GRAY v Chart Air Pty Ltd - [2011] FMCA 218

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GRAY v CHART AIR PTY LTD

[2011] FMCA 218

INDUSTRIAL LAW – Termination of employment – whether proceedings settled – contract made by correspondence between parties’ solicitors – agreement conditional upon the deed of settlement – whether agreement binding.

CONTRACT – Settlement negotiations – whether binding settlement agreement reached.

Fair Work Act 2009 (Cth) s.548

Equuscorp Pty Ltd v Glengallan Investments [2004] HCA 55; 218 CLR 471; 211 ALR 101; 79 ALJR 206
Humphris-Clark v Lazaridis [2010] NSWSC 318
Locnere Pty Ltd and Anor v Jakk's Bagel and Bread Co Pty Ltd [2003] NSWSC 1123
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181; (2001) 185 ALR 152; (2001) 76 ALJR 246; [2002] ATPR 41-854; [2002] AIPC 91-778; 53 IPR 1; [2002] Aust Contract Reports 90-140; (2001) 22 Leg Rep 28
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
Summergreene v Parker [1950] HCA 13; (1950) 80 CLR 304

Applicant:

LACHLAN GRAY

Respondent:

CHART AIR PROPRIETARY LIMITED

File Number:

MLG 1361 of 2010

Judgment of:

Riethmuller FM

Hearing date:

3 November 2010

Date of Last Submission:

31 January 2011

Delivered at:

Melbourne

Delivered on:

1 April 2011

REPRESENTATION

Counsel for the Applicant:

Mr Molnar

Solicitors for the Applicant:

Coutler Roache Lawyers

Counsel for the Respondent:

Mr Sweet

Solicitors for the Respondent:

Cridlands MB Lawyers

ORDERS

The Respondent’s claim that the parties had settled the dispute in September 2010 be dismissed.
The affidavits of the parties filed to date, together with their written submissions be sealed in an envelope marked ‘Not to be opened other than on order of the Court’.
The Application be heard by another Federal Magistrate.
The Respondent pay the Applicant’s costs.
The matter be adjourned to 6 April 2011 at 10.00 am for directions before Federal Magistrate Hartnett.
The Respondent be granted leave to appear by telephone on 6 April 2011.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1361 of 2010

LACHLAN GRAY

Applicant

And

CHART AIR PROPRIETARY LIMITED

Respondent

REASONS FOR JUDGMENT

In this matter, an issue arose as to whether or not there was a binding agreement, settling the substantive proceedings between the parties. It was agreed that this issue be determined on the papers, given that there were no factual disputes and all of the communications have occurred by correspondence. The parties accordingly having filed written submissions.
This is an industrial action, which involved a termination of employment. On 7 September 2010 the parties attended mediation before the Industrial Commissioner Simpson. Following the mediation there were a number of offers and counter-offers exchanged between the parties. Ultimately, on 10 September 2010, the solicitors for the employer wrote, as follows:
I refer to your letter dated 9 September 2010.
Your client’s proposal is rejected. Notwithstanding previous correspondence, I am instructed to offer $XXXX gross until COB today. My client will not thereafter enter into any further negotiations.
It appears clear from the terms of this letter that the previous offer was rejected outright. A counter-offer was made to settle the claim for the sum set out, and that this offer had a time limitation.
On 10 September 2010, the industrial officer acting for the applicant wrote to the solicitors for the respondent, stating:
I refer to your previous correspondence. Please be advised that we have been instructed to accept your client’s offer of $XXXX gross, conditional upon the terms of any proposed deed of settlement.
Please note that the Federation’s previous offer to draft a deed was based on a settlement offer of $YYYY.
We look forward to receiving a copy of your client’s proposed deed of settlement for our consideration by close of business (EST) on Monday, 13 September 2010, failing which our client’s acceptance may be withdrawn.
No deed was forthcoming in the timeframe provided.
On 14 September the industrial officer acting on behalf of the applicant wrote an email to the Industrial Commissioner (forwarding a copy of the correspondence to the respondent’s solicitor) advising him that:
Whilst a settlement “in principle” has been reached between the parties, this was conditional upon the proposed terms of any settlement deed which has not been forthcoming by the defendant. Please see the attached correspondence.
As this matter remains unresolved at this time I request that you proceed to issue a certificate in accordance with s.369 of the Act.
On 15 September 2010, the solicitor for the respondent forwarded a draft deed of settlement and release. The deed of settlement and release was unremarkable in the description of the amount, and the usual style of clauses that provided for releases from all claims and demands. However, the deed contained additional obligations on behalf of the applicant, beyond discontinuing the proceedings and a release. They were as follows:
3.2 [The applicant] agrees not to disparage or otherwise bring [the respondent], any employee or manager of the [respondent] into disrepute as a result of, or in connection with his employment or the Termination.
Furthermore, the deed contained a confidentiality clause with respect to the contents of the deed and the settlement (clause 7 of the deed of settlement).
Following receipt of the deed, the industrial officer acting for the applicant wrote to the solicitors for the respondent on 16 September, stating:
In view of the restrictive nature of the proposed deed of settlement, we have been instructed by [the applicant] to reject your client’s settlement offer of $XXXX gross.
By letter, on 5 October, the solicitors for the respondent maintained that the matter had settled in accordance with an agreement evidenced in writing, being the course of correspondence set out above. The respondent submits that the terms of the correspondence show that a concluded agreement has been reached to settle the matter.
The respondent’s argument commences with the well known statement from Masters v Cameron (1954) 91 CLR 353, 360 that:
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 cases. 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 Australian Broadcasting Corporations v XIVth Commonwealth Games Ltd (1998) 18 NSWLR 540, 548 per Gleeson CJ (with whom Hope and Mahoney JJA agreed) said:
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.
Thus the respondent argues that the question is whether the parties achieved a state of intention to be bound by their agreement, in circumstances where any additional terms required to perfect the agreement could be subsequently agreed and applied.
The respondent’s submissions at paragraph [21] state that this question must be determined from the document, and not on the subjective intentions of the parties: see Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181; (2001) 185 ALR 152. In paragraph 35 of the outline, the respondent argues:
A reasonable person would understand that, in its commercial context the essential elements of any such settlement are the agreement of:
a. the amount to be paid in settlement;
b. whether that amount was net or gross of tax and costs; and
c. the resulting cessation of proceedings.
However, the respondent goes on to say:
The parties have left to the embodiment in the Deed, matters such as:
a. the time for payment;
b. the terms of any releases; and
c. generally accepted settlement terms such as non-disparagement.
Whilst this brief list of the subject matter of the deed omits reference to the confidentiality clause it may have been considered an incident of the non-disparagement clause.
The key question that arises is whether or not the terms within the deed relating to non-disparagement and confidentiality go beyond the agreement that appears to have been reached in the correspondence. The terms relating to the time of payment and general release from claims and liabilities arising out of the subject matter of the dispute, are not controversial.
The applicant states that the terms of the proposed settlement had not been agreed upon. The applicant relies upon comments of Latham CJ in Summergreene v Parker [1950] HCA 13; (1950) 80 CLR 304, where his Honour pointed out that where a contract depends on an agreement between one of the parties and a third person, it is uncertain in it terms, and not binding. That case, like the cases referred to by the applicant, rely upon the same general principles. In this case it is the application of those principles to the particular facts and circumstances that is at issue.
In the alternative, the applicant argues that his letter amounted to a counter-offer, which was subsequently withdrawn when the deed was not received in the timeframe provided, and not in terms acceptable to the applicant.
Clearly, the applicant acted on the basis that an agreement had not been concluded on 14 September 2010, the day after the deed of settlement was due, and not delivered. This was also communicated to the respondent albeit by the copied email. It was only after these steps, that the applicant received a proposed deed of settlement from the respondent. On the applicant’s case, the deed of settlement that was ultimately provided amounted to a further offer, as any bargain that had been struck earlier had been terminated, or if the earlier letters amounted only to an offer, withdrawn or rejected.
The role of the written deed is important, in that it supersedes all of the informal, or brief agreements that may have been reached by correspondence or orally. In Equuscorp Pty Ltd v Glengallan Investments [2004] HCA 55; [33]-[36], the High Court said:
[33 ]The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it[8]. The parol evidence rule[9], the limited operation of the defence of non est factum[10] and the development of the equitable remedy of rectification[11], all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case that the operative agreements between the parties were wholly oral, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum, or able to have it rectified. The respondents attempted neither.
[34] There are reasons why the law adopts this position. First, it accords with the "general test of objectivity [that] is of pervasive influence in the law of contract"[12]. The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions[13].
[35] Secondly, in the nature of things, oral agreements will sometimes be disputable. Resolving such disputation is commonly difficult, time-consuming, expensive and problematic. Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. Different questions may arise where the execution of the written agreement is contested; but that is not the case here. In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside.
[36] The conclusion that the respondents are bound by the written loan agreements may leave open the possibility that an earlier consensus reached by the parties was in each case a collateral agreement (made in consideration of the parties later executing the written agreement[14]), but that has never been the respondents' case. In another case it may leave open the possibility that the contract is partly oral and partly in writing[15]. But that cannot be so here. The oral limited recourse terms alleged by the respondents contradict the terms of the written loan agreement. If there was an earlier, oral, consensus, it was discharged and the parties' agreement recorded in the writing they executed[16]. It is the written loan agreement which governed the relationship between Rural Finance and each respondent.
There are other cases that have similar factual elements to this case. In Locnere Pty Ltd and Anor v Jakk's Bagel and Bread Co Pty Ltd [2003] NSWSC 1123 (‘Locnere’) the plaintiffs commenced proceedings in the Industrial Commission. Following a conciliation conference, Schmidt J made directions in accordance with a document signed by the parties’ lawyers as set out below:
The court notes:
1. Proceedings have been compromised between the parties.

2. Subject to the entry by the parties into a mutually agreeable Deed, the Applicant to file a Notice of Discontinuance.

3. Liberty to apply on three days' notice. (emphasis added)
A draft deed of release was exchanged between the parties with notations and mark-ups reflecting amendments sought.
Palmer J of the Supreme Court of New South Wales stated at paragraphs [8] to [10]:
[8] …most importantly, the terms of the note signed by the parties on 19 June make it clear, in my opinion, that what was done on that day was not regarded as final and effective to resolve the dispute between the parties.
[9] The note provided that a Deed was to be executed, the terms of which were to be mutually agreed. It was only if the terms of the Deed were agreed and the Deed was executed that the parties contemplated that a Notice of Discontinuance would be filed. In the meantime, the proceedings were kept alive, as appears from paragraph 3 of the directions.
[10] It seems to me, therefore, that all that happened on 19 June 2003 was that the parties had agreed in principle to compromise the matter but that the agreement would not become binding until the Deed referred to had been executed in a satisfactory form. Only at that point would the parties give up their rights and their respective positions in the litigation between them. (emphasis added)
In Humphris-Clark v Lazaridis [2010] NSWSC 318 counsel for the defendant provided a summary that there as an agreement ‘of a sort’ where “(1) there would be a verdict for the plaintiff (ie the defendant in the District Court proceedings); and (2) the agreed amount of settlement moneys of $4,999.99 would be paid under a separate Deed of Release “which the parties will need to enter into”.” This was a reference to a statement by counsel for the plaintiff that “the settlement moneys will be paid under a separate Deed of Release which the parties will need to enter into”. At paragraph [34] Bergin CJ in Eq stated:
[34] In reviewing post-contractual conduct for the purpose of deciding whether a binding agreement was reached: Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153; Mr McClintock [counsel for the defendant] relied on the terms of the proposed Deed of Release in support of a submission that the parties did not reach a binding agreement on 14 August 2009. He referred in particular to the provision in relation to confidentiality (clause 9) and submitted that: (a) there was no discussion between the parties in relation to keeping the agreement confidential; (b) the defendant was entitled to take advice as to whether he would or should agree to keep the agreement confidential; and (c) ultimately he may not have agreed to the terms remaining confidential. I agree with Mr McClintock that the subject of confidentiality was not discussed. The inclusion of this clause in the proposed Deed of Release is either a clause that should be jettisoned as not being consistent with the agreement reached or, as Mr McClintock claims, evidence that would lead to the conclusion that the parties had not reached a binding agreement on 14 August 2009. (emphasis added)
However, Bergin CJ in Eq at paragraph [38] ultimately found that there was a binding settlement agreement. The Court noted that instead of informing the Court that the matter had settled in principle, the parties had the Court note that the matter was settled and abandoned the trial. The Court went on to state:
…Having regard to the issues between the parties in the District Court proceedings and the discussions between Mr Downing and Mr Lawson, I am satisfied that when the parties used the expression "enter into a Deed of Release" they understood and intended that they would sign a Deed providing: (a) for the payment of the agreed amount to the defendant: and (b) releasing the plaintiff from all claims arising out of or relating to the matters the subject of litigation. This was not an agreement to agree at some time in the future referred to by the High Court in Booker. There were no further matters to be agreed. All that had to occur was that the Deed had to be prepared consistently with the agreement. The defendant is entitled to require the plaintiff to remove any provisions of the Deed that go beyond such a release. (emphasis added)
The analysis of Bergin CJ is persuasive. The issues of non-disparagement and confidentiality are obviously significant enough to require the employer’s solicitors to include them in the draft deed even though they are not necessary to effect a settlement. For many citizens confidentiality clauses are anathema, for similar reasons that closed courts and confidential judgments are often decried. For some it is a matter of personal integrity to be able to openly state the terms of any settlement particularly in professions and industries where disputes become well known and have the potential to stain the characters of those involved. Such clauses cannot be assumed, even if they are commonly resorted to, in order to reach an agreement in a difficult negotiation.

In this case it appears that:
a)On 10 September 2010 the employer, after rejecting any earlier offers, put an offer to settle the claim for $XXXX.
b)The offer to settle for $XXXX was not accepted in its terms. The employee agreed to the sum, but required a condition that a suitable deed reflecting the agreement be entered into. He also added a condition that made time of the essence, setting the date for provision of the deed as at 13 September 2010. As a result, the letter of 10 September 2010 was a counter-offer.
c)Had the employer provided a deed (for payment of $XXXX within a reasonable time and a release) reflecting the agreed terms by 13 September 2010 it would have been an acceptance resulting in a binding contract.
d)The counter-offer expired on 13 September 2010 when a deed was not provided.
e)The time for acceptance having expired the applicant acted on the basis that there was no agreement and notified the respondent.
Thus, there is no enforceable settlement agreement.
I therefore dismiss the respondent’s claim that the matter had settled in September 2010.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Reithmuller FM.

Date: 1 April 2011