Fatseas v Fatseas bht Basha
[2022] NSWSC 402
•06 April 2022
Supreme Court
New South Wales
Medium Neutral Citation: Fatseas v Fatseas bht Basha [2022] NSWSC 402 Hearing dates: 6 April 2022 Decision date: 06 April 2022 Jurisdiction: Equity - Probate List Before: Stevenson J Decision: Proper construction of Heads of Agreement as set out at [23]
Catchwords: CONTRACTS – whether Heads of Agreement executed following a mediation binding on the parties – proper construction of Heads of Agreement
Legislation Cited: Conveyancing Act 1919 (NSW)
Cases Cited: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Texts Cited: P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters)
Category: Procedural rulings Parties: Stella Maria Fatseas (Plaintiff/First Respondent)
John Emanuel Fatseas bht Gerard John Basha (First Defendant/Applicant)
Maria Katina Fatseas (Second Defendant/Second Respondent)Representation: Counsel:
M R Pesman SC with C E Alexander (Plaintiff/First Respondent)
P Wallis (First Defendant/Applicant)
Solicitors:
Bay Legal (Plaintiff/First Respondent)
Pryor Tzannes & Wallis (First Defendant/Applicant)
File Number(s): 2017/00085791
Judgment
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By Notice of Motion filed on 1 April 2022 [1] the first defendant, Mr John Fatseas, by his tutor, Mr Gerard Basha, seeks a declaration that a document called “Heads of Agreement” executed by the parties at a mediation on 26 May 2021 constitutes a binding contract between Mr Fatseas, and his nieces, the plaintiff, Ms Stella Fatseas and the second defendant, Ms Maria Fatseas.
1. And amended with leave today.
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It is now common ground that the Heads of Agreement does constitute such a legally binding contract.
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A question has arisen as to the proper construction of the Heads of Agreement.
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For convenience, and without intending any disrespect, I will adopt the parties’ practice of referring to each other by their given names.
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The background to the matter is set out in the recitals to the Heads of Agreement as follows:
“1 George Fatseas (‘George’) died in January 2003.
2 On 8 April 2009, probate was granted to George’s brother, John Fatseas, who is the first defendant (‘John’) and the original executor of George’s estate (‘estate’).
3 The primary beneficiaries to John’s will are George’s two daughters, then children, being ‘Stella’ (who is the plaintiff) and ‘Maria’ (who is the second defendant) upon them both turning 25 years of age.
4 On 20 March 2017, Stella (then 25 years old) commenced these proceedings.
5 On 11 February 2019 the Court revoked John’s grant and granted letters of administration to Stella and Maria jointly.
6 On 16 September 2019, the Court revoked those letters of administration and granted letters of administration to Stella, solely.
7 On 25 November 201, the Court appointed statutory trustees for sale over three properties registered in John’s name. Those properties were:
(a) the land contained in Real Property Act1900 [(NSW)] folio identifier A/411509, situate at and known as 34 Meeks Street, Kingsford in the State of New South Wales (‘Kingsford Property’);
(b) the land contained in … folio identifier 8/250857 situate at and known as 1 Prothero Place, Pagewood (‘Pagewood Property’);
(c) the land contained in … folio identifier 2/900493 (CT Vol. 10723 folio 108) situate at and known as 43 Bathurst Street, Condobolin (‘Condobolin Property’).
8 Each of the above properties have now been sold.
9 The proceedings have continued, now seeking an account from John on a wilful default basis. The real issues in dispute include:
(a) Whether John is liable to account to the estate on a wilful default basis;
(b) Whether the whole of the Pagewood Property ought to be treated as an estate asset or whether John is beneficially entitled to a third of the proceedings; and
(c) Whether the land contained in … folio identifier 60/220631 situate at and known as 1 Podmore Place and also 29A Brittain Crescent Hillsdale (‘Hillsdale Property’) is held beneficially for the estate as to one half or whether it is solely John’s Property.
10 On 25 March 2021, the Court appointed Gerard Basha as tutor for John.
11 On 26 May 2021, the parties attended a mediation.
12 The parties have agreed to settle all issues in the proceedings pursuant to this heads of agreement.”
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It must follow from these recitals, and the parties’ agreement that they are bound by the terms of the Heads of Agreement that these proceedings have settled on such terms. The parties’ rights and obligations in relation to the matters hitherto agitated in the proceedings are now governed, for better or for worse, by the terms of the Heads of Agreement.
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The construction issue arises in relation to cll 19 to 22 of the Heads of Agreement, which clauses are in the following form:
“19 John shall pay to Stella the further amount of $400,000 (‘Settlement Sum’) by 26 November 2021.
20 If John does not pay the Settlement Sum by 26 November 2021, then
(a) interest shall accrue of from that date at the rate of 1 per cent above the RBA cash rate; and
(b) the Settlement Sum shall become payable on or before the earlier of:
i. three months’ following John’s death and for the purposes of this clause, this agreement binds John’s estate and successor; or
ii. The completion of the sale of the Hillsdale Property.
21 John charges the Hillsdale Property to secure the Settlement Sum and consents to Stella lodging a caveat over the Hillsdale Property to secure the Settlement Sum.
22 In the event that the Settlement Sum is not paid in accordance with the Heads of Agreement, the Hillsdale Property shall be sold and the Settlement Sum shall be paid out of the proceeds of sale.”
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The question is whether John’s obligation to pay the “Settlement Sum” was, as stated in cl 19, simply to pay the sum by 26 November 2021; or whether that obligation was qualified by cl 20.
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It has been correctly observed that:
“[T]he only relevant meaning [of a document] is that which the text conveys. This follows from the need to ascertain the intention expressed in the document. Although … context and purpose are relevant, ultimately the court must attribute meaning to the words actually used.” [2] (Emphasis in original.)
2. P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [19.60].
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The High Court has said:
“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract …) and purpose.
…
Ordinarily, this process of construction is possible by reference to the contract alone.”[3]
3. Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46], [48]-[49] (French CJ, Nettle and Gordon JJ).
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It is common ground that the Heads of Agreement should be construed by reference to “the contract alone”. Neither Mr Pesman SC, who appeared with Mr Alexander for Stella, or Mr Wallis, who appeared for John, [4] sought to adduce extrinsic evidence in support of their submissions on construction.
4. Maria did not appear on this application, although her solicitor, Mr Stinson observed proceedings from the well of the Court.
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The relevant context is specified in recital 9(c) which states that an issue in the proceedings, now compromised, was whether John holds the Hillsdale Property “beneficially for the estate as to one half”. If that was so, Stella, as the administratrix would have been entitled to call on John to account to the estate for that half interest and, if need be, seek to enforce the estate’s entitlements by, for example, having trustees for sale appointed under s 66G of the Conveyancing Act 1919 (NSW). That is the relevant right compromised in cll 19-22 of the Heads of Agreement.
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Clauses 19 and 20 do not sit happily together. Both are expressed in mandatory terms.
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Clause 19 contains what appears to be an unconditional obligation that John pay the Settlement Sum to Stella by 26 November 2021; albeit without an obligation to pay interest.
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Yet cl 19 is followed by cl 20 which provides that if “John does not pay the Settlement Sum by 26 November 2021” then interest would accrue at the specified rate and the Settlement Sum “shall become payable” as there set out; on the earlier of three months following John’s death or upon completion of the sale of the Hillsdale Property.
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Unless cl 20 is to be completely ignored, it must be read as bespeaking the parties’ intention that John’s obligation under cl 19, seemingly unconditional when viewed in isolation, is in fact subject to the qualification specified in cl 20.
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It is true, as Mr Pesman submitted, that if this were the parties’ intention, they could have expressed themselves more simply by providing, in one clause, that John would pay the Settlement Sum on his death or on the sale of the Hillsdale Property whichever came first.
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But I must construe the words the parties did use. Acceptance of Mr Pesman’s submission that the Heads of Agreement imposed on John an unconditional obligation to pay the Settlement Sum by 26 November 2021 would render cl 20 otiose.
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The parties must have intended that cl 20 have work to do, and that work must be, in effect, to give John an option as to whether to pay the Settlement Sum by 26 November 2021; albeit at the cost of paying interest from 26 November 2021 if the Settlement Sum was not paid by that date.
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Mr Pesman submitted that the clauses should be read as imposing on John an obligation to use his best endeavours to pay the Settlement Sum by 26 November 2021 and submitted that cll 19 and 20 could be read in harmony by construing cl 20 as applying only if John died during the six month period between the date of the Heads of Agreement and 26 November 2021. I do not see how the words the parties have used permit the Heads of Agreement to be so construed.
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In my opinion, cl 22 takes the matter no further, as the question of whether the Settlement Sum is paid “in accordance with the Heads of Agreement” depends upon the question of construction to which I have referred.
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It is true that cl 22 is a little repetitive, in that it speaks of the Hillsdale Property being sold if the Settlement Sum was not paid in accordance with the Heads of Agreement, whereas cl 20 speaks of the Settlement Sum becoming payable on the earlier of such a sale or John’s death. However, cl 22 would have work to do if John did not sell the Hillsdale Property in his lifetime and the Settlement Sum was not paid within three months’ following John’s death.
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My conclusion is that, on the proper construction of the Heads of Agreement:
notwithstanding the wording of cl 19 that John pay Stella the Settlement Sum by 26 November 2021;
as John has not done so, cl 20 is engaged; and
interest accrues in Stella’s favour on that sum at the rate of 1% above the RBA cash rate from 26 November 2021; and
the Settlement Sum, including such interest is payable in accordance with cl 20(b) of the Heads of Agreement.
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Endnotes
Decision last updated: 06 April 2022
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