff |
| v | |
| BRENDAN WOODS & ORS | Defendants |
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JUDGE: | FERGUSON JA |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 August, 9 September 2014 |
DATE OF JUDGMENT: | 18 December 2014 |
CASE MAY BE CITED AS: | Smith v Woods |
MEDIUM NEUTRAL CITATION: | [2014] VSC 646 |
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CONTRACT – Counteroffer made by party to settle proceedings – All communications regarding settlement between solicitors for parties – Acceptance after death of offeror before either solicitor knew of death – Offer not revoked by death – Acceptance communicated to solicitor on the record – Concluded agreement falling within first category of Masters v Cameron.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Sowden | Ken Smith & Associates |
| For the First, Second and Fourth Defendants and Plaintiffs by Counterclaim | Mr S Tatarka | Millens Pty Ltd |
| For the Third Defendant | Mr S Tatarka |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
The facts............................................................................................................................................... 1
Was the counteroffer revoked automatically upon the death of Mr Woods?......................... 4
To whom could acceptance of the offer be directed?.................................................................. 6
Was there any mistake of fact?......................................................................................................... 7
Was any settlement subject to entry into formal terms of settlement before there was a concluded agreement?..................................................................................................................................... 8
Other matters....................................................................................................................................... 9
Conclusion........................................................................................................................................... 9
HER HONOUR:
Introduction
Gregory Woods began this proceeding against his nephew and his nephew’s wife regarding the ownership and control of two of the defendant companies. Gregory Woods passed away in the early hours of 13 March 2014. The question is whether there was a concluded settlement agreement before Mr Woods died.
For the reasons that follow I have come to the view that there was and that the defendants must pay $430,000 to the plaintiff in his capacity as executor of the estate of Mr Woods.
The facts
On 3 March 2014, the parties attended a judicial mediation. Each was represented by lawyers. As part of the initial joint session, each party’s counsel made a short opening statement. Mr Christian Juebner, who represented some of the defendants, said something like:
So that there is no dispute about whether we have reached a settlement, can we agree that there is no settlement unless a deed of settlement is signed by all the parties?
No‑one disagreed.
The mediation took quite a long time. Eventually, the defendants made an offer of $430,000 to Mr Woods, with that amount to be payable in four separate instalments as follows:
(a)$140,000 by 1 May 2014;
(b)$120,000 by 1 November 2014;
(c)$100,000 by 1 July 2015; and
(d)$70,000 by 1 November 2015.
Mr Woods did not accept the offer immediately. Instead, the mediation concluded, with the defendants agreeing to leave their offer open for seven days. In this regard, at the conclusion of the mediation, a draft deed of settlement and release (which Mr Juebner had brought with him to the mediation) was provided to counsel for Mr Woods. The draft included in handwriting the amount that had been offered and the amount of each separate instalment and the date by which it was to be paid.
On 11 March 2014, Shane Dare, the solicitor for Mr Woods, telephoned Mr Keith Hanslow of Millens Lawyers. Mr Hanslow acted as the solicitor for three of the defendants. Mr Dare made a counter offer on behalf of Mr Woods, with the amount to be received by him to remain at $430,000, but payment was to be made in two instalments rather than four. The contemporaneous file note that Mr Dare made of the discussion recorded in part:
Talked around $200 000 — 30 April 2014
$230 000 — 1 September 2014
Mr Hanslow sent an email on 12 March 2014 confirming that he had put the counter offer to his clients and had communicated the counter offer to Mr Craig Powles of R & G Lawyers, who acted for the remaining defendant. On 12 March 2014, Mr Hanslow and Mr Dare spoke again. Mr Hanslow told Mr Dare that his clients had accepted the counter offer and that he was waiting on instructions from the other defendant as to whether she too would accept the counter offer.
The parties agree that early on the morning of 13 March 2014, Mr Woods passed away.
Mr Hanslow and Mr Dare spoke by telephone late on the morning of 13 March 2014. At this stage, neither knew that Mr Woods had passed away. Mr Hanslow told Mr Dare that the final defendant had accepted the counter offer. Mr Hanslow said that he would prepare the final form of the terms of settlement by amending the deed of settlement and release that had been provided at the conclusion of the mediation to record the agreed terms. Mr Dare told Mr Hanslow that this was acceptable and that he would wait for him to send the deed of settlement and release to him.
After this telephone call, Mr Hanslow learned of Mr Woods’ passing. Nevertheless, he confirmed acceptance of the counter offer by the defendants by email sent at 1.16 pm on 13 March 2014. He stated in the email that the amount of $430,000 in full settlement would be paid in two tranches; the first of $230,000 on 1 May 2014, and the second of $200,000 on 1 September 2014. He concluded his email by stating that he would prepare the formal release incorporating the arrangements in the form of the release previously submitted to Mr Dare (that being the draft that was provided at the conclusion of the mediation).
Sometime after his telephone call with Mr Hanslow, Mr Dare was told by a secretary at his firm that she had received a telephone call advising that Mr Woods had passed away that morning.
At 3.44 pm on 13 March 2014, Mr Dare received an email from Mr Powles to the effect that in light of Mr Woods’ death he would be seeking his client’s instructions and would respond within 14 days.
Later that day, Mr Dare sent an email to Mr Hanslow informing him that he had been advised that Mr Woods had died in the early hours of the morning. He said that he was seeking clarification and would be in further contact. Mr Dare concluded his email with the following:
We can however say our current view is that the key settlement terms have been agreed upon between the parties and so they will proceed — in the case of Greg Woods, presuming it is correct he has passed away, any formal settlement terms will be signed by his legal personal representatives.
The next day, Mr Hanslow responded as follows:
Dear Shane,
We note that the email we sent to you, and referred to below, does not reflect our telephone conversation in that the amounts of the payments are incorrect. Accordingly there is no confirmed settlement.
Notwithstanding this we and our client’s [sic] are carefully considering the total situation as a strong view exists that due to your client’s death before the telephone conversation between us, there was no ability to enter the alleged settlement at the time of the telephone conversation.
Accordingly we differ with your current view and reserve our client’s position.
Was the counteroffer revoked automatically upon the death of Mr Woods?
There is little authority as to the effect of the death of an offeror before acceptance of the offer. In Dickinson v Dodds,[1] Dodds signed a document dated 10 June 1874 in which he stated that he agreed to sell a property to Dickinson for a specified price. A postscript was added to the document which recorded that the ‘offer’ was to be left open until 9.00 am on 12 June. Dodds then changed his mind and sold the property to another person. The plaintiff got wind of this and before 9:00 am on 12 June he attempted to accept the offer to him. The Court of Appeal held that there was no contract between the plaintiff and the defendant and that there was only an offer to sell, not an agreement to sell. Until the offer was accepted, Dodds was free to withdraw it. At the time that he purported to accept the offer, Dickinson knew that Dodds had changed his mind and intended to sell (or had already sold) the property to the other person. In those circumstances, Dickinson effectively knew that the offer had been withdrawn. In the course of coming to this conclusion, Mellish LJ said:
It is admitted law that, if a man who makes an offer dies, the offer cannot be accepted after he is dead, and parting with the property has very much the same effect as the death of the owner, for it makes the performance of the offer impossible.[2]
[1](1876) 2 Ch D 463.
[2]Ibid 475. See also, obiter dicta of Hoffman J in Spiro v Glencrown Properties Ltd [1991] Ch 537, 544.
In Fong v Cilli,[3] the vendor and one of two proposed purchasers signed a document for the purchase of a property. The vendor died. Subsequently, the second proposed purchaser (with knowledge of the vendor’s death) signed the document. Blackburn J held that the document did not become a contract as an offer cannot be accepted after the death of the offeror by an offeree having notice of such death.[4]
[3](1968) 11 FLR 495.
[4]Ibid 498.
There is little commentary in the textbooks about the effect of death on an offer. Greig and Davis[5] favour the view that it is only where the offeree has knowledge of the offeror’s death that the offer terminates.[6] The learned authors seek to limit the obiter dicta reasoning in Dickenson v Dodds[7] by taking the context in which it is said into account. They say:
It has never been the law that simply because a person has entered into a contract, which he is unable to perform, the contract is discharged. If he is foolish enough to enter into contracts to sell his house to two different people, he can only perform one of the contracts, but he will be liable in damages for his failure to perform the other. Hence, all that the …dictum can mean is that, once a party has knowledge of the fact that the other has already sold, or contracted to sell, the property to someone else, that knowledge operates as an implied revocation of a similar offer to himself. If the…dictum must therefore be related to the question posed at the outset, then it seems likely that reference to the death of the offeror should be similarly limited, that is, to a situation where the offeree has knowledge of the offeror’s death.[8]
[5]Greig, DW and Davis, JLR, The Law of Contract, The Law Book Company Limited, 1987.
[6]Ibid 346–347.
[7](1876) 2 Ch D 463.
[8]Greig, DW and Davis, JLR, The Law of Contract, (The Law Book Company Limited, 1987) 347.
There is authority that where an option has been granted for valuable consideration, it may still be exercised with knowledge that the grantor has died.[9] However, underlying this conclusion was Gibbs J’s determination that the burden of the option was a contractual obligation which devolved upon the personal representative of the deceased grantor.[10] Gibbs J referred to both Fong v Cilli[11] and Dickinson v Dodds[12] but because of his Honour’s conclusion that the option was contractual, he did not need to determine whether an offer lapses upon the death of the offeror, at least if the offeree has notice of the death.
[9]Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, 76 (Gibbs J).
[10]Ibid.
[11](1968) 11 FLR 495.
[12](1876) 2 Ch D 463.
As described above, at the time of the telephone call late on the morning of 13 March 2014 when Mr Hounslow told Mr Dare that the counteroffer was accepted by the defendants, neither of them knew that Mr Woods had passed away. In my view, this is the relevant point in the timeline to consider whether a contract was formed. If it was, then that is the end of the matter. If it was not, then the later purported acceptance by Mr Hanslow’s confirmatory email would not conclude the contract because by that time Mr Hanslow knew that Mr Woods was deceased.
I agree with the views expressed by Greig and Davis set out above that the dicta in Dickinson v Dodds should be understood in the context of what was decided in the case. I accept that it should be limited to circumstances where the offeree has knowledge of the death. For in my view, there is no reason why an offer should automatically be revoked upon death of the offeror. It is likely to depend upon the type of contract involved and the intention of the offeror assessed objectively. In a case such as the present, the offer was not one dependent upon anything personal to Mr Woods. It was not, for example, an offer to perform at a concert. As to intention, there is no reason to think that Mr Woods would have intended the offer to lapse upon his death. He clearly must have thought the offer was one in his interests to settle the case. He stood to gain $430,000. It is likely that his intention was that his estate would benefit by receipt of that amount should he die. Consequently, in my opinion, the offer was not automatically revoked upon the death of Mr Woods.
To whom could acceptance of the offer be directed?
To conclude an enforceable agreement, the acceptance of an offer must be communicated. The defendants argued that the death of Mr Woods terminated Mr Dare’s agency. Consequently they submitted that acceptance had not been communicated to any person with authority on behalf of Mr Woods.
It has long been the case that the death of the principal automatically terminates an agency (unless the agency is an irrevocable one).[13] Nevertheless, even if one accepts that proposition (which may be questionable in modern times),[14] it seems to me that it is not the complete answer here. Rule 9.09 of the Supreme Court (General Civil Procedure) Rules provides that a proceeding (such as the present proceeding) does not abate by reason of the death of a party. There is a hiatus because no step may be taken until the deceased person is replaced as a party. However, receipt of acceptance of an offer is not a step in the proceeding. Here, Darrer Muir Fletcher, the firm which employs Mr Dare, remained as the solicitors on the record in the proceeding. Under the Rules, the firm’s address remained as the address for service of documents.[15] Service of a document on the firm after Mr Woods’ death would not have been invalid, albeit that the agency may have terminated. By extension, it seems to me that acceptance of the offer to settle the proceeding could be communicated to Mr Woods’ solicitor and that would be sufficient for the acceptance rule. In other words, Mr Dare had sufficient authority by reason of his position as solicitor on the record for the purpose of giving notice of the acceptance of an offer to settle to the proceeding.
[13]Campanari v Woodburn (1854) 15 CB 400; 139 ER 480.
[14]See Dal Pont, GE, Law of Agency (LexisNexis Butterworths, 3rd ed, 2014) 672–673.
[15]Supreme Court (General Civil Procedure) Rules rr 6.06, 6.07.
Further, the position contended for by the defendants would mean that the reasoning in Fong v Cilli[16] would be deprived of any sensible meaning. It is implicit in the reasoning in that decision that if the offeree does not know of the offeror’s death, the offer may be accepted. On the defendants’ argument, this would mean that the offer would not be revoked, but would remain incapable of acceptance.
[16](1968) 11 FLR 495.
Was there any mistake of fact?
The defendants submitted that at the time that Mr Hanslow purported to accept the counteroffer both he and Mr Dare were mistaken in respect of a critical aspect of the settlement, namely both wrongly assumed that Mr Woods was still alive. In those circumstances the defendants say that equity renders any settlement agreement void, alternatively voidable by reason of the common misapprehension, the fundamental nature of the mistake and the absence of fault on the part of the defendants.
These submissions may be dealt with shortly for there are at least two difficulties with them. First, the mistake is not one made by both parties. As discussed above, the agency of Mr Dare came to an end on the death of Mr Woods. Secondly, any mistake is not as to a fundamental fact. It does not concern the subject matter of the settlement. For example, there was no mistake as to the existence of the underlying litigation which was the subject matter of the settlement and which would otherwise have been ongoing.
Was any settlement subject to entry into formal terms of settlement before there was a concluded agreement?
The defendants submitted that due to what was said by Mr Juebner at the beginning of the mediation, it was agreed by all parties that there would be no settlement unless and until a settlement deed was executed. No settlement deed has been executed. So, the defendants say, the objective intention of the parties was always to bind themselves to a settlement only upon the execution of a formal contract. That is, they argue that the case falls within the third category in the following oft quoted passage from Masters v Cameron:[17]
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract : in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document ; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.…
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own…. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document… or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed.[18]
[17](1954) 91 CLR 353.
[18]Ibid 360–361.
In my opinion, what Mr Juebner said at the commencement of the mediation may have applied to any arrangement between the parties to finalise the dispute at the mediation. However, the matter had moved on significantly by the end of the mediation and certainly by the time that the counteroffer was accepted. As noted above, at the conclusion of the matter, the form of the proposed document that would be executed by the parties had been finalised with the only missing items being the amounts and dates for payment. Once the parties agreed on those essential terms, the agreement was made, albeit that it may be recorded subsequently in a final form of deed (the precise terms of which were known to all parties). Indeed, Mr Hanslow said in his later confirmatory email to Mr Dare:
As discussed we will prepare the formal release incorporating these arrangements in the form of the release previously submitted to you.
The agreement between the parties falls within the first Masters v Cameron category.
Other matters
In view of the conclusion at which I have arrived, it is not necessary for me to consider all of the arguments put on behalf of Mr Woods’ estate. In case I am wrong in my conclusions, I will say that had it been necessary to decide, I would not have accepted the estate’s argument that the email from Mr Hounslow confirming acceptance of the offer constituted an election by the defendants. If there was no concluded agreement before that email was sent, there was nothing to make an election about. There were not two inconsistent rights to choose between.
Conclusion
It follows from what I have said that there is a concluded agreement pursuant to which the defendants must pay $430,000 to the estate of Mr Woods. I will hear from the parties as to the precise form of orders to be made and as to costs.
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