Fitzgerald v Wake - [2022] SASC 47

Supreme Court of South Australia

(Civil)

FITZGERALD & ORS v WAKE & ORS

[2022] SASC 47

Judgment of the Honourable Justice Nicholson

13 May 2022

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT

The applicants and the first and second respondents entered into a series of contractual agreements related to farming. Subsequently, a dispute between the parties arose in relation to the applicants’ purported termination of two of the agreements and the applicants’ claim for outstanding money. On 20 January 2022, the parties engaged in a series of pre-action negotiations that culminated in an email from the applicants’ solicitors to the solicitors for the first and second respondents purporting to set out the terms of an agreement allegedly reached, subject to a deed, and an email in reply from the first and second respondents’ solicitors. A deed was later drafted by the applicants, but was never entered into by the first and second respondents.
The applicants brought a claim that the emails on 20 January 2022 constituted a binding contract and that the first and second respondents have an obligation to enter into a deed which reflects the terms in the emails. The first and second respondents contend that they are not bound by the emails as the objective intention between the parties was to only be bound by a deed formally entered into.
Held:
1. The express and implied terms in the two 20 January 2022 emails are binding on the applicants and the first and second respondents.
2. The applicants and the first and second respondents are obliged to enter into a deed that accurately reflects the terms in the 20 January 2022 emails.

Uniform Civil Rules 2020 (SA) r 61.8; Evidence Act 1929 (SA) s 67C, referred to.
Masters v Cameron (1954) 91 CLR 353, discussed.
Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310; G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; Holt v Bunney [2020] SASCFC 89; Kuehn & Kuehn v Masterton Homes (NSW) Pty Ltd [2020] NSWSC 1049; Lucke v Cleary (2011) 111 SASR 134, considered.

FITZGERALD & ORS v WAKE & ORS

[2022] SASC 47

Civil

NICHOLSON J.

Introduction

The applicants and the first and second respondents entered into a series of contractual agreements relating to leasing, purchasing, and managing farmland in Cortlinye and Cunyarie, South Australia. In early December 2021, the applicants purported to terminate two of the contracts, made a claim for outstanding money allegedly due and asserted ownership with respect to certain grain both harvested from and growing on the land the subject of the agreements. The first and second respondents disputed the applicants’ claims and the parties engaged in pre-action negotiations in an attempt to resolve all aspects of their dispute (the “Underlying Dispute”).
On 20 January 2022, the applicants’ solicitors sent an email to the solicitors for the first and second respondents purporting to set out the terms of an agreement alleged to have been arrived at as a consequence of the pre-action negotiations and certain follow up telephone conversations earlier in the day. The solicitors for the first and second respondents replied by email in terms that the applicants maintain gave rise to a binding settlement agreement to resolve all aspects of the Underlying Dispute. The first and second respondents deny the existence of a binding settlement agreement.
On 11 February 2022, the applicants filed a statement of claim. The relief sought included declaratory relief that a binding contract to settle had been entered into. That issue was heard as a preliminary question on an urgent basis, pursuant to the applicants’ interlocutory application, filed on 11 February 2022. The reason for the urgency will be explained later. However, the Court was advised at the hearing on 11 March 2022 that, the underlying cause having been attended to, there was no longer a need for urgency.
The matters discussed under this heading “Introduction” and the various headings thereafter until the heading “Legal principles” have been taken from the affidavits filed by the parties in support of and in opposition to the applicant’s case on the preliminary issue. Primarily, reference has been made to the contents of exhibits representing correspondence and agreements entered into by the parties. To the extent that I have relied on material to which one or other party has objected, I reject the objection. The affidavit material, insofar as I have relied on it, is relevant to the commercial background to the postulated settlement of the parties’ dispute. Most, if not all of the affidavit material, insofar as relied on, is uncontroversial in any event.

The parties

The first to third applicants, Mr Leigh Fitzgerald, Mr Clement Fitzgerald, and Ms Sherryl Fitzgerald, are the Trustees of the Emu Rocks Land Trust (“the Trust”). The first to fourth applicants, with Ms Laura Fitzgerald as the fourth applicant, are Partners in accordance with the Partnership Act 1891 (SA) trading as Emu Rock Proprietors (“the Partnership”). The fifth, sixth and seventh applicants are the first to third applicants in their capacity as trustees of the Trust. The eighth applicant is the Partnership.
The second respondent, Romley Pty Ltd, is a company incorporated in accordance with the Corporations Act 2001 (Cth) (“Romley”). Its sole director and secretary is the first respondent, Mr Thomas Wake. The third respondent is Thera Agri Capital No.2 Pty Ltd (“Thera”), a company incorporated in accordance with the Corporations Act 2001 (Cth).
Thera did not appear or make submissions at the trial, having indicated that it would abide the orders of the Court as between the applicants and the first and second respondents. In light of this, the first and second respondents will be referred to hereinafter as the respondents.

Background

The Trust owns two plots of land, called Country Life and Emu Rock, collectively referred to as the Property.

The initial heads of agreement

On 22 April 2021, after a series of discussions, the Fitzgeralds and Mr Wake entered into an initial heads of agreement (“Initial HOA”) with respect to the farming of the Property. This was typed up and signed by Mr Clement Fitzgerald and Mr Wake. As required under the Initial HOA, Mr Wake paid a deposit of $10,000 into his solicitors’ trust account which, according to Mr Wake, is still held by his solicitors at his discretion.

The agreements

During April and May, the Fitzgeralds and Mr Wake negotiated the terms of the anticipated arrangements in accordance with the Initial HOA. On or around 1 June 2021, a number of agreements were entered into by the applicants and the respondents.
The Fitzgeralds entered into a Heads of Agreement (“HOA”) with Mr Wake. The terms of the HOA are that Mr Wake or his nominee would:
(i)         Lease the Property from the Fitzgeralds for the 2021 farming season;
(ii)        Purchase Country Life from the Trust for $1.2 million, with settlement to occur on 1 March 2022;
(iii)       Purchase certain plant and equipment; and
(iv)       Enter into a lease agreement for Emu Rocks commencing on 1 March 2022 for five years at a rent of $100,000 per year plus GST.
The HOA was subject to three special conditions being satisfied (“HOA Special Conditions”):
(i)         The ANZ Bank (“ANZ”) agreeing to settle and discharge the applicants’ liabilities on terms acceptable to the applicants;
(ii)        The Regional Investment Corporation (“RIC”) agreeing to continue their current security and lending arrangements; and
(iii)       The parties entering into agreements for each of the transactions and arrangements on standard and not unusual terms and conditions, which they agree to enter on good faith.
The Trustees entered into a contract for the sale of Country Life to Mr Wake and/or his nominee for $1.2 million, with settlement to occur on 1 March 2022 (“Sale Contract”). The Sale Contract was subject to two special conditions being satisfied (“Sale Contract Special Conditions”):
(i) ANZ accepting a settlement of the funds owed to it by the applicants that is acceptable to the applicants; and
(ii) The RIC agreeing to continue their existing security and lending arrangements.

If either of the Sale Contract Special Conditions was not met, either party could terminate the Sale Contract with 30 days written notice.

The Partnership entered into an agreement to lease the Property to Romley for a period of 12 months, starting on 1 March 2021 and ending on 28 February 2022 (“Agricultural Lease”). The total rent payable was $120,000 plus GST.

Clause 14 states that:

The Tenant agree (sic) to:
(a) reimburse the Landlord for the cost of fuel used in preparing and seeding the Property, chemicals and other inputs applied to the Property by them this season upon proof of payment being provided;
(b) replace any of the Landlord’s seed planted on the Property by way of NGR transfer; and
(c) reimburse the Landlord for the cost of fertilizer applied to the Property upon being provided with an invoice from the Landlord that is due for payment.

Finally, an unwritten management agreement was entered into between the respondents and the first applicant, Mr Leigh Fitzgerald (“Management Agreement”). The agreement was that the first applicant would be paid $8,800 per month, inclusive of GST, for the duration of the Agricultural Lease to manage the Property for the benefit of the respondents.
The HOA, the Sale Contract, the Agricultural Lease and the Management Agreement will be collectively referred to as the Agreements. In effect, the Agreements meant that the respondents would grow grain on the applicants’ land as managed by the first applicant, the applicants would harvest the grain for the benefit of the respondents and the harvested grain would be registered on the respondents’ National Grower Register (“NGR”) code.
It is not in dispute that the Agreements were entered into nor are the written terms disputed by any party.

The Sale Contract Special Conditions

The respondents allege that, on or around 29 October 2021, Leigh and Clement Fitzgerald, on behalf of the Trust, told Mr Wake that they had reached a satisfactory agreement with ANZ and RIC and hence had met the Sale Contract Special Conditions. Based on this representation, on or around 4 November 2021, Mr Wake paid the deposit of $10,000 under the Sale Contract into the trust account of Mellor Olsson, being the applicants’ (then) solicitors.

The terminations

On 6 December 2021, the applicants sent a notice of termination to Mr Wake purporting to terminate the HOA on the basis that none of the three HOA Special Conditions had been met and that they could not be satisfied, despite the best efforts of the applicants (“Purported HOA Termination”). The applicants stated in the notice that this did not affect the Agricultural Lease, which would continue until 28 February 2022 as expected.
On 9 December 2021, the applicants sent another notice of termination to Mr Wake purporting to terminate the Sale Contract on the basis that the two Sale Contract Special Conditions had not and could not be satisfied (“Purported Sale Contract Termination”).

Caveat

On 14 December 2021, Romley lodged a caveat over the Property claiming an estate and interest as equitable lessee pursuant to the Agricultural Lease. On 13 January 2022, the Trust warned and sought the removal of the caveat. No application was made to extend the caveat and it expired on 4 February 2022.

The pre-action letters setting out the Underlying Dispute

On 16 December 2021, the applicants sent a pre-action letter to the respondents asserting payments outstanding under the Agreements.
The applicants claimed that they were owed $184,985.76 for fuel and fertiliser pursuant to clause 14 of the Agricultural Lease, $8,800 for the November managerial fee under the Management Agreement, and $290,800 for the use of the applicants’ plant and equipment. The applicants also claimed an equitable lien over the crop to secure the payment of the outstanding $484,585.76. The applicants assert that they are entitled to the lien under clauses 8(f) and 8(g) of the Agricultural Lease. Included in the money due calculation is an offset resulting from the applicants having sold 150 tonnes of wheat to compensate for the respondents’ alleged failure to comply with clauses 14(a) and (b) of the Agricultural Lease.
With respect to the grain that had already been, and was soon to be, harvested, the applicants advised that they had stored or would store it on their NGR code and proposed to sell such of it as necessary to satisfy the alleged debt. The applicants offered to accept $441,000 in settlement of the alleged debt. Any surplus grain and money would then be transferred to the respondents.
Between 21 December 2021 and 10 January 2022, the solicitors for the applicants and Mr Wake exchanged a series of emails in an attempt to negotiate a resolution of the dispute. In the emails of 23 December 2021, 24 December 2021 and 26 December 2021, the applicants’ solicitors made various offers, each of which was said to be subject to entering into a deed.
On 19 January 2022, the solicitors for the respondents sent a pre-action response. The respondents’ stated position was that: they did not owe any money under clause 14 of the Agricultural Lease, as the fertilizer invoice was not overdue at the time of the letter of demand and Romley had not been shown proof of payment for the fuel as required by clause 14; the management fees were no longer payable because the applicants had terminated the HOA; and the claim for plant and equipment fees was not valid because there was no contract, agreement, or arrangement with respect to any harvesting or associated costs. The respondents also asserted that the applicants had no right to an equitable lien over the grain, to sell a portion of the grain or to store it under their NGR code.
Finally, the respondents asserted that the applicants had not validly terminated the Sale Contract, on the basis that the applicants had affirmed over the phone, on or about 3 November 2021, that they had reached satisfactory arrangements with ANZ and RIC, as a consequence of which, on or about 4 November 2021, the respondents had paid the $10,000 deposit into the applicants’ solicitor’s trust account.
The respondents demanded that the applicants immediately return all harvested crops, together with an accounting of their dealings with harvested crops.

The alleged contract to resolve the Underlying Dispute

On 20 January 2022, the parties and their respective solicitors engaged in pre-action settlement negotiations. No agreement was reached during the meeting.
The applicants allege that on that same day, after the meeting, the respective solicitors had two telephone conversations in one of which the terms of an offer to settle were proposed by the respondents.
At 2.47 pm, still on that same day, the applicants’ solicitors sent an email to the respondents’ solicitors which recorded what the applicants understood to be the terms of an offer as to which the respondents had indicated a willingness to settle the Underlying Dispute. The applicants purported to accept that “offer”, but with additional proposed terms and “subject to a Deed of Settlement, Release and Indemnity being executed by the parties”.
At 5.40 pm that same day, 20 January 2022, the respondents’ solicitors responded by email in the following terms.
In response to your query below, we confirm that our clients agree not to seek an order to extend the caveat (No. 13681243).
We also confirm that you/your clients will arrange for the prompt return of the $10,000 paid by Mr Wake into Mellor Olson’s trust account, previously paid under the lands sale contract.
Our clients agree to settle on the basis outlined in your email below and set out above.
We look forward to receipt of a draft Deed for our clients’ review.
The applicants contend that the two emails of 20 January 2022 comprise a binding agreement to settle the Underlying Dispute (“the Alleged Settlement Agreement”) the terms of which are:
(i)         the seven numbered terms in the 2.47 pm email (set out later in these reasons);
(ii)        the three additional terms in that email relating to notice, mutual confidentiality clauses, and not extending the caveat;
(iii)       that the applicants were to arrange for the prompt return of the $10,000 deposit earlier paid by the first respondent, pursuant to the Sale Contract, into the trust account of the applicants’ former solicitors (Mellor Olsson); and
(iv)       An implied term that the $10,000 held in the Finlaysons’ trust account is to be returned to the first respondent.

Some of the subsequent correspondence

On 24 January 2022, the respondents’ solicitors sent two emails to the applicants’ solicitors requesting that the applicants not deal with the grain further and seeking a copy of the draft proposed Deed of Settlement. Later that day, the applicants’ solicitors provided a copy of the proposed Deed of Settlement. In that email, they also stated that because of the substantial rainfall over the previous weekend, approximately 15 tonne of the oats had been washed away and that, as a consequence, the quantity of oats initially to be included in the Deed had been modified. Still later that day, the applicants’ solicitors provided an updated copy of the draft Deed of Settlement with minor changes marked up.
The parties continued to engage in email correspondence, some of which is referred to later in these reasons, but which did not clearly advance the respondents’ position until the respondents in their email of 4 February 2022 referred to Masters v Cameron and denied the existence of a binding settlement agreement. No deed has been signed.

Thera

On 2 February 2022, Thera purportedly served on the applicants a notice claiming a security interest over the crop pursuant to the Personal Property Security Act 2009 (Cth) and demanding that the proceeds of any sale by the applicants be paid directly to Thera. On 2 February 2022, the respondents’ solicitors sent an email to the applicants’ solicitors containing the following.
Pursuant to the terms of [the applicants’ solicitor’s] email of 20 January the settlement is conditional on the agreement on and execution of a Deed. The draft that was provide (sic) was not acceptable to our clients.
Our clients are however not in a position to progress further discussion as to the terms of the Deed or its execution at this point in time. In particular we understand that Thera are still considering their position consequent upon your clients actions in taking possession and sale of a portion of the grain and their alleged lien. Until Thera resolves its position our clients’ (and probably your clients as well) hands are tied.
Separately our clients (and Thera) are concerned as to the viability of the grain left on the property given the serious rain events that have occurred in the area.
The applicants’ solicitors responded on 3 February 2022 asserting that any valid claim by Thera could only be as against the respondents and that there was no claim by the respondents against the applicants with respect to any interest of Thera. On 3 February 2022, the applicants’ solicitors sent a letter to Thera asserting that Thera had no claim against the applicants.

Orders sought

In their statement of claim filed on 11 February 2022, the applicants have sought relief as follows.
(i)         A declaration that the Alleged Settlement Agreement reached by way of correspondence between the applicants’ and respondents’ solicitors on 20 January 2022 is binding and enforceable on the terms set out therein.
(ii)        A declaration that the applicants have no liability to Thera including in respect of:
(a) Thera’s purported notice;
(b) The grain the subject of the Alleged Settlement Agreement; and
(c) The sale proceeds of the grain the subject of the Alleged Settlement Agreement.
(iii)       That the respondents pay the applicants’ costs on an indemnity basis.

The respondents deny that the applicants are entitled to any such relief.

Counterclaim

On 28 February 2022, the respondents filed a defence denying the enforceability of the Alleged Settlement Agreement and a counterclaim essentially asserting rights and seeking remedies with respect to the Underlying Dispute. In the applicants’ defence to the counterclaim, they plead that if the Alleged Settlement Agreement is found to be binding, the Underlying Dispute will have been finally resolved and the respondents’ counterclaim would fall away.

Urgency

The applicants filed an interlocutory application seeking an urgent hearing on the basis that a large quantity of the unsold grain had been stored in mobile field bins and silo bags which are not designed for long-term storage. As such, there arose an ongoing risk that the grain would suffer moisture damage and deterioration. Further, because the applicants had not intended that the grain would be stored in this manner for the long term, it had not been properly treated to protect it against weevils.
On 16 February 2022, I made an order dispensing with pre-action steps pursuant to rule 61.8 of the Uniform Civil Rules 2020 (SA). In light of the ongoing risk to the grain, I ordered on 7 March 2022 that the applicants’ claim for declaratory relief with respect to the enforceability or otherwise of the Alleged Settlement Agreement was to be heard urgently as a preliminary issue.
However, at the outset of the hearing of the preliminary issue, counsel informed me that the parties had agreed on arrangements for the grain to be suitably stored and, as such, the matter was no longer urgent.

Legal principles

The critical (although not the only) issue which arises upon the proper construction of the exchange of emails on 20 January 2022 is the meaning to be given to the clause in the applicants’ email “subject to a Deed of Settlement, Release and Indemnity being executed by the parties”.
The leading case dealing with the potential characterisations of an apparent contractual arrangement which is expressly qualified by the phrase “subject to contract” or similar remains Masters v Cameron.
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In the first two cases, the parties are immediately bound. In the third case, the parties only become bound if and when the formal contract is entered into.

A fourth category has also been identified “in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms”. In this category, the parties are also immediately bound.
Ultimately, as is the case with so many contractual disputes, the question will be one of construction in order to discern the parties’ objectively manifested intention. Whilst the four categories referred to above will cover much of the field, particularly where legal advisers are involved who can be expected to have had those characterisations in mind when formulating the relevant documents, there is scope for variation. The four categories or characterisations are not to be seen as rigid in their formulation.
In Holt v Bunney, the Full Court adopted the following summary by Hammerschlag J of additional principles applicable when assessing whether a binding agreement has been entered into, with reference to well known authority.
(1)          Whether an agreement has been entered into is to be objectively assessed. The objective intention of the parties is fact-based, found in all the circumstances, including by drawing inferences from their words and their conduct in their making of the agreement … .
(2)          In ascertaining the intention of the parties, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract … .
(3)          The Court will not write a contract for parties who have failed to reach agreement. Failure to reach agreement includes where there is obscurity or incompleteness in the agreement … .
(4)          The existence of matters of importance on which the parties have not reached consensus in their informal agreement will render it less likely that they intended immediately to be bound before the execution of a formal document. That the terms have not been fully or well stated is material to whether a contract has been made. The more important the term, the less likely it is that the parties will have left it over for future decision, but there is no legal obstacle which prevents the parties agreeing to be bound now while deferring important matters … .
(5)          Regard may be had to the parties’ subsequent communications to assess whether it was in their contemplation that they were not to be bound until all the essential preliminaries had been agreed to or until the formal contract had been drawn up embodying all the matters incidental to the transaction … .
(6)          An agreement may contain an implied term requiring the parties to do all cooperative acts necessary to bring about the contractual result. A duty to cooperate may require parties to execute a formal instrument but does not apply to the negotiation of varied or additional terms … .
The applicants submit that the present case is analogous, on the facts, with Lucke v Cleary. In that matter, the solicitor for Cleary sent an email to the other parties setting out the proposed settlement terms and concluding with “If all parties confirm their agreement to the above, we will commence the preparation of the Deed”. The solicitor for Lucke responded confirming agreement. The parties later engaged in negotiations about the deed, but a deed was never executed.
The Court found that at the time the email was sent, “the parties had agreed the essential terms of an agreement pursuant to which the litigation was settled”.
True it is that the agreement concluded between the parties at that stage contemplated that there would be mutual discharges and releases to be perfected in a deed […] and that the drafting of the deed necessarily implied that there would be further negotiations between the parties as to its contents. Nonetheless, I consider that at this stage the parties had reached a binding agreement. The essential terms of that agreement were set out in the email of 14 October 2010 from the solicitors for the third and fourth defendants. The suggestion of a deed came not from the plaintiff, but from the third and fourth defendants. The requirement of a deed was, as the learned trial judge found, no more than a mechanism to implement the settlement agreement itself which was contained in that email.

The so called fourth category was found to have been invoked.

This was a contract where the parties were content to be bound immediately and exclusively by the terms which they agreed upon while expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

Admissibility of settlement negotiations

Section 67C of the Evidence Act 1929 provides as follows.
67C—Exclusion of evidence of settlement negotiations
(1)          Subject to this section, evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute, or of a document prepared in connection with such an attempt, is not admissible in any civil or criminal proceedings.
(2)          Such evidence is, however, admissible if—
(a)    the parties to the dispute consent; or
…
(e)    the proceeding in which the evidence is to be adduced is a proceeding to enforce an agreement for the settlement of the dispute or a proceeding in which the making of such an agreement is in issue; or
…

The parties agreed that, for the purpose of deciding the preliminary issue, evidence of the settlement negotiations is admissible as falling within section 67C(2)(e).

The parties’ primary contentions

The applicants submit that the correspondence on 20 January 2022 gave rise to a binding contract within the so called fourth category or, in the alternative, the first category identified in Masters v Cameron. The respondents contend that no binding agreement was intended and the parties’ negotiations fell squarely within the third category identified in Masters v Cameron.

The 20 January 2022 correspondence

The parties provided extremely comprehensive written and oral submissions. Both referred in detail to the earlier contractual arrangements between the parties, and the conduct of and rights of Thera as the secured creditor of the respondents, as providing the commercial context for their negotiations. They also referred to the conduct of the parties vis a vis each other after 20 January 2022 as potentially indicative (or otherwise) of their respective intentions as at 20 January 2022. The parties also spent quite some time parsing the language of the critical emails and referred to a number of cases where the principles in Masters v Cameron have been both elaborated and applied.
I have reviewed all of the parties’ submissions and incorporate some of them in the discussion that follows. In most cases of this nature, and certainly as far as this case is concerned, the starting point should be a close examination, within the commercial context, of the parties’ language used in the critical documentation. I have not found the many cases to which the parties referred to be of much assistance. All of the examples referred to turned on the language deployed by the parties and their own contextual circumstances. Insofar as the law is discussed, the cases start with Masters v Cameron and often reformulate the language of the High Court into different but similar terms.
The difficulty, illustrated by the cases and which I will confront, is in explaining that final step between ascertaining the facts of and context concerning the putative agreement and placing those findings into one of the four categories referred to above.
On 20 January 2022, the parties and their respective legal advisers engaged in pre-action settlement negotiations in an effort to resolve all then outstanding legal issues between them. On the basis of the affidavit evidence, including the various exhibited contractual documents, and the parties’ submissions, I infer that the parties’ Underlying Dispute showed all the hallmarks of leading to complex, expensive and time consuming litigation, if not resolved extra-curially. The pre-action settlement negotiations were unsuccessful.
There is no evidence before the Court as to the content of those negotiations or as to the reason(s) why they failed. However, I infer that both parties were and remained keen to reach a settlement agreement. I infer this from the facts that:
(i)         The parties’ respective solicitors engaged in “telephone discussions” aimed at resolving the Underlying Dispute on the very same day and soon after the earlier attempt to settle had failed.
(ii)        In those telephone discussions, the respondents’ presented the applicants with an “offer” or at least an overture of some sort, to settle.
(iii)       As soon as 2.47 pm on that day, the applicant’s solicitors had obtained their clients’ instructions and emailed to the respondents’ solicitors what the applicants perceived to be an offer to settle capable of acceptance.
(iv)       By 5.40 pm on that same day, the respondents’ solicitors had obtained their clients’ instructions and emailed a response which included the clause “our clients agree to settle on the basis …”.

There was, on both sides, a strong desire to resolve the Underlying Dispute.

I turn now to consider more closely the language used in the correspondence. It is convenient to set out the material terms of the applicants’ email sent at 2.47 pm and to re-state the material terms of the respondents’ reply email sent at 5.40 pm.
The material terms of the applicants’ 2.47 pm email are as follows.
We refer to our telephone discussions shortly after the pre-action meeting came to a close today (20 January 2022).
We understand that Mr Wake and Romley Pty Ltd’s offer is as follows:
1. The Fitzgeralds keep all grain currently on their NGR code (approximately 532 tonne).
2. The balance of the wheat, barley and oats (kept on farm by the Fitzgeralds being comprised as follows: 1050 tonne of wheat; 12 tonnes of barley; and 40 to 50 tonnes of oat) will be provided to Mr Wake / Romley. Mr Wake will collect this.
3. Each party bear their own legal costs.
4. The Fitzgeralds will take the property as is (i.e. no chemical or fuel for summer weeds will be paid by Mr Wake).
5. All agreements are terminated effective from the date of executing a Deed (i.e. the Agricultural Lease; Sale Contract; Heads of Agreement and Management Agreement).
6. The Fitzgeralds will keep the $184,985.76 (being the outstanding amount owed under the Lease referred to at paragraph 3 of your letter dated 19 January 2022) with the surplus to be transferred to Mr Wake.
7. Mutual release clauses with respect to all claims past, present and future including but not limited to the Thera Capital Management and on-sale contracts that Mr Wake and/or his nominees has entered into.
(Offer)
Our clients are prepared to accept the Offer subject to a Deed of Settlement, Release and Indemnity being executed by the parties, which we will circulate. Please note that the Deed will also include:
• a requirement that Mr Wake provide the Fitzgeralds with no less than 48 hours’ notice to collect the balance of the wheat, barley and oats;
• mutual confidentiality clauses regarding the Deed.
Please note that we have indicated a range for the amount of tonnes of oat (namely 40 to 50) above in circumstances it (sic) is difficult for the Fitzgeralds to quantify this amount. Further, in relation to the surplus amount that will be transferred to Mr Wake/Romley, we anticipate that this will be $5,791.78.
Finally, we would be grateful if you could please confirm whether your clients agree not to seek an order to extend the caveat (No. 13681243). In circumstances that the above Offer is accepted, we anticipate that this will not be an issue and for the avoidance of doubt, we will include it in a Deed.
We would be grateful if you could please confirm our understanding of the above and we will prepare the Deed on this basis.
(Emphasis in original)

The material terms of the respondents’ 5.40 pm email are as follows.

Thank you for your email.
In response to your query below, we confirm that our clients agree not to seek an order to extend the caveat (No. 13681243).
We also confirm that you/your clients will arrange for the prompt return of the $10,000 paid by Mr Wake into Mellor Olsson’s trust account, previously paid under the land sale contract.
Our clients agree to settle on the basis outlined in your email below and set out above.
We look forward to receipt of a draft Deed for our clients’ review.

The applicants’ email can be distilled to the following essential propositions (all emphases added).
(i)         A recitation of what they understood to have been the respondents’ “offer”, being the seven numbered terms.
(ii)        An indication that the applicants were “prepared to accept the Offer subject to a Deed of Settlement, Release and Indemnity being executed by the parties”.
(iii)       A requirement that “the Deed will also include” the “notice” requirement and “mutual confidentiality clauses regarding the Deed”.
(iv)       An explanation concerning the applicants’ difficulty in quantifying the amount of oats for the purpose of term number 2, resulting in the inclusion of a range of 40 to 50 tonnes.
(v)        An advice as to an estimate of the surplus amount to be transferred to the respondents in accordance with term number 6.
(vi)       A request for the respondents to “confirm whether [they] agree not to seek an order to extend the caveat”.
(vii)      An expression of belief that “in circumstances that the above Offer is accepted, we anticipate that [proposition (vi)] will not be an issue”.
(viii)     An assertion that “for the avoidance of doubt” the confirmation in proposition (vi) will be included “in a deed”.
(xi)       A request for the respondents to “confirm [the applicants’] understanding of the above”.
(x)        An advice that the applicants “will prepare the Deed on this basis”.

Proposition (i)

The respondents’ purported offer as understood by the applicants (terms numbered 1 to 7) is comprised of clearly stated and certain terms. When regard is had to the parties’ prior dealings with each other, expressions such as “the property” and the various named agreements admit of no uncertainty as far as the parties are concerned. Neither party has suggested to the contrary. It is the case that term number 5 does not expressly refer to the Initial HOA entered into in April 2021 and which started the parties’ ball rolling. However, it is necessarily implicit in term number 5 itself and the agreement as a whole that the Initial HOA is also to be terminated.
Term number 5 may need to be construed in the future, but probably not. On its face, it can admit of two possible meanings. The “agreements” are terminated forthwith (at the time the Alleged Settlement Agreement is entered into) but the terminations will only take effect from the date the Deed is executed or the “agreements” are to be terminated on (and with effect from) the date the Deed is executed. It is likely that there would be no difference in practical effect for the parties. In any event, it is not necessary to the issue before me that I resolve this question of construction. If such an exercise of construction were to be undertaken, one of those alternatives would be settled upon, but term number 5 is not uncertain merely because it may need to be construed as to its precise meaning.
Term number 2 is supported by the explanation in proposition (iv) as to why a range of tonnage for oats is to be agreed as compared with the precise weights provided for wheat and barley. Proposition (iv) is an explanation only and whilst it might in certain circumstances take on a representational character, it is not, by its terms, part of any proposed contractual promise.
As in the case of term number 2, the intended contractual promise in term number 6 is not qualified by proposition (v). The amount of $5,791.78 said by the applicants to be the anticipated amount is not promissory. In appropriate circumstances, it might take on a representational character.
As far as term number 7 is concerned, I will need to return to this in some detail later in these reasons.

Propositions (ii) and (iii)

Proposition (ii) speaks for itself; the applicants have expressed a willingness to accept, that is, their satisfaction with terms numbered (1) to (7) as stated. However, any such acceptance would be “subject to a Deed …”. Proposition (iii) must be read as the applicants proposing additional terms. The deed to which acceptance of terms numbered 1 to 7 is to be subject will also include the stated notice requirement (essentially a supplementation or qualification of term number 2) and also “mutual confidentiality clauses regarding the Deed”.

Proposition (iv) and (v)

Propositions (iv) and (v) have been dealt with in the discussion of proposition (i).

Proposition (vi)

Whilst, by proposition (vi) the applicants only express a request for information, it is apparent that the confirmation they seek is of some perceived importance to them. However, it would seem to be otiose or, at least, somewhat excessively cautious. It is a term of the proposed settlement that all prior (contractual) agreements are to be terminated, at the latest upon executing the Deed. As such, once the Deed were to be executed and the agreements terminated, the respondents would no longer enjoy a caveatable interest. It may be that the applicants were concerned to protect their position in this respect in the period between 20 January 2022 and the execution of the Deed. In any event, the respondents’, in their reply email on 20 January 2022, provided the confirmation as sought and, whatever the status of proposition (vi) (as part of an offer or otherwise) the parties were ad idem on the question of the respondents not applying for an extension of the caveat.

Proposition (vii)

Proposition (vii) would appear to be no more than a musing by the applicants. It adds nothing to the analysis of the email as a whole.

Proposition (viii)

Proposition (viii) speaks for itself. Whether confirmation concerning the caveat were to be otiose or not, once included in the Deed in promissory form, it would become a contractual obligation, notwithstanding the analysis with respect to proposition (vi) above.

Proposition (ix)

By proposition (ix), the applicants seek from the respondents their agreement or confirmation that the applicants have accurately recorded in their email the terms of settlement proposed by the respondents together with their agreement to the supplementary matters set out in the email.

Proposition (x)

By proposition (x), the applicants have conveyed their intention, once the respondents were to “confirm [the applicants’] understanding of the above” to prepare a Deed “on this basis”, that is, on the basis of the matters set out in the body of the email.

The legal characterisation of the applicants’ email of 20 January 2022

Having regard, first and foremost, to the language used by the applicants’ in their email of 20 January 2022 but against the background of the commercial context in which it was sent and the parties’ evident mutual desire to resolve the Underlying Dispute, I am satisfied that the applicants’ email, objectively considered, constituted an offer to settle the Underlying Dispute. I am satisfied, based on the language used by the applicants, that a reasonable person in the circumstances of the respondents would have understood the applicants’ email to be an offer to settle. I am also satisfied, based on all the circumstances as then in place and on the language used by the respondents in their reply email of 20 January 2022, that the respondents understood the applicants to have made an offer to settle.
The terms of the applicants’ offer were as follows:
(i)         the terms numbered 1 to 7;
(ii)        a promise by the respondents reflecting the notice requirement;
(iii)       mutual confidentiality clauses regarding the Deed;
(iv)       a promise by the respondents that they will not seek an order to extend the caveat; and
(v)        that any agreement by the parties based on (i) to (iv) is to be “subject to a Deed of Settlement, Release and Indemnity being executed by the parties”.

I have described the term in (v) above in the way that I have because that is the clear, objectively discerned intent of the author of the email when read as a whole. I make this finding as being supported by, although also in spite of the applicants’ use of the term “Deed”, somewhat inelegantly, in seven different contexts.

The legal characterisation of the respondents’ email of 20 January 2022

The respondents’ email of 20 January 2022, by its terms but for one minor matter, was a clear and express acceptance of all of the terms comprising the applicants’ offer, including that concerning the caveat. Nothing could be clearer than “Our clients agree to settle on the basis outlined in your email below and set out above”, but for the minor matter.
Embraced by the qualification “set out above” is the caveat term and a new potential term, what I have referred to as the minor matter – “We also confirm that you/your clients will arrange for the prompt return of the $10,000 paid by Mr Wake into Mellor Olsson’s trust account, previously paid under the land sale contract”. On its face, this would appear to be a new, additional term of any proposed settlement agreement, rendering the respondents’ reply email not an acceptance but a counter-offer.
However, the applicants’ offer already provided for the (land) Sale Contract to be terminated. Where this contract is terminated, without attributable fault, the deposit must be repaid to the purchaser within five business days of termination, subject to the purchaser causing to be withdrawn, inter alia, any caveat. The caveat had lapsed and thus there would be no impediment to the obligation to repay the deposit within five business days of any termination arising. Further, whatever meaning might be given to the word “prompt” and where money is held in a solicitor’s trust account, it is unlikely that a repayment within five business days would not be considered “prompt”. As such, the respondents’ request for confirmation is to be seen as otiose and not intended to result in the imposition of a contractual obligation further to or different from that already in place; hence the use of the language “We also confirm that you/your clients will arrange …”, rather than expressly seeking a “promise” or an “undertaking” to do so. The use of “confirm” is consistent with there being an understanding by both parties that the repayment of the deposit would go without saying, there being a contractual obligation already in place.
Nevertheless, it may be that the respondents were seeking to achieve more – a settlement term/promise that the applicants’ existing contractual obligation would be honoured and honoured “promptly”.
Save for one small hiccough to be dealt with below, it has never been suggested by the applicants that the deposit would not be repaid promptly consequent on the settlement of the Underlying Dispute. Indeed, not long after 20 January 2022, the applicants took steps in an attempt to have this occur (see below). The respondents were fully contractually protected with respect to the deposit with or without the requested confirmation. And, subject to the Deed controversy, the parties were ad idem with respect to a clear intention to settle on the terms I have summarised above.
In the circumstances, I am not satisfied that the respondents, in the email on 20 January 2022, were seeking anything more than confirmation that the existing contractual entitlement would be promptly attended to. Whether or not any such confirmation were to be expressly forthcoming, the deposit issue was not intended by the respondents to be included in the settlement as a separate contractual promise. Nor did the applicants understand this request for confirmation to be intended as promissory, otherwise they undoubtedly would have expressly agreed to it with promptitude. As far as the applicants were concerned (and any objective observer in the applicants’ position) it was so obvious as to go without saying.

The acceptance of the respondents’ putative counter-offer

If I were to be wrong in this respect and the respondents’ 20 January 2022 email is to be seen as a counter-offer to the extent that it included an additional required term dealing with the deposit, the question would arise of whether or not that counter-offer was ever accepted by the applicants.
The parties engaged in the following correspondence in the immediate aftermath of the exchange of emails on Thursday 20 January 2022.
(i)         On Monday 24 January 2022 at 8.48 am, the respondents’ solicitors emailed the applicants’ solicitors in these terms.
We note we have not received any draft Deed.
We require a draft for our and our clients’ review asap today. Time is of the essence.
(ii)        At 9.03 am that same day, the respondents’ solicitors again emailed the applicants’ solicitors.
Obviously until such time as all parties approve and execute the Deed, your clients have no entitlement to sell or otherwise dispose of or do anything in respect of the grain/crops that sit within your clients’ NGR or otherwise on the property.
Please confirm your clients understand this.
(iii)       At 11.29 am that same day, the applicants’ solicitors responded by email. The email was lengthy and it is not necessary to set out its terms in full. It contained the following.
we now attach a draft deed for … review. If there are no amendments, please provide your clients executed version of the deed by no later than 9 am on Thursday, 27 January 2022. Time is of the essence.
(Emphasis in original)
The “draft deed” does not expressly refer to the fate of the Sale Contract deposit. However, it contains the following provision to which I will return.
2.6   All parties agree as at the date of execution of this Deed:
.  .  .  .
2.6.4 the Sale Contract is terminated and no rights or obligations of any party under the Sale Contract survive;
(iv)       At 1.45 pm that same day, the applicants’ solicitors sent by email to the respondents’ solicitors an amended draft Deed. The proposed amendment has no relevance to the question of the deposit under the Sale Contract.
(v)        At 12.56 pm on Thursday 27 January 2022, the applicants’ solicitors emailed the respondents’ solicitors noting that no response with respect to the draft Deed had been received.
(vi)       Follow up emails were sent by the applicants’ solicitors on Friday 28 January and Monday 31 January 2022. In the latter email, the applicants again indicated that they were open to receiving amendments to the draft Deed.
(vii)      At 4.33 pm on 31 January 2022, the respondents’ solicitors sent an email which included the following.
We are working through some issues with respect to our clients’ ability to enter the Deed as you have framed it. It does not appear to reflect the correct position as between our respective clients nor the intention of where discussions were left.
(viii)     The applicants’ solicitors replied 22 minutes later, at 4.55 pm, attaching the 20 January 2022 correspondence and in terms suggestive of bewilderment and anxiety concerning the respondents’ unexplained delay in progressing the matter.
(ix)       At 4.50 pm the next day, Tuesday 1 February 2022, the applicants’ solicitors sent another email requesting an update as to the “finalisation of the Deed”.

I interpolate here that, by this time some 12 days after the exchange of emails on 20 January 2022, no issue concerning the repayment of the Sale Contract deposit had been raised by either of the parties and, in particular, the respondents. Furthermore, the applicants had made it clear at least twice that they were open to receiving suggested amendments to the draft Deed. Consistent with the applicants having an understanding that their obligation to procure repayment of the deposit remained in place, the applicants then pursued the deposit issue on behalf of, although unsolicited by, the respondents (see (x), (xii), (xiii) and (xvi) below).

(x) At 11.07 am on Wednesday 2 February 2022, the applicants’ solicitors again emailed the respondents’ solicitors complaining about the lack of any substantive response concerning the draft Deed. Included in that email is the following.
Notwithstanding the above, in accordance with the agreed position and in any event our clients’ valid notice of termination of the Land Sale Contract dated 21 May 2021, please immediately provide Finalysons’ or your clients’ relevant account details in order for us to communicate with Mellor Olsson to transfer the $10,000.00 held in their trust account to Finalysons’ or your clients’ account.

(xi) At 12.56 pm on Wednesday 2 February 2022, the respondents’ solicitors emailed a response to the applicants’ email in (x) above. The email raised a number of perceived impediments to the respondents progressing negotiations with respect to the terms of the draft Deed and stated their position to be that the settlement is “conditional on the agreement on and the execution of a Deed”.
(xii) At 8.52 am on Thursday 3 February 2022, the applicants’ solicitors emailed Mellor Olsson in these terms. The email was copied to the respondents’ solicitors.
We refer to your email of 15 November 2021 in which you confirmed that Mellor Olsson hold the deposit of $10,000 paid in to its trust account on 4 November 2021 pursuant to a Contract of Sale dated 1 June 2021.
Pursuant to an agreement reached between our clients (your former clients) and Mr Wake (the terms of which are confidential), the Contract of Sale with Mr Thomas Wake (the depositor of $10,000) has been terminated and the $10,000 can be returned to Mr Wake. We would be grateful if you could please kindly arrange for the prompt return of the $10,000 to Mr Wake. Please contact [the respondents’ solicitor] (copied into this email) in order to obtain Mr Wake’s account details.
We have copied in Mr Wake’s solicitors to this correspondence.

(xiii) At 8.57 am on Thursday 3 February 2022, the applicants’ solicitors emailed a reply to the respondents’ solicitors email in (xi), challenging in detail the position therein adopted by the respondents. The email included a specific request, “What is it about the draft Deed that is not acceptable” and a reiteration that the applicants “remain open to resolve any concerns with the wording of the terms of the Deed”. The email also contained the following.
3.5 Finally, on the basis of [the respondents’ solicitor’s] email on 20 January 2022, we have also written to (and copied you in) Mellor Olsson seeking the return of $10,000 to Mr Wake.

(xiv) At 9.25 am on Thursday 3 February 2022, Mellor Olsson sent an email to the applicants’ solicitors, copied to the respondents’ solicitors, confirming receipt of the former’s email and that Mellor Olsson would be in contact with the respondents’ solicitors.
(xv) At 9.39 am that same morning, the respondents’ solicitors emailed Mellor Olsson, copied to the applicants’ solicitors, in these terms.
Our client does not accept that there has been a valid termination of the contract so at this stage please continue to hold the funds in trust

(xvi) At 9.14 am and 9.18 am on Friday 4 February 2022, the applicants’ solicitors emailed the respondents’ solicitors identifying steps taken or to be taken in accordance with their understanding of the terms of the settlement, including that the applicants have “corresponded with Mellor Olsson on the agreed basis to return the $10,000 to Mr Wake and/or Romley”. Each email concluded with “Our clients will continue to act in accordance with the agreement”. The second email also contained the following.
Further, we also understand from Mr Wake that there has been $10,000 deposited into the Finlaysons’ Trust Account pursuant to the April Document. Pursuant to the agreement reached between the parties, the April Document has been terminated and therefore it goes without saying that the $10,000 held in the Finlaysons’ Trust Account can be returned to Mr Wake.
We would be grateful for Finlaysons’ Trust Account details to deposit the surplus amount of $5,791.78 referred to in paragraph 4 above and in accordance with the agreement.

(xvii) At 1.06 pm on Friday 4 February 2022, the respondents’ solicitors replied expressing “surprise” and complaining of an aspect of the applicants’ solicitors conduct concerning Thera.
(xviii) At 1.06 pm on Friday 4 February 2022, the respondents’ solicitors sent a second email expressly raising their Masters v Cameron objection to a binding settlement having been agreed upon.

The correspondence just now summarised is clear to the effect that at no time after 20 January 2022 and prior to the respondents’ solicitors’ 4 February 2022 email was it suggested by the respondents that their email of 20 January 2022 was a counter-offer, because of the additional request for confirmation concerning the Sale Contract deposit, that had not been accepted by the applicants. At no time was it ever suggested that the respondents’ email of 20 January 2022 qua counter-offer had been withdrawn. Indeed, the notion that the parties were not ad idem with respect to the respondents’ right to a return of the deposit was first raised in the respondents’ submissions at the hearing when the Court’s attention was drawn to clause 2.6.4 of the draft proposed Deed, the terms of which have been set out earlier.
I do not propose to attempt to construe clause 2.6.4 in the abstract. In order to properly construe this provision, one would need to consider the context, including a finalised form of the Deed as ultimately executed which may not be in the same terms as the draft as proffered, and all of the circumstances leading to its execution. However, for the sake of the respondents’ argument, I accept that clause 2.6.4 as it presently stands (and if it had formed part of an executed deed) might be seen as negating the respondents’ erstwhile Sale Contract right to the return of the deposit.
However, the respondents’ belated reliance on draft clause 2.6.4 is misplaced. The circumstances as at 20 January 2022, the terms of the emails on that day and the nature of the parties’ correspondence with each other thereafter, make it plain that the applicants never intended clause 2.6.4 to operate in this way nor did the respondents understand, nor would an objective person in the position of the respondents have understood, the applicants to have intended this. Clause 2.6.4 plainly was the product of infelicitous drafting. The applicants have clearly indicated a willingness to consider amendments to the draft and I have no doubt that they would have accepted an appropriate amendment to clause 2.6.4.
For these reasons, the “minor hiccough” that is draft clause 2.6.4 can be put to one side and ignored. The applicants’ email (with accompanying draft Deed) sent on Monday 24 January 2022 would have amounted to an acceptance by conduct of the respondents’ counter-offer in its email of 20 January 2022, if such it was.
On my analysis to this point, the parties entered into the Alleged Settlement Agreement on either 20 or 24 January 2022 on the terms I have earlier set out. Nevertheless, the Alleged Settlement Agreement contained and remained qualified by the term “subject to a Deed of Settlement, Release and Indemnity being executed by the parties”. Before considering the effect of this Masters v Cameron provision, I will briefly mention an alternative contractual formation analysis.
As already observed, at no time did the respondents seek to withdraw any counter-offer if such were to have been effected by its 20 January 2022 email. At all times prior to 4 February 2022 (at the earliest), the respondents have challenged only the meaning and consequence of the arrangement arrived at on 20 January 2022 by relying on its “conditional” nature as requiring agreement on the terms of and the execution of a deed. The respondents’ “counter-offer” remained available to be accepted at any time during this period. The applicants’ conduct throughout this period in insisting on procuring execution of a complying deed and in writing to Mellor Olsson, copied to the respondents’ solicitors, authorising the return of the deposit, was conduct clearly accepting of any such “counter-offer” which was communicated to the respondents’ solicitors. However, this is an unnecessary, somewhat clumsy, analysis. It is unnecessary because, for the reasons given above, the Alleged Settlement Agreement was entered into on 20 January 2022 or, if I were to be incorrect in that respect, on 24 January 2022.

Consideration of the “subject to a Deed … being executed” condition

The three categories of case emanating from Masters v Cameron and the fourth category identified in Sinclair, Scott & Co Ltd v Naughton can be summarised as follows.

Category 1

The case may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.

Category 2

Secondly, the case may be one in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.

Category 3

Thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

Category 4

Fourthly, the case may be one where parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.
I have earlier suggested that, in effect, the categories are not closed and can admit of variations – each case will raise a question of construction in the context of all of the relevant circumstances. I agree with the proposition put by the author of Contract Law in Australia when discussing the putative fourth case.
While it would be possible to conceive of several further categories to those identified in Masters v Cameron, the High Court intended to identify three points on a continuum of transactions. The initial agreement in situations where parties are bound by an agreement to execute a formal document containing additional terms falls within the second category because the first agreement will be enforceable unless superseded by a later agreement.
It is difficult to see how the first category can apply in this case. The language used does not permit a finding that the parties entered into a contract binding them at once to perform the agreed terms “whether the contemplated [deed] came into existence or not”. The problem arises from term number 5, pursuant to which, on any analysis, the agreed terminations would only take effect on and from “the date of executing the Deed”. It follows that the parties contemplated that a deed must come into existence.
Before considering the potential application of categories two or four or some variation thereof, it will be helpful to consider the respondents’ contention that the parties’ “arrangement” falls within category three, and that, in the absence of the execution of a negotiated deed, there is no binding settlement agreement at all.
The Court in Masters v Cameron expounded further on the third category.
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor & c. of the Poor of Kingston-upon-Hull v. Petch. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v. Parker or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v. Miller. Lord O’Hagan said: “Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made”. And Lord Blackburn said: “parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement”. So, as Parker J. said in Von Hatzfeldt-Wildenburg v. Alexander in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.
The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: Farmer v. Honan. Nor is any formula, such as “subject to contract”, so intractable as always and necessarily to produce that result: cf. Filby v. Hounsell. But the natural sense of such words was shown by the language of Lord Westbury when he said in Chinnock v. Marchioness of Ely: “if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation”. Again, Sir George Jessel M.R. said in Crossley v. Maycock: “if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce”.
This being the natural meaning of “subject to contract”, “subject to the preparation of a formal contract”, and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract.
(Footnotes omitted)
The respondents agreed to settle “on the basis outlined” in the applicants’ solicitors’ email. The applicants’ email refers to a deed seven times.
(i)         The date of execution of the deed fixes the date that the terminations of the underlying agreements are to be effective.
(ii)        The deed is to include the settlement terms numbered 1 to 7.
(iii)       The deed is to include the notice requirement.
(iv)       Mutual confidentiality clauses regarding the deed are to be included in the deed.
(v)        The deed is to be one of “Settlement, Release and Indemnity”.
(vi)       The applicants are to prepare a deed on the basis of the agreement that has been arrived at.
(vii)      The parties’ agreement is to be “subject to the deed being executed”.

As to those seven “uses”, I make the following observations.

The use in (i) above is truly substantive. As earlier noted, there can be no doubt that a deed must come into force (be executed) if the Alleged Settlement Agreement is to come into effect.
As far as the uses in (ii), (iii), (iv) and (v) above are concerned, the parties have agreed that the deed will record these matters. The settlement terms numbered 1 to 6 are clearly stated in the email and admit of no material uncertainty. As far as term number 7 is concerned, this also is clearly stated. Whilst the parties may have anticipated the wording for this notion of mutual releases being expanded upon in the deed, the intent of the parties is clear. Each is to release the other from all claims (“past, present and future”) arising with respect to the Underlying Dispute. The release by the respondents is to extend to any claim they otherwise would have against the applicants arising with respect to the Thera contracts and any on-sale grain contracts that Mr Wake and/or his nominees may have entered into. The task for the lawyers, in drawing the deed, is to provide for these releases and their extent as agreed upon in commonplace “legal language”.
The use in (iii) (the notice requirement) is also clearly stated in the email. There would be no impediment to including this term in the deed in terms, if necessary, fuller or more precise, but which will be no different in effect.
Similarly, as far as the use in (iv) is concerned, there would be no difficulty in including in the deed a standard or common provision requiring each party to treat the terms of the deed as confidential between themselves.
I turn now to the use or purpose of the deed identified in (v) above. The issues of settlement and release have been dealt with. The notion of an indemnity is one commonly understood by lawyers and, I would suggest, most business persons. To agree to indemnify a person is to agree to compensate them for or keep them free from harm or loss. Again, this notion is commonly expressed by lawyers by drafting provisions in language fuller or more precise but no different in effect. The issue in this matter is the determination of the parties’ mutual (objectively discerned) intention as to the subject matter of the indemnity.
The parties have already specifically agreed to release each other from any claim relating to the Underlying Dispute each may have against the other. Whilst from time to time, such release clauses are drafted to include a release of and an indemnity with respect to such claims, strictly, the latter is otiose. Once a party is “released” by, and with respect to claims by, another party, there is nothing for that other party to indemnify.
Typically, an indemnity will involve one party indemnifying another party with respect to claims brought directly against that second or other party by a third party. In this case, the indemnity in contemplation is to be construed or understood in the context of the third parties that may have claims relating to the Underlying Dispute that were in the contemplation of the applicants and the respondents at the time of the 20 January 2022 exchange of emails. The third parties in contemplation were identified in the context of the mutual release term as being Thera and parties to on-sale contracts entered into by the first respondent and/or his nominees.
In this respect, the “mutual” release provision captures claims by the respondents against the applicants arising as a consequence of the respondents’ dealings with Thera and any of their on-sale contracting parties. It logically follows that any indemnity to be given by the respondents is to capture claims brought directly against the applicants by Thera and the respondents’ on-sale contracting parties. To this extent, the indemnity called for under the Alleged Settlement Agreement is to operate in one direction only and can readily be drafted in “legal language”.
To have both parties provide comprehensive cross indemnities with respect to all third party claims would make no commercial sense at all and cannot have been intended. For example, the fate of either a Thera or on-sale contracting party claim where the applicants or the respondents might both be liable for a similar or the same loss would depend on which of the two the third party elected to claim against. If Thera claimed against the respondents, the applicants would have to indemnify and ultimately meet the claim. Whereas, if Thera elected to claim against the applicants, the respondents would have to indemnify and ultimately meet the claim. Insofar as claims by third parties who had contracted with the respondents but brought against the applicants are concerned, the common sense mutual intention was for the respondents to indemnify the applicants. Equally, insofar as claims by third parties who had contracted with the applicants but brought against the respondents are concerned, the common sense mutual intention was for the applicants to indemnify the respondents.
Indeed, it is difficult to see how any grain on-sale contracting party with the respondents would have a viable claim against the applicants or how any third party who had contracted with the applicants in some way connected to the Underlying Dispute would have a viable claim against the respondents. The indemnity provision is likely to have little work to do other than with respect to Thera, as secured creditor of the respondents, whose security may have been wrongfully interfered with by the applicants.
The respondents are primarily liable to their secured creditor, Thera, and have settled with the applicants in light of that understanding. There is no suggestion in the 20 January 2022 emails or later correspondence that the applicants vis a vis the respondents should assume that primary liability. To the contrary, the 20 January 2022 correspondence is clear to the effect that the applicants are to be released from any liability to the respondents with respect to Thera following the settlement of the Underlying Dispute. As a consequence, and to give force to the release, the applicants are to be indemnified as to any direct claim Thera might have as to which, insofar as the applicants are aware, the respondents have always been and remain primarily responsible.
The use of the word “deed” in (vi) above speaks for itself. And the use in (vii) above raises the essential issue under consideration.
When considering (vii), the immediate context is of importance. The parties evinced a strong desire to settle the Underlying Dispute which, as earlier stated, had all the hallmarks of leading to lengthy, complex and expensive litigation. Whilst the Underlying Dispute is relatively complex, the proposed settlement concerned the disposition of one season of grain and a relatively modest amount of money.
As such, and notwithstanding the potential complexity of the Underlying Dispute, the terms of settlement are relatively simple with each party walking away from earlier agreements and a negotiated division of the grain and money in contention. Allied to the parties’ strong desire to settle is the fact that the agreed settlement terms could be described briefly and simply. This is not a case involving the sale of land or a business where the principal terms are noted in a short document but are expressed to be subject to what is anticipated will be a longer and much more detailed formal contract with additional terms to be negotiated and drawn up by lawyers.
This case involves a settlement of a complex dispute where, after some period of negotiations, the respective solicitors drafted and agreed on settlement terms. But for the termination of agreements timing issue provided for in term number 5, there would be no need for a deed.
I return to some of the language used by the High Court in the extract above concerning the third category. This is not a case where the parties only dealt with major issues and contemplated that other issues would be negotiated and then regulated by provisions in a formal document. There is nothing in the parties’ conduct or communications, particularly the two 20 January 2022 emails, evidencing a desire on either side to reserve a right to withdraw at any time until the formal document (the deed) were to be executed. Indeed, at no time during the later correspondence, before 4 February 2022, did the respondents assert, let alone exercise, such a putative reserved right. This is not a case where the possibility of new terms or the modification of terms already dealt with was contemplated such that the parties were still negotiating. Indeed, the exchange of emails on 20 January 2022 is, at the least implicitly, to the contrary. Some of the agreed terms are to be included in the deed in a fuller or more precise form but not to be different in effect from those expressly or impliedly already agreed upon (discussed above).
I am satisfied that the parties intended to be immediately bound to the terms of settlement expressed in the emails and notwithstanding the agreed need for a deed to be executed. This is not a category three case. However, where it is to be pigeonholed along the category one, two or four case continuum is neither here nor there. The parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms expressly state or imply. However, they have made it a condition that a deed is to be executed. The deed is to include the agreed terms (express and implied) restated in a form which will be fuller or more precise but not different in effect. They have also agreed that the date of execution of the deed is the time when termination of the previous agreements is to take effect.
It follows that the parties’ Settlement Agreement entered into as a result of the 20 January 2022 correspondence as explicated in these reasons was binding as at that date and contains the following implied terms. First, the parties will do all things reasonably necessary and within a reasonable time after 20 January 2022 to formulate a deed which records the terms of the Settlement Agreement. Second, once that deed is formulated, the parties will, within a reasonable time thereafter, execute the deed.

The draft proposed deed

I turn to consider the terms of the draft proposed deed for the assistance of the parties, particularly, with respect to the first implied term identified above. Before doing so, I make these general observations. First, the fact, as will be seen, that the draft proposed by the applicants may not entirely conform with the Settlement Agreement, is of no moment when considering whether the parties had reached a binding Settlement Agreement comprising the two 20 January 2022 emails. The only question to arise is whether or not the draft as proffered conforms or whether some other draft would conform to the parties’ then existing contractual arrangement. Second, I have not heard full argument on the question of which of the draft deed provisions conform to the terms of the Settlement Agreement arrived at on 20 January 2022. I have not heard full argument as to the extent that any of the provisions might be more broadly drafted than the Settlement Agreement permits. It follows that the following comments are my preliminary views only; either party remains entitled to exercise liberty to apply to resolve any dispute as to the final form of a deed that complies with the Settlement Agreement reached, in the event and to the extent that the parties cannot otherwise agree.
The applicants proffered a draft deed on 24 January 2022. The draft deed is comprised of the following provisions.

Under the heading “Background”

The deed includes recitals A to Q. The recitals purport to do no more than record the relevant history of dealings between the parties leading to the settlement. I am in no position to vouch for the accuracy of the recitals but in the event of any material inaccuracy, a suitable amendment can no doubt be agreed upon. The respondents during submissions raised no objection to the recitals. The last recital, recital Q, simply provides that “the parties have agreed to resolve all matters between them, as set out in this Deed”.

Under the heading “Definitions and Interpretation”

Clause 1 sets out an array of definitions and matters of or aids to interpretation. To the extent that the various definitions are inaccurate or inconsistent with the agreed terms of settlement, they can readily be re-drafted. The interpretation provisions in subclauses 1.2 and 1.3 are unexceptional.

Under the heading “Settlement”

Subclauses 2.1 to 2.6 purport to record the agreed terms of settlement. The respondents have drawn attention to sub-clause 2.6.4 (discussed above). This will need to be amended. Subclause 2.2.4.1 and the chapeau to subclause 2.2.4.2 would appear to be consistent with the agreed terms. However, as the respondents assert, paragraphs (a) and (b) are additional to and not contemplated by the agreed terms. The applicants submit that they have included those provisions for the assistance of the respondents. Whether or not this is so, they are non-conforming and should be removed unless the respondents were to agree to their inclusion as a variation to the original agreed terms.
Subclause 2.2.4.3 is implicit in the right impliedly conferred on the respondents to enter upon the applicants’ land for the purpose of collecting the grain, as described in term number 3.
The balance of subclauses 2.3 to 2.6 would appear to properly record the agreed terms of settlement. However, whether or not this is so, is a matter in the first instance for the parties. In the event of controversy, either party can apply to the Court.

Under the heading “Enforcement”

Subclause 2.7 provides that either party can enforce the terms of the deed by judicial proceedings and is unobjectionable.

Under the headings: “Fitzgerald Family release” and “Romley and Wake release”

Subclauses 3.1.1 to 3.1.3, 3.2.1, 3.2.2, 3.3 and 3.4 purport to provide for the mutual releases clauses and the indemnity as agreed to in the Settlement Agreement.
Subclause 3.1.1 provides for a release by the “Fitzgerald Family” as defined (in effect, the applicants) in favour of Romley and Wake (in effect, the respondents) “and its related bodies corporate and their directors, officers, employees, agents, successors and assignees” (which I will refer to as the respondents’ related parties).
Subclause 3.2.1 provides for a release by Romley and Wake in favour of the Fitzgerald Family “and their related bodies corporate and their directors, officers, employees, agents, successors and assignees” (which I will refer to as the applicants’ related parties).
The Settlement Agreement provides for the parties to release each other. The proposed forms of releases by the parties in subclauses 3.1.1 and 3.2.1 operate in favour of a much wider class of entities, being the respondents’ related parties and the applicants’ related parties. This appears not to be supported, expressly or impliedly, by the terms of the Settlement Agreement. Of course, the parties might find this to be mutually acceptable and consent to include it.
The subject matter of the respective releases is convolutedly drawn but in typical, and unobjectionable, legalese – “all Claims, actions, demands, damages and causes of action”. However, this subject matter is qualified in each case. When the applicants’ related parties and the respondents’ related parties are removed, subclauses 3.1.1 and 3.2.1 read as follows.
(3.1.1) Subject to [the respondents] complying with their obligations under this Deed … [the applicants] … will release [the respondents] … from all claims … that [the applicants have] or may have against [the respondents] … arising out of any allegations and all Claims … they may have against [the respondents] regarding their involvement with [the respondents] and the Dispute.
(3.2.1) Subject to [the applicants] complying with their obligations under this Deed … [the respondents] will release and indemnify [the applicants] … from all claims … that [the respondents have] or may have against [the applicants] … arising out of any allegations and all Claims … they may have against [the applicants] regarding their involvement with [the respondents] and the Dispute.
(Emphasis added)

The “Dispute” is defined as:

the dispute between the [applicants], and [the respondents] in respect of all matters relating to the April Document, the Management Agreement, Heads of Agreement, Lease Agreement, the Sale Contract and Caveat.

All of the documents/agreements referred to in this definition are identified in the recitals.

I make these observations insofar as they may assist the parties. The reference to the “Dispute” as defined is an attempt to capture what I have described as the “Underlying Dispute” for the purpose of the Settlement Agreement entered into on 20 January 2022. The term “Dispute” is more precisely defined than my use of “Underlying Dispute”. It is a matter for the parties whether the definition of “Dispute” sufficiently captures the subject matter of the Settlement Agreement.
In both subclause 3.1.1. and 3.2.1 there appears to be an unnecessary repetition of language. The subclauses would be simpler, less productive of confusion and more consistent with the Settlement Agreement if the repeated words were deleted.
Further, there may be a drafting error in either subclause 3.1.1 or 3.2.1. Subclause 3.1.1 describes a purported release by the applicants in favour of the respondents. Subclause 3.2.1 describes a purported release by the respondents in favour of the applicants. In each case the phrase “their involvement with” occurs towards the very end. The pronoun “their” is ambiguous in this context.
In 3.1.1 it presumably refers to the applicants, that is, the “Fitzgerald Family”. This is so notwithstanding that conventional grammar requires a pronoun to refer to the noun immediately proximate. Conventional grammar would result in the release operating with respect to claims by the applicants “against Romley and Wake regarding Romley and Wakes involvement with Romley and Wake and the Dispute”; plainly not intended. The use of “their” as referring to the “Fitzgerald Family” should be made explicit.
If “their” is to be used in this unconventional manner in subclause 3.2.1, that is, assuming that consistency of use is to be maintained, a problem of meaning will arise. Plainly, the word “their” in that subclause is intended to be used inconsistently with the use in subclause 3.1.1 and to refer to the immediately proximate noun, being the “Fitzgerald Family”.
If the word “their” is to be maintained in both subclauses, consideration might be given to replacing the phrase “Romley and Wake” where it last occurs in subclause 3.1.1 with “the Fitzgerald Family”.
Finally, with respect to subclauses 3.1.1 and 3.2.1, there appears to be unnecessary verbiage. Consideration might be given to deleting replicated wording.
I come now to the use of the phrase “and indemnify” in subclause 3.2.1 and emphasised in italics above. Stripped to its essentials (and on the basis that references to the list of associated entities is removed) subclause 3.2.1, in this respect, reads as follows.
[the respondents] will release and indemnify [the applicants] … from all Claims … that [the respondents] has or may have against the [applicants] … regarding [the applicants] involvement with [the respondents] and the Dispute.
The indemnity applies to claims etc that the respondents have against the applicants. However, the respondents have already given a release to this effect, the addition of “indemnify” in this context adds nothing. This is the only attempt at an indemnity provision in the draft deed. The form of indemnity provided for by the Settlement Agreement, that is, with respect to direct claims against the applicants by Thera and the respondents’ on-sale contractors, as earlier discussed, does not appear to have been included.
The phrase “all Claims, actions, demands, damages and causes of action” used twice in each of the subclauses 3.1.1 and 3.2.1 also seems rather (and potentially confusingly) over engineered. The word “claim” is already defined to mean:
a claim, notice, action, demand, proceeding, litigation, investigation, damage, judgment, loss, cost or liability however arising, whether present, unascertained, immediate or future whether based in contract, tort or statute and whether involving a third party or a party to this Deed.

If this definition were to remain in this form, what is “whether involving a third party” (not defined) intended to mean or capture? How would this relate to the use of the word “indemnify” in subclause 3.2.1 if that word were to remain?

Subclauses 3.1.2 and 3.2.2 to a large degree mirror subclauses 3.1.1 and 3.2.1 but this time the applicants and the respondents agree vis a vis each other, that “they will not make, take or institute any Claims” etc, that is, any of the “Claims” etc from which they have already agreed to release each other, pursuant to subclauses 3.1.1 and 3.2.1. The same labyrinthine wording is used and my earlier comments apply. Further, if subclauses 3.1.2 and 3.2.2 in practical effect do no more than the releases in subclauses 3.1.1 and 3.2.1, why are they there? If something more is achieved, they are not underpinned by the Settlement Agreement and should not be included.
Subclause 3.1.3 provides as follows.
the release above [that is, the release by the applicants in favour of the respondents] does not apply to any damage caused to the Land or [the applicants’] trucks or plant and equipment that are used (subject to clause 2.2.4.2), when the Grain On Land [as defined] is collected by [the respondents].

A provision of this nature is a necessary concomitant to the express obligation imposed on the respondents by subclause 2.2.4.3. However, the words “or … trucks … clause 2.2.4.2)” would seem otiose unless paragraphs (a) and (b) of subclause 2.2.4.2 which stand outside the Settlement Agreement, were to be included by consent.

Subclause 3.3 provides for a covenant by the applicants and the respondents “not to sue”. It appears to be in conventional terms and might not be objected to by the respondents. However, again, if it achieves no more than the mutual release provisions, one would query the need for it. If, in effect, it provides some further protection, additional to the mutual releases, it stands outside the Settlement Agreement and should be removed unless all parties to the Settlement Agreement consent to its inclusion.
Subclause 3.4 purports to provide for the Deed to be pleaded as an “absolute bar to proceedings”. It is in conventional terms. However, the same comments as made with respect to subclause 3.3 apply.

Under the heading “Payment and Liability”

Subclause 4.1 provides that no party makes any admission as to liability and subclause 4.2 provides for each party to be responsible for their own legal costs in connection with the Deed. Each subclause is in conventional terms and necessarily implicit in the Settlement Agreement.

Under the heading “General Warranties”

Subclauses 5.1 and 5.2 provide in effect that all parties warrant that they have taken their own legal advice and not relied on any representation etc. These are typical in commercial transaction documentation and are in conventional terms.
They are not specifically referred to in the Settlement Agreement. It really is a matter for the parties as to whether they should go into the Deed by consent. Otherwise, strictly, they stand outside the terms of the Settlement Agreement.

Under the heading “Confidentiality”

Clause 6 appears to be a standard confidentiality provision in language typical of the same. Subclauses 6.1 and 6.2 impose obligations of confidentiality (with conventional exceptions) referrable to the Deed itself, consistent with the express terms of the Settlement Agreement. However, subclause 6.3 is wider and imposes an obligation of confidentiality with respect to information and documents concerning “the Dispute”. Again, the parties might see this as acceptable and consent to it being included in the Deed. However, subclause 6.3 might be seen as falling outside the Settlement Agreement and, in the absence of agreement, not to form part of the Deed.

Under the heading “Miscellaneous”

Clause 7 contains a series of subclauses dealing with non-substantive matters, typically found in a deed of this nature and in typical legal language. Most of the subclauses would seek to impose mutual obligations on the parties that have not been referred to in the Settlement Agreement. For example, subclause 7.1 is to the effect that any alteration to the Deed must be in writing and subclause 7.4 is to the effect that any act of waiver must be in writing. Other subclauses, such as, 7.3, 7.6, 7.7, 7.8, 7.9 and 7.11 might be seen as implicit or necessarily concomitant with the Settlement Agreement. In any event, the parties may see fit for all of clause 7 to be included in the Deed but, again, that is a matter for them.

Under the headings “GST” and “Notices”

Clauses 8 and 9 appear to be in conventional and unobjectionable language. Again, a matter for the parties as to whether they are to be included.

Under the heading “Costs”

Clause 10 appears to be consistent with and implicit in the Settlement Agreement.

Conclusion

As earlier indicated, the section immediately above comprises observations made without fully hearing from the parties and in an effort to assist the parties. However, whilst it is not the Court’s task to draft the Deed, if the parties continue to have difficulty in agreeing upon what are the required terms of the Deed, either is at liberty to seek further assistance from the Court to resolve any dispute.
I make the following orders.
1.          Judgment for the applicants on the preliminary issue.
2.          The Settlement Agreement comprised of the exchange of emails on 20 January 2022 and as explicated in these reasons is binding on the applicants and the first and second respondents.
3.          The parties to the Settlement Agreement are to do all things reasonably necessary and within a reasonable time after 20 January 2022 to formulate a Deed which records the terms of the Settlement Agreement.
4.          The parties are to execute the Deed within a reasonable time after its formulation.
The applicants, after consultation with the respondents, are to file draft minutes of order consistent with these reasons and to include proposed directions for the further conduct of the proceedings as a whole. In this respect, it should be noted that I am in no position at this stage to make any orders concerning the relationship, if any, between the applicants and the third respondent (Thera) or the relationship between the first and second respondents and the third respondent (Thera).