Stekovic v Radovanovic

This case involves a dispute between family members over the alleged settlement of an underlying dispute over the distribution of proceeds from the sale of a property located in Queanbeyan, New South Wales.

The plaintiffs, Milivoj Stekovic and Jovanka Stekovic, are married. Jovanka is the sister of the defendant, Goran Radovanovic. Because the dispute involves a family group, for convenience I will use the first names of each member of the family without meaning any disrespect to them.

The property is located at 8 Donald Road, Queanbeyan, New South Wales.

By the summons filed 21 December 2022, Milivoj and Jovanka seek declarations and orders for specific performance of an alleged agreement with Goran in June 2022 to settle the underlying dispute, which occurred through the exchange of letters marked “without prejudice save as to costs” between their respective solicitors.

The resolution of the dispute requires the application of the long-standing principles established in Masters v Cameron (1954) 91 CLR 353 and the subsequent authorities that have considered those principles.

Milivoj and Jovanka contend that a binding agreement was made. Goran contends to the contrary.

The underlying dispute is not before me for any determination.

For the reasons set out below, I have determined that Milivoj and Jovanka should succeed because the parties intended to be immediately bound upon their solicitors’ acceptance of a counter offer made by Goran’s solicitors.

The plaintiffs relied on the following evidence:

The defendant relied on the following evidence:

Mr A Davis appeared as counsel for Milivoj and Jovanka instructed by Chamberlains Law Firm. Ms L Collaris appeared as counsel for Goran instructed by Warlows Legal. I am grateful to counsel for the efficient and effective presentation of the case.

The Court of Appeal in Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 recently summarised the legal principles relevant to whether an agreement between parties was binding at [64]-[68], as follows:

In factual circumstances very similar to those in this case, in Narayan v Narayan [2022] NSWSC 1685, Kunc J at [9]-[11] helpfully summarised the applicable principles as follows:

In Manny v Rose [2022] NSWSC 1671, Ball J at [27] said that the question of whether the parties reached an agreement of either category as outlined by Masters v Cameron is to be decided objectively. That is, it is to be decided by reference to what the parties’ words and conduct would be reasonably understood to convey, not upon their actual beliefs and intentions: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34]. The words and conduct, taken in context, must show that the parties intended to be bound by their agreement, not simply that they had reached agreement on the terms: Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA at 326, 329.

In Narayan, Kunc J at [14]-[18] made the following additional observations about the contractual context provided by Calderbank correspondence:

I agree with Kunc J’s reasoning on the context provided by Calderbank correspondence in the objective assessment of whether the parties intended to be bound by an alleged agreement contained within it.

Before dealing with the relevant correspondence in June 2022 between the respective solicitors which is central to the dispute I am determining, it is necessary to set out some of the details of the events leading to the alleged settlement.

From June 1999 to November 2020, Goran was the sole registered proprietor of the property.

On 6 July 2020, contracts for the sale of the property by Goran to Trinity Law Pty Ltd for consideration of $675,000 were exchanged, with settlement scheduled for 9 October 2020.

On 2 October 2020, Chamberlains sent a letter to Baker Deane & Nutt setting out in detail the basis on which Milivoj and Jovanka claimed an equitable interest in the property arising from the alleged agreement between Milivoj, Jovanka, George Radovanovic (the father of Jovanka and Goran), Bogdanka Radovanovic (the mother of Jovanka and Goran, wife of George), Goran and Gordana Radovanovic (former wife of Goran) to develop the property for the benefit of all of them.

The letter contained a demand that by no later than 5pm on 7 October 2020:

The letter further states that in the event that the proposed undertaking was not accepted, Chamberlains had instructions to register a caveat over the property to protect their clients’ interests. The letter concluded by proposing a mediation conference to be held between the parties in an effort to reach a resolution of the dispute.

On 6 October 2020, Milivoj and Jovanka lodged a caveat on the title of the property claiming a beneficial interest in the property arising from a “[v]erbal agreement between the caveators and registered proprietors to hold the property on trust for the benefit of the caveators”, which was dated at 13 July 1999.

Milivoj, Jovanka and Goran then reached agreement to enable settlement of the sale of the property to occur, with Milivoj and Jovanka agreeing to withdraw the caveat if the net proceeds of sale of the property were retained by the conveyancing solicitors, Baker Deane & Nutt, pending the resolution of their claim to have an interest in the property.

On 13 October 2020 at 1:53pm, the solicitors acting for Goran at the time (North Herring Lawyers) sent an email to the solicitors acting for Milivoj and Jovanka (Chamberlains) which attached a letter to Chamberlains which stated:

The letter concluded by asking Chamberlains to seek instructions from Milivoj and Jovanka to take immediate steps to withdraw the caveat.

On 15 October 2020 at 12:34pm, Baker Deane & Nutt sent an email to Chamberlains asking whether Milivoj and Jovanka agreed to the proposal contained in North Herring’s letter of 13 October 2020.

On 15 October 2020 at 12:43pm, Chamberlains sent an email to Baker Deane & Nutt, copied to North Herring, confirming that Milivoj and Jovanka consented to the proposal contained in North Herring’s letter of 13 October 2020 and that they were in the process of removing the caveat over the property.

On 13 November 2020, settlement of the sale of the property occurred and the net proceeds of sale of $546,409.17 were placed in the trust account of Baker Deane & Nutt, where they presently remain.

On 23 May 2022, North Herring sent an email to Chamberlains attaching a letter dated 23 May 2022 referring to their previous correspondence in relation to the monies held in the Baker Deane & Nutt trust account and stating:

On 30 May 2022, Chamberlains sent two letters by email to North Herring.

The first letter was an open letter which set out the history of the dealings between the parties since the sale of the property had been settled on 13 November 2020, noting that the amount of $546,409.17 remained in the trust account of Baker Deane & Nutt. The letter stated that their clients reserved the right to seek appropriate injunctive relief to prevent the dissipation of those funds and proposed that the parties engage in mediation “prior to the commencement of litigation to mitigate the risk that the proceeds become dissipated by legal fees”.

The first letter requested that North Herring confirm before 5pm on 3 June 2022 that their client was prepared to attend a mediation conference as proposed and concluded by stating:

The second letter was marked “Without Prejudice Save as to Costs”. Under the first heading “Our Clients’ Claim”, it set out the alleged basis on which Milivoj and Jovanka claimed an equitable interest in the property, stating that they had instructions to prepare a summons and affidavit evidence with a view to commencing proceedings and confirming that counsel had been briefed.

The second part of the second letter is headed “Calderbank Offer” and is in the following terms:

On 3 June 2022 at 10:53am, North Herring sent an email to Chamberlains which attached a letter dated 2 June 2022 marked “Without prejudice, save as to costs” which referred to the letters of 30 May 2022 from Chamberlains and relevantly stated:

On 3 June 2022 at 11.44am, Chamberlains sent an email to North Herring which was headed “Without Prejudice save as to costs” which relevantly stated:

On 10 June 2022 at 10:34am, Chamberlains sent an email to North Herring headed “Without Prejudice save as to costs” which relevantly stated:

On 24 June 2022 at 9:14am, Chamberlains sent yet another email to Herring North headed “Without Prejudice save as to costs” which referred to a telephone conversation between Antonia Tahhan of Chamberlains and Rebecca Wakefield of Herring North on 16 June 2022 in which Ms Wakefield advised that the Deed of Settlement would be issued to Chamberlains early in the week commencing 20 June 2022. The email stated that the Deed of Settlement had not been received and asked for confirmation when they could expect to receive it for their clients’ consideration.

On 24 June 2022 at 12:32pm, North Herring sent an email to Chamberlains stating that they were finalising a draft which they were to send to their client for his consideration over the weekend (i.e. 25-26 June 2022) and they would forward it to Chamberlains early the following week.

On 1 July 2022 at 10:11am, Chamberlains sent an email to North Herring marked “Without Prejudice save as to costs” which stated:

On 7 July 2022 at 11.42am, Chamberlains sent an email to North Herring asking to be provided with “an update as to the status of the Deed of Settlement”.

On 7 July 2022 at 1:16pm, North Herring sent an email to Chamberlains, which said “The draft deed is still with my client. We are chasing him today”.

On 18 July 2022 at 11:24am, Chamberlains sent an email to North Herring asking “[h]ave you been able to obtain instructions from your client with respect to the draft Deed of Settlement?”.

On 25 July 2022 at 8:44am, North Herring sent an email to Chamberlains in the following terms:

On 5 August 2022 at 2.46pm, Chamberlains sent an email to the new solicitors acting for Goran (Warlows), the saliently parts of which were:

On the same day at 4.43pm, Warlows responded by email to Chamberlains in the following manner:

On 22 August 2022, Chamberlains sent a letter to Warlows marked “Without Prejudice”, which set out the background to the dispute and the allegedly “binding and enforceable agreement” and demanded that “Goran instruct Baker Deane & Nutt to immediately transfer from their trust account the amount of $225,000.00 into our firm’s trust account” by 4:00pm on 26 August 2022, failing which they were instructed to immediately commence proceedings to enforce the alleged agreement.

On 21 December 2022, these proceedings were commenced.

Milivoj and Jovanka submitted that, according to an objective appraisal of the clear, certain and concise words used by the parties in their correspondence of 2 and 3 June 2022 and absent any contemporaneous material to properly assert that the parties did not intend to be bound immediately, the parties clearly intended to be bound immediately by the offer and acceptance, consistent with the facts and principles set out in Masters v Cameron. They submitted that the present case came within the first, second or the so called fourth categories added to Masters v Cameron by the decision in Baulkham Hills Private, being one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

In addition, Milivoj and Jovanka identified the post-contractual conduct of the parties (up until the point when Goran’s former solicitors stated on 18 July 2022 that he did not intend to sign the Deed of Settlement) as consistent with a binding agreement having been reached, insofar as the post-contractual language of both parties did not raise any issue as to the acceptance or seek to assert that the matter was anything other than a concluded agreement. They said that there was no engagement in further negotiation or in exploring the terms, and no queries or observations raised. They relied on the terms of the letter of 18 July 2022 as indicative of Goran’s former solicitors holding the view that a binding agreement had been formed because by ceasing to act they were clearly in conflict with Goran.

Milivoj and Jovanka embraced the reasoning of Kunc J in Narayan in relation to the Calderbank nature of the communications on 30 May, 2 and 3 June 2022 as providing the contractual context supportive of the immediately binding nature of the agreement formed from it.

Goran submitted that the court is unable to conclude that the parties had entered into a binding and enforceable contract in circumstances where a key term of substance was yet to be agreed, being to whom the balance of the funds held by Baker Deane & Nutt, after the payment of $225,000 to Milivoj and Jovanka, would be paid. Goran contended that this placed the present case into the third category in Masters v Cameron, being “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”.

Goran submitted that, upon a proper construction of the letter dated 2 June 2022 from North Herring to Chamberlains, the agreement between the parties was conditional on the execution of the deed of settlement and release and, accordingly, as the condition remains unfulfilled, the agreement is not binding and enforceable. Goran urged me to find that these communications were like the first category of those described in Godecke v Kirwan (1973) 129 CLR 629, Walsh J at 638-639 citing Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, Parker J at 288-289:

It was pressed by Goran that even though the correspondence was not expressed to be “subject to” the deed of settlement, I should nevertheless treat it as having the same effect.

Unsurprisingly, Milivoj and Jovanka relied on the same passage from Godecke to contend that the present case fell into the latter category described in it.

Goran also submitted that the letter of 2 June 2022 does not expressly state that the parties intended to be immediately bound and, in the absence of evidence of the surrounding circumstances which would imply that they did, the conclusion ought to be that they did not enter into a binding and enforceable settlement.

Goran contended that the facts in the present case were not anywhere similar to those which were dealt with in Baulkham Hills Private which gave rise to the fourth category because in that case the parties had expressly stated in their correspondence that the written responses would be legally binding until they were superseded by a formally binding agreement. Goran pointed to the fact that no such express indications were given in the communications of 30 May, 2 and 3 June 2022 by the solicitors, when one would have expected that they would be there.

Goran submitted that the proposal in the open letter of 30 May 2022 from Chamberlains was for mediation and there was nothing in the circumstances of the case which indicated that there was any urgency in the matter requiring the parties to be bound immediately, because if the settlement fell through because the deed of settlement was not signed the parties could have proceeded on to the mediation that had been proposed.

In relation to the considerations expounded by Kunc J in Narayan in relation to the Calderbank nature of the communications on 30 May, 2 and 3 June 2022, Goran submitted that none of them could be considered to be Calderbank offers as they were written before any proceedings had been commenced and the Calderbank principles are limited to cases where proceedings are already on foot. Goran contended that proceedings were not even imminent because the open letter of 30 May 2022 was an invitation to mediate the dispute. Further, Goran suggested that the counter offer of 2 June 2022 could not be considered to be a Calderbank offer because it does not expressly state that it is, and to be such a Calderbank offer it must expressly state that a special costs order will be sought.

Goran also sought to distinguish this case from the facts in Narayan which was a case in which the parties had reached a clear agreement about all of the terms of the settlement, whereas the parties in the present case had not reached agreement on the release of the balance of the funds.

Applying the relevant principles outlined above to the facts of this case, in my view there was a clear objective intention of the parties to be immediately bound by the agreement expressed in the counter offer contained in the North Herring letter of 2 June 2022 and the acceptance of that counter offer in the Chamberlains email of 3 June 2022.

My reasons for this conclusion are as follows:

For these reasons, I consider that Milivoj and Jovanka are entitled to a declaration that an immediately binding settlement agreement arose between them on 3 June 2022 with the acceptance of the terms of the counter offer made on 2 June 2022.

The parties are to consult and attempt to agree short minutes reflecting these reasons, including any claim for specific performance of the agreement, any claim to interest up to the date of judgment, and costs and provide them to my Associate by email within 7 days. If the parties are unable to agree on the proposed orders by that time, I will determine those orders on the papers after allowing the parties a short period of time to provide me with any further evidence and submissions (of no more than 2 pages, 1.5 spacing, 12 font).