Clintway Pty Ltd v Humich

[2011] WADC 84

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   CLINTWAY PTY LTD -v- HUMICH [2011] WADC 84

CORAM:   BOWDEN DCJ

HEARD:   6, 7 & 8 APRIL 2011

DELIVERED          :   3 JUNE 2011

FILE NO/S:   CIV 3406 of 2009

BETWEEN:   CLINTWAY PTY LTD

Plaintiff

AND

IVAN HUMICH
HUMICH NOMINEES PTY LTD
ANILIA PTY LTD
Defendants

Catchwords:

Construction of settlement agreement entered into at a Supreme Court mediation conference

Legislation:

Nil

Result:

Settlement agreement - settled all matters between the parties including matters the plaintiff now seeks to litigate

Representation:

Counsel:

Plaintiff:     Mr G Abbott

Defendants:     Mr M Solomon

Solicitors:

Plaintiff:     Q Legal

Defendants:     Ilberys

Case(s) referred to in judgment(s):

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119

Australian Zircon NL v Austpac Resources NL [2010] WASC 166

Butler v St John of God Health Care Inc [2008] WASCA 174

Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117

Clintway Pty Ltd v The Owners of Strata Plan 21805 [2008] WASAT 294

Clintway Pty Ltd v The Owners of Strata Plan 21805 [2008] WASAT 294 (S)

Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Fazio v Fazio [2010] WASC 263

Fountain v Alexander (1982) 150 CLR 615

Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 264 ALR 15

Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259

Hoddell v Hoddel Pty Ltd [1999] WASC 156

Home Building Society Ltd v Pourzand [2005] WASCA 242

Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160

International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151

Joye v Beach Petroleum NL (1996) 137 ALR 506

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44

O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356

Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd [2009] WASC 79

Queensland Alumina Ltd v Alinta DQP Pty Ltd [2007] QCA 387

The State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3; (1999) 160 ALR 588

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

United States of America v Castro (1987) 813 F 2d 571

Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530

1. BOWDEN DCJ:  The preliminary issue arising in this case is whether an agreement, said to be partly written and partly oral, entered into by the parties on 15 July 2003 operates as a complete settlement, compromise and release of the claim sought to be advanced in these proceedings.

2. It involves ascertaining the terms of the agreement and the construction of those terms.

3. Before answering those questions, it is necessary to set out a brief history of the relationship between the parties.

4. Mr Ivan Humich is a real estate agent and property developer.

5. Mr Stati is a registered builder and property developer.

6. In around 1988 Mr Humich and Mr Stati, using a variety of corporate entities commonly referred to as the Humich‑related parties and the Stati‑related parties, orally formed a number of partnerships which undertook a variety of building/development projects.

7. The division of responsibilities was that Mr Stati undertook the building works and Mr Humich identified prospective developments, obtained approvals and managed and administered the developments.

8. The parties were involved in a number of well known developments, including the Belridge and La Plaza Bentley Shopping Centres and lesser known developments referred to in this judgment as 'Via Marina' and 'Moran Street'.

9. The Moran Street development was the first constructed by the partnership.  It involved simple ground, single‑level villas built in Beaconsfield.

10. The Via Marina development was more sophisticated involving four‑storey villas within the Fremantle inner city.

11. In due course, differences developed between the parties and they agreed to dissolve their partnership which was then worth several millions of dollars.

12. On or about 22 September 1998, they entered into a deed of dissolution of partnership (dissolution deed).

13. Clause 15 provides:

    BANK ACCOUNTS

    The parties hereto shall as soon as practicable following registration of all the transfers of interests in land to be effected pursuant to this deed cause all bank accounts existing between them relating to the properties referred to above to be closed and after verification of the financial and other records by the accountants for the parties hereto and in any event within 60 days after completion of the registration referred to all monies held therein shall after making all payments of any outstanding debts of the relevant partnership be distributed after equalising the parties' capital accounts as to one half to the Stati Related Parties and one half to the Humich Related Parties.

14. Clause 20:

    SHARED INDEMNITIES- VIA MARINA AND MORAN STREET

    The Stati Related Parties of the one part and the Humich Related Parties of the other part agree that they will each bear in equal shares all costs of maintenance, reinstatement and repair obligations which may arise in respect of units in the Via Marina Project and the units in the Moran Street Project sold to third parties prior to the date hereof …

15. Clause 31:

    FULL AND FINAL SETTLEMENT

    Except to the extent rights are reserved in this Deed and except for the obligations to be performed by the Parties as set out herein, this Deed shall be in full and final satisfaction of all existing claims and any claims which may arise in the future which any of the Parties may have or would but for this Deed have had against any other Party or Parties in respect of any matters arising out of or in relation to any of the Partnerships and each of the Parties hereby forever releases each and every one of the Parties in respect of any such claims.

16. Regrettably, the dissolution deed did not resolve the issues between the parties.

17. Shortly after the parties entered into the dissolution deed a dispute arose and, in April 2000, the Stati‑related parties issued proceedings in the Supreme Court (the Supreme Court proceedings).

18. The relief claimed included an account of all partnership dealings and transactions in relation to certain property developed during the partnership, re‑opening of the partnership accounts, a declaration in relation to cl 10 of the dissolution deed and rectification of the same clause.  There was no reference in the pleadings to the Moran Street development.

19. Subsequently unsuccessful negotiations took place in an effort to resolve these and other issues which had arisen including the distribution of over $1.1 million in the partnership bank account (the funds).

20. On 15 July 2003, a formal mediation conference before Supreme Court Registrar Johnstone occurred (the mediation).

21. The mediation was attended by Mr Humich, his son Mr Randal Humich, their lawyer Mr Hotchkin, representing the Humich‑related parties and Mr Stati, his nephew Mr Pasqua and their lawyer Mr Dundo representing the Stati‑related parties.

22. The mediation lasted for approximately two hours and concluded after the parties signed a one‑page handwritten document comprising eight short paragraphs (the deed).

23. Its terms are as follows:

    (1)All moneys in the partnership accounts net of bank fees and charges be distributed equally to the parties (half to the Stati‑related parties and half to the Humich‑related parties) within 10 days.

    (2)As to clause 20 of the Deed of Dissolution dated 22 Sept 1998, the Humich related parties [oblige] to indemnify be as limited to $30,000 for Via Marina.

    (3)The action be dismissed.

    (4)The counter‑claim be dismissed.

    (5)Each party bear their own costs of the action and the counter‑claim.

    (6)Each party release the other from all claims however arising.  includ The Tax Returns shall not be amended.

    (7)Each party agrees that the Terms hereof are in full and final satisfaction of all claims whatsoever in relation arising in relation to the subject matter of the action.

    (8)The terms of this settlement and the matters the subject of those proceedings shall be & remain confidential.

24. By September 2004, the Stati‑related parties as the builders had incurred liabilities in respect of building defects for units in the Moran Street development that were sold to third parties.

25. The total costs incurred for these liabilities was $160,915.32 comprising an $80,960 payment to the owners of the Moran Street units pursuant to a SAT decision (Clintway Pty Ltd v The Owners of Strata Plan 21805 [2008] WASAT 294). $11,586 for costs awarded to the owners of those units (Clintway Pty Ltd v The Owners of Strata Plan 21805 [2008] WASAT 294 (S) and $68,369.32 being their solicitors' costs.

26. The plaintiffs say they are entitled, pursuant to cl 20 of the dissolution deed, to be indemnified by the Humich‑related parties for 50% of this amount, a sum of $80,457.66.

27. The defendants say the plaintiff cannot pursue this claim because the settlement agreement settled all matters between the parties, including the matters the plaintiff now claims indemnification for.

28. These District Court proceedings were issued by the plaintiff to pursue its claim, and it was agreed to determine the preliminary issue that I have referred to.

29. It is therefore necessary to determine the terms of the settlement agreement.

Is the settlement agreement partly written and partly oral?

1. The defendant's contend the agreement reached at mediation was partly in writing and partly oral (defence par 21).

2. It is said the written terms are contained in the deed and the oral terms are comprised from discussions between the parties and their representatives at the mediation.

3. It is said that in those discussions it was agreed by the parties that they would settle all outstanding controversies between them, such that there would be no further recourse by one party against the other in respect of any matter arising from the matters in issues between them, including but not limited to, maintenance, rectification and other costs in respect of the Via Marina units and the Moran Street property.

The plaintiff's contention on the oral term

1. The plaintiff says the evidence establishes that it was the intention of all parties to embody the entirety of the agreement in the deed (ts 232) and that deed constitutes the entire agreement.

The defendants' contention on the oral term

1. The defendant said the question ought to be posed along the lines of whether the oral agreement was superseded by the deed.

2. They say the test, was whether on its proper construction, the deed was objectively intended to replace the oral agreement.  Mr Solomon indicated that he did not wish to make lengthy submissions on the oral agreement and appreciated that 'we are pushing uphill a battle on the oral term' (ts 301).

3. Mr Hotchkin's evidence was that the oral agreement was reflected in the deed which was the committing of the agreement to writing (ts 62 ‑ 63).  He also confirmed it was his intention to embody in the deed everything that was agreed (ts 64 ‑ 65).

4. Mr Dundo's evidence was that he was satisfied the deed properly recorded the terms (ts 161) and did not accept that what was agreed was not reflected in the deed (ts 164).

5. Examining the issue from either approach, that is whether the deed was intended by both parties to reflect what had been agreed or whether the deed supplanted the oral term, I find the answer to be the same, that being the settlement agreement is contained solely within the deed (hereafter referred to as the settlement agreement) and the case turns on the proper construction of that settlement agreement.

Principles applicable to the construction of the settlement agreement

1. The court's primary task in construction of a written agreement is to discover the intention of the parties from the words in the agreement read as a whole.

2. Where different parts of the agreement appear to be inconsistent, a court will attempt to construe the agreement in a way which avoids any inconsistency and renders those parts harmonious: Australian Broadcasting Commission v Australian Performing Rights Association Ltd (1973) 129 CLR 99, 109 - 110; Queensland Alumina Ltd v Alinta DQP Pty Ltd [2007] QCA 387 [51]; Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd [2009] WASC 79 [41].

3. A court is not to disregard clear words or language.

4. When the court is construing a commercial contract it begins with the words of the document.  There it often finds expressed the factual context known to both parties and the common purpose and object of the transaction, but the court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document.  When that is taken into account the words in the contract may legitimately have one or more of a number of possible meanings.  It is then the court's task to identify which of the possible meanings represents the party's contractual intention.  However, when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract the meaning which by no stretch of language or syntax they will bear, then in truth one has a rectification suit not a construction suit:  Hughes vSt Barbara Mines Ltd [No 4] [2010] WASC 160 [595].

5. The document should be construed practically to give effect to its commercial purpose: Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259 [72] and so as to avoid making commercial nonsense: Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530.

6. A court's task is not to attempt to judicially re‑write the contact to accord with the result contended for it by a party, or to reflect the court's own view of commercial reality.  Commercial reality or business commonsense is to be ascertained objectively.  Reasonable commercial minds may differ as to what is commercial reality: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11], Hughes v St Barbara Mines Ltd (No 4).

7. The appreciation of the commercial purpose of a document calls for an understanding of the genesis of the transaction, the background and the market: International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151, 160.

8. Consideration must be given not only to the express terms of the document but also to the surrounding circumstances known to the parties and the apparent purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 (Toll).

9. This involves ascertaining the meaning which the document would convey to a 'reasonable person' having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: Maggbury Pty Ltd v Hafele Australia Pty Ltd [11].

10. Evidence as to parties' actual intentions when outwardly expressed in negotiations is not relevant to the construction of a document unless an examination of those negotiations discloses mutually known facts in existence in the period up to the point the contract is entered and those facts bears upon ascertaining the surrounding circumstances in which the contract and its words are to be interpreted: Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 349; St Barbara Mines Ltd (No 4), [595]. 

11. The question of whether or not the document terms must be ambiguous in order to admit evidence of surrounding circumstances is one of controversy: Home Building Society Ltd v Pourzand [2005] WASCA 242 [25] ‑ [33]; Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117; Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd [2009] WASC 79 [42]; Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119 [114] ‑ [116] St Barbara Mines Ltd (No 4) [595].

12. In Australian Zircon NL v Austpac Resources NL [2010] WASC 166 [63] – [68] Justice Corboy pointed out the Court of Appeal in this State has found it unnecessary to decide whether ambiguity in the wording was required before recourse could be had to evidence of surrounding circumstances. However, in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 264 ALR 15 [14], the New South Wales Court of Appeal stated unequivocally:

    There is no place … for requirement to discern … ambiguity in the words of the document before any resort can be made to such evidence of surrounding circumstances…

13. Accordingly, Justice Corboy opined  as a result of the doctrine of precedent, a trial judge in this State would be bound to apply the decision of an intermediate appellant court unless convinced that decision was wrong: Australian Zircon NL v Austpac Resources NL [2010] WASC 166 [63] – [68].

14. Therefore I do have regard to the surrounding circumstances known to the parties or which ought reasonably be known to the parties, the purpose and object of the deed in assessing how a reasonable person would have understood the language in that context even if ambiguity is not established: Home Building Society v Pourzand [33]; Australian Zircon NL [65].

The surrounding circumstances known to the parties or which ought reasonably to have been known, the purpose and object of the transaction

1. The surrounding circumstances known to the parties or which ought reasonably to have been known shall be referred to as the surrounding circumstances in this judgment.

2. The relevant surrounding circumstances are those which relate to the settlement agreement, that of course involves considering the prior negotiations which occurred in efforts to resolve the disputes between the parties and the discussions which took place immediately prior to the execution of the settlement agreement.

3. In determining those surrounding circumstances the subjective intent and belief of a witness is disregarded.  However, that intent or belief may be relevant in determining the witness's credibility when considering the witness's account of what was said or done at a particular time.

4. There are some surrounding circumstances which are clearly not in dispute.  They are not limited to but include those mentioned at [4 ‑ 26] of this judgment.

5. To ascertain the other surrounding circumstances, it is necessary to briefly deal with the evidence.

General comments on credibility

1. Counsel for the plaintiff submitted that all witnesses should be regarded as being honest, pointing out that some of the events occurred more than 10 years ago and the mediation occurred almost eight years ago.  He said in those circumstances there was always going to be some imprecision in the witness's recollection as the effluxion of time causes memories to fade.

2. Generally, he said there were no real issues of demeanour, self‑contradictory evidence or obfuscation on critical evidence effecting credibility (ts 230 – 231).

3. The defendants' counsel accepted in broad terms the contention that all witnesses were doing their best to recollect honestly what occurred and pointed out that people often, naturally, adopt positions favourable to themselves and a witness's recollection is often shaped by the legal position they take (ts 317 ‑ 318).

4. He urged me to look at the contemporary evidence and documentation and from them draw inferences about what was likely to have happened (ts 317 ‑ 318).

5. Clearly a witness's recollection of events is liable to be influenced by the position they took in those events.

6. I attach significant weight to contemporaneous documents and where it is possible to establish objective facts from them I asses the witness's evidence in light of the inherent probabilities of a particular version of events within the context of the established objective facts rather than attempting to determine credibility on a particular witness's demeanour: Fazio v Fazio [2010] WASC 263.

1. It is recognised that basing credibility findings on the demeanour of a witness may be fraught with difficulties:  The State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3; (1999) 160 ALR 588 (Kirby J).

2. I am satisfied that each witness was doing their best to provide truthful answers and any inaccuracies in their recollection is a result of the effluxion of time and their position in the ongoing dispute between the parties.

3. I do not find dishonesty in any of the witness's evidence.

The evidence

Court proceedings and correspondence between the parties

1. On or about 13 April 2000 the Supreme Court proceedings were commenced by the Stati‑related parties.

2. The correspondence between the parties' respective solicitors occurring after the issue of the writ must be considered in determining the surrounding circumstances.

3. Although much of the correspondence is marked 'without prejudice', it is admissible, as an exception to the without prejudice rule when a court is considering the objective facts communicated in the course of negotiations: Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44 [45] ‑ [46].

4. On 8 January 2002, the Stati‑related parties' then solicitor Costantino & Co, reminded the Humich‑related parties of maintenance issues relating to Via Marina and their obligations under cl 20 of the dissolution deed (exhibit A186, 187).

5. On 18 July 2002 the Stati-related parties' then lawyers, Clayton Utz, made an offer to Hotchkin Hanly, acting on behalf of the Humich‑related parties (exhibit A188 ‑ 189).  Mr Dundo agreed this letter contained a proposal to settle the existing Supreme Court proceedings which involved each party mutually releasing the other from all claims they had against each other (ts 123), by resolving issues which included those related to the indemnity arising under cl 20 of the deed of dissolution.

6. A counteroffer was made by Hotchkin Hanly, which provided upon acceptance of the offer 'each party should be released by the other and bear their own costs' (exhibit A190).

7. On 24 September 2002 Clayton Utz made a further offer (exhibit A192 ‑ 195).  It included a proposal to settle the Supreme Court proceedings by expanding the indemnities to all building projects completed by the partnership and noted the non‑compliance with existing indemnities given in relation to Via Marina and Moran Street (ts 124 ‑ 126, exhibit A192).

8. It also referred to the parties 'mutually releasing all claims they may have  against each other relating to or howsoever arising out of the Court proceedings' and by the penultimate paragraph referred to the 'total release' proposed in earlier parts of the letter and stated the Stati‑related parties claim to investigate the partnership accounts would cease in all respects if settlement was achieved and advised that such a settlement would be a sensible commercial resolution 'to all issues in contention between the parties'.

9. On 16 October 2002 this offer was rejected by Hotchkin Hanly's letter (exhibit A196 ‑ 197) which contained a counter‑proposal offering a complete release upon payment of a specified sum or money or alternatively, the payment of a lesser sum leaving the parties free to pursue any claims they wished.  Hotchkin Hanly acknowledged the Stati‑related parties' steadfast position that nothing less than equal distribution of the funds would be acceptable.

10. The statement of claim as amended in February 2003, inter alia, particularised amounts which had been wrongly debited to the partnership accounts, or were due to the partnership but not credited and unauthorised payments made from the partnership accounts (exhibit A146 ‑ 158).

11. On 8 April 2003 Clayton Utz (exhibit A200) drew attention to an alleged discrepancy in the accounts for construction costs relating to both the Moran Street and Via Marina developments and advised of their intention to further amend the statement of claim to reflect these matters.  Mr Dundo agreed this was broadening the ambit of the existing proceedings (ts 127).

12. Hotchkin Hanly's reply of 17 April 2003 (exhibit A203 ‑ 204) expressed exasperation that these allegations were being made some five years after the  dissolution deed and reserved the Humich‑related parties' right to thoroughly investigate Mr Stati's personal affairs.  It also pointed out that if the claims raised in the letter of 8 April 2003 (exhibit A200) were correct amendments to tax returns would be required.

Ivan Humich

1. Mr Humich said that prior to the dissolution deed Mr Stati had frequently changed his mind over issues relevant to the dissolution.

2. For example, Mr Stati originally agreed the partnership property would be partitioned with the Stati‑related parties retaining certain specified properties, then changed his mind as to the properties he wished to retain (exhibit A43, A46 ‑ A51, A52, A53 – A54).

3. He said Mr Stati agreed the properties would be auctioned, and then changed his mind (exhibit A58).

4. Mr Humich said Mr Stati agreed Cockle & Co, solicitors, would prepare the necessary documentation (exhibit A59 – A60).  Notwithstanding this, Mr Stati then appointed solicitors Williams Hughes to act on his behalf (exhibit A81).

5. Both parties then agreed the dissolution deed would be drawn by Sceales & Co (exhibit A87 – A107), however, when this was done Mr Stati refused to sign and insisted his solicitors prepare the deed (exhibit A108 – A136).

6. Mr Humich said he was aware of maintenance issues with cost potential in relation to both developments and had been involved in rectification issues for Moran Street (ts 68).

7. He had been aware since 1999 of potential issues for Via Marina (ts 67 ‑ 70) which had revived as a result of Costantino & Co, letter dated 8 January 2002 (exhibit A186, 187).

8. Mr Humich agreed that at the time of mediation he knew the Stati‑related parties were seeking 50% of the funds and the Humich‑related parties were seeking approx $900,000 (ts 78).

Ivan Humichs evidence in relation to the mediation of 15 July 2003

1. It is common ground that the mediation before Registrar Johnson began with everyone in the same room.  Then the Stati‑related parties stayed in that room with their counsel and the Humich–related parties and their counsel went into a different room and the mediator moved between the rooms (ts 88).

2. Mr Humich said there were no discussions directly between he and Mr Stati and the conversations took place through lawyers (ts 79).

3. He said his stated position was that the Stati‑related parties had no right to a 50% split of the funds, however, he was prepared to 'finalise' by agreeing to equally divide the funds if they agreed to give some leeway and assume all liabilities for the maintenance obligations of the constructions.

4. Mr Humich says Mr Hotchkin communicated to everyone, in his presence, on a number of occasions both that the Humich-related parties wanted to be sure of their obligations in respect of the dissolution deed and they wished to have no liability at all to indemnify the Stati‑related parties.  However, he said Mr Stati remained steadfast and would not budge on the Via Marina project.

5. He said it was made clear by Mr Hotchkin that the settlement was to provide certainty so the Humich‑related parties knew what their exposure was and their obligations would end and everything would be brought to an end.

6. He said most of the discussion took place about Via Marina as its potential liability exceeded that of Moran Street, which he said had already been rectified by Mr Stati (ts 81).

7. Mr Humich said Mr Stati said $30,000 should be enough to cover the Via Marina costs and said he would fix Moran Street because it was 'not going to be much' (ts 82) and through his solicitor said he would not maintain the requirement to indemnify Moran Street.

8. Mr Humich said he agreed he would give half of the funds to the Stati‑related parties on the proviso that the Via Marina indemnity would be limited to $30,000 and there would otherwise be no liability to the Stati‑related parties (ts 80 – 83).

9. His recalled Mr Hotchkin wrote the words 'Via Marina' in par 2 (ts 83).

10. He said the words 'the tax return shall not be amended' in par 6 were included at his specific request because he was concerned that as the funds were now being distributed 50/50, it could affect the tax returns and he wished to make it clear they would not be amended.

11. He said this amendment was made before the document was taken to the Stati‑related parties (ts 84).

12. The Stati‑related parties then agreed cl 1 to cl 6 and added cl 7.  He said he then insisted Mr Hotchkin insert cl 8, (ts 83 ‑ 85).

13. Mr Humich said he wanted to make sure everything was written down and Mr Stati signed off on it because he wanted finality of all the issues between them (ts 85).

14. I found Mr Humich's evidence to be straightforward, credible and accurate.

15. I accept his version of what occurred at the mediation in preference to that of Mr Stati, Mr Pasqua and Mr Dundo.

16. The objective and undisputed circumstances establish that Mr Stati had previously changed his mind on numerous issues connected with the partnership dissolution and had commenced Supreme Court proceedings, the ambit of which was increasing as is evidenced by the amendments and proposed further amendments to the statement of claim.

17. Mr Stati of course is entitled to change his mind, lawyers and amend his pleadings, however the importance of Mr Humich's knowledge of these facts is that it does make it more inherently plausible and lends credibility to his and Mr Hotchkin's evidence that they insisted that all issues between the parties be finalised so they did not have to deal with each other in the future.

18. Similarly, the pre‑mediation correspondences which refer to the failure to meet obligations under cl 20 in respect of both Moran Street and Via Marina and offers to settle the Supreme Court proceedings in a manner which included resolving matters not specifically raised in those proceedings increases the likelihood that Mr Humich's evidence that he said he wanted to resolve all his obligations under cl 20, and all issues between the parties so they did not have to deal with each other in the future, is correct.

19. Mr Humich's evidence was that he compromised his claim to the funds by agreeing to a 50/50 split, after he had been advised he had good prospects of successfully defending the proceedings in an effort to have all issues between the parties resolved is a plausible explanation.

20. His evidence that Mr Stati said he would fix Moran Street has the ring of truth to it when one considers that part of Mr Stati's evidence where he said fixing Moran Street was not going to require 'much' and Mr Randal Humich's evidence that Mr Stati said Moran street was not a major concern.

21. Mr Humich's evidence that he insisted the second sentence of cl 6 be inserted is supported by the evidence of Mr Hotchkin whose evidence in general is similar to and supportive of the evidence of Mr Humich.

22. Mr Humich's evidence, which was generally to the effect that he had gone to the pre‑trial conference in an effort to resolve all matters so the parties could go their own separate ways and was prepared to throw enough money on the table by compromising his claims to the funds to achieve that aim, is inherently plausible.  His intent is relevant to his credibility and to my assessment of what I accept he said at the mediation.

Randal Humich

1. Mr Randal Humich is the son of Ivan Humich.  He has a beneficial interest in the Humich‑related parties.

Randal Humichs' evidence in relation to the mediation of 15 July 2003

1. He said the parties discussed the funds, the indemnities and bringing the disputes between the parties to an end.

2. Insofar as the indemnities are concerned, he said both Moran Street and Via Marina were raised.

3. He claimed Mr Stati said, in relation to Moran Street, that there was no substantial claim for rectification and it was not a major concern and said the potential liability was 'not much' (ts 90).

4. He said the Humich‑related parties' stated position was that they were entitled to much more than 50% of the funds, however they agreed to a 50/50 split on the basis that there would be no further claims against them and there would be no obligation to indemnify in respect to Moran Street and the Via Marina liability was restricted to $30,000.

5. He says it was agreed after lengthy discussions between the parties that the funds were to be split 50/50 on the basis that there were to be no further claims against the Humich‑related parties who would indemnify the Stati‑related parties up to $30,000 for Via Marina.  There were to be no other actions brought against the Humich‑related parties.

6. He recalled Mr Hotchkin saying the agreement had to bring everything to an end that day, and commenting that Mr Stati did not have time to change his mind as he done previously and saying the Stati‑related parties could not come back later and ask for more.

7. He said they wanted the settlement agreement signed off because of the nature of the Stati‑related parties' unwillingness to sign anything (ts 93).

8. He did not know who wrote the words 'Via Marina' in par 2 (ts 92).

9. I consider Mr Randal Humich's evidence to be credible, plausible and accurate.

10. His evidence was supported by his father and Mr Hotchkin's evidence, both of which I found credible.

Michael Hotchkin

1. Mr Michael Hotchkin is a solicitor of 18 years' experience and the principal of Hotchkin Hanly Solicitors who acted for the Humich‑related parties for many years.

2. Mr Hotchkin gave details of the history of the disputes between the parties.

Michael Hotchkins evidence in relation to the mediation of 15 July 2003

1. Mr Hotchkin said he attended the mediation and took brief notes (exhibit A207 ‑ 209) during its course (ts 45) which had refreshed his memory as to what was discussed.

2. He said Mr Stati did not have much to say, however his nephew; Mr Pasqua did (ts 55).

3. He said Mr Dundo made it clear that Mr Stati did not trust the Humich‑related parties and in response he indicated the Humich‑related parties did not trust the Stati‑related parties.

4. Mr Hotchkin said he brought to Mr Dundo's and Mr Stati's attention the fact that new issues were being raised and that matters had been going on for some years and there had to be an end.  He said they agreed the settlement would include a complete release (XN, par 37).

5. He could not recall whether at the mediation he was aware there was an actual maintenance claim on Moran Street, however, he was aware of the risk of such a claim (ts 37 – 39, 43).

6. He said there was also the potential for a live issue in relation to indemnities for all buildings as a result of Clayton Utz's letter of 24September 2003 (exhibit A192) and potentially a big problem over the plastering at Via Marina (ts 55, 57).

7. He agreed the main focus and discussion was over the biggest asset which was the funds, however he said maintenance costs over the two properties was an issue at mediation (ts 47, 49).

8. He said there were suggestions by Mr Dundo that the statement of claim would be amended to expand the existing claim, as he understood it to raise financial and accounting matters and further issues in regards to the Via Marina and Moran Street properties (ts 35, 43, 44).

9. He said that although there had been complaints (exhibit A192) that his client had not fulfilled their obligations under cl 20 of the dissolution deed, the actual particulars of those failures were not discussed (ts 44).

10. He said Mr Dundo referred to global issues (ts 58) and the entry 'global issues - range of matters' in his notes was because issues additional to the distribution of funds and matters covered by the pleadings were raised, as was the need for their to be an end to all matters.

11. He said there were discussions that it was in the parties' interests to resolve all of the matters arising out of the dissolution of the partnership so that they had nothing to do with each other (ts 60, 61).

12. He said the Stati‑related parties negotiated on the basis that they wanted 50% of the funds because they had been equal partners and they wanted cl 20 of the dissolution deed unaffected.

13. The Humich‑related parties wanted approximately 80% of the funds because that was the division calculated by the Stati‑related parties' own accountant and they did not want to provide any indemnity at all as the properties had not been built by Mr Humich (ts 51).

14. Eventually, he said, Mr Humich was prepared to distribute the funds 50/50 and cap the indemnity at $30,000 for Via Marina and that was to be the extent of the Humich‑related parties' obligations.

15. Paragraph 2 as drafted by him did not contain the words 'Via Marina' which were added by Mr Dundo (ts 57) because that development was potentially a big problem.

16. Paragraph 6 reflected the general release.

17. Both parties discussed the fact that this was the end of it and that there would be no further claims of any kind (ts 58, 59).

18. He said it was agreed that there would be a full release of all the matters that the parties had discussed (ts 64) and said his wording of par 6 was intended to reflect the oral agreement that there was a global release (ts 64, 65).

19. He said Mr Humich insisted that the reference to tax returns be included and so he added the second sentence of par 6 and said he was not asked by Mr Dundo about the meaning of those words (ts 54, 55).

20. Mr Hotchkin said he deleted the word 'includ' from par 6 and told Mr Humich why.  That deletion and discussion relating to it does not form any part of the surrounding circumstance known to both parties.  Its only relevance is to credibility assessment.

21. He said there was no suggestion that par 7 limited the scope of the general release provided in par 6.

22. Mr Hotchkin agreed that as a competent and prudent solicitor he was trying to record the settlement that had been reached in writing (ts 36).

23. Mr Hotchkin said there was an oral term expressly agreed that his client would only indemnify the Stati‑related parties for the Via Marina units and only up to $30,000 and there would be no further obligations.

24. He said the oral agreement reached at mediation was reflected in the deed (ts 63) which was the committing of the agreement to writing (ts 62).

25. He confirmed it was his intention to embody in the deed everything that was agreed (ts 64) and he thought the deed actually evidenced the oral agreement (ts 65).

26. He agreed that in his letters of 14September 2004 (exhibit A220a) and 15May 2009 (exhibit A226), by which he responded to demands by the Stati‑related parties, he only referred to the deed and made no reference to any alleged further oral agreement.

27. I found Mr Hotchkin's evidence to be straightforward, plausible and accurate.

28. He had contemporaneous notes which had refreshed his memory.

29. His explanation as to why he deleted 'includ' from par 6 was a plausible explanation both as to why his client wished the second sentence of cl 6 included and why he carried out the deletion.

30. His evidence that the words 'Via Marina' were added by Mr Dundo was supported by Mr Dundo's evidence and consistent with the manner in which Mr Hotchkin says negotiations occurred.

31. Matters known to Mr Hotchkin, including the history of Mr Stati changing his mind and solicitors, the correspondence I have referred to [70 ‑ 78], the commencement of Supreme Court proceedings, the amendments and proposed further amendments to the statement of claim, the negotiations to settle those proceedings by including matters not the subject of those proceedings and the 'tit‑for‑tat claims/response' being made in the sense that each party was saying  they do not trust each other all, make it inherently more likely that both Mr Humich and Mr Hotchkin wished to resolve matters by way of a global solution so the parties could go their own way knowing exactly where they stood.

32. That inherent likelihood in turn make it more likely his version of what was said at mediation is more credible and where his evidence conflicts with that evidence of Mr Stati, Mr Pasqua and Mr Dundo, I prefer his evidence.

Nicola Stati

1. Mr Nicola Stati is a director of the plaintiff company.

2. He explained the general background of the partnership.

3. He said there was a dispute in 1996 or 1997, over maintenance issues for the Moran street units which was referred to the Builders Dispute Tribunal and resulted in an order, requiring him to make some repairs.  He said Mr Hotchkin represented the partnership during this dispute.

4. He conceded that in January 1998 he reached agreement with Mr Humich over division of the partnership properties and, on the same day, changed his mind (ts 181, 197).

5. He agreed the parties arranged for Edwards and Thompson to draft the dissolution deed.  However, when this was done he would not sign it (ts 181, 197).

6. He agreed he then appointed Williams and Hughes as his lawyers, and together with Hotchkin Hanly they agreed Sceales & Co would prepare the dissolution deed.  However, once it was prepared he would not sign it (ts 183), although later in his evidence he said he did not remember that (ts 197).

7. He agreed that in October 1999 he knew there were problems at Via Marina (ts 186) and caused his lawyers to write to Hotchkin Hanly about this matter (exhibit A142).

8. He agreed he told his lawyers to go along to the meeting on 29 August 2002 and to try and settle the whole matter, that is, settle all the disputes (ts 191).

9. He agreed Clayton Utz's letter of 24 September 2002 (exhibit A192) asked for complete settlement including settlement on the Moran Street property issues (ts 195).

10. He agreed there was an argument about what Mr Humich had to pay for Via Marina and Moran Street (ts 192).

11. He agreed he had demanded $300,000 for extra work he had performed in the partnership (ts 182) and did not accept his accountant's calculation as to how the funds should be split (ts 198).

12. He said he was angry at Mr Humich, whom he felt had been unfair to him, and would sue him if he found 'anything else wrong'.  He assumed his lawyers told this to Mr Humich's lawyers (ts 187, 196, 197).

Nicola Statis’ evidence in relation to the mediation of 15 July 2003

1. Mr Stati said that by mediation he knew of fresh complaints by Moran Street home owners (November 2002, exhibit A198) and knew the Builders Dispute Tribunal were involved (January 2003) (ts 199, 200, exhibit A199).

2. He said Mr Humich also mentioned there was a complaint about Moran Street (ts 198) but said Moran Street should not have any trouble (ts 199), to which he responded effectively if there was not any trouble its 'good for you and good for me' (ts 199, 200).  He said there was no discussion about costs in relation to Moran Street.

3. I found Mr Stati's evidence in relation to Moran Street somewhat contradictory.

4. In part of his evidence he said there was already lots of trouble about Moran Street (ts 199) and he told everyone he was worried about Moran Street (ts 206) and said it was a 'big thing' discussed at the mediation (ts 207) and a 'big deal' to him (ts 207).  He also said Mr Humich was worried about Moran Street.

5. In other parts of his evidence he said Moran Street was not a big deal, although he did say if a retaining wall was required for the 30 m drop into the mine (ts 204) it would be a $2 million claim (ts 201).  However he qualified this by saying that at the mediation he was not worried about the wall (ts 205).

6. The cross‑examiner asked Mr Stati whether his evidence really was to the effect that he was saying his lawyers wrote to the Humich‑related parties about Via Marina, a property Mr Stati said he was not worried about, but did not write to them about Moran Street, a property he says he was worried about.

7. Mr Stati did not answer the question directly and whilst I accept he may not have fully understood the question, the cross‑examiner made his point.

8. Mr Stati said he told his lawyer, in the presence of Mr Humich, that it was very important to put into the agreement that Moran Street was 50/50 in respect of maintenance (ts 208).

9. Mr Stati agreed he was the person best able to estimate the cost of rectification work (ts 209).

10. When asked if he was worried about Via Marina at the mediation he replied 'no'.  He agreed that prior to the mediation there were a number of letters written about its problems (ts 205) and he had bought back two units to stop a complaint (ts 205), and acknowledged that a few owners had gone to Builders Registration Tribunal (ts 205).  Notwithstanding this, he maintained he was not worried about Via Marina 'at all' (ts 205).

11. He said Mr Humich wanted the costs of Via Marina capped and said the maximum he would give was $30,000 saying words to the effect of 'it wouldn't cost more than this'.

12. Although Mr Stati said he originally wanted the potential costs split 50/50, he agreed to the proposal (ts 209).

13. He said before he signed the deed 'everything was to be 50/50' (ts 215) and 'Ivan still has to pay me on Moran Street' (ts 215).

14. He said that when he was given the deed it was complete and he signed it.

15. He recalled in evidence‑in‑chief that after the deed was signed somebody said something like 'that's the end, it's all finished'.  Although he denied this was said in cross‑examination (ts 214), when his evidence‑in‑chief was read to him he agreed those words were spoken (ts 214, 215, 217).

16. I have made  due allowances for Mr Stati's nervousness, age, and the fact that English is not his first language, however, I did not find him to be a reliable or accurate witness.

17. On many occasions he provided answers to questions before the question was complete.

18. He spoke over the cross‑examiner and his answers were often unrelated to the questions.

19. He gave answers designed to advance his own case, which I have no doubt he genuinely believes in, irrespective of the question actually asked.

20. His evidence in relation to Moran Street was contradictory, saying in parts that there was lots of trouble about Moran Street and it was a 'big thing' discussed at the meeting as it was a 'big deal' to him.  In other parts of his evidence he said Moran Street was not a big deal.

21. Further, he said he was not worried about 'Via Marina' at the mediation.  Other witnesses indicate that there was much discussion about Via Marina at the mediation.

22. The tenor of his evidence was that Moran Street was given a greater prominence than Via Marina and this is simply not supported by the evidence of  any other witness.

23. His assertion that before he signed the deed he said 'everything was to be 50/50' and 'Ivan still has to pay me on Moran Street' was unsupported by other credible evidence.

24. He was shown in cross‑examination to have a faulty recollection of whether or not after the deed was signed someone said, 'that's the end, it's all finished', initially denying it was said and then agreeing the words were spoken.

25. My overall impression was that Mr Stati was not prepared to listen to the question in full, but rather prepared to answer any question in a manner which was consistent with his version of events.

26. Where his evidence conflicts with the evidence of Mr Hotchkin and Mr I and R Humich, I prefer their evidence.

Jamie Pasqua

1. Mr Pasqua is the nephew of Mr Stati and assisted him with the dissolution deed and the mediation.

2. He prepared notes prior to the mediation based on his understanding of the issues which came from prior discussions with Mr Stati and Mr Dundo and reading correspondence.

3. He said his notes were a summary of the issues outstanding regarding the partnership dissolution and he understood the purpose of the conference was to resolve those issues (ts 225, 226).

4. A copy of those notes was annexed to his evidence‑in‑chief.

Mr Jamie Pasquas' evidence in relation to the mediation of 15 July 2003

1. Mr Pasqua said the first issue was the settling of the partnership bank account and the distribution of funds and this was settled on a 50/50 basis after much discussion (ts 227).

2. He said the second issue related to concerns raised by Mr Humich at the costs of plastering works at the Via Marina project (ts 227).

3. He could not recall detailed discussion about Moran Street (ts 228), however he agreed that during the mediation conference he had written on his pre‑prepared notes 'Moran Street clause 20' (ts 227).  I am satisfied from other evidence that such discussions occurred.

4. Although he could not specifically recall a statement being made along the lines of 'We've got to bring an end to all of this.  This has got to be it.  This has got to be the end.  Final resolution', he said there would have been those types of words discussed at the conference (ts 229).

5. He said he could not recall words to that effect, however, he agreed that was his impression of what people were saying (ts 229).

6. I accept that the witness's impression of what is said is inadmissible however when a witness cannot recall the exact words spoken by another he is entitled to give the effect of those words: Wigmore on Evidence (Chadbourne rev par 2097); United States of America v Castro (1987) 813 F 2d 571, 576.

7. I consider that Mr Pasqua's evidence at ts 229 is correctly interpreted as being evidence of the effect of the conversations and not simply his speculation or impression of what was said.

8. Mr Pasqua's evidence was given in a straightforward and credible fashion.

9. I found him to be a credible witness.

Kevin Dundo

1. Mr Kevin Dundo is a corporate commercial lawyer who is also involved in litigation.

2. He has been a legal practitioner for 26 years, and is currently a partner in Q Legal.  He was formerly a partner in Clayton Utz.

3. In June 2002 he received instructions to act for the Stati‑related parties.

4. Mr Dundo was cross‑examined at length as to his subjective intent in drafting cl 3 and cl 4 of Clayton Utz letter of September 2002 (exhibit A192) which raised, inter alia, the issue of the indemnities under cl 20 for both Via Marina and Moran Street.

5. The cross‑examination proceeded along the lines that Mr Dundo's subjective intent was that cl 3 and cl 4 only affected a release of the court proceedings and not a release of all matters in contention between the parties, and therefore did not affect a release in relation to the maintenance costs (ts 132, 136).  However, as a result of the penultimate paragraphs (exhibit A194) reference to 'a total release proposed in pars 3 and 4 … ' and the offer being a 'sensible commercial resolution to all issues in contention between the parties' (ts 137) the wording used in cl 3 and cl 4 was in fact intended by him to be a total release of all matters in contention between the parties (ts 137, 138).

6. Mr Dundo initially said the wording of his letter was a little loose and could have been better and did not correctly reflect what was proposed in the earlier parts of the letter (ts 139, 140).

7. He ultimately agreed that if the five points referred to in that letter had been incorporated in a deed of settlement it would have resulted in a total release of all issues in contention between the parties (ts 141, 146) even though pars 3 and 4 referred only to the court proceedings (ts 146).

8. The cross‑examiner was, in a rather sophisticated way, endeavouring to establish that Mr Dundo had the same subjective intent, that is, to provide a total release of all issues in contention between the parties (ts 142), at the time he drafted that letter and some time later when he used essentially the same wording in par 7 of the deed, and therefore Mr Dundo lacked credibility in saying he drafted par 7 specifically so as not to provide a total release of all matters.

9. Mr Solomon argued that although the draftsperson intention is irrelevant to my consideration of both the surrounding circumstances and the construction of the deed, it is a matter that I ought to take into account in assessing Mr Dundo's credibility.

10. I think this it is too sophisticated a point.  As was correctly pointed out by Mr Abbott, my task is to determine and construct the settlement agreement not the letter of September 2002 and as Mr Dundo pointed out, whatever his subjective intent in drafting that letter it was not operating on his mind at the mediation (ts 147).  In any event exhibit A192 – 195 refers to the parties drawing a formal deed.  In those circumstances perhaps close attention was not given to the precise language used in latter parts of the letter.

11. Mr Dundo agreed that the intention in the September 2002 letter and the negotiations generally was to try and resolve everything (ts 147).

12. He agreed that leading up to the mediation everyone had been talking about a complete resolution of everything (ts 153).

Mr  Kevin Dundo's evidence in relation to the mediation of 15 July 2003

1. Mr Dundo represented the Stati-related parties at the mediation.

2. He did not recall taking notes at the mediation and there were no notes on the file.

3. He said this did not surprise him as he was not a big note‑taker.  He said he may have scribbled on pieces of paper (ts 121, 122).

4. He could not recall the name of the other person who was present with Mr Ivan Humich representing the Humich‑related parties, nor could he recall whether another solicitor employed by Clayton Utz was present.

5. Mr Dundo said the leverage his client had was that Mr Stati considered Mr Humich had made payments out of the partnership bank account for expenses that had nothing to do with the partnership, and that the partnership tax returns prepared by Mr Humich had been prepared incorrectly (ts 127).

6. He recalled there being discussions about maintenance on both Via Marina and Moran Street (ts 154), however he could not recall any discussion about those developments or cl 20 before the deed was handed to him, although he did not discount the possibility that it occurred (ts 148).

7. He said that after the deed was handed to him there was a discussion between all of the parties about $30,000 being the Humich‑related parties' preferred limitation for claims that might arise on Via Marina and Moran Street projects.

8. He recalled Mr Stati advising him that the issues over Moran Street had resurfaced in some way (ts 148, 153).  However, he could not recall the actual details.  He said there was a discussion about the work to be done on both properties (ts 150, 151) and the group in the room discussed cl 20 of the dissolution deed (ts 150).

9. He said that there was then a discussion between Mr Stati and Mr Humich because Mr Humich wanted to limit his liability.

10. He said this discussion took place with the group in the room and he recalled quite clearly that the limitation sought related to both properties but the agreement was only limited to the Via Marina property.  He could not recall the specific words spoken by each party (ts 149, 150).

11. His clear recollection of the discussions and the agreement was the limitation of the liability would only relate to Via Marina and it would be limited to $30,000.  Clause 20 would continue to apply to Moran Street and that is why he added the words 'Via Marina' at the end of par 2 of the deed.

12. Mr Dundo said his subjective understanding was that par 2 limited Mr Humich's liability for Via Marina to $30,000 but left cl 20 of the deed insofar as it affected Moran Street untouched (ts 160).

13. He said that insofar as par 6 was concerned, he discussed its effect, at a time he could not recall, with Mr Hotchkin.

14. He agreed that Mr Hotchkin said he wanted to make sure the Stati‑related parties did not have any further claims regarding the expenses that they continuously alleged had been improperly claimed and he did not want these allegations to continue (ts 159).

15. Initially Mr Dundo's evidence was he said words to the effect of 'put the words in about the tax returns' (ts 155, 157).  Later in his evidence he denied he suggested Mr Hotchkin write that sentence.  When challenged about the inconsistency he replied he may have said 'put the words in' and thought it was his suggestion (ts 157).

16. He said Mr Hotchkin inserted the words 'the tax returns shall not be amended' in par 6.

17. Mr Dundo said his genuine belief was that par 6 only related to releasing the parties in relation to the allegations made by Mr Stati that Mr Humich had made payments out of the partnership bank accounts for expenses that had nothing to do with the partnership (ts 127, 159), allegations which naturally flowed through to the partnership tax returns (ts 155 – 159).

18. His subjective belief was there was no release other than in relation to the accounts and expenses that flowed into the tax returns via par 6.  The full and final settlement referred to in par 7 only applied in relation to the narrow compass of the matters pleaded in the Supreme Court (ts 161) and he said the settlement deed properly reflected the terms of that agreement (ts 162).

19. These 'genuine' and 'subjective beliefs' are admissible only on issues of the credibility of Mr Dundo.

20. Mr Dundo said he added par 7 to the deed of settlement and he did so consciously intending to exclude cl 20 of the dissolution deed from its effect (ts 130).

21. Mr Dundo denied Mr Hotchkin said words to the effect of 'this has got to be a complete settlement.  All matters in contention have to come to an end' (ts 152).  I prefer Mr Hotchkin's evidence on this point as his memory was refreshed by his notes which referred to 'global issues ‑ range of matters'.

22. Mr Dundo agreed that he was not a big note‑taker and certainly had no notes to refresh his memory.

23. I note Mr Pasqua's evidence was that the purpose of the conference was to resolve the issues referred to in his pre‑mediation notes, which included matters extraneous to the extant Supreme Court pleadings and that there were conversations at mediation to the effect that there was the need for an end or final resolution.

24. Mr Dundo had also made reference in pre‑mediation communications to resolving all issues in contention between the parties.

25. I find it inherently more probable that it was agreed to resolve all issues in contention between the parties in the manner described by Mr Hotchkin and Messrs Humich in their evidence, and I reject Mr Dundo's evidence to the contrary.

26. For similar reasons, where the evidence of Mr Dundo conflicts with that of Mr Hotchkin and Messrs Humich, I prefer the evidence of the latter.  I find their version of what occurred and was agreed at mediation to be inherently more probable.

27. Additionally, Mr Dundo's recollection that he told Mr Hotchkin to include the words about the tax returns in the second sentence of par 6 was shown to be faulty in that he initially asserted he had said these words then denied suggesting Mr Hotchkin write those words.  He then agreed he may well have said those words and thought the words were written at his suggestion.

28. Mr Dundo's inability to recall what was said in opening statements to the mediator and the details of the issues relating to Moran Street and precisely when the effect of par 6 was discussed, whilst understandable considering the lapse of time, establish there are matters of which he has no recall.

The surrounding circumstance known to the parties

1. The findings I make about the surrounding circumstance known to the parties at the time of entering the settlement agreement and the purpose and the object of the agreement are as follows.

2. The nature of the partnership and the role of Mr Nicola Stati and Mr Ivan Humich, within it meant each knew the physical characteristics of each of the partnership developments and the nature, although not necessarily the extent of potential maintenance issues that were likely to arise in the Moran Street and Via Marina developments.

3. The dissolution deed was entered into after protracted negotiations and with the aim of resolving the issues then existing between the parties and after the Stati‑related parties had frequently changed their mind over issues relevant to the dissolution.

4. The dissolution deed recognised the ongoing maintenance liabilities of the parties in respect of Via Marina and Moran Street by cl 20 and, pursuant to cl 31, the parties released each other from other potential claims.

5. After the dissolution deed numerous disputes arise resulting in the Stati‑related parties issuing Supreme Court proceedings seeking:

   (a)an account of the partnership dealings and transactions, of several partnership developments;

   (b)the re‑opening of the accounts dealings and transactions of the partnership since its inception;

   (c)a declaration as to the meaning of a specific clause in the dissolution deed;

   (d)rectification of the dissolution deed.

1. Those proceedings did not relate to the indemnities for Via Marina and Moran Street, however after the proceedings were issued the Stati‑related parties made further claims alleging:

   (e)that Mr Ivan Humich had paid from the partnership account expenses that did not relate to the partnership and had knowingly prepared incorrect partnership accounts;

   (f)the Humich‑related parties had not met their obligations under cl 20 of the dissolution deed  to pay 50% of the maintenance expenses for the Via Marina and Moran Street developments.

2. In response to the Supreme Court proceedings and subsequent claims the Humich‑related parties claimed:

   (i)rectification of a clause in the partnership agreement;

   (ii)that the defendant's personal accounting affairs may need to be investigated;

   (iii)the Stati‑related parties had failed to sign cheques and do things necessary to distribute the balance of partnership funds in a bank account whereby they suffered loss, being the loss of opportunity to reduce its interest rate burden on a loan;

   (iv)exasperation at the fresh claims being made against them.

3. Subsequent negotiations, occurring over a period of approximately 12 months included proposals by the Stati‑related parties to settle the existing court proceedings by, inter alia, resolving matters relating to the indemnity arising under cl 20 of the dissolution deed and included proposals that the parties provide each other with a total release of all matters in contention.

4. Negotiations by the Humich‑related parties included, inter alia, offers of a complete release upon payment of a specific sum, or alternatively, payment of a lesser sum leaving the parties free to pursue any claims they wish.

5. Each party was, whilst negotiating, threatening to increase the ambit of the litigation.

6. Mr Stati was determined to pursue any claim against the Humich‑related parties he thought he could.

7. By the time of the mediation:

   (a)maintenance issues with Via Marina, which had arisen in 2000, were active (exhibits A186, A192) and related mainly to plastering issues'

   (b)maintenance issues with Moran street which had arisen in 1996 (exhibit A10‑42) were active (exhibits A192, A198, A199, A210) and related mainly to subsistence issues of the soil;

   (c)Mr Stati and Mr Humich were aware of the nature but not the extent of potential liability for maintenance issues;

   (d)maintenance issues for Via Marina were thought to be more pressing than those of Moran Street;

   (e)Mr Stati had steadfastly maintained that he was entitled to 50% of the funds.

8. The issues in discussion at the mediation conference included:

   (a)the division of the funds and the demands by the Stati‑related parties to re‑open the accounts and the allegation that Mr Humich had included in the partnership account expenses not relating to the partnership;

   (b)potential maintenance liabilities for Moran Street and Via Marina; and

   (c)the need to resolve all of the issues between the parties.

9. The purpose and object of the mediation and settlement agreement was to resolve all issues in dispute, not merely those the subject of the Supreme Court proceedings so that each party could go their separate ways aware of the nature and extent of their obligations.

10. At the mediation each party withdrew from positions they had previously steadfastly held.  In particular the Stati‑related parties agreed to amend cl 20 and the Humich‑related parties agreed to accept a smaller distribution of the funds

11. The words 'for Via Marina' in par 2 of the settlement agreement were inserted by Mr Dundo.

12. The words 'the tax return shall not be amended' in par 6 were inserted by Mr Hotchkin at Mr Ivan Humich's insistence.

13. Paragraph 7 was inserted by Mr Dundo after the settlement agreement containing pars 1 ‑ 6 was presented to the Stati‑related parties.

14. Paragraph 8 was inserted by Mr Hotchkin after the insertion of par 7.

15. These findings mean I have accepted the evidence of Messrs Humich and Hotchkin that it was known at the mediation that they wanted to resolve all issues so that each could go their own way and they would know their liabilities and obligations henceforth.

16. Their evidence as to both the discussions and agreements is inherently more credible, particularly in circumstances where Mr Stati agreed he had told his lawyers to go along to a previous meeting to try and settle 'all the disputes' (ts 191), and Mr Pasqua, understanding that the mediation was to resolve the issues outstanding regarding the partnership dissolution (ts 225 – 226) and Mr Dundo's evidence that prior to the mediation, everyone had been talking about a complete resolution of everything (ts 153).

17. I do accept that these issues of finality were raised by Messrsr Humich and Hotchkin and the settlement agreement was drawn with that purpose and object in mind.

18. Some of the surrounding circumstances referred to above are of little assistance.  The reality is that both parties have by entering the agreement, withdrawn from previously stated positions.  What, of course, is said in negotiations is not evidence of the party's position as opposed to their stated position.

19. However, the most significant aspect of the surrounding circumstances is that they do establish the settlement agreement was entered into after protracted negotiations and those negotiations had involved attempts to resolving all issues in dispute between the parties, not simply those which related to the Supreme Court proceedings.

20. I am satisfied that the purpose and object of the settlement agreement was to resolve all issues in dispute, not merely those the subject of the Supreme Court proceedings so that each party could go their separate ways aware of the nature and extent of their obligations.

The construction of the settlement agreement

The parties' submissions

1. As previously indicated the agreement must be construed having regard to its entirety.

Paragraph 2

As to cl 20 of the deed of dissolution dated 22 September 1998 the Humich‑related parties' obligation to indemnify be as limited to $30,000 for Via Marina.

The plaintiff's contention

1. The plaintiff points out that the words 'for Via Marina' in par 2 were added during the course of negotiations by Mr Dundo.

2. The plaintiff says that the addition of those words is a rejection of the proposal that cl 20 of the dissolution deed is limited by sole reference to a monetary amount.

3. The plaintiff says that if the words 'for Via Marina' were not added, cl 20 would continue to apply to both the Moran Street project and the Via Marina project, but the amount of the liability for the Humich‑related parties would alter from the unlimited obligation to a capped obligation of $30,000.

4. The plaintiff says the addition of the words 'for Via Marina' must be given effect such that it denotes only the Via Marina liabilities within cl 20 are effected in that the monetary amount of the obligation to indemnify is limited to $30,000, but otherwise the obligation to indemnify in respect of the Moran Street project is unaltered and to be dealt with in accordance with cl 20 of the dissolution deed.

5. The plaintiff points out that the surrounding circumstances establish the only negotiations in relation to maintenance costs was to either maintain the arrangement as specified in cl 20 of the dissolution deed or extend the maintenance obligations to all partnership projects and says the defendant knew the plaintiff was steadfastly insisting on all partnership obligations being split 50/50.

6. The plaintiff says by its very terms par 2 does not seek to remove the operation of cl 20 rather specifically refers to it and thereby acknowledges that the dissolution deed continues.

7. The plaintiff says the surrounding circumstances show the parties had recognised there would be prospective liabilities which are to be dealt with by cl 20 of the dissolution deed and resolved all other issues through the full and final release provided by cl 31 of that deed.

8. The plaintiff says that par 2 of the settlement agreement means the Via Marina obligation to contribute to maintenance is capped at $30,000 and the Moran Street obligation continues to be determined by cl 20 and is uncapped with the defendant obliged to contribute 50% of whatever the maintenance costs are.

The defendants' contentions

1. The defendant says that the natural meaning of par 2 is plain and obvious in its terms and it means the indemnity under cl 20 is limited to a specific property and a specific amount, i.e. $30,000 for Via Marina.

2. They say the purpose of the deed was to settle and compromise all disputes between the parties so that each party could go their separate ways aware of the nature and extent of their obligations.

3. The defendant says throughout the lengthy negotiations Moran Street and Via Marina maintenance issues had been raised and the mere fact that cl 20 of the dissolution deed is referred to is an indication that the obligations pursuant to cl 20 were a live issue at the mediation and the words 'obligation to indemnify be limited to $30,000 for Via Marina' means that the obligations under cl 20 is now limited to $30,000 for Via Marina.

4. The defendants say that it is impermissible to construe the instrument by reference to its drafting history.

5. The defendants say par 2 limits the liability and effect of cl 20 of the dissolution deed to both one project (via Marina) and the specified amount ($30,000).

Paragraph 6 of the settlement agreement

Each party release the other from all claims however arising include the Tax Returns shall not be amended.

Plaintiff's contentions

1. The plaintiff contends that pars 6 and 7 must be read together and that the phrase 'the tax returns shall not be amended' in par 6 must be taken into account when construing the meaning of 'each party release the other from all claims however arising' and, accordingly, limits par 6 to the matters concerning the 'tax returns'.

2. The plaintiff says that par 6 was not intended to be given an unlimited release and the words 'the tax returns shall not be amended' were not in the original version of par 6.

3. The plaintiff submitted that par 6 cannot extinguish the prospective liabilities of cl 20 of the dissolution deed because par 2 recognises those prospective liabilities.

4. The plaintiff says the surrounding circumstances show the primary issue in contention between the parties at mediation was the plaintiff's claims that the Humich‑related parties had included in the accounts partnership expenses which did not relate to the partnership and this would result in, if the plaintiff was correct, the partnership expenses being reduced; and require amendments to the partnership accounts and the tax returns.

5. Paragraph 6 provides, they say, a mechanism whereby the money referred to in par l could be paid out of the partnership account without the necessity of the tax returns being amended as monies paid out pursuant to par 1 would be paid as part of a negotiated compromise and not an admission that the accounts filed were inaccurate or improper.  All par 6 does is make clear there is no requirement to rewrite tax returns.

6. The plaintiff says that the inclusion of the words 'the tax returns shall not be amended' limits the preceding paragraph 'each party releases the other from all claims however arising' to claims arising from matters central to the plaintiff's allegation that the partnership expenses had been wrongly included.

7. The plaintiff points out that par 7 was added after par 6 and  says this fact should lead to the plain rejection of any proposal that par 6 provides an unlimited release.

Defendant's contentions

1. The defendant contends that a plain and unqualified release between the parties is provided by par 6.

2. They say the words are unequivocal and par 6 provides a complete release from all claims and the words 'the tax returns shall not be amended' is simply a statement that the plaintiff agrees not to disturb the tax returns.  The defendant says it is not even an operative provision, merely a notation after the provision of a general release saying the parties agree on a particular consequence.

3. They say to limit the release is inconsistent with the purpose of the agreement.

4. They argue that to interpret par 6 as providing a limited release applying only to matters relating to the partnership accounts and the allegations the plaintiff had made against the defendant would mean the parties were leaving issues that had been aired at the mediation, such as maintenance obligations on Moran Street, up in the air and the surrounding circumstances establish this was not their intent.

5. The defendants say the surrounding circumstances show the parties had been in negotiations for about a year and the purpose of the deed was to settle and compromise all disputes between the parties and provide finality.

6. The defendant says the drafting history of the deed is to be disregarded.

7. The defendant contends it provides a general release and should not be read down.

Paragraph 7 of the settlement agreement

Each party agrees that the terms hereof are in full and final satisfaction of all claims whatsoever relation arising in relation to the subject matter of the action.

Plaintiff's contentions

1. The plaintiff contends that par 7 when read with par 6 results in the release provided by par 6 being construed to relate to matters concerning tax returns, and the release in par 7 being construed to matters relating to accounting and the re‑opening of partnership accounts.

2. They say par 7 in accordance with its natural meaning resolves 'all claims whatsoever arising in relation to the subject matter of the action' and says the subject matter of the action is synonymous with the relief sought, that is, the opening or settling of the partnership accounts.

3. The plaintiff says the effect of cl 31 of the dissolution deed means all that was left after the dissolution deed was the obligation to prepare accounts under cl 15 of the deed and pay monies out of the partnership bank account once those accounts had been finalised and the liability for prospective maintenance claims under cl 20.

4. They point out that the Supreme Court proceedings and pleadings did not deal with the subject matter of cl 20 and therefore the only other matters that could be in issue between the parties in the Supreme Court proceedings was the opening or settling of partnership accounts and therefore that was the subject matter of the action.

5. The subject matter of the action they say does not include the parties' prospective liabilities which are covered by cl 20 of the dissolution deed.

6. The plaintiff says this provides a harmonious reading of pars 2, 6 and 7.

Defendants' contentions

1. The defendants submits the words 'all claims whatsoever' 'arising in relation to' and 'the subject matter of the action' require a broad interpretation.

2. They point out that the expression 'all claims whatsoever' reflects an intention of board operation; that the words 'in relation to' is an expression of wide and general import (Fountain v Alexander (1982) 150 CLR 615, 629 (Mason J)), and those words are wide enough to cover every conceivable connection (O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356, 367 (Dawson J)).

3. The defendants say there is a clear distinction between the subject matter of the action and the proceedings: Hoddell v Hoddel Pty Ltd [1999] WASC 156 [21] (Murray J).

4. The subject matter, they argued, means the subject matter for determination in legal proceedings, rather than the proceedings itself: Joye v Beach Petroleum NL (1996) 137 ALR 506, 516.

5. The defendant submits the subject matter of the action is wider than the action and relates to the dissolution of the partnership, and the use of the words 'in relation to' further expand the ambit such that par 7 should be interpreted to mean all matters relating to the partnership dissolution including the indemnity dispute over Moran Street.

6. The defendant argues the surrounding circumstances show the parties accepted as a premise of their negotiations that a resolution of the Supreme Court proceedings would involve a resolution of all matters in contention between them including Moran Street indemnity and maintenance costs.

7. The defendant says that these words in par 7 should be given broad import in circumstances where matters relating to cl 20 and the Moran Street maintenance costs had been referred to both at the mediation and in previous correspondence.

8. Further, they say the object and purpose of the deed was to resolve all issues between the parties and provide a full and final release of all obligations under the partnership and its dissolution so the parties could go their own ways.

My determination

Paragraph 2 of the settlement agreement

1. Without knowledge of the surrounding circumstances par 2 is ambiguous.  It could be interpreted in the way urged by the plaintiff or the defendant.

2. I have found the purpose and object of the mediation and settlement agreement was to resolve all issues in dispute, not merely those the subject of the Supreme Court proceedings, so that each party could go their separate ways aware of the nature and extent of their obligations.

3. The surrounding circumstances show that in prior negotiations the parties envisaged settling all their disputes by resolving all matters in contention and not merely those the subject of the Supreme Court proceedings.

4. I have also found that the prospective liabilities for both Via Marina and Moran Street were discussed at the mediation.  Paragraph 2 of the deed refers to cl 20 of the dissolution deed which imposes prospective maintenance liabilities on each party in equal but unspecified amounts.

5. A reasonable person considering the text of par 2 and the surrounding circumstances known to the parties, and that the purposes and objects of the deed would understand par 2 limits the liability under cl 20 of the dissolution deed to one project, being Via Marina and one amount, being $30,000 thereby providing certainty as to the extent of maintenance obligation.

Paragraph 6 of the settlement agreement

1. The issues in dispute at mediation related to the funds and accounting procedures (covered by cl 15 of the dissolution deed) and the prospective liabilities for Via Marina and Moran Street (cl 20).

2. Having considered the intention of the parties as determined from the words used and considering the whole of the deed its purpose and object the surrounding circumstances and what a reasonable person would understand by the language used in the deed, I am of the view that such person would conclude that a general release is provided by par 6.

3. The grammatical structure of the paragraph means the second sentence contains a separate subject matter and obligation and it does not limit the release provided by the first sentence.

4. The second sentence stands alone.  The obligation it purports to impose is probably unenforceable.  The obligations and requirements to amended tax returns are governed by the Income Tax Assessment Act 1937.  The parties cannot by agreement remove themselves from the ambit of that Act.  Leaving that issue aside, it seems to me that the second sentence does not limit the general release I have found is provided by the first sentence.

5. The language of the deed is inconsistent with an intention that the deed be limited in the way contended by the plaintiff.

Paragraph 7 of the settlement agreement

1. The use of words such as 'all claims whatsoever arising in relation to' are words of wide import.

2. Like the expression 'in respect of ' the words 'arising in relation to' have a wide meaning, and are intended to convey a connection between the subject matter to which the words refer although that connection is less than that required by words such as 'as caused by' or 'as a result of': Butler v St John of God Health Care Inc [2008] WASCA 174 [38].

3. The settlement agreement was made in the context of both existing court proceedings and ongoing issues not specifically raised in those proceedings.

1. The existing court proceedings related to the construction of the dissolution deed and accounting issues.  The ongoing issues included the allegations of non‑fulfilment of obligations under cl 20 of the dissolution deed.

2. Paragraph 7 refers to the subject matter of the action.

3. The subject matter of the action could only ever relate to matters arising from the dissolution deed because as counsel for the plaintiff submitted, 'everything else was resolved by the full and final release provided in cl 31' (ts 284, 285).

4. The subject matter of the action is properly described as an allegation of a breach of obligations under the dissolution deed.

5. The release provided in par 7 is intended to release the parties from 'all claims whatsoever arising in relation to' the subject matter of the action, that is from all claims whatsoever arising in relation to breaches of obligations under the dissolution deed except those preserved by the settlement agreement.

6. The obligation preserved by the settlement agreement are to divide the funds 50/50 (par 1) and contribute to prospective maintenance obligations for Via Marina up to a maximum of $30,000 (par 2)all other claims are released .

7. For these reasons, I find that the claim by the plaintiff cannot be pursued because the settlement agreement (which I have found to be constituted solely by the mediation deed) settled all matters between the parties, including matters the plaintiff now claims indemnification for.

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION: CLINTWAY PTY LTD -v- HUMICH [2011] WADC 84 (S)

CORAM:   BOWDEN DCJ

HEARD:   6, 7 & 8 APRIL 2011

DELIVERED          :   3 JUNE 2011

SUPPLEMENTARY

DECISION              :22 AUGUST 2011

FILE NO/S:   CIV 3406 of 2009

BETWEEN:   CLINTWAY PTY LTD

Plaintiff

AND

IVAN HUMICH
HUMICH NOMINEES PTY LTD
ANILIA PTY LTD
Defendants

Catchwords:

Costs - Calderbank offer - Offer rejected - Whether rejection unreasonable

Legislation:

Nil

Result:

Costs ordered on a party/party basis

Representation:

Counsel:

Plaintiff:     Mr C Biris

Defendants:     Mr P Read

Solicitors:

Plaintiff:     Chris Biris

Defendants:     Ilberys

Case(s) referred to in judgment(s):

Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115

Miller v Evans [2010] WASC 127

Miller v Evans [2010] WASC 127 (S)

1. BOWDEN DCJ:  On 3 June 2011 I found that the claim by the plaintiff could not be pursued because the settlement agreement entered into by the parties settled all matters between them including matters the plaintiff  claimed indemnification for.

2. In those circumstances, it is appropriate that action be dismissed.

3. The defendants seek an order that the plaintiff pay their costs on a party/party basis up to 3 February 2011 and on an indemnity basis thereafter.

4. They seek indemnity costs from 3February 2011 because they made a Calderbank offer, open until 11 February 2011, on that date.

5. The plaintiff made no request for an extension of time within which to consider that offer nor did they make a counteroffer.

6. The plaintiff claims that the defendants' rejection of the offer was so unreasonable as to justify an order for indemnity costs.

The principles applicable to Calderbank offers

1. Calderbank offers were considered by the Court of Appeal in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115. Buss JA cited all the relevant principles and cases supporting them and the following propositions can be extracted from his Honour's reasons.

2. A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable [16].

3. All of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable [17].

4. The mere fact that the recipient of a Calderbank offer is ultimately worse off than he would have been had the offer been accepted does not mean that its rejection was unreasonable [18].

5. Whether the conduct in rejecting the offer is reasonable or unreasonable involves matters of judgment and imprecision and, although not exhaustive, ordinarily regard should be had to at least the following factors:

   (a)the stage at the proceedings in which the offer was received;

   (b)the time allowed to consider the offer;

   (c)the extent of the compromised offer;

   (d)the offeree's prospects of success assessed as at the date of the offer;

   (e)the clarity in which the terms of the offer was expressed; and

   (f)whether the offer foreshadowed an application for indemnity costs in the event of its rejection [19].

6. The onus of satisfying the court that it should make an award of indemnity costs in there favour is on the party who made the rejected offer: [21].

7. It does not follow that a party who receives a Calderbank offer in an amount which is approximately 50% of the claim will necessarily be acting unreasonable if it rejects the offer. The amount of the offer is merely one factor to be considered with all other relevant circumstances [90].

Consideration of the application

The stage of the proceedings in which the offer was received

1. The offer was made on 3 February 2011 which was prior to the date for compliance with orders which required the filing of witness statements by 23 February 2011.

2. The trial commenced on 6 April 2011.

3. The writ of summons in this matter was filed in November 2009 and was subsequently amended on 18 January 2010.

4. The offer was made some two months prior to the trial.  The offer was not made until some 15 months after the writ was issued.  After the offer was made, the defendants amended their defence on 29 March 2011 and the trial of the preliminary issue was agreed as a consequence of that amendment.  The amendment of the defence in my opinion has no bearing on the question I am now considering.  The general rule is the successful should be awarded costs and there is nothing in the amendment that would lead to the departure from that general rule.

5. Whilst I accept that significant costs were incurred after the date of the offer, clearly significant costs would have been incurred by both parties before the offer had been made.

The time allowed to the offeree to consider the offer

1. The offer allowed eight days before it lapsed which, in the circumstances, was a reasonable time.

2. I note there was no application to extend the time for the plaintiff to consider the offer.  Nor was there any counteroffer by the plaintiff.

3. It is a significant factor but it is only one factor to be considered together with all of the other factors.

The extent of the compromise

1. The amount of the offer was approximately 50% of the amount claimed exclusive of interest and cost.

The offeree's prospects of success assessed as at the date of the offer

1. It is true that in respect of the preliminary issue, the defendants' success would bar the plaintiff's claim.

2. On the other hand, if the plaintiff was successful in relation to the preliminary issues, they would still have to establish its case against the defendant, requiring it to prove inter alia:

   1.That costs incurred by the plaintiff were properly and reasonably incurred in relation to the matters contained in cl 20 of the deed of dissolution;

   2.Legal costs were contemplated by cl 20 of the deed of dissolution; and

   3.The legal costs, if covered by cl 20, were reasonable.

3. What must also be born in mind is that the trial of the preliminary issue necessarily involved the interpretation of a handwritten document prepared at a mediation conference held in the Supreme Court of Western Australia.

4. The plaintiff, notwithstanding that it was ultimately unsuccessful, clearly had a reasonable prospect of success.

5. The outcome of litigation, as Hall J in Miller v Evans [2010] WASC 127 stated, cannot always be predictable. The fact the plaintiff failed, does not mean that it was destined to fail, far less, does it mean that such failures would have been foreseen.

6. It cannot be said that the plaintiff unreasonably resisted a claim that was devoid of any reasonable prospect of success.

7. Litigation is uncertain.  In many cases proceeding to trial simply proves that one of the two lawyers was wrong because no doubt in most cases both think that they are going to succeed.

8. The plaintiff's case was not doomed to fail.

The clarity with which the terms of the offer were expressed

1. The terms of this offer were clear and unambiguous, the terms being that on payment of the money, a full and final settlement to all matters in dispute between the parties would be achieved and a deed of settlement and release entered into.

Whether the offer foreshadowed an application for indemnity costs in the event of its rejection

1. The offer did foreshadow that the letter would be produced in support of an application for costs in the event that the offer was not accepted.

2. It is quite true that the letter does not contain the oft used phrase 'save as to costs' immediately following the words 'without prejudice'.

3. However, the offer refers to 'an offer to the plaintiff … made pursuant to the principles in Calderbank v Calderbank (the offer)' and proceeds to state:

   In the event that the offer is rejected we anticipate producing this letter in support of an application for costs in the event the defendants are wholly or partially successful in defending this action.

4. In my opinion this offer carries the necessary implication that if rejected it would be relied upon in making an application for indemnity costs: Miller v Evans [2010] WASC 127 (S). Although there is no reference to indemnity costs, the reference to Calderbank clearly conveys that implication.

Other relevant matters

1. The defendant also asks me to consider the likely costs of the parties in pursuing the action compared to the amount of the claim, the plaintiff's failure to respond to the offer within the time period and failure to make any counteroffer.  They point out there were no other consideration which the plaintiff could reasonably take into account in rejecting the offer.

2. Clearly the plaintiff ought to have responded to the offer.  It is a matter of concern that they chose not to.

3. Whilst I do not agree that the parties ought to have been aware that legal costs were likely to exceed the amount claimed, I accept the defendants' proposition that both parties knew the trial would last three days and they ought to have been aware that legal costs were likely to be extremely high.

4. The fact that the plaintiff made a reasonable offer does not establish that its rejection was unreasonable.

5. It was not unreasonable for the plaintiff to pursue its claim.

6. The offer by the defendant was not of such an amount that its rejection was unreasonable.  Indeed by its terms, an offer of one half of the claim is capable of conveying the impression that the offeror thought each party had an equal chance of success.

7. After considering the combined weight of all of the factors it cannot be said that it was unreasonable for the plaintiff to pursue its claim, particularly as the action was always going to involve issues of credibility of witnesses in establishing the surrounding circumstances of the settlement deed and depend on my construction of clauses within that deed.

8. Neither the rejection of the offer nor any aspect of the manner in which the plaintiff conducted the case provides any sufficient basis to order indemnity costs.

9. I reject the defendant's submission that the plaintiff's actions in rejecting the offer were unreasonable.  I reject the plaintiff's submissions that costs should only be paid by them from the date of their amendment of 29 March 2011.

10. I order the defendants' costs be paid by the plaintiff on a party/party basis to be taxed if not agreed.