SWV Pty Ltd v Spiroc Pty Ltd

[2006] NSWSC 668

Reported Decision: 201 FLR 238

New South Wales

Supreme Court

CITATION:	SWV Pty Ltd v Spiroc Pty Ltd [2006] NSWSC 668
HEARING DATE(S):	22/06/06
JUDGMENT DATE :	4 July 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Notice of motion dismissed with costs
CATCHWORDS:	CONTRACTS - offer and acceptance - informal offer of compromise made in writing sought response "as soon as possible in writing by return" - whether offer specified time limit for acceptance - whether acceptance made within time limited by offer - EVIDENCE - admissibility - communications between parties in dispute in connection with attempt to negotiate settlement of dispute - proceeding in which question of making agreement to settle the dispute is in issue - whether exception in such proceedings to rule that evidence not be adduced of such communications applies only to immediate offer to settle and events following it - WORDS AND PHRASES - "by return" - "as soon as possible"
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.232, 233 Evidence Act 1995, ss.131(1), 131(2)(f) Uniform Civil Procedure Rules 2005, rule 20.26
CASES CITED:	Abriel v Australian Guarantee Corporation [1999] FCA 50 Benchmark Certification Pty Ltd v Standards Australia International Ltd (2004) 212 ALR 464 Bowes v Chaleyer (1923) 32 CLR 159 Brown v Commissioner of Taxation (2001) 187 ALR 714 Connex Group Australia Pty Ltd v Butt [2004] NSWSC 673 Finlayson v Campbell (NSWSC, Young J, 4 September 1997) Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 Jacobson v Ballina Shire Council [2006] NSWLEC 114 KC v Shiley Incorporated (unreported, FCA, Tamberlin J, 11 July 1997) Lahoud v Lahoud [2006] NSWSC 126 Lang v Carroll (2004) 188 IR 58 McVeigh v Bell [2002] ANZ ConvR 9 Mercator Property Consultants Pty Ltd v Sumampow [2000] WASC 157 Pacific Aviation Pty Ltd v Bradley (unreported, NSWSC, Wood J, 7 November 1985) Rivkin Financial Services Ltd v Sofcom Ltd (2004) 51 ACSR 486 Tinn v Hoffmann & Co (1873) 29 LT 271 Tomlin v Standard Telephones and Cables Ltd [1969] 3 All ER 201 Vines v Djordjevitch (1955) 91 CLR 512
PARTIES:	SWV Pty Limited - Plaintiff Spiroc Pty Limited - First Defendant Contact Centres Holdings Pty Limited - Second Defendant Susanne Katherine Crabbe - Third Defendant Peter Stewart Thomson - Fourth Defendant
FILE NUMBER(S):	SC 1448/06
COUNSEL:	Mr J.A.C. Potts - First, Third and Fourth Defendants Mr P.D. Doyle-Gray - Second Defendant
SOLICITORS:	Clayton Utz - First, Third and Fourth Defendants Price & Company - Second Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 4 JULY 2006

1448/06 SWV PTY LIMITED v SPIROC PTY LIMITED & 3 ORS

JUDGMENT

The proceedings

1 These proceedings were commenced by originating process filed on 15 February 2006 by which the plaintiff, relying on ss.232 and 233 of the Corporations Act 2001 (Cth), sought as against the first, second and fourth defendants, an order that those defendants purchase 188 shares in Contact Centres Australia Pty Limited held by the plaintiff.

2 The originating process was returnable in the Corporations List on 20 February 2006. Certain orders were, on that occasion, made by me by consent and without admissions. Those orders included the following orders:

“1. Pursuant to section 233 of the Corporations Act , 2001 (Cth), that the first and fourth defendants purchase the 188 shares in Contact Centres Australia Pty Limited held or formerly held by the plaintiff for the proper value of those shares as at 31 December 2005.
2. Pursuant to section 233 of the Corporations Act, 2001 (Cth), that the first and fourth defendants purchase the 188 shares in Contact Centres Australia Pty Limited held or formerly held by the second defendant for the proper value of those shares as at 31 December 2005.
3. A referee be appointed pursuant to Rule 20.14 of the Uniform Civil Procedure Rules 2005 to determine the proper value as of 31 December 2005 of the 188 shares in Contact Centres Australia Pty Limited each held or formerly held by the plaintiff and the second defendant.”

3 Orders 2 and 3, involving the first and fourth defendants and the second defendant, are of immediate relevance for present purposes; but it is pertinent to note that Order 3 applied separately to two parcels of shares, being the parcel held or formerly held by the plaintiff (to which Order 1 is irrelevant) and the parcel held or formerly held by the second defendant (to which Order 2 applies).

The present application and the approach to it

4 I am at present concerned with an application by the first, third and fourth defendants, by notice of motion filed on 12 May 2006, for the following orders:

“1. A declaration that the First and Fourth Defendants entered into a binding agreement with the Second Defendant on 5 April 2006, by which the Second Defendant agreed to transfer all of its right title and interest in the shares owned by it in the company Contact Centres Australia Pty Ltd, to the First and Fourth Defendants, or their nominee, for the sum of $250,000 plus costs as agreed or assessed ( ‘the Agreement’ ).
2. An order that the Second Defendant specifically perform the Agreement.
3. An order that the Second Defendant execute a share transfer in the form annexed and marked ‘A’ to this notice notice of motion.”

5 The question whether the binding agreement the first, third and fourth defendants allege was in reality made turns upon a consideration of the course of events after the consent orders had been made. Certain correspondence was entered into between the solicitors for the first, third and fourth defendants (Clayton Utz) and the solicitors for the second defendant (Price & Company) and certain other events occurred. The correspondence is said to be the source of the alleged agreement.

6 Questions of admissibility arose in relation to elements of the evidence sought to be adduced in relation to the course of correspondence and events. Because the time for the hearing was limited, I took the course (which I acknowledge to be generally undesirable) of reserving my decision on the objections to admissibility, with the intention that they should be dealt with in my reasons for judgment in relation to the application for orders enforcing the alleged agreement. I was satisfied that this course would not, in the context of the confined issues, occasion undue prejudice to either party.

7 I shall refer to relevant aspects of the evidence, including those in relation to which objection was taken. I shall then deal with the objections. Finally, having identified the admitted evidence, I shall proceed to a consideration of the claims made by the first, third and fourth defendants.

The course of correspondence and events

8 The affidavit of Mr Price of Price & Company upon which the second defendant relies refers to events at court on 20 February 2006, the day on which the orders set out at paragraph [2] above mere made by consent and without admissions. After referring to the fact that the matter came before me in the Corporations List in the morning and that counsel for all parties were present, Mr Price deposes:

“That morning, the matter stood in the list, and the parties, inter alia, had prospective settlement negotiations throughout the morning.”

9 Mr Price goes on to say that he was present throughout the day instructing counsel, as was Mr Collins, solicitor for the first, third and fourth defendants and Mr Freidman, solicitor for the plaintiff. He says that, during the course of the day, he and his counsel had discussions with Mr Collins and his counsel regarding the second defendant’s shareholding in Contact Centres Australia Pty Limited. The affidavit continues:

“There were discussions in relation to the third and fourth defendants purchasing the second defendant’s 188 shares in Contact Centres Australia Pty Ltd. To the best of my recollection, there was a further offer from the third and fourth defendants via either Mr Collins or Mr Potts, which the second defendant rejected and a counter-offer wherein either I or my counsel said to Mr Potts and Mr Collins, words to the effect:
‘We are instructed that the second defendant will accept $250,000 for his shares.’”

10 Mr Price also deposes:

“Mr Collins said words similar to:
‘That is ridiculous. No, that offer is rejected.’”

11 It was after the conversations to which Mr Price deposes – indeed, at about 4.30 in the afternoon – that the orders to which I have referred were made by consent and without admissions.

12 On 23 February 2006, Clayton Utz, acting for the first, third and fourth defendants, wrote to Price & Company, acting for the second defendant, enclosing an offer of compromise made under rule 20.26 of the Uniform Civil Procedure Rules 2005. The proposed compromise was to the effect that the first and fourth defendants pay the second defendant the sum of $188,000 (less the amount paid by the first defendant to the second defendant on 9 February 2006) plus costs as assessed or agreed, with the period for acceptance being 28 days from the making of the offer.

13 On the same day, 23 February 2006, Price & Company sent a fax to Clayton Utz at 5.10 pm. The fax read as follows:

“We refer to the above matter and to your letter of even date enclosing your clients [sic] Notice of Offer of Compromise dated 23 February 2006.We are instructed that our client rejects the offer.We are instructed that our client is willing to transfer all of our client’s right, title and interest in his shares to your client or your client’s nominee, for the sum of $250,000.00 plus costs as agreed or assessed.We would be grateful if you could obtain your clients [sic] instructions in respect of this counter-offer and advise us of same as soon as possible in writing by return.”

14 I return to Mr Price’s affidavit and refer to his account of events which took place on 24 February 2006 when the matter was again in court and came before the Registrar in Equity. He says that all parties were again represented by counsel but he was not present. He notes that the court made certain orders on that day including orders prescribing a procedure by which an expert was to be selected and commissioned to carry out the valuation contemplated by the orders of 20 February 2006.

15 The court file shows that the orders of 24 February 2006 included several orders about things that “the parties must” do by specified dates (28 February in one case and 3 March in another) with respect to the selection of an expert to value the shares. There was also an order regarding liability for the expert’s fees, with the plaintiff and each of the first, second and fourth defendants being ordered to bear part.

16 On 27 February 2006, Clayton Utz wrote to Price & Company referring to the orders made by the Registrar on 24 February 2006 saying, among other things:

“Our clients are prepared to provide access to all company information to which your client is entitled as a director of Contact Centres Australia Pty Ltd to Mr Wright and to any expert your client wishes to appoint for the purpose of determining the value of the shares she held in CCA.”

17 On 28 February 2006, Price & Company wrote to Clayton Utz referring to the orders of 24 February 2006 and nominating, in accordance with those orders, a person to undertake the valuation function contemplated by the consent orders. On the same day, Clayton Utz wrote to Price & Company nominating other persons to perform that function. The plaintiff’s solicitors wrote to Price & Company (also on 28 February 2006) nominating yet another accountant for the task.

18 On 1 March 2006, Clayton Utz wrote a letter addressed to both Price & Company and the solicitors for the plaintiff referring to the various nominations and suggesting that the several persons nominated “be referred to the President of the Institute of Chartered Accountants tomorrow to choose which of them will be appointed the referee”. The letter asked whether that proposal was acceptable.

19 Between 1 March 2006 and 8 March 2006, there was correspondence between Clayton Utz and Price & Company regarding the availability of documents to Mr Wright for the purpose of preparing evidence pursuant to Order 9 of the Registrar’s orders.

20 On 10 and 14 March there was correspondence about the Institute of Chartered Accountants and the request that its President select an accountant to perform the valuation.

21 According to the court file, the proceedings were before the Registrar again on 21 March 2006 and the following directions were made:

“1. Plaintiff to file and serve any notice of motion regarding discovery by 4.00pm Monday 27 March 2006 together with any affidavit evidence in support.
2. Defendants to file and serve any notice of motion regarding discovery by 4.00pm Tuesday 28 March 2006 together with any affidavit evidence in support.
3. Plaintiff to serve any affidavit evidence in reply by 4.00pm Tuesday 18 April 2006.”

22 On 5 April 2006, Clayton Utz wrote to Price & Company as follows:

“We refer to your facsimile to us dated 23 February 2006.We are instructed that our clients accept your client’s offer to transfer your client’s right, title and interest in your client’s shares in Contact Centres Australia Pty Limited to our clients, or our clients’ nominee, for the sum of $250,000 plus legal costs as agreed or assessed.Our clients will provide your client with payment of the $250,000 (less the amount already paid to your client on 10 February 2006) plus costs within 28 days of the date of this letter in accordance with Rule 20.26.8 of the Uniform Civil Procedure Rules 2005.As such, please advise us of your client’s estimate of his party-party costs in this matter to date as soon as possible and to whom a cheque should be made payable.”

23 On 13 April 2006, Clayton Utz wrote a letter addressed to Price & Company, the plaintiff’s solicitors and the President of the Institute of Chartered Accountants saying, in effect, that the first, third and fourth defendants had now performed Order 2 of 20 February 2006 (in that the first and fourth defendants had purchased the shares held or formerly held by the second defendant) and that, since there was no longer any dispute between the second defendant and the first, third and fourth defendants, it was assumed that the second defendant’s nomination of an accountant was withdrawn.

24 On 2 May 2006, Clayton Utz wrote to Price & Company as follows:

“We refer to our facsimile to you dated 5 April 2006 accepting your client’s offer of settlement.We enclose two cheques made out to your client totalling the amount of $123,206.60 which equals the difference between the agreed payment amount of $250,000 less the amount already paid to your client on 10 February 2006.Please arrange for your client to execute the enclosed resignation of director form and return to us as soon as possible. We note that the Orders made by the Court in this matter on 20 February 2006 recorded your client’s undertaking to do all things necessary to resign forthwith as a director of CCA upon purchase by the first and fourth defendants of your client’s shares in CCA.”

25 This letter was accompanied by the form of resignation of Mr Wright as a director and two bank cheques, one for $40,000 and the other for $83,206.60.

26 On 3 May 2006, Clayton Utz wrote to Price & Company referring to the letter of 2 May 2006 and saying that the cheques were mistakenly made out to Mr Wright rather than Contact Centres Holdings Pty Limited. They requested that the cheques not be banked and instead be returned, adding that new cheques were being obtained and would be provided that afternoon. Also on 3 May 2006, Price & Company wrote to Clayton Utz as follows:

“We refer to your letter of 5 April 2006 purporting to accept an offer made by our client in our letter to you dated 23 February 2006.Our client is of the view that your client’s conduct between 23 February and 5 April 2006 amounted to a rejection of that offer, and/or the time for acceptance of that offer had lapsed before your client’s purported acceptance. Accordingly, there is no concluded bargain.Your letter of 5 April 2006 has been considered as an offer. After reflection, our client has elected to reject that offer. Our client will of course consider any alternative offer made by your client in future, but has himself no counter offer to make now.We note that you have sent us cheques yesterday afternoon totalling $123,206.60. Those cheques will not be presented. The cheques are hereby returned.”

27 Clayton Utz replied promptly to this letter. The reply is also dated 3 May 2006. They referred to Price & Company’s letter of that date enclosing two cheques and continued:

“We refute entirely the allegations made in your letter that our clients’ conduct between 23 February 2006 and 5 April 2006 amounted to a rejection of your client’s offer of settlement as set out in your letter dated 23 February 2006.”

28 The letter went on to say why it was contended that an agreement of compromise had been made. The two replacement cheques were enclosed and there was a renewed request that Mr Wright sign the resignation form.

29 Later still on 3 May 2006, Price & Company wrote to Clayton Utz referring to a visit to their office at approximately 3.25 pm that day by Ms Sheppard, a solicitor from Clayton Utz together with another woman, for the purpose of delivering a letter and cheques. I need not go into the content of this letter. It is sufficient to say that, according to the letter, Ms Sheppard had been told that Price & Company had no instructions to accept any cheques from Clayton Utz and that the position of the second defendant remained as stated in Price & Company’s earlier letter of 3 May. The cheques were returned to Clayton Utz with the letter together with the unsigned document submitted for Mr Wright’s signature.

The objections to evidence

30 At this point, I consider the objections to evidence. Mr Potts of counsel, who appeared for the first, third and fourth defendants, submitted that each of the following is inadmissible:

· the passage in Mr Price’s affidavit extracted at paragraph [8] above;

· the passage in Mr Price’s affidavit extracted at paragraph [9] above;

· the passage in Mr Price’s affidavit extracted at paragraph [10] above;

· the Clayton Utz letter of 23 February 2006 and enclosed offer of compromise referred to at paragraph [12] above; and

· the first two paragraphs (but not the balance) of the Price and Company letter of 23 February 2006 quoted at paragraph [13] above.

31 The objection is, in each case, based on s.131(1) of the Evidence Act 1995:

“(1) Evidence is not to be adduced of:
(a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or
(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.”

32 Mr Potts submitted that the items I have identified are covered by s.131(1). Except perhaps in relation to the first of the items (which does not disclose a communication but, rather, the fact that communications occurred), that must be so. Mr Doyle-Gray of counsel, who appeared for the second defendant, did not seek to submit otherwise. He did, however, submit that s.131(2)(f) had the effect of removing the s.131(1) prohibition. Section 131(2)(f) is as follows:

“Subsection (1) does not apply if:
…
(f) the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue;

…”

33 Mr Doyle-Gray submitted that these proceedings are proceedings in which there is in issue the making of an “agreement” between the second defendant, on the one hand, and the first, third and fourth defendants on the other; that they were, at the time of the making of the alleged agreement, persons “in dispute”; and that the agreement in question was one “to settle the dispute”. That being so, Mr Doyle-Gray says, the case is clearly within s.131(2)(f).

34 Mr Potts submitted to the contrary. He says that, where the particular communication is one regarding an alleged offer, s.131(2)(f) operates to disapply s.131(1) only where the agreement in issue (that is, the agreement sought to be enforced or the making of which is in issue) is an agreement resulting from acceptance of that offer. In the present case, Mr Potts submits, the agreement the making of which is in issue is not an agreement that resulted from any of the communications referred to at paragraph [31] above, so that, in the context of a proceeding to determine whether the alleged agreement was made, s.131(2)(f) does not operate in relation to any of those communications.

The decided cases referring to s.131(2)(f)

35 Mr Potts sought to support these submissions by reference to two Federal Court decisions, KC v Shiley Incorporated (unreported, FCA, Tamberlin J, 11 July 1997) and Brown v Commissioner of Taxation (2001) 187 ALR 714 (Emmett J). It is fair to say, I think, that neither of those judgments exhibits any intention of expressing a concluded view on the scope and application of s.131(2)(f). Emmett J did no more than observe that “[p]aragraphs (e) and (f) are concerned with evidence relating to attempts to settle a dispute, for example, where there is a dispute as to whether or not settlement has been achieved”. Tamberlin J’s judgment contains the following passage:

“In my view para (f) does not apply because the making of the settlement agreement is not in issue in the present proceedings. There is an agreement. It has been made. There is no issue on this question.”

36 Neither judgment contains anything useful to the determination of the objections before me. Nor is any definitive guidance obtained from the three other judgments I have been able to find in which s.131(2)(f) is mentioned, being the judgment of Young J (as he then was) in Finlayson v Campbell (NSWSC, Young J, 4 September 1997), the judgment of Branson J in Abriel v Australian Guarantee Corporation [1999] FCA 50 and the judgment of Jagot J in Jacobson v Ballina Shire Council [2006] NSWLEC 114.

37 In Finlayson v Campbell, Young J (as he then was) referred only briefly to the effect of s.131(2)(f):

“I believe the only sensible way of reading s131(2)(f) is that if it is alleged that there is an agreement resulting from the without prejudice discussions, and it appears that such allegation is supportable, the court should, at that stage, allow the evidence to be adduced. Accordingly, even though in the ultimate I have found that there was no agreement, I believe I should admit the evidence.”

38 In Abriel’s case, Branson J was dealing with a strike-out application. She had occasion to refer briefly to the potential operation of s.131(2)(f) and did so in terms suggestive of a broad interpretation enabling the adducing of evidence of a course of settlement negotiations in a case where the making of an agreement to settle a dispute is in issue.

39 In Jacobson v Ballina Shire Council, Jagot J expressed an opinion (in proceedings to which the Evidence Act did not apply) that s.131 should be construed in a way that reflects the common law as stated in Tomlin v Standard Telephones and Cables Ltd [1969] 3 All ER 201. That case was concerned with common law rules about the admissibility of “without prejudice” correspondence. The English Court of Appeal held, by majority, that several letters making up a chain of correspondence between solicitors should have been admitted, despite their “without prejudice” quality, when the question before the court was whether a settlement agreement had been reached.

40 In summary, therefore, there do not appear to be any decided cases in which considered analysis of s.131(2)(f) has been undertaken. Such limited guidance as exists is very largely by way of obiter dictum (the exception may be the brief observation of Young J).

Decision on evidence

41 The basic proposition advanced on behalf of the first, third and fourth defendants is that, in a case where the making of a settlement agreement is in issue, s.131(2)(f) allows the adducing of evidence about the particular offer and acceptance said to have resulted in the agreement (assuming that the agreement is alleged to have been formed by offer and acceptance), but that the section does not displace the prohibition imposed by s.131(1) in relation to anterior communications and documentation. That, in my opinion, is too restrictive an interpretation, given the terms of the legislation. Section 131(1)(a), as it relates to a bipartite situation, refers to communications between “persons in dispute” in connection with “an attempt to negotiate a settlement of the dispute”, while s.131(1)(b) speaks of documents prepared in connection with “an attempt to negotiate a settlement of the dispute”. The starting point is the “dispute” between “persons in dispute”. The privilege attaches to relevant items created or occurring “in connection with an attempt” to negotiate a settlement of that “dispute”.

42 Section 131(2)(f), referring to “an agreement between the persons in dispute to settle the dispute”, has in contemplation, obviously enough, the dispute referred to in s.131(1) and the persons who are the parties to that dispute. The link between, on the one hand, ss.131(1)(a) and 131(1)(b) and, on the other, and s.131(2)(f) is the “dispute”, so that s.131(2)(f) is concerned with an acknowledged or alleged agreement representing success (or alleged success) in an attempt to settle that dispute. Once a proceeding is on foot in which there is a question of the s.131(2)(f) kind with respect to an acknowledged or alleged agreement, s.131(1) “does not apply” to preclude the adducing of evidence of communications made and documents prepared “in connection with an attempt to negotiate a settlement of the dispute”. In my opinion, “an attempt”, in each of ss.131(1)(a) and 131(1)(b) means “any attempt” and refers to all such attempts as may have been made, the single connecting factor being the parties’ “dispute”. Each paragraph of s.131(1) is concerned to protect each and every attempt related to the particular dispute. It follows, as I see it, that when s.131(2)(f) causes ss.131(1)(a) and 131(1)(b) not to apply to proceedings concerning an acknowledged or alleged agreement to settle the “dispute”, it displaces the s.131(1) prohibition in relation to all communications and documents of the relevant kind bearing the prescribed relationship to that “dispute” (there may be a valid relevance objection in relation to some but that is a different matter). As I have said, the sole connecting factor between s.131(1) and s.131(2)(f) is the dispute. It is not any particular attempt related to it.

43 It may be, of course, that parties make several distinct attempts to negotiate a settlement of their dispute. On one view of the facts, that is what happened here: one party made an oral offer on 20 February 2006 which the other rejected orally on the same day; there was a written offer on 23 February 2006 which was in turn rejected in writing on the same day; and so forth. On another view, these events were part of an ongoing attempt to reach agreement. A contrasting situation is to be found in the typical mediation where the parties meet and engage in ongoing communication in a structured setting during which several offers may be forthcoming for acceptance or rejection – or where the mediator may make both see that their interests will be sufficiently served by a particular outcome to which both subscribe without identifiable offer and acceptance.

44 According to the interpretation of s.131(2)(f) which I consider to be correct, having regard to the language of the provision, it makes no difference whether a continuum of contacts is broken down into several distinct “attempts” or viewed as a single composite “attempt”. This is because the particular “dispute” and its settlement are at the heart of the overall “attempt” or each separate “attempt”, with the result that, where there are proceedings to enforce (or as to the making of) an agreement to settle that “dispute”, the section allows the introduction of evidence of all or any communications made in the course of any one or more of such attempts as have been made to settle that dispute. The linking factor between s.131(1) and s.131(2)(f) is, as I have said, “dispute”, not “attempt”.

45 For these reasons, the objection to the introduction into evidence of the passages and documents referred to above is not upheld and those passages and documents are admitted into evidence.

Contentions on the question whether an agreement was formed

46 I turn now to the central question, namely, whether a binding agreement to settle was concluded on 5 April 2006. The contention of the first, third and fourth defendants is that such an agreement came into existence when, on 5 April 2006, Clayton Utz on their behalf communicated to Price & Company the content of the letter of that date (see paragraph [22] above). That letter, it is said, communicated unequivocal acceptance of the second defendant’s offer contained in the third and fourth paragraphs of Price & Company’s letter of 23 February 2006 to Clayton Utz (see paragraph [13] above).

47 The second defendant denies that any such agreement was formed. The contention of the second defendant is that, when Clayton Utz wrote to Price & Company on 5 April 2006, the offer of 23 February 2006 was no longer open for acceptance. That contention rests on three alternative bases: first, that, according to its own terms, the offer of 23 February 2006 specified a time by which it was to be accepted, which time had passed before communication of the purported acceptance of 5 April 2006; second, that the first, third and fourth defendants, at times subsequent to the making of the offer on 23 February 2006, acted, vis a vis the second defendant, inconsistently with any intention that the offer should remain open and thereby revoked or withdrew it; and, third, that the second defendant, at times subsequent to the making of the offer of 23 February 2006, acted, vis-à-vis the first, third and fourth defendants, inconsistently with any intention to accept and thereby rejected the offer. The same course of conduct is involved in the second and third possibilities.

Was the offer expressed to be open for a period?

48 I consider first the question whether the letter of 23 February 2006 specified a period for which the offer conveyed by it was to remain open. It is common ground between the parties that, if no period was specified, the offer must be taken to have been available for acceptance for a reasonable time.

49 The second defendant points to the concluding paragraph of the letter of 23 February 2006 in which Price & Company asked that Clayton Utz obtain their clients’ instructions “in respect of this counter-offer” and “advise us of same as soon as possible in writing by return”. There is here obviously a stipulation of writing as the required method of acceptance. But is there a stipulation of “as soon as possible … by return” as the time by which any acceptance is to be made?

50 The words “by return” are probably intended to convey some modified version of the message that comes from the words “by return of post”. That expression is generally taken to connote a request or requirement that reply to a letter sent by post be by means of the next mail in the opposite direction – or, at least, in the words of Professors Carter and Harland, “a requirement of a prompt reply” although without a stipulation that “acceptance must be by letter and no other means” (J.W. Carter and D.J. Harland, “Contract Law in Australia”, 4th edition, 2002, at pp.48-49). It has thus been held that an offer seeking “Your reply by return of post” limited a time for acceptance and could be accepted by unequivocal telegram provided that the telegram arrived within the period that it would have taken for a posted letter to arrive in the next post in the opposite direction: Tinn v Hoffmann & Co (1873) 29 LT 271.

51 In the present case, the letter of 23 February 2006 was, like the bulk of the parties’ correspondence, sent by facsimile. Any concept analogous to the next post in the opposite direction is therefore foreign. A reply by facsimile can be sent at any hour of the night or day by anyone with access to a fax machine connected to a telephone line. I am nevertheless satisfied that “by return” is meaningful in the context of correspondence by electronic means such as facsimile and email. Indeed, a random inspection of decided cases reveals a great number of examples of correspondence employing the expressions “by return fax”, “by return facsimile”, “by return email” and “by return telex”, although none of them seems to have involved judicial consideration of the meaning of these expressions. Examples are Rivkin Financial Services Ltd v Sofcom Ltd (2004) 51 ACSR 486; Lang v Carroll (2004) 188 IR 58; Benchmark Certification Pty Ltd v Standards Australia International Ltd (2004) 212 ALR 464; Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306; Lahoud v Lahoud [2006] NSWSC 126; Connex Group Australia Pty Ltd v Butt [2004] NSWSC 673; Pacific Aviation Pty Ltd v Bradley (unreported, NSWSC, Wood J, 7 November 1985); McVeigh v Bell [2002] ANZ ConvR 9.

52 The same survey of the cases shows a vast number involving correspondence using the words “by return” – or, in one case, “by return or as soon as possible” (Mercator Property Consultants Pty Ltd v Sumampow [2000] WASC 157).

53 I am satisfied that “by return”, used in a facsimile communication (or, for that matter, any other means of non-oral communication), has a meaning that is more than the equivalent of merely “we await your reply”. Because of the established meaning of “by return of post” and its connotation of very prompt reply, modification of it, albeit imperfect in a technical sense, to fit electronic methods of communication means, in my opinion, that “by return”, when used in facsimile correspondence, connotes urgency and promptness. It is an indication that the sender expects the communication to be separated from the general flow of routine correspondence and given special precedence so far as response is concerned.

54 I proceed to a consideration of the other timing element of the words “as soon as possible in writing by return”. I was taken to various cases in which the meaning of “as soon as possible” has been considered. It is sufficient to mention two of them.

55 In Bowes v Chaleyer (1923) 32 CLR 159, the High Court had before it a contract for the sale and shipment of goods, “Half as soon as possible. Half in six months.” Three members of the court commented on the meaning of the words “as soon as possible”. Isaacs and Rich JJ (at p.175) regarded “as soon as possible” as “somewhat more stringent than ‘a reasonable time’”:

“We think it means, ‘as soon as reasonably practicable, paying due regard, from factory to ship, to the appellant’s requirement for speedy despatch’. And we think that the availability of shipping accommodation must be considered as an element …”

56 Starke J said (at p.193):

“The words ‘as soon as possible’ in this contract mean ‘within a reasonable time’, regard being had to the ability of the vendor to obtain the goods from the manufacturers and to dispatch them to the purchaser.”

57 The second case is Vines v Djordjevitch (1955) 91 CLR 512 which involved a statutory provision requiring notification “as soon as possible” after a claimant knew that the identity of the motor vehicle involved in injury to the claimant could not be established. The provision fell to be construed in a statutory context which also contemplated certain steps “within a reasonable time” after knowledge arose. The court (Dixon CJ, McTiernan, Webb, Fullagar and Kitto JJ) said (at p.522):

“Presumably, ‘as soon as possible’ requires a higher degree of expedition. Perhaps the most satisfactory paraphrase is to say with all reasonable expedition of which the circumstances allow.”

58 In neither of these High Court cases was the meaning of “as soon as possible” central to the decision. But the passages I have quoted are sufficient to illustrate four basic propositions: first, the words “as soon as possible” take their meaning from the context in which they are used; second, they do not indicate the greatest degree of speed humanly achievable; third, they import a requirement of reasonable expedition or such despatch as is reasonably practicable; and, fourth, a “reasonable time” marks the very outer limit of “as soon as possible”.

59 In the present case, I have to construe the compose phrase “as soon as possible … by return”. Because both forms of words are used together, the situation must, to my mind, be regarded as one in which a requirement of reasonable expedition or such despatch as is reasonably practicable was combined with a requirement that the matter of reply be given special precedence ahead of the routine flow of correspondence.

60 The offer conveyed by the letter of 23 February 2006 was therefore an offer that specified a deadline for acceptance. The stipulated deadline was the expiration of the period which entailed, in the particular factual context, action by the offeree with reasonable expedition or such despatch as was reasonably practicable and with the matter of acceptance being given special precedence ahead of the general flow of routine correspondence.

Was the purported acceptance made within the specified period?

61 This question must be approached in the light of the whole of the circumstances surrounding the making and receipt of the offer conveyed by Price & Company’s letter of 23 February 2006.

62 The proceedings had been commenced on 15 February and service was effected on 16 February. The matter came before the court promptly, on 20 February. All parties negotiated throughout that day and, by about 4.30pm, had reached a position in which the basics of a settlement had been reached and placed before the court in the form of an application for the making of orders by consent and without admissions. One matter which remained for future determination, in accordance with those orders, was the “proper value” of each parcel of 188 shares as at 31 December 2005 (see Order 3 at paragraph [2] above). This followed a proposal by the solicitor for the second defendant, in the course of the day, that the price for the second defendant’s parcel should be $250,000, coupled with rejection of that proposal as “ridiculous” by the first, third and fourth defendants, virtually on the spot.

63 Three days later, on 23 February 2006, the solicitors for the first, third and fourth defendants proposed a price of $188,000 for the second defendant’s shares and conveyed the proposal by way of formal offer of compromise in accordance with the rules of court, the offer being expressed to be open for the minimum time allowed by those rules, being 28 days. The offer was rejected in writing on the day it was made.

64 The offer at issue on the present application was made by the second defendant on the very day on which the first, third and fourth defendants’ offer of $188,000 had been both made and rejected. It was an offer at $250,000 plus legal costs.

65 The very next day, the matter was back in court, with all parties’ legal representatives again present. Each party – that is, the plaintiff and each of the four defendants – became subject to new obligations by reason of orders made on that occasion. Thereafter, from 27 February up to 14 March, there was correspondence between the solicitors for the first, third and fourth defendants and the solicitors for the second defendant regarding details of the process by which the value of shares was to be determined by an expert as contemplated by Order 3 of 20 February 2006.

66 Having regard to this context, I am of the opinion that the words “as soon as possible … by return” in the letter of 23 February 2006 connoted a degree of despatch consistent with not only the timeframes in which the two earlier offers and the responses to them had been dealt with but also the generally rapid progress of the matter as a whole. In the case of each of the earlier offers, the response was made on the same day as the offer. When making the offer of 23 February 2006 (by means of the letter that rejected the immediately preceding offer), the second defendant did not resort to the formal process of offer of compromise available under the rules of court. There was thus a conscious choice by the second defendant to adopt a course which did not involve the minimum duration of 28 days. It may safely be inferred, in my view, that a much greater degree of speed was intended by the offeror and, by means of the words “as soon as possible … by return”, communicated to the offeree as part of the offer.

67 At the time the offer of 23 February 2006 was made, the parties knew that the matter was to be back before the court the next day, 24 February, for directions. They must have contemplated that those directions would deal with the matter of expert valuation, not only as between the plaintiff and the first and fourth defendants but also as between the second defendant and the first and fourth defendants. The second defendant’s offer had, as its purpose, avoidance of the need for the independent valuation to be undertaken as between the second defendant and the first and fourth defendants. By making on 23 February an offer that would be of significance to the form of any directions that might be made the following day affecting the second defendant and the first and fourth defendants and saying that a response was requested “as soon as possible in writing by return”, the solicitors for the second defendant showed that they were attempting to resolve the matter very quickly and before it was further taken in hand by the ongoing court process.

68 In my opinion, the letter of 23 February 2006, by its concluding words “as soon as possible in writing by return”, indicated that any acceptance of the offer it conveyed must be in writing and must be communicated with a degree of speed and despatch consistent with that which had attended the responses to the two earlier offers and was indicated by the fact that the purpose of the offer was to resolve a question that was about to become the subject of a directions hearing before the court on the following day.

69 I am accordingly of the opinion that, because of the time limit for acceptance contained in the letter of 23 February 2006 and having regard to the surrounding circumstances I have described, the offer contained in that letter was no longer open for acceptance at the time of the purported acceptance by the Clayton Utz letter of 5 April 2006, that is, forty-one days after the making and communication of the offer. Reply by letter despatched after the lapse of forty-one days was not, in the factual context, a response “as soon as possible in writing by reply”.

Conclusion

70 Having reached this point, I need not pay any particular attention to the two further contentions of the second defendant referred to at paragraph [47] above. I would nevertheless observe that the actions of the second defendant, on the one hand, and the first and fourth defendants on the other, through their respective solicitors, in the period on and after 24 February 2006 were consistent with a common assumption that the question of fixing the value of the shares would be addressed by a referee as contemplated by Order 3 of 20 February 2006. On that basis, the arguments based on the second defendant’s alternative grounds would have succeeded.

71 The notice of motion of the first, third and fourth defendants filed on 12 May 2006 is dismissed with costs.

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