Kylee Wilson v Canberra Tyre Service Ltd and Tim Reilly [1991] ACTSC 77 (3 October 1991)

SUPREME COURT OF THE ACT

KYLEE WILSON v. CANBERRA TYRE SERVICE LTD and TIM REILLY
S.C. No. 1549 of 1987
Judgment by Consent

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J.(1)

CATCHWORDS

Judgment by Consent - Personal injury - Application to set aside on grounds of mistake - Offer and acceptance of settlement - Plaintiff's solicitor unaware of unilateral error made by defendant's solicitor concerning the word "inclusive" - Offer made by plaintiff's solicitor not capable of conveying the meaning attributed to it by defendant's solicitor.

Buseska v Corich Sergio et anor (No. SC 1047 of 1987; ACTSC; Higgins J.; 18/10/90; unreported)

Vanzwan v Dunstan (No. SC 651 of 1978; ACTSC; Kelly J.; 1/12/80; unreported)

HEARING

CANBERRA
3:10:1991

Counsel for the Plaintiff: Mr S. Wilcox

Instructing solicitors: Messrs Ken Johnston Bedford and Co

Counsel for the Defendants: Mr Neilson

Instructing solicitors: Messrs Hunt and Hunt

ORDER

The orders made by the Master on 15 May 1991 herein be confirmed.

There be a declaration that the terms read onto the transcript and noted by the Master additionally thereto were not terms of the settlement agreed between the plaintiff and the defendants.

DECISION

This is an application either to set aside or to make a declaration as to the terms of an agreement made for the settlement of an action before Master Hogan on 15 May 1991.

2. The action itself arose out of a motor vehicle accident on 28 August 1987 in which the plaintiff suffered personal injury. The accident was alleged to have been caused by the failure of the defendants properly to carry out repairs to the plaintiff's vehicle. The defendants denied liability and asserted that the plaintiff's manner of driving was to blame.

3. On 25 March 1991, the hearing of the action commenced before Master Hogan. On 27 March 1991, the Master reserved his decision.

4. Mr Craig, solicitor, and Mr Stretton, barrister, appeared before the Master on 15 May 1991 for the defendants and the plaintiff respectively. The following conversation ensued.
MR STRETTON: Yes, in the matter 1549 of 1987, Wilson and

Canberra Tyre Service and Reilly would you, by consent, enter
judgment for the plaintiff for the sum of $40,000. Make the
usual order as to interest.
MASTER: Costs?
MR STRETTON: No order as to costs. And, Master, we'd ask you
to note two terms which I'll read onto the transcript. First,
is that the plaintiff agrees and undertakes to indemnify the
defendants, each of them, against any claim made against the
defendants, or either of them, arising out of the motor vehicle
accident the subject of these proceedings. The second term is
that the plaintiff agrees to execute, if called
upon, a deed of indemnity in favour of the defendants, and each
of them, in those terms.
MASTER: In the matter of Wilson v Canberra Tyre Services and
another, by consent, I direct the entry of judgment for the
plaintiff in the sum of $40,000. And make no order as to costs.
By consent, make the usual order as to interest. And I note the
agreement set out in the two matters read by counsel onto the
transcript to the general effect that the plaintiff agrees to
indemnify the defendants against any claims made against them
arising out of the accident and to execute a deed of indemnity
if called upon to do so.
MR STRETTON: May it please the court.

5. This statement from Mr Stretton accurately reflected the text of written terms that had been drawn up by the defendants' representatives. The formal orders, of course, were that judgment be entered for the plaintiff in the sum of $40,000.00 and that the usual order be made as to interest.

6. The apparent agreement leading to these terms being prepared and read came about, it seems, as follows.

7. Towards the end of the hearing, the defendants' solicitor, Mr Craig, put an offer of settlement to Mr Johnston, the plaintiff's solicitor. The defendants (without prejudice) offered to pay $25,000.00 to the plaintiff (inclusive of costs) subject to the plaintiff agreeing to give a release of all claims against the defendants and an indemnity to the defendants against further claims by any other person.

8. The indemnity was relevant because there were at least two property damage claims and one personal injury claim pending or being contemplated against the plaintiff and arising out of the subject accident. If the accident had been due to the defendants' negligence, the plaintiff would be entitled to indemnity or contribution from the defendants in respect of those claims. The situation would have been reversed if the accident had been due at least in part to the plaintiff's negligence but the defendants had been successfully sued. The defendants would, of course, have been entitled in such circumstances to claim contribution from the plaintiff to the extent that any negligence of hers partly contributed to the damage suffered by other parties in the event of a successful claim against them.

9. On 8 April 1991, Mr Johnston spoke to Mr Muller, a solicitor with Mr Craig's firm (Hunt and Hunt). He told Mr Muller that Mr Craig's offer was rejected. He put a counter-offer of $50,000.00 on condition that the defendants indemnify the plaintiff against further claims against her. A letter of 12 April 1991 from Mr Johnston's firm (Ken Johnston Bedford and Co) quite unambiguously confirmed this offer.

10. On 15 April 1991, the defendants' solicitors put a counter-offer of $40,000.00. The terms of that letter clearly made it a condition of the offer that the plaintiff agree to indemnify the defendants against further claims. In reply, Mr Johnston spoke to Mr Craig. They agree that the conversation was as follows:

JOHNSTON: The plaintiff would accept $40,000.00 plus
indemnities from the defendants in relation to any claims
arising out of the accident, or $45,000.00 inclusive of indemnities.
CRAIG: I will get instructions and get back to you.

11. Mr Johnston rang Hunt and Hunt on 23 April 1991. He was told that instructions were pending. On 14 May 1991 Mr Craig spoke with Mr Johnston. He said,

"There will be no further offers forthcoming in the matter above
the present offer."

12. Later that day, Mr Johnston left a message with Miss Turner, a secretary employed by Hunt and Hunt. The message was to the effect that the plaintiff would take $40,000.00 inclusive. There was some dispute as to whether the term "inclusive" was qualified by Mr Johnston as "all inclusive" or not. Miss Turner, however, understood the term used by Mr Johnston to refer to costs. I am satisfied Mr Johnston did not expressly refer to any term as to costs and that in writing "all inclusive" Miss Turner was not reflecting the words used by Mr Johnston but what she thought they meant. She thought Mr Johnston meant $40,000.00 inclusive of costs.

13. Mr Johnston said that the reason he had offered $40,000.00 plus indemnities from the defendants or $45,000.00 inclusive of an indemnity to the defendants was that the property damage claims he was aware of were worth about $5,000.00. It was, of course, not certain that they would succeed. It appears to me that Mr Johnston was then not turning his mind to the personal injuries claim of the plaintiff's sister. Additionally, he must have overlooked or forgotten the express reference to personal injuries by the defendants' solicitors in the terms of the request for indemnities they had made.

14. Mr Craig, on 14 May 1991, rang back and said to Mr Johnston:

"I got your message about the Wilson matter. $40,000.00 is OK."

15. Neither Mr Johnston nor Mr Craig mentioned the topic of indemnities.

16. It is clear that Mr Craig assumed that Mr Johnston's offer was inclusive of indemnities to the defendants. Mr Stretton, who appeared for the plaintiffs, assumed that the indemnity question had been resolved as suggested by the terms prepared by Mr Craig.

17. Upon receipt of Mr Stretton's advice as to what happened before the Master on 15 May 1991, Mr Johnston promptly advised Mr Craig of the apparent error.

18. The judgment ordered by the Master has not, at this stage, been formally entered because of this dispute.

19. The defendants' position is that they consented to judgment in good faith and assumed the terms noted represented the agreement between the parties.

20. I have little doubt that Mr Craig, on reading the note from Miss Turner assumed that Mr Johnston had agreed to terms inclusive of costs and indemnities as he had proposed. The test, however, is what the objective bystander would have understood Mr Johnston's offer to be at the time he communicated it to Miss Turner.

21. The fact that Mr Johnston was, plainly, under the influence of some degree of mistake or oversight in that he had not adverted to the issue of pending personal injuries claims does not greatly assist. Mr Craig was only aware of the two potential property damage claims. He regarded the indemnities as being of much the same value, it seems, as stated by Mr Johnston. Prudently, he wanted them framed as wide as possible. I think that it was for that reason he referred to personal injury claims in his correspondence to Mr Johnston.

22. I do not accept that Mr Craig had no interest in obtaining the indemnities sought by him as was suggested in argument. It is true that his clients were not the third party insurers of the plaintiff's vehicle. However, the third party insurer was liable only if and to the extent that the vehicle was negligently operated. If it was the case that the accident was caused or contributed to by the negligent repairs alleged by the plaintiff then the defendants would be liable to any injured third parties whether their loss was by way of personal injury or property damage. Subject to sufficient means, an indemnity from the plaintiff would shift the ultimate burden of that risk to her. Ironically, she would then find it in her personal interests to blame her own negligence for the accident. Her third party motor vehicle insurer (and her property damage insurer if she had one) would then have to indemnify her. It would then be against her personal interests to assert the default of the present defendants for the consequences of which she would have given a personal indemnity.

23. In the end, the real question is as to the interpretation of the apparent offer and acceptance. The course of negotiations is relevant to assist to interpret the terms of the agreement and, so far as it is relevant, to assess the state of mind of the offeror and the offeree. There is then a further question, of course, as to whether it is equitable that the consent order for judgment should stand.

24. The agreement: A unilateral misconstruction of an offer by a party accepting it will not avail that if that misconstruction is not induced by or known to that other party. I discussed this principle in Buseska v Corich Sergio et anor (No. SC 1047 of 1987; 18/10/90; ACTSC; unreported) and it is unnecessary further to consider the issue here.

25. I accept that Mr Johnston made the final offer in the belief that the offer was for judgment in the sum of $40,000.00 inclusive of costs. He dealt neither expressly nor by any necessary implication with the question of indemnities.

26. I accept that Mr Craig accepted the final offer in the belief that it was for judgment in the sum of $40,000.00 inclusive of costs and indemnities. This was a different belief than that entertained by Miss Turner who spoke with Mr Johnston. She had believed that she had received an offer of $40,000.00 inclusive of costs. It is true that she was unaware of the previous discussions concerning indemnities.

27. The question is, therefore, whether the offer made by Mr Johnston was capable of conveying the meaning attributed to it by Mr Craig. In my opinion, it was not. It was only capable of conveying the meaning attributed to it by Miss Turner and intended by Mr Johnston. Reading more than that into it can only be attributed to the unilateral error of Mr Craig of which Mr Johnston was unaware when the acceptance was communicated.

28. It follows that the terms that Mr Craig drew up did not represent the agreement in fact made between the plaintiff and the defendants.

29. It remains to be considered whether there is any discretionary reason why the orders of the Master should not be given effect. Unlike the case of Vanzwan v Dunstan (No. SC 651 of 1978; ACTSC; Kelly J.; 1/12/80; unreported) there is no equitable reason that I can see why the orders agreed to should not be permitted to stand. The question of liability to third parties will, in due course, be resolved according to the relative fault of the plaintiff and the defendants. It follows that there is no real unfairness in permitting the judgment as ordered to stand and be entered.

30. I declare that the terms read onto the transcript and noted by the Master do not form part of the settlement agreed between the plaintiff and the defendants. They are of no effect. Otherwise, the orders made by the Master are confirmed.

31. I will hear the parties as to costs.