Balcomb v Brownlee

Doreen May Balcomb died in July 2012. Her only child, Geoffrey Balcomb, survived her. He was an undischarged bankrupt at the time of her death. He commenced proceedings under Succession Act 2006 seeking an order for family provision in December 2013, more than 12 months after the deceased’s death and therefore beyond the time Succession Act s 58(2) limits for the commencement of family provision proceedings. On 7 May 2014, the executors of the deceased’s estate accepted an offer to settle the proceedings made on Mr Balcomb’s behalf by his solicitors. Mr Balcomb now seeks by motion filed in the proceedings pursuant to Civil Procedure Act 2005, s 73(1), to enforce what he contends was a binding agreement made on 7 May 2014 to settle the proceedings. The estate contests his case and says that any agreement made that day was subject to the Court’s approval and is not finally binding on the parties until that approval is obtained.

On his motion the plaintiff, Mr Balcomb, seeks a declaration that on 7 May 2014 the parties settled the proceedings on terms that Mr Balcomb would receive a distribution of $500,000.00 from the deceased’s estate, and that he would pay his own costs of the proceedings. He seeks specific performance of that agreement, or alternatively damages for breach.

The parties agree on the essential facts. Those facts are usefully considered in two stages: what passed between the parties before the alleged settlement agreement on 7 May 2014; and, what passed between them after that date.

Ms J. Needham SC and Ms A. Power appeared for the plaintiff in the proceedings. Mr L. Ellison SC appeared for the defendants.

The deceased was born on 4 January 1926. At her death on 19 July 2012 aged 86 she left a will dated 27 October 2010. Probate of her estate was granted on 22 October 2012 to her nephew and niece. Mr Balcomb received very little under his mother’s will.

Mr Balcomb did not commence proceedings for a family provision order during the 12 months following the deceased’s death. At the 12 month anniversary of her death he was an undischarged bankrupt. He frankly says in his affidavit that his bankruptcy was the reason he did not file proceedings earlier. He was discharged from bankruptcy on 16 October 2013.

On 16 December 2013, Mr Balcomb filed his summons seeking orders for family provision under Succession Act, s 59, and an order under s 58(2) that the time for making his application be extended.

The essentials of the parties’ disputed agreement are contained in two short emails. The first email dated 1 May 2014, from Mr Balcomb’s solicitors to the estate’ solicitors contained the following without prejudice settlement offer:

The second email is the reply the solicitors for the estate sent on 7 May 2014. The attached letter in reply relevantly stated:

Mr Berecry, who is referred to in this 7 May reply letter, is a private mediator and a former Registrar of this Court. At the time of this correspondence the Court had appointed Mr Berecry as the mediator for the matter.

The following day, 8 May 2014, Mr Balcomb’s solicitors wrote back to the estate’ solicitors noting the acceptance of Mr Balcomb’s offer, and anticipating that the estate’s solicitors would send terms of settlement and short minutes. The 8 May letter requests that the estate’s solicitors transfer the agreed sum of $500,000.00 into Mr Balcomb’s solicitors’ trust account at the estate solicitors’ earliest convenience.

The same day, the estate’s solicitors wrote to Mr Berecry, the parties’ mediator, vacating the date allocated for the mediation and advising that the:

On 13 May 2014, Mr Balcomb’s solicitors emailed the estate’s solicitors, noting that they understood that the residue of the deceased’s estate was predominantly held in an interest bearing term deposit account that would mature in mid-June, but that some of the residue was held in the estate’s solicitors trust account. Citing Mr Balcomb’s “severe financial circumstances” his solicitors requested that a sum of $15,000.00 be deposited into their trust account by 15 May, with the balance to be deposited by 23 June 2014.

The estate’ solicitors wrote back by email on 14 May 2015, counselling a slower approach and stating:

As the text of the 14 May email indicated, an “attached letter”, drafted by the estate’s counsel was addressed to the Associate to Hallen J. The draft letter said:

Mr Balcomb’s solicitors emailed their approval of the contents of the draft letter the same day. And they requested that the estate’s solicitors instruct their counsel to send the letter as soon as possible (with some presently irrelevant amendments) to the Associate to Hallen J, together with the Short Minutes of Order.

The estate’ solicitors emailed again, requesting that an executed copy of the draft orders be sent and stating that:

Mr Balcomb’s solicitors sent the finalised orders to Hallen J for his Honour’s approval on 22 May 2014. Those orders provided for: (1) the plaintiff to have leave to apply pursuant to Succession Act s 58(2) for a family provision order up to the date of filing the summons; (2) the plaintiff to be paid a legacy of $500,000 from the estate; (3) no order as to costs; and (4) other orders of no present consequence.

On 27 May 2014, his Honour’s Associate wrote to the parties requiring them to make submissions on the question of the extension of time for the making of Mr Balcomb’s application. The parties filed those submissions. At a directions hearing on 6 June 2014, Hallen J did not decide the issue of the extension of time but as the issue was a matter on which his Honour required to hear submissions he stood the extension issue over for hearing to 18 July 2014.

On 11 June 2014, Mr Balcomb’s solicitors wrote to the estate’s solicitors proposing a “Settlement and Release Deed”. This Deed provided for the parties to execute a Notice of Discontinuance mutual released and mutual covenants not to sue. Mr Balcomb’s solicitors claimed that these terms substantially reflecting the terms of what was claimed to be the agreed settlement of 7 May 2014.

The estate rejected that offer. On 18 June 2014, the estate’s solicitors wrote back stating that the estate would now offer to pay Mr Balcomb $350,000.00 by way of a deed of family arrangement, and for Mr Balcomb to pay his own costs.

Dissatisfied with that what was now being offered was $150,000 less than what he thought had been agreed on 7 May, Mr Balcomb filed the present motion on 14 July 2014. As a result the hearing before Hallen J on 18 July 2014 was abandoned.

The parties agree that an agreement was reached on 7 May. But are at issue as to what they had agreed.

The plaintiff Mr Balcomb submits that: on 7 May 2014 the parties reached an agreement to be immediately bound to finalise these proceedings by some means, in exchange for a distribution to Mr Balcomb of $500,000 from the estate; they did not include condition that finalisation of the proceedings was to occur in any particular way, for example, by way of an order for provision out of the estate under Succession Act, s 59; and they could have implemented their agreement several ways; by a deed of family arrangement, by an ex gratia payment from the estate, or by an order for family provision.

Alternatively, Mr Balcomb submits that if necessary a term may be implied into the agreement that each party will use best endeavours to reach the point where the proceedings are determined and the plaintiff receives the agreed distribution from the estate.

Mr Balcomb expanded these submissions. The agreement did not require the making of a family provision order. The language of 1 May 2014 letter is studied in its failure to adopt the family provision related language of the Succession Act. Succession Act, (s 59(2)) refers to an “order for provision out of the estate”. But the 1 May 2014 letter refers to the plaintiff accepting “a distribution from the estate in the amount of $500,000.00” [emphasis added]. The plaintiff sees this difference as a linguistic marker of the parties’ intention to achieve finality by whatever means that were available to them.

He also contends the 7 May 2014 agreement was binding without more, and did not require any formal documentation to be effective. In the alternative, the plaintiff contends that the acceptance of the offer incorporated a term requiring entry into a formal contract within the first category in Masters v Cameron (1954) 91 CLR 353 at 360, per Dixon CJ, McTiernan and Kitto JJ, and was binding in the meantime. In Master v Cameron the High Court described the three well-known categories as follows:

But as will be seen, the estate does not contend that the consensus the parties reached was a Masters v Cameron second or third category case. Rather, the estate’s issue is one of construction of the terms.

Mr Balcomb had to reconcile the words “full and final settlement” in the 1 May letter with his submission that the agreement does not require him to provide the estate with a binding release of his rights under the Succession Act. Mr Balcomb submits that discontinuing the proceedings, or covenanting not to sue under Succession Act, Chapter 3 a consent dismissal are available means of achieving finality in the proceedings. Mr Balcomb submits the agreement properly construed requires the plaintiff, in exchange for a distribution from the estate, to perform one of those acts.

The defendants submit that by the 7 May 2014 agreement, the parties agreed to settle the proceedings, subject to orders being presented to the Court and the Court giving its approval to a release. The defendants submit that until the Court gives its approval, performance of the agreement is not required. The Court’s approval is therefore a condition precedent to the settlement agreement: Jameson v Central Electricity Generating Board [1999] 1 All ER 193 at 207 per Lord Hope; see also Cleary v Masterton [1999] NSWSC 207 at [28] per Young J (as he then was).

The estate’s submission is that there was no express, implied or collateral agreement between the parties that a private agreement would be made between them in the absence of the court giving approval of the settlement under Succession Act, s 95.

The estate contends: that the statutory scheme of the Succession Act contains clear indications that the Court’s approval is necessary to give effect to this settlement agreement; and that the agreement was made subject to the Court’s approval.

The first statutory provision is Succession Act, s 58(2), which provides that an “application for a family provision order must be made not later than 12 months after the date of the death of the deceased person, unless the Court otherwise orders on sufficient cause being shown”. Under the previous legislation, the Family Provision Act 1982, s 16, the parties could consent between themselves to an extension of time. But under Succession Act, s 58(2) the parties cannot consensually enliven the Court’s jurisdiction. The Court must now exercise its discretion before an order for family provision can be made under the Succession Act. In this case, the Court hesitated to exercise that discretion, apparently because of Mr Balcomb’s decision to delay commencing proceedings until his discharge from bankruptcy. Following the parties providing Short Minutes of Order to Hallen J, requested the parties to submissions on the issue of an extension. This seems to have prompted the executors to make a new and lower offer of $350,000.00.

The second relevant statutory provision is Succession Act, s 95, which makes ineffective any attempted release of rights of an applicant for a family provision order unless approved by the Court. The Court explained this operation of the section in Colosi v Colosi [2014] NSWSC 1892 at [18]. Succession Act, s 95 provides:

Section 95(5) is important. It extends the requirement for approval to instruments “executed by the person that would be effective as a release”.

The estate contends that the agreement unambiguously discloses that the parties intended their agreement to be subject to the Court’s approval under s 95, rather than the parties’ further documentation, and that no Masters v Cameron point arises. In support of this approach the estate relies upon what Young J describes in Cleary v Masterton [1999] NSWSC 207 (“Cleary”) at [39], as “the general rule” that parties do not intend a settlement of litigation to be effective until executed documents are exchanged. Young J said in Cleary:

Mr Balcomb’s reply to the estate’s contention based on Cleary is persuasive. He submits that other cases do not support applying Young J’s proposition as a “general rule”, rather than as an empirical generalisation: see for example, Grave v Blazevic Holdings Pty Limited [2012] NSWCA 329 at [53] per Bergin CJ in Eq. With all respect to what Young J said in Cleary, in my view, Bergin CJ in Eq’s observations describe the real limits on what Young J said.

The estate also relies upon the conduct of the parties subsequent to the defendants’ acceptance of the plaintiff’s settlement offer on 7 May 2014. The estate submits that subsequent conduct implies that the parties had not intended the settlement agreement to be binding until the parties submitted orders to the Court by consent and the Court had made those orders. But if an agreement was reached by 7 May 2014, the conduct of parties subsequent to that date cannot be used to assist in the construction of the agreement: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 (“Brambles”) at [26]. The parties do not contest here that they made an agreement. I must apply Brambles and ignore their conduct after 7 May 2014 in attempting to construe their agreement.

During the course of the parties’ oral submissions, the Court invited them to make further submissions as to whether the term used in the 1 May letter, “full and final settlement of the claim” had established meaning.

Mr Balcomb contends that the phrase “full and final settlement” should be given its ordinary and natural meaning, and that no special meaning importing some condition of release of rights should be implied. Mr Balcomb points to Murphy v Yolanda Nominees Pty Ltd (unreported, Supreme Court of Victoria, Nathan J, case no 11681 of 1991, 13 March 1992) (“Yolanda”) which considered the meaning of “full and final settlement (of a claim)”. In Yolanda Nathan J held:

Mr Balcomb also referred the Court to Jingalong Pty Limited v Todd [2015] NSWCA 7 (“Jingalong”), considered whether a mediated heads of agreement, which did not contain an express release of rights, constituted a binding and enforceable settlement agreement. Sackville AJA (with whom Meagher and Leeming JJA agreed) held (at [90]):

The estate submitted in reply on this issue that the term “full and final settlement” is imprecise, and that it may for example have different meanings in the context of Common Law or commercial cases compared to Equity cases, and particularly where statutory relief is sought, where the Court’s jurisdiction cannot be invoked by consent, or where Court approvals for releases are required. In Equity in the exercise of statutory rights under family provision legislation, the estate submits that a release is the prerogative of the Court. If “full and final settlement of the claim” means that the plaintiffs’ claim or action will not continue, then the agreement may be construed as incorporating a release or discharge of that claim or action, as Sackville AJA noted in Jingalong. In the present case, therefore, the estate submits, the words “full and final settlement” confirm that the parties intend the Court to have the final role in determining whether the parties’ agreement will be approved.

The Court has jurisdiction to determine any dispute between the parties to the proceedings as to whether and on what terms the proceedings have been compromised: Civil Procedure Act 2005, s 73(1), Grave v Blazevic Holdings Pty Ltd [2012] NSWCA 329 at [3] – [5]; and Ahmed v Chowdhury [2011] NSWSC 893 at [4]. That determination should take into account any agreement reached between the parties regarding the compromise.

There are many appellate pronouncements upon how courts should construe commercial and other contracts. I am guided by principles of construction set out in the most recent of these, the High Court’s decision in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] but mindful that the present case is not a commercial but more a domestic agreement.

In my view the centrepiece of Mr Balcomb’s offer to the estate on 1 May 2014 was that he would receive payment and pay his own costs in “full and final settlement of [his] claim”. By their letter on 7 May 2014, the estate’s solicitors communicated to Mr Balcomb that the estate would accept the offer and recited the payments that would be made. The estate accepted the offer that it would be in “full and final settlement” of the plaintiff’s claim. That is the heart of what the parties intended.

What did the parties mean by that well worn formula? In my view in the statutory context of the Succession Act that means that Mr Balcomb offered to give something that would totally exhaust his rights against the estate. That can only be achieved by a Court - approved s 95 release. The phrase “full and final settlement” meant that the settlement would exhaust the claim completely and conclude the litigation between the parties.

That legislative background is a part of the surrounding circumstances known to the parties to this agreement, who were all represented by legal practitioners at the time.

But Mr Balcomb’s submission that the settlement agreement has the effect of finalising the Court proceedings “in some way” in exchange for a distribution of $500,000 from the estate is not sufficiently certain, in my view, to answer the description “full and final settlement”. These are words that import the idea of a plenary giving of the promise to settle.

In light of the agreement’s purpose of giving full and final settlement, the agreement cannot be construed as obliging the plaintiff merely to discontinue the proceedings or to effect a dismissal by the parties’ consent, as the plaintiff contends. Neither of those outcomes would achieve the requisite finality and fullness of settlement that the parties’ agreement demands. They did not have to use the term “full and final settlement of the claim”. But they did. An obligation on the plaintiff to discontinue the proceedings would not preclude him from enlivening the proceedings at a later date.

If the parties had used different words, as parties may freely do, they could have expressly agreed to discontinue the proceedings, for example, in exchange for the funds agreed. But in using a different formula such as this the parties would of course be consciously accepting the theoretical risk of revival of the proceedings.

If the parties want the security of the effect a release then they can only get that through s 95. If they are content to agree on something less they do not have to go to Court.

The words of this agreement oblige the plaintiff to approach the Court and seek a s 95 approval of a release. If that is not forthcoming, the plaintiff his not delivered full and final settlement and has no entitlement to the agreed funds.

The Court therefore concludes that the precise agreement the parties reached on 7 May 2014 requires them to approach the Court under Succession Act, s 95 for an approval of a release, if the Court extends time and finds it has jurisdiction to do so. The Court will not enforce the defendants’ obligation to distribute $500,000.00 from the estate to the plaintiff without the plaintiff so approaching the Court for approval of what amounts to the promise by the plaintiff of a release.

The Court directs the parties to bring in short minutes of order to give effect to these reasons.