St Hilliers Constructions (NSW) Pty Ltd v Peter Kelly Flooring Pty Ltd

[2002] NSWSC 270

CITATION:	St Hilliers Constructions (NSW) Pty Ltd v Peter Kelly Flooring Pty Ltd [2002] NSWSC 270
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 5858/01
HEARING DATE(S):	5 April 2002
JUDGMENT DATE:	5 April 2002
PARTIES :	St Hilliers Constructions (NSW) Pty Ltd Peter Kelly Flooring Pty Ltd
JUDGMENT OF:	Davies AJ at 1

COUNSEL :	Mr P J Bambagiotti for the Plaintiff Mr C J Millard for the Defendant
SOLICITORS:	O'Hara & Company Solicitors & Attorneys for the Plaintiff Business Law Office Solicitors & Notaries for the Defendant
CATCHWORDS:	Contract - offer of settlement - misunderstanding of terms by one party - whether unilateral unexpressed reservation vitiates agreement
CASES CITED:	Taylor v Johnson (1983) 151 CLR 422
DECISION:	See paragraphs 21 and 24 of the judgment.

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Davies AJ

Friday, 5 April 2002

5858 / 01 St Hilliers Constructions (NSW) Pty Ltd v Peter Kelly Flooring Pty Ltd

Judgment

1 His Honour: These proceedings seek a declaration that proceedings in the District Court of New South Wales were settled between the parties on 2 April 2001.

2 Those proceedings had been brought by Peter Kelly Flooring Pty Ltd as subcontractor against a contractor, St Hilliers Constructions (NSW) Pty Ltd, in respect of work done and materials provided at the Chesalon Nursing Home, Woonona.

3 Peter Kelly Flooring Pty Ltd had sued for the balance of the contract price owing, a sum of $181,639.94. That sum included a retention sum of $7,500, which may not at the time have been strictly payable, for a provision of the contract provided for retention for a period of time against the contingency that problems in the work done might arise.

4 Negotiations were carried on between the solicitors for the parties with a view to achieving a settlement and certain payments were made. A letter from the solicitors for Peter Kelly Flooring of 3 July 2000 made an offer to settle for $172,000, subject to release of retention deposits.

5 There was a response by the solicitors for St Hilliers Constructions referring to moneys paid and offering a further sum, that amount to include the retention moneys in the sum of $7,450, which I assume was the total of the retention moneys then outstanding.

6 A further letter from the solicitors for Peter Kelly Flooring of 1 August 2000 referred again to payments and the outstanding balance. It referred to the claim for $181,639.94, the balance outstanding of which was then said to be $48,666.44.

7 On 12 March 2001 the solicitors for Peter Kelly Flooring wrote to say that their client would settle the action by the payment to it of $28,500 plus $4,500. The total of those sums was $33,000.

8 Subsequent to that letter, there was an offer by the solicitors for St Hilliers Constructions to pay $31,500 and that was countered by a telephone offer made by the solicitor for Peter Kelly Flooring to accept the sum of $32,500. According to the affidavit of the solicitor for St Hilliers Constructions, the solicitor for Peter Kelly Flooring, Mr Moffatt, said:

“My client will accept the sum of $32,500 and that is the last offer we will make.”

Shortly after, but on the same day, the solicitor for St Hilliers rang Mr Moffatt to say that his client accepted the offer.

9 On 2 April 2001 the solicitor for St Hilliers Constructions wrote to Mr Moffatt to say:

“Our client accepts your client's offer of settlement of $32,500 by way of full and final settlement of your client's claim.”

10 If these facts are looked at objectively, the matters which were said and written amounted to a final and binding agreement to settle the action.

11 The letter of 12 March 2001 expressly made the offer of $28,500 plus $4,500 costs, a total of $33,000, as the consideration for the settlement of the action. There is no reason to think that the following telephone conversations were on any other basis. The action was one for the whole of the outstanding balance of the contract price and included a claim for outstanding retention moneys.

12 After he had received the letter accepting his offer, Mr Moffatt rang the solicitor for St Hilliers Constructions to say that the offer on his part did not include the retention moneys.

13 The case has been put on behalf of Peter Kelly Flooring that no contract had been arrived at as the solicitors were not speaking of the same subject matter, that there was a misunderstanding between the them. The submission has been made by counsel that the solicitors were clearly at cross purposes in their dealings. In support of that contention, he relied upon an affidavit sworn by Mr Moffatt, para 12 of which reads as follows:

“There were lengthy settlement discussions between myself and Mr Tudehope. During these settlement discussions the question of the retention moneys was never raised and it was my understanding that those moneys had already been paid by St Hilliers to Peter Kelly in accordance with the terms of the contract.”

14 It is not in dispute in these proceedings that Mr Moffatt proceeded upon a misunderstanding. However, the question is whether an unexpressed reservation will lead to the result that a contract, which on its face appears to have been complete, will fail to be formed.

15 The point of general principle is expressed in Chitty on Contracts, General Principles, 25 Edition, para 41, where this is stated:

“The normal test for determining whether the parties have reached agreement is to ask whether an offer has been made by one party and accepted by the other. In answering this question, the courts apply an objective test: if the parties have to all outward appearances agreed in the same terms upon the same subject-matter neither can generally deny that he intended to agree. An unexpressed qualification or reservation on the part of one party to an apparent agreement does not normally prevent the formation of a contract. The theory, popular in England in the nineteenth century, that there can be no contract without a meeting of the minds of the parties, has been largely discredited as it would tend to produce commercially inconvenient results.”

16 The point made in Chitty was discussed by the High Court of Australia in Taylor v Johnson (1983) 151 CLR 424 where Mason ACJ, Murphy and Deane JJ at pages 427 to 430 examined the approach to be taken. Their Honours mentioned the past conflict between the subjective and the objective approaches to contract and said, at 429, that the clear trend in decided cases and academic writings has been to leave the objective theory in command of the field.

17 It follows that the fact that Mr Moffatt had an unexpressed reservation or qualification in his own mind did not result in the failure of the parties to agree on the terms which, on the face of it, their words expressed.

18 In this case, what was settled was a claim for the balance of the outstanding price. The outstanding moneys claimed included retention moneys. Despite Mr Moffatt's affidavit, those retention moneys had in fact been referred to by both solicitors in their letters and offers of settlement had been made in writing which included the retention moneys.

19 The offer made in writing on 12 March was an offer to settle the action, not a part of the action. The telephone conversations which occurred subsequently, the offer on the one side for $31,500 and on the other for $32,500, would have been understood by both solicitors as being further offers on the terms set out in that letter of 12 March.

20 For those reasons, I am satisfied that there was between the parties an agreement to settle the District Court proceedings. Accordingly, there should be a declaration to that effect.

21 I make the declaration set out in para 1 of the summons and the order set out in para 2 of the summons.

22 A submission has been made by counsel for Peter Kelly Flooring that no order for costs should be made as the issue which has been the subject of judgment could and should have been resolved in the District Court.

23 It appears, however, that there was an issue which had to be resolved. It is not clear to me that that issue could have been resolved at lesser expense in the District Court than in this Court. Perhaps it could have been. In any event, some attempt was made to raise the matter in the District Court and it appears that his Honour Judge Delaney expressed the view that the issue was more properly determined in the Supreme Court. It was after his Honour's indication or direction to that effect that these proceedings were instituted.

24 In all the circumstances of the case I consider that the plaintiff should have its costs.

-oOo-

Last Modified: 04/10/2002