Camil Holdings Pty Ltd v McCarthy
[2015] VSC 430
•4 September 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 01967
| CAMIL HOLDINGS PTY LTD (ACN 101 887 174) | Plaintiff |
| v | |
| JANE CATHERINE McCARTHY | Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 April and 27 May 2015 |
DATE OF JUDGMENT: | 4 September 2015 |
CASE MAY BE CITED AS: | Camil Holdings Pty Ltd v McCarthy |
MEDIUM NEUTRAL CITATION: | [2015] VSC 430 |
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CONTRACT – Application to enforce terms of settlement – Whether a representation was made regarding the costs of the proceeding during the course of settlement negotiations – Onus of proof borne by the party asserting the making of a representation – Currie v Dempsey [1967] 2 NSWLR 532 followed – Play Australia Pty Ltd v Papadimtriou [2014] VSC 608 considered – No representation made – The legal effect of the representation if made – Whether representation made ‘in trade or commerce’ – Liability for breach of collateral warranty and misleading and deceptive conduct – Orders made enforcing terms of settlement.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Ihle | Lobb & Kerr |
| For the Defendant | Dr P Bender | Diakou Faigen |
HER HONOUR:
The dispute currently before the Court arose out of a loan made by the plaintiff, Camil Holdings Pty Ltd (‘Camil’), to the defendant, Ms McCarthy, on or about 28 September 2012. Camil is a property developer which constructed a group of townhouses in Malvern. Earlier in 2012, Ms McCarthy purchased one of the townhouses off the plan but found herself short of the funds required to settle the purchase of the townhouse. Camil agreed to lend Ms McCarthy the sum of $250,000, repayable on 29 March 2013, with interest at 12 per cent per annum repayable at the date of repayment of the loan. This loan enabled her to take possession and become the registered proprietor of the townhouse.
Ms McCarthy failed to repay the loan by the due date and Camil, through its solicitors, made a demand for payment on 2 April 2013. This proceeding was filed on 18 April 2013 and Camil issued a summary judgment application on 7 May 2013. Ms McCarthy filed a defence and counterclaim on 3 June 2013 asserting that the deed relied upon by Camil was unenforceable because Camil was acting as a credit provider, and had engaged in unfair conduct within the meaning of the relevant consumer protection legislation. In particular, Ms McCarthy alleged that Camil failed to make an assessment of the suitability of the advance of credit, or make reasonable enquiries about Ms McCarthy’s capacity to repay the loan. Ms McCarthy sought declarations to that effect, and damages, being the costs thrown away by reason of the purchase and subsequent sale of the townhouse, Ms McCarthy having entered into a contract of sale for the townhouse in May 2013.
Consent orders were made to dismiss the application for summary judgment on 18 June 2013, and an amended statement of claim was filed on 25 June 2013. Camil filed a further summons for summary judgment on 11 October 2013, returnable on 11 November 2013.
On 11 November 2013, the summons was adjourned by consent to 13 December 2013. This occurred by reason of an agreement which was reached between the parties on the evening of 8 November 2013, the Friday prior to the Monday hearing. The agreement was reached after a series of email and telephone communications between counsel briefed by the parties over the course of the afternoon of 8 November 2013 (‘8 November’). At 6.06pm, Mr Aaron Weinstock, the barrister retained by Camil, wrote to Mr Adrian Muller, counsel retained by Ms McCarthy, as follows:
Adrian,
Your email came in at 6.01pm, a minute after the offer expired.
So my client renews its offer that:
(1)your client pay mine:
·$250,000;
·statutory interest on that sum from 29 March 2013; and
·costs on a standard basis, assessed as provided in cl 2
(the Compromise Sums);
(2)my client’s costs be assessed at your client’s expense by Mr John White, costs consultants, who shall:
·issue a draft assessment to both of our instructors simultaneously;
·give them 48 hours in which to comment on the draft; and
·after considering any such comments, issue a final assessment to both of our instructors simultaneously;
(3)the Compromise Sums be paid on the settlement of your client’s resale of 3/13 Fraser Street Malvern (Settlement) by cheque from the purchasers in favour of my client;
(4)by 13 November 2013, your client give irrevocable instructions to her solicitors to arrange for such a cheque to be given to my instructors at Settlement;
(5)on compliance with cll 1 to 4:
·my client release yours from the claim stated in the Amended Statement of Claim dated 25 June 2013; and
·your client release mine from the counterclaim stated in the Defence & Counterclaim dated 3 June 2013;
(6)in default of any of cll 1 - 4, your client consent to judgment in this proceeding for the Compromise Sums;
(7)our clients consent to an order adjourning my client’s summons dated 11 October 2013 to 2 December 2013 or as soon thereafter as the business of the Court allows.
Does your client accept?
At 6.15pm, Mr Muller sent an email to Mr Weinstock in which he stated ‘Accepted’.
As noted above, the terms of settlement as finally agreed represented the culmination of negotiations which took place over the course of the afternoon of 8 November. There was an exchange of offers and counteroffers by email between the barristers. It is not clear from the evidence as to whether there was also extensive telephone communication between counsel, but it is apparent from one of the emails that there was at least one telephone discussion between them during the course of the afternoon.
The first email was sent by Mr Muller to Mr Weinstock at 12.55pm. The email contained some information about Ms McCarthy’s personal circumstances, and some commentary on the potential weaknesses in Camil’s position, and went on to say as follows:
1.My client will pay your client the sum of $250,000 in full and final satisfaction of the claim, interest and costs.
2.Payment will be made by cheque from the vendor in favour of your client (Cheque) at settlement of the Townhouse.
3.My client will undertake to give irrevocable instructions to her solicitors to arrange the Cheque and to forward it to your instructors forthwith or to arrange for them to attend settlement and collect the cheque themselves.
4.Your client’s application be adjourned to a date not before 30 November 2013 and that upon receipt of the Cheque, the parties will sign consent orders dismissing the application, the proceeding and the counterclaim with no orders as to costs.
I am instructed that the offer is open to be accepted until 9:30 on Monday morning. However, can you please get back to me as soon as possible?
At 2.44pm, Mr Weinstock responded in the following terms:
Nothing you have said shakes my client’s confidence that, on Monday, it will be awarded at least the principal of the loan. And, when it is awarded the principal, it will also be awarded costs and at least statutory interest.
Therefore my client is not prepared to settle for less than the principal, costs, and statutory interest. Therefore your client’s offer is rejected.
However, to accommodate your client, my client is prepared to defer the principal, costs, and statutory interest to 29 November 2013 or the settlement of your client’s resale of 3/13 Fraser St, Malvern (the Property), whichever is earlier.
Therefore my client counteroffers that:
1.your client pay mine:
o$250,000;
ostatutory interest on that sum from 29 March 2013; and
ocosts on a standard basis;
2.those amounts be paid by 29 November 2013 or the settlement of your client’s resale of the Property, whichever is earlier;
3.on compliance with cll 1 & 2, my client release yours from the claim stated in the Amended Statement of Claim dated 25 June 2013;
4.in default of cl 1 or 2, your client consent to judgment on that claim.
This counteroffer is open until 4pm today.
A further email was sent by Mr Weinstock to Mr Muller at 3.21pm to clarify two aspects of Camil’s offer. The 3.21pm email included a reference to Camil’s costs being assessed by Mr John Ahern, a costs consultant, and a term to the effect that Camil would consent to an order adjourning the application for summary judgment to 2 December 2013 or after (that is, to a date after the anticipated date for settlement of the sale of the townhouse).
Mr Weinstock sent a further email at 4.07pm in the following terms:
Adrian,
Further to our discussion of this afternoon, my client now offers that:
1.your client pay mine:
o$250,000;
ostatutory interest on that sum from 29 March 2013; and
ocosts on a standard basis, as assessed by Mr John Ahern, costs consultant;
2.those amounts be paid by 29 November 2013 or the settlement of your client’s resale of the Property, whichever is earlier;
3.on compliance with cll 1 & 2:
o my client release yours from the claim stated in the Amended Statement of Claim dated 24 June 2013;
o your client release mine from the counterclaim stated in the Defence & Counterclaim dated 3 June 2013;
4.in default of cl 1 or 2, your client consent to judgment in this proceeding for the amounts listed in cl 1;
5.our clients consent to an order adjourning my client’s summons dated 11 October 2013 to 2 December 2013 or as soon thereafter as the business of the Court allows.
This offer remains open until 4:30pm.
At 4.41pm, Mr Weinstock sent a further email to Mr Muller, which commenced:
Adrian,
My client’s offer of 4.07pm expired at 4.30pm.
He then went on to restate the offer made at 4.07pm with some minor drafting changes of no consequence.
At 4.49pm, Mr Muller replied as follows:
Is that different or just neater?
My instructor has not heard of John Ahern. Would John White (John White Consulting, 7 John Street, Kew) be acceptable to your instructor?
At 5.15pm, Mr Weinstock replied:
John White is acceptable on the following terms:
1.his fees be paid by your client;
2.after assessing my client’s costs, he provide his assessment to my instructors, who then forward it to your instructors.
At 5.26pm, Mr Muller replied as follows:
Point 1 agreed.
Point 2 – should be provided to both parties in draft who have 48 hours to make comments before he issues a final to both parties again simultaneously.
At 5.49pm, Mr Weinstock replied in an email which commenced as follows:
Sounds reasonable.
So my client’s offer, incorporating all changes so far agreed, and tidying up the drafting, is that….
The offer which followed was in the same terms as the email reproduced at paragraph 4 above, and was stated to be open until 6.00pm.
Settlement of the sale of the townhouse was due to take place on 29 November 2013. On 20 November 2013, Mr White issued a draft assessment which assessed Camil’s costs of the proceeding on a standard basis at $39,518.52. This assessment caused some consternation amongst Ms McCarthy and her legal team. They asserted, and continue to assert, that during the course of negotiations on 8 November 2013, Mr Weinstock told Mr Muller that Camil’s solicitor/client costs were approximately $25,000, and thus Ms McCarthy is not liable to pay Camil’s costs in the amount assessed by Mr White.
On 29 November 2013, after some attempts by Mr Kerr to contact Mr Diakou in the preceding days, Mr Kerr wrote to Mr Diakou in the following terms:
We refer to previous correspondence with you in this matter and confirm that despite our repeated telephone calls to you, and extant correspondence of 26 November 2013 and 28 November 2013, we have not received the courtesy of a reply.
We hereby put you on notice that the writer will personally attend settlement of the sale today in order to collect the bank cheque payable to Lobb & Kerr Lawyers in the amount of $310,649.45.
The foregoing will fulfil clause 4 of the Terms of Settlement and comply with your client’s irrevocable instructions for a cheque in the settlement sum to be given to us at settlement.
Any deviation from the above will be met with immediate application to the Supreme Court for judgment in accordance with clause 6 of the Terms of Settlement.
We again reserve the right to produce this and previously correspondence to the Court on the question of costs which as a result of your client’s actions will be sought on an indemnity basis.
Mr Diakou responded as follows:
I am instructed that my client was induced to agree to the proposed settlement terms based upon the representations of your client’s barrister to my client’s barrister prior to the terms of the settlement being agreed, that your fees on your file (to be costed) were approximately $25,000 on a solicitor client basis, which is now known to be false.
For settlement of the sale of the subject property today, I have been instructed to draw a cheque made payable to my firm’s trust account for an amount which includes the monies your client alleges it is owed (which my client disputes).
Any application by your client for judgment should be made on proper notice.
All rights reserved.
On 13 December 2013, on the return of Camil’s summary judgment application, Derham AsJ ordered (apparently without substantial opposition) that Ms McCarthy pay Camil the sum of $250,000, plus interest of $17,506.85 from 20 March 2013 to 29 November 2013, plus $15,000 on account of Camil’s costs. The outstanding dispute, being whether Ms McCarthy was liable to pay the full amount of costs as assessed by Mr White, was referred to mediation by an associate judge. On 11 February 2014, Wood AsJ conducted a mediation. The dispute was not resolved. On 11 March 2014, Camil issued a summons seeking judgment on the terms of settlement. Orders were made for the filing and service of affidavits on 27 March 2014, with Ms McCarthy to file and serve the affidavits upon which she relied first. Camil’s summons was listed for a one day fixture on 20 May 2014.
On 29 May 2014, Derham AsJ acceded to the submissions made on behalf of Ms McCarthy that it was appropriate for the dispute to be the subject of a trial, rather than be dealt with on a summary basis. The trial was listed for hearing on 1 October 2014, but was adjourned by reason of the unavailability of counsel, and was refixed for hearing on 15 April 2015. The trial was not completed on that day, and was adjourned part‑heard to 27 May 2015 and concluded on that day.
The factual disputes in the proceeding are set out in the affidavits relied upon by each of the parties. As noted by counsel for Ms McCarthy, the trial was essentially concerned with two issues: whether Mr Weinstock made a statement to the effect that Camil’s legal solicitor/client costs were approximately $25,000, and, if that statement was made, what was its legal effect? Ms McCarthy asserts that the statement was made and either amounted to a collateral warranty which induced Ms McCarthy into entering the terms of settlement, or, alternatively, that the making of the statement amounted to misleading and deceptive conduct within the meaning of s 18 of the Australian Consumer Law. Camil denies that the statement was ever made but, in any event, if there was a finding that such a statement was made, in all of the circumstances in the case it could not be relied upon by Ms McCarthy to avoid the terms of settlement. It was not sufficiently precise or promissory, nor was it made in circumstances where it was, or ought to have reasonably been, relied upon by Ms McCarthy. Further, it was not a representation made ‘in trade or commerce’, and, in any event, in all of the circumstances, it was not unconscionable for Camil to seek to enforce the terms of settlement.
Ms McCarthy relied upon an affidavit sworn by her on 31 July 2014, and also relied upon the evidence of her solicitor, Mr Dimitrios ‘Jimmy’ Diakou of Diakou Faigen, and Mr Muller. Ms McCarthy deposed, in summary, as follows:
(a) on 7 November 2013 she met with Mr Muller at his chambers to discuss the pending application. She instructed Mr Muller to contact Mr Weinstock to try and settle the matter;
(b) on the afternoon of 8 November she had several telephone conversations with Mr Diakou in relation to the settlement discussions she believed Mr Muller was having with Mr Weinstock;
(c) Mr Diakou asked her whether she was prepared to pay Camil’s costs as this was the only issue that remained unresolved. She instructed Mr Diakou to ask how much the costs were because she did not want to pay Camil’s costs. She did not believe they were entitled to their costs in light of the aggressive way they had run the litigation and she was concerned that their costs would be very high;
(d) Mr Diakou called her and said that Mr Muller had asked Mr Weinstock how much the plaintiff’s costs were likely to be. Apparently, Mr Weinstock told Mr Muller that the plaintiff’s costs were approximately $25,000 on a solicitor-client basis. Mr Diakou then told her that if those costs were then assessed on a standard basis the costs would be approximately $15,000, or at worst $25,000, but definitely not more than that amount;
(e) based upon her understanding that Camil’s costs were approximately $25,000 on a solicitor-client basis, she agreed to settle with Camil and pay its costs on a standard basis to be assessed by John White, the jointly agreed costs consultant;
(f) when she received the draft assessment of Mr White on 20 November 2013 she was shocked that it was so much and sent an email to Mr Diakou to that effect; and
(g) she would not have agreed to pay Camil’s costs had she not received the assurance that Camil’s costs were approximately $25,000. Rather, she would try to negotiate some alternative agreement about costs which limited the amount she had to pay and if it was not possible to reach such an alternative agreement, she would have defended Camil’s application.
The email referred to at paragraph 24(f) above was the last in an email chain which commenced with the email from John White of 20 November 2013 to both Mr Kerr and Mr Diakou attaching the assessments. On the following day, Mr Diakou wrote ‘Hi Jane. I attach a copy of the draft assessment of the costs prepared by John White. I will speak to Adrian Muller about them today so that we can make our submissions to John within the 48 hour window.’ Ms McCarthy’s response was as follows:
Hi Jim based on our brief conversation there is no way i would be paying $39K AS YOU SUGGESTED WHEN WE TALKED ON SETTLEMENT COSTS WERE $25K there are things in the document like valuation done @ $2k and it goes on.
Did we get in writing that legals costs were $25K when yo u (sic) and Adrian were discussing with their barrister and then if it was that we would pay half, it looks like they have sent john client costs at full price and even then looks ridiculous.
cheers
Jane.
Ms McCarthy also relied upon an affidavit affirmed by Mr Muller on 29 May 2014. Mr Muller deposed that he was briefed as counsel by Ms McCarthy on or about 23 May 2013, and held the brief until 29 November 2013. He exhibited the electronic documents and handwritten notes which remained in his possession and described how they came into existence. He deposed that the agreement between the parties was reached after a series of telephone calls and emails between him and Mr Weinstock from about 12.30pm until approximately 6.15pm that evening. He took only limited notes during the course of the afternoon, as he would speak to his instructor directly after each telephone conversation with Mr Weinstock.
Mr Muller deposed that Ms McCarthy had initially offered to settle the matter for $250,000, inclusive of interest and costs. Camil did not accept this as it wanted additional amounts for interest and legal costs, and there was also discussion about the exact date for payment. The issue of the amount of interest to be paid was resolved on the basis of statutory interest from 29 March 2013 (that is, the date for repayment of the principal amount rather than interest as provided for in the original loan agreement). They agreed to fix the date for payment as the settlement date of the re-sale of the townhouse, which was expected to be in late November 2013.
At paragraph 11 of his affidavit, Mr Muller deposed as follows:
The issue of costs was more difficult to negotiate as my client’s instructions were to agree on a sum certain for costs if at all possible and Mr Weinstock told me his client wanted to settle on the basis that the costs were to be assessed. During one of our telephone conversations, I asked Mr Weinstock for an estimate of his client’s legal costs on a solicitor-client basis and he said to me that they were approximately $25,000 but that his client still wanted the costs to be assessed. I then relayed this to my instructors and I was then instructed to agree to costs being assessed on a standard basis. This is what ultimately was put in the various offers sent by Mr Weinstock and accepted by me on behalf of my client in the 6.15pm email.
Mr Muller also deposed that on 21 November 2013 he received an email from Mr Diakou attaching Mr White’s draft assessment in the sum of $39,518. His response was ‘That can’t possibly be right’. Mr White issued his final, unchanged assessment on or about 27 November 2013. At around that time he had a telephone conversation with Mr Diakou in which Mr Diakou told him that Ms McCarthy was considering not paying because she had been misled as to the quantum of the actual legal costs Camil had incurred.
At trial, Mr Muller was asked some further questions by counsel for Ms McCarthy by way of evidence‑in‑chief. In particular, he was taken to a copy of the handwritten notes made by him during the course of his retainer which were exhibited to his affidavit (‘notes’). He confirmed that only one page of the notes recorded aspects of his conversations with Mr Weinstock. The remaining handwritten notes record what occurred at a conference with Ms McCarthy and a representative of Diakou Faigen (not Mr Diakou) on 7 August 2013.
The notes are rudimentary. A transcription follows:
Without prejudice offer
- $250,000 all in
- interest foregone
- legal fees for proceeding less for summary judgment on scale
- payable from settlement sums at
on 29 Novsettlement- 11th – struck out
- 18th – notice of appeal
25th – appeal heard and struck out
Lawyer went hard – should have waited.
√ $250,000 + $25,000 for int & costs
√ - interest from date loan was due
√ - costs to be taxed in default of agreement
√ Payment of settlement $25,000
Judgment for settlement amount √
Mr Muller gave evidence that the first line of the note refers to a without prejudice offer for $250,000 all in which reflected the original offer put. The reference to ‘interest foregone’ and ‘legal fees for the proceeding less the summary judgment on scale’ refers to something Mr Weinstock might have come back with, or it was written down during a conversation, he could not quite recall. He was then asked about the remainder of the note, and gave the following evidence:
Let’s go to the next line then, what does that next line say?---The next line says $250,000 plus $25,000 for interest and costs, and I presume that is a reference to a further offer that’s been put once the offer of $250,000 all in was rejected, and then you see the next line is interest from date loan was due followed by costs to be taxed in default of agreement, payment of settlement, judgment for settlement amount, and those are ticked off. So my practice – what I would have done is as we have done various negotiations I would have added to what the offers were and you can see they are ticked off down the side and then under costs to be taxed in default of agreement there is a figure of $25,000 which is what I recall Mr Weinstock telling me their solicitor/client cost were about in the course of those conversations.
Finally, Ms McCarthy relied upon the affidavit of Mr Diakou sworn on 13 December 2013. He deposed as follows:
One of the conditions of the terms of settlement was that the plaintiff’s solicitors file in this proceeding would be assessed and the defendant would pay the assessed costs. Such costs were assessed at $39,518.52.
Mr Adrian Muller, barrister, was retained to act for the defendant in this matter and on the afternoon of Friday, 8 November 2013 he began negotiating with Mr Aaron Weinstock, barrister retained to act for the plaintiff to attempt to settle this proceeding.
During such negotiations, Mr Muller called me and said that he had spoken to Mr Weinstock who had communicated to him that his client’s costs (referring to the plaintiff) had already been assessed on a solicitor client basis at $25,000. I communicated this to the defendant and she instructed me to agree to pay the plaintiff such costs to be assessed on an ordinary basis so it was therefore assumed that such costs would be assessed at approximately $15,000. I communicated these instructions to Mr Muller who then accepted the plaintiff’s offer in writing.
I am told by the defendant that she would not have accepted the plaintiff’s offer the subject of the terms of settlement had it not been for this representation by Mr Weinstock as to what his client’s costs were in this proceeding.
Mr Diakou also gave further oral evidence at trial which expanded upon the evidence in his affidavit. He gave evidence that he believed the negotiations between the parties started at around 2.45pm, when he received Mr Weinstock’s first email from Mr Muller, which he then forwarded to Ms McCarthy. He called Ms McCarthy and took her through the terms of the counter offer. Ms McCarthy questioned him about the term regarding costs, she did not understand what costs on a standard basis were, and she wanted to know how much she would be liable for. He then called Mr Muller and asked if he could find out from the solicitor what the costs were roughly. He assumed that Mr Muller had spoken to Mr Weinstock, because Mr Muller called him back and told him that they were $25,000 on a solicitor-client basis, which he then communicated to Ms McCarthy. These conversations would have had to have taken place after 2.45pm because the first time costs were raised was by reason of Camil’s counter offer: as the previous offer had been on an ‘all‑in’ basis.
Mr Diakou gave evidence that Ms McCarthy’s initial response to the estimate of $25,000 is that she was paying too much money, but she understood that she had to pay some costs. Mr Diakou said he told her that in his experience if solicitor-client costs were $25,000, standard costs would be $15,000 to $20,000, but definitely no more than $25,000. He then discussed with Ms McCarthy who would conduct the assessment. He suggested Mr White, as Ms McCarthy was adamant about not wanting to pay a lot of costs, and if they got a favourable costs consultant they could potentially get the costs down as much as possible.
Mr Diakou gave evidence that he had a discussion with Mr Muller about putting the $25,000 figure in the terms of settlement, because Ms McCarthy was so concerned about paying excessive costs. Mr Muller told him that it was not required because it was common for barristers to have agreements in place, and he relied upon what he was told by Mr Weinstock. Mr Diakou accepted counsel’s advice.
Camil relied upon affidavits sworn by Mr Aaron Weinstock and Mr Darren Kerr, the solicitor at Lobb & Kerr with conduct of the file on behalf of Camil.
Mr Weinstock deposed that he has practised at the Victorian Bar since about 9 November 2006. At paragraph 3 of his affidavit he deposed as follows:
I have read the affidavit of Mr Adrian Peter Muller, affirmed 29 May 2014. In paragraph 11 of his affidavit, Mr Muller deposes that, in one of our conversations on 8 November 2013, I said that ‘my client’s legal costs were on a solicitor client basis … were approximately $25,000’. I did not say this, because I did not know it. No-one had told me that my client’s legal costs, on a solicitor-client or any other basis, were approximately $25,000. And I would not have made up, and accordingly did not make up, a number for those costs.
Camil also relied upon three affidavits sworn by Mr Darren Kerr of Lobb & Kerr Solicitors. The first affidavit was sworn on 29 November 2013, when Mr Kerr deposed, in summary as follows:
(a) terms of settlement in the proceeding were reached between respective counsel on 8 November 2013;
(b) in accordance with clause 4 of the Terms of Settlement, Ms McCarthy was to provide irrevocable instructions to her solicitors to arrange for a cheque for the settlement sum to be provided to his firm at the settlement of the sale of the townhouse. Ms McCarthy’s lawyers confirmed that they held those irrevocable instructions by email on 14 November 2013;
(c) Mr White issued his Certificate of Assessment on 20 November 2013; and
(d) on 26 November, he sent a letter to Ms McCarthy’s solicitors requesting details as to the time and venue for settlement and advising of the settlement sum, but received no response. He received no response to a further letter dated 28 November 2013. On 29 November 2013, in a further email to Mr Diakou, he reiterated that in accordance with the terms of settlement and the irrevocable instructions provided to Mr Diakou, Lobb & Kerr would attend settlement on behalf of Camil in order to collect a bank cheque payable in the amount of $310,649.45. In response, an email was received from Mr Diakou stating that Ms McCarthy was induced to agree to the proposed terms of settlement based on misrepresentations.
Ms Kerr swore a further affidavit on 8 July 2014. At paragraph 2 of that affidavit he deposed as follows:
I refer to my previous affidavit filed in this matter sworn on 29 November 2013 and state further that on 14th November 2013 I was telephoned by the defendant’s lawyer Mr Jimmy Diakou. Mr Diakou stated to me that he now had irrevocable instructions in respect to the payment of the sum of $250,000. Mr Diakou then enquired what our standard costs were. I responded that at his instigation the standard costs are being assessed by Mr John White Costs Consultant and they will be as assessed by Mr White. I stated that the terms are quite explicit and his client doesn’t have a lot of wriggle room. Mr Diakou agreed. I further pointed out that based on his present instructions which limited the irrevocable instructions to the payment of the $250,000 amount only that his client was in breach of the terms of settlement.
Mr Kerr produced a file note of this conversation which is consistent with the evidence given above.
Mr Kerr swore a further affidavit on 22 April 2015 when the matter was part-heard. He deposed that when he was cross‑examined by counsel for Ms McCarthy he was asked if he made file notes of the conversations which he had with Mr Weinstock on 8 November 2013. He acknowledged that he had. He produced two documents, being two file notes made on 8 November 2013. The first file note refers to a discrete telephone conversation with Mr Weinstock. The second file note refers to a number of further telephone conversations occurring between himself and Mr Weinstock. During the course of the conversations which are the subject of the second file note, he was driving from his office in Mt Waverley to the Mornington Peninsula, a journey of approximately one and a quarter hours. His conversations with Mr Weinstock commenced prior to leaving the office and continued through the journey. He deposed as follows:
I can recall that during the conversation a sticking point arose as to who would perform the cost assessment as envisaged in the Terms of Settlement. As our firm regularly engages Mr John Ahern in relation to costing matters, Mr Weinstock was instructed to stipulate in the terms of settlement that Mr John Ahern perform the assessment. Instructions were subsequently given for Mr Weinstock to agree to terms which provided for Mr White, costs consultant, chosen by the Defendant, to do the assessment.
Each of the witnesses were subject to thorough cross‑examination. Ms McCarthy initially refused to accept that she did not want to pay Camil’s legal costs because of the aggressive manner in which they had run the litigation against her, but conceded that she had made a statement to that effect in her affidavit. Apart from that, her evidence under cross‑examination largely elaborated upon the evidence in her affidavit, rather than contradicted it, although, understandably, her recollection about the time at which certain statements were made was poor, and she demonstrated some confusion regarding the terms ‘standard costs’ and ‘solicitor-client’ costs. Her demeanour was on occasion defensive, but she was adamant that at the time she gave instructions to Mr Diakou during the course of negotiations on 8 November, she knew that her likely maximum exposure to costs was $25,000. Indeed, she believed that she knew the quantum of Camil’s costs prior to the commencement of negotiations on the afternoon of 8 November 2013. It was a significant matter for her, because she wanted to know her total exposure prior to settling with Camil, although she could not recall telling Mr Diakou that. She did see the emails that passed between counsel during the course of the day, but all of her instructions were given to Mr Diakou via telephone, and all of the information she received about the settlement negotiations was via Mr Diakou.
Ms McCarthy agreed that on or about 14 November 2013, she spoke to Mr Diakou and gave him instructions that at settlement a cheque be drawn for $250,000 only. When queried as to why only for $250,000, she stated it was because they had not agreed upon legal costs. She did not recall that there had also been an agreement upon interest, including the rate of interest and the date from which interest would be payable.
Ms McCarthy gave evidence that when she received a copy of the draft costs assessment prepared by Mr White, she ‘nearly fell off her chair’, and her email to Mr Diakou of 21 November 2013 (reproduced at paragraph 25 above) reflected her understanding of what occurred on 8 November.
During the course of his cross‑examination, Mr Muller could not recall whether he got instructions to make an offer to resolve the matter for $250,000 all in on the previous day or on the morning of 8 November. Mr Muller was once again taken to the notes. Mr Muller explained that the reference to ‘lawyer went too hard, should have waited’ referred to him telling Mr Weinstock that the application for summary judgment should not have been made. He may well have said to Mr Weinstock that Camil should not get its costs of the summary judgment application, but that was rejected by Mr Weinstock. Mr Muller agreed that the reference in the notes to ‘interest foregone’ and ‘legal fee for proceeding less summary judgment under scale’ was inconsistent with an ‘all-in’ offer, and he assumed that they were notes of the discussions he had with Mr Weinstock during the course of the day. He agreed that there were certain matters discussed which did not make their way into the final agreement. The references to ‘11th struck out’ etcetera must have been a reference to another matter he was dealing with on that day.
Mr Muller accepted that every offer made by Camil was made in writing, and he assumed that all of these offers would have been forwarded by him to Mr Diakou. Mr Diakou always responded by telephone. When queried about the gap in time which elapsed between Camil’s counter offer (2.47pm) and his first response in writing (4.49pm), Mr Muller stated that there were discussions between him and Mr Weinstock during that period. The email sent by Mr Muller at 4.49pm stated, “My instructor has not heard of John Ahern. Would John White Consulting, (7 John Street, Kew) be acceptable to your instructor?” He later stated that it took some time for Mr Diakou to get instructions from Ms McCarthy.
Mr Muller gave evidence that the reference to ‘$250K plus $25K for interest and costs’ referred to a discussion between him and Mr Weinstock about a settlement proposal, and that this proposal was consistent with his usual practice to settle for a sum certain. He does not like to settle on ambiguous terms, which was what caused him to ask what solicitor-client costs Camil had incurred, thinking that would put an upper limit on costs as the assessment would not have come back any higher than the estimate.
Mr Muller could not recall at what time during the course of the afternoon the alleged representation regarding costs was made. He considered that it was plausible that Ms McCarthy was aware of the $25,000 figure before Camil’s counter offer was made at 2.44pm.
Mr Muller conceded that he was engaging in some speculation in identifying the reference to $25,000 in the notes as a reference to the alleged representation. However, he did not accept that the only matter discussed as to costs was the identity of the costs consultant, as the notes include a reference to interest and costs being bundled up in one sum. He accepted that the notes made no reference to either Mr Ahern or Mr White.
Mr Muller had little direct recollection about the timing and circumstances in which he had the conversation with Mr Weinstock during which the allegation was allegedly made, or the form of words which he had used. He could not recall whether there was one or more conversations between him and Mr Weinstock between the first and second emails, or whether the conversation occurred later, or whether Mr Weinstock’s response was immediate. He did not believe that Mr Weinstock told him that the file had been costed. He could not say whether there had been an ongoing discussion about costs.
Mr Muller gave evidence that no‑one (that is, neither his instructor or client) contacted him to tell him that the issue of costs was important, and that there needed to be an express reference to costs in the terms of settlement. He saw no need to do so, as he was told a number by counsel and accepted that number. He rejected the proposition that Mr Weinstock had not told him that Camil’s costs were $25,000, and did not allow for any possibility that he might have been mistaken. He rejected a suggestion that the reference to $25,000 represented an attempt or a suggestion to carve out Camil’s costs of the summary judgment application, which he may have discussed with Mr Diakou.
Mr Muller could not recall whether he had done the interest calculations, or Mr Weinstock had done them and told him about it, but he assumed the statutory interest was lower than interest under the loan agreement.
During the course of re‑examination by counsel for Ms McCarthy, Mr Muller gave the following evidence, in summary:
(a) once again, he could not recall the sequence of events, emails and telephone conversations on the afternoon of 8 November;
(b) he was taken to minor changes in the terms recorded in the 3.21pm, 4.07pm and 4.21pm emails;
(c) he could not recall whether he has ever settled on the basis that costs would be assessed: he has never settled for an open cheque. He noted that there was a level of ambiguity about the terms of settlement, which gives him confidence that he would have asked for some level of surety as to what Camil’s costs might be;
(d) he did not recall discussing with Mr Diakou about putting anything in the terms of settlement about the $25,000; and
(e) he did not believe that there was any correlation between the two references to $25,000 in the notes. He did not believe the reference to $25,000 related to the legal costs of the summary judgment application being ‘carved out’, because the negotiations were well past that point at the time he made this reference in the note.
Finally, counsel for Ms McCarthy asked:
Why would you take a representation from a fellow member of counsel on face value?
Mr Muller responded:
That’s what we do, isn’t it?
Cross-examination of Mr Weinstock focussed to a substantial extent upon Mr Weinstock’s experience and practices, first as a solicitor in a large commercial law firm, and as a barrister. When asked about his file note taking practices as a solicitor, Mr Weinstock gave evidence that he only spoke to a client or opposing solicitor on one occasion during his relatively brief period of practice as a solicitor because he was so junior. He does not have a practice of keeping file notes. Despite being a member of the Bar’s Professional Standards Scheme, he was not aware of the requirement to have in place a professional risk management plan. He also gave evidence that he was not familiar with the obligations of legal practitioners under the Legal Profession Act 2004 (Vic) to inform clients of their possible costs exposure in the context of settlement negotiations. He does not recall being asked about costs in the context of a mediation.
Turning from the general to the specific, Mr Weinstock did not recall whether he made file notes of his telephone conversations with his instructor, Mr Kerr, on 8 November, but if he had, they would have been destroyed. He believes that at some stage he was told that the costs had been assessed at about $39,000, but does not recall whether it was on the afternoon of 8 November, or on some other occasion. He does not recall whether he had been told that the file had been costed by Mr Ahern, or telling Mr Muller about it. He had not seen the certificate issued by Mr Ahern on 30 October 2013, addressed to his instructing solicitors, which stated that Camil’s solicitor-client costs (excluding disbursements) were $43,715 as at 9 November 2013. He specifically denied that he had told Mr Muller that his client’s costs on a solicitor-client basis were $25,000. While he recalled that at some point he was told that the file had been costed, he was never told it was costed at $25,000.
It was put to Mr Weinstock that he must have known the amount of his own fees at the time. He rejected that, on the basis that his recollection was probably not good enough for him to know how much he had incurred in fees in total in every matter on which he was working on any particular day. He might be able to guess, but he could not say that it would be a reasonable guess. He records his time electronically, but not on a system which allows him to see the time that has been recorded on a particular matter to date.
It was put to Mr Weinstock that given his years of experience in commercial litigation he would surely have a rough idea of how much it costs to run a dispute up to a particular stage, either a dispute generally, or a dispute of this nature up to a particular stage. He rejected that proposition, and said that while on occasion he may have asked an instructing solicitor what their costs were, he does not ask his clients how much his solicitors have charged them.
As shown by the following extract from the transcript, it was put to Mr Weinstock that his recollection of the events of the afternoon of 8 November 2013 may have been faulty:
Given you haven’t actually kept any file notes of any of these discussions on 8 November 2013, it’s possible, isn’t it, your recollection of what you discussed with Mr Muller isn’t completely accurate?---It’s possible that it isn’t completely accurate except in respect of my evidence that I did not tell him that my client’s costs were about $25,000, I did not tell him that because I did not know it.
During the course of his re‑examination, Mr Weinstock gave evidence that he had been involved in matters where offers have been made on the basis that costs were to be taxed in default of agreement, although he could not recall whether they had been accepted. In those circumstances, the precise sum payable would not have been known at the time that the terms were executed.
Finally, Mr Weinstock gave evidence that on the afternoon of 8 November 2013, he commenced drafting the emails containing the various offers of settlement to almost immediately upon receipt of instructions from Mr Kerr. The first email may have taken half an hour to draw. He does not recall working on any other matter that afternoon, and thought that it was unlikely that he would have done so.
Mr Kerr was cross‑examined in two stages: first, on 15 April 2015, and again on 27 May 2015. On 15 April 2015, he gave the following evidence in cross‑examination:
(a) he had acted for Camil for approximately five to ten years;
(b) he had at least three telephone conversations with Mr Weinstock on the afternoon of 8 November 2013;
(c) he did not tell Mr Weinstock that Camil’s costs were $25,000, and he does not believe Mr Weinstock asked him what Camil’s costs were;
(d) he discussed the proposed settlement with his client, but cannot recall whether they discussed the issue of costs;
(e) he had received the certificate from Mr Ahern which related to solicitor’s costs only, prior to 8 November 2013, but he did not tell Ms McCarthy or her lawyers about that certificate;
(f) he was aware of his disclosure obligations under the Legal Profession Act 2004, but he owed no duty to Ms McCarthy, and in any event, under the terms of settlements, costs were to be assessed;
(g) Ms McCarthy’s solicitors asked him what Camil’s costs were likely to be after 8 November 2013, not before; and
(h) he does not believe he ever discussed the issue of Camil’s costs with Mr Weinstock.
When Mr Kerr was recalled to the witness box on 27 May 2015, he was largely cross‑examined upon the two file notes he produced recording his discussions with Mr Weinstock on the afternoon of 8 November 2013. The first file note was made in his office. The second file note records the main points of his discussions with Mr Weinstock which took place while Mr Kerr was travelling from his office to the Mornington Peninsula. These conversations took place over the course of the journey, took up the majority of the time of the journey, and the file note was made at the conclusion of the journey.
The second file note refers to costs ‘to be assessed’. He believes that if he and Mr Weinstock had discussed a figure for costs he would have made a note of it. Mr Kerr considered that the term that the costs be assessed was an important issue, as Ms McCarthy’s property had been sold, and he did not want his client to miss out on the opportunity to get paid from the proceeds of sale, which was a risk if the matter had to go to the Costs Court. His recollection was that the amount of costs was not an issue that he would have discussed with Mr Weinstock: rather, the issue under discussion was by whom the costs were to be assessed.
Finally, Mr Kerr gave evidence that the solicitor for Ms McCarthy did not ask him for an estimate of Camil’s costs until about a week after the settlement: he would have expected him to ask earlier, but he did not.
As previously noted, the Court is required to determine two issues: first, was the representation made, and secondly, if it was made, what was its legal effect? To those questions I would add a third: if I found that the statement was made, and it had the effect of limiting Camil’s rights to enforce the terms of settlement, what orders should I make to give effect to those findings?
The onus of proof of establishing that the statement said to have been made by Mr Weinstock was made is borne by Ms McCarthy.[1] I also accept that the necessary degree of persuasion varies according to the potential gravity of the findings, although I am not convinced that, in order to make a finding that Mr Weinstock made the representation, I would need to make a finding that he had deliberately misled Mr Muller and subsequently swore a false affidavit denying the making of such a representation. However, based upon the way that the evidence proceeded, I would need to make a finding that he had given Mr Muller a cost estimate in circumstances where he had no sound basis for doing so.
[1]see Currie v Dempsey [1967] 2 NSWR 532, 539.
In Play Australia Pty Ltd v Papadimitriou,[2] I was concerned with a claim for misleading and deceptive conduct based almost entirely upon a series of alleged oral representations, in circumstances where there was a remarkable paucity of contemporaneous documents. It was thus necessary to consider questions of onus of proof and the necessary standard of persuasion, as set out below (omitting footnotes):
In such circumstances, it is necessary, in the case of each of the pleaded representations, to be mindful of who bears the onus of proof. In cases of misleading or deceptive conduct, the onus is upon the plaintiff to establish that the pleaded representation has been made. As stated by Dixon J in Briginshaw v Briginshaw:
The truth is that, when the law requires the proof of any act, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to infinite gradations of certainty: and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal.
Other judges of the Court in Briginshaw refer to the necessity for a decision‑maker to feel a ‘comfortable satisfaction’, ‘certainty of intellectual conviction’, and to not be ‘oppressed with reasonable doubt’.
[2][2014] VSC 608.
While the remarks above are relevant to the current case, they were made in somewhat different circumstances to the current case, as illustrated by the following passages:
All of the above claims and the submissions regarding their potential impact upon the credit of the parties have merit. Indeed, it could be said that each of the main witnesses have a track record of making statements and engaging in conduct which indicates a willingness to be loose with the truth when it is in the perceived commercial interests of the parties and their associates to do so.
In these circumstances, it can be difficult to make a judgment as to which party, or which witness, is more or less creditworthy than another, such that it would not be possible to determine that on every issue where there is a dispute of fact, the evidence of one party or witness is to be preferred over that of another. Rather, it is necessary to evaluate the evidence in the context of the evidence as a whole, the inherent plausibility of the evidence concerned, including its plausibility in the context of the subsequent statements and pleadings of the parties, the existence and weight of corroborative evidence, and the likelihood that the evidence is likely to be at least in part shaped through the prism of self‑interest. That task is made just that more difficult by the paucity of contemporaneous documents, which in turn is consistent with the rather free‑wheeling approach to business shown by the parties.
Of course, the current case is completely different. In particular, rather than there being significant, if any concerns about the credit of the witnesses, four of the five witnesses in the current proceeding are officers of the Court, and no attacks were made on their credit worthiness in any real sense. Rather, any concerns about the reliability of their evidence arise out of the inevitable impact upon the recollections of the witnesses owing to the passage of time between the relevant events and the trial, where the witnesses who are legal practitioners have no doubt dealt with many litigious matters since that time. In circumstances where an assessment of comparative creditworthiness brings little to bear upon the evaluation of the reliability of evidence, but the parties are diametrically opposed on key factual questions, much does turn upon the plausibility of the evidence and its consistency with uncontroversial facts and what contemporaneous documents are available.
It is apparent from the evidence of a number of witnesses that their recollection of the relevant events is relatively shaky. The remarks of McLelland CJ in Eq in Watson v Foxman[3] are apposite here:
Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self‑interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
[3](1995) 49 NSWLR 315, 319.
Such observations, along with the fact that there are terms of settlement in writing which are complete on their face, does make the task facing Ms McCarthy in discharging the onus of proof imposed upon her somewhat difficult.
There is certainly evidence in support of a finding that, as at 8 November, Ms McCarthy and her legal team believed that Camil’s costs were in the order of $25,000. This is apparent from the testimony of the witnesses, and the responses of Mr Muller and Ms McCarthy to Mr White’s assessment, as recorded in their emails to Mr Diakou. The question is, even if I can be reasonably satisfied that this belief was held by Ms McCarthy and her legal representatives, can I be reasonably satisfied that this belief was engendered by any statement of Mr Weinstock to that effect?
I cannot be so satisfied. It is possible that such a statement was made. After all, it is not an unlikely subject for discussion in the context of negotiations of this kind. However, given that the evidence of Mr Weinstock and Mr Kerr was largely unshaken, the inconsistencies in the evidence of the witnesses called by Ms McCarthy on some key factual matters and the absence of any reference in any document to Camil’s costs being estimated at $25,000 until 21 November 2013 means that I am not persuaded, to the level of satisfaction required, that such a statement was made.
I accept Mr Kerr’s evidence that he did not discuss the question of the quantum of Camil’s costs with Mr Weinstock. In any event, it would be almost inconceivable that, if he had, he would have told Mr Weinstock that Camil’s solicitor client costs were $25,000, having received advice from Mr Ahern only days before that the professional fees alone had been assessed at $43,000. Therefore, in order to find that the representation was made, I would need to be satisfied that Mr Weinstock, when asked about the costs incurred by Camil, simply made a guess, which he passed on to Mr Muller, without any knowledge of or regard for its accuracy.
I accept Mr Weinstock’s evidence which was to the effect that he really does not know or understand much about costs. There are of course legal practitioners, both solicitors and barristers, but particularly the former, who are experienced in calculating and estimating the costs associated with litigation and particular steps in litigation. However, I accept that there are many practitioners, particularly barristers, who have just not had to be concerned with such matters during the course of their practice. Further, I do not accept that the implied criticism of Mr Weinstock’s file note taking practices and lack of awareness of his disclosure obligations under the Legal Profession Act 2004 goes very far in undermining Mr Weinstock’s credibility as a witness, or cause me to draw an inference that he made the representation to Mr Muller. After all, Mr Muller’s own file notes were not comprehensive, and Mr Diakou made no file notes at all.
In the end, Mr Weinstock’s evidence that he did not say that Camil’s costs were $25,000, because he did not know it, was largely unshaken. His only source of knowledge could have been Mr Kerr, and as previously noted, I accept Mr Kerr’s evidence that he did not discuss the quantum of Camil’s costs on 8 November: the focus of the discussion was the mode of assessment. I also find it inherently improbable that, given Mr Weinstock’s professed lack of knowledge of costs, that if he had been asked by Mr Muller what Camil’s costs were, that he would not simply ask the person who would know, being Mr Kerr. As noted by counsel for Camil in his submissions, Mr Weinstock was in regular telephone contact with Mr Kerr throughout the course of the afternoon. He obtained his instructions from Mr Kerr, and it is apparent from Mr Kerr’s file note that he referred to Mr Kerr for instructions in relation to the detail of the terms of settlement.
Mr Muller’s lack of recollection about the circumstances in which the representations was made is significant here. If Mr Muller had been able to give positive, confident evidence that, in a phone call with Mr Weinstock, he had asked about Camil’s costs, Mr Weinstock had said words to the effect that he would find out and call him back, and then did so, it would be difficult not to accept that evidence. However, Mr Muller’s lack of recollection regarding the timing and circumstances in which the representation was made makes it difficult to assess whether the statement was made, but, also if it was, whether it was promissory in nature. The reference to $25,000 in the notes is not conclusive, particularly given that it is apparent from another reference in the notes that a settlement on terms that Ms McCarthy pay Camil the sum of $250,000 plus $25,000 in respect of interest and costs, was at least contemplated, if not formally made. It is possible that the separate reference to $25,000 in the notes referred to Ms McCarthy’s own costs.
I should emphasise that I have no reason to find that Mr Muller gave untruthful evidence. I also accept that it is possible that Ms McCarthy, Mr Diakou, and Mr Muller believed Camil’s costs would be in the order of $25,000. It is conceivable that this belief may have arisen by reason of discussions amongst themselves, particularly given that Mr Diakou has given evidence that Ms McCarthy’s own solicitor client costs were in the order of $20,000 to $25,000. It also may have arisen because of a proposal that was discussed that Ms McCarthy pay $25,000 on account of interest and costs, although it is not apparent from the evidence that this proposal was ever conveyed to Mr Weinstock. But, while these are matters of mere speculation, they do highlight how some confusion might have arisen in Ms McCarthy’s camp.
It is also difficult to reconcile the evidence of Mr Diakou that he asked Mr Muller to include a reference to costs being capped at $25,000 in the terms of settlement with Mr Muller’s evidence that he could not recall such a conversation taking place. While understandably the passage of time will affect recollection, one would expect Mr Muller to recall such a conversation if it took place. If it did take place, then it casts further doubt upon Mr Muller’s ability to recall key conversations and factual matters. If it did not occur, then that casts some doubt upon the reliability of Mr Diakou’s evidence. Either way, such inconsistencies make Ms McCarthy’s task of discharging her burden of proof more difficult.
Further, while I could not, and do not need to make a positive finding to this effect, there is also evidence consistent with Ms McCarthy and her team not having a belief that Camil’s costs were $25,000. I accept Mr Kerr’s evidence, supported by a contemporaneous file note, that on 14 November 2013 Mr Diakou contacted him and told him he had irrevocable instructions for payment of the sum of $250,000 to Camil, and then enquired what the costs would be. Mr Diakou at first denied that such a conversation took place, then, when presented with Mr Kerr’s file note, said he did not recall the conversation. When Mr Kerr put to him that the costs will be assessed, and that his client did not have a lot of ‘wriggle room’, Mr Diakou apparently agreed. One would have expected that if the representation of $25,000 had been made on 8 November, that would have been mentioned on this occasion. Similarly, Mr Diakou’s email to Ms McCarthy on 21 November 2013 enclosing Mr White’s assessment expressed no surprise or concern about its contents, despite his evidence that costs were such a significant matter that he asked Mr Muller for a reference to the quantum of costs being incorporated in the terms of settlement. The terms of settlement provided both parties with an opportunity to make submissions on the draft assessment, but there is no evidence of any submissions being made. There was no communication from Mr Diakou to Mr Kerr in the period 21 November to 28 November 2013, despite Mr Kerr’s repeated attempts to contact him between 26 and 29 November 2013. This evidence is more consistent with a case of ‘buyer’s remorse’ on the part of Ms McCarthy rather than Ms McCarthy having been misled.
Indeed, it is apparent from Ms McCarthy’s email of 21 November 2013 that she did not entirely understand what had been agreed in the terms of settlement, referring to only being required to pay half of Camil’s costs. While such a proposal may have been one of the options under discussion on the afternoon of 8 November, it was not part of any offer made in writing, and was certainly not part of the terms of settlement. The statements made in Ms McCarthy’s email also create some difficulties for her on the question of reliance should the question arise: if Ms McCarthy believed that she was only obliged to pay half of Camil’s costs, then how could she say that she relied upon a representation that those costs were $25,000?
Accordingly, I am not satisfied, to the applicable standard, that the representation was made. However, in the event I had found that the representation was made, I would need to consider the evidence and the submissions of the parties regarding its legal effect.
Counsel for Ms McCarthy submitted that if the statement was made, Camil’s insistence that Ms McCarthy pay the costs as assessed by Mr White:
(a) amounts to a breach of warranty on the part of Camil;
(b) is conduct in breach of s 18 of the Australian Consumer Law; and/or
(c) is conduct which is barred by the principles of promissory estoppel.
Counsel for Ms McCarthy submitted, in relation to (a) above, that the statement is promissory in character, and, contrary to the submissions of counsel for Camil, was sufficiently specific to be binding upon Camil, and was not contradictory to the written terms of settlement. He relied upon the summary of the relevant principles by Gillard J in Mihaljevic v Eiffel Tower Motors Pty Ltd[4] (omitting footnotes).
First, to establish that a statement made during the course of negotiation was promissory or contractual in character, proof of a common intention of the parties to impose a contractual obligation on the person making the statement is essential. Secondly, it is unnecessary that the statement must contain an express form of words. It is sufficient if in the context of the words used import the requisite meaning to impose on the person making the statement a contractual obligation by way of promise or guarantee. Thirdly, whether a statement was intended to be contractual or not must be determined objectively in the light of the whole of the circumstances. Fourthly, whether an animus contrahendi exists is a question of fact and can only be determined by looking at all the circumstances attending the transaction. Fifthly, in the process of drawing such conclusion, the tribunal of fact is not entitled to draw any inference contrary to the express terms of any written contract made between the parties. Sixthly, it is easier to draw an inference that a warranty was intended where the person making the statement of condition or quality of an article has a personal knowledge thereof and the person to whom the statement is made is, to the knowledge of both parties, ignorant of the condition or quality of the article and is relying on the first party’s knowledge. Finally, in order to determine whether such intention be inferred I was and still am of the opinion that the method suggested by Lord Denning, MR, in Oscar Chess Td v Williams and Hornal v Neuberger Products Ltd is the most useful way to arrive at a decision. His Lordship said: ‘If an intelligent bystander would reasonably infer that a warranty was intended, that would suffice even though neither party in fact had it in mind.’
[4][1973] VR 545, 555.
Counsel for Ms McCarthy submitted that, in relation to the alleged misleading and deceptive conduct of Camil in the course of the settlement negotiations on 8 November 2013, that the submissions made on behalf of Camil that the statement was not made ‘in trade or commerce’ should be rejected. He relied upon Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd[5] as authority for the proposition that statements made in the context of ‘without prejudice’ negotiations are not protected from the operation of s 52 of the Trade Practices Act 1974 (Cth). Further, in Rosenbanner Pty Ltd v Energy Australia,[6] Ward J held that statements made during the course of settlement negotiations were made ‘in trade or commerce’. Her Honour stated:
I do not consider that statements made in a without prejudice meeting (or without prejudice correspondence) entered into between the parties (not as part of any compulsory or court-ordered mediation process) for the purposes of trying to resolve a dispute arising out of or of critical relevance to the business functions of a corporation, are not made in the course of trade of commerce for the purposes of the Trade Practices/Fair Trading legislation.
It surely cannot be the case that in discussion with a view to resolving a dispute at the least possible cost to a corporation and with what must have been a view to the continued and efficient conduct of its business, a corporation would be free to engage in misleading and deceptive conduct without recourse by a party suffering loss in reliance thereon….
[5](1990) 27 FCR 86, 93.
[6](2009) 223 FLR 406, 452.
In relation to Ms McCarthy’s contention that Camil was estopped from entering the term that she pay Camil’s costs in the sum assessed, counsel for Ms McCarthy rejected the submissions advanced on behalf of Camil that it was unreasonable for Ms McCarthy to rely upon the representation, and, that in any event, it was not unconscionable in the circumstances for Camil to resile from the representation. He submitted that Mr Weinstock must have known that reliance would have been placed on the statement, in the context of settlement negotiations where it was agreed that Ms McCarthy would pay Camil’s costs, and where the only source of Ms McCarthy’s knowledge of those costs was Camil’s legal team. For these reasons, Ms McCarthy was dependent upon Camil to inform her about her potential exposure under the terms of settlement, and thus was in a vulnerable position.
Setting aside the issue of reliance for the moment, I would add that if I were to find that the representation had been made, I would find that it had a promissory character. Notwithstanding Ms McCarthy’s evidence that she knew about Camil’s costs prior to 8 November, if it had been made, it was most likely made during the course of the afternoon of 8 November, while the parties were in settlement negotiations, and the representation was sufficiently precise and sufficiently connected with the subject matter of the settlement agreement to have promissory force. Further, the representation that Camil’s solicitor‑client costs were $25,000 is not, as was submitted by counsel for Camil, inconsistent with the written terms of settlement that costs would be payable on a standard basis, to be assessed, given the two different bases of assessment and the common understanding within the profession that standard costs are almost inevitably less than solicitor-client costs.
The authorities provide that if a material representation is made, and that representation is calculated or is objectively likely to induce a person into entering a contract, an inference can be drawn that it operated as an inducement to do so.[7] However, that inference is rebuttable, and, despite Ms McCarthy’s evidence that she was very keen to know her final exposure under the terms of settlement, the terms of her email to Mr Diakou on 21 November 2013 suggest that she did not entirely understand what had been agreed. However, it was not directly put to Ms Mc Carthy that she had not relied upon the representation, but rather had entered into the settlement agreement because it was otherwise commercially advantageous for her to do so in the circumstances, or because she thought she was only liable to pay half of Camil’s costs, and as such I would need to accept Ms McCarthy’s evidence that she relied upon the representation.
[7]Gould v Vagellas (1984) 157 CLR 215, 236.
Of course, an issue arises as to whether in all the circumstances, it was reasonable for Ms McCarthy, or, more relevantly, her legal advisors, to rely upon the representation. When one closely examines the position in hindsight, maybe not, considering that Lobb & Kerr had done considerably more work in the proceeding than Diakou Faigen, and given that Ms McCarthy had incurred costs of $20-25,000 by 8 November, one might have expected Camil to have incurred substantially more costs than Ms McCarthy, as it indeed did. However, at the time, during the course of negotiations in the context of a looming court hearing, and given that all of the information regarding Camil’s costs was in the possession of it and its legal representatives, I consider it would have been reasonable for Ms McCarthy to rely on such a statement emanating from counsel for Camil. Further, I agree that the representation, had it been made, had been made in trade and commerce. The representation was made in the course of settlement negotiations arising out of a dispute concerning Camil’s attempts to enforce a loan made by it to Ms McCarthy to finance the purchase of a property constructed by it. Camil may not have been in the business of lending money, but it did provide vendor finance ancillary to its commercial activities as a property developer. Accordingly, the jurisdiction of the Court to make orders under the Australian Consumer Law would be enlivened.
Accordingly, if I had found that the representation had been made, I would have found that it amounted to a collateral warranty, or, alternatively, that the making of the representation amounted to misleading and deceptive conduct. In the circumstances, the appropriate remedy would be to limit Ms McCarthy’s liability for costs to $25,000, which would require the making of an order that Ms McCarthy pay Camil the sum of $10,000.
However, given my findings that I am not satisfied that the representation has been made, I will enter judgment for Camil on the terms of settlement, and order that Ms McCarthy pay Camil the sum of $24,518.52. I will hear further from counsel on the question of interest and costs.
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