Blenheim Lifestyles Limited v Neumegen & Company HC Blenheim CIV 2004 406 128

[2008] NZHC 2624

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

CIV 2004 406 128

BETWEEN  BLENHEIM LIFESTYLES LIMITED First Plaintiff

ANDRAEWYN JEAN SIMMONS AND COLLINGWOOD TRUSTEE SERVICES LIMITED

Second  Plaintiff

ANDMARLBOROUGH OLIVE HOLDINGS NO. 1 LIMITED

Third Plaintiff

ANDF SIMMONS BUILDERS LIMITED Fourth Plaintiff

ANDNEUMEGEN & COMPANY Defendant

Hearing:         3 September and 18 September 2008

Appearances: H Rice for Defendant/Applicant

D Hayes for Plaintiffs/Respondents

Judgment:      14 October 2008

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

[1]      The issue concerns an argument by the defendant that the plaintiffs’ claims against it were settled at a mediation conference.

[2]      The defendant acted for all the plaintiffs to advise and guide the plaintiffs in a project which included the purchase of rural property, the establishment of a joint

venture, the subdivision and sale of subdivision lots in the property, and in the

BLENHEIM LIFESTYLES LIMITED AND ORS V NEUMEGEN & COMPANY HC BLE CIV 2004 406 128

14 October 2008

financing and refinancing of the venture over a period of time.  The plaintiffs allege the defendant acted negligently, and caused significant losses.

[3]      This proceeding was filed in 2004.  In November 2007 all parties referred the matter to mediation.

[4]      Mrs  Simmons,  a  named  second  plaintiff,  appeared  at  the   mediation represented by her solicitor, Mr Gilbert and counsel Mr Upton QC.

[5]      The defendant was represented by Mrs S Thodey of the defendant’s insurer’s solicitor’s firm.   Also in attendance were Mr Rolfe of the defendant firm, Ms J Wight as a representative of the underwriter, Mr J Cregten of Corporate Finances Limited, an expert witness on behalf of the defendant, and Mr R Simpson of Grant Thornton & Associates.

[6]      The mediator was Mr G Sharp.  The mediation took place at the Wellington

Club on 28 and 29 November 2007.

[7]      In  the  course  of  the  second  day of  the  mediation  all  but  Mrs  Simmons considered that a settlement was reached by which:

(a) The plaintiffs agreed to accept the sum of $180,000.00 inclusive of GST.

(b) The defendant would pay the mediator’s costs.

[8]      The underwriter’s solicitors paid the sum of $180,000.00 to Mr Gilbert, who retains that sum in the interim.  The plaintiffs have engaged new solicitors.  They wish  to  advance  this  proceeding  to  a  hearing.    The  defendant’s  solicitors  have brought an application for orders that a preliminary question be determined.   The question is:

Whether  the  plaintiffs’  claim  (was)  the  subject  of  a  settlement  on  29

November 2007 thus preventing the plaintiffs proceeding any further with this claims against the defendant.

[9]      The same question affects a related proceeding in which the plaintiffs were sued by another party, to which proceeding our present defendant was joined as a third party.

[10]     If the defendant is correct in its contention that matters between it and the plaintiffs have been settled, that will resolve all issues between the parties, and this proceeding will be at an end.

[11]     Upon the application I heard evidence over 2 days, including on 3 September

2008 in Nelson, and on 17 September 2008 in Auckland.  Previously affidavits were sworn by Mrs Thodey, dated 28 May 2008, and Mrs Simmons, dated 19 June 2008.

[12]     For the applicant, Mr Upton and Mr Gilbert appeared under subpoena.  Mrs

Thodey also presented to be cross examined upon her affidavit.

[13]     For the respondent, Mrs Simmons appeared for cross examination upon her evidence.

[14]     I will review that evidence shortly.  Suffice to say that in the outcome Mrs Simmons’ evidence was in material respects at odds with that of Mr Upton, Mr Gilbert and Mrs Thodey regarding whether or not a settlement was reached.  What each does agree upon can briefly be summarised as follows:

(a) At the beginning of each day of the mediation Mrs Simmons was asked if she had the authority of all plaintiffs to negotiate an outcome.  On the first day that question was asked of her by the mediator.  On the second day Mrs Thodey asked her whether she had full authority to settle specifically on behalf of the trust (of which she was a trustee), and F Simmons Builders Limited (of which she was not a director).

(b) According  to  Mr  Upton,  Mr  Gilbert  and  Mrs  Thodey,  Mrs Simmons confirmed she had authority to negotiate and to settle on behalf of all plaintiffs.

(c) According to Mrs Simmons on both occasions when asked those questions she responded with the qualification “at this time”.

[15]     The   evidence   of   Mrs   Thodey,   and   indeed   of   the   plaintiffs’   legal representatives, clearly supports the view that terms of settlement were agreed to. Mrs Simmons says that before any settlement was reached she left the company of her legal representatives in order to telephone her husband (who was a director  of F Simmons Builders Limited).  In that outcome, Mrs Simmons refused to sign the form of mediation agreement Mrs Thodey had prepared to record the terms of settlement. Before then, the pre-prepared settlement document had the settlement sum hand- written into it, and it was signed on behalf of the applicant by Mr Rolfe.

[16]     The issues for determination include:

(a) Whether   Mrs   Simmons   represented   throughout,   but,   most critically, at the time of the alleged settlement agreement, that she had authority to act on behalf of all plaintiffs.

(b) Whether, in fact, a settlement agreement was concluded. [17]     The first question is for factual determination alone.

[18]     As to the second question, the considerations are both factual and legal. There will in this instance be some inquiry about the process and interplay leading to that point in time to determine if Mrs Simmons actually agreed upon a settlement figure.  For Mrs Simmons it is argued there never was a meeting of the minds, but in any event a signed settlement agreement was a prerequisite to a binding agreement being created.

Areas of evidential conflict

[19]     These include:

(a) Whether the plaintiffs agreed to mediation.

(b) Whether, on the first morning of the mediation, Mrs Simmons acknowledged having authority to settle for all parties, or whether she ever expressed any qualification to her ability to represent all parties.

(c) Whether on the morning of the second day of the mediation Mrs Simmons confirmed she had the authority of all plaintiffs to settle, or whether she expressed any qualification to that authority.

(d) Whether Mr Simmons participated on the second day when offers were exchanged and when the sum of $180,000.00, inclusive of GST was offered/agreed to.

(e) Whether in the course of the exchange of offers on the second day Mrs Simmons signalled any offer was subject to confirmation of acceptance by Mr Simmons.

The evidence of Mrs Simmons

[20]     Mrs Simmons states she did not personally agree to mediation, but attended because Mr Gilbert had made the arrangements for it, and advised her she was required to attend.

[21]     Mrs Simmons states that at the beginning of the first day of the mediation she was asked if she had authority to settle for all parties.  She responded that she did have authority “for the main entities except the Simmons Family Trust” (the second plaintiff).   When asked if she had authority for F Simmons Builders Limited, of which she was not a director, she said responded that the director  (her husband Mr Simmons) had given authority “at this time”.

[22]     When at the commencement of the second day of mediation Mrs Thodey asked her again about her authority to settle Mrs Simmons stated she responded as she had done on the first day.  To her she perceived the question was asked because it was clear to all that she was becoming increasingly dissatisfied with her legal

representation.  She thought Mrs Thodey was just checking that settlement was still possible.

[23]     With reference to the presentation by Mrs Thodey of a proposed settlement agreement, Mrs Simmons states that on the first day a white board was used to go over the proposed agreement terms; that they were written on the board by the mediator.  Mrs Simmons recalls discussions about how Mrs Thodey’s expert witness would prove how each of the plaintiffs’ claims would fail.

[24]     Mrs Simmons states that on the second day, at about morning tea time, the parties broke into two rooms.  Later in the day she says she was not present during any discussion of settlement terms.   She recalls an initial offer of $30,000 being made and rejected.  Later she was advised the offer had increased to $160,000.00, but she had no idea as to how that result was arrived at.

[25]     Concerning the settlement terms, she states she had no personal knowledge of any discussion about GST, although she recalls it being raised by Mr Gilbert.  She said she was never involved in any discussions about GST, nor were her instructions concerning GST sought.

[26]     Mrs Simmons states the mediator had no instructions from her to settle for

$180,000.00.  She says it was always clear that her husband, Fraser Simmons, would be involved.  She informed the mediator Mr Simmons would have to be contacted before any agreement could be reached.

[27]     When the mediator was with her, Mr Gilbert and Mr Upton when the figure of $180,000.00 was being discussed, she asked Mr Upton if she could telephone her husband.  She states Mr Upton responded that he would make the decision for Mrs Simmons.  She then, and when the written document (in which I infer the figure of

$180,000.00 inclusive of GST had been inserted) was put in front of her by Mr Gilbert, asked Mr Gilbert if he could wait until she had discussed the matter with her husband.  According to her, Mr Gilbert advised she could, at which point she left the room in order to telephone Mr Simmons.  For these reasons she believes it was clear

there would be some discussion with her husband before any final authority to sign was put in place.

[28]     Mrs Simmons states that before she attended mediation she informed Mr Gilbert her husband was away.  She asked whether it was essential he attend.  She states Mr Gilbert informed her that Mr Simmons did not have to attend, provided Mrs Simmons could discuss things with authority at the mediation.

[29]     She stated in her evidence that at the beginning of each day of the mediation, when she was asked if she had full authority at that time to represent the plaintiffs, that she believed it was clear to her lawyers that “at the very least (her husband) would be involved”.

[30]     She  recalls  Mr  Gilbert  arriving  back  into  their  separate  room  with  the settlement agreement and being asked to sign it.   She states that she asked Mr Gilbert, and he agreed, she could telephone her husband to discuss it.

[31]     She said she was informed by Mr Upton that he and Mr Gilbert would make the decision regarding settlement, because it did not appear that Mr & Mrs Simmons had sufficient funds to take the matter to Court.

[32]     She later rang her husband again, and says he expressed concern about her mental state and told her to leave the mediation forthwith.  She then informed Mr Gilbert and Mr Upton that Mr Simmons would not give his authority to settle.

[33]     Mrs Simmons then telephoned her husband again, who told her to leave and to take her depression medication.  She says she tried to leave, but that Mr Gilbert detained her.  She telephoned her husband and had him shout over the telephone to Mr Gilbert to “leave her alone”.

The evidence of the plaintiff’s legal advisers, and of Mrs Thodey

[34]     Mrs Thodey states that there was agreement in principle between the parties to refer the matter to mediation.  It was confirmed by the arrangements made by Mr Sharp.

[35]     Mr Upton and Mr Gilbert state they were given authority by Mrs Simmons to settle,  but  it  was  Mrs  Simmons’  who  finally  agreed  to  settle  at  the  figure  of

$180,000.00, inclusive of GST.

[36]     At  the  commencement  of  the  mediation  Mr  Upton,  Mr  Gilbert  and  Mrs Thodey state that Mrs Simmons was asked by Mr Sharp if she had full authority to negotiate on behalf of all the plaintiffs, and in response Mrs Simmons confirmed that she did.  Mr Upton and Mr Gilbert deny not being given instructions to settle at the mediation.  They refer to the mediation agreement initially signed by Mrs Simmons by which she acknowledged she had authority to settle.

[37]     Mr Upton and Mr Gilbert deny Mrs Simmons qualified her authority with reference to any need to consult with husband beforehand.  Each rejects her claim that she said she did not have authority to commit on behalf of the trust or the company.

[38]     Mrs Thodey states she was not aware at all that Mrs Simmons asserted she could not enter into an agreement before she  had  contacted  her  husband.    The recollections of Mr Upton, Mr Gilbert and Mrs Thodey are at one, namely that without qualification Mrs Simmons acknowledged on the morning of the first day of the mediation that she had authority on behalf of all plaintiffs to settle.  Indeed, she acknowledged as much by the mediation agreement that she was the authorised representative of each of the plaintiffs.

[39]     Mr Upton recalls Mrs Thodey against asking Mrs Simmons for confirmation of her authority to settle on behalf of all plaintiffs.  Mrs Thodey explained that she was  concerned  that  Mrs  Simmons  was  not  a  director  of  F  Simmons  Builders Limited.  Also she wanted confirmation that Mrs Simmons had authority on behalf

of the trustees of the second plaintiff, the Simmons Family Trust.  All confirm Mrs

Simmons expressed she had that authority.

[40]     Mr Upton and Mr Gilbert confirmed that at the beginning of the second day Mrs Thodey went through each of the terms of the proposed settlement agreement presented.   Mr Upton says these were written upon a white board, and remained there with the parties during the whole of the second day.  Mrs Thodey recalls that at the end of each clause the mediator wrote on the while board a summary, as agreed to by the parties.  Mrs Thodey says that Mrs Simmons was present throughout, and was an active participant in the process.  Mr Upton confirms this.

[41]     Mrs Thodey recalls discussion about the GST component.  It being plain that any offer made was to be inclusive of GST.  Mr Upton says that Mrs Simmons was involved in those discussions.

[42]     At the time offers were exchanged the parties were in separate rooms.

[43]     Mrs Thodey states that in the mid-afternoon of the second day the defendant made an offer of $180,000.00.   It was put through Mr Sharp.   Later Mr Sharp returned to the room where she and her clients were and said he had instructions to reach an agreement at a level of $180,000.00, subject to conditions, i.e., payment within 7  days,  and  upon payment  of  mediation  fees.    She  states  the  defendant accepted that offer.  Mrs Thodey said her client confirmed acceptance of the offer and those conditions while the mediator was in the room.

[44]     Mr   Gilbert   states   the   mediator   came   to   their   room   and   suggested consideration be given to the possibility of settling for $180,000.00, plus payment of the mediator’s fee.  He said Mrs Simmons agreed to that proposal being put.  Shortly after the mediator returned and said that offer had been accepted.  Mr Gilbert said he discussed the offer with Mrs Simmons, and asked her if she agreed or not, and she nodded her head in acceptance.

[45]     Mr Upton described the situation as one where offers were being made a situation of offer and counter offer.  He said the parties got into a trading position,

and a “shuttle negotiation” was taking place with  the mediator  acting  as  a  go- between.  He said the mediator had come to their room and asked if Mrs Simmons would seriously consider $180,000.00.   In response she indicated she would.   He said the mediator suggested the defendant might pay the mediator’s fees as well.  At that stage he said Mrs Simmons indicated agreement.   Mr Upton states that Mrs Thodey’s affidavit evidence accurately records what happened.

[46]     After  that,  Mr  Gilbert  and  Mr  Upton  met  with  Mrs  Thodey,  and  they discussed the changes to the form of settlement agreement to record the settlement sum and attendant conditions.   Also, some name substitution and proceeding clarification details were to be noted.  Mrs Thodey states Mr Gilbert and Mr Upton had explained to her that Mrs Simmons had been happy to sign the agreement, but wanted to telephone her husband to tell him about the mediation.   Later she was informed that once Mrs Simmons had telephoned her husband certain issues arose, and that Mrs Simmons had left in a distressed state.  However, she was informed by Mr Gilbert and Mr Upton that in their opinion an agreement had been confirmed by that time.

[47]     Mr Gilbert states that the issue of consulting other people only arose when the settlement agreement was produced, i.e., after settlement had been reached.  Only then had Mrs Simmons stated she wished to discuss it with her husband.  Before then she had not expressed any such wish.

[48]     Mr Upton states that after settlement had been reached, at about 3.30pm, Mr Sharp had come into their room with the settlement agreement.   At that time Mr Upton took his leave to attend to other business.  When he returned he was informed of Mrs Simmons’ telephone conversation with her husband, and in that outcome that Mrs Simmons would not sign the agreement.  He said that when he and Mr Gilbert confronted Mrs Simmons, Mrs Simmons had acknowledged she had understood what was going on, and that she confirmed she had authority to settle, but that her husband had now withdrawn that authority.

Assessment of the evidence

[49]     I do not accept Mrs Simmons’ account.   Obviously, the question of her authority to represent all plaintiffs was a matter of significance for the purpose of the mediation, and in its outcome.  Mrs Simmons claims she confirmed an authority on behalf of all plaintiffs, but subject to having given the qualification “at this time”. Mr Upton, Mr Gilbert and Mrs Thodey were not really challenged at all regarding their recall.   I do not accept Mrs Simmons’ evidence on the point.   Rather, my impression was that she had willingly participated in the mediation, and clearly had authority to act for all plaintiffs.  She did not, during the course of the first day of the mediation, express any reservations regarding her confidence in her legal advisers.

[50]     Contrary to her assertions, the discussions regarding GST clearly occurred in her presence.  By early mid-afternoon on the second day the only issues concerned the amount of an offer and discussion concerning payment of the mediator’s fees.

[51]     Although, and I am satisfied it is so, the plaintiffs may have authorised their legal representative to finalise negotiations on their behalf, it is clear no sum was agreed   without  Mrs  Simmons’  endorsement.     Further,   I  am   satisfied   such endorsement was given.  It follows I do not accept Mrs Simmons’ claim that a figure of $180,000.00 was not agreed to by her.  The clear evidence is that sum was agreed to by her with the knowledge it was GST inclusive, and consideration of the defendant agreeing to pay the mediator’s costs.

[52]     My impression is, having heard Mrs Simmons, that she, having spoken to her husband, then regretted making the agreement she had.   That is why she nurtured regret and appeared stressed in that outcome.   Her evidence appeared to me to demonstrate selective recall over matters of critical importance in this inquiry, e.g., concerning her claim of qualification to her authority and whether she was present when the settlement sum and conditions were put to her.

Discussion

[53]     Mr Hayes, for the plaintiff/respondent uses an offer and acceptance analysis to attack and bring into doubt whether an oral settlement agreement was reached.  He identifies a difference of view between Mr Upton on the one hand, and Ms Thodey and Mr Gilbert on the other regarding the sequence of events during the settlement offer of $180,000.00.  He submits that Mr Upton’s evidence is to be preferred;  that it should be considered that the mediator merely made an inquiry of Mrs Thodey about whether her client would be prepared to offer the sum of $180,000.00, plus mediator’s fees, rather than communicating acceptance of an offer in those terms.  It follows from that, that when the mediator returned to Mrs Simmons with Mrs Thodey’s “acceptance” of that offer, he, Mr Sharp, was actually communicating a counter offer to Mrs Thodey’s offer.

[54]     The assertion of a difference does not, to my mind, amount to anything. Even on Mr Upton’s account, Mrs Simmons indicated acceptance of an offer of

$180,000.00, plus mediator’s fees.   The accounts of Mr Gilbert and Mrs Thodey were that the mediator returned with a counter offer of an agreement to accept

$180,000.00, plus mediator’s fees.

[55]     In my view, whatever version is correct, a settlement agreement was still concluded because Mrs Simmons did, and I accept she did, indicate her acceptance to the settlement of $180,000.00, plus payment of fees, when the mediator returned to Mrs Simmons with what Mr Hayes has characterised as Mrs Thodey’s “counter offer”.    Although,  as  Mr  Hayes  points  out,  the  issue  of  how  Mrs  Simmons’ acceptance was communicated to Mrs Thodey was not traversed in evidence, it can be inferred that Mrs Simmons’ acceptance would have been communicated to Mrs Thodey by Mr Gilbert and Mr Upton when they entered Mrs Thodey’s room to collect the written contract for Mrs Simmons to sign.

[56]     This factual situation is the kind addressed by Burrows Finn & Todd in Law of Contract in New Zealand in their discussion of the global/objective approach to contract formation at 3.2.1.  The authors state that:

there can be occasions where it is difficult to establish any clear offer or acceptance.   The difficulties are particularly acute when there has been a multiplicity of communications covering a number of different issues on

which the parties are negotiating.  It may well be very difficult in such cases to point to any particular communication as being an offer or an acceptance.

[57]     My view is that because of the nature of the shuttle negotiation that was taking place between the parties, it is superficial to accept a traditional offer and acceptance analysis, to attack and to bring into doubt whether an oral settlement agreement was reached.  Rather, it would be more appropriate to determine whether or not the totality of the dealings between the parties should be regarded as having resulted in a contract having come into existence.  Cooke J described the approach in Meates v Attorney General [1983] NZLR 308 (CA) at 377:

The real question in this part of the case is whether an implied contract can be spelt out of the words and acts of the parties. As indicated in Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 and having regard to the authorities there cited, I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field, although any difficulty on that head is a factor telling against a contract. The acid test in a case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain

[58]     In my judgment, applying a “global” or objective approach to the evidence, rather than a strict offer and acceptance analysis, the parties reached an agreement on

$180,000.00 plus payment of the mediator’s fees, because when this option was put to each of them, they each said yes.

If there was an oral agreement was it conditional upon the parties’ signature to it?

[59]     Clause 10 of the pre-prepared settlement agreement provided:

This agreement shall be binding on the signature as between the parties signing and other parties who have signed the agreement.

[60]     Clause 1 of the agreement provided:

Raewyn Simmons warrants that she is at the date of this agreement the party who is entitled to sign this agreement on behalf of the claimants.

[61]     Mr Hayes submits that clause 1 of the agreement simply warrants that at the time of signature, and not at any prior time, Mrs Simmons was authorised to endorse

a signature on the agreement.   That clause, Mr Hayes, states does not preclude consultation with Mr Simmons prior to Mrs Simmons’ signature being endorsed.

[62]     Mr Hayes notes that the settlement agreement document is interpreted against the party that prepared it.  Nevertheless, clause 10 could be applied for the benefit of either party.   The fact is Mrs Simmons did not sign the agreement, and it being conditional upon her signature, Mr Hayes submits no binding agreement was ever entered into.

[63]     There is an irony in that argument because according to Mrs Simmons, no oral agreement was reached.  Now, she argues that if there was an oral agreement, it was not formally executed.   Of course, no objection can be taken to this stance because clause 20 of the Mediation Agreement provided:

If the parties agree to resolve the dispute, a note of the essential terms of the settlement must be signed by or on behalf of the parties, before they leave the mediation.

[64]     In my judgment, the requirement for a signature to the agreement entailed a matter of formalisation only.   It was intended to record the fact of an agreement which, as I have held, was reached.   I have held the sum of $180,000.00, plus mediator’s fees, had been agreed to on the basis that all other terms, the subject of the draft agreement, had been settled.   It followed that in the circumstances as outlined, a signed agreement presents as a record of the parties’ accord, and the signatures to it were merely part of the process to acknowledge that accord.

Summary

[65]     With authority of all plaintiffs, Mrs Simmons concluded an agreement to settle their claims against the defendant, and in that outcome agreed to accept the sum of $180,000.00 on the basis that sum was inclusive of GST, and because the defendant agreed to accept responsibility for payment of the mediator’s cost.

[66]     In that outcome, it is my judgment that there has been a settlement of all of the plaintiffs’ claims against the defendant, be it in this proceeding or in that related

one against the plaintiffs, to which they, the plaintiffs, have joined the defendant as a party.

Costs

[67]     The applicant’s costs upon this application shall be paid by the respondents calculated on a Category 2B basis, together with disbursements approved by the Registrar.

Solicitors

Heaney & Co., Auckland for Defendant/Applicant

Brook Law, Hamilton for Plaintiff/Respondent