Dealing with the Unreal: contesting the enforceability of a settlement agreement after performing all its terms

In Bourke v Bourke & Ors [2024] NZHC 3218 the High Court remarked that there was “a sense of unreality about this proceeding”.  After a brief survey of the facts, that is putting it mildly.      

The case arose from a purported settlement of trust litigation.  The protagonist, Mr Bourke, arranged for his solicitors to circulate a settlement agreement.  All parties signed it, except Mrs Bourke. 

After pointing out some errors in the original agreement, Mrs Bourke executed an updated version of the agreement.  All the other parties signed the updated version, except Mr Bourke.  The requirements of the updated agreement were in fact performed: a trustee was removed and replaced, and the underlying litigation was discontinued.  Yet Mr Bourke still refused to sign the updated version.  He then initiated separate proceedings seeking a declaration that no binding settlement agreement had been reached.

Mr Bourke’s counsel explained the position this way:

[32] In Ms Whitfield’s submission, the parties did not have the intention for the settlement agreement to be binding on the parties until all parties executed the same version of the written settlement agreement — which they did not do. Of particular significance, Ms Whitfield’s submission was that all versions of the written document said “this agreement shall not bind any party until it has been signed by the parties” and in Ms Whitfield’s submission this is the best evidence that there was no agreed settlement agreement and there is no evidence to suggest that Mr Bourke ever resiled from this position.

Unsurprisingly, the High Court gave this argument short shrift.  After citing rudimentary contract law principles, Powell J opined:

[37] In this case it is clear that no party objected to the further amendments proposed on behalf of Mrs Bourke after version 1 had been signed by both Mr Bourke and Mr Makgill, and these were incorporated so as to create version 2. As noted, version 2 was then sent out to the defendants and interested parties to sign first. At the time it was sent out, there was absolutely no suggestion that Mr Bourke did not intend to sign, nor that the terms did not make a settlement recorded by the parties. As a result, it is at this point I consider that an agreement to settle the Henmar Trust claim was reached and from that point Mr Bourke was estopped from denying that agreement notwithstanding his subsequent and unexplained aversion to formally executing version 2 once the other parties had signed.

Lessons learned

It is difficult to understand what Mr Bourke was trying to achieve by seeking a declaration after all the proposed terms of settlement had in fact been performed. 

Bourke is another example of substance prevailing over form, almost the default position in the context of interpreting settlement agreements.    The decision confirms that courts will interpret agreements on an objective basis and apply equitable doctrines such as estoppel to prevent unjust outcomes:

[40] I likewise conclude that on the facts before me it would be unconscionable for Mr Bourke to depart from the belief or expectation by way of his ongoing refusal to sign version 2 after it had been signed by the other parties.

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