Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Grave v Blazevic Holdings Pty Limited [2012] NSWCA 329
• Hearing dates: 26 September 2012
• Decision date: 12 October 2012
• Before: Campbell JA at [1]; Barrett JA at [7]; Bergin CJ in Eq at [8]

Decision

Appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: [CONTRACT] - whether parties entered into binding agreement - whether Deed of Release drafted by Appellant's solicitors reflected a binding agreement - whether agreement subject to execution of the Deed
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999; Civil Procedure Act 2005; Supreme Court Act 1970
• Cases Cited: Ahmed v Chowdhury [2011] NSWSC 893; Blazevic Holdings Pty Limited v Warwick S Grave [2011] NSWSC 287; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Chinnock v The Marchioness of Ely (1865) 4 De. G. J. & S. 638; 46 E.R. 1066; Cleary v Masterton [1999] NSWSC 207; Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510; Fine Real Estate Network Pty Ltd v Howell (No 2) (Supreme Court of New South Wales, Young J, 9 December 1997 unreported); Grave v Blazevic Holdings Pty Ltd [2010] NSWCA 324; Green v Rozen [1955] 1 WLR 741; Humphris-Clark v Lazaridis [2010] NSWSC 318; McCallum v Country Residences Ltd [1965] 1 WLR 657; Masters v Cameron (1954) 91 CLR 353; Phillips v Walsh (1990) 20 NSWLR 206; Roberts v Gippsland Agricultural & Earth Moving Contracting Company Pty Ltd [1956] VLR 555; Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310
• Category: Principal judgment
• Parties: Warwick S Grave (Appellant); Blazevic Holdings Pty Limited (ACN 106 372 123) (Respondent)
• Representation: Mr T Lynch (Appellant); Bridges Lawyers (Appellant); Dibbs Barker Lawyers (Respondent)
• File Number(s): 2009/332394
• Publication restriction: Nil

Decision under appeal

• Jurisdiction: 9111
• Citation: [2011] NSWSC 287
• Date of Decision: 2011-05-06 00:00:00
• Before: Nicholas J
• File Number(s): 2009/324672

Judgment

1 CAMPBELL JA: I agree with the orders proposed by Bergin CJ in Eq, and with her Honour's reasons.

2 There is an additional reason for rejecting the sixth of the Appellant's submissions.

3 Prior to the enactment of the Civil Procedure Act 2005 there had been a live question concerning whether s 63 of the Supreme Court Act 1970 enabled the Court to use the procedural vehicle of a notice of motion filed in proceedings to decide the question of whether those proceedings themselves had been settled: Green v Rozen [1955] 1 WLR 741; McCallum v Country Residences Ltd [1965] 1 WLR 657 cf Roberts v Gippsland Agricultural & Earth Moving Contracting Company Pty Ltd [1956] VLR 555; Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510. Even if the Court had such jurisdiction, there remained a question of whether it was an appropriate exercise of discretion for the Court to permit the procedure to be adopted: Phillips v Walsh (1990) 20 NSWLR 206; Fine Real Estate Network Pty Ltd v Howell (No 2) (Supreme Court of New South Wales, Young J, 9 December 1997 unreported).

4 The question of the Court's jurisdiction to decide, on a notice of motion, whether proceedings had been settled was brought to an end by the enactment of s 73 Civil Procedure Act. Section 73 provides:

(1) In any proceedings, the court:

(a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and

(b) may make such orders as it considers appropriate to give effect to any such determination.

(2) This section does not limit the jurisdiction that the court may otherwise have in relation to the determination of any such question.

5 When such a course of action was open consistent with ss 56-58 of the Civil Procedure Act, s 73(2) would permit the Court to decline to hear, upon the filing of a notice of motion, complex litigation concerning whether the proceedings in which the notice of motion was filed had settled. However, there can now be no doubt about its jurisdiction to entertain such proceedings. Slattery J has recognised this in Ahmed v Chowdhury [2011] NSWSC 893 at [4].

6 One cannot conclude from the fact that the T & C List proceedings were only to be dismissed after the second payment had been made, that the purpose in keeping them alive was so that the merits of the case could be litigated if the payment was not made. It is equally consistent that the proceedings were to be kept alive for the purpose of enforcing the settlement agreement that had been reached. Indeed, when the Respondent took steps to enforce the settlement agreement it did so by filing a notice of motion in the proceedings that had been kept alive, rather than by starting separate proceedings. Thus, the fact that the proceedings were kept alive does not assist a conclusion that no settlement had been reached.

7 BARRETT JA: I agree with Bergin CJ in Eq.

8 BERGIN CJ in EQ: This is an appeal from the judgment of Nicholas J (the trial judge) in which his Honour found that the Appellant, Warwick S Grave, and the Respondent, Blazevic Holdings Pty Limited, had reached a settlement agreement as set out in a Deed of Release (the Deed) drafted by the Appellant's solicitor: Blazevic Holdings Pty Limited v Warwick S Grave [2011] NSWSC 287.

9 The Appellant contends that the trial judge fell into error in: (1) finding that the conversations between the legal representatives of the Appellant and the Respondent on 2 December 2010 effected an immediately binding final settlement of the proceedings then pending in the Technology and Construction List (the T&C List proceedings) of the Court; and (2) in not finding that the settlement was not binding unless and until each had executed the Deed.

Background

10 In February 2009 the Respondent, of which Josip Blazevic is the sole director, carried out construction work (fit out works) at the Appellant's dental surgery in the CBD of Sydney. On 6 March 2009 the Respondent served a payment claim on the Appellant under the Building and Construction Industry Security of Payment Act 1999 in respect of that construction work for an amount in excess of $126,000. An amount of $66,000 was paid to the Respondent on account of that payment claim by cheque drawn on the account of Gradenco Pty Ltd (Gradenco).

11 On 6 April 2009 the Respondent served a further payment claim on the Appellant for an amount a little in excess of $57,000. The Appellant did not respond to that payment claim.

12 On 5 May 2009 the Respondent commenced proceedings in the District Court of New South Wales against the Appellant seeking judgment for the unpaid balance of the amount sought in the payment claims, plus interest and costs.

13 On 10 June 2009 default judgment was entered in the District Court for the Respondent against the Appellant in the amount of $120,232.08. On 1 December 2009 the Appellant's application in the District Court to set aside the default judgment was dismissed.

14 On 8 February 2010 the Respondent caused a Bankruptcy Notice to be issued against the Appellant in respect of the default judgment amount.

15 On about 28 May 2010 the Appellant and Gradenco issued proceedings in the Consumer, Trader & Tenancy Tribunal (CTTT Proceedings) against the Respondent and Mr Blazevic. The nature of the claims in the CTTT proceedings is unknown.

16 On 10 June 2010 the Federal Magistrates Court dismissed the Appellant's application to set aside or extend the time for compliance with the Bankruptcy Notice and ordered the Appellant to pay the Respondent's costs.

17 The Appellant appealed from the dismissal of his application to set aside the default judgment. In July 2010 the Court of Appeal granted a stay of the District Court judgment on the condition that the Appellant pay $48,000 to the Respondent on the Respondent's undertaking to repay the amount within a month of any final judgment of the Court of Appeal setting aside the District Court judgment. The Court of Appeal also ordered that the Appellant provide a bank guarantee in the amount of $79,283. Gradenco paid the sum of $48,000 to the Respondent on 26 August 2010.

18 On 16 November 2010 the Court of Appeal (Allsop P, Macfarlan JA and McDougall J) granted the Appellant leave to appeal and allowed the appeal: Grave v Blazevic Holdings Pty Ltd [2010] NSWCA 324. The Court of Appeal noted (at [9]) that the defence proposed by the Appellant was that he was not a party to the construction contract under which the Respondent had carried out the construction work. It was alleged that the Appellant's service company, Gradenco, was party to the construction contract. The default judgment was set aside and the Appellant was let in to defend the proceedings. The Court of Appeal removed the proceedings from the District Court to the T&C List and ordered that the matter be listed before the T&C List Judge with a view to the expeditious resolution of the question as to whether the Appellant was a relevant party to the construction contract for the purpose of the Building and Construction Industry Security of Payment Act 1999. The Court also set aside the order requiring the provision of a guarantee.

19 On 26 November 2010 the T&C List Judge (Hammerschlag J) made an order that the question of whether the Appellant was the relevant party to the construction contract was to be tried as a separate issue. That separate trial was listed for hearing on 13 December 2010.

20 On 30 November 2010 the Appellant filed a Notice of Motion seeking security for costs from the Respondent. That Motion was listed for hearing on 3 December 2010.

21 On 3 December 2010 Hammerschlag J was informed that the whole of the proceedings had settled. By consent his Honour ordered that the hearing date on 13 December 2010 be vacated and the proceedings be listed for directions on 25 February 2011 with liberty to apply. Hammerschlag J also made an order that if Consent Orders were faxed to his Chambers before 12 noon on 24 February 2011, the listing on 25 February 2011 would be vacated.

22 On 10 March 2011 the Respondent filed a Notice of Motion in the T&C List proceedings seeking a declaration that the parties had reached a settlement agreement as set out in the Deed that had been drafted by the Appellant's solicitors. The Respondent also sought "further, or in the alternative" an order that the Appellant pay to the Respondent the sum of $25,000 and that the Appellant personally and or through his company Gradenco be restrained from commencing or continuing any action concerning the building works undertaken at the Appellant's premises. The Respondent also sought an order that any previous order of the Court requiring it to repay the sum of $48,000 to the Appellant be vacated. The Motion was listed for hearing before Nicholas J on 7 April 2011.

The Trial

23 The only evidence relied upon at the hearing was an affidavit of the Respondent's lawyer, Mitch Lozina, sworn on 9 March 2011. Mr Lozina was not cross-examined. Annexed to his affidavit was a copy of the Deed and the email communications between the respective legal representatives. The only other documentary material before the trial judge was an ASIC search of Gradenco recording the Appellant and his wife as the directors of that company.

24 Mr Lozina's affidavit evidence related in part to the conversations between himself and Mr JJ Garnsey QC, counsel for the Appellant (defendant) in the T&C List proceedings. That evidence was as follows:

2. On or about 1 December 2010, I was contacted by Mr John Garnsey QC, counsel for the Defendant and we had a conversation in words to the following effect that dealt specifically with a settlement proposal:

JG: I think it would be in both parties' interests if this matter were to settle.

ML: I don't disagree. What is he prepared to offer?

JG: Your client has already been given $48,000 by my fellow and he would be prepared to let your client keep that money with each party walking away.

ML: I am pretty sure that my guy won't walk away. He would at least want something for his legals given how long this has gone on. I'll get some instructions and call you back.

3. Later that same day, I contacted Mr Garnsey by telephone and we had a further conversation in words to the following effect:

ML: Hi John, Joe is prepared to finish this if the Doctor pays him $40,000 inclusive of costs.

JG: I can't see that happening but I will get some instructions and get back to you.

4. We had a number of telephone conversations that went into the evening and the next day until we were able to have our respective clients agree on the following terms:

i. The Plaintiff to retain the $48,000 paid to him by the Defendant.

ii. The Defendant to pay to the Plaintiff a further $25,000 within 2 months.

iii. Each part[y] to bear its own legal costs.

iv. The CTTT proceedings to be discontinued.

v. A Deed of Release would be prepared by Swaab Attorneys.

vi. The hearing dates for the Motion and Hearing would be vacated.

25 Mr Lozina's affidavit also annexed the email communications between the Appellant's then solicitors, Swaab Attorneys, and Mr Lozina. On 2 December 2010 Jessica Bates, of Swaab Attorneys, wrote to Mr Lozina in the following terms:

Subject: Blazevic Holdings Pty Ltd v Warwick Grave Supreme Court of New South Wales Proceedings no324672 of 2009

We refer to the above proceedings and your telephone conversations with Mr Garnsey QC yesterday and today.

Please see attached deed of release that we have prepared to record the settlement that has been reached in this matter. Please have your client and Mr Blazevic execute the deed and deliver the original to us (with all 7 pages) as soon as possible.

We propose that the motion and the proceedings be adjourned tomorrow to the first available Court date after the expiration of 2 months (ie a date in mid February 2011) after both payments have been made, with liberty to apply to file the short minutes prior to the Court date if appropriate.

Please let us know whether your client will consent to this adjournment.

26 The Deed that was attached to the email identified the parties as the Appellant, Gradenco, the Respondent and Mr Josip Blazevic. It included the following:

Recitals

A. Mr Blazevic is the sole director and secretary of Blazevic.

B. Grave is a director of Gradenco.

C. In or about February 2009, Blazevic carried out the Fit Out Works at the Premises and issued Invoices for the Fit Out Works.

D. On 5 May 2009, Blazevic commenced the District Court proceedings against Grave.

E. On 10 June 2009, Blazevic was awarded default judgment against Grave.

F. On or about 28 May 2010, Grave commenced the CTTT proceedings against Mr Blazevic.

G. On 8 June 2010, in the Federal Magistrates Court proceedings, the Federal Magistrates Court dismissed Grave's application to set aside or extend the time for compliance with the bankruptcy notice issued by Blazevic against Grave in respect of the default judgment and ordered Grave to pay Blazevic's costs of the application.

H. On 12 July 2010, in the Appeal proceedings, Young J ordered, inter alia, that Grave pay Blazevic the sum of $48,000 on Blazevic's undertaking to repay that amount within a month of final judgment of the Court of Appeal setting aside the District Court judgment. Grave paid the sum $48,000 to Grave (sic) on 26 August 2010.

I. On 16 November 2010, the Court of Appeal in the Appeal proceedings ordered, inter alia, that the default judgment in the District Court proceedings be set aside, the District Court proceedings be transferred to the Supreme Court (to become the Supreme Court proceedings) and that Blazevic pay Grave's costs of the Appeal proceedings.

J. On 26 November 2010, the Supreme Court proceedings were listed for hearing on 13 December 2010.

K. On 30 November 2010, Grave filed and served the Motion, which is returnable on 3 December 2010 at 9.15am.

L. Grave is defending the Supreme Court proceedings inter alia on the basis that Blazevic carried out the Fit Out Works at the Premises pursuant to an agreement with Gradenco and not Grave.

M. The parties have agreed to finalise all matters between them on the terms set forth below.

OPERATIVE PROVISIONS

1. Definitions

1.1 In this Deed the following words and phrases have the following meanings:

...

CTTT proceedings means the proceedings commenced by Grave and Gradenco against Mr Blazevic and Blazevic in the General Division of the Consumer, Trader & Tenancy Tribunal proceedings no. GEN 10/28283.

...

Federal Magistrates Court proceedings means Federal Magistrates Court of Australia proceedings no. SYG 747 of 2010 in which Grave is the applicant and Blazevic is the respondent.

First Payment means the sum of $12,500.00.

...

Second Payment means the sum of $12,500.00.

...

Supreme Court Proceedings means Supreme Court of New South Wales proceedings no. 324672 of 2009 in which Blazevic is the plaintiff and Grave is the defendant.

2. Terms of Settlement

2.1 Gradenco shall pay and Grave shall procure that Gradenco shall pay to Blazevic, or as it directs, the First Payment within 30 days of the Parties executing and exchanging this Deed.

2.2 Gradenco shall pay and Grave shall procure that Gradenco shall pay to Blazevic, or as it directs, the Second Payment within 60 days of the parties executing and exchanging this Deed.

2.3 Upon payment and receipt of the First Payment and Second Payment the parties shall do everything necessary on the part of each to procure that the orders annexed to this deed of release shall be filed in the Supreme Court proceedings and made by the Court.

2.4 Blazevic shall conditionally, upon the releases in clause 3 taking effect, be entitled to retain the sum of $48,000 paid to Blazevic by Gradenco on 26 August 2010.

2.5 Blazevic and Mr Blazevic shall not seek in any way to rely further on and shall not assist or procure any person or company to seek in any way to rely upon the Bankruptcy Notice the subject of the Federal Magistrates Court proceedings and shall, if requested by Grave, do all things necessary on their respective parts to procure withdrawal or discontinuance of the Federal Magistrates Court proceedings or any proceedings founded on the Bankruptcy Notice.

3. Releases

3.1 Upon payment to and receipt by Blazevic, or as it directs, of the First Payment and Second Payment:

(a) Blazevic and Mr Blazevic shall:

(i) Accept the First and Second Payments in full and final satisfaction of all Claims against Grave and Gradenco;

(ii) Make no further claims against Grave or Gradenco; and

(iii) Release each of Grave and Gradenco from all Claims.

(b) Grave and Gradenco shall:

(i) Make no further Claims against Blazevic and Mr Blazevic; and

(ii) Release Blazevic and Mr Blazevic from all Claims.

3.2 Nothing in this clause shall prevent the enforcement of the terms of this Deed or the obligations arising under it.

4. Bar to Further Proceedings

Each party is at liberty to plead this Deed in any court of law, arbitral tribunal or in any other proceedings in relation to, in connection with or arising out of the matters contained in this Deed as a bar to such proceedings.

27 The Short Minutes of Order in the T&C proceedings that were attached to the Deed were in the following terms:

1. The proceedings be dismissed with no order as to costs.

2. The defendant's motion filed 30 November 2010 be dismissed with no order as to costs.

3. All existing orders for costs whether in the District Court or this Court or in the Court of Appeal on appeal from the District Court be vacated and set aside.

28 The next email was dated 2 December 2010 from Mr Lozina to Ms Bates in the following terms:

The proposed orders with respect to the adjournment are satisfactory. Can you kindly mention my appearance and advise me of the orders made.

I will have Mr Blazevic execute the documents and forward same.

29 The next email was from Ms Bates to Mr Lozina dated 2 December 2010 in the following terms:

Thank you for your email.

I confirm your client's consent to the proposed adjournment and will let you know what orders the Court makes tomorrow.

30 The final email was dated 3 December 2010 from Ms Bates to Mr Lozina in terms that including the following:

I confirm I appeared before Hammerschlag J today for this matter and mentioned your appearance.

I informed His Honour that the whole of the proceedings had been settled.

I sought an adjournment to a date in February 2011 to allow for the payments to be made.

The Court made the following orders:

1. Matter stood over to 25 February 2011.

2. Liberty to apply on 3 day's notice.

3. If consent orders are faxed to Hammerschlag J's chambers before 12 noon on 24 February 2011, the listing on 25 February 2011 will be vacated.

4. Hearing date of 13 December 2010 is vacated.

At this stage, we expect the exchange date for the counterparts of the deed to be next week sometime, after both parties have had the opportunity to execute a copy of the deed. I will touch base with you next week in this regard.

31 The further evidence before the trial judge included that: the Respondent and Mr Blazevic executed the Deed; Mr Lozina sent a scanned copy of the executed Deed to Ms Bates on 13 December 2010; Mr Lozina forwarded a letter to the Appellant's solicitors enclosing two copies of the executed Deed and requested that arrangements be made for the Appellant to execute the Deed and return a copy to him; and Mr Lozina requested confirmation from the Appellant's solicitors that for the purposes of the Deed time would run from 14 December 2010.

32 The further evidence before the trial judge included the communications between Mr Lozina and Ms Bates in January 2011. On 11 January 2011 Mr Lozina asked Ms Bates whether the Appellant was "trying to back out of agreement". Ms Bates informed Mr Lozina that she did not know what was happening with the matter and she did not have any instructions. On 18 January 2011 Mr Lozina wrote to Ms Bates noting that the Appellant had failed to sign the Deed and "otherwise honour the terms of the settlement agreement". He advised Ms Bates that he had written to the Court seeking to have the matter re-listed for mention.

33 The evidence also included communications between Mr Lozina and another solicitor at Swaab Attorneys, Mr T Sperber, during January 2011. The first of those communications was on 18 January 2011 in which Mr Lozina asked Mr Sperber whether the Appellant was trying to "withdraw his offer". Mr Sperber advised Mr Lozina that he did not have those instructions. There was a further discussion on 25 January 2011 in which Mr Sperber advised that the firm had written to the Appellant on a number of occasions and "let him know of the consequences if he doesn't go ahead". Mr Sperber also advised Mr Lozina that the Appellant could be "difficult to deal with". Mr Lozina's evidence was that the conversation continued as follows:

TS Anyway, I know you have listed it for mention and I can understand why, but I've got some instructions in this matter and I can tell you that the reason the Deed wasn't signed was because one of the Directors of Gradenco has been overseas. She was overseas before the deed was ready to be signed. She is coming back and I am seeing her this Friday and you should have a signed contract you can rely on next week.

ML We already have an agreement that we can enforce.

TS Well that's one way of looking at it.

34 The final email in evidence before the trial judge was that from Mr Lozina to Mr Sperber with a copy to Ms Bates dated 8 February 2011 in which he referred to the "recent discussions concerning the signing of the deed" and noted that he had yet to receive a copy of the document or hear from the Appellant's solicitors as to whether "the other director has signed the deed".

The Judgment

35 The trial judge identified the crucial question for determination as whether there was a binding agreement to settle the proceedings: [27]. After referring to the categories identified in Masters v Cameron (1954) 91 CLR 353 at 360 his Honour observed that post contractual conduct could be taken into account in determining whether the parties intended to enter into a binding agreement, citing Heydon JA's (as his Honour then was) judgment in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25].

36 The trial judge referred to the evidence of Mr Lozina, the emails and the Deed and to the fact that during January 2011, when Mr Lozina was communicating with Swaab Attorneys as to the progress of execution of the Deed by the Appellant, there was no suggestion on the Appellant's behalf that agreement had not been reached or that agreement was conditional upon the execution and exchange of the Deed: [39]. His Honour said:

40 The evidence taken as a whole shows, and I find, that the parties intended to reach agreement prior to the hearing of the defendant's motion for security on 3 December 2010. The statements made to the court on that day by Miss Bates were completely inconsistent with the parties, or any of them, holding the view that the proceedings had not been settled. On her own account her statements were unqualified, and no use was made of phrases such as "settled in principle" or "settled subject to documentation". I am satisfied that the defendant's solicitors drafted the deed in accordance with the agreement reached between counsel in their telephone conversations, just as Miss Bates' email of 2 December 2010 states. I find that the deed was intended to record this agreement, and that its execution by the parties was neither required nor intended before the agreement had binding effect. The subsequent failure of the defendant to protest the absence of agreement when there was ample opportunity to do so provides strong support for this conclusion.

41 Accordingly, I find that this case belongs to the first class of case identified in Masters. I am satisfied that when counsel agreed that a deed of release be prepared by the defendant's solicitors, it was intended to be the mechanism for the payment of the agreed amounts to the plaintiff, and for mutual releases of all claims including those in these proceedings. All that remained was for the preparation of a deed consistently with the agreement and, as Miss Bates' email shows, this was done.

42 In my opinion the defendant's submission that the deed should not be accepted as a record of the agreement reached between counsel because it relates to parties, and contains terms, which were not the subject of counsel's conversations can not be upheld. The terms of the agreement were set out, in summary form, in par 4 of the affidavit. Miss Bates' email of 2 December 2010 referred to those conversations and presented the deed as a record of the settlement reached. As such, the deed was accepted by Mr Lozina who was a party to those conversations. The parties proceeded on that basis. There was no suggestion by anybody that the deed went beyond the subject matters of what had been agreed, or was intended to operate other than as the mechanism for performance of the agreement.

The Appeal

37 The appeal was heard on 26 September 2012. Mr T Lynch, of counsel, appeared for the Appellant and Mr M Seck, of counsel, appeared for the Respondent.

38 The Appellant contended that the objective evidence before the trial judge established that the parties did not intend to enter into a binding agreement. In support of this contention the Appellant submitted that: (1) there was a material difference between the content of the conversations between Mr Garnsey and Mr Lozina and the terms of the Deed; (2) Mr Garnsey and Mr Lozina were retained by the parties to the T&C List proceedings and were therefore not able to bind the additional parties to the proposed Deed, being Gradenco and Mr Blazevic; (3) the Deed was not signed by the co-director of Gradenco; (4) the proffering of the Deed was an offer to the Respondent to settle the dispute on the terms in the Deed, subject to the execution of the Deed; (5) it was necessary to take further steps to finalise the T&C List proceedings and the CTTT proceedings; and (6) the Respondent wished to reserve its position in the T&C List proceedings so that if the further payments were not made, it could continue those proceedings. No argument was raised concerning the terms of the orders made by the trial judge to give effect to the decisions of principle contained in his reasons for judgment.

39 (1) There was a material difference between the content of the conversations between Mr Garnsey and Mr Lozina and the terms of the Deed. The Appellant submitted that the terms of the Deed were not to "the effect of the conversations" and were "significantly different" from the terms of the conversations between Mr Garnsey and Mr Lozina. The problem with that submission is that the terms of the conversations were not expressly referred to in the affidavit evidence. Rather paragraph 4 of Mr Lozina's affidavit merely referred to "a number of telephone conversations that went into the evening and the next day". Mr Lozina's evidence was that those conversations continued until he and Mr Garnsey "were able to have our respective clients agree" on the "terms" as set out in paragraph 4 (i to vi) of his affidavit.

40 It was submitted that the most obvious difference between the terms of the conversations and the Deed was the identification of the party upon whom the payment obligation was imposed. Paragraph 4ii of Mr Lozina's affidavit referred to "the defendant" (the Appellant) paying the $25,000 within 2 months, whereas the Deed imposed the obligation for that payment on Gradenco, with the Appellant having the obligation to "procure that Gradenco" make that payment. It was submitted that this difference was objective evidence that the parties were still negotiating the terms of an agreement rather than having reached a final binding agreement.

41 I am not satisfied that this so called "difference" supports that conclusion. Mr Lozina appears to have used the expression "the Defendant" to refer to either or both of the Appellant and Gradenco. For instance in paragraph 4i of his affidavit, Mr Lozina referred to the payment to "the Plaintiff" (the Respondent) of $48,000 having been made by "the Defendant" (the Appellant) whereas that payment was made by Gradenco. The Appellant seems to have used similar language. For instance, in Recital H to the Deed prepared by the Appellant's solicitors there is reference to the Appellant having paid $48,000 to the Respondent (although the Deed contains a typographical error suggesting that it was paid to himself). Whereas clause 2.4 of the Deed refers to $48,000 having been paid to the Respondent by Gradenco.

42 The "difference" needs to be considered in the context of the communications and the Deed. The trial judge considered all of the evidence and in doing so referred to the very important email from Ms Bates to Mr Lozina of 2 December 2010. That email referred specifically to the conversations between Mr Garnsey and Mr Lozina "yesterday and today" and recorded that the Deed was "prepared to record the settlement that has been reached" between Mr Lozina and Mr Garnsey in those telephone conversations. The Deed referred to the $48,000 as having been paid by Gradenco and that Gradenco would make the further payments totalling $25,000. The Deed recorded what had been agreed between Mr Garnsey and Mr Lozina in this regard. That is, that it would be Gradenco who was responsible for the payment and the Appellant who was responsible for procuring Gradenco to make the payments.

43 I am not satisfied that this "difference" supports the conclusion that the parties had not reached a binding agreement.

44 (2) Mr Garnsey and Mr Lozina were retained by the parties to the T&C List proceedings and were therefore not able to bind the additional parties to the proposed Deed, being Gradenco and Mr Blazevic. It was submitted that Mr Garnsey and Mr Lozina were only retained by the Appellant and the Respondent respectively in the T&C List proceedings and were not able to bind Gradenco and Mr Blazevic in any agreement that was reached. The evidence does not support that contention. It is clear that the discussions occurred in the context of the most pressing matter, the T&C List proceedings that were listed for the hearing of the Motion the following day. However Mr Lozina referred specifically to "my guy" and the fact that "Joe" (Mr Blazevic) was "prepared to finish this". In any event when Mr Garnsey provided the Appellant's solicitors with the detail of the conversations with Mr Lozina for the purpose of preparing the Deed to record the settlement, the irresistible conclusion is that Gradenco and Mr Blazevic had (through those legal representatives) been party to the discussions.

45 In any event Mr Lozina's affidavit makes clear that it does not set out all the conversations he had with Mr Garnsey. It must have been Mr Garnsey who provided the Appellant's solicitors with the detail of the conversations with Mr Lozina for the purpose of preparing the Deed to record the settlement. There is no reason to believe the solicitors misunderstood what he told them, or mistakenly drafted the Deed too widely. The irresistible conclusion is that Gradenco and Mr Blazevic had (through those legal representatives) been party to the discussions.

46 (3) The Deed was not signed by the co-director of Gradenco. The Appellant submitted that the absence of the co-director's assent, by signature on the Deed, is a significant factor weighing against the conclusion that a binding agreement had been reached. There was no suggestion at any stage during the communications between the legal representatives that the Deed did not reflect the terms of the agreement reached between them. Indeed the clear inference from Mr Sperber's conversation with Mr Lozina in late January 2011 is that the Appellant had already signed the Deed and that Mr Sperber was awaiting only the further signature of the Appellant's wife who was the co-director of Gradenco. Mr Sperber did not suggest that Mrs Grave had not agreed to the terms of the Deed. Rather it was that a practical matter (her absence overseas) had prevented her signature being placed on the Deed. When, for the reasons I have given, Gradenco was party to the discussions between Mr Lozina and Mr Garnsey, any agreement reached in those discussions would bind it, regardless of later signature on a deed.

47 I am not satisfied that the absence of the co-director's signature on the Deed supports the conclusion that the parties had not reached a binding agreement.

48 (4) The proffering of the Deed was an offer to the Respondent and Mr Blazevic to settle the dispute on the terms in the Deed, subject to the execution of the Deed. The Appellant relied upon the reference in Masters v Cameron at 362 to the statement in Chinnock v The Marchioness of Ely (1865) 4 De.G.J. & S. 638; 46 E.R. 1066 at 1069 that "if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation". It was submitted that in the present case the "stipulation" was that a term of the "assent" was the execution of the Deed and there was no agreement independent of the execution of that Deed. In Chinnock v The Marchioness of Ely the solicitor for the Marchioness had written to the prospective purchaser of the subject land advising that he had been instructed "to proceed with the sale" of the premises to him. The solicitor also advised that the draft contract was being prepared and would be forwarded to the purchaser for his approval in a few days. That was the context of the Lord Chancellor's statement, part of which was extracted in Masters v Cameron and the balance of which was as follows (at 46 ER 1069):

But if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation. And this appears to me to be the real state of the case before me, for I am clearly of opinion that the true and fair meaning and legal effect of the letter of the 19th November may be expressed in these words: "I will go on with the treaty for sale to you of my house, and for that purpose will send you the form of the contract which I am willing to enter into".

I take therefore the letter of the 19th November either as a conditional acceptance of the Plaintiff's terms, subject to the draft contract being agreed to, or as an expression of willingness to continue the negotiation, and for that purpose to propose a form of agreement.

49 The Appellant submitted that the proffering of the Deed was an offer to the Respondent and Mr Blazevic of the form of the agreement into which the Appellant and Gradenco were willing to enter.

50 The correspondence and communications in this case are quite different from the correspondence in Chinnock v The Marchioness of Ely. This could not fairly be described as a case in which the Appellant was sending a form of Deed into which he and Gradenco were willing to enter. It was a communication without any ambiguity that this was the Deed reflecting the agreement that had been reached between the Appellant and Gradenco on the one hand and the Respondent and Mr Blazevic on the other.

51 (5) It was necessary to take further steps to finalise the T&C List proceedings and the CTTT proceedings. The Appellant also submitted that the conversations between the legal representatives in providing for the adjournment of the T&C List proceedings to permit the Appellant to pay the $25,000, objectively indicates that there was to be no immediate settlement of either the T&C proceedings or the CTTT proceedings. It was submitted that in the context of settlement of litigation where a deed is to be prepared and other steps taken, the "general rule" is that there is no binding settlement until the coming into effect of the envisaged deed and the taking of the other steps.

52 In support of this submission the Appellant relied upon Young J's (as his Honour then was) decision in Cleary v Masterton [1999] NSWSC 207. That was a case in which the plaintiffs, a firm of solicitors, claimed that the defendant had settled proceedings brought against them on the basis that the claim would be discontinued, each party would pay their own costs and the defendant would execute a Deed of Release. Young J analysed the communications between the respective legal representatives and concluded that when the defendant's solicitor advised that his client "consents to a disposal of the matter along the lines proposed", he was "merely indicating that the principal terms" had been agreed but that there would not be a contract until a formal deed of release was agreed to and signed. The Appellant relied in particular upon the following passage of Young J's judgment at [39]:

Litigation in the Supreme Court is a serious matter and settlement of that litigation is a serious matter. If parties have brokered a deal whereby there is to be a deed of release and a discontinuance, the parties, to my mind, intend as a general rule that there is no contract until that release has been delivered and exchanged and the Notice of Discontinuance is at least signed. There may be in any particular set of circumstances some other intention manifested, but I think that is the general rule.

53 Although the Appellant sought to rely upon the "general rule" as something more, on analysis, it does not rise above an empirical generalisation. In any event, the facts in Cleary v Masterton were quite different from those in the present case. The proposal in that case was that the defendant would execute a deed of release, the terms of which had not been drafted. It was not clear from the communications between the respective legal representatives whether the deed of release would be a mutual release or, as was suggested later in the negotiations, limited to a release by the defendant of the plaintiffs.

54 In the present case the terms of the Deed were well known by all parties because it was drafted to "record the settlement that had been reached" between all the parties.

55 (6) The Respondent wished to reserve its position in the T&C List proceedings so that if the further payments were not made, it could continue those proceedings. It was submitted that the orders in the Short Minutes of Order attached to the Deed support the contention that the parties had not reached a binding agreement. It was submitted that these orders demonstrate that there was no agreement to settle the proceedings until the payment of the additional $25,000 had been made.

56 The terms of the Deed read with the attached Short Minutes of Order provide that the orders for dismissal of the T&C List proceedings will not be made until after the payments are made. That does not support the conclusion that the parties had not reached agreement. Rather it was a term of the agreement that the orders would not be made until after the payment had occurred. The evidence supports the conclusion that the reason the adjournment occurred was "to allow the payments to be made" (as Ms Bates put it in her email) and to facilitate the parties' compliance with clause 2.3 of the Deed to have the orders in the Short Minutes of Order made by the Court.

57 This was not an agreement to agree to a settlement after the payments had been made. Rather this was an agreement pursuant to which the parties agreed that certain events were to occur (the payments), at the conclusion of which a further event (the filing of the Short Minutes dismissing the proceedings) was to occur. The Respondent had no entitlement to continue the T&C List proceedings if the Appellant failed to make the payments under the Deed. Rather the Respondent was limited to proceedings to enforce the final agreement reached.

58 The fact that there is no express reference in the Deed to the discontinuance of the CTTT proceedings does not mean that a final and binding agreement was not reached. Clearly the parties had decided to release each other from whatever claims were included in those proceedings. This can be seen from paragraph 4iv of Mr Lozina's affidavit; the definition of Claim in clause 1.1; the Releases in clause 3 and the Bar to Further Proceedings in clause 4 of the Deed.

59 Generally: The evidence before the trial judge established that the conversations between Mr Garnsey and Mr Lozina on 1 and 2 December 2010 included the following: (1) the Respondent was to retain the $48,000 that Gradenco had paid it on 26 August 2010 (reflected in paragraph 4i of Mr Lozina's affidavit and clause 2.4 of the Deed); (2) Gradenco was to pay (and the Appellant was to cause it to pay) the Respondent a further $25,000, in two payments of $12,500 within 2 months (reflected in paragraph 4ii of Mr Lozina's affidavit and clauses 2.1 and 2.2 of the Deed); (3) that each party was to pay their own legal costs (reflected in paragraph 4iii of Mr Lozina's affidavit and in clause 9 of the Deed and paragraphs 1 to 3 of the Short Minutes of Order attached to the Deed); (4) the CTTT proceedings were to be discontinued (reflected in paragraph 4iv of Mr Lozina's affidavit and clauses 1.1 ("Claim"), 3.1 and 4 of the Deed); and (5) the Deed was to be prepared by Swaab Attorneys to record the agreement that had been reached (reflected in paragraph 4v of Mr Lozina's affidavit and the presentation of the Deed by Swaab Attorneys the following day in which the Deed was described as having been prepared "to record the settlement that had been reached").

60 The Respondent placed emphasis on the fact that the Appellant's solicitor advised the Court on 3 December 2010 that "whole of the proceedings had been settled". That was the day on which the Appellant's Motion for an order against the Respondent for security for costs was listed for hearing. The statement made to the Court was intended to convey that not only was it unnecessary to hear the Motion for security or costs but it was also unnecessary that the hearing of the main case take place so that the hearing date could be vacated. In this regard the Respondent relied upon Humphris-Clark v Lazaridis [2010] NSWSC 318. That was a case in which the parties agreed to advise the Court that the litigation was settled and requested that the trial date be vacated. The fact that the parties chose to inform the Court that the matter was settled (rather than merely settled in principle) and abandoned the trial, was found to be conduct that evidenced an intention to be immediately bound by their agreement, notwithstanding that they had also agreed that a deed would be prepared: [38]-[39] However as noted in that case, each case will depend on its own facts: [32].

61 In Mr Lozina's conversation with Ms Bates on 11 January 2011 he asked Ms Bates whether the appellant was "trying to back out of agreement". In the conversation between Mr Lozina and Mr Sperber on 18 January 2011 he asked Mr Sperber whether the Appellant was "now trying to withdraw his offer". That is the only evidence that such language was used and was not relied upon by the Appellant in submissions as having any significant import. This is understandable having regard in particular to the fact that Mr Sperber explained that the only reason that the Deed had not been provided to Mr Lozina was "that one of the directors of Gradenco was overseas". As I have already said, the irresistible inference is that the Appellant had already signed the Deed in accordance with the final agreement that had been reached with the Respondent and Mr Blazevic.

62 The trial judge found that the agreement that had been reached fell into the first class referred to in Masters v Cameron (1954) 91 CLR 353, that is, where parties intend to be immediately bound to the performance of the terms agreed, but at the same time propose to have the terms restated in a form which will be fuller or more precise but no different in effect.

63 I am satisfied that there is no error to be found in the trial judge's careful reasoning and conclusions.

Notice of Contention

64 The Respondent sought to rely upon a Notice of Contention in which it was submitted that his Honour's judgment could be sustained on the following bases:

1. The Appellant and the Respondent were content to be bound immediately and exclusively by the terms which they had agreed on in the conversation between their counsel on 1 December 2010 while expecting to make a further contract in substitution for the first contract, containing by consent, additional terms and additional parties.

2. The Appellant and the Respondent reached agreement on the terms set out in a deed of release by the Appellant's solicitors by e-mail on 2 December 2010 making an offer on behalf of the Appellant set out in the terms of the deed of release attached to the e-mail and the Respondent accepting the offer by his legal representatives returning an executed deed to the Appellant's solicitors on 13 December 2010.

65 The Appellant opposed leave being granted to the Respondent to rely upon the Notice of Contention on the basis that, in relation to paragraph 1 of the Notice, the Respondent had expressly disavowed any reliance on the class of contract in Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 before the trial judge. The Respondent accepted that the trial judge had been advised that there was no need to "worry about that for current purposes" [RB 78] but submitted that this was in the context of whether or not the parties had reached agreement to be immediately bound on the terms set out in the Deed. It was submitted that it had not been appreciated that there was going to be reliance upon a distinction between the Appellant and Gradenco. The Respondent accepted that this was an issue in the proceedings before the Court of Appeal in relation to the setting aside of the District Court judgment, however it was submitted that it was not apparent that there was such an issue in respect of whether a settlement had been reached between the parties. The Respondent also submitted that there is no prejudice to the Appellant in leave being granted to rely upon the Notice of Contention.

66 Given the findings above, it is unnecessary to deal with the Notice of Contention. However if I had not been satisfied that the trial judge was correct in holding that there was an agreement within the first class of Masters v Cameron, and it had been necessary to deal with the mattters in the Notice I am satisfied that the trial judge's decision could have been affirmed on the basis of paragraph 2 of the Notice.

Orders

67 The orders I propose are:

(1) The appeal is dismissed.

(2) The Appellant is to pay the Respondent's costs of the appeal.

Amendments

17 October 2012 - typographical changes

Decision last updated: 17 October 2012