Al Azhari v 27 Scott Street Pty Ltd
[2017] VSC 600
•5 October 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2016 02498
| IHAB AL AZHARI | Plaintiff |
| v | |
| 27 SCOTT STREET PTY LTD & ORS | Defendants |
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JUDGE: | ALMOND J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 31 July – 2 August 2017 |
DATE OF JUDGMENT: | 5 October 2017 |
CASE MAY BE CITED AS: | Al Azhari v 27 Scott Street Pty Ltd & ors |
MEDIUM NEUTRAL CITATION: | [2017] VSC 600 |
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CONTRACT – Terms agreed at mediation – Whether parties intended to be immediately bound or bound only when formal terms executed – objective intention of the parties – Masters v Cameron (1954) 91 CLR 353.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | P Fary | HWL Ebsworth |
| For the Defendants | A T Schlicht | Jeremy Johnson & Associates |
HIS HONOUR:
This dispute concerns the outcome of a court ordered mediation. On 24 January 2017, the parties to this proceeding and their legal advisers attended a mediation with a view to possible resolution of the proceeding.
At the conclusion of the mediation a handwritten document (‘the mediation terms’) was signed by the respective parties’ legal practitioners.
A question has arisen as to whether by signing the mediation terms the parties intended to be bound immediately or whether they intended to be bound only when formal terms were executed. To expeditiously resolve this issue the Court ordered that it be determined as a preliminary question.[1]
[1]The preliminary question is as follows: Was the proceeding compromised on 24 January 2017 by the signing of the document that day marked as Exhibit 1 (as referred to in paragraph 1 of the orders of Lansdowne AsJ made on 15 May 2017)? A copy of Exhibit 1 is at Tab 28 of Court Book, Exhibit P1.
The defendants submit that:
(a)the parties intended to be bound immediately though expressing a desire to draw up their agreement in a more formal document at a later stage;[2] or intended to be bound immediately whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms;[3]
(b)the mediation terms are enforceable; and
(c)the plaintiff is estopped from relying on s 126 of the Instruments Act 1958 and s 32 of the Sale of Land Act 1962.
[2]Masters v Cameron (1954) 91 CLR 353, 360 (‘Masters v Cameron (Category 1)’).
[3]Civil & Allied Technical Construction Pty Ltd v A1 One Quality Concrete Tanks Pty Ltd [2015] VSCA 75 12, [36]-[37].
The plaintiff submits that:
(a) the parties did not intend to make a concluded bargain unless and until they executed a formal contract;[4]
(b)the mediation terms are not enforceable; and
(c)the plaintiff is not estopped from relying on s 126 of the Instruments Act 1958 or s 32 of the Sale of Land Act 1962.
[4]Masters v Cameron (1954) 91 CLR 353, 360 (‘Masters v Cameron (Category 3)’).
The mediation terms
The original draft of the mediation terms was prepared by the defendants’ legal advisers and provided to the plaintiff’s legal advisers by the mediator. Words reproduced in bold type were added to the original draft by the plaintiff’s solicitor and the document was then signed by the solicitors on behalf of their respective clients.
Omitting formal and crossed out parts, the document states:
1.These terms of settlement are in summary form of terms to be more fully engrossed.
2. The parties agree to settle this proceeding on the following terms:
(a)the first defendant will transfer unencumbered the following properties in the development known as The Lonsdale situated at 27 Scott Street, Dandenong (‘the land’):
(i) Retail 1(a) at value of $440,500;
(ii) Retail 1(b) at value of $597,500;
(iii) Retail 3 at value of $447,500. (‘The properties’).
(b)The properties will be transfered (sic) in fee simple after discharge of the construction funding facility.
(c)The first defendant will give to the 2nd Plaintiff a mortgage not to be registered but secured by a caveat over the land situated at 27 Scott Street Dandenong, which caveat will remain until such time as the titles are transferred into the 2nd Plaintiff’s name. If the defendants default under the terms, the plaintiff may register the mortgage.[5]
(d)The 2nd Plaintiff will execute and provide the required documentation for the security of the land to be provided to financiers of construction funding.
(e)Upon execution of these terms and performance by the defendants of their obligations thereunder the parties hereby release each other from all claims, liabilities and obligations arising out of all and any claims the subject of this proceeding including but not limited to the agreement referred to in paragraph 3 in the Statement of Claim and the deed referred to in paragraph 7 of the Statement of Claim.
(f)In the event that the 1st defendant fails to transfer the properties when due the defendants consent to orders for specific performance together with costs of entry of judgment. These terms are evidence of the defendants’ consent to such judgment.
(g)The proceeding be struck out with a right of reinstatement and the parties sign consent orders to this extent on signing the terms.
[5]There were originally two plaintiffs. The first plaintiff Best Fab Pty Ltd discontinued its claim, leaving Mr Al Azhari as sole plaintiff.
Applicable principles
In Masters v Cameron, Dixon CJ, McTiernan and Kitto J identified three classes of case where parties have been in negotiation, have reached agreement on terms and also agree that the subject matter of the negotiation would be dealt with by a formal contract.
(a)First, the parties may have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect;
(b)Second, the parties may have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of them conditional upon the execution of the formal document; and
(c)Third, the parties may intend not to make a concluded bargain at all unless and until they execute a formal contract.[6]
[6](1954) 91 CLR 353, 360.
In Sinclair, Scott & Co v Naughton,[7] Knox CJ, Rich J and Dixon J identified a fourth class of case, namely ‘….one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms’.[8]
[7](1929) 43 CLR 310, 317 (‘Sinclair, Scott & Co’).
[8]See also Civil & Allied Technical Construction Pty Ltd v A1 One Quality Concrete Tanks Pty Ltd [2015] VSCA 75 12, [36]-[37].
The construction of a contract is to be determined objectively, and in the case of a commercial contract it is necessary to ask what a reasonable business person would have understood the terms to mean. The approach which should be taken to the construction of commercial contracts was enunciated by the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[9] as follows:
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.[10]
[9](2015) 256 CLR 104.
[10]Ibid, 116-117, [46]-[50].
In Queensland Phosphate Pty Ltd v Korda,[11] the Victorian Court of Appeal considered a very similar question to the question arising in this proceeding, namely whether an exchange of emails between solicitors, one containing an offer to settle proceedings, the other containing an acceptance of the offer, constituted an immediately binding agreement. The Court characterised the legal principles as follows:
First, the question of whether there was a binding agreement is one that falls to be determined objectively from the terms of the emails, read in the light of the surrounding circumstances and having regard to the commercial context in which they were exchanged. If an essential term was not agreed, then the ‘agreement’ is incomplete and did not give rise to an enforceable contract. Moreover, the existence of matters of importance on which the parties have not reached consensus will render it less likely that they intended immediately to be bound before the execution of a formal document. Secondly, in determining whether a binding contract was in fact formed, regard may be had to the parties’ subsequent communications: (1) in order to see what was important or essential to the transaction; (2) as admissions; and (3) as probative of the parties’ contractual intention.[12]
[11][2017] VSCA 269 (‘Queensland Phosphate v Korda’).
[12]Queensland Phosphate v Korda, [37] citing Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 [77] and Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 [73]; Gangemi v Osborne & Anor [2009] VSCA 297 [23]-[24].
Did the parties intend to make a concluded agreement at the mediation such that they were bound immediately?
Defendants’ submissions
The defendants submit that the parties did intend to be bound immediately and rely on either the first class of case identified in Masters v Cameron or the fourth class of case identified in Sinclair, Scott & Co v Naughton. The defendants submit that the essential terms of the agreement are contained in the mediation terms and that what was contemplated was a document which contained not only these terms but possibly further terms which were merely mechanical or procedural to carry out the essential terms embodied in the agreement.[13]
[13]Defendants’ outline of closing submissions dated 2 August 2017, [7].
The defendants characterise the following terms as the essential terms:
‘(1)That the First Defendant transfers to the Second Plaintiff three properties being Retail 1A, 1B and 3;
(2)The properties will be transferred after the discharge of the construction funding facility;
(3)The interest of the Second Plaintiff in the properties is to be secured by a mortgage not registered but protected by a caveat over the land;
(4) The Second Plaintiff will allow for security for construction finance;
(5) Mutual Releases;
(6) Default provision; and
(7) Consent orders disposing of the proceeding.’[14]
[14]Defendants’ outline of closing submissions dated 2 August 2017, [13].
The defendants also rely on post-mediation conduct of the solicitors for the plaintiff who wrote an email to the Court after the mediation in the following terms:
Dear Associate,
Thank you for your email below.
A mediation was held in the matter on 24 January 2017 in which the matter was settled on the basis of a heads of agreement, to be formalised in a deed of settlement which is currently being finalised.
Accordingly we do not expect that a directions hearing will be required on 16 February 2017. However we will ensure that the Court is notified either way prior to 4.00pm on 14 February 2017. [15]
[15]Defendants’ outline of closing submissions dated 2 August 2017, [9]; Email dated 9 February 2017 Court Book Tab 8, Exhibit P1.
The defendants submit that this email constitutes an admission that there is a concluded contract.[16]
[16]Defendants’ outline of closing submissions, dated 2 August 2017, [11].
Plaintiff’s submissions
The plaintiff submits that the objective intention of the parties was not to be bound unless and until a formal contract was executed and that the mediation terms fall within the third class of case identified in Masters v Cameron.
The plaintiff submits that the following matters point to an objective intention that the parties not be bound immediately.
First, the plaintiff submits that the mediation terms are uncertain and do not address critical matters. In particular, that:
(i)there is no statement of the arrangement made for the deposit;
(ii)there is no reference to an attached plan or plan of subdivision that identifies the properties to be sold;
(iii)the reference to Retail 1(a), Retail 1(b) and Retail 3 in the development is not an adequate identification of the properties;
(iv)the terms fail to identify what construction facility or facilities were in existence as at 24 January 2017 and fail to identify at what point after discharge of any such facility the first defendant is obliged to transfer any properties as defined; and
(v)the terms refer to, but do not include, terms of the proposed mortgage or identify the principal obligation that is the subject of the proposed mortgage;
Second, the plaintiff submits that if the mediation terms were immediately binding, they would constitute ‘a contract for the sale of land’ entered into among other things in breach of:
(a) s 32 of the Sale of Land Act 1962 because no vendor statement was provided; and
(b) s 9AA(1A) of the Sale of Land Act 1962 because the Heads of Agreement did not contain a ‘conspicuous note’ containing the mandatory requirements provided for in that section.[17]
[17]The plaintiff also submitted that if the mediation terms were immediately binding they would breach the Sale of Land Act 1962 (Vic) s 9AA(1)(a).
Third, neither the plaintiff’s solicitor nor the defendants’ solicitor were persons lawfully authorised in writing to sign a contract for the sale of an interest in land;[18]
[18]Instruments Act 1958 (Vic) s 126 and Property Law Act 1958 (Vic) s 54.
Fourth, the opening paragraph of the handwritten document states:
these terms of settlement are in summary form of terms to be more fully engrossed.
Fifth, the plaintiff relies on evidence given by his solicitor as follows:
I said to Mr Carey that nothing will be signed up today because this is going to be quite a complex deed and it will take some time to draw it, so we didn’t have time on that day to draw it…
Then Mr Carey said to me, ‘Well at least let’s sign up to a heads of agreement so everyone understands who is getting what units’, to which I responded to him by advising, ‘One of the things that we will require for the deed is the plan of subdivision so that we can accurately identify on that plan exactly what units my client is getting and there is no risk of the plan changing so that the subsequent units would change….[19]
[19]T 105.30 – 106.12.
Sixth, the plaintiff submits that the post-mediation conduct relied upon by the defendants is equivocal.
Overall it was submitted by the plaintiff that here, as was the case in Sinclair, Scott & Co, the mediation terms ‘by no means comprise the detail necessary in a contract of the character relied upon in this case’.[20]
[20]Sinclair, Scott & Co, 332.
Disposition
It is clear from the mediation terms that the parties intended that the matters agreed upon at the mediation were to be elaborated upon. What is more difficult to discern is whether the mediation terms, viewed objectively, indicate that the parties had either ‘reached finality in arranging all the terms of their bargain’ (first class identified in Masters v Cameron) or were ‘content to be bound immediately and exclusively by the terms which they had agreed upon’ (fourth class identified in Sinclair, Scott & Co), alternatively, intended not to make a binding agreement unless and until they had executed formal terms (third class identified in Masters v Cameron).
In this case, recourse to events and surrounding circumstances is necessary to help identify their commercial purpose or objects.
Mr Al Azhari gave evidence that during the mediation he questioned the validity of the claim that two of the five retail shops in the proposed development had been sold. He insisted on being shown copies of the contracts of the sale of the shops which had been sold, including evidence that the deposits with respect to their sale had been placed into a trust account, because he did not trust the defendants’ assertion that genuine sales had taken place. In a further attempt to verify that a sale had in fact taken place,[21] he made contact with the purchaser of one of the retail shops during the mediation. This conduct indicates that during the mediation there was a high level of mistrust by the plaintiff towards the defendants.
[21]T 80.9-83.21; T 87.27-28; T 88.18-29; T 89.1-4.
Further, it is evident from the pleadings and documents to which reference was made during the hearing of the preliminary question that the transaction between the plaintiff and the defendants was originally characterised by Mr Al Azhari as an investment, in which Mr Al Azhari’s corporate vehicle Best Fab Pty Ltd became a unit holder in a trust known as the 27 Scott Street Unit Trust in consideration of payment of $800,000 to the first defendant, but that that arrangement was prima facie re-characterised as a lending transaction subsequently documented by a Deed of Loan.[22]
[22]General endorsement of a claim, dated 28 June 2016, [6], Court Book Tab 1, Exhibit P1; Statement of Claim, dated 12 August 2016, [3]-[7], Court Book Tab 2, Exhibit P1; Amended Defence and Counterclaim of the defendants, dated 22 May 2017 [3]-[4], Court Book Tab 3, Exhibit P1.
There is a live issue on the pleadings as to whether the Deed of Loan was procured by duress.[23]
[23]Amended Defence and Counterclaim of the defendants, dated 22 May 2016, [7], Court Book Tab 3, Exhibit P1.
It is plainly inappropriate for present purposes to make any assessment of the viability of either the claim or counterclaim in the proceeding save to say that, given the nature of the allegations, it is reasonable to infer and I do infer that it is likely there was also a level of mistrust felt by the defendants towards the plaintiff at the mediation.
In my view, these surrounding circumstances help shed light on whether the parties objectively intended the mediation terms to be a concluded bargain.
For the following reasons I am not satisfied that the parties had ‘reached finality’ or ‘were content to be bound immediately and exclusively by the terms agreed at mediation’. There are simply too many matter of importance on which the parties had not reached a consensus for it to be otherwise.
First, the three retail properties which were the primary subject matter of the mediation terms are described generally and without reference to a plan of subdivision (registered or unregistered) or any other document which would specify the measurements or their precise location within the development. This is an important consideration in circumstances where construction had not yet commenced on the development site.
During the mediation at the request of the plaintiff, the respective positions of the retail properties described as Retail 1(a), 1(b) and 3 were marked on a copy of the ground floor floor plan extracted from a marketing brochure for the proposed development and the marked up floor plan was shown to Mr Al Azhari. The ground floor floor plan does not specify the dimensions of the retail premises and does not appear to have a scale. It includes a notation that ‘all areas shown are approximate’.[24] The marked up copy of this floor plan was not annexed to the mediation terms, nor was it incorporated by reference in the mediation terms.[25]
[24]Court Book Tab 35, Exhibit P1, Ground floor, floor plate.
[25]T 89.11-15.
Second, there are no pro forma terms of a contract of sale of the relevant retail premises or vendor’s statement with respect to the sale(s) accompanying or incorporated by reference in the mediation terms from which detailed terms of a contract of sale might be ascertained.
Mr Al Azhari denied having received a pro forma contract of sale and vendor’s statement from the defendants in the months prior to the mediation. At the hearing of the preliminary question, Mr Al Azhari produced a bundle of documents which he claimed had been provided to him prior to the mediation. This included a major project summary document, a spreadsheet showing which apartments within the development were available or reserved, with specific reference to five individual apartments and a marketing brochure for the proposed development.[26]
[26]Bundle of documents produced by Mr Al Azhari, 1-76, Court Book Tab 41, Exhibit P1.
One of the defendants, Mr Visedo, gave evidence that during discussions in 2016 he provided Mr Al Azhari with marketing material, a pro forma contract of sale, feasibility studies and profit and loss material relating to the development.[27] Mr Visedo was vague about when he had provided a pro forma contract of sale and vendor’s statement to Mr Al Azhari, stating that it was at one of the meetings he had with Mr Al Azhari between June and December 2016. He later expressed the belief that it was handed to Mr Al Azhari between November and December of that year.[28] There was no documentary evidence to corroborate or substantiate this evidence. Mr Al Azhari gave evidence that he did not receive a pro forma contract of sale and vendor’s statement. In contrast with the vagueness of the defendants’ evidence, Mr Al Azhari was emphatic that he did not receive a pro forma contract of sale and vendor’s statement. He firmly resisted cross-examination on that question, responding that he had never seen the document.[29] I accept Mr Al Azhari’s evidence on this issue.
[27]T 50.17-22-T 51.6-19.
[28]T 51.20-22.
[29]T 92.19-28; Pro Forma contract of sale and vendor’s statement, Court Book Tab 33, Exhibit P1; Bundle of documents brought by the plaintiff to court, Court Book Tab 41, Exhibit P1.
Had a pro forma contract of sale and vendor’s statement been provided to Mr Al Azhari in the form of the pro forma contract of sale and vendor’s statement tendered at the hearing, Mr Al Alzhari would have known or have been able to ascertain from the plan of subdivision (in Annexure B thereof) the specific locations of the retail premises.[30]
[30]Profile on contract of sale and vendors statement including Annexure B plan of subdivision, sheet 1 diagram 1 ground level, Court Book Tab 33, Exhibit P1.
Further, Mr Visedo did not disagree that part of the marketing brochure, entitled ‘Floor plate, ground floor’ was provided through the mediator to Mr Al Azhari so there could be negotiations about what was to be acquired.[31] The fact that the parties had to work from a marketing brochure during the mediation to determine the location of Retail 1(a), 1(b) and 3 is consistent with Mr Al Azhari’s evidence that he had not been provided with the plan of subdivision (which precisely identified the location of these retail premises) in late 2016 and is also consistent with his evidence to the effect that he had never seen the plan of subdivision.[32]
[31]T 66.18-67.-2.
[32]T 92.15-23.
The pro forma contract of sale and vendor’s statement provides for fittings, fixtures applicable to the relevant lot,[33] specifies applicable owners corporation rules and the applicable lot entitlement and lot liability.
[33](Cf pro forma contract).
The mediation terms do not provide for any of these things. This tends to suggest that the mediation terms were high level terms which were general in nature and not intended to be a concluded bargain.
Third, the date of settlement (hence the date for occupation of the premises) is not specified in the mediation terms. Transfer of the retail properties is contingent upon discharge of an undefined ‘construction funding facility’ with no indication when such discharge might occur. This tends to suggest that the agreement is not finalised.
Fourth, the mediation terms provide that the first defendant will give to Mr Al Alzhari ‘a mortgage not to be registered but secured by a caveat over the land’. The terms of the mortgage are not specified. The principal sum secured is also not specified and in circumstances where there is underlying conflict on the pleadings about the nature of the transaction, cannot be implied.
The recitals in the Deed of Loan, security, guarantee and indemnity document dated 25 November 2015 (‘Deed of Loan’) relevantly state:
A.The lender (Mr Al Azhari) has provided financial accommodation to the borrower (27 Scott Street Pty Ltd) by lending to the borrower interest-free monies for the purpose of buying land at 27 Scott Street Dandenong.
…
B.The Borrower acknowledges as having received financial accommodation referred to in paragraph A from the lender in the sum of $1,200,000 (the principal)…[34]
[34]Deed of Loan, security, guarantee and indemnity dated 25 November 2015, Court Book Tab 40, Exhibit P1.
Without prejudice to submissions which might later be made about the characterisation of the money advanced by Mr Al Azhari’s interests to the first defendant, it seems that the mediation terms propose a transfer of properties in lieu of repayment of funds advanced, because the terms contemplate that the first defendant will give Mr Al Azhari a mortgage over the development land. Ordinarily mortgages are given for the purpose of securing repayment of debt.
From the pleadings, it is evident that the sum secured in this case could potentially be :
(a)$800,000, being the alleged amount of the original advance from Mr Al Azhari to the first defendants;
(b)$1.0 million,[35] referred to in the Deed of Loan;[36]
(c)$1.6 million, being the alleged consideration which the first defendant would pay Mr Al Azhari in exchange for advancing the first defendant funds;[37] or
(d)$1,485,500, being the total of the purchase price for the retail premises as set out in the mediation terms.
[35]Paragraph B.$1.2m allowing for repayments totalling $200,000; clauses 1.2(a)and 1.2(b) Deed of Loan.
[36]Statement of claim, dated 12 August 2016, [7] Court Book Tab 2, Exhibit P1; Court Book Tab 40, Exhibit P1.
[37]Statement of claim, dated 12 August 2016, [3] Court Book Tab 2, Exhibit P1.; Court Book Tab 40, Exhibit P1.
Without reference to an amount secured or any other terms, the mediation term that the first defendant would ‘give the second plaintiff a mortgage’ is vague and uncertain and further tends to indicate that the parties did not intend to conclude a binding agreement at the mediation. This view is fortified by the fact that in post mediation negotiations the plaintiff’s solicitors proposed that the debt for the purpose of the formal terms means $1,000,000 plus interest and enforcement costs payable on an indemnity basis whereas the defendants’ solicitors proposed an amendment to the definition so that debt would mean simply $1,000,000 plus enforcement costs.
Fifth, neither the plaintiff’s solicitor nor the defendants’ solicitor was authorised in writing by their respective clients to sign a contract for the sale of an interest in land at the mediation.[38] This is another objective indication that the parties did not at the time of the mediation intend to enter into a binding agreement to transfer real property.
[38]Instruments Act 1958 (Vic) s 126 and Property Law Act 1958 (Vic) s 54.
Sixth, I accept the plaintiff’s submissions to the effect that if the mediation terms are found to be immediately binding they would constitute a ‘contract for the sale of land’ entered into in breach (a) of s 32 of the Sale of Land Act 1962 because no vendor’s statement was provided; and (b) of s 9AA(1A) of the Sale of Land Act 1962 because the mediation terms did not contain a ‘conspicuous note’ to the purchaser satisfying the mandatory requirements provided for in that section.
In my view, the failure to give a vendor’s statement or a conspicuous note in the proper form are not merely mechanical or procedural matters to be dealt with after the parties have reached a concluded agreement for the sale of land.
Both the plaintiff and the defendants retained legal advisers who attended the mediation. In my view, reasonable business people so advised would not have intended to enter into a binding agreement for the sale of land in contravention of Sale of Land Act 1962 provisions with the consequent risk of prosecution for offences under that Act. Failure to comply with the Sale of Land Act 1962 also renders the contract of sale susceptible to rescission by the purchaser any time before registration of the plan of subdivision.[39]Further, reasonable business people in the position of the parties seeking finality in resolution of litigation would not wish to settle proceedings on the basis of entering into contracts of sale of land exposed to an obvious risk of rescission by one of the parties.
[39]Sale of Land Act 1962 (Vic) s 9AE(1).
All six matters referred to above are important contextual matters to consider when assessing whether the parties intended to be immediately bound by the mediation terms. In my view it is more likely that the parties intended to address and resolve these matters as part of a binding agreement to be arrived at in subsequent negotiation of formal terms.[40] Only on execution of these terms would they be bound. Only then would they give mutual releases.
[40]Queensland Phosphate Pty Ltd v Korda [2017] VSCA 269, 16 [47].
The plaintiff’s submission that the fact that no arrangements were made for the deposit signifies that the parties had not reached a concluded bargain is not a factor to which I give any weight. In the circumstances of this case it is evident that the funds had already been advanced well before the funding transaction was allegedly re- characterised as a loan. In my view reasonable business people would not have sought to provide for a deposit after the fact or to have been aware of the extended definition of deposit in the Sale of Land Act that arguably attaches to the funds advanced in this case.
Other clauses in the mediation terms
In my view, the mutual release clause (2(e)) and the agreement to sign consent orders striking out the proceeding with the right of reinstatement (clause 2(g)) properly construed do not assist either party.
In the case of the mutual release, the original draft provided that the releases were to take effect immediately upon execution of the mediation terms, but the solicitors for the plaintiff amended the original draft by the addition of the words ‘and performance by the defendants of their obligations thereunder’. The mediation terms were signed as amended. The amendment has the effect of postponing the operation of the release until performance of the obligations undertaken but does not determine the nature and extent of those obligations; the mutual release in the form in which it is drafted does not in my view help answer the preliminary question.[41]
[41]Clause 2(e) of the mediation terms.
Similarly, clause 2(g) of the mediation terms, states that the proceeding be struck out with a right of reinstatement and provides for the parties to sign consent orders to that effect, ‘on signing the terms’. On its proper construction this is clearly a reference to the terms to be entered into in the future. This is evident from consideration of the mediation terms as a whole, which in several places employs the expression ‘these terms’ when referring to the mediation terms (cf ‘the terms’ when referring to other terms). In my view, this clause does not help answer the preliminary question either. Though the parties agreed not to strike out the proceeding until terms had been formalised later, it does not indicate whether the parties intended to be bound immediately or only upon signing the formal terms.
Likewise, I found the evidence of the solicitor for the plaintiff regarding a conversation which he had with the mediator is of no assistance in determining the objective intention of the parties at the mediation.
Post-mediation conduct
Finally, in my view the post-mediation conduct of the solicitors for the plaintiff, who sent an email of 9 February 2017 to the Court advising that’ the matter had been settled on the basis of a heads of agreement to be formalised in the deed of settlement which is currently being finalised’ is no more than a recitation of what had occurred. The classes of case identified in Masters v Cameron all contemplate a situation where parties have been in negotiation and have reached agreement on terms and also agree that the subject matter of their negotiations would be dealt with in formal documentation. The solicitors’ email simply recounts that general state of affairs. It does not assist the Court to determine whether the matter had been resolved on terms which were to be immediately binding or on terms that the parties would only be bound when formal terms were agreed upon.
In this case, subsequent to the mediation the parties exchanged a draft deed of settlement which provides a clear indication of what the parties considered important or essential to the transaction. It is significant that the formal terms of the draft deed provide that parties would execute ‘the standard contracts of sale for the settlement lots’ (which includes a Vendor’s Statement, Plan of Subdivision, details of Lot entitlement and Lot liability and a list of fixtures and fittings), a mortgage appearing in a schedule to the draft deed, which specifies the principal sum in consideration for the advance as defined and the settlement date as defined. It is difficult to see that a binding contract in the circumstances of this case could have been formed without important terms to this effect.
Estoppel
Having regard to my findings that the parties did not reach an immediately binding agreement, the question of whether the mediation terms are unenforceable for failure to comply with s 126 of the Instruments Act 1958 or s 32 of the Sale of Land Act 1962 does not arise. As a consequence, it is unnecessary to consider the defendants’ estoppel arguments.
Conclusion
In this matter, I conclude that the mediation terms fall within the third class of case identified in Masters v Cameron, namely that the objective intention of the parties was not to be bound unless and until a formal contract was executed.
Accordingly the answer to the preliminary question is no. It follows that the mediation terms are not enforceable.
I will hear counsel on the appropriate form of orders.
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