Capital Securities No. 1 Pty Ltd v Saliba

[2016] NSWSC 1093

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Capital Securities No. 1 Pty Ltd v Roger Saliba [2016] NSWSC 1093
Hearing dates:	14 June 2016
Date of orders:	19 August 2016
Decision date:	19 August 2016
Jurisdiction:	Common Law
Before:	Garling J
Decision:	(1) Parties to bring in Short Minutes of Order. (2) Proceedings adjourned to 9.30am on 25 August 2016 for further directions.
Catchwords:	CONTRACT – formation – offer and acceptance – email correspondence regarding settlement of dispute – where parties agreed on terms in email correspondence but did not execute formal document – whether the parties reached a binding agreement to settle the dispute – whether the subsequent conduct of the parties was consistent with the existence of a binding agreement   PROCEDURE – civil – cross-claim – Notice of Motion seeking declaration of settlement of cross-claim
Legislation Cited:	Not Applicable
Cases Cited:	Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Barrier Wharfs Ltd v W. Scott Fell & Co. Ltd [1908] HCA 88; (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v G R Securities Ltd (1986) 40 NSWLR 622 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68 Howe v Connell [1997] NSWSC 432 Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 Love & Stewart v S Instone & Co (1917) 33 TLR 475 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Sinclair, Scott & Co v Naughton [1929] HCA 34; (1929) 43 CLR 310
Texts Cited:	Not Applicable
Category:	Consequential orders (other than Costs)
Parties:	Roger Saliba Roger Saliba Pty Ltd (Cross-claimants) Tony Mitry Linda Mitry (Cross-Defendants)
Representation:	Counsel: A Rodgers (Cross-claimants) A Hourigan (Cross-defendants)   Solicitors: Mitry Lawyers (Cross-claimants) SRM Lawyers (Cross-defendants)
File Number(s):	2014/130581
Publication restriction:	Not Applicable

Judgment

1. In April 2014, the plaintiff, Capital Securities No.1 Pty Ltd (“Capital Securities”) commenced proceedings in this Court against the defendant, Roger Saliba (“Mr Saliba”). Those proceedings have now been resolved. However, in the course of those proceedings, Mr Saliba, and a company with which he is associated, Roger Saliba Pty Ltd (“the Company”), filed a cross-claim against Tony Mitry and Linda Mitry (“the Mitrys”) claiming relief largely with respect to the reimbursement to Mr Saliba of the monies which he paid to Capital Securities to settle the claim against him.

2. There were other components of the cross-claim. It is unnecessary to describe in detail all of the facts giving rise to the original claim by Capital Securities, or the cross-claim by Mr Saliba and the Company.

3. The proceedings presently before the Court consist of two motions. One motion, filed by Mr Saliba and the Company on 18 February 2016, seeks a declaration to the following effect:

“The proceedings between the cross-claimants and the cross-defendants settled in and about October to November 2015, on terms, inter alia, that the cross-defendants pay to the cross-claimant the sum of $390,000.”

4. The Mitrys dispute the entitlement of Mr Saliba and the Company to that relief.

5. Mr and Mrs Mitry also filed a Notice of Motion on 19 February 2016 seeking, among other orders, leave to file an Amended Defence to the cross-claim. It is agreed between the parties that the Court should first consider the Motion filed by Mr Saliba and the Company.

Factual Background

6. The cross-claim was filed on 6 November 2014. It sought judgment for Mr Saliba in the sum of $65,510.00 and a judgment indemnifying Mr Saliba and the Company in such sum as they were liable to pay to the plaintiff, Capital Securities. For the purposes of this judgment, there is no need to refer separately to the Company. It will be sufficient to refer to Mr Saliba as the person advancing the cross-claim.

7. The Mitrys admitted that Mr Saliba had loaned them the sum of $65,510.00, which has not been repaid. They did not admit any liability to indemnify Mr Saliba with respect to the principal proceedings.

8. Although the exact date is unclear, by no later than January 2015, Mr Saliba paid a sum of $332,170.00 to the plaintiff, Capital Securities.

9. During 2014 and early 2015, negotiations took place to resolve the proceedings between Mr Saliba and the Mitrys, which included without prejudice meetings between the lawyers for the parties, and the making of a number of offers in writing. Those negotiations and settlement efforts did not bear fruit.

10. On 10 September 2015, Mr Saliba’s solicitor, by email, made an offer to the Mitrys to settle the cross-claim on the basis that Mr Saliba be paid a sum of $440,000.00. On 16 September 2015, at a meeting between the parties’ lawyers, that offer was repeated. A counter-offer was then made by the Mitrys to Mr Saliba through their solicitor.

11. On 5 October 2015, Mr Saliba’s solicitor made the following offer by email:

“We are instructed to reject your most recent offer of settlement and advise that our client is willing to settle on the following terms:

1. Payment to Mr Saliba of $390,000.

2. Each party pay his, its or their own costs.

3. Settlement to be conditional upon Mr Saliba settling with the plaintiff (i.e. Capital Securities).

In respect of paragraph number 3 we note that we consider that there are strong prospects of Mr Saliba settling with the plaintiff. If we know that, subject to that matter, your client is willing to accept the proposal, we will move promptly to attempt to conclude the matter with the plaintiff.”

12. A few hours later, on the same day, the solicitor for the Mitrys made a counter-offer in response to that offer, in the following terms:

“We are instructed that our clients are prepared to offer the sum of $350,000 in settlement of the proceedings/cross-claim issued against our clients.”

13. On the evening of 5 October 2015, Mr Saliba’s solicitor sent an email rejecting that offer. The email indicated that consequent upon that rejection, the solicitor would proceed to relist the matter and ask the Court to fix a date for hearing.

14. On 7 October 2015, the Mitrys’ solicitor, by email, indicated to Mr Saliba’s solicitor that they remained interested in negotiating a resolution of the proceedings. By that email he sought further details of the way in which the settlement offer made on 5 October 2015 for $390,000.00 had been calculated.

15. On 13 October 2015, by email, Mr Saliba’s solicitor declined to itemise the claimed amounts as requested, rejected the Mitrys’ earlier offer of 5 October 2015, and renewed his offer of 5 October 2015, saying:

“We confirm that our client has instructed us to reject your client’s offer … and relist the matter for hearing if it is not settled in accordance with our offer of 5 October … by close of business Thursday 15 October 2015.”

16. This offer, and the deadline associated with it, provoked a response on the morning of 15 October 2015 from the Mitrys’ solicitor in these terms:

“We are instructed to accept your client’s offer subject to settlement terms being entered into.

Please forward proposed settlement terms for our client’s approval.”

17. On the evening of 16 October 2015, Mr Saliba’s solicitor responded to that email, saying:

“… We confirm we are waiting for counsel’s draft terms which we will forward as soon as they arrive.”

18. The matter seems to have rested there for some time. On 26 October 2015, the Mitrys’ solicitor wrote to Mr Saliba’s solicitor, saying:

“We await your response and proposed settlement terms”.

19. This did not prompt a response and, accordingly, on 28 October 2015, the Mitrys’ solicitor wrote to Mr Saliba’s solicitor in the following terms:

“We are instructed that if proposed settlement terms are not received by 29 October 2015, to relist this matter for application to strike out the proceedings pursuant to r 12.8 Uniform Civil Procedure Rules 2005.”

20. This email was responded to on the following day in these terms:

“We have been discussing this matter with Tony Rogers of counsel, who has advised us that he will have the terms of settlement completed either late today or tomorrow morning.

You will appreciate that there are more issues to be addressed and accommodated than the agreement between your client and ours.”

21. On 2 November 2015, the Mitrys’ solicitor again, by email, requested the terms of settlement and enclosed a copy of a motion to be filed on 4 November 2015 if the settlement terms were not received.

22. On 4 November 2015, Mr Saliba’s solicitor sent to the Mitrys’ solicitor a document headed “Terms of Settlement”. Immediately under that heading were the following words:

“DRAFT – WITHOUT PREJUDICE – FOR CONSIDERATION ONLY”

23. Thereafter, the various formal court details and title of the proceedings were set out. The document then set out the following terms:

“1.   The First and Second Cross Claimants (‘the Cross Claimants’) have brought a claim against the First and Second Defendants in matter number 2014/130581 (‘the Proceedings’).

2.   The First Cross Claimant has also brought claim against Capital Securities No.1 Pty Ltd seeking payment of certain monies.

2.   The First and Second Cross Defendants have agreed to pay to the First Plaintiff the sum of $390,000.

3.   The Cross Claimants, in consideration of receipt of the above payment hereby agree that upon receipt of such monies, they will not pursue, or further pursue, the Proceedings against either or both of the First and Second Cross Defendants in respect of the matters alleged in the Proceedings or to otherwise commence proceedings of any character against the First and/or Second Cross Defendants in respect of those matters.

4.   The First and Second Cross Claimants agree that the sum of $390,000 payable to the First Plaintiff may be paid to the First Plaintiff from monies held in the trust account of the solicitor for the First and Second Defendants and agree that, upon receipt of such monies, all other monies remaining in the trust account of the solicitor for the First and Second Defendants may be released and paid to the Defendants.

5.   The above matters are all subject to the First Cross Claimant settling his claim against Capital Securities No.1 Pty Ltd.” (sic)

24. Later, on 4 November 2015, the solicitor for the Mitrys responded by email to the proposed terms, saying:

“We refer to your email below, and the attached proposed settlement terms.

The settlement terms are acceptable except for proposed Order 5, which we request that you remove, have your client and sign and forward to our office for signing and filing at the Court. The First Cross Claim that your clients have issued against Capital Securities does not affect our clients’ liability in these Proceedings.

If we do not receive your response by 6 November 2015, we are instructed to issue the attached Motion seeking to dismiss the Second Cross Claim pursuant to r 12.7 of the Uniform Civil Procedure Rules.” (sic)

25. On Monday 9 November 2015 at 9:11am, Mr Saliba’s solicitor sent an email the Mitrys’ solicitor in the following terms:

“Subject: signed terms

Please see attached, signed terms as discussed.

I will ask my office to send you out trust account details today.”

26. The signed Terms of Settlement were headed, as was the previous copy:

“TERMS OF SETTLEMENT

DRAFT – WITHOUT PREJUDICE – FOR CONSIDERATION ONLY”

27. The contents of the Terms were the same as the draft previously forwarded, except that paragraph 5 was removed. In the signature block, Mr Saliba had signed as the first cross-claimant, and also on behalf of the company as the second cross-claimant.

28. That email of 9.11am on 9 November 2015, was responded to a few hours later by the Mitrys’ solicitor. He said:

“We refer to the attached settlement terms.

We request that you:

1. Amend Order 1 to read ‘First and Second Cross Defendants;

2. Amend the second Order 2 to read the First Plaintiff Cross Claimant

3. Amend Order 4 to record:

3.1   $390,000 payable to the First Cross Claimant: and

3.2   that the balance of the trust account be released and paid to the Cross Defendants – being Tony and Linda Mitry;

Attached Amended Orders for your revision.

4. Confirm:

4.1    the amount your client paid to Capital Securities; and

4.2    the date of your client made all payments to Capital Securities; and

4.3   evidence of when the Capital Securities loan facility was provided to Tony and Linda Mitry.” (sic)

29. The email attached to it a copy of the signed Terms of Settlement which had been sent to the solicitor for the Mitrys with handwritten changes reflecting the amendments sought in the body of the email.

30. On 14 November 2015, Mr Saliba’s solicitor sent an email to the Mitrys’ solicitor attaching the Terms of Settlement which made all of the amendments that had been requested and which had been signed by Mr Saliba on behalf of himself and on behalf of the Company. The heading of the Terms of Settlement, however, remained “DRAFT – WITHOUT PREJUDICE – FOR CONSIDERATION ONLY”. No immediate response was received to that email. On Thursday 19 November 2015, a follow up email was sent to the Mitrys’ solicitor enquiring as to when the matter would be finalised.

31. On 30 November 2015, the Mitrys’ solicitor responded to that email, attaching a letter addressed to Mr Saliba’s solicitor in the following terms:

“We refer to our email correspondence dated 19 November 2015 requesting further particulars in respect of your client’s settlement offer to be paid $390,000. We note that we have not received your response.

We are instructed that our clients are prepared to offer the sum of $230,000, calculated as follows:

Date	Amount Advanced	Court prescribed interest to date
04/12/2012	$45,582	$8,920.87
29/05/2013	$20,028	$3,236.31
01/08/2013	$130,000	$19,438.56
Total debt	$227,205.74 including Court prescribed interest calculated to date

This offer is made pursuant to Regulation 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Please see attached proposed Settlement Terms for your signing and return.

Our clients are prepared to offer, pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333, the sum of $260,000 in settlement of the Proceedings, including payment of your costs.

We are instructed to transfer the sum of $230,000 into the Mitry Lawyers Law Practice Trust Account … on 7 December 2015. If we do not receive your response by 7 December 2015, we intend to apply to the Court to seek to dismiss the proceedings pursuant to Regulation 12.8(7) of the UCPR.”

32. Together with that letter was a document headed “Terms of Settlement”, which reflected the contents of the new offer letter, including the following terms:

“1.   Cross Defendants to pay the Cross Claimants the sum of $230,000 (Settlement Sum).

2.   The monies retained in the SRM Lawyers Trust Account pursuant to orders 2 and 3 of the Orders entered on 10 December 2014 be released to the Cross Defendants.

3.   Each party to pay its/his own costs.

4.   The Cross Claim Proceedings are otherwise dismissed.”

33. This letter provoked a prompt response on the same day from Mr Saliba’s solicitor in the following terms:

“We refer to your letter of 30 November 2015.

Your assertions therein are yet another delay in finalising the settlement already agreed to between the parties. Your email to the writer of 15 October 2015 clearly accepted our client’s offer to settle for the sum of $390,000, subject to ‘settlement terms being entered into’. Settlement was not conditional upon your subsequent request in your email of 9 November for confirmation

‘4.1 The amount your client paid to Capital Securities, and

4.2 The date your client made all payments to Capital Securities, and

4.3 Evidence of when the Capital Securities loan security was provided to Tony and Linda Mitry’.

These matters were not relevant and had no bearing on the settlement agreed to.

Draft settlement terms, as amended by you, were signed by our clients and returned to you on 14 November 2015. As we had not received anything by 19 November, we emailed you on this date requesting you to advise when this matter might be finalised.

Our client will not tolerate any further delays, and unless this matter is settled by 4pm Wednesday 2 December 2015, our client will immediately seek advice from Counsel and either institute the proceedings for specific performance, or relist this matter for expedited hearing.” (sic)

34. Equally promptly, the Mitrys’ solicitor responded with a further letter on 30 November 2015, in the following terms:

“We refer [to] your recent correspondence 30 November 2015.

We refer you to Regulation 20.26(4) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), and note that the particulars requested have not been provided.

Regardless, the proposed Settlement Terms provided on 4 November 2015 which your client has signed, were and remain marked – Draft – Without Prejudice – For Consideration Only. These Settlement Terms are incapable of being accepted, and as such do not constitute any offer made by your client.

Please note that our email to you dated 15 October 2015, was conditional upon the Settlement Terms being approved by our client, which to date [they] are not.

Please again refer to our emails requesting further particulars in respect of [the] amount claimed by your client dated 7 October 2015, and the proposed Settlement Terms dated 4, 9 and 19 November 2015, and your last email response on 13 October 2015 responding in part:

We are instructed that our client’s itemised claim amounts to in excess of $470,000.00 and that there is no point in itemising a claim for $390,000.00.

Please see attached proposed Settlement Terms for your signing and return.

Our clients are prepared to offer, pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333, the sum of $260,000 in settlement of the Proceedings, including payment of your costs.

We are instructed to transfer the sum of $230,000 into the Mitry Lawyers Law Practice Trust Account … on 7 December 2015.

We intend to apply to the Court to seek to dismiss the proceedings pursuant to Regulation 12.7 and 12.8(7) of the UCPR after that date.”

35. Following that letter, Mr Saliba’s solicitor, pursuant to liberty to apply, sought to have this matter relisted for directions. The Notices of Motion were then filed, and the proceeding brought on for hearing.

Submission of the Cross Claimants

36. Counsel for Mr Saliba filed submissions in support of the orders sought in the Notice of Motion. Those written submissions canvassed the sequence of correspondence which has been set out in detail above.

37. Counsel submitted that the sequence of events “… leads to the unanswerable conclusion that there is … a concluded agreement”. Counsel submitted that the final agreement was reflected in the terms of the email of 14 November 2015, referred to in [30] above, to which was attached signed Terms of Settlement which had been corrected to reflect the amendments sought by the Mitrys’ solicitor.

38. Counsel went on to submit this:

“There was probably a concluded agreement on 15 October 2015 but, if there is any doubt about the matter, that doubt is cleared up by the correspondence of 4 November 2015 from the solicitor for the cross-defendants … accepting the terms forwarded and requesting that signed copy be forwarded.”

39. The terms of the October correspondence are to be found in [11]-[20] above.

40. In oral submissions, counsel for Mr Saliba submitted that an agreement had been reached on 15 October 2015, which was “… within the first or second categor[y] of Masters v Cameron”. He submitted that even if such an agreement was not reached at that time, it was beyond argument that the exchange of emails on 9 November 2015, found above at [25] to [29], constituted a binding agreement, the terms of which were set out in the signed Terms of Settlement document. He submitted that the solicitor for the Mitrys had, on 4 November 2014, expressed satisfaction with the Terms of Settlement subject only to Term 5, which he asked Mr Saliba’s solicitor to delete. When, on 9 November 2014, Mr Saliba’s solicitor sent the signed Terms of Settlement to the Mitrys’ solicitor with Term 5 deleted, counsel submitted that there could be “no doubt … there was a deal at that moment”.

39. Counsel further submitted that the heading “Draft – Without Prejudice – For Consideration Only” did not negate the existence of a binding agreement, because the response from the Mitrys’ solicitor did not refer to the document as a draft and merely pointed out typographical errors which were of no substantive significance to the terms of the agreement. Similarly Counsel submitted that the request for confirmation of certain matters by the Mitrys’ solicitor was not inconsistent with a settlement agreement being reached, as these matters had not formed any part of the settlement discussions.

Submissions for the Cross Defendants

42. Counsel for the Mitrys opposed the orders sought in the Notice of Motion on the basis that:

1. there was no agreement between the Mitrys and Mr Saliba to settle the proceedings;

2. the negotiations relied upon to establish an agreement to settle the proceedings were so uncertain as to be incapable of constituting an agreement;

3. having regard to the inexact nature of the negotiations, the failure to agree upon critical aspects of the proposed settlement, and the failure to execute any formal document, the Court should conclude that there was no intention of the parties to make a concluded bargain.

43. In support of those grounds, counsel for the Mitrys pointed to the vague and general nature of the declaration sought in the present Notice of Motion as demonstrating the imprecision of the terms and conditions of the agreement which it is claimed were reached.

44. Counsel submitted that, whilst there may have been an intention to negotiate the details of a bargain to settle the proceedings, that intention was only to come to fruition “… upon the execution of formal documentation reflecting same”. Counsel went on to submit that there was no concluded agreement because:

1. at no point were the exchanged draft Terms of Settlement finalised with sufficient specificity, as the heading “Draft – Without Prejudice – For Consideration Only” confirmed;

2. at no point did the parties conduct themselves on the basis that a concluded settlement agreement had been reached; and

3. at no point did Mr Saliba respond to the request by the Mitrys for particulars and information as set out in the exchanged correspondence.

45. Based upon those propositions, counsel submitted that the Court ought not to conclude that there was any intention to come to a final agreement in the absence of a formal document executed by the cross-claimants and the cross-defendants.

Legal Principles

46. It is convenient before considering the arguments of the parties to identify the relevant legal principles.

47. On the issue of whether a binding contract has come into existence, the High Court of Australia identified in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 that there are several categories into which contractual negotiations fall in circumstances where parties have agreed on terms but also agreed that those terms will be dealt with by subsequent formal documentation. Those categories were described by the Court at 360 in these terms:

(a)   “[a case where] the parties have reached finality in arranging all the terms of the bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect”;

(b)   “… 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”; and

(c)   “[the case] in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract”.

48. The High Court held that in the first two categories there was a binding contract, but in the third there was not.

49. As McClelland J recognised in Baulkham Hills Private Hospital Pty Ltd v G R Securities Ltd (1986) 40 NSWLR 622 at 628E, there is a fourth category of case, in addition to the three mentioned in Masters, namely one in which:

“… the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”

See: Sinclair, Scott & Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 at 317 per Knox CJ, Rich and Dixon JJ; Love & Stewart v S Instone & Co (1917) 33 TLR 475 at 476 per Lord Loreburn.

50. Whichever category of case one is dealing with, it is important to identify the intention of the parties. McHugh JA (as he then was), with whom Kirby P and Glass JA agreed, described intention as the “decisive issue” in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634E. His Honour said:

“… [T]he decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances … If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.”

51. In considering the application of this statement of principle to the facts of this case, it is to be observed that the parties’ intention is not to be ascertained by reference to a single document, but rather to the words and phrases used in various email exchanges between the parties’ solicitors.

52. in considering the question of whether a contract was formed, or an agreement was reached, the Court is not looking at the subjective intentions of a party, but rather what the intention was, ascertained objectively. In Brambles Holdings, Heydon JA (as he then was) also noted at [27] that:

“The construction of a contract is an objective question for the Court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention be found.”

53. In determining whether those email exchanges constituted a binding agreement, it is proper to take into account subsequent communications between the parties: Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 at 670C per Sheller JA (Kirby P and Meagher JA agreeing): see also Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68 at 77 per Griffith CJ; Barrier Wharfs Ltd v W. Scott Fell & Co. Ltd [1908] HCA 88; (1908) 5 CLR 647 at 669 per Griffith CJ, at 672 per Isaacs J; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [25] per Heydon JA.

54. Glass JA said in B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149, referring to subsequent communications:

“Such materials may be legitimately considered in order to determine whether prior dealings between the parties gave rise to a binding contract.”

See also Mahoney JA at 9155.

55. A convenient template for determining the existence of a binding contract was set out in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, where Mahoney JA said at 326G that it was useful to consider three questions, namely:

“… did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?”

Additional Factual Context

56. The context for the negotiations between the parties was the existing litigation. Although the Mitrys admitted Mr Saliba had loaned them money which had not been repaid, the Mitrys did not admit that, with their knowledge and consent, Mr Saliba had obtained monies for on-lending to them from the plaintiff, Capital Securities. They did not admit that they had authorised or consented to reimbursing Mr Saliba the interest rate charged by Capital Securities, nor any of the additional charges. Consequently, there was a dispute about a significant sum of money which was much larger than the amount of the loan which the Mitrys admitted that they owed Mr Saliba.

57. The amount of the total claim is not precisely stated in the evidence, but a general idea may be obtained. It seems that as at January 2015, the claim being made by the solicitors for Mr Saliba was for a sum in excess of $447,000. That was a figure calculated by reference to the capital of the loans by Mr Saliba to the Mitrys. This included: $65,510, which the Mitrys admitted; the capital, interest and costs paid by Mr Saliba to Capital Securities of $322,170; and legal fees of $60,000. That figure was calculated without any interest which may have accrued on the admitted loan.

58. The relevance of this overall claim is that it provides an indication that the sum proposed in the Terms of Settlement was a not insubstantial (over 10%) compromise of the claim.

59. The other contextual matter to which it is necessary to make reference is the existence of another set of proceedings in the Court. Those separate proceedings were commenced by Mr Saliba and the Company against the Mitrys on 2 December 2014, to deal with a feared disposal of assets to put them beyond the reach of Mr Saliba and the Company. On 3 December 2014, Hall J made an order restraining the Mitrys from selling, conveying or otherwise dealing with their property in Mary Street, Merrylands, until further order of the Court.

60. The matter came back before the Court on 10 December 2014. It was dealt with by McCallum J, who was then the duty Judge. The orders made by her Honour on that day were largely by consent. Her Honour varied the injunction so that it did not prevent the Mitrys “… from entering into, and completing, a bona fide sale of the property to any third party”.

61. The orders were also varied to provide that, in the event of a bona fide sale, the net proceeds of sale up to a total amount of $432,671.52 were to be paid into an identified trust account of the Mitrys’ solicitor so as to be invested in a controlled moneys account pending the determination of the present proceedings. Since those orders were made, the Merrylands property has been sold and the abovementioned sum paid into the Mitrys’ solicitor’s trust account.

62. The parties also informed McCallum J that they were proceeding to an informal settlement conference, or perhaps a mediation (both terms were used) within 48 hours after her Honour made the orders in an attempt to resolve all outstanding matters between the parties, including these proceedings.

63. The fact that these monies (or some part of them) were unlikely to be available to the Mitrys for their own use until these proceedings had been resolved, was a factor which no doubt made a settlement of these proceedings more attractive to the Mitrys.

Discernment

64. The exchange of correspondence in the first few days of October, to which I have referred at [11]ff above, indicates an intention on the part of both parties, through their lawyers, to resolve the present proceedings by reaching a compromise agreement, which would also have had the effect of resolving the proceedings in which McCallum J had made various orders.

65. It is appropriate to record that none of the parties were under any legal disability. Accordingly, there was no impediment to any agreement reached being recorded in terms of settlement, consent orders, or a consent judgment. The filing of agreed terms of settlement or consent orders would have resulted in the Court making the orders sought (assuming they were in proper form). Having regard to the terms of the offers and counter-offers in the email correspondence, the document to be filed in Court to give effect to an agreement would have been a relatively straightforward one.

66. The first offer made by Mr Saliba’s solicitor on 5 October 2015, found above at [11], which proposed that settlement be conditional upon Mr Saliba settling with the plaintiff, was capable of acceptance but does not seem to me to have had the capacity, if accepted, to constitute an immediately binding agreement. The term regarding the plaintiff settling with Capital Securities was undefined as to the timeframe and terms of that settlement. It is unclear from the terms of the email whether a concluded agreement between Mr Saliba and Capital Securities was needed before the agreement between the parties in these proceedings was to be binding.

67. It is not necessary to take that analysis any further because the counter-offer made a few hours later on 5 October 2015 by the Mitrys’ solicitor amounted to a rejection of that offer. That counter-offer was then rejected by Mr Saliba’s solicitor on the evening of 5 October 2015.

68. The proposal which was then made on the morning of 15 October 2015 by the Mitrys’ solicitor, found above at [16], constituted an acceptance by the Mitrys of Mr Saliba’s offer of 5 October 2015 “… subject to settlement terms being entered into”. Although, as I have just mentioned, the Mitrys had already rejected Mr Saliba’s 5 October 2015 offer, that offer was renewed in an email from Mr Saliba’s solicitor on 13 October 2015, set out above at [15]. The email from the Mitrys’ solicitor was not an unequivocal acceptance of that offer, however, because it was subject to the approval of settlement terms. As such, it is properly regarded as a counter-offer.

69. The email on 16 October 2015 from Mr Saliba’s solicitor, found above at [17] in which the solicitor stated that he would forward the settlement terms once they were prepared by counsel, constituted an acceptance of the counter‑offer. However, since the counter-offer was subject to settlement terms being forwarded to the Mitrys for approval, it does not seem to me to have been an offer capable of giving rise to a binding contract upon acceptance. The intention of the parties in this email exchange was not to make a concluded agreement unless and until the settlement terms were forwarded to the Mitrys and approved by them. Accordingly, the agreement born of this email exchange fell, at that stage, within the third category described by the High Court in Masters v Cameron.

70. I am not satisfied that, as of 16 October 2015, or at any time prior to November 2015 when substantive correspondence was again engaged in, there was any concluded agreement.

71. However, the legal position changed on 4 November 2015.

72. On that day, the email from Mr Saliba’s solicitor attaching a document headed “Terms of Settlement”,, found above at [22] and [23], amounted to an offer which would undoubtedly have given rise to a binding agreement if accepted. Although there was no covering email accompanying the attached Terms of Settlement, it is clear from the previous correspondence in October 2015 that the parties intended to make a concluded agreement upon the approval by the Mitrys of settlement terms.

73. The terms of the offer were in writing and contained in a document described as “Terms of Settlement”. The words “Without Prejudice” in the heading of the document, were intended to mean, and did mean, that the fact of the offer and the terms of it could not be tendered in these proceedings if no settlement was reached. In addition, the words “Draft” and “For Consideration Only” in the heading simply meant that an offer had been made for the consideration of the Mitrys. The document containing the terms of the offer was a “Draft” in the sense that it was open to the Mitrys to propose amendments, and it allowed for typographical or drafting errors to be corrected. The use of these words does not seem to me to be inconsistent with an intention to enter into an immediately binding agreement.

74. The Mitrys’ response, found above at [24], did not accept the offer according to its terms, because they were not prepared to accept Term 5. The Mitrys’ solicitor, in his email at 3.48pm on 4 November 2015, informed Mr Saliba’s solicitor that:

1. Term 5 would need to be deleted because it was not acceptable;

2. The terms are otherwise acceptable; and

3. A response was required by 6 November 2015 so as to prevent the filing of a notice of motion to dismiss the cross-claim.

75. There are two ways in which this communication can be interpreted. The first is that it represents an acceptance of all of the terms proposed in the Terms of Settlement document except Term 5, hence leading to a concluded agreement on all terms, except Term 5. Alternatively, it may be viewed as a counter-offer which had the effect of rejecting the offer contained in the Terms of Settlement document, and making a new offer to settle on those terms with the exception of Term 5. That counter-offer, if it was accepted, was capable of giving rise to an immediately binding agreement.

76. In light of the subsequent communications between the parties, the choice between those alternative interpretations may not ultimately produce a different result. However, in my opinion, the better view is the latter, namely, that the communication from the Mitrys’ solicitor amounted to a counter-offer to settle on the basis of the existing terms, except Term 5.

77. This choice, whilst not dependent upon, is consistent with, the view expressed by Young J (as his Honour then was) in Howe v Connell [1997] NSWSC 432, where in not dissimilar circumstances, his Honour found that a counter-offer, which is not inconsistent with the terms of the offer, does not necessarily reject the first offer, but is nevertheless an offer capable of acceptance.

78. The effect of the email communication was that a binding agreement would come into being once the counter-offer contained in the email of 3.48pm on 4 November 2015 was accepted. The terms of the agreement are to be found in the Terms of Settlement document, excluding Term 5.

79. Although a response to the counter-offer was not received by the Mitrys on Friday 6 November 2015, a response was received at the start of the next business day on Monday 9 November 2015. No submission has been made that the overnight delay between consecutive business days in responding to the counter-offer is of any significance to the relief being sought. The Notice of Motion referred to in the email of 4 November 2015 at [24] above had not been filed at that time. The response indicated that Mr Saliba accepted the counter-offer because a set of the Terms of Settlement without Term 5 were prepared, signed by Mr Saliba in his own capacity and on behalf of the company, and forwarded to the Mitrys’ solicitor.

80. The contents of the Terms of Settlement were clear: Terms 1 and 2, in short form, recited the background; another Term 2 (later acknowledged to be a typographical error) recited the agreement by the Mitrys to pay Mr Saliba the sum of $390,000; Term 3 had the effect that the proceedings by Mr Saliba against the Mitrys would be terminated, and no new proceedings would be commenced; and Term 4 provided the mechanism for the payment of the sum of $390,000.

81. These were terms which were clear and unambiguous, and they were contained in a document which, had the Mitrys signed it, would have unarguably constituted a binding agreement. The document reflected the end result of negotiations which had been afoot for some time, and reflected the terms of an agreement reached between the parties’ solicitors.

82. The Mitrys argue that because the Terms of Settlement document was headed “Draft – Without Prejudice – for Consideration Only”, the objective observer would conclude that there was no intention for the contract to be binding. They argued that the Court should conclude that this was an agreement which fell within the third category of Masters v Cameron, namely an agreement which is not binding unless and until a further formal document embodying the agreement comes into being and is signed.

83. One thing is clear from a review of the exchange of emails and attached documents, and that is that neither solicitor when undertaking their negotiations paid any attention to precision in matters of form. What is also clear is that the solicitors, no doubt doing their best to ensure that their clients would settle a dispute of a kind crying out for settlement, reached an agreement with which their clients were content. The matters of form were not relevant.

75. The issue of typographical errors in the proposed Terms of Settlement, including the description of the Mitrys as defendants rather than cross‑defendants in paragraph 1, the double-numbering of paragraph 2, and the incorrect description of Mr Saliba as the plaintiff rather than the cross‑claimant in paragraph 3, was not the subject of any exchange of correspondence prior to the forwarding of the signed Terms on 9 November 2015. Equally, it is clear that the heading which was relied upon by the Mitrys as indicating that there was no agreement was simply a part of the original document which ought to have been, but which was not, removed prior to Mr Saliba signing the Terms of Settlement and the Terms being sent to the Mitrys.

76. The typographical errors are not of substance. They do not stand in the way of the Court concluding that the parties had agreed upon Terms and that the Terms were clear. Equally, I am not satisfied that the heading of the Terms of Settlement document, which initially existed and which I am satisfied continued to be kept in the document through oversight, can stand in the way of a conclusion that an agreement had been being reached.

77. In essence, turning to the questions posed by Mahoney JA, to which I have referred at [55] above, I am satisfied that the parties arrived at a consensus. That consensus was that the Mitrys would pay Mr Saliba $390,000; Mr Saliba and the Company would cease all proceedings between the parties, and not commence any further proceedings; and $390,000 would be paid from the trust account in which a larger sum was retained after the orders made by McCallum J in the related proceedings.

78. That agreement was to be put into effect by appropriate short minutes of order being filed in court, and the release of the monies from trust.

79. The second question is whether such a consensus, as I have just described, was capable of forming a binding contract. In my view, it was. The terms are clear. They are capable of being implemented, and do not require any further agreement by way of a formal deed.

80. The third question is whether, if the consensus was capable of forming a binding contract, the parties intended that the consensus at which they arrived should constitute a binding contract. In my view this was unarguably so. The parties had been negotiating to resolve the proceedings for some time. They had searched for terms which were acceptable to both sides. Those terms were ultimately found, identified and written down. In those circumstances, I am satisfied that there was a binding agreement which was to be given effect to by the filing of appropriate short minutes of order and payment of the money.

81. The other argument which the defendants raise is that the post-agreement conduct of the parties did not reflect the position that a concluded agreement had been reached. In my view, this argument fails. There was no immediate post‑agreement conduct which reflected upon whether an agreement had been reach or not, except insofar as there was a request for particulars which was not answered. It is therefore convenient to consider the third argument of the Mitrys, which is that in the absence of a response by Mr Saliba to the Mitrys’ request for particulars and information, which was made in the email of Monday 9 November 2015 (set out at [28] above), there was no concluded agreement.

82. It is necessary to observe that that email was sent in two distinct parts. The first part of it dealt with the typographical errors to which reference has earlier been made. That part concluded with a reference to the fact that amended orders were attached. No part of those amended orders referred to the agreement which had been reached as being conditional upon the provision of particulars in accordance with the request which was made in the second part of the email.

83. The second part of the email sought confirmation of various facts relating to monies paid by Mr Saliba to Capital Securities, and “evidence” of when the Capital Securities loan facility was provided to the Mitrys.

84. On 7 October 2015, the solicitor for the Mitrys had requested, although not in precisely the same terms, various particulars of the sums which underlay the payment of $390,000. On 13 October 2015, the solicitor for Mr Saliba, in effect, declined to provide those particulars. He informed the solicitor for the Mitrys that his client’s claim amounted to a sum in excess of $470,000, and said that there was no point in itemising the claim for $390,000.

85. Some observations with respect to these requests for particulars of the underlying payments and debt are as follows:

1. it was clear that particulars had been requested at an earlier stage of the litigation, and were the subject of an email exchange in October 2015, ending with the email of 13 October 2015;

2. it was clear from that exchange that the solicitor for the Mitrys sought particulars, and the solicitor for Mr Saliba was not prepared to provide them in the form in which they were requested;

3. that exchange concluding on 13 October 2015 did not impact the negotiations which proceeded from 15 October 2015 onwards;

4. those negotiations did not express themselves at any point to be conditional upon, or subject to, the provision of the particulars which were requested; and

5. by that stage in the litigation, there had been attempts at mediation, and a range of offers exchanged.

95. Whether or not there had been discovery is not disclosed by the evidence on this Motion. However, on any view, both parties had the opportunity to obtain discovery from the other. In the case of the discovery provided by Mr Saliba, this would ordinarily have included the sort of particulars which were sought.

96. In all of those circumstances, I am not satisfied that the provision of the particulars was a condition of the settlement which was agreed, nor am I satisfied that the whole of the settlement itself was subject to the provision of those particulars.

97. The request for particulars in the email of 9 November 2015, which was written after, I have been satisfied, an agreement came into existence, does not constitute conduct inconsistent with an agreement having been reached. It displays a curiosity for detail, but it does not constitute conduct inconsistent with an agreement, the terms of which had been reduced to writing and which had been agreed upon.

98. In those circumstances, I am not satisfied that the lack provision of these particulars stood in the way of the agreement which had been reached, nor am I satisfied that the conduct after the agreement had been reached, comprising the request for, and the refusal to provide, the specific particulars requested, constituted conduct inconsistent with an agreement having been reached.

99. For completeness, I note that the agreement which I have found was reached is not one that falls into any of the Masters v Cameron categories. As I have explained at [74]-[81], the agreement was reached through the making of an offer by Mr Saliba and the acceptance of that offer by the Mitrys or, alternatively, by the making of a counter-offer by the Mitrys and the acceptance of that counter-offer by Mr Saliba. The agreement was not one which the parties intended to be consummated by subsequent formal documentation, which is what the first two categories in Masters v Cameron contemplate. Rather, here, an immediately binding agreement to settle the proceedings was reached by the exchange of emails and attached documents. That agreement was to be given effect to by relatively straightforward and uncomplicated steps: filing short minutes of order, and paying money from the trust account holding the Mitrys’ funds.

Conclusion

100. I am satisfied that a binding agreement has been reached to settle the cross‑claim on the terms to which reference has been made in [80] above. In light of that conclusion, it is unnecessary to consider the Notice of Motion filed by the Mitrys.

101. Rather than the Court determining with precision the appropriate declaratory relief and other orders to be made, it is proper to give the parties an opportunity to bring in short minutes of order which reflect these reasons.

102. The parties should include orders for costs. If they are unable to agree, provision should be made for written submissions on that issue to be provided to the Court for subsequent determination on the papers.

103. The appropriate order is to stand the proceedings over to 9.30am on 25 August 2016 before me for further argument and directions.

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Amendments

22 August 2016 - Citation correction [52], [53]

Decision last updated: 22 August 2016