Narayan v Narayan

The plaintiff (Latchmi) is the elderly mother-in-law of the defendant (Ranu). They are in dispute over their respective alleged interests in a property at Busby. Without intending any disrespect, I shall refer to the parties by their given names.

At the relevant time, Latchmi, who lives in Fiji, was represented by Redline Legal and Ranu by Hunt & Hunt. By letter dated 22 March 2021 (set out in [21] below), Redline Legal made a Calderbank offer to Hunt & Hunt to settle these proceedings “on terms to be recorded in a Deed of Settlement”. By letter dated 31 March 2021 (set out in [24] below), Hunt & Hunt confirmed that Ranu “agrees to accept the terms of this offer”.

A draft deed of settlement was substantially agreed between the parties. However, before it was executed, Ranu retained her current solicitors. Ranu now contends that, in the absence of an executed deed of settlement, there is no binding settlement agreement between the parties.

On 12 August 2022, Latchmi filed a notice of motion which is the subject of these reasons, and which included this relief:

At the hearing of the motion, the parties accepted that it was to be determined by reference to the correspondence between the parties. No other evidence was relied upon. Nor was there any dispute about the applicable legal principles. It was common ground that whether a binding settlement agreement had been concluded between the parties required their common intention to be objectively determined by reference to the language of the correspondence in its context. It was also accepted that what was, on Latchmi’s case, post-contractual conduct could be taken into account on the question of whether a binding contract had been made.

For the reasons which follow, the Court has concluded that the parties intended to be immediately bound to a settlement upon Redline’s receipt of Hunt & Hunt’s letter dated 31 March 2021. That letter was received on 1 April 2021 and a binding agreement then came into existence. That conclusion is based on the terms of Redline’s letter of 22 March 2021 when construed in the context of the letter being a Calderbank offer. For reasons more fully set out below, that context – in the absence of clear words to the contrary – is a very powerful objective indicator in this case of the parties’ immediate intention to be bound.

The objective intention evinced by particular language lies in the eye and ear of the beholder. Because the parties essentially pointed to the same parts of the correspondence in support of their respective positions, the least repetitive way to set out these reasons is to deal first with the legal principles and the Court’s conclusions in relation to context, before going through the correspondence chronologically and making any necessary observations about each event.

Mr V M Mishra, solicitor, appeared for Latchmi. Mr M Fantin of Counsel appeared for Ranu.

I gratefully adopt and apply this summary of the applicable principles by Halley J in the Federal Court in Wong v Wong [2022] FCA 78:

Mr Mishra also relied on these observations of Pembroke J in Jennings v Jennings [2015] NSWSC 1826 (leave to appeal refused in Jennings v Jennings [2016] NSWCA 29):

To similar effect, Sackville AJA said in Jingalong Pty Ltd v Todd [2015] NSWCA 7 at [78] (Meagher and Leeming JJA agreeing): “The context in which the Settlement Agreement came into existence suggests that the parties intended to enter into a binding and immediate agreement”. The “context” to which his Honour was referring was that the settlement agreement in that case had been entered into at a mediation.

To determine the parties’ objective intention, the words they used are paramount. Nevertheless, those words must be understood in the context in which they were used, context referring to the text of the relevant documents as a whole, but also surrounding circumstances known to both parties. As I have already noted, each party relied on substantially the same words in support of their opposing contentions. That at least supports a conclusion that some of those words are ambiguous (a conclusion which, as appears below, I do not share), but it is now well-settled that ambiguity is not a prerequisite to considering the surrounding circumstances: Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295.

If, contrary to the view I have come to on construction, there is ambiguity in any of the relevant expressions, that ambiguity is resolved in favour of the conclusion that the parties intended to be immediately bound by the context that the relevant correspondence comprises the making and acceptance of a Calderbank offer to settle litigation where each party was legally represented. The nature of the correspondence as being Calderbank correspondence is both a textual matter, and extratextual in the sense that the purpose of, and legal principles, in relation to Calderbank letters must be taken as relevant surrounding circumstances known to both parties through their solicitors.

I have referred in [10] and [11] above to authorities which support the conclusion that the fact that an agreement has been made in the context of a mediation to settle litigation can be (not must be, given the possibility of clear textual indications otherwise) an important contextual matter favouring the finding of an intention to be contractually bound immediately. In my respectful opinion, that analysis applies with even greater force to Calderbank correspondence for at least three reasons.

First, Calderbank offers are well understood by the legal profession to be a flexible and less formal (than offers of compromise under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) means of attempting to bring litigation to an end. There is a real forensic, economic and strategic imperative in knowing with certainty whether or not litigation has been brought to an end by the acceptance of a Calderbank offer. While theoretically possible, a Calderbank offer that did not have immediate binding effect upon acceptance, but depended upon whether or not a formal document was ultimately agreed would, in the experience of the Court, be highly unusual, not least because such a thing would be inimical to how and why such offers are generally made. As the next reasons demonstrate, such a Calderbank offer makes very little sense given how they are used and the legal principles which apply to them.

Second, it is a hornbook proposition that an offeror obtaining a better result at trial than the offer does not have an automatic costs consequence (unlike, generally, offers of compromise), but goes to the Court’s discretion as to costs. The inquiry which informs (but does not necessarily dictate) the exercise of the Court’s discretion is whether the offeree’s rejection (in which I include non-acceptance) of the offer was not unreasonable in all the circumstances. That inquiry can be complex even in what might be termed the usual situation of the offeree’s conduct being assessed against the terms of an offer and a particular point in time when it could have been accepted.

A Calderbank offer which required consensus on the terms of a later deed to bring about a binding settlement would depart from the perceived advantages of such an offer in at least two respects in relation to the inquiry as to the offeree’s conduct:

Third, one of the advantages of a Calderbank offer is its flexibility in being able to be made with a short period of time being specified for its acceptance, but recognising that the reasonableness in the circumstances of that period of time will be a factor in its efficacy. This is to be contrasted with UCPR reg 20.26(5)(a), which requires a minimum of a 28 day acceptance period for offers made two or more months before the trial date. This is another example of why it is to be expected that a Calderbank offer will be made with the intention of certainty that a binding settlement is reached upon acceptance of the offer.

On 8 March 2021, Hunt & Hunt wrote to Redline Legal making a Calderbank offer headed “without prejudice save as to costs” to settle the proceedings, including (emphasis in original):

On 15 March 2021, Mr M Klooster of Counsel on behalf of Latchmi sent an email to Ms J Whitaker of Counsel who was acting on behalf of Ranu. Mr Klooster’s email stated:

On 22 March 2021, Redline Legal responded with a Calderbank offer which was undoubtedly a counter-offer to Hunt & Hunt’s letter of 8 March 2021 (set out in [19] above). Redline Legal’s letter was headed “without prejudice save as to costs” and included (and I emphasise the language to which Mr Fantin drew attention):

There was no dispute that the defined term “the offer” referred to the entirety of sub-paragraph 2(a)-(d) of the letter.

Annexure “A” to that letter was headed “proposed terms of sale” and set out in considerable detail how the subject property was to be dealt with. The entirety of the annexure read (emphases added):

On 1 April 2021, Hunt & Hunt emailed a letter dated 31 March 2021 to Redline Legal marked “without prejudice save as to costs”. It was signed by the solicitor with the carriage of the matter, Mr Ian Miller. That letter stated (and again I emphasise the language to which Mr Fantin drew attention):

It is convenient to pause in the narrative at this point.

Mr Mishra submitted that it was clear from the language of the two letters and Annexure “A”, including the words which I have emphasised, that the parties intended to be immediately bound and that this was an example of the “fourth” category of Masters v Cameron: the parties were bound but they intended their agreement would be superseded by the deed which would contain additional mutually agreed terms.

Mr Fantin relied on the words I have emphasised. With no disrespect to his argument, it can be reduced to this single proposition: the emphasised language, and the fact that under Annexure “A” the time for the various steps began with the execution of the deed, all pointed to a binding commitment only being intended to arise upon execution of the deed.

Reading the two letters (including Annexure “A”) together, I accept Mr Mishra’s submission and find that, in accordance with the parties’ common intention, a binding agreement arose in terms of the “offer” (as defined in Redline Legal’s letter of 22 March 2021) on 1 April 2021, being the date when Redline Legal received Hunt & Hunt’s letter of 31 March 2021. That agreement is of the kind referred to as the “fourth” category of Masters v Cameron. The “offer” that was open for acceptance was what was contained in paragraphs 2(a) – (d) of Redline Legal’s letter (including Annexure “A”), which were the terms “to be recorded in a Deed of Settlement” (my emphasis). In other words, if the offer were accepted, the terms of the agreement that would thereby have arisen would be recorded in the deed, as opposed to being effected by the deed.

In reaching this conclusion, I have also taken into account five additional matters:

Furthermore, in reaching this conclusion I have not overlooked Mr Fantin’s reliance on the language of Hunt & Hunt’s letter of 31 March 2021 (see [24] above). The Court finds that letter is an unequivocal acceptance of the offer in Redfern Legal’s letter. With respect to Mr Fantin’s submission, to read “agrees to accept the terms of this offer” as meaning “will accept those terms at some future time when set out in the deed” would be artificial and unnatural in the context of the letter itself and the correspondence to which it replies. The reference to “receiving a draft deed to set out these arrangements” is consistent with the construction found in [28] above or, if that be wrong, is equivocal on the question of intention to be immediately bound.

The parties agreed that subsequent conduct can be admissible on whether a contract had been formed and, therefore, turned their attention to what happened next.

On 6 April 2021, draft short minutes of order were sent by email from an administration assistant at Hunt & Hunt (not Mr Miller) to Redline Legal (the Draft Short Minutes). The email included:

The Draft Short Minutes set out this order:

Mr Fantin submitted this favoured his client’s argument that there was no concluded agreement. However, that is not what the parties agreed. An amended copy of the Draft Short Minutes (the amended Draft Short Minutes) was sent by return email from Redline Legal to Hunt & Hunt the following day. The amended Draft Short Minutes set out these orders:

On 7 April 2021, solicitors for both parties signed the amended Draft Short Minutes. The orders as set out in the amended Draft Short Minutes were made by Senior Deputy Registrar Hedge on 8 April 2021.

The Court finds those orders are consistent with the parties accepting that they were already bound (“have reached settlement”). Mr Fantin submitted that if that were the case, the parties should have entered the orders set out in sub-paragraphs 2(b) – (d) of Redline Legal’s letter of 22 March 2021 to dispose of the proceedings there and then.

That submission is unrealistic and contrary to what the Court regards as the well-established practice of the profession. Even where a binding settlement has come into existence, the fact that formal orders need to be made is consistently used by competent solicitors to keep the parties focussed on the need to agree the terms of any consequential deed. When I put this to both parties in the course of argument, neither advocate suggested it would be otherwise.

On 30 April 2021, Redline Legal wrote to Hunt & Hunt by email:

On 3 May 2021, Redline Legal again wrote to Hunt & Hunt, attaching a draft Deed of Release (the draft Deed of Release). The email stated that the draft Deed of Release was “subject to our client’s approval”. Mr Fantin again pointed to this as supporting a finding that the parties did not regard themselves as bound. I disagree. The reference to “client’s approval” reflected the practical difficulties referred to in the email set out in the preceding paragraph.

The draft Deed of Release contained, among others, the following relevant terms which reflected what appeared in Annexure “A”:

The draft Deed of Release also confirmed that the document constituted the “whole agreement between the parties regarding the subject matter” of the draft Deed of Release unless expressly agreed in writing.

It is not necessary to record the balance of the draft Deed of Release. Its essential operative part was to incorporate Annexure “A”. The balance can be described, with no disrespect, as a boilerplate, uncontentious deed of settlement and release.

The events recorded in [32] to [35] above were repeated on 5 May 2021 with minor, irrelevant variations. On 5 May 2021, the parties agreed Short Minutes of Order adjourning the proceedings for directions before the Equity Registrar for a period of six weeks (Hunt & Hunt had originally suggested four weeks) “to allow the parties time to finalise their settlement negotiations”. The orders note that “[t]he parties have reached settlement and needs [sic] time to finalise the terms of the deed”. To the extent it may be relevant, the Court finds those orders are consistent with the parties accepting that they were already bound (“have reached settlement”).

As at 10 May 2021, the parties were in the course of negotiating the contents of the draft Deed of Release, as evidenced by a letter of that date addressed to Redline Legal from Hunt & Hunt with several “interim comments” for consideration. Those comments included:

Mr Fantin properly accepted both that, save for the point which I have just reproduced, Hunt & Hunt’s other comments were minor, and that the point which I have set out was misconceived for the reasons given by Redline Legal in their letter of 9 June 2021 (see [47] below).

On 11 May 2021, Redline Legal replied, including:

On 9 June 2021, Redline Legal again wrote to Hunt & Hunt. That correspondence included these comments:

As I have already noted, Mr Fantin accepted that those comments were correct. When that point is understood, it is apparent from the correspondence between the solicitors that by this point the terms of the deed had in effect been agreed. However, events then appear to have overtaken what the Court is satisfied would have happened next, being consensus as to the terms of the deed being formally acknowledged between the solicitors.

Further adjournments were agreed by the parties because of practical difficulties in obtaining Latchmi’s instructions from Fiji. The Court is satisfied for the reasons set out above that the parties’ conduct after 1 April 2021 to which the Court has been referred is consistent with the parties regarding themselves as already contractually bound and does not support the case advanced for Ranu by Mr Fantin.

On 13 August 2021, Ranu’s new legal representatives, Bassan Lawyers and Associates, wrote to Redline Legal. That letter stated (among other things):

It will be apparent from the conclusions that I have already expressed, that the Court accepts Mr Mishra’s submission that Ranu was not entitled to purport to “withdraw her acceptance”.

Latchmi is entitled to a declaration that an immediately binding settlement agreement arose between her and Ranu on 1 April 2021. While the Court will hear the parties as to the appropriate relief to give effect to these reasons, including as to costs, my preliminary view is that the most straightforward means of ordering the specific performance of that agreement is to require Ranu to execute the settlement deed as it appears to have been negotiated between Redline Legal and Hunt & Hunt. If that course commends itself to the parties, at least two variations will need to be considered by reason of the time and events which have intervened: