Understanding the Radovanovic v Stekovic Case: A Landmark Decision in Contract Law

The recent decision in Radovanovic v Stekovic [2024] NSWCA 129 by the New South Wales Court of Appeal has provided significant clarity on the nuances of contract formation, particularly in the context of settlement agreements. The judgment, delivered by Justices Meagher, Gleeson, and Payne, delves into whether a binding agreement was formed when the parties reached a settlement through a series of emails. This case underscores the importance of clear communication and the parties’ intentions when forming contractual agreements.

Background of the Case

The dispute arose from a sale of property in Queanbeyan, New South Wales. Goran Radovanovic, the appellant, sold the property for $675,000. However, his sister, Jovanka Stekovic, and her husband, Milivoj Stekovic, claimed an equitable interest in the property, which led to them placing a caveat on the title. To facilitate the sale, the parties agreed that the net sale proceeds would be held in the conveyancing solicitor’s trust account pending the resolution of the dispute.

After the sale, the funds remained in the trust account for nearly two years. In 2022, Radovanovic sought to release these funds, which prompted the Stekovics to make a settlement offer. This offer, marked as a “Calderbank offer,” was rejected by Radovanovic, who then made a counteroffer. The core issue was whether the acceptance of this counteroffer constituted a binding settlement agreement.

Key Issues on Appeal

The Court of Appeal examined three primary issues to determine if a binding agreement was formed:

1. Condition Precedent and Execution of a Deed: Whether the execution of a Deed of Settlement and Release was a condition precedent to the agreement.
2. Completeness of the Agreement: Whether the agreement was incomplete due to missing key terms.
3. Intent to be Bound: Whether the parties intended to be immediately bound by the agreement given the use of “without prejudice save as to costs” in their communications.

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Court’s Analysis and Decision

Condition Precedent

The court found that there was no indication that the execution of the deed was a condition precedent to the agreement. Clause 2 of Radovanovic’s counteroffer, which called for a Deed of Settlement and Release, was viewed as an unfulfilled term rather than a condition that needed to be met before the agreement became binding.

Completeness of the Agreement

The counteroffer was deemed a complete agreement. The court held that it was commercially obvious that Radovanovic was to retain the balance of the funds after the respondents received their settlement amount. No explicit term was necessary to that effect. This interpretation was supported by precedents such as Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd.

Intent to be Bound

The court concluded that the use of “without prejudice save as to costs” indicated an intention to be immediately bound upon acceptance of the offer. This phrase typically engages the principles established in Calderbank v Calderbank, which allow parties to argue for favorable cost orders if the offer is unreasonably refused. The urgency and context of the communications further supported this conclusion.

Tips for Making Effective Calderbank Offers

Calderbank offers can be a powerful tool in settlement negotiations, providing leverage in cost discussions if the case proceeds to court. Here are some tips for making effective Calderbank offers:

1. Clear and Precise Language: Use clear and precise language to outline the terms of your offer. Ambiguity can lead to misunderstandings and disputes over whether a binding agreement has been formed.
2. Label Correctly: Clearly label the offer as “without prejudice save as to costs.” This ensures that the offer can be used in cost arguments if the offer is rejected and the matter proceeds to trial.
3. Reasonableness: Ensure the offer is reasonable and justifiable. Courts will assess whether it was unreasonable for the other party to reject the offer. A reasonable offer increases the likelihood of a favourable cost order.
4. Detail Key Terms: Include all key terms in the offer. This reduces the risk of the agreement being considered incomplete. Ensure that the essential elements of the settlement are clearly defined.
5. Timely Submission: Submit the offer at a strategic time. An early offer can demonstrate a willingness to settle and may pressure the other party to consider the offer seriously.
6. Follow Up in Writing: Always follow up verbal offers with written confirmation. This creates a clear record of the offer and its terms, which is crucial if the offer needs to be presented in court.
7. Consider Future Implications: Think about the implications of the offer for future litigation. Make sure the offer aligns with your overall strategy and does not inadvertently weaken your position.
8. Engage Legal Advice: Consult with legal counsel to ensure the offer is well-crafted and legally sound. This helps in drafting a comprehensive offer that stands up to scrutiny in court.

Conclusion

The decision in Radovanovic v Stekovic serves as a valuable precedent for future cases involving settlement agreements and the interpretation of contractual terms. It reinforces the principle that the courts will look at the entirety of the circumstances, including the parties’ communications and the commercial context, to determine whether a binding agreement has been formed.

By following best practices for making Calderbank offers, parties can effectively use this tool to encourage settlement and potentially secure favourable cost orders if litigation proceeds. Clear communication, strategic timing, and comprehensive terms are key to making effective Calderbank offers.

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How Aylward Game Solicitors Can Help

Navigating the complexities of dispute resolution and settlement negotiations can be challenging. At Aylward Game Solicitors, we have a team of experienced legal professionals who specialize in dispute resolution and contract law. Our expertise includes drafting effective Calderbank offers, providing strategic advice, and representing clients in negotiations and court proceedings.

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