Barbara Mergler v HP Mercantile Pty Limited - [2006] NSWSC 179

No judgment structure available for this case.

CITATION: Barbara Mergler v HP Mercantile Pty Limited [2006] NSWSC 179

HEARING DATE(S): 28 February 2006, 1 March 2006

JUDGMENT DATE :
24 March 2006

JUDGMENT OF: Bergin J

DECISION: Application dismissed.

CATCHWORDS: Application for specific performance of an agreement alleged to have been made at a meeting between the parties without the presence of their solicitors - whether binding agreement reached.

CASES CITED: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153
Dare v Pulham (1982) 148 CLR 658
Geebung Investments Pty Limited v Varga Group Investments No 8 Pty Limited (1995) 7 BPR 14, 551
Masters v Cameron (1954) 91 CLR 353

PARTIES: Barbara Mergler (Plaintiff)
HP Mercantile Pty Limited (Defendant)

FILE NUMBER(S): SC 6225/04

COUNSEL: T D F Hughes (Plaintiff)
T G Stitz (Defendant)

SOLICITORS: MBP Legal (Plaintiff)
Versace McKenzie Lawyers (Defendant)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BERGIN J

24 MARCH 2006

6225/04 BARBARA MERGLER v HP MERCANTILE PTY LIMITED

JUDGMENT

1 The plaintiff, Barbara Colette Talbot Riordan Mergler, seeks an order for specific performance on an agreement alleged to have been reached with the defendant, HP Mercantile Pty Ltd, on 12 November 2004 purportedly settling District Court proceedings between the defendant (as plaintiff) and the plaintiff (as defendant).

District Court Proceedings

2 The District Court proceedings related to an investor loan agreement allegedly entered into between Tumut River Orchard Management Limited (in Liquidation) (TROM) and the plaintiff on 30 June 1997 (the Loan Agreement). The purpose of the Loan Agreement was to allow the plaintiff to purchase four allotments in a tax scheme known as the Harcourt Vines Project. The security held for the loan included a charge over the allotments financed by the loan.

3 The defendant, as plaintiff in the District Court, claimed it was the assignee of TROM’s interests under the Loan Agreement and that the plaintiff, as the defendant in the District Court proceedings, had defaulted under the Loan Agreement. The District Court Statement of Liquidated Claim claimed $76,460 as the outstanding balance of the loan. Those proceedings were commenced on 30 May 2002.

4 On 11 July 2003 the defendant was ordered to lodge $20,000 with the District Court for security for costs. It was also ordered to pay the plaintiff’s costs of that motion (the Costs Order). The plaintiff’s solicitors forwarded a Tax Invoice to the defendant’s solicitors in respect of those costs in the amount of $18,105.40. The defendant’s solicitors suggested that the costs should be assessed at the conclusion of the proceedings.

5 In August 2004 there was a settlement conference attended by the plaintiff and her husband, Mr John Mergler, and a solicitor from MBP Legal, solicitors for the plaintiff. Also present at the meeting were Mr Ross Chapman, an agent of the defendant and Peter Ton, a solicitor for the defendant. The settlement negotiations were unsuccessful and, it appears, somewhat acrimonious. The District Court proceedings were set down for hearing on 22 November 2004 for three days. On 20 October 2004 the plaintiff filed a Notice of Motion seeking an order vacating the hearing and referring the matter to compulsory mediation. That Motion was unsuccessful and the plaintiff was ordered to pay the defendant costs of the Motion (the Mediation Motion Costs Order).

6 On 11 November 2004 the plaintiff’s solicitors wrote to the defendant’s solicitors, Versace McKenzie Lawyers, requesting a meeting to attempt to resolve the matter “in the absence of each party’s legal advisors”. The defendant’s solicitors advised that Mr Ross Chapman, an agent of the defendant, would be available “up until 4pm” on Friday 12 November 2004. The defendant’s solicitors also advised that if the plaintiff was unavailable to attend at that time Mr Chapman would be available on Monday afternoon, 15 November 2004 or Wednesday morning, 17 November 2004.

7 The meeting between the plaintiff and her husband and Mr Chapman occurred on 12 November 2004. The outcome of this litigation depends upon the findings in respect of the conversations that occurred at that meeting, which are the subject of analysis later in this judgment. On the one hand the plaintiff claims that a binding agreement was struck at 6pm that evening, and the other hand the defendant claims no such binding agreement was reached.

8 After the meeting correspondence ensued between the solicitors for the respective parties in respect of some Short Minutes of Order and a Deed of Release. Those communications broke down and these proceedings were commenced on Friday 19 November 2004 by Summons.

These proceedings

9 The Summons sought a declaration that “the verbal agreement reached between the Plaintiff and Defendant on 12 November 2004 is a binding and enforceable contract as between the Plaintiff and Defendant” and an order for specific performance of the contract.

10 On 21 December 2005 the plaintiff filed a Statement of Claim in this Court which includes the following:

9. On 12 November 2004, as a result of the District Court proceedings, at the Plaintiff’s request a settlement conference was arranged on a without prejudice basis between the Plaintiff and the Defendant directly, without the presence of either party’s legal advisers (“the 12 November conference”).

10. The parties’ legal advisers were not present at the 12 November conference as the idea of the conference was to allow the parties the opportunity to negotiate the quantum of any possible settlement amount and reach an agreement between themselves so that the District Court proceedings could be finally resolved. Once those terms were agreed upon, the lawyers’ task would be to document the agreement and provide the mechanism for that dismissal of the proceedings.

11. As a result of the 12 November 2004 conference, a binding settlement agreement was reached between the Plaintiff and the Defendant (“the Agreement”)

PARTICULARS

(a) The Plaintiff to pay the defendant the sum of $80,000 made up as follows:

(i) $45,000 by Christmas 2004 subject to bank finance;

(ii) Plaintiff to pay the Defendant the sum of $35,000 in equal instalments over a 2 year period;

(iii) the documentation to record the agreement was to be drawn up by the parties’ respective lawyers.

(b) The Defendant would pay the District Court costs order of 13 June 2003;

(a) The Plaintiff would assign her allotments in the project to the Defendant for the sum of $1;

(b) The District Court costs order of 13 June 2003 be vacated;

(c) The amount of security paid into the District Court by the Defendant was to be released to the Defendant;

(d) All of the existing costs order made in favour of both parties were included in the agreement;

(e) Judgment could be entered against the Plaintiff by the Defendant for the full amount of the District Court claim if the Plaintiff defaulted under the agreement.

(a) instructed her barrister to cease preparation of this matter for hearing. At this time the Defendant similarly instructed its barrister to cease preparation for the hearing;

(b) made regular contact with her bank manager to ensure that finance would be in place to enable the Plaintiff to perform the agreement.

13. On 23 December 2004 the Plaintiff’s refinancing facility was approved.

11 After the commencement of these proceedings an application was made to the District Court to stay those proceedings and in support of that application the Plaintiff and her husband each swore an affidavit. Within Mr Mergler’s affidavit, sworn on 18 November 2004, the following appeared:

(a) Defendant agrees to pay the Plaintiff the sum of $80,000.00.

(b) A lump sum of $45,000 is to be paid by the Defendant to the Plaintiff on or by 20 December 2004 unless otherwise agreed between the parties.

(c) The balance of $35,000 to be paid by the Defendant to the Plaintiff in equal instalments over a two year period.

(d) Plaintiff agrees to pay the Defendant’s costs in accordance with a costs order made on 13 June 2003 in favour of the Defendant of $15,000.

12 The plaintiff’s affidavit sworn on 19 November 2004 in the District Court proceedings simply referred to the content of her husband’s affidavit and stated that she confirmed that the terms of the verbal contract entered into by her were as set out in the abovementioned paragraph in her husband’s affidavit. The District Court proceedings have been stayed pending the outcome of these proceedings.

13 The defendant sought particulars of the plaintiff’s Statement of Claim in these proceedings. In respect of paragraph 11.1(b) the defendant asked what was the “allegedly agreed mechanism by which the quantum of the costs order of 13 June 2003 was to be determined?”. The response was, “as agreed or assessed”.

14 This matter was heard on 28 February 2006 and 1 March 2006. Mr TDF Hughes, of counsel, appeared for the plaintiff and Mr TG Stitz, of counsel, appeared for the defendant. The plaintiff read the affidavits of John Mergler in the District Court sworn on 18 November 2004 (the first affidavit) and an affidavit in this Court sworn on 29 December 2004 (the second affidavit). The plaintiff also read her own affidavit in the District Court sworn 19 November 2004 and her affidavit in these proceedings sworn on 29 December 2004. The defendant read the affidavit of Ross Chapman of 6 April 2005 and the affidavits of Peter Ton, solicitor, sworn 6 April 2005 and 22 February 2006.

Principles

15 Whether a binding agreement has been reached depends on an objective determination of the intention of the parties: Masters v Cameron (1954) 91 CLR 353; Geebung Investments Pty Limited v Varga Group Investments No 8 Pty Limited (1995) 7 BPR 14, 551. All of the circumstances, including the subsequent words and conduct of the parties, are relevant factors in determining whether a binding agreement has been reached: Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153.

12 November 2004 Meeting

16 The meeting on 12 November 2004 (the Meeting) took place in the defendant’s boardroom. Present at the Meeting were the plaintiff, Mr Mergler and Mr Chapman. In his second affidavit, Mr Mergler gave evidence that during the course of the Meeting Mr Chapman said:

The costs order in the District Court if assessed would probably end up being about $12,000 which I acknowledge we still have to pay.

17 Mr Mergler also gave affidavit evidence in his first affidavit that the following conversation took place at the conclusion of the Meeting:

Mr Mergler: In summary, the deal is we will pay you $80,000 over two years. We will pay you $45,000 by Christmas subject to bank finance, with the balance payable over two years. We will let the lawyers sort out the detail and draw up the documents to record the deal.

Mr Chapman: I expect to receive a phone call from you by 6.30pm tonight to confirm the agreement as I need to call off my barrister.

Mr Mergler: That’s fine I will do that.

18 In his second affidavit, Mr Mergler gave the following evidence in relation to the conversation at the conclusion of the Meeting:

Mr Mergler: Ok Ross, so the terms that we have agreed upon, its $80,000 in total, and subject to our finance being approved $45,000 will be paid before Christmas, and the remaining $35,000 will be paid in equal instalments over the next 2 years.

Mr Chapman: I’m happy with that. The details can be worked out by the lawyers on Monday, I will run the deal past my lawyers this evening to let them know. I want you to call me at 6.30pm to confirm the deal and I will then call off my barrister. If you don’t call the deal is off.

19 Mr Mergler claimed that at 6.30pm he telephoned Mr Chapman and advised him, “I confirm the deal is as we discussed”, to which Mr Chapman responded, “I hope the deal we cut will help you sleep more easily and make your life a bit easier”.

20 Mr Chapman gave more detailed evidence in his affidavit in respect of the conversation at the beginning of the Meeting. His evidence included Mr Mergler advising him of a “legal dispute” that the plaintiff and Mr Mergler had been involved in with insurers, builders, contractors and the like in respect of renovations of their home. Mr Mergler referred to a legal bill of $2 million and the consequence of presently living in rented premises as well as having to pay their mortgage. Mr Mergler proposed to Mr Chapman that the only amount that he and the plaintiff could afford to pay the defendant was $65,000 because the plaintiff’s earnings were utilised to pay the mortgage and Mr Mergler’s earnings were utilised for living expenses. In response to the suggestion of $65,000 being the only amount the plaintiff could pay, Mr Chapman claimed the following conversation then took place:

Mr Chapman: Look, $65,000 is just simply not going to be enough to settle this matter. I sympathise with your situation but as we stand today the amount outstanding on your loan is $107,000 plus. On top of this are all of our costs to date.

Mr Mergler: There is a costs order in our favour, I assume you have seen the account forwarded to HP Mercantile’s solicitors.

Mr Mergler: Why does HP want the allotments?

Mr Chapman: The loan was provided to finance the allotments and if there had been no default under the loan terms, the loan would be repaid from proceeds of the project. To write off the loan for a discount and allow the investor to keep the allotments would put a defaulting borrower in a better position than a non-defaulting borrower. Any net sale proceeds from the project would be payable to the defaulting borrower without having to repay a debt, such debt having been partly repaid and partly written off. We hold them as security and could have repossessed them in any case. Their value is Nil and you are more than welcome to attempt to find a buyer willing to pay anything for them.

21 Mr Chapman claims there was a further conversation in which he advised the plaintiff and Mr Mergler of the various amounts of costs that the defendant had incurred in the District Court proceedings and the ultimate amount required to cover the loan debt and the costs totalling $150,000. Mr Chapman then said that to settle the matter on that day, “the amount we need to be talking about is in the order of $110,000”. Mr Chapman claimed that at this point in the conversation the plaintiff commenced to cry and then said that she and her husband simply could not pay that much and asked Mr Chapman, “can’t you accept $65,000”. It was at this point that Mr Chapman spoke of a “hardship application” and that the defendant would consider such an application based on the financial circumstances of the debtor. After explaining the process and the fact that it would take some time, Mr Chapman said:

As I have already said, our barrister has commitments next week so he was intending to work on this file over the weekend. I cannot call him off unless we have a signed settlement. It is not possible to obtain a signed settlement on the basis of a hardship application before the end of the day.

22 Mr Mergler then enquired as to whether the barrister could be called off if agreement was reached. Mr Chapman advised that he could not do that unless, “we have signed off on all the settlement documents necessary”. He further advised that the defendant would “not adjourn the hearing set down for Monday week unless we have a complete settlement fully documented”. Mr Chapman claimed that he then said,:

The only way I can see to avoid the costs of preparing for the hearing is if you were willing to sign consent orders in this matter giving judgment to HP Mercantile and costs to HP Mercantile. We would then agree not to enforce the judgment until you made a hardship application and a decision on that application was made. The downside to this strategy is that you will have to put your trust in us that we will treat you fairly on your hardship application and the amount approved may be more than you will like. The upside is that your maximum loss, as assessed by us, is now limited to less than $150,000 instead of $180,000 if we had to run the hearing and won. The situation does not sit well with me but I am struggling to find a way that will end the matter and call of the hearing by the end of today.

23 Mr Chapman claimed that Mrs Mergler then suggested that would mean that she and her husband “could be up for some $150,000 and be relying on” the defendant to decide any reduction. The plaintiff said that would not be acceptable and she would not be prepared to do that. Mr Chapman agreed that it was not the most satisfactory way of dealing with it as he did not want them coming to him later on if they were unhappy with the final result. Mr Chapman advised that he was still struggling to come up with another solution.

24 At this stage Mr Mergler asked if he and the plaintiff could have a private discussion. Mr Chapman agreed to leave the room and suggested to the plaintiff and her husband that they should “also at least discuss [the matter] with your solicitors before signing anything”. He invited the plaintiff and her husband to contact their solicitors from the boardroom should they wish to do so. Approximately ten minutes later Mr Chapman returned to the boardroom and a further conversation occurred, once again with the plaintiff and her husband pressing for the settlement at $65,000. Mr Chapman resisted a settlement of $65,000 and said:

Given your financial circumstances as you have explained them to me, I could stretch our position and get HP Mercantile to accept, as far as the payment of monies goes in settling these proceedings, an extra $20,000 payable over 12 months. That is $65,000 by Christmas, accepting that this is being funded by your loan refinance, and $20,000 payable over the next 12 months making a total of $85,000.

25 Mr Mergler enquired as to whether they could not “split the difference” and make the figure $75,000. Although Mr Chapman said that $85,000 was as far as he could go, the following conversation then took place:

Mr Chapman: I will make it $80,000 but we have to finish this thing today.

The plaintiff: We are only now talking about $5,000. Why can’t you come down to our $75,000 offer?

Mr Chapman: I am at the bottom of what I can do. In fact I have gone further than I was supposed to go especially given you don’t have to wait for a hardship approval. At the outset, I had no ability to go below the $100 to $110 thousand dollar figure.

Mr Mergler: We will accept that position and we will agree to pay the amount of $80,000 on the basis of $65,000 by Christmas, accepting that this funding is to come from our loan refinance, followed by $15,000 paid in 12 equal monthly instalments commencing in January 2005.

26 After further conversation Mr Chapman observed that the time was approximately 4:30pm and said he did not think it would be possible to have the documents prepared for signing that afternoon. Mr Mergler advised that he and his wife had to leave to pick up their children and also that he would have to “run the deal past our solicitor anyway”. Mr Mergler then requested whether something could be done by phone later in the day. Mr Chapman then said:

Until we have signed the appropriate documents, I am not prepared to call off the hearing on Monday week. Any settlement is subject to the appropriate documentation being signed. However, provided you confirm to me by 6.00pm today that you will accept the deal I will call off the barrister over the weekend and at least save those costs. For the deal to proceed, the documentation must be completed on Monday 15 November 2004 otherwise we will continue with the hearing.

27 Mr Mergler advised that he would tell Mr Chapman by 6pm whether or not he and the plaintiff accepted the payment arrangement. As the Meeting was about to close Mr Chapman said that he and Mr Mergler had a conversation in the following terms:

Mr Mergler: Would you accept an upfront payment of $45,000 instead of $65,000, with the balance, being $35,000 instead of $15,000 payable over 24 months instead of 12 months? This would give us a bit of a financial buffer by leaving $20,000 surplus from the refinancing in the bank to cover contingencies.

Mr Chapman: Look, yes if it assists you we will agree to accept payments in that way. I understand that this will give you a buffer zone given your financial circumstances.

28 At about 4.30pm Mr Chapman had a conversation with Mr Ton, the solicitor for the defendant, in which he advised him that the plaintiff had agreed to pay the defendant $80,000 to settle the whole proceedings with $45,000 up front and $35,000 over two years. Mr Chapman advised that it was “lower than what we should settle for but I felt sorry for her and settle for the amount she could afford to pay back”.

29 At approximately 4.45pm Mr Ton received a telephone call from Mr Martin, solicitor for the plaintiff who said that “it looks like there may have been an in principle settlement”. Mr Ton advised Mr Martin that he understood that the plaintiff had “agreed to pay $80,000 all up” and referred to the payment regime of $45,000 immediately and $35,000 over two years. Mr Martin asked Mr Ton to call off the barrister, but Mr Ton required confirmation of the details of the in principle settlement in writing before he would do that. Mr Martin then indicated that he did not have those instructions but that Mr Ton should call the barrister off in any event. Ultimately Mr Ton agreed to call off counsel on the basis that the terms of settlement were sent to Mr Ton by Mr Martin not later than Monday, 15 November 2004. Mr Ton proceeded to instruct the barrister to cease work over the weekend and left a message for Mr Martin at his office that he had done so.

30 Mr Chapman’s evidence was that at approximately 6pm Mr Mergler telephoned him and said “I confirm the deal is as we discussed” to which he responded, “I hope the deal we cut will help you sleep more easily and make your life a bit easier”.

Subsequent events

31 During the weekend Mr Chapman prepared a precedent Deed of Release and Short Minute of Order for the defendant’s solicitors to finalise and send to the plaintiff’s solicitors. Mr Ton spoke with Mr Chapman early on Monday morning at which time Mr Chapman advised Mr Ton that the “exact settlement terms” were:

$80,000 all up. $45,200 by 20 December 2004 and $34,800 over two years paid monthly. If she defaults on the payment arrangement judgment for the full amount on the loan schedule I’ve given you. Assignment of her allotments for $1. Use the usual deed of release and assignment, and consent orders.

32 Mr Ton said to Mr Chapman that he assumed that the Costs Order was to be vacated. Mr Chapman agreed because the “settlement amount covers all costs of the proceedings”. Mr Ton completed the draft documents and forwarded them to the plaintiff’s solicitors by facsimile that morning. Mr Martin telephoned Mr Ton after receipt of the fax and asked him to forward a copy of the Deed and the Short Minutes of Order by email so that he could make some changes that he promised to send Mr Ton when he had some instructions. Mr Ton sent the documents by email to Mr Martin and advised that it would be unlikely that his client would accept any changes to the Deed and the Consent Orders. He also advised that the time for the defendant to accept the Terms of Settlement had passed and Mr Ton would be obtaining instructions as to whether the offer was still open.

33 On Tuesday 16 November 2004 Mr Martin telephoned Mr Ton and informed him, “our clients made a deal and you can’t back out of it”. Mr Martin advised Mr Ton that he was just “fiddling around the edges” with the documents that had been sent to him.

34 On the morning of 16 November 2004 Mr Chapman had a conversation with the plaintiff in which he asked her what the problem was with the Terms of Settlement. The plaintiff advised Mr Chapman that she was going into a meeting and would not be available to discuss the issues until later in the day but that the differences were minor and could be fixed up easily. Mr Chapman asked the plaintiff to leave a message for him on his mobile phone as to when she would be available to speak with him.

35 There were some further telephone conversations between Mr Martin and Mr Ton which culminated in an email to Mr Ton from Mr Martin at 4.15 pm on 16 November 2004 in the following terms:

I am instructed that on Friday last a settlement in this matter occurred between our respective clients on the following terms:

___________________________________________________________

(i) The Defendant has agreed to pay to the Plaintiff the sum of $80,000 less the set-off contained in (iii) below;

(ii) Payment to be made in equal instalment payments over a 2 year period;

(iii) An amount of $15,000 (acknowledged by your client as still owing) in respect of an adverse costs order made against the Plaintiff in favour of the Defendant was to be set-off against this $80,000;

(iv) Such that the net amount agreed to be owing by the Defendant to the Plaintiff was $65,000 .

I also note the Plaintiff by its proposed consent orders and deed of release intends to receive a further substantial benefit, in that it wants the adverse costs order against it in relation to the security for costs application to be vacated, despite your client’s acknowledgement that this amount was still owed to the Defendant by the Plaintiff. This term was not included in the deal struck between our respective clients either.

On a strictly without prejudice and without admission basis, our client is prepared to assign the allotments in the scheme to the Plaintiff for $1, provided that no other terms of the agreement are unilaterally amended, added or varied by the Plaintiff and the agreement remains in accordance with the terms (i) to (iv) set out above.

I confirm my comments made to Peter in my telephone conversation with him that the proposed consent orders were not in a form which will be made by the Court in any event, and that the most appropriate way for this matter to be dealt with as far as the Court is concerned is the (sic) vacate the hearing date, place the matter into the Not Ready List whilst the installment payments are made, and to refund the $20,000 security payment.

36 Mr Martin attached an Amended Deed to this email that included an additional paragraph in the following terms:

19. HPM will indemnify the Grower for any tax liability, including but not limited to CGT or GST, which the Grower is required to pay as a result of the assignment contained in this Deed.

37 The Amended Deed also changed the settlement amount from $80,000 to $65,000, with $45,200 payable on or before 20 December 2004 and the balance by instalments of $4,950 on 15 July 2005, 15 January 2005 and 15 July 2006, followed by a final payment of $8,700 payable on 15 January 2007. The figures suggested in the Amended Deed are peculiar because if these arrangement were to be implemented the plaintiff would pay a total of $68,750, being $11,250 less than the $80,000.

38 According to Mr Chapman’s evidence, it was at 4.45pm on 16 November 2004 that he had a further telephone conversation with the plaintiff in which he claimed the plaintiff said:

Let’s just analyse how the $80,000 was made up. You said that the principal sum outstanding was $37,000 and that you had incurred $35,000 in costs. You also said that the amount payable under the costs order was $15,000.

39 Mr Chapman responded, “I did not say that and the deal was that you would pay $80,000”. The plaintiff did not give any evidence denying this conversation. The figures suggested by the plaintiff in this conversation are also peculiar. According to that regime the total payment by the plaintiff, less the claimed $15,000 would be $57,000.

40 Shortly after his conversation with the plaintiff Mr Chapman had a conversation with Mr Ton in which, according to Mr Ton, Mr Chapman advised that he had just spoken with the plaintiff and that he told her that he would not allow her to “try and screw us”. Mr Chapman advised Mr Ton that he had given the plaintiff until 6pm that evening to accept the Deed of Release and sign the Consent Orders without amendment otherwise the defendant would proceed to the hearing in the District Court.

41 There were some further discussions between the solicitors but it was at this stage that the parties’ negotiations ceased and these proceedings were commenced.

Was agreement reached?

42 The plaintiff submitted that at the end of the Meeting the parties were in accord about the way the matter was to be resolved. It was submitted that the parties were expecting that at the end of the Meeting they would both do whatever was necessary to give effect to what had been agreed during the Meeting. The mechanics whereby the settlement agreement was to be effected were to be contained in a document to be drawn up by the parties’ lawyers but, it was submitted, that document would be a mere recording of the agreement.

43 The plaintiff claimed that the principals of each party had come to a concluded agreement either at the end of the Meeting or alternatively about 6.00pm on 12 November 2004 when Mr Mergler telephoned Mr Chapman to confirm that the agreement reached at the Meeting. It was submitted that from that point on it is clear that the parties intended to be immediately bound by the agreement they had reached.

44 The plaintiff claimed that the agreement reached on 12 November 2004 was that the plaintiff would pay to the defendant $80,000, $45,000 by Christmas and the balance by instalments over a two year period. The plaintiff also claimed that the defendant agreed to pay a costs order in the District Court in the plaintiff’s favour in the amount of $15,000.

45 It is clear that the figure of $80,000 was agreed at the Meeting. The real question in issue between the parties is whether or not the defendant agreed to be bound by the Costs Order in the plaintiff’s favour and to pay the plaintiff $15,000 irrespective of the amount the plaintiff agreed to pay the defendant.

46 The plaintiff did not give any evidence independently from that given by her husband other than in a most general way. For instance in the affidavit sworn on 19 November 2004 in the District Court proceedings the plaintiff gave the following evidence:

3. I was personally present at the meeting which occurred on 12 November 2004 deposed to at paragraph 2 of John’s affidavit.

4. I confirm that the terms of the verbal contract entered into by myself and my husband with [H P Mercantile] were as set out in paragraph 2 of John’s affidavit.

47 In the affidavit sworn in these proceedings on 29 December 2004, the plaintiff stated that she had read her husband’s affidavit of the same date in these proceedings and gave the following evidence:

3. At the conclusion of the meeting held on 12 November 2004 at the Defendant’s offices I understood that the Defendant had acknowledged it still had to pay the costs order made in my favour in the District Court of New South Wales in proceedings 4787 of 2002 on 13 June 2003.

48 There was no objection to the contents of Mrs Mergler’s affidavits. Mr Mergler was the first witness in the plaintiff’s case. After the conclusion of Mr Mergler’s evidence the plaintiff gave evidence in chief identifying her name, address, occupation and the fact that she had sworn the two affidavits to which I have referred. The defendant’s counsel, Mr Stitz, advised that he had no cross-examination of the plaintiff.

49 The evidence that Mr Mergler gave in his second affidavit of the discussion at the Meeting in relation to the Costs Order was that Mr Chapman had said during the Meeting that: “the costs order in the District Court if assessed would probably end up being about $12,000 which I acknowledge we still have to pay”. In his first affidavit Mr Mergler made no mention of the costs order when he recounted the conversation he had with Mr Chapman at the Meeting. Certainly, his first affidavit included paragraph 2(d) stating that the contract “entered into” on 12 November 2004 at the Meeting included the term that the “[HP] agrees to pay the [Mrs Mergler’s] costs in accordance with the costs order made on 13 June 2003 in favour of the Defendant of $15,000”.

50 Mr Mergler was cross-examined in relation to this aspect of his evidence.

Q. In sub-paragraph (d) of paragraph 2 you are quite specific that the plaintiff, that being H P Mercantile in those proceedings, was to pay your wife the sum of $15,000 in respect of that costs order on 13 June 2003.
A. Yes, I am.

Q. Where did that figure of $15,000 come from?
A. There was a discussion during the meeting where the costs order was discussed. We had been advised by our solicitor that the costs order stood at $18,000. We had been advised that after assessment, it would most likely come down to $15,000, and Mr Chapman suggested, on assessment, it would come down to perhaps $12,000.

Q. So you were saying that the figure of $15,000 was based on what your solicitor told you that the costs order would tax out at?
A. Yes, we were given advice by our solicitors.

Q. You didn’t get that from Mr Chapman, did you?
A. No, he suggested that it was $12,000.

Q. And depending upon which it was, that would ultimately determine how much your wife had to pay HP Mercantile.
A. It would ultimately determine how much was to be paid by HP Mercantile for the costs order.

Q. Which would ultimately affect how much your wife had to pay HP Mercantile?
A. No, the agreement was we were to pay HP Mercantile $80,000.

(tr 2-3)

51 Mr Mergler agreed that he did not turn his mind to any other costs order that had been made in the proceedings at the Meeting on 12 November 2004. He gave evidence that at the conclusion of the Meeting both parties agreed that the lawyers would, on Monday morning, detail the arrangements (tr 4). Mr Mergler also gave the following evidence:

Q. And would it be fair to say that the only thing expressly agreed upon in your mind was that the amount of $80,000 would be paid to HPM and that there was an instalment proposal discussed?
A. Plus that there was an agreement that the costs order would be honoured by HP Mercantile.

Q. When you say “an agreement that the costs order would be paid”, that was in fact an assumption on your part was it not?
A. It was not an assumption. Ross Chapman clearly said that after assessment, the costs order, in his eyes would be in the order of $12,000 and he acknowledged that HP Mercantile had to pay that amount.

Q. So that the agreement is your wife pays HP $80,000 and Mr Chapman agrees he will pay your wife $12,000.
A. That is not how it transpired. We believed the mechanism involved here is that the costs order – HP Mercantile, regardless of what happened in that settlement meeting, had to meet that costs order, of whatever it was assessed at finally. We suggested that it was $15,000 on advice from our solicitors. He said it was more like $12,000.

Q. Can I take you back to paragraph 2 of your affidavit of … November, filed in the District Court.
A. Yes.

Q. Can you tell me where in your assertion as to what the agreement was, there is any provision there for the costs order to be agreed or assessed?
A. It doesn’t state that.

Q. In fact, it says quite specifically that the amount was $15,000?
A. That’s what we believed it would be.

Q. But is not what Mr Chapman said, was it?
A. He believed it to be $12,000, we believed it to be $15,000.

Q. $15,000 is not what Mr Chapman said, was it?
A. I said before, he said that after assessment he believed that it would be $12,000.

Q. Or, alternatively, it could have been some other sum.
A. We were going on our best advice. $15,000 was what our solicitors suggested the amount would be after assessment.

Q. Didn’t Mr Chapman tell you in his view he thought it would be assessed at as little as $8,000?
A. No, he did not.
…

Q. It is the case, is it not, that you did not say to Mr Chapman that you thought the costs order would be assessed at $15,000 did you?
A. I was acting on information supplied to me by my solicitors that the costs order would be assessed at about $15,000.

Q. I understand that, but you didn’t say that to Mr Chapman, did you?
A. Yes we did, I certainly did.

(tr 4-6)

52 Mr Mergler gave evidence that when he saw the Short Minute of Order vacating the costs order he “clearly said” that it was not the arrangement struck the previous Friday. Although at cross purposes with the cross-examiner, Mr Mergler gave the following evidence:

53 Mr Stitz returned to the topic of the costs order at the conclusion of his cross-examination of Mr Mergler. Mr Mergler gave the following evidence:

Q. Just in closing, I want to talk about the net position, that is, the net position after you paid HPM $80,000, they paid the costs order, meaning that at the end of the day there is a net balance of some amount, do you agree with that proposition?
A. There is a logic there, yes.

Q. If we have a look of your affidavit of 18 November 2004 and specifically paragraph 2 thereof. Quite clearly the net position, as you have expressed there, from your understanding of the meeting some six days prior, was that the net position was $65,000?
A. I don’t say that.

Q. Well, what else could $80,000 less $15,000 be?
A. The conclusion of the meeting was that we would pay them $80,000 in instalments. The $15,000 would be paid back to the Courts and from that point would make its way back to our solicitors. We had no calculation in mind that we were to have a net position of $65,000.

Q. Paragraph 2(d) couldn’t be clearer?
A. In what respect?

Q. You are specifically stating HPM pays your wife $15,000, leaving a net of 65?
A. The defendant’s costs which were payable to the Courts.

Q. Where does it say that?
A. That was our understanding of the mechanism involved, that it was a costs order to the Courts that we would eventually receive back via our solicitors.

(tr 14-15)

Q. And clearly, sir, Mr Chapman did not acknowledge or suggest in any way an ongoing liability to pay you that costs order or an intention to pay that costs order?
A. He acknowledged that HP Mercantile still had to pay the costs order outstanding.

Q. And I suggest to you the discussion about the costs order came up on the context of what the parties had been spending by way of legal expenses?
A. No, we asked him directly how he arrived at his sums, at his figures.
Q. But you haven’t chosen to put on any evidence of that, have you?
A. Any evidence for?

(tr 17)

54 Mr Chapman denied having said the words that Mr Mergler claimed he said in relation to the Costs Order (par 45). Mr Chapman claimed in his affidavit that the words he said in relation to the Costs Order were as set out earlier in this judgment. They are set out again hereunder for ease of reference:

Mr Mergler: There is a costs order in our favour, I assume you have seen the account forwarded to HP Mercantile’s solicitors.

55 Mr Chapman was cross-examined in relation to this aspect of his affidavit and his evidence included the following:

Q. You say that you said, “Yes, I have seen the account. You claim an amount of $18,000 plus, which we consider to be a ludicrous number”?
A. Yes.

Q. You didn’t say that at all, did you?
A. Yes, I did.

Q. Nor did you say, “our estimate is that your real costs for this Notice of Motion would be no more than 10 to 12,000 and even at this level, it would, in all likelihood be reduced in taxation to 8”?
A. That’s exactly what I said.

Q. Insofar as this figure is concerned, do you tell the Court you were thinking in terms of the tax and the costs award that had been made in the District Court in favour of the defendant in the District Court?
A. No, I was thinking of a discussion – that was introduced by Mr Mergler along the lines of, “You owe us some money and you owe us a lot of money”, and in his mind there was a $18,000 bill sent to us, and I was suggesting to him that even at its best that bill, as paid, if paid, would be taxed in the order of $8,000.

(tr 27)

56 Mr Chapman also gave the following evidence:

Q. You understood that that - or that conversation you attribute to Mr Mergler to be a conveying to you by him of an enquiry as to whether a deal could be done or finalised by telephone later that day?
A. Yes, if the amount could be finalised by telephone by - that day.

Q. If the amount could be finalised by telephone later that day?
A. Yes.

Q. You were prepared to finalise the amount, weren't you?
A. Yes.

Q. You said, "Any settlement is subject to appropriate documents being signed", do you see in the middle of page 8?
A. Yes.

Q. You say, "However, provided you confirm to me by 6 pm today that you will accept the deal I will call off the barrister over the weekend and at least save those costs". You see that?
A. Yes.

Q. You were talking at that point about the deal, weren't you?
A. The amount.

Q. The deal?
A. My reference is to the amount.

Q. Your reference, Sir, is to the deal?
A. I know the word I used. The word I used is referring to the amount.

(tr 35)

Q. You said to him, "Look, yes, if it assists you we will agree to accept payment in that way. I understand this will give you a buffer zone given your financial circumstances"?
A. Yes.

Q. Now, would you go to paragraph 46.
A. Yes.

Q. At 6 o'clock or thereabouts you received a call from Mr Mergler. You see that?
A. Yes.

Q. You accept that so much. The last arrangement that was being discussed before you received the call from Mr Mergler was the one I have just taken you to, wasn't it - on your view of it that is referred to in paragraph 41?
A. Yes, that's correct.

Q. And Mr Mergler said, "I confirm the deal is as we discussed"?
A. Yes.
Q. Correct. And you said, "I hope the deal we cut will help you sleep more easily and make your life a bit easier"?
A. Yes, I did.

Q. Because you regarded yourself as having, on behalf of the defendant company, cut a deal that day at 6 o'clock, didn't you?
A. Yes, we cut a deal. As I mentioned before, the deal was the amount, with documents to be finalised by the Monday.

Q. And you very kindly said, "I hope the deal we cut helps you sleep more easily and make your life easier". You said that, didn't you?
A. Yes, I did.

Q. Because as far as you were concerned, it would give the Merglers peace of mind to know that they had arrived with you at a resolution of the dispute that existed between you?
A. Arrived at an amount that we agreed on --

Q. well --
A. substantially less than the liability.

Q. The amount was an important matter?
A. Absolutely --

Q. essential?
A. Absolutely, it's an essential matter.

Q That was really what this negotiation was all about, wasn't it - arriving at an amount - because it's all about price for a debt collector, for what price you can get out of a --
A. That is all the time we had to negotiate during the meeting because the Merglers had to cut it short because of family commitments and all we had time to reach right up to the walking out of the door was the amount and how it was to be paid.

Q. Now, that was the deal - the amount - that was the deal you were referring to, wasn't it, because that was the deal? That was the price of the settlement?
A. Yes.

Q. The critical issue was the amount, wasn't it, as far as you were concerned?
A. A critical issue.

(tr 36-37)

Q. You had a settlement in principle. Do you agree so far?
A. We had - we had agreed on the amount we were going to settle on and some terms, other terms were discussed at the meeting, but that is as far as it went.

Q. On a deal you had cut on some substantive matter?
On a deal you had --
A. One imagines that on some substantive matter. We cut a deal on some substantive matters.

Q. Do you accept that you regarded yourself as having cut a deal with Mrs Mergler, which deal could fairly be described as a settlement in principle of the claim H P had against her?
A. I think that is going just a bit further than I would go. I would suggest that we had a deal cut of a settlement in principle covering substantive matter of the amount to be paid and how it was to be paid. My understanding was we also agreed on an assignment of allotments. Other substantive matters had yet to be agreed between the parties, none the least of which is what happened if they did not make the payments.

(tr 38-39)

57 Paragraph 9 in Mr Mergler’s second affidavit, to which there was no objection, was as follows:

I understood at the close of that meeting that the Defendant as a result of its acknowledgment … would still pay the costs order of 13 June 2003. I did not feel the need to refer to the costs orders at the conclusion of the meeting as I believed HPM had acknowledged it would still be paying that costs order.

58 The plaintiff’s affidavit of 29 December 2004 included paragraph 3 referred to earlier but set out hereunder for ease of reference:

59 Neither the plaintiff, her husband nor Mr Chapman made a note of the discussions and/or outcome of the Meeting at the time of the Meeting and there is no evidence from Mr Martin, the plaintiff’s solicitor, of any note that he took when contacted by the plaintiff or her husband immediately after the Meeting. The closest to a contemporaneous note of what occurred at the Meeting is Mr Ton’s note of a conversation he had with Mr Martin, the plaintiff’s solicitor, soon after Mr Ton had spoken to Mr Chapman at 4.30 pm only minutes after the conclusion of the Meeting. Mr Ton did not make a note of the conversation with Mr Chapman but the note of the conversation with Mr Martin at 4.45 pm was in the following terms:

60 There is no mention of Mr Martin suggesting that the “in principle settlement” included the additional element of the defendant paying the plaintiff $15,000. The next note was made by Mr Ton at 8.45 am on Monday 15 November 2004 of a conversation he had with Mr Chapman at that time. The note was in the following terms:

$34,800 over 2 years. Monthly payment default – re schedule amount $107k

61 Mr Hughes submitted that by reason of the combination of the plaintiff having given affidavit evidence that her husband’s affidavit was “a correct and accurate reflection” of the Meeting and the defendant’s failure to cross-examine the plaintiff when she was made available for cross-examination, I would conclude that it is more probable than not that Mr Chapman did say the words deposed to by Mr Mergler, that “the costs order in the District Court if assessed would probably end up being about $12,000 which I acknowledge I still have to pay”. I will take into account the absence of cross-examination of the plaintiff but I should also note the very general nature of her evidence with no detail or context of any statements allegedly made by Mr Chapman and her reliance upon her husband’s evidence.

62 The discussion at the Meeting covered a number of topics and it is clear to me that the plaintiff was very keen to settle for $65,000. That figure was pressed on Mr Chapman a number of times. I am satisfied that Mr Chapman was sympathetic to the plaintiff and her financial difficulties and that is why he dropped down to $80,000 and agreed to a regime for payment that would give the plaintiff and her husband a “financial buffer”. I am satisfied that the discussion in relation to the Costs Order was at a time in the Meeting when the parties were dissecting the costs incurred by each of them and setting the ambit for discussion of what amount would settle the matter. There were other costs orders, including the Mediation Motion Costs Order that were not discussed at all.

63 Mr Hughes submitted that I should have real concerns in relation to Mr Chapman’s credit and reliability. In support of this submission reliance was placed upon a computer search (Ex A) that suggests that Mr Chapman prepared the draft documentation for settlement on Saturday evening, 13 November 2004. Mr Hughes submitted that such preparation by Mr Chapman is inconsistent with the following paragraph in his affidavit evidence:

47. On 12 November 2004, I instructed Versace McKenzie Lawyers to contact the Defendant’s barrister to advise him not to incur any further costs in this matter over the weekend. I also instructed Versace McKenzie Lawyers to prepare the appropriate documentation to finalise the District Court Proceedings and enable us to vacate the hearing dates of 22, 23 & 24 November 2004. My instructions were that until the appropriate documentation was finalised and executed, the hearing was not to be vacated but no further costs were to be incurred. I also instructed Versace McKenzie Lawyers that the documentation to finalise this matter was to be settled by close of business Monday 15 November 2004 or the hearing in this matter would proceed on 22 November 2004.

64 It was submitted that far from the lawyers preparing the draft documentation, as Mr Chapman’s evidence suggested, the commercial party who was present at the Meeting prepared it. Mr Hughes was critical of Mr Chapman for not having mentioned in his evidence that he had prepared these documents. This material was not put to Mr Chapman as Mr Hughes did not receive the computer search until after Mr Chapman had completed his evidence. As Mr Stitz said, application could have been made to recall Mr Chapman for the purpose of putting the material to him and allowing him the opportunity to give evidence about it, but Mr Hughes did not make such an application nor did Mr Stitz seek to recall Mr Chapman after the computer search was admitted, without objection (tr. 97). Mr Hughes submitted that Mr Chapman’s failure to mention his preparation of the documents on the Saturday evening was a deliberate and telling omission from his affidavit and that it was a “major concern” in terms of assessing Mr Chapman’s credit.

65 Mr Ton gave evidence that after the Meeting, at about 4.30pm, Mr Chapman asked him to “start working on the settlement documents now” and said that he wanted “everything sorted out by Monday” (par 57). Mr Ton was cross-examined in relation to the computer search and explained that Mr Chapman had been provided with electronic precedents that had been created by Versace McKenzie for the defendant for use in settlements in other cases. Mr Ton said that when he spoke to Mr Chapman on the Monday morning, 15 November 2004, they discussed the document that Mr Chapman had left for him “to see if that was sufficient to represent what the agreement was”. Mr Ton then created the fax, which Mr Chapman approved, and it was sent to the plaintiff’s solicitors.

66 Mr Chapman had informed the plaintiff that the settlement documentation had to be finalised on Monday and there was the pressure of the imminent hearing the following Monday with counsel having to prepare for that hearing if the matter was not settled. It is perfectly understandable that Mr Chapman wanted to ensure that the documentation was prepared in time. The fact that he utilised a precedent and left it for Mr Ton to effectively “settle” is, in my view, also perfectly understandable. I do not regard the absence of evidence from Mr Chapman that he utilised a precedent on Saturday evening after he had asked Mr Ton to prepare the documents on the Friday as a material inconsistency. I am not persuaded that this evidence has any adverse impact on Mr Chapman’s credit or reliability.

67 A further matter raised by Mr Hughes in respect of Mr Chapman’s credit was contained in a supplementary submission in a facsimile from the plaintiff’s solicitors dated 2 March 2006 after I had reserved my judgment. It was in the following terms:

In her Honour’s deliberations concerning the assessment of Mr Chapman’s credit, regard ought to be had to paragraph 55 of Mr Chapman’s affidavit sworn 6 April 2005, paragraph 79 of Mr Ton’s affidavit of 6 April 2005 and the transcript at page 54 line 22 to page 55 line 22.

68 Paragraph 55 of Mr Chapman’s affidavit is the evidence of the conversation with the plaintiff at approximately 4.45pm on 16 November 2004 outlined earlier in this judgment. Paragraph 79 of Mr Ton’s affidavit details the conversation with Mr Chapman on the same day, referred to earlier in this judgment, in which Mr Chapman reported to Mr Ton that he had informed the plaintiff that he would not allow her “to try and screw us”. The transcript reference at pages 54 to 55 includes the following:

Q. You told her that you will not allow her to try and screw us do you remember that?
A. No, I didn’t say that.

Q. You didn’t say that? You told her that she had until 6pm to accept your deed of release and assignment and consent orders without amendments otherwise we will run the hearing, that is what you told her isn’t it?
A. Yes.

Q. It was a heated conversation wasn’t it?
A. Yes, it was.

Q. But you denied telling her that you wouldn’t allow her to screw us?
A. I think I used the word “renegotiate me”.

Q. Renegotiate you?
A. Yes.

Q. You didn’t tell Mr Ton at 4.55pm, about 10 minutes after this phone call with Mrs Mergler, that you had told Mrs Mergler that you would not allow her to screw us did you perchance?
A. Did I tell Mr Ton that I said that in this conversation?

Q. I suggest you did but you have chosen to leave out the heated parts of the conversation in paragraph 55?
A. I think it was heated from the start.

Q. How long did it go for?
A. Very short, one minute perhaps.

69 It seems to me more probable than not that Mr Chapman informed Mr Ton that he had told the plaintiff that he would not allow her to “try and screw us”, but what he actually said to the plaintiff on the topic is not as clear. It is clear that Mr Chapman accepted in his cross-examination that the conversation with the plaintiff was heated from the moment it commenced. On the assumption that he reported accurately to Mr Ton that part of the conversation that he had with the plaintiff, it is probable that he used those words to the plaintiff. There was no evidence from the plaintiff in relation to this conversation. In any event I will take this denial of the use of those words into account in assessing whether Mr Chapman is to be believed in his denial of the statement that he acknowledged that the defendant still had to pay the Costs Order.

70 Another aspect of Mr Chapman’s evidence upon which Mr Hughes relied to attack his credit was the cross-examination referred to earlier in this judgment in relation to the statement he made to Mr Mergler when he telephoned him at 6pm on 12 November 2004. Mr Hughes submitted that in cross-examination (set out earlier) Mr Chapman was attempting to suggest that a “deal” had not been done or struck. It is true that Mr Chapman referred to the “amount” having been agreed when he was asked about his use of the words “the deal we have struck”, but I am of the view that what he was intending to convey in this evidence was as he said (tr. 36) “Yes, we cut a deal. As I mentioned before, the deal was the amount, with documents to be finalised by the Monday”.

71 It seems to me that the absence from Mr Mergler’s first affidavit of any mention of a conversation in which Mr Chapman is said to have acknowledged that the defendant “still had to pay” the Costs Order of “about $12,000” is a matter to be taken into account when assessing the competing versions of the discussion at the Meeting in relation to the Costs Order. It is of some significance because Mr Mergler did depose to some conversation at the Meeting in his first affidavit but there was no mention of any discussion about the Costs Order. It was not until the second affidavit, some six weeks later that Mr Mergler claimed that Mr Chapman had said that the Costs Order “if assessed would probably end up being about $12,000 which I acknowledge we still have to pay”. That statement is at odds with paragraph 2(d) of Mr Mergler’s first affidavit in which he claimed that the “verbal contract” was that the defendant had agreed to pay the plaintiff $15,000 for the Costs Order. When Mr Mergler was cross-examined about this difference he resorted to the explanation that it was the “advice from our solicitors” that the amount would be $15,000. That is a very different matter from a claim in an affidavit that the defendant had agreed at the Meeting to pay the plaintiff $15,000.

72 Mr Mergler’s evidence in cross-examination in relation to the “net position” of the plaintiff was that although the proposition that $80,000 less the payment of the Cost Order by the defendant led to a net balance, had “a logic” to it, “we had no calculation in mind that we were to have a net position of $65,000”. He said he thought the costs to be paid by the defendant pursuant to the Costs Order were to be paid “to the Courts” and then it would “make its way to” the plaintiff’s solicitors and eventually back to the plaintiff and himself.

73 In his affidavit evidence Mr Mergler did not place the alleged conversation about the Costs Order in any context other than stating that it was “during the course” of the Meeting. On the other hand Mr Chapman, in his affidavit evidence, placed the conversation that he alleges occurred in context. Mr Mergler accepted that the discussion about the Costs Order occurred early in the Meeting and that it was at a time during which the parties were discussing the various amounts that had been incurred by each side (tr 8). Mr Chapman’s version of what was said about the costs order includes Mr Mergler raising its existence with him. In cross examination Mr Chapman said:

This is a conversation of competing claims, if you like, at this stage. “You owe us so much”. “We owe you so much”. I didn’t ever dispute the fact that, as we said in that meeting, HP Mercantile had a costs order against it in their favour. This conversation was an issue about what the quantum of that might be.

(tr 27)

74 I am satisfied that the parties discussed the quantum of the Costs Order in more detail than that suggested by Mr Mergler. Indeed, Mr Mergler gave no affidavit evidence as to what was said that prompted Mr Chapman to say that the Costs Order would probably end up being “about $12,000”. Mr Mergler did not give any evidence about any discussion of the amount of $15,000. The bill or invoice sent by the plaintiff’s solicitors to the defendant’s solicitors was for approximately $18,000. Although Mr Mergler denied that there was any mention of the figure $18,000 in the conversation, I am satisfied that this figure was discussed in the context of the figure that would “end up” at $12,000. Mr Chapman recollects indicating to Mr Mergler and the plaintiff that costs of $18,000 for an argument over security for cost of $20,000 was “ludicrous”.

75 Mr Mergler made no mention of the Cost Order at the latter part of the Meeting and importantly at the end of the Meeting when his evidence was that he said to Mr Chapman:

OK Ross, so the terms that we have agreed upon, its $80,000 in total, and subject to our finance being approved $45,000 will be paid before Christmas, and the remaining $35,000 will be paid in equal instalments over the next 2 years.

76 Mr Mergler’s evidence, in his second affidavit, was that the reason he did not mention the alleged agreement in relation to the Costs Order at the conclusion of the Meeting was because he did not “feel the need” to refer to it because Mr Chapman had said, “I acknowledge we still have to pay” the Costs Order. Mr Mergler gave no explanation for not mentioning the alleged agreement that the defendant was to pay the Costs Order when, an hour and a half later, apparently after speaking to the plaintiff’s solicitor, he rang Mr Chapman at about 6pm and said, “I confirm the deal is as we discussed”. The plaintiff’s solicitor, Mr Martin, made no mention of the Costs Order when he telephoned Mr Ton after the Meeting.

77 At the end of the Meeting Mr Mergler said to Mr Chapman that the agreement was $80,000 “in total”. What Mr Ton said to Mr Martin after the Meeting was that he understood that the plaintiff had agreed to pay $80,000 “all up”.

78 Mr Mergler described his occupation as “recruitment specialist” and in his conversation with Mr Chapman at the Meeting he referred to his occupation as a “Head Hunter”. The plaintiff described her occupation as “media director” (tr. 19). Mr Chapman gave unchallenged evidence that at that part of the Meeting when he returned to the boardroom after the plaintiff and Mr Mergler had asked for some time in private, there was a conversation in which the plaintiff said:

Look in my job I am negotiating all the time and I am pretty good at it. All you are doing now is negotiating a position for the sake of negotiation.

79 I am conscious of the statement made by Kirby P in Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd at 14,570:

Courts should be the upholders of bargains and not their destroyers. Of course, I realise this aphorism, derived from the cases, begs the question to be solved. However, it is important that courts should approach challenges such as the present avoiding an over-nice approach to the arrangements between the parties which result in a disharmony between the parties’ reasonable expectations and what our law provides. To strike down the agreements of the parties here, themselves and without solicitors, to settle their dispute, would disappoint legitimate and reasonable expectations of the parties and of the community. The law should strive to avoid that result in every case, but particularly in an agreement between business people whose agreements the law should be specially ready to uphold and enforce.

80 The plaintiff, her husband and Mr Chapman were negotiating without solicitors. They could probably be described as business people and there is no doubt that they were striving to reach agreement. On the other hand, the following observations of Gleeson CJ, at 14,553 in the same case, seem more apt to the circumstances of this case:

In an appropriate case, it is open to a court to find that lay clients, in the absence of their lawyers, have settled pending litigation between them, even though there are some formalities as to the disposition of the legal proceedings left to be worked out by the lawyers. In such a case, the agreement made by the parties may clearly imply what is to be done by the lawyers. On the other hand, if the nature of the dispute between the parties is such that its resolution necessarily requires agreement on certain points, or if the parties themselves contemplate that they must agree on those points, then failure to agree on such points cannot be ignored by a Court in the supposed interest of giving effect to the expectations of the parties. That would be to disregard their intentions.

81 In cases such as this where it is word against word, with neither party taking notes, it is very difficult to be certain of what was actually said. But that is not the test. I am satisfied on the balance of probabilities that the conversation in relation to the Costs Order was as claimed by Mr Chapman. The parties were discussing and dissecting the various amounts that had been incurred at the early part of the Meeting. Mr Chapman started the negotiations with a figure of $110,000 and dropped it by $30,000 over a series of offers and counter-offers as can be seen from the exchange as evidenced in his affidavit, most of which, but for the discussion about the Cost Order is not disputed.

82 I am satisfied that the words used by Mr Chapman in the context of the Meeting as a whole were not such as to provide an inference or suggestion that the defendant would pay the Costs Order irrespective of the amount the plaintiff agreed to pay the defendant. A reasonable and objective assessment of that conversation in the context of the whole Meeting leads me to conclusion that there was no agreement that the defendant would pay to the plaintiff $15,000 or $12,000 or costs as agreed or assessed irrespective of the $80,000 that the plaintiff was to pay the defendant.

83 It seems to me that but for the plaintiff’s claim that the defendant agreed to pay the Costs Order (irrespective of the payment of $80,000 by the plaintiff) the parties had in fact settled the matter on the basis that the plaintiff would pay the defendant $80,000, inclusive of all Costs Orders. That however is not the claim or the case the plaintiff pleaded or sought to prove at trial. Modern pleadings permit the real controversy between the parties to be tried even if evidence is admitted without objection going to a new issue not specifically pleaded, and the parties run the trial on the basis that such issue is included: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; Dare v Pulham (1982) 148 CLR 658 at 664. This is not such a case. The plaintiff presses for an order for specific performance of an agreement that includes the defendant paying to the plaintiff $15,000 in satisfaction of the Costs Order or, according to the particulars, an amount agreed or assessed.

84 I am not satisfied that the parties reached a binding agreement as alleged, in particular, an agreement that included a provision that the defendant pay the plaintiff $15,000 (or some other amount) in respect of the Costs Order.

85 There were other matters raised by Counsel for the defendant to submit that the parties had not reached agreement, but it seems to me that this matter is so pivotal to the plaintiff’s capacity to succeed in this application that it is not necessary for me to consider the other matters.

Order

86 I order that the plaintiff’s Statement of Claim be dismissed. If the parties are unable to agree on a costs order I will hear argument in due course by the parties making contact with my Associate, such contact to be made by no later than 7 April 2006.

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Citations

Barbara Mergler v HP Mercantile Pty Limited [2006] NSWSC 179

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CITATION:	Barbara Mergler v HP Mercantile Pty Limited [2006] NSWSC 179
HEARING DATE(S):	28 February 2006, 1 March 2006
JUDGMENT DATE :	24 March 2006
JUDGMENT OF:	Bergin J
DECISION:	Application dismissed.
CATCHWORDS:	Application for specific performance of an agreement alleged to have been made at a meeting between the parties without the presence of their solicitors - whether binding agreement reached.
CASES CITED:	Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153 Dare v Pulham (1982) 148 CLR 658 Geebung Investments Pty Limited v Varga Group Investments No 8 Pty Limited (1995) 7 BPR 14, 551 Masters v Cameron (1954) 91 CLR 353
PARTIES:	Barbara Mergler (Plaintiff) HP Mercantile Pty Limited (Defendant)
FILE NUMBER(S):	SC 6225/04
COUNSEL:	T D F Hughes (Plaintiff) T G Stitz (Defendant)
SOLICITORS:	MBP Legal (Plaintiff) Versace McKenzie Lawyers (Defendant)