Blueprint Homes (WA) Pty Ltd v Samuel
[2016] WASC 287
•8 SEPTEMBER 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BLUEPRINT HOMES (WA) PTY LTD -v- SAMUEL [2016] WASC 287
CORAM: LE MIERE J
HEARD: 24 AUGUST 2016
DELIVERED : 8 SEPTEMBER 2016
FILE NO/S: CIV 2038 of 2016
BETWEEN: BLUEPRINT HOMES (WA) PTY LTD
Plaintiff
AND
MATTHEW JOHN SAMUEL
KELLY SAMUEL
JOHN SAMUEL
Defendants
Catchwords:
Contract - Intention to make immediately binding agreement - Where agreement is made and performance conditional on execution of formal document - Turns on own facts
Legislation:
Succession Act 2006 (NSW), s 95
Result:
Plaintiff's claim successful
Category: B
Representation:
Counsel:
Plaintiff: Mr M L Bennett
Defendants: Mr J E Scovell
Solicitors:
Plaintiff: Bennett + Co
Defendants: Edwards Mac Scovell Legal
Case(s) referred to in judgment(s):
Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) NSWLR 540
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Cleary v Masterton [1999] NSWSC 207
Geebung Investments Pty Ltd v Varga Group Investments Pty Ltd [No 8] (1995) Aust Contract Rep 90‑059
Grave v Blazevic Holdings Pty Ltd [2012] NSWCA 329
Howe v Connell (Unreported, NSWSC, 25 September 1997)
Jennings v Jennings [2015] NSWSC 1826
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
MV & JM Petronaitis v DM Petronaitis [2016] NSWSC 765
Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
LE MIERE J:
Summary
The plaintiff, Blueprint Homes, entered into a building contract with Matthew John Samuel and Kelly Samuel, who I will sometimes refer to as the defendants, to construct a dwelling in Aveley. The defendants complained of defective products and workmanship. The complaints eventually led the Building Commissioner to refer a dispute between Blueprint Homes and the defendants to the State Administrative Tribunal. There were negotiations between Blueprint Homes and the defendants. Blueprint Homes says that the negotiations resulted in a legally binding compromise agreement. The defendants say no binding agreement was made. In this action Blueprint Homes seeks a declaration that the defendants are bound by the terms of the compromise agreement and an order for specific performance of the terms of the agreement.
For the reasons which follow I find that on 14 March 2016 Blueprint Homes and the defendants made an immediately binding agreement that Blueprint Homes pay the defendants $16,962.45 in compromise of their claims and payment of that sum and dismissal of the Tribunal proceedings was conditional upon the execution of a deed of settlement compromise and release including indemnities by the defendants in relation to those matters.
Facts
There is little, if any, conflict about the facts giving rise to the alleged agreement. There were only two witnesses ‑ Mr Guerini, the solicitor for Blueprint homes, and Ms Dowley, the solicitor for the defendants. Each of them gave evidence by affidavit and was cross‑examined.
In [1] to [19] of his affidavit Mr Guerini produced letters and emails passing between he and Ms Dowley between 11 March and 29 March 2016 and his notes of his telephone conversations with Ms Dowley during that period. In her affidavit Ms Dowley said she had nothing to add to the first 19 paragraphs of Mr Guerini's affidavit and the annexures referred to in those paragraphs. Mr Guerini was not cross‑examined about those matters. Accordingly, I accept that Mr Guerini's notes correctly and accurately record his telephone conversations with Ms Dowley in that period including the critical telephone conversation on 14 March.
Ms Dowley's affidavit evidence is directed to correspondence and telephone discussions with Mr Guerini after 29 March. I will make reference to some of the differences between Mr Guerini and Ms Dowley concerning those conversations in referring to the events that occurred after 29 March.
I will start by relating the events which led to the proceedings in the State Administrative Tribunal.
Relationship between parties
Blueprint Homes entered into a building contract with the defendants to construct a dwelling for them in Aveley. The defendants made complaints against Blueprint Homes to the Building Commissioner relating to and including allegations of defective products and workmanship in the construction of the dwelling. The complaint became the subject of a Building Remedy Order made by the Building Commissioner (BRO). Blueprint Homes alleged that it had satisfied its obligations arising from the BRO and had complied with the requirements in it. The defendants disputed this and sought amongst other things compensation from Blueprint Homes. The Building Commissioner referred the dispute to the State Administrative Tribunal for determination.
The third defendant, John Samuel, is the father of the first named defendant, Matthew John Samuel, and acted as agent for the defendants in relation to the complaints to the Building Commissioner and in dealings with the defendants' solicitor in relation to the complaints to the Building Commissioner and the proceedings in the State Administrative Tribunal.
Offer to settle Tribunal proceedings
A directions hearing was scheduled before a member of the Tribunal for 15 March 2016. On 29 February the defendants' solicitor, Ms Dowley, wrote to Blueprint Homes' solicitor, Mr Guerini, attaching a report of Richard Machell concerning remedial work necessary to the dwelling and made an offer to settle the proceedings by a combination of Blueprint Homes carrying out certain plastering work and otherwise reimbursing certain costs. That was to be by way of an order to remedy. Ms Dowley proposed that orders be made by consent at the directions hearing on 15 March. The offer expressly stated that it was withdrawn if not accepted prior to the directions hearing.
On 11 March 2016 Mr Guerini wrote to Ms Dowley stating that Blueprint Homes did not accept the defendants' offer of settlement and proposed to settle the matter by:
(a)Blueprint Homes paying to the defendants $16,962.45;
(b)the Tribunal proceedings being dismissed; and
(c)the parties entering a deed of settlement and release containing usual terms inter alia indemnities and release.
The offer was stated to remain open for acceptance until 12 noon on 14 March.
At 10.36 am on 14 March Ms Dowley emailed Mr Guerini. Ms Dowley stated that the defendants would be prepared to settle for the figure in Mr Guerini's letter as an Order to Pay and that the order could be made by minute of consent orders sent to the Tribunal that day which would save the parties the cost of the directions hearing as the Tribunal could simply make the orders the following day without the need for attendance. Ms Dowley requested a response before 12 noon if possible.
At 12.26 pm that day, Monday 14 March, Mr Guerini emailed Ms Dowley. Mr Guerini said that Blueprint Homes was not agreeable to an Order to Pay and that the offer of settlement was made on a without prejudice and without admission basis and that continued to be the case. Mr Guerini said that his instructions were to consent to an adjournment of the following day's hearing for the period of, say, 21 days during which time a deed of settlement compromise and release will be drafted by him for settlement and execution by the parties. The settlement deed was to include indemnities to be provided by the defendants in relation to those matters. Mr Guerini stated that the defendants will receive a cheque in the agreed sum contemporaneously upon execution of the settled deed which will occur as swiftly as this week.
Defendants say binding agreement made
Between 12.26 pm and 12.54 pm that day, 14 March, Mr Guerini spoke to Ms Dowley by telephone. Ms Dowley said:
Her client okay with proceeding with deed. She will email me to confirm and will prepare minute to adjourn SAT.
At 12.54 pm Ms Dowley emailed Mr Guerini stating:
I have instructions from my client to confirm that the directions hearing tomorrow can be adjourned to allow you time to prepare a deed. I am away from 2 April 2016 for three weeks so please ensure that the Deed is provided within the next seven days or I will run out of time to settle it. Consent orders are attached (in open word format) for you to add your unavailable dates so that a backup directions hearing can be listed. It will have to be after 25 April 2016.
The attached minute of consent orders said that the parties consent to orders that the directions hearing be adjourned to a date after 25 April 2016 and taking into account the unavailable dates that were specified. Later that afternoon Ms Dowley forwarded to the Tribunal the minute of consent orders signed by both solicitors together with a letter which said:
The parties are in settlement discussions and are preparing a deed for consideration. To allow these discussions to be concluded and for the parties to formally advise the State Administrative Tribunal of the outcome, we request that the matter be relisted in accordance with the minute.
On Wednesday, 16 March 2016 Mr Guerini emailed Ms Dowley a draft deed of settlement compromise and release. The principal provision of the deed is cl 2 'compromise and release' which provides:
•Blueprint Homes shall pay $16,962.45 contemporaneously upon the defendants' execution of the deed;
•upon payment to the defendants, the defendants release Blueprint Homes from all claims and demands whatsoever which the defendants now have or at any time may have against Blueprint Homes;
•the defendants indemnify Blueprint Homes from all claims and demands whatsoever arising from or in any way relating to or incidental to the dwelling;
•the defendants shall execute a Minute of Consent Orders substantially in terms of the minute attached to the deed, which provided that the Tribunal proceedings be dismissed and each party bear the own costs;
•Blueprint Homes releases and discharges the defendants from all liability arising out of the Tribunal proceedings and all claims and demands whatsoever which Blueprint now have or at any time may have against the defendants.
There was also a confidentiality clause which provided that the provisions of the deed shall remain confidential and not be disclosed, except as may be required for the purpose of operating the deed or by statute or order of any court and that a party shall not disclose to any person not a party to the deed other than to its lawyer any of the provisions of the deed except for the fact that it has been entered into and shall not disclose any commercial or other confidential information which is or becomes available to it as a result of entry into or operation of the deed and is not in the public domain other than as a result of a breach of the provision. There was also a clause (the bar clause) that if the terms of the deed are complied with, the deed may be pleaded in bar by the parties to any claim, proceeding or action which either party may have or may hereafter commence against the other party in connection with or in any way relating to or arising out of the Proceedings or any liability either party may have to the other party or but for the execution of the deed might have had.
On Thursday, 17 March Ms Dowley emailed Mr Guerini a revised draft deed of settlement compromise and release containing amendments which her client requires. Ms Dowley said that the amendments were self‑explanatory and perhaps even expected. There were five amendments. First, the release clause was amended so as to release Blueprint Homes from claims and demands arising from or connected with the defendants' complaints to the Building Commissioner (Complaint), the BRO, the defendants' dispute that Blueprint Homes complied with the BRO and sought compensation (Dispute) or the referral of the Dispute by the Building Commissioner to the State Administrative Tribunal (Proceedings). Secondly, the indemnity was amended so as to be similarly confined to the Complaint, the BRO, the Dispute or the Proceedings. Thirdly, Blueprint Homes released the defendants from claims and demands arising from or connected with the Complaint, the BRO, the Dispute and or the Proceedings. Fourthly, the deed may be pleaded in bar in connection with or relating to proceedings or any matter the subject of the compromise and release in the deed. Fifthly, a new cl 6.2 was added to the confidentiality provision:
The Respondent acknowledges that in relation to the Complaint and in negotiating the settlement of the Dispute, the Applicants have been represented by a non‑legal agent and agree that the provisions of this cl 6 apply from the date of execution of the Deed and not retrospectively so as to apply to any past disclosures.
Confidentiality issue arises
Mr Guerini questioned the meaning of cl 6.2 proposed by Ms Dowley in a telephone conversation with Ms Dowley on 23 March. Ms Dowley said that the clause referred to John Samuel who is a non‑lawyer and they just wanted to make sure that his activities do not breach her client's obligations. Mr Guerini said that he had information that John Samuel attended a public forum and spoke of a dispute involving his client which is the type of thing which is supposed to be covered by the confidentiality clause. Mr Guerini suggested perhaps John Samuel ought to be a party to the deed. Ms Dowley said she would take instructions.
On 25 March there was a further telephone conversation between Ms Dowley and Mr Guerini. Ms Dowley said that John Samuel had attended a public forum of the Building Commission to discuss a review of legislation and had raised concerns about administration and also about the way the Building Commission handled complaints and the Tribunal as well. Ms Dowley said that it was okay to join John Samuel but she wants to see the proposed amended deed.
On Tuesday, 29 March Mr Guerini forwarded to Ms Dowley a further draft deed. The revised draft incorporated Ms Dowley's proposed amendments to the indemnity, release and bar clauses. The revised deed made John Samuel a party, added a recital to refer to him but deleted cl 6.2 proposed by Ms Dowley in her proposed deed.
Settlement breaks down
On Tuesday, 29 March there was a further telephone conversation between Mr Guerini and Ms Dowley. There is some difference between them as to the detail of the conversation. Mr Guerini says that Ms Dowley said that the defendants got quotes and they will settle for the amount of the quotes which are going to be about $5,000 more. He told Ms Dowley that the offer was made and it was accepted. Ms Dowley said that John Samuel's comments were directed at the industry and the Building Commission. Mr Guerini said Ms Dowley should email him precisely what her client's instructions were. Ms Dowley says she said that her clients are concerned that they cannot get the house actually fixed for the amount, that they were getting quotes from other people and they are going to come in at more. Mr Guerini said his client would not pay any more. She said it was premature to say that if he did not know how much more; if it were only $5,000 more, then it would make sense to find out before throwing the baby out with the bathwater. She agrees Mr Guerini said that the offer had been made and accepted. Ms Dowley says she said:
I understand why your client would think that but we both know that the deal isn't done yet because John Samuel has to agree to sign the deed.
Ms Dowley say that they then discussed John Samuel's comments, she said John Samuel would not sign anything that would stop him talking about the things he had already been discussing in public or sign something that he might have already breached.
On 30 March Ms Dowley sent an email to Mr Guerini in which she requested that he provide her by way of reply email with his interpretation of the types of documents that would be covered in his view by par (b) of the confidentiality clause as her client was trying to understand the breadth of the obligation and wants to be assured that they are both on the same page. Ms Dowley made comments about the meaning of the confidentiality clause and concluded:
To avoid conflict between the parties I think it wise that we document whether our respective interpretations are consistent in this regard. If that is the case then I may be able to advise you by COB whether my client will execute the deed.
After receiving the email Mr Guerini spoke to Ms Dowley by telephone. Ms Dowley said that her client was concerned with the interpretation of the confidentiality clause as it relates to John Samuel and that he wanted Mr Guerini's interpretation.
At about 5.05 pm on Friday, 1 April Mr Guerini spoke to Ms Dowley by telephone. Mr Guerini recorded that Ms Dowley said she was going away on Sunday for a few weeks and would like to see the matter concluded before she goes. Ms Dowley said her client was concerned that documents already in existence and circulated might breach the confidentiality clause and her view was that they were not covered by the confidentiality clause. Ms Dowley said she had sent an email and Mr Guerini said he would look at it and talk over the weekend. Ms Dowley says that she said words to the effect that the deal has to be done before she leaves even if the parties sign it while she is away.
Mr Guerini and Ms Dowley did not speak over the weekend. On Sunday, 3 April Ms Dowley sent an email to Mr Guerini in which she said that she had received instructions that her client intends to proceed with the Tribunal complaint and she will be expected to progress the matter at the directions hearing that has been listed for the end of April.
Tribunal proceedings continue
A directions hearing in the Tribunal took place on 26 April 2016. Counsel for Blueprint Homes informed the Tribunal that a concluded settlement had been reached and applied for an adjournment of the proceedings. Ms Dowley informed the Tribunal that the defendants' position was that there was no concluded agreement. The Tribunal gave directions for the exchange of documents and summaries of witness statements and adjourned the matter for further directions on 21 June.
On 10 May Mr Guerini telephoned Ms Dowley. There is a difference between them about what was said. Mr Guerini says he said that he considered there to have been a compromise. Price was agreed, parties were agreed, terms were agreed and the only query was what interpretation was to be given to the confidentiality clause. He asked her why her client had changed their mind. Ms Dowley said her client had been advised at that time about this issue and she said that just before she went away her client had obtained information that his expert had not got it right and that the theoretical pricing was not the same as a tradesman's prices. She said that he was still doing his homework and has to submit some figures by mid‑May. Her client was consulting an independent expert on pricing and they should all wait for that because it might be that the parties are only a couple of thousand dollars apart. Ms Dowley says she said that the terms were not agreed because her client had not agreed to sign the deed. In her affidavit Ms Dowley says that she did not say that 'just before she went away' her client obtained information that his expert had not got the pricing right, she said that she said 'while I was away' as she was not aware of pricing being available before she went away.
Between 10 May and 31 May there was a letter and emails passing between Mr Guerini and Ms Dowley concerning whether a compromise agreement had been reached. On 31 May Ms Dowley telephoned Mr Guerini. Ms Dowley said that the defendants' position is that the costings which John Samuel wanted checked were in relation to the theoretical versus practical cost, she said that he now has costing for the whole of the house which is what he is now pursuing. Mr Guerini said that he had held off advancing his client's interest at Ms Dowley's request because in her words the two figures might not be all that different and there might be a commercial resolution of the matter without having to determine whether there was a compromise or not.
There were further communications between the parties which did not resolve the differences between them. On 17 June Blueprint Homes commenced the proceeding in this court.
Blueprint Homes' claim in this court
Blueprint Homes commenced this action against Matthew John Samuel, Kelly Samuel and John Samuel. In the indorsement to the writ the plaintiff claims that it and all three defendants negotiated a resolution of proceedings in the Tribunal and claims a declaration that the parties are bound by the terms of the agreed compromise and claims an order for specific performance of the terms of the compromise.
I ordered that the matter proceed to trial without pleadings. At trial Blueprint Homes' case is that it and Matthew John Samuel and Kelly Samuel agreed on 14 March 2016 by their solicitors to compromise the Tribunal proceedings. Blueprint Homes does not press its case against John Samuel. Blueprint Homes says that the terms of the compromise agreement are:
1.Blueprint Homes pay to the defendants $16,962.45;
2.the proceedings before the Tribunal be dismissed by consent; and
3.the parties enter into a deed of settlement and release containing the usual terms including:
3.1mutual releases between Blueprint Homes on the one part and the defendants on the other, concerning the dispute between them the subject of the Tribunal proceedings; and
3.2an indemnity on the part of the defendants in favour of Blueprint Homes in relation to the dispute between them the subject of the Tribunal proceedings.
The defendants' case is that a binding compromise agreement was not made because there was no intention by either side that the compromise would be immediately binding and agreement on the material terms had not been reached as is evidenced by the fact that the parties remained in negotiations as to the material terms for some time after the alleged contract came into existence.
Legal principles
The court's task is to ascertain from the dealings between the parties whether they intended to make an immediately binding agreement or not. That intention is tested objectively by reference to what a reasonable observer would have concluded. Where the intention of the parties is equivocal, conduct or correspondence subsequent to the alleged agreement can be used as evidence to show whether or not a contract was concluded. Subsequent events cannot be used to show that there was no contract when the court would otherwise conclude that there was one. Conversely, if the court concludes that the dealings between the parties did not result in a contract, then subsequent events or statements cannot be used to show that there was a contract.
There are numerous statements in text books and authorities concerning factors relevant to whether a concluded agreement was made. The authors of the 10th Australian edition of Cheshire & Fifoot Law of Contract observed that none of the statements is hard and fast because so much depends on the interpretation of the particular facts.
An obvious starting point for a consideration of whether the parties intended to make an immediately binding agreement is Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 in which Dixon CJ, McTiernan and Kitto JJ said:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties 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. Or, secondly, it may be a case in which the parties 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 the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution (360).
After saying that the first is the more common of these two cases their Honours referred to cases in the second class in these terms:
Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller (1878) 3 App Cas 1124 when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: ' . . . as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed' (1878) 3 App Cas, at p 1151: see also Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, at p 317. A case of the second class came before this Court in Niesmann v Collingridge (1921) 29 CLR 177 where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made 'on the signing of the contract'. Rich and Starke JJ observed (1921) 29 CLR, at pp 184, 185 that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, 'and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion' (360 ‑ 361).
The plurality further noted in respect of the third class:
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor & c of the Poor of Kingston-upon-Hull v Petch (1854) 10 Exch 610 (156 ER 583). The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker (1950) 80 CLR 304 or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed (361).
The plaintiff says that this case falls within the second of the three cases mentioned in Masters v Cameron. The plaintiff says that the parties completely agreed upon all the terms of their agreement but made performance of the terms relating to payment and dismissal of the proceedings conditional upon the execution of a deed of settlement compromise and release.
There is a distinction between conditions on which the formation of a contract depends and conditions of the obligation to perform it. In Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, 551 Mason J said:
There is an obvious difference between the condition which is precedent to formation or existence of a contract and the condition which is precedent to the obligation of a party to perform his part of the contract and is subsequent in the sense that it entitles the party to terminate the contract on non-fulfilment. In the first category the transaction creates no rights enforceable by the parties unless and until the condition is fulfilled. In the second category there is a binding contract which creates rights capable of enforcement though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and non‑fulfilment entitles him to terminate.
The plaintiff's case is that the execution of a deed of settlement compromise and release was a condition not of the formation of the compromise and settlement agreement but of the performance of the agreement by payment of $16,962.45 and dismissal of the Tribunal proceedings.
There is no one factor that will determine whether the parties intended to be immediately bound by the negotiated agreement. The ultimate outcome depends on a consideration of the dealings between the parties as a whole in the context of the surrounding circumstances.
In Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) NSWLR 540, 548 Gleeson CJ, with whom Hope and Mahoney JJA agreed, observed that a question of this kind involves the intention of the parties to make a concluded bargain, which is related to but not the same as the question whether the parties have reached agreement upon such terms as are legally necessary to constitute a contract. His Honour noted:
… In the ordinary case, as a matter of fact and common sense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.
In Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 Bathurst CJ observed that the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed and in cases which do not depend on the construction of a single document:
… what is involved is the objective determination of the question from the communications between the parties in their context and the parties' dealings over the time leading up to the making of the alleged contract. This involves consideration of the subject matter of the communications: … that includes consideration of what the parties said or wrote [15]. (citations omitted)
Beazley P, who delivered the leading judgment, identified at [64] that where the parties have reached an agreement as to all the terms of a contract, but have also agreed that a further formal agreement is to be executed, the question for determination is whether the parties intended to be immediately bound, which is to be determined objectively from the 'outward manifestations' of the parties' intentions. Her Honour also observed at [65] that the question was 'what each party by words and conduct would have led a reasonable person in the position of the other party to believe'. Her Honour identified at [67] that the starting point for such analysis is the three categories identified by Dixon CJ, McTiernan and Kitto JJ in Masters v Cameron. Beazley P observed at [69] that the three classes of case in Masters v Cameron are no longer applied, if they ever were, as strict categories into which cases must fall. Her Honour noted at [72] that it was relevant to consider the commercial context and surrounding circumstances of the parties' dealings in determining whether a binding agreement had come into existence. Her Honour found that no binding agreement had been reached. It was relevant that the parties had always dealt with each other in a formal context and their relationship had been governed by complex formal agreements, including a series of deeds and there had been no indication that they had intended to depart from those arrangements. Rather, the parties had negotiated the terms of complex formal documents, within the confines of the existing formal relationship between them. Her Honour observed at [83] that it was probable, as a matter of commercial reality, that if the parties had intended to be bound without signing the relevant deed, one or both of the solicitors would have said so. Her Honour found at [111] that the emails that Universal contended constituted the making of an agreement appeared on their face to reflect no more than the making of arrangements for execution and exchange. As to the parties' post‑contractual conduct, her Honour found that this was at best equivocal and could not have been interpreted as indicating the existence of a binding agreement.
There are numerous cases which have considered agreements to settle pending litigation. In Geebung Investments Pty Ltd v Varga Group Investments Pty Ltd [No 8] (1995) Aust Contract Rep 90‑059 the respondent, Varga, sued on an agreement said to have been made at a meeting between representatives of the parties for the payment by Geebung to Varga of the sum of $300,000 plus interest plus costs. At the meeting agreements were reached on various points and the parties contemplated the preparation of a written document by their lawyers. The New South Wales Court of Appeal decided by majority that there was a binding agreement even though the parties intended to embody the agreement in a more formal form to be drawn up by solicitors. Kirby P carried out a review of the authorities and came to the conclusion that there was a binding agreement. His Honour stressed the importance of the law's flexible approach and the fact that the court should strive to uphold the parties' agreement. The fact that this was a case in which the parties were trying to settle out of court was significant because the law has always encouraged settlement rather than litigation:
Settlement of litigation is generally welcomed and facilitated by courts, including this court. Courts should avoid adopting a reinterpretation of the facts of an alleged agreement which undoes settlement of litigation, formally arrived at [90,329].
After observing that the parties had deliberately met together Kirby P said:
They settled their dispute. They did so to avoid litigation. It will be a serious wrong in this case if the law were to deny the parties that facility and to insist, in effect, that they must have formal documents prepared by lawyers. Yet that would be the effect of insisting that there was no binding agreement until the lawyers had settled every term and drawn all the documents to close the Equity file. Properly viewed these were machinery steps, so long as all vital terms of the settlement were agreed, as in my view they were. If necessary, disputes about such machinery questions as remained outstanding could be resolved by a court in terms compatible with a fundamental agreement to settle, on terms already arrived at (90,329 ‑ 90,330).
A different approach appears to have been taken by Young J in Cleary v Masterton [1999] NSWSC 207 which was referred to by Beazley P in Pavlovic. Having analysed the communications between the parties Young J found that what was said by the plaintiffs to be acceptance of an offer 'is too mealy mouthed to be an acceptance'. Young J said:
Litigation in the Supreme Court is a serious matter and settlement of that litigation is a serious matter. If parties have brokered a deal whereby there is to be a deed of release and a discontinuance, the parties, to my mind, intend as a general rule that there is no contract until that release has been delivered and exchanged and the notice of discontinuance is at least signed. There may be in any particular set of circumstances some other intention manifested, but I think that is the general rule [39].
In Grave v Blazevic Holdings Pty Ltd [2012] NSWCA 329 (Grave) the New South Wales Court of Appeal dismissed an appeal from a judgment finding that the appellant had reached a settlement agreement as set out in a deed of release. The agreement was made in a telephone conversation between counsel in which they agreed that the plaintiff would retain money paid to him by the defendant, the defendant would pay the plaintiff a further $25,000 within two months, each party was to bear their own legal costs, the proceedings were to be discontinued, a deed of release would be prepared by the defendant's lawyers and the hearing dates for the motion and hearing would be vacated. The trial judge found that the evidence taken as a whole shows that the parties intended to reach agreement prior to the hearing of the defendant's motion. Bergin CJ in Eq, with whom Campbell and Barrett JJA agreed, referred to the statement of Young J in Cleary v Masterton that if the parties had brokered a deal whereby there is to be a deed of release and a discontinuance the parties intend as a general rule that there is no contract until the release has been delivered and exchanged and the notice of discontinuance signed. Bergin CJ in Eq said that the 'general rule' on analysis does not arise above an empirical generalisation. Importantly, in Cleary v Masterton the terms of the deed of release were not known, it was not known whether the deed of release would be a mutual release or limited to release by the defendants of the plaintiffs whereas in Grave the terms of the deed were well known by the parties.
In Jennings v Jennings [2015] NSWSC 1826 Pembroke J referred to a statement by Young J in Howe v Connell (Unreported, NSWSC, 25 September 1997) that 'generally speaking, settlements in litigation are intended to be final as soon as the barrister or solicitors involved shake hands ‑ whether they do that physically or notionally over the telephone'. Pembroke J said that he did not suggest that there is a general rule, each case will depend on its own facts. His Honour found that an agreement was made by the parties' legal representatives notwithstanding that the agreement was to be recorded in a deed of release to be drafted by one of the lawyers.
MV & JM Petronaitis v DM Petronaitis [2016] NSWSC 765 is a recent decision of the New South Wales Supreme Court concerning an agreement to settle litigation pending in the court. Black J found that there was a concluded agreement at a mediation notwithstanding that the parties continued discussions for several hours after the oral agreement between counsel had been made and that the agreement had subsequently contemplated consent orders to be drafted and signed. Black J found that the oral agreement formed between counsel amounted to an agreement within the fourth class contemplated by McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 in the sense that the parties had reached an agreement by which they were bound, although they expected to make a further contract, in the form of consent orders, including a notation under s 95 of the Succession Act 2006 (NSW) or a deed, which may include additional terms. Black J referred to the fact that case law has recognised that it would at least be common that settlement in litigation can be reached when the barristers or solicitors involved 'shake hands' whether literally or metaphorically and that is capable of giving rise to an arrangement within the fourth class in Baulkham Hills Private Hospital. Black J found that the factors which supported the conclusion that the agreement was concluded include that the terms were comprehensive and the absence of any express statement seeking to condition a settlement on the provision of documents.
Agreement reached on terms necessary to constitute a contract
The defendants submitted that there was no concluded agreement because agreement on the material terms had not been reached as is evidenced by the fact that the parties remained in negotiations as to the material terms for some time after 14 March 2016.
Blueprint Homes says that on 14 March the parties agreed the terms of their agreement: Blueprint Homes is to pay the defendants $16,962.45, the proceedings in the Tribunal are to be dismissed and the parties are to enter into a deed of settlement and release containing the usual terms including mutual releases and an indemnity on the part of the defendants in favour of the plaintiff. After 14 March the parties negotiated the terms of the deed of settlement and release but did not reach agreement on the terms. However, that is not an insuperable impediment to a binding agreement having been reached. The parties agreed that they enter into a deed of settlement and release containing the usual terms including mutual releases and an indemnity as referred to above. The usual terms will include at least the parties, recitals and defined terms. It will often contain terms relating to execution, the effect of execution, severability, costs, service of notices, waiver and entire agreement. In this case there is no difficulty in ascertaining the usual terms. Mr Guerini drafted a deed of settlement compromise and release. Ms Dowley agreed with the terms of the draft deed except for the release and indemnity clauses, the 'bar' clause and the confidentiality clause. In my opinion Ms Dowley's redrafting of the release, indemnity and bar clauses is in accordance with the usual form of such clauses in a deed of settlement compromise and release in relation to pending proceedings in a court or Tribunal. Indeed, Mr Guerini readily accepted the amendments drafted by Ms Dowley.
Ms Dowley redrafted the proposed confidentiality clause. No agreement was reached on the terms of a confidentiality clause. The offer in Mr Guerini's email did not specifically refer to a confidentiality clause. In my opinion a confidentiality clause is often included in deeds of settlement compromise and release but cannot be said to be one of the usual terms of such a deed. Therefore, the agreement made between the parties did not include an agreement that a confidentiality clause be included in the deed.
Parties intended to make immediately binding agreement
I find that the objective intention of the parties was to make an immediately binding agreement. I reach that conclusion for the following reasons.
First, Ms Dowley in the telephone conversation on 14 March agreed to the only element of the compromise that had not been agreed. Prior to the telephone conversation the parties had reached a consensus that Blueprint Homes should pay the defendants $16,962.45 in compromise of the defendants' claims in and leading to the Tribunal proceedings. The only outstanding matter was whether the settlement should be effected by an Order to Pay by the Tribunal or a deed of settlement compromise and release containing usual terms including indemnities. In that context Ms Dowley's statement that 'her client okay with proceeding with deed' resolved the only outstanding matter between them.
Secondly, the language used by Ms Dowley is the language of acceptance and affirmation. She said her client was 'okay' with proceeding with a deed. 'Okay' means to approve, agree to, sanction or pass: Oxford English Dictionary.
Thirdly, the negotiations proceeded by way of conventional offer, counteroffer and acceptance and Ms Dowley's statement that 'her client okay with proceeding with deed' was an acceptance of the offer in Mr Guerini's email earlier that day. On 29 February the defendants, by Ms Dowley, made a written offer to settle the proceedings. On 11 March 2016 Blueprint Homes, by Mr Guerini, in writing rejected the offer and made a counterproposal. On 14 March by email from Ms Dowley to Mr Guerini the defendants made a new offer to settle. Later on 14 March Blueprint Homes, by email from Mr Guerini to Ms Dowley, rejected that offer and made a counteroffer. Soon after that email Ms Dowley and Mr Guerini spoke by telephone. Ms Dowley, on behalf of the defendants, accepted Blueprint Homes' counteroffer by stating that her client was okay with proceeding with a deed.
Fourthly, the negotiations leading to the telephone conversation between Mr Guerini and Ms Dowley on 14 March were conducted on the basis of making an agreement before the directions hearing on 15 March. That was proposed by Ms Dowley on 29 February. Blueprint Homes' offer on 11 March was stated to remain open for acceptance until 12.00 noon on 14 March. Ms Dowley's email on the morning of 14 March proposed that an agreement be made that day and orders sent to the Tribunal which could make orders the following day without the need for attendance. Mr Guerini's email at 12.26 pm on 14 March proposed an agreement be made and the parties agree to an adjournment of the Tribunal proceeding the following day to enable a deed of settlement compromise and release to be drafted and executed that week.
Fifthly, Mr Guerini's email of 14 March stated that the defendants 'will receive a cheque in the agreed sum contemporaneously upon execution of the settled deed' and 'that could occur as swiftly as this week'. That indicates an intention to be immediately bound not a further period of negotiation over terms to be inserted in the deed.
Sixthly, neither party spoke any words which expressly or impliedly made their agreement subject to the execution of a deed. Ordinarily when solicitors orally agree to settle proceedings by payment of an agreed amount and to proceed with a deed containing usual terms including indemnities and release a solicitor would state that the agreement is subject to execution of the deed if that was their intention.
Seventhly, the compromise was a simple agreement which required no further negotiation or elaboration. The settlement consisted of the payment of an agreed amount, the discontinuance of the Tribunal proceedings, mutual releases in relation to the Tribunal proceedings and the complaints and dispute which gave rise to the proceedings and an indemnity. The deed, and its terms were machinery provisions to give effect to the agreed compromise the terms of which were fully agreed.
Subsequent conduct equivocal
Both parties contended that terms of the deed drafted by Mr Guerini, and not amended by Ms Dowley, support their case. The drafting of the deed occurred after Blueprint Homes asserts the agreement was made and is therefore conduct subsequent to the asserted agreement. Recital G states that 'the parties have now settled the Dispute and compromise the Proceedings and seek to embody the terms of their settlement in this Deed'. I find the wording of that recital to be of little assistance. The wording suggests that the parties settled their dispute before executing the deed. However, it is common for deeds of settlement to recite that the parties have agreed to settle their dispute and I do not read much significance into the words of recital G.
The defendants say that the compromise and release clauses indicate that the parties did not intend to make a binding agreement until the deed was executed. Clause 2.1 provides that Blueprint Homes shall pay $16,962.45 contemporaneously upon the defendants' execution of the deed. Clause 2.2 provides that upon payment to the defendants the defendants release Blueprint Homes from liability. In my opinion those terms are neutral. The wording is consistent with an intention that an agreement to compromise by payment of the agreed amount and the release by the defendants of Blueprint Homes is only to arise on the execution of the deed. However, the wording is equally consistent with the parties intending to be immediately bound but having made performance of the payment of the agreed amount and the release conditional upon the execution of the deed. That intention is consistent with the wording of Mr Guerini's email of 14 March that 'your client will receive a cheque in the agreed sum contemporaneously upon execution of the settled deed'.
Both parties referred to other subsequent conduct in support of their cases. I find little assistance from that subsequent conduct. Ms Dowley's letter of 14 March 2016 to the Tribunal requested that the directions hearing listed for the following day be adjourned. She stated:
The parties are in settlement discussions and are preparing a deed for consideration. To allow these discussions to be conducted and for the parties to formally advise the State Administrative Tribunal of the outcome, we request that the matter be relisted in accordance with the minute.
That is some support for the defendants' case that no binding agreement had been reached. However, I find it of little assistance in the circumstances. It is not uncommon for solicitors to ask a court or a Tribunal to adjourn proceedings pending the performance of a settlement agreement. I find it was the intention of the parties that performance of their agreement by discontinuance of the Tribunal proceedings was conditional upon the execution of the deed and payment of the compromise amount.
The defendants say in effect that the failure of the parties to agree on the terms of the deed of settlement compromise and release evidences that no final binding agreement had been made. The first problem that arose in agreeing the terms of the deed was the difference between the parties concerning the confidentiality clause inserted by Mr Guerini in the deed. As I have said, there was no express agreement on 14 March that the deed contain a confidentiality clause and the agreement that it should contain the usual terms is not sufficient to make the inclusion of a confidentiality clause in the deed a part of the settlement agreement. Mr Guerini's inclusion of a confidentiality clause in the deed went beyond the agreement. Instead of rejecting it, Ms Dowley sought to amend it. Matters were then overtaken by the defendants wanting to increase the compromise payment amount. That, in effect, brought an end to discussions about the terms of the deed. That Mr Guerini sought to insert in the deed a clause which went beyond the terms of the agreement does not detract from my finding that an immediately binding agreement was made on 14 March.
The defendants say that the inclusion of the entire agreement clauses in the deed show that there was no intention to make a binding agreement prior to the execution of the deed. I do not agree. Entire agreement clauses are commonly found in deeds of settlement and release. Counsel for Blueprint Homes showed me precedents in Australian Encyclopaedia of Forms & Precedents on Compromises and Releases which contain 'whole agreement' clauses. The inclusion of such a provision in a deed may indicate an abundance of caution to ensure that there is no subsequent contention that there is any collateral agreement or further undertaking by either party in relation to the subject matter of the deed. It is not an indication that there was no Masters v Cameron class 2 agreement made prior to the execution of the deed.
The conduct of the parties after Sunday, 3 April 2016 is of little assistance. Thereafter the parties' positions were fixed. Blueprint Homes maintained that an immediately binding agreement had been made on 14 March. The defendants maintained no such agreement had been made. Those positions informed the statements and conduct of the parties thereafter. The settlement eventually fell over because the defendants obtained advice and subsequently quotations which showed that the cost of the remedial work to the house was greater than they had believed when they agreed on the sum of $16,962.45 and wanted to renegotiate the agreed settlement amount in light of that information. That appears from the telephone conversation between Mr Guerini and Ms Dowley on 10 May 2016. It is common ground that Mr Guerini said he considered there had been a compromise, price was agreed, parties were agreed, terms were agreed. Ms Dowley says she then said that the terms were not agreed because her client had not agreed to sign the deed. It is common ground that Mr Guerini said words to the effect that the only query was what interpretation was to be given to the confidentiality clause. Ms Dowley says that he added words to the effect that the settlement was for a sum of money on reasonable terms to be agreed and the court can determine what are the reasonable terms. Mr Guerini says he then asked Ms Dowley why her client had changed their mind and she said that her client had been advised at that time about this issue and she then said that just before she went away her client had obtained information that his expert had not got it right, that is the theoretical pricing was not the same as the tradesmen giving prices, that he is still doing that homework and has to submit something by mid‑May. Mr Guerini says Ms Dowley said that she has her client consulting an independent expert on pricing and they should all wait for that because it might be that the parties are only a couple of thousand apart. In her affidavit Ms Dowley says that she said 'while I was away' not 'just before I went away' but otherwise does not appear to dispute Mr Guerini's account of that part of the conversation. It is common ground that Mr Guerini said words to the effect that they had reached an accord or that there is already a binding agreement.
Orders
The court should make a declaration that Blueprint Homes and Matthew John Samuel and Kelly Samuel entered into an enforceable agreement on 14 March 2016 to settle and compromise the Complaint, the BRO, the Dispute and the Proceedings. The court should order that the agreement be specifically performed. Blueprint Homes should draft and execute a deed of settlement compromise and release in the form drafted by Mr Guerini and amended by Ms Dowley and being annexure RG10 to the affidavit of Robert Guerini sworn 8 August 2016 except that cl 6 should be deleted and the clauses after cl 6 renumbered accordingly. The deed should be executed by Matthew John Samuel and Kelly Samuel. Blueprint Homes and Kelly Samuel and Matthew John Samuel should execute by themselves or by their solicitors a minute of consent orders dismissing the Tribunal proceedings, such minute to be substantially in the form of the minute which is part of attachment RG10 to the affidavit of Mr Guerini sworn 8 August 2016. There should be liberty to apply in the event that the defendants do not execute the deed or the minute of consent orders and generally. The proceedings against John Samuel should be dismissed.
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