Iacullo v Remly Pty Limited; Iacullo v Iacullo

No judgment structure available for this case.

CITATION: Iacullo v Remly Pty Limited; Iacullo v Iacullo [2008] NSWSC 1176

HEARING DATE(S): 1, 2, 3 and 15 October 2008

JUDGMENT DATE :
7 November 2008

JURISDICTION: Equity Division

JUDGMENT OF: Ward J

DECISION: Defendants' second cross-claim dismissed.

CATCHWORDS: CONTRACTS - offer and acceptance - whether parties had entered into binding contract to settle proceedings - whether objective intention immediately to be bound - HELD no common intention immediately to be bound.

LEGISLATION CITED: Civil Procedure Act 2005
Conveyancing Act 1919
Uniform Civil Procedure Rules 2005

CATEGORY: Principal judgment

CASES CITED: Air Great Lakes Pty Limited v K S Easter (Holdings) Pty Limited (1985) 2 NSWLR 309
Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540
B Seppelt & Son Limited v Commissioner for Main Roads (1975) 1 BPR 9147
Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647
Baulkham Hills Private Hospital Pty Limited v G R Securities Pty Limited (1986) 40 NSWLR 622
Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251
G R Securities v Baulkham Hills Private Hospital Limited (1986) 40 NSWLR 631
Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1966] 1 WLR 287
Helmos Enterprises Pty Limited v Jaylor Pty Limited [2005] NSWCA 235
Masters v Cameron (1954) 91 CLR 353
R T & Y E Falls Investments Pty Limited v The State of New South Wales & ors [2001] NSWSC 1027
Sinclair, Scott & Co v Naughton (1929) 43 CLR 310
Tasman Capital Pty Limited v Sinclair and Anor [2008] NSWCA 248
Toll v Alphapharm (2003) 56 NSWLR 662

TEXTS CITED: Barrett, “Masters v Cameron: The Fourth Class Is Here To Stay” (2005) 79(8) ALJ 493
Peden, Carter and Tolhurst, "When Three Just Isn’t Enough: The Fourth Category of 'Subject to Contract' Cases" (2004) 20 (2) JCL 156

PARTIES:
Luigi Iacullo (Plaintiff in both matters)
Remly Pty Limited (First Defendant in 5484/07)
Dominic Iacullo (Second Defendant in 5484/07 and First Defendant in 4963/07)
Lillian Iacullo (Third Defendant in 5484/07 and Second Defendant in 4963/07)

FILE NUMBER(S): SC 5484 of 2007; 4963 of 2007

COUNSEL: BA Coles QC with him G A Moore (Plaintiff)
P Taylor SC with him M Luitingh (Defendants)

SOLICITORS: Kreisson Legal (Plaintiff)
Lincoln Smith & Company (Defendants)

- 33 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WARD J

FRIDAY 7 NOVEMBER 2008.

5484/07 LUIGI IACULLO V REMLY PTY LIMITED ACN 106 966 278, 4963/07 DOMINIC IACULLO and LILLIAN IACULLO

Hearing 1-3 and 15 October 2008

Submissions 10, 17, 21 and 22 October 2008.

JUDGMENT

1 In proceedings No. 5484/07, by a second cross-claim filed 9 July 2008, the cross-claimants (the defendants to the proceedings) (“the Dominic parties”) have sought declaratory relief and specific performance in relation to an agreement (or, alternatively, two agreements), which it is alleged was (or were) made to compromise and settle both these proceedings and other proceedings (No 4963/07) in this Court.

2 The proceedings which it is alleged have been compromised pursuant to the disputed agreement(s) concern various (but not all of the) property or other disputes between the parties.

3 The cross-claimants contend that a written agreement was concluded between Dominic Iacullo (“Dominic”), on his own behalf and on behalf of the two other cross-claimants, and the cross-defendant, Dominic’s brother, Luigi Iacullo (“Luigi”), on 11 April 2008 or, alternatively, that a written agreement was concluded between those parties on 20 March 2008 and amended on 11 April 2008. The alleged 11 April agreement is particularised as being partly oral and partly in writing; the oral part comprising communications between Dominic and Luigi at meetings between them on 20 March and 11 April 2008.

4 Luigi denies that any specifically enforceable agreement was entered into on 11 April 2008 and, further, denies that any specifically enforceable agreement to compromise the respective proceedings was entered into on that date or at any other time.

5 In his defence to the second cross-claim, denying the alleged agreement was made, Luigi says, among other things, that the agreement pleaded is void for uncertainty (paragraph 3(a)); that there was no intention between the parties to create legal relations (paragraph 3(j)); and that, insofar as the agreement pleaded is binding (which is otherwise denied), the agreement is void for illegality (paragraph 3(k)).

6 During the course of the hearing, and in submissions filed on 10 October 2008, senior counsel for Luigi clarified the plaintiff’s position. No defence based on illegality of the alleged agreement is pressed and insofar as Luigi’s defence raises questions of uncertainty these are contended to be relevant only to the issue whether a common intention to form a binding and enforceable contract can be found (not as to whether, if any otherwise binding agreement had been formed, it or part of it was too uncertain to be enforceable).

Factual background

Substantive disputes

7 I do not propose to outline in detail the substantive disputes between the parties. Suffice it to note that they relate to matters arising out of a course of property dealings over a number of years between Luigi and Dominic (together with one or more of Dominic’s wife, Lillian; entities associated with one or other of the brothers; and, in some instances, a third party, Mr Michael Murr or a company associated with Mr Murr).

8 However, I do note that the complexity of those property dealings and the disputes which have arisen in relation to those property dealings are matters relied upon by Luigi as factors which should lead the court to conclude that the parties did not intend to resolve their disputes once and for all by means of the document(s) signed by them on 20 March and 11 April 2008.

9 By way of evidence as to the complexity of the disputes between the parties, Luigi tendered three affidavits (two of which had been filed in these proceedings and one of which had been filed in proceedings No. 4963/07). Those affidavits were admitted, subject to relevance and the cross-claimants’ other objections as to admissibility, for the limited purpose of proving (what was in any event expressly conceded by Dominic’s senior counsel) that Luigi had sworn and filed affidavits in both proceedings making various assertions as to disputes of some complexity between the parties. Those affidavits have not yet been read in the main proceedings.

10 As I foreshadowed when admitting the tender of those affidavits (one sworn 12 and two sworn 14 November 2007), I have not had regard to their contents with reference to the merits or otherwise of the substantive allegations in the respective proceedings. I simply note that these affidavits depose to a variety of dealings between the parties over a number of years.

11 Further, I do not think any inference can be drawn (as was suggested during oral submissions by senior counsel for Luigi) from the fact that to date no affidavit evidence has been filed by Dominic in response to those affidavits. Although directions were made by consent on 22 February 2008 in relation to the filing of affidavits of or on behalf of Dominic, the parties seem to have treated those directions as having been superseded by the events which ultimately led to the hearing of the second cross-claim before me, namely an agreement or understanding reached between the parties on 20 March 2008 that, apart from two specific matters, the continuation of the existing proceedings should be “suspended”.

12 Turning to the context in which the present dispute arose, on 29 February 2008 orders were made by Brereton J pursuant to s 66G of the Conveyancing Act 1919 (NSW), by consent, appointing trustees for sale in respect of a property at 143 Moorefields Road, Roselands (referred to in the hearing as Property O) and vesting that property in those trustees to be held by them in trust for sale pursuant to that section. That sale has not yet taken place. The dispute in relation to Property O is one of the underlying disputes between the parties.

13 There is on foot at least one notice of motion in relation to that sale, that application having been stood over to await the outcome of the second cross-claim.

20 March 2008 meeting

14 In an attempt to resolve their disputes the parties have engaged in discussion and correspondence since at least March this year. So, for example, on 11 March 2008 the solicitors for Dominic forwarded by facsimile transmission to the solicitors for Luigi a letter marked “Without Prejudice except as to costs”, apparently following the rejection by Luigi of an earlier offer, setting out two alternatives pursuant to which the Dominic parties offered to resolve all current proceedings and any other claims. Each of the alternative offers contained as one of its terms that “all current proceedings be dismissed and any other claims be withdrawn”.

15 On 20 March 2008 a meeting took place between Dominic, Luigi and Mr Joe Bongiorno (“Mr Bongiorno”), Luigi’s partner in an accounting and financial services firm known as Bongiorno Tax and Financial Services. It is common ground that the meeting was convened by Mr Bongiorno and that its purpose was to try to resolve all disputes between the two brothers. Mr Bongiorno apparently adopted the role of an informal facilitator or mediator in this meeting and in later discussions which took place between the parties (including a critical meeting on 11 April 2008).

16 At the conclusion of the 20 March meeting, a handwritten document headed “Agreement 20/3/08” was signed by each of Luigi and Dominic. It was also signed (apparently in the capacity of witnesses) by a Mr Emanuele Bongiorno and a Mr Vincent Lagana. No evidence was adduced from either Mr Emanuele Bongiorno or Mr Lagana.

17 The document signed on 20 March (which I will refer to as the “20 March Agreement”), and which the parties accepted was binding when signed, was a three page document (handwritten by Luigi) to which was attached a two page document (also handwritten by Luigi) containing matters in clarification or amplification of the preceding three page document.

18 The 20 March Agreement listed six items, the first of which was that “an independent major Accounting Firm do a complete Audit [of] all entities which conducted Developments”, and in that regard the document named Mr Murr “and all of his entities involved in the developments” as well as all entities involved in the developments either owned by Luigi or Dominic and their associated entities “including all distributions made”.

19 Item 2 referred to Property O. It stated that Property O be “put to Auction 30 May 2008” and that on the conclusion of the auction independent accountants be appointed “to sort out the funds and to pay all loan accounts, loan accounts will be from a complete audit of the books of the property above”.

20 Item 6 noted that, “All proceedings and actions to be suspended”.

21 Under each of Items 1, 2, 3 (which I have not set out) and 6 were the words “Refer attached”. It is accepted by the parties that this directs the reader to the two page attachment which was added by way of amendment after separate consultation by telephone with lawyers which took place during the meeting.

22 In the case of Item 1, the attachment noted “To avoid any doubt the developments in Hogben Street and Gladstone Street are to be included in the audit”.

23 In the case of Item 6, the attachment contained the words, “Other than relation to existing court orders eg filing of cross-claim and complying of subpoenas already issued”.

24 It is accepted by the parties that the reference in Item 6 to existing court orders for the filing of a cross-claim related to orders made by consent in these proceedings (5484/07) on 22 February 2008. (I note that on 25 March Dominic filed the first cross-claim in these proceedings (verified by affidavit sworn 20 March 2008) against Luigi and a company associated with Luigi, Badminton Pty Limited.)

25 It is also accepted by the parties that as at 20 March 2008 one or more subpoenas had been issued at the request of Dominic in one of the current proceedings for Mr Murr (or an associated company) to produce certain financial documents and materials. There was no suggestion that Mr Murr was present, or party to any agreement reached, at the meeting on 20 March 2008.

26 As noted above, it is accepted by both Dominic and Luigi that, by the conclusion of the 20 March meeting, they had reached an agreement which was to be binding on them, as recorded in the signed and witnessed notes taken at that meeting. What they also agree is that this agreement did not resolve all outstanding issues between them.

27 In passing I note that after the 20 March meeting a further dispute arose between Dominic and Luigi (evidenced in an exchange of correspondence between Dominic’s and Luigi’s respective solicitors on 3 April 2008) as to whether Item 1 of the 20 March “Agreement” related solely to an audit of the records in relation to an alleged claim by Dominic against Bongiorno Partners. That dispute does not appear to have been resolved but the existence of that dispute would not, of itself, deprive the 20 March Agreement of the contractual force the parties seem to concede it has.

28 In any event, as I understand it, no relief is sought in relation to that agreement standing alone (ie as a separate agreement, unaffected by anything which occurred on 11 April 2008).

23 March 2008

29 Dominic gave evidence that he had at least two meetings with Mr Murr on 23 March 2008. One of these was also attended by Luigi. Both brothers accept that at the meeting they attended together with Mr Murr there was a discussion as to “adjustments” in respect of Property O. By this, the parties mean an account of amounts referrable to contributions as between themselves for outgoings, expenses and the like in relation to the property or any distributions to be made referrable to the property.

30 At that meeting Luigi says there was also a discussion as to Remly Street Pty Limited (“Remly”) (the trustee of a unit trust which had acquired the mortgage over Property O), by which I understand him to mean there was a discussion as to his claim (disputed by Dominic) to an interest in Remly or certain properties acquired by it.

11 April 2008

31 A meeting subsequently took place between the brothers, again at Mr Bongiorno’s suggestion and for part of which Mr Bongiorno was again present, on 11 April 2008.

32 For present purposes, this is the critical meeting. The recollections of Dominic and Luigi in respect of the outcome of this meeting differ markedly. However, there is some common ground. It is not disputed that the discussion at the 11 April meeting took place on a without prejudice basis. It also does not appear to be in dispute that various issues or areas of disagreement between Dominic and Luigi were discussed (including Property O and the Gladstone and Hogben Street developments) and that figures relating to those matters were put on a whiteboard (some written by Luigi and some – the so-called “middle” figures - written by Mr Bongiorno), and that the brothers agreed that the record of that meeting was (at least to some extent) to be kept confidential.

33 Relevantly, the matters in dispute between Dominic and Luigi in relation to this meeting include what the “middle” figures on the whiteboard represented; what was encompassed by any consensus as to matters involving Property O and Remly; the circumstances in which the 11 April document came to be written out (and signed), including when the words “without prejudice” were written on the document; and the degree of confidentiality which was to attach to the document.

34 According to Dominic, various scenarios were written on the whiteboard, including what Luigi alleged Dominic owed him and what Dominic alleged Luigi owed him; he and his brother discussed with Mr Bongiorno the various items in dispute; and, after they had gone through each of the items on the whiteboard, Mr Bongiorno added the “middle” figures. Those are the figures which Dominic says he agreed with his brother (which agreement he is now seeking to enforce). Annexed to his affidavit of 9 July 2008 (Annexure “B”) is a copy of a letter in which Dominic made handwritten notes during the meeting recording what he says was agreed in the course of the discussion in respect of those items. It accords with the signed 11 April document.

35 Luigi, on the other hand, while he accepts that the figures written by Mr Bongiorno on the whiteboard were numbers which represented generally the midpoint between the respective brothers’ figures, denies that any agreement was reached as to those figures. He says that before Mr Bongiorno left the meeting he encouraged the brothers to think about the numbers and see if they could reach an agreement.

36 Not all the figures written by Mr Bongiorno represented the precise mathematical midpoint between the brothers’ respective positions in relation to the items noted on the whiteboard. However, it is clear from the evidence given by Dominic and Luigi that the exercise carried out at this meeting involved, first, figures being put onto the whiteboard as to what each of the brothers either claimed was his particular entitlement in relation to various items or indicated he would or might (subject perhaps to the overall resolution of the disputes) be prepared to accept (or to pay the other) in satisfaction of the claimed entitlements in relation to the various areas of dispute in question, with Mr Bongiorno then putting forward a third amount apparently by way of his suggestion for compromise. It is not disputed that in some cases numbers were amended on, or erased from, the whiteboard.

37 Toward the end of the meeting (at or about the time Mr Bongiorno left the meeting) the figures as they then appeared on the whiteboard were printed off on a sheet of paper (Tab 11 of Exhibit 1).

38 A two page document was subsequently handwritten by Luigi. It was signed by Dominic and Luigi, as well as by Mr Emanuele Bongiorno (again apparently as a witness to the signatures of Dominic and Luigi). It is agreed between the parties that, other than the signatures of Dominic and Emanuele and the date at the top of the first page (which Dominic wrote), the document is wholly in Luigi’s handwriting.

39 Both pages of the document are headed “Without Prejudice”. The document contains a number of unnumbered paragraphs expressed in summary form. It is silent as to the legal status it was intended to bear.

40 A transcript of the 11 April document is attached as Annexure A to this judgment. In summary, the items recorded on the document relate to the Gladstone Street development; adjustments in respect of Property O and Remly; the sale of Luigi’s half share in Property O; the Hogben Street development; the subpoenas issued to Michael Murr (and an indemnity in favour of Luigi in relation to claims in respect of Hogben Street); and releases in favour of Luigi.

41 According to Dominic, Luigi said he would write down what had been agreed on a separate piece of paper; they would sign it as their agreement, and he would get Mr Bongiorno to witness it. Presumably this could only have been said prior to Mr Bongiorno leaving the meeting as otherwise Mr Bongiorno would not be there to act as witness.

42 At the stage Mr Bongiorno did leave the meeting it seems to be common ground between Dominic and Luigi that not all the matters recorded in the 11 April document had been agreed (though a “tentative” agreement reached on some items). In particular, it is not suggested that the matters which appear in the 11 April document relating to the continuation of the proceedings in relation to the Murr subpoenas had been discussed by the time Mr Bongiorno left the meeting.

43 Dominic said that the document recorded what Luigi and Mr Bongiorno wanted to be written on the document. Dominic’s evidence was that Luigi was writing up the document which became the signed 11 April document as Mr Bongiorno left the meeting and that after all the writing on the two page document had been completed, but before it was signed, Luigi wrote on the document the words “page 1 of 1” on the first page, “page 2 of 2” on the second page; and “without prejudice” (and that Luigi had said that “without prejudice” meant the document was confidential and could not be shown to Michael Murr or his legal people).

44 Luigi denied that conversation and said that the words “without prejudice” on the front page were the first words written by him on that page (ie before any other writing on the document, except perhaps the date). I will refer to the significance of the “without prejudice” header later, but note at this point that if Dominic’s recollection is correct this would lend support to Luigi’s denial that the 11 April document recorded a binding agreement, since it would suggest that Luigi was communicating a reservation or qualification of some kind in relation to the document or its contents after Dominic believes they had been agreed.

45 According to Luigi, it was Dominic who said that he wanted Luigi to write down the figures and that he, Luigi, proceeded to write down what Dominic had “dictated”. I regard it as unlikely that Dominic literally “dictated” all of the notes on the 11 April document (even if he dictated some) because the word “indemnified”, which appears on the document, is one which Dominic had considerable difficulty articulating a number of times during cross-examination; and it was Luigi’s evidence that Dominic also had difficulty articulating that word in the discussion on 11 April. Accordingly, some process of interpretation would have to have been carried out by Luigi if there had been a “dictation”, as such, by Dominic of that part at least of the document. In cross-examination Luigi accepted that Dominic had not dictated anything after what appears at the top half of the first page. I do not consider it likely that Luigi acted purely as a “scribe” when the document was prepared.

46 It does not seem to me to be material to the dispute who it was (Dominic, Luigi or Mr Bongiorno) who suggested or asked that a document be prepared. Insofar as it is relevant, I would accept Dominic’s version of this part of the conversation as being the more credible because of the improbability of Dominic dictating the document.

47 What seems to me to be relevant is that the parties thought it worthwhile doing more than just printing out the contents of the whiteboard. They put in writing, in point form, the outcome (to use a neutral term) of their discussions and signed that document.

48 Both Dominic and Luigi accept that at the meeting on 11 April 2008 they agreed that the document they signed should be kept confidential; the only differences between them in this regard being as to whether there was to be an exception for the provision of the documents to their lawyers, and as to who it was who wanted it to be kept confidential.

49 According to Dominic, Luigi said he would prefer it if no one was told about what had happened and if it could be kept confidential, to which Dominic said he responded there was no problem but he would give a copy to his solicitors to prepare the documents to wrap up the court proceedings. (Dominic’s subsequent conduct is consistent with that.)

50 Dominic also gave evidence that Luigi said he did not want Michael Murr or his legal people ever to see the document. This is consistent with Dominic offering to have the “agreement” put into two separate documents (one which could be shown to Mr Murr and one which would not).

51 According to Luigi, however, Dominic said to him that no one was ever to see those notes and that it was just between him and Luigi.

52 In that regard, the only brother who appears to have expressed any concern about part or all of the contents of the document signed on 11 April was Luigi. It was Luigi who was to benefit from the protection of the indemnity in respect of any come-back by Mr Murr on the Hogben Street development if Dominic pursued his claim. After the meeting, Luigi expressed his concerns to Dominic (both at a 16 April meeting and in writing by letter dated 17 April 2008) about the document insofar as it made reference to matters relating to Mr Murr.

53 Although Luigi does not claim to have had a concern at the 11 April meeting about Mr Murr seeing the document, I consider it more likely that Luigi (rather than Dominic) wanted to keep the document from Mr Murr (since Dominic’s position vis a vis Mr Murr was to be tested by way of the audit the parties were contemplating).

54 It therefore seems to me that Dominic’s recollection of who wanted the document kept confidential at the 11 April meeting is the more credible.

55 At the conclusion of the 11 April meeting, a cheque for $25,000 was given to Dominic by Luigi (endorsed not to be banked without Luigi’s authority). Luigi subsequently refused to authorise payment on that cheque (which was presented for payment but not honoured) and there was a further dispute between the brothers as to the presentation and dishonour of the cheque (and as to the claims which had led to the tender of the cheque). It is difficult to see how the tender of this cheque is of any relevance to the issue before me, as there is no reference to the payment of such an amount in the document of 11 April and I do not understand it to be contended that this represented part performance of the alleged 11 April agreement. Dominic’s evidence was that this was a personal matter between himself and his brother and not part of the resolution of their commercial dealings. I think nothing useful for the purposes of the question before me can be drawn from the events surrounding the tender and subsequent dishonour of the $25,000 cheque.

56 After the 11 April document was signed and the meeting concluded, it was Dominic’s evidence that he had separate conversations with his solicitor and with his wife in relation to the outcome of the meeting in which he conveyed his belief that an agreement to had been reached with Luigi.

57 Dominic gave his evidence in a down to earth, direct and open manner. He described the conclusion of the meeting as being one where Luigi shook his hand, looked him in the eyes, and said words to the effect, “As brothers let’s put all this behind us.” I accept that Dominic genuinely believed, at the conclusion of the meeting, that he had reached an agreement with his brother to resolve their disputes. That subjective belief, however, does not determine the issue in dispute before me.

16 April meeting

58 On 16 April 2008 a further meeting took place between Dominic and Luigi, again convened by Mr Bongiorno. There is a dispute as to whether that meeting lasted half an hour (as Dominic said) or longer (say one and half or two and a half hours) (as Luigi said).

59 According to Luigi, at that meeting the parties went in detail through the items which had been agreed at the 20 March meeting. Dominic denied this and said that, at the 16 April meeting, the discussion was as to concerns which Luigi said he had (and which Mr Bongiorno apparently shared) as to the morality (or illegality) of what was set out in the document signed on 11 April 2008 in relation to Mr Murr. Dominic said that he left the meeting when Luigi started to “rehash” the agreement they had reached on 11 April 2008.

60 Counsel for the plaintiff referred to the draft of a letter addressed to Dominic and written by Luigi on 17 April (which became Exhibit 4 in the proceedings) as support, because of its contemporaneity, for (among other things) Luigi’s recollection of the length and content of the 16 April meeting.

61 Ultimately, I think nothing turns on the length of the 16 April meeting, because even if the parties had (as Luigi said) gone through every item which had been agreed on 20 March 2008 all over again at the 16 April meeting, that is not in my view inconsistent with a binding agreement having been reached on 11 April 2008. It could equally be consistent with the parties exploring how (which to my mind was not clear on the evidence), if at all, the two agreements were to work together.

62 Whether or not Mr Bongiorno referred in this 16 April meeting to “notes of a meeting” (as Luigi said) or to “an agreement” (as Dominic said), it is common ground that Mr Bongiorno expressed concerns at this meeting as to what had been written in the document in relation to the position with Mr Murr.

63 Luigi’s evidence was that he also had concerns as to what the 11 April document recorded viz-a-viz Mr Murr. It would seem, from Luigi’s subsequent correspondence with Dominic and from his evidence during the hearing, that Luigi was concerned not only that if Dominic pursued any claim against the Murr interests this might have some come-back against him (a matter which the parties had apparently sought to address by the indemnity set out in the 11 April document - which supports Dominic’s recollection that this was a concern raised by Luigi at the 11 April meeting) but also that Luigi might be exposed to some kind of breach of fiduciary duty or secret commission claim to which he subsequently referred (such a claim arising out of the reference in the document to him “underwriting” $650,000 of the $800,000 Dominic claimed to be entitled to from Mr Murr).

64 Luigi’s evidence in relation to this issue was somewhat tortured. At first he accepted that “illegality” was in his mind, since he said that the idea of “illegality” was something that he had first considered but that it was re-inforced by the advice he received from his lawyers. Later in cross-examination Luigi was reluctant to accede to the proposition that he had concerns about the “illegality” of what was contained in the 11 April document. He was only prepared to concede that he had “concerns” or that he was “concerned about” the document (refusing to accept that he had concerns as to any illegality about the document).

65 I consider it unlikely that Luigi would have held such apparently pressing concerns as to the “morality” (or ethics) of what was recorded in the 11 April document had he not believed that an agreement of some kind had been reached with his brother on 11 April. Luigi’s obvious reluctance in the witness box to concede that his concerns at this meeting were as to any “illegality” with the document, seems to me to reinforce that view. It is telling also that Luigi denied in the witness box that he had any concerns about “notes of a meeting” being shown to Mr Murr (but said he would have had concerns about it being shown to Mr Murr if it had been an agreement).

66 Luigi’s evidence was also inconsistent as to whether he had or would have had concerns about Dominic suing Mr Murr – first saying he had no such concern (as such an action would be unsuccessful) and then saying he would be concerned by such a proceeding as it could affect the profitability of the Hogben Street development (in which he has an interest).

67 After the meeting with Luigi on 16 April, Dominic forwarded the 11 April documents to his solicitors with instructions for them to prepare the necessary documents. It was submitted, for Luigi, that the delay in Dominic so doing until 16 April, after he became aware that Luigi was in some way disputing that agreement, is significant. I do not regard that 5 day delay (encompassing, as it did, a weekend) as having much, if any, significance. 11 April 2008 was a Friday. There was no evidence to suggest that the parties had contemplated a particular time frame for documentation of any agreement they may have reached.

68 The fact that Dominic did not immediately contact his solicitors in writing with instructions to document the agreement does not seem to me to bear much weight. Nor does the fact that, quite sensibly in hindsight, Dominic’s solicitors deferred drafting any such documentation pending confirmation that the agreement was as they understood it from the 11 April document and Dominic’s instructions. (In light of the history of the disputes between the parties, it seems to me that the prudent course was to do what Dominic’s solicitors in fact did – to seek confirmation from Luigi’s solicitors before proceeding to incur expenses in drafting any documentation.)

17 April correspondence

69 By letter dated 17 April 2008, Dominic’s solicitors wrote to Luigi’s solicitors in relation to the agreement which Dominic contends was reached at the meeting on 11 April. Luigi responded to Dominic with a letter dated 17 April 2008 but sent on 18 April 2008.

70 It emerged for the first time during the course of his cross-examination that Luigi had sent this letter first to his counsel in draft for comment. The draft letter, which Luigi says he prepared and then sent to Mr Moore of counsel, was not produced (though called for) during the course of the initial hearing. Luigi said it was possible that he had a copy of the draft but that he did not know. Luigi gave evidence that Mr Moore had made comments on the draft. Luigi did not give evidence as to any discussion with Mr Moore either giving him instructions or receiving advice from him in relation to the contents of the draft given.

71 After the hearing had concluded on 3 October 2008, an electronic copy of the draft letter was retrieved by Luigi and an application was made by the Dominic parties (to which I acceded) for leave to reopen their case and for access to that document, which was (following my ruling on Luigi’s privilege claim on 15 October 2008) subsequently tendered by the Dominic parties. Although the final version of the document is not dissimilar to the draft version, the letter was fairly extensively rewritten.

72 Further, at least some of the changes are of note. For example, the letter, as settled or at least commented on by counsel, amends the reference to “lawyers” in Luigi’s draft to a reference to solicitors (a change I can only infer followed from a recognition by Luigi’s counsel that any complaint by Luigi as to “lawyers” becoming involved by Dominic was a hollow complaint given that Luigi for his part was also seeking the counsel of his lawyers – albeit from his barrister, and not from a solicitor).

73 I also note that the final version of the letter concedes in its terms that a “tentative agreement” was reached at the 11 April meeting (something that Luigi also conceded in the witness box after having initially denied that he had ever referred to it as an agreement), whereas the draft version prepared by Luigi contained the statement that “no agreement” was reached at the 11 April meeting.

74 Considerable weight was placed by the Dominic parties on the circumstances in which Luigi’s 17 April correspondence was generated because of the fact that the 17 April response from Luigi had itself been relied upon (in particulars and in submissions) by Luigi for its contemporaneity without any acknowledgement that the letter had been settled by counsel.

75 The force of any submission as to the contemporaneity of the letter as sent to Dominic does suffer in my view from the fact that the letter as sent now turns out to have been in part the product of counsel’s amendments. However, as I do not consider that Luigi’s submissions based on the contemporaneity of this document would have carried much weight in any event, the evidence which later emerged does not in my view alter the position in any material way.

Subsequent correspondence

76 Luigi’s counsel referred to a 22 April letter written, on a without prejudice basis, by Dominic’s solicitors which refers to attempts (following the 16 April meeting) to resolve the dispute as to the existence or otherwise of a binding agreement in terms of the 11 April document. In that letter, Dominic’s solicitors asserted that if the matter could not be resolved by agreement they would need to proceed to the auction of Property O.

77 I was also referred to a letter dated 1 May 2008 from Dominic’s solicitors, again written on a without prejudice basis, which, in part, stated that Dominic had agreed to the figures in the 11 April agreement on the basis that he would be paid the moneys sought by him in relation to two of the property developments:

If your client’s position is now to be that our client will not be assured of payment by Murr interests of money agreed to in that document for those developments, your client should not assume our client would any longer be agreeable to paying him $1.3 million for his interest in Property O.

78 It was suggested by Luigi’s counsel that this demonstrated the conditionality attached by Dominic to that part of the matters recorded in the 11 April document which related to Mr Murr (ie the amount in respect of the Gladstone Street development). While the position in relation to Mr Murr is not clear (and this gives rise to considerable difficulty in finding that there was sufficient certainty as to any consensus reached on 11 April), I do not read the 1 May 2008 letter as any admission against Dominic in this regard.

79 I think little weight can be attached to this correspondence; it being consistent, in my view, with Dominic seeking to resolve the dispute then confronting him – namely that Luigi was by then denying the existence of a binding agreement – rather than amounting to any admission that the 11 April document was not binding.

Issue for Determination

80 The critical issue in dispute is whether the document signed by Dominic and Luigi on 11 April (and witnessed by Mr Emanuele Bongiorno) records a binding agreement between the parties (ie including Dominic’s wife and Remly) which (whether read together with the 20 March agreement or read alone, and supplemented as necessary by reference to the oral communications between the parties) effects a final and binding resolution of all of the disputes between the parties; pursuant to which these proceedings and the other proceedings in this Court have been or are to be compromised.

81 The answer to this issue depends on:

(1) Whether the parties reached an agreement on 11 April 2008;

(2) The terms of any such agreement; and

82 In R T & Y E Falls Investments Pty Limited v The State of New South Wales & ors [2001] NSWSC 1027, Palmer J (referring among others to Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251 at 9254 ff; Air Great Lakes Pty Limited v K S Easter (Holdings) Pty Limited (1985) 2 NSWLR 309; Baulkham Hills Private Hospital Pty Limited v G R Securities Pty Limited (1986) 40 NSWLR 622 at 627; and G R Securities v Baulkham Hills Private Hospital Pty Limited (1986) 40 NSWLR 631 at 634) said that:

[50]

83 The decisive issue, as stated by McHugh JA in G R Securities at 634, is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances. In other words, the relevant intention is not the individual subjective intentions of the parties, as such, but rather what the law takes to have been their intentions at the relevant time (Mahoney JA in B Seppelt & Son Limited v Commissioner for Main Roads (1975) 1 BPR 9147 at 9151). There his Honour recognised the possibility that in the process of negotiation the parties might reach an interim consensus which nevertheless did not amount to a binding agreement upon all of the terms of the proposed transaction.

84 For the reasons outlined below, I have concluded that the second cross-claim fails on the ultimate question of intention. However, I also consider the question as to whether, and if so what, agreement was reached on 11 April.

Was an agreement reached on 11 April?

85 For Dominic it was contended that the brothers had participated in a process of negotiation, in which both he and his brother had put forward proposals to compromise the disputes as to amounts owed by them; these proposals were discussed (in the presence of Luigi’s partner, Mr Bongiorno); and the “negotiated proposal” was reduced to writing by Luigi and was signed (as an agreement) by both parties and witnessed.

86 It was contended (and in essence it was put to Luigi in cross-examination) that at the time Mr Bongiorno left the meeting on 11 April a tentative agreement had been reached on those items in dispute between the parties which were recorded on the whiteboard (Gladstone Street, adjustments re Property O and Remly, sale of Property O, and Hogben Street); and that agreement was subsequently reached between Dominic and Luigi on all matters.

87 Luigi denied that agreement on these four matters had been reached when Mr Bongiorno left the meeting but accepted in cross-examination that a “tentative” agreement as to those items had been reached by the close of the meeting (subject, however, to agreement being reached on other matters and the deal being documented).

88 It was contended for Dominic that the only two matters outstanding when Mr Bongiorno left the meeting were the position in relation to Mr Murr and Luigi’s claimed interest in Remly and that these were both resolved after Mr Bongiorno left by the additions made to the written record of what had been on the whiteboard; and that the parties intended immediately to be bound thereby. Luigi adamantly denied this.

89 The only document signed by Luigi and Dominic on that day was unfortunately silent as to whether it recorded an immediately binding agreement (as opposed, say to an interim agreement not to become binding until it was formally documented or other matters agreed upon) or any “agreement” at all (as opposed, say, to recording a compromise proposal for Luigi and Dominic to take away and consider as the basis, subject to resolution of any other issues, of a settlement; akin to some kind of agreed starting point for further discussion).

90 Luigi resisted any suggestion that what was recorded in the document on 11 April constituted an agreement (by which I understood him to mean a binding agreement). Luigi was adamant that the 11 April document was no more than “notes of a meeting”. In the witness box he was wary of answering questions which made reference to “agreement” and at one stage asked that the defendants’ senior counsel rephrase his questions by reference to “notes of a meeting” rather than “agreement”.

91 As noted above, Luigi at first denied that he had ever referred to what occurred on 11 April as an agreement. He later conceded in the witness box that the parties had reached a “tentative agreement” on 11 April as to the issues the subject of the 11 April document, as he had earlier conceded in his letter to Dominic which he sent on 18 April 2008.

92 (While counsel for Luigi relied on the fact that Luigi’s initial draft of the 17 April letter maintained there was “no agreement” reached on 11 April, as being Luigi’s contemporaneous record as to what had occurred, it seems to me that it is of some significance that Luigi clearly accepted – by apparently adopting counsel’s comments on the draft – that there had been a “tentative” agreement on that day.)

93 Luigi accepted in the witness box that subject (as he had said in his letter dated 17 April to Dominic) to resolving the position in relation to Michael Murr and the documentation to implement the agreement and subject also (as he said not in the 17 April letter but in the witness box) to agreement as to the disposition of his claims in relation to Remly, the tentative agreement reached on 11 April 2008 would have finally resolved all issues between the parties.

94 Luigi’s conduct after the 11 April meeting is consistent with an agreement of some kind having been reached on 11 April.

95 The strength of Luigi’s concerns as to the morality (or illegality) of what was recorded in the 11 April document lead me to infer that, at least at the time of the 16 April meeting, Luigi accepted that an agreement had been reached at the 11 April meeting (and was concerned to avoid any adverse consequences which might flow to him from having reached such an agreement).

96 Further, Luigi seems to have accepted that there was an agreement at least to the extent that he considered that after that meeting both he and his brother were under an “obligation” (which Luigi was quick to assert in the witness box that his brother was the first to breach) not to consult with their solicitors in relation to the matters discussed on that date. The fact that Luigi was defensive in the witness box about this issue reinforces my view that he understood (or was concerned that it might be found) that consensus of some kind had been reached on 11 April 2008.

97 Luigi’s evidence that he did not consider that this “obligation” had been contravened by him, notwithstanding the consultation he admitted he had had with his barrister on 17 April 2008 (in relation to the draft 17 April letter), particularly in light of the amendment to the wording of his draft letter from “lawyer” to “solicitor”, shows a readiness by Luigi to rely on what might be seen as a very technical distinction between the two branches of the legal profession to justify his own conduct.

98 That is consistent with Luigi’s tendency in his evidence in the witness box to take technical points (for example, the difference between “communication” and “discussion” with Mr Murr between 23 March 2008 and April 2008) or to make technical distinctions (not conceding that there were “disputes” between himself and his brother, asking what was meant by “issues”, questioning what was meant by disputes, yet eventually accepting there were areas of disagreement between them; and denying that he had studied any legal subjects but ultimately conceding he had done so, but not with law students, in his Economics degree).

99 The fact that the 11 April document may not have dealt with all of the disputes between the parties would not of itself preclude a finding that the parties had reached a binding agreement in relation to those of the disputes which were referred to in that document (in the same way that the 20 March agreement addressed only part of the matters then in dispute).

100 However, the fact (as it seems to be the case) that there were areas of dispute left unresolved by the items recorded in the document, particularly given the ambit of those areas, would be relevant when considering whether the parties’ intention was immediately to be bound by any such agreement.

101 The 11 April meeting had been convened on the basis that its purpose was to reach a final resolution of all disputes, if possible. It could not seriously be suggested (nor was it suggested to me) that the parties intended that part only of the matters recorded in the 11 April document should operate without others. So, for example, Dominic would surely not have expected the releases to operate if the preceding items (and any related matters, such as Luigi’s claim in relation to Remly, if that were not otherwise covered by the agreement) were not also agreed.

102 On balance I am of the view that there was an agreement (in the sense of a consensus) reached between the brothers on 11 April, not just as to confidentiality but also as to the items comprising whiteboard “proposal” representing a compromise which both brothers in principle were prepared to accept as a means of reaching a resolution of their overall disputes.

103 However, it is clear from the evidence (including the background, about which there is no dispute, against which the discussions took place, namely that the brothers were seeking (and being urged by Mr Bongiorno) to resolve all disputes once and for all) that any agreement on 11 April was one which was subject to all matters in dispute being agreed.

104 Were all such matters agreed?

Was any “agreement” sufficiently comprehensive (and certain) to be enforceable?

105 This issue is closely aligned to the question of certainty as to what the terms recorded in the agreement objectively mean.

106 The fact that there were many facets to this dispute does not make it inconceivable that the parties could have agreed an overall sum by way of compromise to buy out Luigi’s interest in Property O, plus his share, if any, in the development rights and in Remly or any properties owned by Remly. Certainly that is what Dominic seems to have understood was contemplated by the arrangement – he would pay $1.3 million to Luigi (more than he considered Luigi’s share in Property O was worth) against which would be offset any moneys Luigi agreed to pay him (such as the $650,000 in relation to Gladstone Street); the agreed adjustments would be made and very little money would change hands.

107 For Dominic it is asserted that all the questions of price were agreed; that Luigi’s claim in relation to Remly was bound up in the agreement by Dominic to pay Luigi the sum of $1.3 million for his interest in Property O; and that by reference to the surrounding circumstances it can be inferred that the parties agreed thereby to resolve all their disputes (with formal documentation to be attended to, in effect, as a matter of course).

108 Luigi, on the other hand, emphasised the complexity of the dispute in relation to Remly (which he said had many facets) and placed considerable weight on what is said to be a significant lacuna in the second cross-claim, namely how the parties were to deal with Luigi’s undetermined claim to a half beneficial interest in Remly as trustee of the Remly Unit Trust.

109 The existence of any such lacuna is dependent on what construction is given to the first item recorded on the 11 April document.

110 For Dominic, it is contended that all of the Remly dispute was encompassed in the proposed payment of $1.3 million to Luigi.

111 For Luigi, it was contended (as I understand it) that his claim to an interest in Remly or the Remly properties could only have been compromised by a settlement which saw him acquire part of Remly or be paid out for a share of that company or its properties, since his claims in relation to Remly included a claim (in effect) for a share in other property assets acquired by Remly.

112 Luigi was taken to his affidavit of 26 August 2008 (transcript pp 202/204) and questioned as to what would have been left unresolved in relation to Remly on the two alternative scenarios being considered (namely, Dominic to pay $1.3 million for Luigi’s claimed half interest in Property O and the development rights Remly had in a development application relating to Property O; or Luigi to pay Dominic $1.95 million for Dominic’s interest in Property O and “1 RS” which was said to relation to the Remly Street development – perhaps one of the properties acquired by Remly.)

113 Luigi accepted that the second alternative (ie that he paid the sum of $1.95 million to Dominic) would be payment for all Dominic’s (and his wife’s) entitlements in Remly and he would become the sole owner of Remly but he did not accept that this would resolve all disputes in relation to Remly. In particular, Luigi said this would not cover his claim in relation to certain Remly properties (referred to as Properties A and B). This appears to be because Luigi (though initially accepting that he would become sole owner of Remly on this alternative) nevertheless suggested that the payment would only be for Dominic’s half interest in Property O and a half share in the DA rights in Remly and that Dominic would retain ownership of Remly and, through that ownership, the properties known as A and B.

114 I understand this line of questioning (the underlying premise of which Luigi did not accept) was to have been to suggest that the two settlement alternatives ($1.3 million to Luigi or $1.95 million to Dominic) were intended to proceed on the same basis – so that if the latter included all aspects of the Remly dispute so also did the former.

115 At the conclusion of the evidence, however, I was left unclear as to what, objectively, was the intention of the parties on the Remly issue. I found the different explanations by both Dominic and Luigi (and their respective counsel) as to how Property O, Remly, and the amounts discussed in relation to those properties were to be resolved to be confusing and at times contradictory. Accordingly, I am not satisfied that all the matters in dispute between the parties were the subject of the consensus recorded in the 11 April document – which reinforces my doubt as to the existence of any agreement in this regard.

116 A stark illustration of the difficulty in finding that any “agreement” reached on 11 April was one which, as a matter of law, could have had binding force is the question as to what was comprised by the first item.

117 The 11 April document is unclear in its terms as to how the parties intended any agreement represented by the first item (in relation to the dispute over the Gladstone development) and, in particular, the underwriting by Luigi of Dominic’s claimed share of profits out of that development, to operate and it is unclear as to whether the agreement was in any way conditional on Mr Murr’s position in relation to the development.

118 It seems to me quite conceivable that the nub of any agreement reached between Dominic and Luigi on 11 April, as recorded in the first item, was that Dominic would be prepared to accept $800,000 from Mr Murr or the Murr interests in order to give up his claim in relation to the Gladstone development (and not to press for more) but that if, for whatever reason, he was not able to procure the whole of that sum from Mr Murr, then Luigi would pay Dominic $650,000 in order to dispose of any claims Dominic had against Luigi in relation to that development.

119 Seen in that light (which would not strictly operate as a guarantee or underwriting), there would be no need for the 11 April document to be conditional on Mr Murr’s agreement to the $800,000 figure, nor would there by any issue as to how the “guarantee” or “indemnity” was to operate if Dominic’s actual entitlements in respect of Gladstone Street were shown on the audit contemplated under the 20 March agreement to be less than $650,000.

120 While that construction does not address the uncertainty as to when it was that Luigi might become obliged to pay the $650,000 – in other words, as to what steps had first to be taken to ascertain what amount, if any, could be procured from Mr Murr – this might be overcome by incorporation of an implied term that this happen on reasonable notice. (Reliance was also placed by the Dominic parties on the statement made in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1966] 1 WLR 287 at 339-340 by Lord Diplock, in effect, that when a party leads the other party to believe agreement has been reached on a particular matter then there is an implied obligation to take those steps which are necessary to effect it.)

121 That construction is consistent with Dominic’s evidence that, in effect, this was a compromise, just as his agreement to pay Luigi $1.3 million for Property O (when he did not think it was worth that much) was also a compromise on his part.

122 However, that construction of the first item of the 11 April document does not sit comfortably in all respects with Dominic’s apparent insistence on an audit of all developments (including the Gladstone development) to ascertain precisely what Mr Murr owed him (if anything); and it is not the construction for which I understood Dominic to contend.

123 While I accept as likely (particularly given the absence of lawyers from the meeting) Dominic’s explanation that the brothers were not attempting, by the 11 April document, to record any agreement they might have reached in “technical” legal terms, the summary (and incomplete) way in which the items were recorded in the 11 April document makes it difficult for me to conclude that on the face of the document its terms were sufficiently comprehensive to cover all the disputes between them or sufficiently certain to give rise to an enforceable agreement.

124 Resort to the oral communications between the parties (even on what Dominic said of those communications) would, I think, supplement only some of the missing information necessary to make the 11 April accord workable as indicated by reference to my difficulties with the first item recorded on that document.

125 Reliance was placed by the defendants on the judgment of Young CJ in Eq in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2003) 56 NSWLR 662 quoting with approval the statement that a person who signs a document containing contractual terms is normally bound by them, even though that person has not read them and is ignorant of their precise legal effect. However, the application of that principle in this case would presuppose that the 11 April agreement was otherwise a document setting out contractual terms which were sufficiently certain to be enforceable.

126 There is force in the submission made on behalf of Luigi that, so far as any agreement recorded in the 11 April document contemplated the continuation of court proceedings (which it did, at least for the purposes of continuance of the subpoenas which by then had been issued and which, without leave, could not have been used except for the purposes of or in connection with the current court proceedings), this would be inconsistent with a finding that the 11 April document recorded an agreement once and for all to dispose of all of the current court proceedings.

127 Therefore, although it is not necessary for me to reach a final conclusion on this issue, given the view I have formed as to the critical question of intention, I am of the view that the 11 April document does not contain sufficiently comprehensive or certain terms to comprise a final agreement on all the issues in dispute between the parties.

Was there a common intention immediately to be bound?

128 It is contended for Dominic that, on the proper construction of the negotiations between the parties, this case falls within the “fourth class” of case identified in Baulkham Hills Private Hospital Pty Limited v G R Securities, being one additional to the three classes of case mentioned in Masters v Cameron (1954) 91 CLR 353. In Baulkham Hills, McLelland J stated that:

The intention of the parties to be legally bound by their consensus is sufficiently clearly expressed to take the case out of the third class of cases referred to in Masters v Cameron (1954) 91 CLR 353 at 360-362, that is, “… cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own” (at 361). There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron , as recognised by Knox CJ, Rich J and Dixon J, in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317, namely,“… one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms”.

129 There has been recent criticism of the correctness of this passage (Peden, Carter and Tolhurst, “When Three Just Isn’t Enough: The Fourth Category of ‘Subject to Contract’ Cases” (2004) 20 (2) JCL 156; cf Helmos Enterprises Pty Limited v Jaylor Pty Limited [2005] NSWCA 235 at [69] per Young CJ in Eq and Barrett, “Masters v Cameron: The Fourth Class Is Here To Stay” (2005) 79(8) ALJ 493). This debate does not concern whether or not contracts in this class are binding, but rather is one of categorisation, namely whether the “fourth class” is truly one independent of the three set out in Masters v Cameron.

130 Whether or not the class of contract within which Dominic contends the 11 April agreement falls is truly independent of those identified in Masters v Cameron does not alter the critical question in issue in the present case, namely whether or not there has been agreement, upon terms of sufficient certainty, in respect of which a common intention to be immediately bound has been evinced (Tasman Capital Pty Limited v Sinclair and Anor [2008] NSWCA 248 at [26] per Giles JA).

131 The Dominic parties submitted that the 11 April document determined with clarity the price to be paid by each of the parties in relation to the items specifically identified in the document and that, despite the fact that not all terms of their agreement might have been completely agreed (the remainder being referred to in submissions as minor formalities), the parties nevertheless intended themselves to be immediately bound by the terms of the agreement.

132 Reliance was placed on the recognition by Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 at 543, that parties who have negotiated about and made an agreement concerning price could be held to have entered at that stage into a formal contract, albeit one which would later be overtaken by a further more formal contract containing additional terms and conditions.

133 For Dominic it was also contended that an adverse inference should be drawn from the fact that Mr Bongiorno did not give evidence in the proceedings.

134 In that regard, I note that an application was made on behalf of Luigi on the first day of the hearing for leave pursuant to Pt 35 r 2(3) of the Uniform Civil Procedure Rules 2005 for an affidavit sworn on 23 July 2008 by Mr Bongiorno and filed in the proceedings for Luigi to be read, notwithstanding that Mr Bongiorno was overseas and not able to attend or otherwise be available for cross-examination. In the exercise of my discretion I rejected that application for the reasons set out in a judgment delivered on 3 October 2008.

135 While I think it unfortunate that Mr Bongiorno’s evidence was not before the court (and I expressed the view during the hearing that it was unfortunate, having regard to s 56 of the Civil Procedure Act 2005 (NSW), that Luigi’s solicitors had not alerted the defendants’ solicitors at an earlier stage to the fact that Mr Bongiorno would be overseas during the course of the hearing and unable to attend physically in court over that period), I am not satisfied that any adverse inference which might be drawn from the absence of evidence from Mr Bongiorno would materially assist the Dominic parties’ case for the reason that on both versions of the meeting Mr Bongiorno left before the final written document (on which the Dominic parties rely) was signed. Accordingly, I have no basis on which to assume Mr Bongiorno would have been able to shed light on what was said during the critical part of the meeting on which Dominic must rely as evidence of the manifestation of mutual assent to the final terms of the 11 April document.

136 Considerable weight is placed by the Dominic parties on the fact that the document which was handwritten by Luigi on 11 April 2008 was formally signed by both parties and witnessed. That fact is said to give rise to the inescapable premise that what was signed was an agreement. The primary position of the Dominic parties was that such an agreement, in the absence of some other convincing fact to the contrary, was a valid and binding agreement.

137 As to the “without prejudice” header, it was contended that while the discussions were held on a “without prejudice” basis, once the parties signed the document the without prejudice status of discussions was in effect superseded.

138 Luigi, on the other hand, contends that there are a number of factors or contraindications to an objective contractual intent which should lead the court to conclude that, objectively ascertained, the parties did not agree to be bound by any consensus recorded in the 11 April document. Broadly summarised, those (to an extent overlapping) factors are:

1. that the document lacks any agreed description as an agreement (by contrast with earlier agreements reached between the parties – the 28 February 2008 consent orders and the 20 March 2008 “Agreement”) but was headed “Without prejudice”;

2. that far too many matters were separately not the subject of agreement even in the informal consensual sense which it would have been expected were essential to be reached for final accord between the parties if the parties were seeking to resolve all of their differences;

3. that the subject matter to which the parties’ communications were directed was extensive, complex and involved properties and amounts of money of very significant value;

4. the absence of clear words in the 11 April document as to the parties having a positive intention immediately to be legally bound;

5. the objective improbability of a binding legal agreement being likely to result from circumstances which (it is said) depended significantly on purely oral communications especially where the parties did not trust each other;

6. that the 11 April document on its face does not reveal any particular contractual content or actually identify the subject matter of or define the respective performance steps which the parties may have had in mind;

7. that the need to rely on oral matters (and the disagreement as to their outcome) objectively negates any inference that the parties intended to make a binding agreement;

8 that the parties were already in disagreement as to the 20 March agreement (from which I understand it is suggested I should infer that they would have been unlikely to have intended on 11 April to be bound by a similarly informal document); and

139 Luigi also relies on subsequent correspondence between the parties, including the letter dated 17 April 2008, as indicating that the parties understood there was no binding agreement reached on 11 April 2008.

140 The factors relied upon by Luigi as set out above seem broadly to turn on the following three matters:

· The lack of formality of the document

· The uncertainty/incompleteness of the terms recorded in the document; and

· The absence of a clear indication on the face of the document that it was intended to be binding, coupled with the contrary inference to be drawn from the “without prejudice” header.

141 Turning to those matters:

· Subsequent conduct

142 Subsequent communications may be considered when considering whether a binding agreement has been reached. In Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251, McLelland J noted that in determining whether the communications between the parties constituted a contract, the court was not confined to a consideration of the terms or manner in which the communications were made, but could interpret them by reference to the subject matter and surrounding circumstances, (including the nature of and relationship between the parties; previous communications between the parties; and standards of reasonable conduct in the known circumstances); and that it was legitimate to refer to and take into account subsequent communications between the parties.

143 His Honour noted that the probative value of subsequent communications must be found in the light they throw on the proper interpretation of the earlier communications alleged to constitute the contract and said that, perhaps more commonly, subsequent communications might be legitimately used against a party as an admission by conduct of the existence or non-existence as the case may be of a subsisting contract, referring to Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647.

144 The parties’ conduct after 11 April demonstrates that the parties (at all times on a without prejudice basis) have attempted to resolve the later differences which had arisen between them (namely as to whether there was an agreement on 11 April or as to what that agreement represented) in their meeting on 16 April.

145 The fact that they did so (and that they may even have entertained discussions as to whether or not to reach a new agreement or to amend the earlier 20 March agreement) does not seem to me to be of much weight as to whether or not there was a binding agreement on 11 April. Such conduct is equally consistent with there being a binding agreement but with the parties making a final attempt to avoid the need for further litigation over that issue.

· Informality

146 As to the informality of the way in which the document was expressed, I note that in R T & Y E Falls Investments, Palmer J accepted that, as a general rule, when parties had been negotiating a substantial commercial transaction in the common expectation that at some stage a formal contract would be brought into existence, the court should be reluctant to find a common intention that a binding informal contract should come into existence at any time prior to the execution of the formal document; especially when the terms of the alleged informal contract would have to be pieced together or implied from various conversations and from selective extracts from correspondence. His Honour said (at [53]):

Commonsense has a part to play in the Court’s enquiry: it is inherently improbable that commercial people will intend to bind themselves to a substantial transaction in that haphazard and imprudent fashion, so potentially productive of subsequent dispute, when they have already recognised the need for a formal contract to record the terms of the transaction.

147 Significance was placed by Luigi on the circumstance that the parties each had experienced lawyers acting for them throughout, from which I am invited to infer that they would not have intended to be bound unless and until their solicitors had advised upon and documented the agreement.

148 In that regard, while there may be an inference in some cases to be drawn from the lack of involvement of solicitors that the parties did not intend any informal consensus to be binding, here, where the parties had hitherto been unable to conclude their disputes with the assistance of solicitors, (and from some of the comments made in the witness box may, rightly or wrongly, have regarded each other’s solicitors as hindering the process of resolution) it does not seem to me to be improbable that they may still have been prepared to agree a simple (even if awkwardly expressed) written agreement as to the basis on which they would settle their disputes and to have intended this agreement immediately to be binding notwithstanding that they contemplated that solicitors would be instructed later to document and implement that agreement.

149 It was common ground that there was a serious level of distrust between the brothers. However, that does not lead in my view to an inference that in a private meeting they did not agreed to be bound. The fact that they had agreed to meet without lawyers and with only an informal “mediator” or facilitator present might be thought to indicate a genuine attempt to overcome whatever difficulties had previously been encountered in resolving the matter through their lawyers. Accordingly, I draw little of assistance to Luigi from the fact that solicitors were not involved in the 11 April meeting.

150 That said, the informality of the 11 April document (against the background of the complex and longstanding commercial disputes between them) carries with it the inherent improbability that it was intended to be binding, as Palmer J noted in R T & Y E Falls Investments.

· Uncertainty/Incompleteness

151 The magnitude, subject matter or complexity of the transaction or dispute may in appropriate cases lead to an inference that the parties’ common intention was not to be bound by any agreement until a formal document was executed – see Baulkham Hills Private Hospital Pty Limited v G R Securities and ABC v XIV Commonwealth Games. In the ABC case, Gleeson CJ noted (at 548) that:

… 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.

152 His Honour considered it would normally be of importance in such a case that the court have an understanding of the commercial context in which the dispute arose:

…[a]nd a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract.

153 I have referred earlier to the uncertainty as to whether all matters in dispute between the parties were encompassed by the consensus reached at the 11 April meeting.

154 Further, it is difficult to ascertain from the written document (even supplemented by Dominic’s version of what was discussed – as opposed to what he understood to have been intended) how the 11 April consensus was to operate in the context of the agreement of 20 March which mandated an audit of all developments.

155 Finally, there is uncertainty as to whether (and if so how) the consensus recorded in the 11 April document was going to dispose (once and for all) of all disputes between these parties if the subpoenas (issued in the current proceedings) to Mr Murr were to be pressed.

· Matters of execution/header of document

156 There is in my view significance to be drawn from the fact that the parties thought it necessary (or important or prudent) to sign, and have formally witnessed, the document of 11 April. It might be thought, why were the notes signed at all if they were to be of no binding effect?

157 Luigi says that due to the level of distrust with Dominic he had no reservations about the note being signed. I do not find this a likely explanation. In any event it begs the question of what use was to be made of the notes. Luigi also says it was his practice of signing notes of meetings presumably to show is assent to that record of what was discussed at the meeting. However, I was shown no other notes of meetings or discussions (not accepted by him as having the agreed status of an agreement) which were simultaneously signed and witnessed.

158 Luigi also says this was because Dominic insisted that they be written down. I am not satisfied on the evidence that this was something upon which Dominic had insisted, but even if he had that seems to me to be beside the point.

159 The relevant question is what objectively was being manifested by each brother to the other in terms of intention when the document was formally signed.

160 The inference I would draw, given the formal witnessing of the brothers’ signatures, is that, at the very least, the brothers intended there to be an acknowledged record of the consensus reached at the conclusion of the meeting.

161 However, it is a big step to go further than that and to draw, from the fact that the document was signed and witnessed, a common intention that the parties were immediately to be bound thereby, ie without the need for agreement as to the final documentation of their correspondence and without the need for agreement on any outstanding issues between them.

162 I am not satisfied that such an inference should be drawn, particularly in light of the contradictory indications arising from the header to the document (and the informality of its contents).

163 Significantly, when the parties did record an agreement (which both accepted was binding) on 20 March 2008, they headed it “Agreement”. It would have been open to the parties, at the time of signing the 11 April document, to have added the header “Agreement” or to have included a simple statement that this was an agreement by which they would be immediately bound. They did not do so.

164 Having regard to the precise, almost pedantic, way in which Luigi gave evidence, I find it hard to believe that, had he sought to manifest his assent to an immediately binding agreement, he would not have done so very clearly and in writing.

165 If, as Dominic asserted, the header “without prejudice” was added after all the writing on page one of the 11 April document, that only reinforces my view that Luigi, at least, did not at that stage intend to be bound by any consensus recorded in that document unless and until it was formally documented. The shaking of hands and expression of the sentiment that, as brothers, “let’s put all this behind us”, does not in my view manifest sufficient intention to be immediately bound; it being equally consistent with an acknowledgement that an interim or tentative agreement (or agreement in principal) had been reached.

Conclusion

166 The conclusion I have reached is that the Dominic parties have not established, on the balance of probabilities, that the parties’ common intention, objectively ascertained, was immediately to be bound by any consensus reached at the 11 April meeting, without more (ie without agreement on any outstanding items or without the elements of their agreement being fully spelt out in a formal agreement).

167 The only objective circumstance which in my view points towards such an intention is the fact that the agreement was formally signed and witnessed. It might be thought that there was no need for that to occur if the parties were not thereby wishing to signify their assent to the matters set out in that document in some binding manner. However, evidence of a consensus between the brothers is not enough. What is necessary is some mutual manifestation of an intention immediately to be bound by that consensus.

168 The formality with which the document was signed seems to me to be of insufficient weight to overcome the difficulties arising out of the summary incomplete documentation of their consensus. This is particularly so, when account is taken of the agreed “without prejudice” nature of the discussions recorded in the document. It is significant that the “without prejudice” heading was added to the document at or shortly before the time it was signed, ie at the end of the meeting not the beginning (and, on Dominic’s evidence, even after the first page of the document had been written).

169 As I have reached the conclusion that the evidence does not support a finding, on the balance of probabilities, that there was a common intention on 11 April for there to be an immediately binding and enforceable agreement it is not necessary to consider whether and how such an agreement would have been capable of specific performance.

170 I find in favour of the cross-defendant and dismiss the second cross-claim with costs.

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Citations

Iacullo v Remly Pty Limited; Iacullo v Iacullo [2008] NSWSC 1176

Most Recent Citation

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Statutory Material Cited

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CITATION:	Iacullo v Remly Pty Limited; Iacullo v Iacullo [2008] NSWSC 1176
HEARING DATE(S):	1, 2, 3 and 15 October 2008
JUDGMENT DATE :	7 November 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Ward J
DECISION:	Defendants' second cross-claim dismissed.
CATCHWORDS:	CONTRACTS - offer and acceptance - whether parties had entered into binding contract to settle proceedings - whether objective intention immediately to be bound - HELD no common intention immediately to be bound.
LEGISLATION CITED:	Civil Procedure Act 2005 Conveyancing Act 1919 Uniform Civil Procedure Rules 2005
CATEGORY:	Principal judgment
CASES CITED:	Air Great Lakes Pty Limited v K S Easter (Holdings) Pty Limited (1985) 2 NSWLR 309 Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 B Seppelt & Son Limited v Commissioner for Main Roads (1975) 1 BPR 9147 Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Limited v G R Securities Pty Limited (1986) 40 NSWLR 622 Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251 G R Securities v Baulkham Hills Private Hospital Limited (1986) 40 NSWLR 631 Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1966] 1 WLR 287 Helmos Enterprises Pty Limited v Jaylor Pty Limited [2005] NSWCA 235 Masters v Cameron (1954) 91 CLR 353 R T & Y E Falls Investments Pty Limited v The State of New South Wales & ors [2001] NSWSC 1027 Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 Tasman Capital Pty Limited v Sinclair and Anor [2008] NSWCA 248 Toll v Alphapharm (2003) 56 NSWLR 662
TEXTS CITED:	Barrett, “Masters v Cameron: The Fourth Class Is Here To Stay” (2005) 79(8) ALJ 493 Peden, Carter and Tolhurst, "When Three Just Isn’t Enough: The Fourth Category of 'Subject to Contract' Cases" (2004) 20 (2) JCL 156
PARTIES:	Luigi Iacullo (Plaintiff in both matters) Remly Pty Limited (First Defendant in 5484/07) Dominic Iacullo (Second Defendant in 5484/07 and First Defendant in 4963/07) Lillian Iacullo (Third Defendant in 5484/07 and Second Defendant in 4963/07)
FILE NUMBER(S):	SC 5484 of 2007; 4963 of 2007
COUNSEL:	BA Coles QC with him G A Moore (Plaintiff) P Taylor SC with him M Luitingh (Defendants)
SOLICITORS:	Kreisson Legal (Plaintiff) Lincoln Smith & Company (Defendants)

[2008] NSWSC 1176

7 November 2008

Key Legal Topics

Areas of Law

Contract Law

Legal Concepts

Contract Formation