Cleary v Masterton [1999] NSWSC 207
In the Equity Division of the Supreme Court of New South Wales, Young J dismissed a firm of solicitors' suit for specific performance of an alleged settlement, holding that oral and written exchanges between solicitors, which at most agreed the principal terms of a settlement including a deed of release, did not settle the proceedings, because the parties intended no contract until the release was delivered and exchanged and the notice of discontinuance at least signed [39], [40], [43].
What the court decided
Mrs Masterton had sued a firm of solicitors, and other defendants closer to an estate, in the Equity Division over a problem arising out of the estate [1]. The firm claimed that she had settled those proceedings on terms that the claim would be discontinued, each party would bear its own costs and she would execute a deed of release, and it sued for specific performance [2].
On 25 May 1998 Mrs Masterton's then solicitor, Mr Boyd, told the firm's solicitors by telephone that "it looks like we have settled" [4]. The firm's solicitors then wrote that their client would bear its own costs on the basis that the claim was discontinued, the parties executed a deed of release in the firm's favour and there was no order as to costs [5]. Mr Boyd replied on 28 May that his client consented to a disposal of the matter along the lines proposed and that he awaited the deed of release [11]. At a conference on 29 May he said that the matter was settled as far as he was concerned [6]. He then said that his client might now settle only with the other defendants and that he was still considering the position against the firm [8]. His letter of 5 June said that his client would execute the deed once it was sent [12]. A draft deed of release was sent on 18 June [13]. On 1 July Mr Boyd told the firm's solicitors that he had ceased to act [14].
Young J did not need to decide the position if Mr Boyd had settled contrary to his client's instructions, noting that under Harvey v Phillips there may still be a contract because a solicitor on the record is ordinarily presumed to have authority to settle [19]. The question was whether there was a binding contract to settle [20]. Counsel for the firm argued that the case fell within the fourth category of Masters v Cameron identified in G R Securities, or alternatively the first or second category [25]. His Honour said that Mrs Masterton's intention had to be found in what Mr Boyd said and wrote, which were not necessarily consistent, and that he could only look at the communications between the parties [29].
Although the firm's letter was not the clearest example of an offer that could simply be accepted, his Honour treated it as an offer to settle that focused on a deed of release and a discontinuance [30], [32]. He thought Mr Boyd's letter in reply "too mealymouthed to be an acceptance", and in reality a conditional acceptance [35]. Even if it was an acceptance, in his Honour's view it indicated only that the principal terms were agreed, with no contract until the formal deed was agreed and signed [35]. His Honour took into account, and weighed with the other matters, the submission of counsel for the firm that the correspondence did not use the words "subject to" a deed of release [36]. The letter of 5 June, which his Honour saw as reflecting Mr Boyd's optimism that his client would take his advice, seemed to suggest that the matter had not yet been resolved [37].
His Honour said that, as a general rule, parties who broker a deal for a deed of release and a discontinuance intend that there is no contract until the release has been delivered and exchanged and the notice of discontinuance is at least signed [39]. A different intention may appear in particular circumstances [39]. The parties had not reached that point, so the case fell within the third category of Masters v Cameron, there being no contract until the formalities were completed [40].
In the alternative, if he were wrong and the analysis in Jameson v Central Electricity Generating Board had to be applied, any contract would have been subject to a condition precedent rather than a condition subsequent [41]. Unlike Jameson, the settlement was to be completed by documents rather than by a payment of money, so it was more likely than not that a condition precedent was intended [42]. His Honour was not satisfied that the matter was settled [43]. He did not need to consider either the ordinary discretion to order specific performance or the special considerations that apply when the court is asked to enforce an agreement to settle litigation in the court [44]. His Honour therefore ordered that the summons be dismissed with costs [45].
Why it matters
The decision is a reminder that correspondence apparently agreeing the terms of a settlement, and even a solicitor's oral statement that a matter is settled, may not settle the proceedings where the terms include a deed of release still to be executed. A party that intends to be bound at once should record that intention expressly in writing; the absence of the words "subject to" counted for the firm here but was outweighed. The general rule was stated in a judgment given on the day of the hearing by a single judge of the Equity Division, and is expressly subject to a contrary intention shown in the circumstances [39].
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.