Kerry Albert Pty Ltd t/as Kerry Albert and Co v Fuller

[2018] NSWDC 254

District Court

New South Wales

Medium Neutral Citation:	Kerry Albert Pty Ltd t/as Kerry Albert & Co v Fuller [2018] NSWDC 254
Hearing dates:	16 August 2018
Date of orders:	07 September 2018
Decision date:	07 September 2018
Jurisdiction:	Civil
Before:	Dicker SC DCJ
Decision:	(1) Judgment for the plaintiff against the defendants. (2) The parties are to bring in agreed Short Minutes of Order within seven days for the judgment amount together with any applicable interest. (3) The Notice of Motion filed 19 July 2018 is otherwise dismissed. (4) The defendants are to pay the plaintiff's costs of the Notice of Motion filed 19 July 2018 as agreed or assessed. (5) Leave is granted to the parties to apply to vary the costs order in paragraph (4). (6) The exhibit on the application is to be returned after 28 days. (7) Liberty to the parties to apply to the Associate to Dicker SC DCJ on three business days’ notice.
Catchwords:	Contract – whether the parties entered into a binding agreement at a mediation – whether any agreement reached was conditional on the agreement being recorded in an executed deed – implied actual and ostensible authority of defendants’ solicitor – whether the plaintiff by its solicitor was entitled to rely on the implied actual and/or ostensible authority of the defendants’ then solicitor – relevant category in Masters v Cameron – ratification by defendants of solicitor’s acts
Legislation Cited:	Civil Procedure Act 2005 (NSW)
Cases Cited:	Australian Medico-Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165 Cassar v New South Wales Crime Commission [2014] NSWCA 356; (2014) 87 NSWLR 383 Donellan v Watson (1990) 21 NSWLR 335 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Fabre v Arenales (1992) 27 NSWLR 437 Feldman v GMN Australia Ltd [2017] NSWCA 107 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Leybourne v Permanent Custodians Pty Ltd [2010] NSWCA 78 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Newell v De Costi [2018] NSWCA 49 Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 Payne v Parker [1976] 1 NSWLR 191 The Owners Strata Plan No 57164 v Yau [2016] NSWSC 1056 The Owners Strata Plan No 57164 v Yau [2017] NSWCA 341 Yangdo Pty Ltd v Equiti Group Pty Ltd [2017] NSWDC 277
Category:	Principal judgment
Parties:	Kerry Albert Pty Ltd t/as Kerry Albert & Co (Plaintiff) Eric Andrew Fuller (First Defendant) Andrew Simon John Fuller (Second Defendant) Fuller Holdings International Pty Ltd (Third Defendant) Bellingen Management Pty Ltd (Fourth Defendant) Tradebase International Pty Ltd (Fifth Defendant) Sunway Solar Australia Pty Ltd (Sixth Defendant)
Representation:	Counsel: M Hall (Plaintiff) P Sim (Solicitor) (Defendants)   Solicitors: Pure Legal (Plaintiff) Philip Sim & Associates (Defendants)
File Number(s):	2017/00094255

Judgment

1. Before the court was a Notice of Motion filed on 19 July 2018 pursuant to which the plaintiff sought orders relating to an agreement allegedly entered into between the parties settling litigation in this court. The plaintiff submits that a binding agreement was entered into, that the defendants have defaulted under the agreement and that the plaintiff is entitled to damages pursuant to the breach of agreement. The defendants submit that no such binding agreement was entered into and the application should be dismissed.

The substantive proceedings

2. The plaintiff commenced proceedings in this court by way of a Statement of Claim filed on 28 March 2017 asserting that it was owed money by the defendants for accounting services provided by it to some of the defendants in the period 2011-2015.

3. In an Amended Defence filed on 8 August 2017, the defendants have denied any liability to pay the fees sought by the plaintiff.

4. Until 26 June 2018, a Mr Andrew Ford of Andrew R Ford Lawyers appeared in the proceedings for the defendants. Mr Ford's name is on the first Defence filed on behalf of the first defendant on 15 May 2017. A Notice of Intention of Ceasing to Act was filed by Mr Ford on 18 June 2018. A Notice of Ceasing to Act was filed on 26 June 2018. The defendants’ current solicitor is Mr Philip Sim from Crowther Sim Lawyers. A Notice of Appointment of Mr Sim as the solicitor for the defendants was filed on 10 August 2018. Accordingly, Mr Ford acted for the defendants from the commencement of the proceedings until 26 June 2018. This is significant in relation to the issues raised on the Motion.

5. The parties are also involved in Supreme Court proceedings.

Background to the alleged settlement agreement

6. I now propose to set out the background facts in the matter. Unless I indicate to the contrary, these represent my factual findings in the matter on the application.

7. At all relevant times, Ms Christine Perry has acted as the solicitor for the plaintiff in these proceedings. On 28 April 2017, Ms Perry was served with an appearance filed by Mr Ford on behalf of all defendants, except Mr Andrew Fuller. On 15 May 2017, Ms Perry was served by Mr Ford with an appearance on behalf of Andrew Fuller, the second defendant. It is alleged by the plaintiff in the proceedings that all of the defendants are liable for the accounting services provided by the plaintiff which I have referred to above. There is some evidence that the sixth defendant, Sunway Solar Australia Pty Ltd, has been deregistered. Mr Ford was also acting for the first and second defendants in the Supreme Court proceedings.

8. In the course of interlocutory stages in these proceedings, Mr Ford took steps to prepare the matter on behalf of the defendants including engaging in communications with Ms Perry.

9. On 15 November 2017, a Notice of Motion was filed for the plaintiff in which it sought summary judgment in relation to the whole of the plaintiff’s claim. On 1 February 2018, Acting Judge Cowdroy QC made orders which included ordering summary judgment in respect of part of the amount claimed in the Statement of Claim in the sum of $50,471.45. Those orders were subsequently varied by consent.

10. The Supreme Court ordered that a mediation occur in relation to the Supreme Court proceedings. It was agreed between the parties that the Supreme Court and District Court proceedings would be considered in the mediation so that all disputes between the parties could be mediated.

11. Although the mediation agreement in evidence does not include the District Court proceedings, it is not in issue that the District Court proceedings were part of the mediation and were referred to in the agenda for the mediation.

12. The mediation occurred on 23 February 2018. In attendance at the mediation were: the mediator, Mr Laughton SC, Mr Ford, the first defendant Mr Eric Fuller and his accountant; Ms Perry, counsel for the plaintiff, and Mr Kerry Albert and Ms Sandra Albert who were the controllers of the plaintiff.

13. At the time of the mediation on 23 February 2018, orders had been made by Acting Judge Cowdroy varying those which he had made on 1 February 2018 and which provided for:

1. Summary judgment in the amount of $20,343.86 as against the first defendant, Mr Eric Fuller;

2. Summary judgment in the amount of $1,792.52 against the second defendant, Mr Andrew Fuller;

3. The plaintiff’s costs of and incidental to the Motion to be paid by the defendants and fixed in the amount of $350 plus GST.

14. There was some suggestion in the course of the hearing that these orders were inaccurate and that the appropriate amount ordered to be paid was $34,924.79: see paragraphs 15 to 16 of the affidavit of Eric Fuller sworn 9 August 2018.

15. It seems to have been a common position between the parties that all thought that this was the amount of the judgment despite the orders which were actually made being as shown in Exhibit 1.

16. At the commencement of the mediation on 23 February 2018, the mediator asked whether those attending had authority on behalf of all parties to reach a settlement. Ms Perry states in her affidavit sworn 19 July 2018 that Mr Ford replied “We do”. A similar answer was given by Ms Perry. I accept that this occurred.

17. Ms Perry gives evidence that it was her understanding that the purpose of the mediation was to settle all disputes between the parties including the District Court proceedings and that the first item on the agenda at the mediation was the District Court proceedings.

18. Annexed to Ms Perry's affidavit sworn 10 July 2018 is a copy of a Deed of Settlement and Release (“the Deed") which Ms Perry said, and which I accept, was prepared and signed at the mediation on 23 February 2018. It was the plaintiff’s position that this Deed reflected the binding agreement reached between the parties at the mediation.

19. The Deed appears on its proper construction to be between the parties to the current District Court proceedings. See the first page of the Deed, the definition of “Party” and the execution pages. Recital B of the Deed provides as follows:

“Without admission of liability, the Parties have agreed to resolve all matters in dispute between them including the Proceedings on the terms and on the basis set out in this Deed.”

20. In the Deed, the “Proceedings” are defined as meaning “the District Court of New South Wales Case Number 2017/94255”. The Deed provides for the payment by Mr Eric Fuller, the first defendant, by bank cheque or electronic transfer of funds to the plaintiff of the sums of $34,925.28 on or before 18 March 2018 and $142,800 on or before 29 June 2018: Clause 1.2. Under the Deed, the parties were to cause their respective legal advisors to execute consent orders annexed to the Deed to be held in escrow by Ms Perry’s law firm.

21. Clause 1.4 provided: “Upon execution of this Deed and the consent orders, the Parties will cause to be filed in the Proceedings the consent orders marked and annexed “A” to this Deed”.

22. Clause 2.1 provided: “Upon receipt of the Settlement Sum [the two amounts] the Parties will cause to be filed in the Proceedings the consent orders annexed and marked “B” to this Deed.”

23. In the event the two settlement payments were not paid, under Clause 2.3 the parties agreed to the filing by the plaintiff of the consent orders marked and annexed “C” to the Deed which provided for judgment to be entered for the plaintiff against the defendants in the sum of $283,566.31.

24. The plaintiff claims that the parties reached a binding agreement at the mediation, that the two settlement payments have not been paid and that accordingly, they are entitled to judgment for the amount referred to plus interest less any amount paid.

25. The Deed could be executed in any number of counterparts which when taken together would constitute one instrument: Clause 10. It is noted that the Deed in evidence is signed by Mr Eric Fuller, the first defendant, by Sunway Solar Australia Pty Ltd and by Trade Base International Pty Ltd. The Deed is not signed by Andrew Fuller, by Bellingen Management Pty Ltd or by Fuller Holdings International Pty Ltd. It was an agreed fact between the parties that Mr Andrew Fuller and Mr Eric Fuller were the directing mind and will of all the corporate defendants.

26. The Deed was also not signed by the plaintiff. However, the evidence establishes that the directors of the plaintiff company resolved to enter into the Deed at a meeting of the Board of the plaintiff held on the day of the mediation.

27. The Deed does not state that it is only binding on execution by all the parties. It does not refer to any previous agreement allegedly reached at the mediation and as recorded by the terms of the Deed.

28. Paragraph 9 of Ms Perry’s 10 July 2018 affidavit states that at the time of the completion of the mediation she had a conversation with Mr Ford, the solicitor for the defendants, in which he stated:

“Here is the Deed signed by my clients other than Andrew Fuller. It is quite late at night and he is unable to get access to a machine to scan the Deed and return it but I will undertake to provide you with the Deed signed by him on Monday. I otherwise signed the orders to be held by you in escrow per the Deed."

29. Ms Perry was not cross-examined about this conversation and I accept her evidence.

30. No signed deed by Mr Andrew Fuller and his related companies was ever provided by Mr Ford to the solicitors for the plaintiff. Ms Perry annexes to her 10 July 2018 affidavit consent orders signed by Mr Ford (and Ms Perry) adjourning the District Court proceedings until 30 June 2018 (or some time thereafter as the court sees fit), dismissing the proceedings with no order as to costs and vacating the orders made on 15 February 2018. The consent order for judgment (Annexure “C”) was not signed by Mr Ford.

31. In her affidavit sworn 19 July 2018, Ms Perry states as follows in paragraphs 24-27:

“24. At approximately 12 noon, I received an offer of settlement from Andrew Ford on behalf of the defendants that was accepted by the plaintiff.

25. I then commenced typing a Deed of Settlement and Release recording the terms of settlement which was provided in draft to Andrew Ford. The terms of the deed were negotiated between Andrew Ford and myself with input from Andrew Ford on behalf of the defendants including as to the time for payment of the Settlement Sum as recorded in the Deed of Settlement.

26. I was present during the meeting of the directors of the Plaintiff company when the Deed of Settlement and Release was tabled and was resolved to be entered and drafted the Minutes of Meeting.

27. The Consent Orders which I drafted during the course of the mediation in conjunction with Andrew Ford and handed to him with the Deed of Settlement signed by the Plaintiff and the Consent Orders signed by me were provided to Andrew Ford at approximately 2 pm on 23 February 2018.”

32. Ms Perry gives evidence that on 26 February 2018 she telephoned Mr Ford and had a conversation with him in which she was pursuing the signed Deed of Settlement. Ms Perry gives evidence that Mr Ford stated to her words to the effect: “I have received the Deed from Andrew Fuller and I will get Myrna [his employed solicitor] to send a copy over to you but I will try to get it to you before I go [on holidays to Japan later that week]”. In evidence was Ms Perry's file note of the conversation which confirms that Mr Ford told her that he had received the Deed of Settlement from Mr Andrew Fuller.

33. However, repeated requests to Mr Ford and his associate after 26 February 2018 to provide the signed Deed were left unanswered. In an email sent on 7 June 2018 to Ms Perry, Mr Ford stated: “I have again emailed Andrew Fuller, renewing my earlier emailed requests he provide his signed counterpart Deed of Settlement. I will advise you immediately I receive same.”

34. There is accordingly some tension in the evidence as to whether Mr Ford said he had the signed Deed from Mr Andrew Fuller in the conversation on 26 February 2018 or whether he indicated only that Mr Fuller had signed the Deed. Ms Perry was not cross examined on this issue. Mr Ford was not called in relation to this issue.

35. Ms Perry on 26 February 2018 forwarded an email to Mr Ford seeking his permission to forward the consent order and email to the Associate to Acting Judge Cowdroy. The proposed email was as follows:

“This email is forwarded with the knowledge and consent of the solicitors for the defendants who are also copied into this email.

The parties have reached a conditional settlement of the proceedings.

For the purposes of enabling the settlement to be finalised we seek that the attached adjournment orders be made and the next court listing on 13 March 2018 be vacated together with Orders 2, 4, 5 of 2 February 2018 and Orders 1 and 2 of 21 February 2018."

36. Mr Ford replied on 28 February 2018 to Ms Perry and his associate: “Dear Chris Noted. Please proceed as proposed.”

37. This email was relied upon by the plaintiff as supporting an inference that a binding agreement had been entered into settling the matter and also as a representation by Mr Ford that a settlement had been reached.

38. A review of the court file suggests that the orders made did not include the vacation of the orders sought.

39. By email dated 28 February 2018, the legal assistant to Ms Perry forwarded the email agreed to the District Court registry.

40. On 28 February 2018, Ms Perry received an email from the liquidator of one of the Fuller companies which indicated that he had been advised that the dispute with the plaintiff had been settled and that a proof of debt lodged by the plaintiff in that liquidation could be withdrawn. Counsel for the plaintiff submitted that this information of settlement must have come from Mr Ford. In an email sent on 28 February 2018, Ms Perry informed the liquidator that the “dispute concerning the debts has been settled and the proof of debt is withdrawn”.

41. There was then discussion between Ms Perry and Ms Taouil of Mr Ford's firm requesting that Ms Perry be given permission to contact the Associate to Judge Letherbarrow, the District Court Civil Listing Judge, to let him know that the matter had settled. Permission was given and an email was sent by Ms Perry on 12 March 2018 to Judge Letherbarrow's Associate. Ms Taouil confirmed that Ms Perry would mention the matter before Judge Letherbarrow and hand-up consent orders adjourning the matter. The proceedings were then placed in the Note Settled List on 10 July 2018, being a date after the due date for payment of the Settlement Sum under the Deed.

42. As indicated above, Ms Perry did not receive the Deed signed by Mr Andrew Fuller and his related companies from either Mr Ford or Ms Taouil. Over the next few weeks, she sent a number of emails chasing up the Deed signed by Mr Andrew Fuller. She never received that Deed.

43. Under the Deed, the first payment of $34,925.28 was to be paid on or before 18 March 2018: Clause 1.2. On 19 March 2018, Ms Perry sent an email to Mr Ford seeking the receipt for the funds transfer and the Deed signed by Mr Fuller.

44. Mr Ford provided a payment receipt to Ms Perry for the payment of the first instalment under the Deed dated 19 March 2018 on 20 March 2018. In his email dated 20 March 2018 Mr Ford noted: “I observe $34,924.78 is 50 cents below the partial judgment debt (and costs) of $34,925.28. Please advise if you require .50 cent shortfall to be remitted?”

45. This email is relied upon by the plaintiff as being a reference to the amount which is the First Settlement Payment in Clause 1.2(a) of the Deed. The fact that this amount is referred to by Mr Ford is further relied upon to support the submission that the payment was made pursuant to the Deed and not pursuant to the previous orders of the District Court which were to have been vacated.

46. As stated, Ms Perry then sent a number of emails chasing up the Deed.

47. On 5 April 2018, Ms Perry sent a letter to Mr Ford referring to the fact that “our respective clients have settled the District Court proceedings”. Mr Ford did not dispute this.

48. On 12 June 2018, Ms Perry received an email from Mr Sim of Crowther Sim Lawyers, the defendants’ current lawyers, notifying her that that firm was taking over the conduct of the proceedings from Mr Ford. On 15 June 2018 Ms Perry sent an email to Mr Sim noting the second settlement payment being $142,800 was due on 29 June 2018 under the Deed.

49. At no time did Mr Ford ever question that a settlement had been reached of the District Court proceedings. Further, the initial contact with the defendants’ current solicitors did not result in them disputing a settlement.

50. The plaintiff says that it has changed its position in reliance on the settlement of the matter including by no longer claiming to be a creditor in EA Fuller & Sons Pty Ltd (in liquidation) and stating that it would not dispute an application for the termination of the liquidation of that company. This is established on the evidence.

36. Ms Perry states that at no time from 23 February 2018 until 10 July 2018 “did anyone contact me to indicate that either there was any objection or concern about the validity of the Deed of Settlement, the authority provided by Andrew Fuller to enter into the Deed of Settlement for the terms of the settlement or provision of Consent Orders to be held in escrow. At all material times I understood I held signed Consent Orders in escrow pending payment of the Settlement Sum”: paragraph 46 of Ms Perry's 19 July 2018 affidavit. Ms Perry states that she first heard there was some issue with the settlement on 10 July 2018.

37. The sum of $142,800 due on 29 June 2018 under Clause 1.2 of the Deed of Settlement was not paid by any of the defendants.

38. In his affidavit sworn 9 August 2018, Mr Eric Fuller, the first defendant:

1. Gives evidence that he instructed Mr Ford to act for him in the District Court proceedings;

2. States that he attended the mediation on 23 February 2018 and that his son Andrew Fuller did not attend the mediation;

3. States that he understood the mediation was being conducted in an attempt to settle a number of disputes between the parties but states that he “was opposed to settling the District Court proceedings at this mediation”;

4. Asserts that the amount paid on 18 March 2018 was to satisfy the money owed from the District Court orders made on 15 February 2018 and was not paid under the Deed;

5. Says the payment was made to remove the judgment debt in the District Court so as not to allow it to negatively affect his or his son's ability to obtain finance and any attempts to settle the Supreme Court proceedings;

6. States that although he signed the Deed, it was his belief “that the Deed was only being used as an instrument of negotiation during the mediation and that it would not be used or enforced outside the mediation. It was also my belief that the Deed was contingent on settling other matters in relation to proceedings concerning the company Matcove Pty Ltd, of which both parties to this matter are Directors. At no point did I consider this Deed of Settlement and Release a binding agreement between the parties”: paragraphs 20-22.

54. An affidavit of Andrew Fuller, the second defendant, sworn 9 August 2018 was read. Mr Andrew Fuller states in his affidavit:

1. At no time on 23 February 2018 was he contacted by anyone in relation to the mediation and he was not party to any conversations which took place at the mediation. Mr Fuller states he was not aware of any offers of settlement proposed by any of the parties in attendance and as such was not able to provide his opinion or agreement to any offers or consent to the signing of any Deeds;

2. At no time prior to or during the mediation did he authorise anyone to settle any matters on his behalf;

3. He was not aware that any agreements had been proposed or reached by the parties at the mediation “until days after the mediation had concluded. I was then informed by my previous solicitors at Fordlaw that a Deed of Settlement and Release had been prepared and that I needed to sign this Deed”;

4. He had never agreed to any Deeds that have been prepared in relation to the proceedings or signed them.

The submissions of the parties

55. Detailed and helpful written submissions were provided at the hearing of the Notice of Motion by counsel for the plaintiff. Oral submissions were made on behalf of both parties at the hearing.

56. The submissions made on behalf of the plaintiff were, in general summary, as follows:

1. From the commencement of the District Court proceedings and continuing until June 2018, Mr Andrew Ford of Fordlaw was the solicitor representing all defendants in the District Court proceedings and the plaintiffs in the Supreme Court proceedings. He had filed appearances in the District Court proceedings and had taken steps as a solicitor in the conduct of the District Court proceedings on behalf of the defendants;

2. The mediation held on 23 February 2018 involved discussion between the representatives present of settlement of the District Court proceedings;

3. At the commencement of the mediation, Mr Ford expressly represented that he had authority on behalf of all parties to reach a settlement;

4. An offer of settlement relating to the District Court proceedings was made which was accepted and reduced to writing in the Deed. The Deed was the subject of back-and-forth negotiation between Mr Ford and Ms Perry at the mediation;

5. The Deed was signed by Eric Fuller at the mediation. Mr Andrew Fuller did not sign the Deed at the mediation. However, the reason for the lack of signing was expressly represented by Mr Ford as being because of the lateness of the hour and the difficulty for Andrew Fuller to get to a machine to scan it;

6. A binding agreement was entered into at the mediation and the Deed merely recorded that binding agreement. The case fell within the first category of Masters v Cameron;

7. Mr Ford signed the first two consent orders attached to the Deed as the solicitor for the defendants;

8. Post-contractual conduct may be taken into account to determine that a binding agreement was entered into and the terms of that agreement;

9. After the mediation, Mr Ford made express and implied representations that the Deed was agreed to by Andrew Fuller and had already been signed by Andrew Fuller;

10. As a result of the representations made by Mr Ford and in accordance with the terms of the Deed, Ms Perry arranged for consent orders seeking adjournment of the matter as signed by her and Mr Ford to be provided to the court;

11. Ms Perry also confirmed that the plaintiff's debt alleged with EA Fuller & Sons Pty Ltd (in liquidation) was no longer pressed by it;

12. The first payment was made under the terms of the Deed showing that the defendants believed they were bound by the Deed;

13. No issue was ever raised until 10 July 2018 that the Deed was binding on the defendants;

14. The evidence taken as a whole shows that the parties to the District Court proceedings reached a binding agreement encapsulated in the Deed at the mediation where all parties were represented. The Deed was signed by Eric Fuller and was agreed to by Andrew Fuller by Mr Ford as his solicitor, who had implied actual and ostensible authority at the time to bind Andrew Fuller having been retained by him and the related corporate defendants to represent them in the proceedings. The fact that the Deed was not signed by Andrew Fuller is immaterial as Mr Ford accepted it on his behalf sufficient to fall within the first class of Masters v Cameron such that the defendants were immediately bound;

15. The subsequent conduct of Mr Ford constituted ratification by the defendants of the terms of the Deed;

16. The evidence of Eric Fuller and Andrew Fuller is irrelevant. Whether there was a binding agreement between the parties is to be determined objectively. There is no suggestion of the binding agreement being qualified in any way;

17. A Jones v Dunkel inference should be drawn against the defendants through their failure to call Mr Ford as a witness;

18. Mr Andrew Fuller's agreement to the Deed should be further inferred from his failure to act when he heard “days after the mediation” that an agreement had been concluded;

19. Nothing in the affidavits of Andrew and Eric Fuller impact upon the ostensible authority Mr Ford undeniably had to enter into negotiations and settle the District Court proceedings. The evidence of Mr Andrew Fuller does not negate the representations objectively made that he was bound by the Deed. The conduct of Mr Ford constitutes a retrospective ratification of the terms of the Deed as he was acting within his authority. The payment of the First Settlement Sum constitutes retrospective ratification of the terms of the Deed. The ratification occurred through acts which were clear on an objective basis to adopt the Deed.

57. The defendants submitted, in general summary, as follows:

1. It was unclear on the evidence what offer was made at the mediation, whether it was accepted and what the agreement, if any, was;

2. Mr Andrew Fuller was not present at the mediation;

3. There was no evidence that Mr Ford had authority to bind all the defendants. Mr Andrew Fuller's affidavit negates that Mr Ford had any authority or Eric Fuller had any authority to bind him;

4. The payment that was made was pursuant to the District Court orders not the Deed;

5. There was no evidence that Mr Andrew Fuller was contacted in relation to the post-mediation correspondence;

6. The inference should be drawn that any settlement was only binding when all parties had executed the Deed. There was no evidence that Mr Andrew Fuller had executed it which is satisfactory to be relied upon;

7. There was no evidence that authority was given to Mr Ford to bind the defendants;

8. Ms Perry could not have believed there was a binding agreement when there was no response to her communications chasing up the signed Deed by Andrew Fuller. The fact she chased up the Deed shows she did not think there was any binding agreement;

9. No Jones v Dunkel inference should be drawn by the defendants’ failure to call Mr Ford. The plaintiff should have called Mr Ford in their case. An inference therefore arises against it;

10. On the whole of the evidence, there was no binding agreement and there was no breach as pleaded.

Consideration

Contractual principles

58. In Yangdo Pty Ltd v Equiti Group Pty Ltd [2017] NSWDC 277 I stated as follows in paragraphs [24]-[29]:

“[24] In Masters v Cameron (1954) 91 CLR 353, Dixon CJ, McTiernan and Kitto JJ stated as follows:

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.

[25] In each of the first two cases referred to by the High Court, there is a binding contract. The third class is fundamentally different. There, the terms of agreement are not intended to have and therefore do not have any binding effect of their own.

[26] Later cases have identified a fourth category of Masters v Cameron. However, it is clear that the categories identified in Masters v Cameron “are neither strict nor prescriptive”. They are also not “exclusive nor necessarily exhaustive. Rather, they describe circumstances in which a finally binding contract may or may not have come into existence”: Feldman v G&M Australia Ltd [2017] NSWCA 107 at [68] per Beazley P.

[27] A useful summary of the various principles applicable to Masters v Cameron situations was set out by Beazley P in Feldman at [60]–[71].

[28] Beazley P also quoted the important passage of McHugh JA in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 where his Honour stated at 634–635 the following:

… the decisive issue 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.

[29] That statement reflects the objective theory of contract which is the current law in Australia: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35].”

59. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court stated the following at paragraph [35]:

“[35] Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.

60. In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]:

“[93] The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]–[52].”

61. In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 the majority stated as follows at paragraphs [16]:

“[16] It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it.”

62. Post-contractual conduct of the parties is admissible on the question of whether a contract has been formed: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163-164; Australian Medico-Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 at [70].

Principles relating to the authority of solicitors

63. In Donellan v Watson (1990) 21 NSWLR 335 at 342, Handley JA stated as follows:

“A solicitor retained to conduct litigation ordinarily has both implied and ostensible authority to bind his client to a compromise of those proceedings: see Chown v Parrott (1863) 14 CB NS 74; 143 ER 372; Prestwich v Poley (1865) 18 CB NS 806; 144 ER 662; Little v Spreadbury [1910] 2 KB 658 and Waugh v H B Clifford and Sons Ltd [1982] Ch 374 at 388. Any instruction from the client which restricts the solicitor's authority to compromise the proceedings will only affect the other party who is on notice of that restriction: see Thompson v Howley [1977] 1 NZLR 16 at 23-25 and the cases there cited.

The authority of counsel briefed in the cause to bind his client to a compromise of the litigation is governed by the same principles: see Neale v Gordon Lennox [1902] AC 465 and Harvey v Phillips (1956) 95 CLR 235.

In some cases however a solicitor may have no implied actual authority to compromise litigation without express instructions. The attitude and circumstances of the client known to the solicitor may be such that an implied term that the solicitor shall have actual authority to do so may not “go without saying”: see Waugh v H B Clifford & Sons (at 387), and Thompson v Howley (at 25).

A solicitor certainly has no actual authority to compromise litigation contrary to his instructions and if he does so he will be liable to the client for any damage sustained by the latter as a result of the unauthorised compromise: see Fray v Voules (1859) 1 El & El 839; 120 ER 1125; Butler v Knight (1867) LR 2 Exch 109 at 112; The Hermione [1922] P 162 and Thompson v Howley (at 23-26): see also Bullen and Leake, 3rd ed (1863) at 83-84, 275.”

64. This passage was quoted with approval by Justice Darke in The Owners Strata Plan No 57164 v Yau [2016] NSWSC 1056 at [117]. The decision of Justice Darke was confirmed by the Court of Appeal: [2017] NSWCA 341. Beazley P stated as follows at [172]-[175]:

“[172] The legal principles governing ostensible authority were not in issue. The Owners Corporation, in its submissions to the primary judge, acknowledged that:

Both solicitor and counsel retained to conduct litigation ordinarily have ostensible authority to bind their client to a compromise of those proceedings. Any instruction from the client which restricts that authority will only affect the other party if it is on notice of the restriction: Donellan v Watson (1990) 21 NSWLR 335 at 342

[173] Whether or not a person has ostensible authority (also described at times as ‘apparent authority’) is a question of fact: see Geissler v Accro Motors Pty Ltd (1955) 73 WN (NSW) 31; CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 9 ANZ Insurance Cases ¶61-232 at 75,554. It usually involves an inference based upon a representation or representations made by the principal that the agent has authority to contract within the ambit or scope of the ‘apparent authority’: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503.

[174] As the Owners Corporation pointed out, ostensible authority is traditionally described in terms of estoppel by representation. Reliance is a necessary element of the estoppel: Freeman & Lockyer v Buckhurst Park Properties at 503; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72; [1975] HCA 49; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; [1990] HCA 32 at 200; G E Dal Pont, Law of Agency (3rd ed, 2014, LexisNexis) 460 [20–7].

[175] The question as to the extent of a solicitor’s ostensible authority was discussed by this Court in Pavlovic v Universal Music Australia (2015) 90 NSWLR 605; [2015] NSWCA 313 at [150], where the Court adopted the statement of principle in Lucke v Cleary (2011) 111 SASR 134; [2011] SASCFC 118 of Stanley J, Gray and David JJ agreeing, at [61], that:

… in the context of litigation, a legal practitioner has ostensible authority to bind his or her client to a contract which relates to and, in particular, compromises that litigation … (citations omitted)”.

65. At paragraph 179, Beazley P stated as follows in relation to ratification:

“[179] The relevant principle as to ratification was stated by Barrett JA in 2 Elizabeth Bay Road v Owners — Strata Plan 73943 at [57], as follows:

There will be no ratification unless the subsequent actor has the necessary authority. Thus, if, in the company context, the usual division of authority between the directors and the members in general meeting prevails, purported ratification by the members in general meeting of something exclusively within the province of the directors will not be effective: Massey v Wales [2003] NSWCA 212; 57 NSWLR 718.”

66. Leeming JA agreed with Beazley P except in relation to the point concerning ratification. Similar views were expressed by Emmett AJA.

66. In Cassar v New South Wales Crime Commission [2014] NSWCA 356; (2014) 87 NSWLR 383 the Court of Appeal in a joint judgment stated as follows at [56]-[59]:

“[56] It is useful at the outset to understand the terminology. The terms apparent authority and ostensible authority are generally used as synonyms in the law of agency: see Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503 per Diplock LJ. Mr Cassar submitted that a person has apparent authority if held out by another as having authority to engage in conduct including the particular act in question. That submission states the law too narrowly. In general terms, the scope of an agent’s apparent authority is that which the principal represents or holds out to third parties: G D Dal Pont, Law of Agency (3rd ed 2013, LexisNexis Butterworths), 8.1.

[57] Apparent authority is to be contrasted with the actual authority of an agent. An agent’s actual authority may include such authority as is implied by the nature and terms of the actual authority conferred on the agent by the principal. The scope of an agent’s implied authority in a particular case will depend upon what is necessary or incidental to the performance of the express terms of the agency. An agent may, of course, have both implied and apparent authority. The implied and apparent authority of a legal practitioner was explained by Brightman LJ in Waugh v HB Clifford & Sons Ltd [1982] Ch 374 at 387 as follows:

The law thus became well established that the solicitor or counsel retained in an action has an implied authority as between himself and his client to compromise the suit without reference to the client, provided that the compromise does not involve matter “collateral to the action“; and ostensible authority, as between himself and the opposing litigant, to compromise the suit without actual proof of authority, subject to the same limitation …

[58] His Lordship added that a compromise, which contained a term the court could not have ordered, did not constitute a “collateral matter“ for the purpose of the principle just stated.

[59] Waugh v H B Clifford & Sons Ltd was cited by White J in Across Australia Finance v Bassenger [2008] NSWSC 799, where his Honour was also concerned with the extent of a solicitor’s authority to compromise proceedings. His Honour, at [78], referred to the authority of a legal practitioner to compromise proceedings in the following terms:

A solicitor or barrister retained to conduct litigation ordinarily has implied as well as ostensible authority to bind his or her client to a compromise of the proceedings provided that he or she does not act contrary to instructions, the circumstances do not otherwise indicate that express instructions are required, the compromise does not include matters collateral to the action, and the compromise is effected in a fair and reasonable manner so that it is fairly within the limits of authority (Donellan v Watson (1990) 21 NSWLR 335 at 342; Prestwich v PoleyWaugh v H B Clifford & Sons Ltd [1982] Ch 374 at 387).

68. In Feldman v GNM Australia Ltd [2017] NSWCA 107 Beazley P stated as follows at [99]-[102]:

“[99] Whether or not a person has ostensible authority (also described at times as ‘apparent authority’) is a question of fact: see Geissler v Accro Motors Pty Ltd (1955) 73 WN (NSW) 31; CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 9 ANZ Insurance Cases 61–232 at 75,554. It usually involves an inference based upon a representation or representations made by the principal that the agent has authority to contract within the ambit or scope of the ‘apparent authority’: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503.

[100] The jurisprudential basis of ostensible authority is traditionally described in terms of estoppel by representation. Reliance is a necessary element of the estoppel: Freeman & Lockyer v Buckhurst Park Properties at 503; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 200; G E Dal Pont, Law of Agency (3rd ed, 2014, LexisNexis) 460 [20–7]. In a case such as the present, the party seeking to enforce the contract must prove a change of position to its detriment.

[101] The question as to the extent of a solicitor’s ostensible authority was discussed by this Court in Pavlovic v Universal Music Australia at [150], where the Court adopted the statement of principle in Lucke v Cleary (2011) 111 SASR 134; [2011] SASCFC 118 of Stanley J, Gray and David JJ agreeing, at [60]–[62], that:

As a general proposition, a solicitor does not have ostensible authority to bind his or her client to a contract.

That general proposition, however, is subject to the qualification that, in the context of litigation, a legal practitioner has ostensible authority to bind his or her client to a contract which relates to and, in particular, compromises that litigation …

… in the context of litigation the practitioner’s authority to bind his or her client to a contract is confined to a contract that actually and genuinely relates to the litigation. (citations omitted)

[102] In Pavlovic v Universal Music Australia, the negotiations between the parties had not reached the stage where litigation had been commenced. Rather, at least whilst the negotiations were in train, “litigation was in fact not in contemplation”: at [153]. As I stated at [154]:

… to accept that a ‘potentially litigious’ dispute engages the ostensible authority of a solicitor to enter into an agreement is also not supported by authority. CIC Insurance v Bankstown Football Club does not extend the exception in Lucke v Cleary to such disputes. Rather, in CIC Insurance v Bankstown Football Club the solicitor was retained in relation to an insurance claim, and therefore had ostensible authority to deal with ‘issues which reasonably and foreseeably arose in the pursuit of that claim’ …”

69. McColl JA agreed with Beazley P’s reasons.

Whether a binding agreement was entered into by the parties

70. As indicated above, the decisive issue in determining whether a binding contract was entered into is the intention of the parties as objectively ascertained from the terms of the document or from the conduct of the parties considered in the light of the surrounding circumstances. That reflects the objective theory of contract which has been stated to apply by the High Court in numerous recent cases.

71. The fact that Mr Eric Fuller may have had a private belief that the Deed as signed by him was only being used as an instrument of negotiation during the mediation and that it would not be used or enforced outside the mediation is not to the point. There is no evidence that this belief was communicated to anyone. He signed the Deed.

72. No reliance was made in submissions by the legal representative for the defendants on any conduct of the plaintiff which would render the Deed not binding against the defendants.

73. When the evidence is considered objectively, in my view the evidence supports the conclusion that a binding agreement was entered into between the parties on 23 February 2018 in the terms of the Deed agreed between the solicitors:

1. The undisputed evidence is that Mr Ford indicated in the mediation that authority was held on behalf of all parties to reach a settlement: paragraph 20 of the affidavit of Ms Perry sworn 19 July 2018. There is no evidence anyone disputed that at the mediation;

2. Mr Eric Fuller signed the Deed on his own behalf and on behalf of a number of companies before it was provided to Ms Perry;

3. The Deed was finalised following negotiations between Mr Ford and Ms Perry at the mediation and following an offer of settlement being accepted;

4. Post-contractual conduct may be relied on to determine whether there was a binding agreement;

5. Mr Ford indicated to Ms Perry on 26 February 2018 that he had received the signed Deed from Andrew Fuller. Although this Deed was never provided and Mr Ford sent a slightly contrary email on 7 June 2018, Ms Perry was not cross-examined on this issue;

6. The signed consent orders provided by Mr Ford after the mediation to Ms Perry are consistent with there being a binding agreement in existence between the parties;

7. The payment made on 19 March 2018 related to the first sum in the Deed and was clearly related to the Deed and not the previous orders of the District Court: see Mr Ford’s 20 March 2018 email to Ms Perry;

8. The evidence shows that the Deed was agreed between the solicitors at the mediation at which Mr Eric Fuller, Mr Ford, the directors of the plaintiff and Ms Perry were present;

9. Mr Ford's email dated 28 February 2018 where he stated “Please proceed as proposed” in relation to the settlement of the proceedings is only consistent with the agreement as reflected in the Deed being binding;

10. Mr Andrew Fuller in his 9 August 2018 affidavit states that he became aware of the settlement agreement “days after the mediation had concluded”. Despite this, neither Mr Eric Fuller nor Mr Andrew Fuller disputed any settlement as reflected in the Deed until 10 July 2018;

11. The letter from the liquidator dated 28 February 2018 was copied to Mr Ford and indicated that he (the liquidator) had been advised that the dispute with the plaintiff had been settled. There is no evidence Mr Ford disputed that;

12. The associate of Mr Ford, Ms Taouil, confirmed that Ms Perry could hand up consent orders on 13 March 2018 confirming a settlement of the proceedings. This would not have occurred unless a settlement had been reached;

13. The payment made was only consistent with the first payment to be made under the Deed. The timing of the payment is significant. It was made only one day after the payment was to be made pursuant to the Deed: Clause 1.2(a). The inference should be drawn from the closeness of the timing in the light of the correspondence, that the payment was made pursuant to the Deed;

14. Ms Perry’s conduct in chasing up the Deed from Mr Ford is consistent with her being a diligent solicitor seeking a written executed record of the agreement. It does not suggest that no binding agreement had been reached;

15. For these reasons I find that a binding agreement was entered into between the parties on 23 February 2018 at the mediation as recorded in the terms of the Deed.

74. I reject the submission by the solicitor for the defendants that the plaintiff should have called Mr Ford in its case.

75. In my view, no Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference should be drawn against the plaintiff through its failure to call Mr Ford as a witness on the hearing of the application. The criteria for the application of the principle in Jones v Dunkel as stated by the Court of Appeal in Payne v Parker [1976] 1 NSWLR 191 at 201-202 do not apply in the present case. It would not be expected or natural that the plaintiff would call Mr Ford rather than the defendants. Mr Ford would not be regarded as being in the plaintiff’s camp. There is nothing to support the conclusion that the plaintiff failed to call Mr Ford as it feared to do so because of his likely evidence: Fabre v Arenales (1992) 27 NSWLR 437 at 449-450. Further, even if the inference was open, I would not choose to draw it in this case: Newell v De Costi [2018] NSWCA 49 at [78]-[80]. Mr Ford had been the defendants’ solicitor not the plaintiff’s.

76. The plaintiff makes a submission that a Jones v Dunkel inference should be drawn against the defendants through their failure to call Mr Ford to give evidence. There is no evidence as to why the defendants chose to change their solicitor when they did. Mr Ford acted as the solicitor for the defendants at the relevant time including at the mediation. He would be a crucial witness in relation to whether he had received a signed Deed from Mr Andrew Fuller and what his reasons were for sending the various emails and letters in evidence. In my view, a Jones v Dunkel inference should be drawn against the defendants through their failure to call Mr Ford. I accordingly am of the view that I should, in all the circumstances, draw the inference that the evidence of Mr Ford would not have assisted the defendants’ case: Newell v De Costi at [78]-[80]. However, I wish to make it clear, that my findings in the case would have remained the same even if that inference had not been drawn in favour of the plaintiff.

The authority of Mr Ford

77. It is obvious as a result of the District Court proceedings that there was litigation on foot between the plaintiff and the defendants which was considered at the mediation on 23 February 2018. Accordingly, the case is different to that relied upon by the defendants: Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313 where the negotiations between the parties had not reached the stage where litigation had been commenced and was in fact not even in contemplation: see Feldman, above, at [102] and Pavlovic at [154].

78. The question therefore arises, if I am wrong in my analysis that objectively a binding agreement was reached on 23 February 2018 and that the case fell within the first category in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360, whether a binding agreement to settle the matter was entered into by Mr Ford in his role as a solicitor acting for the defendants in the District Court litigation. Mr Ford had filed, on the evidence, appearances for the defendants in the District Court proceedings.

79. There is nothing in the affidavits of Mr Eric Fuller and Mr Andrew Fuller relied on by the defendants on the Motion to suggest that there was any express limitation on the authority of Mr Ford to reach a settlement at the mediation on behalf of the defendants.

80. Accordingly, pursuant to the authorities which I have set out above, Mr Ford had, as he had been retained to conduct the litigation in the District Court on behalf of the defendants, both implied actual and ostensible authority to bind the defendants to a compromise of the proceedings. There is no evidence that any restriction on Mr Ford’s authority had been communicated to the plaintiff or to Ms Perry. There was no evidence before me that Mr Ford had no implied actual authority to compromise the District Court litigation without express instructions.

81. Even if Mr Ford had no implied actual authority, in his position as the solicitor on the record acting for the defendants in the proceedings he had ostensible authority to act for them to settle the proceedings. There is no question in the present case that the Deed was not a contract that actually and genuinely related to the litigation in the District Court. As was explained by Beazley P in the Feldman case, the jurisprudential basis of ostensible authority is traditionally described in terms of estoppel by representation where reliance is a necessary element of the estoppel: at [100]. The party seeking to enforce the contract must prove a change of position to its detriment.

82. Here, the defendants held Mr Ford out as having authority to act for them by:

1. Retaining him to act for them in the proceedings;

2. Continuing to provide him with instructions to act for them in the proceedings which can be inferred from the various documents filed in the proceedings which are on the court file and of which the court can take judicial notice;

3. By having Mr Ford appear for them at the mediation; and

4. By having Mr Ford engage in correspondence on their behalf after the mediation with Ms Perry.

83. The matters which I have relied upon as establishing a binding contract being formed at the mediation, are equally applicable to establish that Mr Ford had implied actual authority and/or ostensible authority and that the representation made as to his authority was relied upon by Ms Perry. This authority extended to saying the Deed was agreed to at the mediation. Alternatively, it extended after the mediation to stating that a binding agreement had been reached. I particularly rely upon:

1. Mr Ford’s status as the solicitor for the defendants in the proceedings;

2. Mr Ford's email dated 28 February 2018 stating “Please proceed as proposed” to the email to be sent to the District Court registry indicating that there had been a conditional settlement of the proceedings (such condition clearly being the payment of the moneys under the agreement as reflected in the Deed);

3. The forwarding of the email to the District Court registry on 28 February 2018 which was copied to Mr Ford and Ms Taouil without any subsequent indication of dissent;

4. Mr Ford’s acceptance of the email from the liquidator indicating that the dispute had been settled without any indication to the contrary;

5. The signing by Mr Ford of the two consent orders adjourning the proceedings and ordering that the proceedings be dismissed with no order as to costs with the orders made on 15 February 2018 being vacated;

6. Ms Taouil from Ford Law agreeing to the consent orders being handed up that the matter had been settled on 13 March 2018;

7. Mr Ford confirming in his email dated 24 March 2018 that the payment related to the first sum in the Deed. This is clearly the implication of the email;

8. Ms Perry withdrawing the proof of debt in EA Fuller & Sons Pty Ltd (in liquidation) to the knowledge of Mr Ford: see Mr Ford's letter dated 28 March 2018;

9. Mr Ford not disputing the statement in the 5 April 2018 letter from Ms Perry that the District Court proceedings had been settled.

84. All of these matters, in my view, establish Mr Ford's authority to settle the District Court proceedings on behalf of the defendants and the fact that a binding settlement had been reached between the parties. It is clear from the evidence relating to Ms Perry’s acts that she relied on Mr Ford’s conduct and communications to act on behalf of the plaintiff including to its detriment in relation to withdrawing the proof of debt in the company in liquidation. The proceedings were also adjourned.

85. Accordingly, in my view Mr Ford had implied actual authority and/or ostensible authority on behalf of the defendants to bind them to a settlement of the proceedings as reflected in the Deed and the defendants are accordingly bound to that agreement. There is nothing in the Deed to suggest that any binding agreement is conditional in any relevant sense.

86. As indicated by Handley JA in Donellan v Watson, above, at 342, if in fact Mr Ford had no authority to compromise the litigation and acted contrary to his instructions, he will be liable to the defendants for any damage sustained by the unauthorised compromise.

Ratification

87. The plaintiff also relies on the submission that there was a subsequent ratification of the terms of the Deed on behalf of the defendants. I will consider this if I am in error in relation to the first two bases of liability of the defendants.

88. It was submitted that the principles applicable are as follows:

1. A principal can ratify the making of a contract entered into by a purported agent when the agent did not in truth have authority to make the contract on behalf of the principal. The ratification when made is regarded as having effect retrospectively and the agent is treated as having always had the requisite authority;

2. An agent can also ratify acts on behalf of the principal done without authority and that will be treated as having retrospective effect;

3. Whether the conduct of the principal amounts to ratification is a question of fact and will only be accepted to have occurred where there are “clear adoptive acts” of the principal;

4. There must be full knowledge of all the material circumstances in which the act of the agent was done unless the evidence shows that the principal intended to ratify, whatever the circumstances were: Darke J in Yau above at [124] following the decision of the Court of Appeal in Leybourne v Permanent Custodians Pty Ltd [2010] NSWCA 78 at [131]-[134].

89. I do not accept the submission by counsel for the plaintiff that the subsequent conduct of Mr Ford alone constitutes retrospective ratification of the terms of the Deed on behalf of both Eric Fuller and Andrew Fuller: written submissions paragraph 31. In my view, there is no clear evidence that this was a clear adoptive act by the principals.

89. However, I accept the submission that the payment by the defendants of the First Settlement Sum does constitute retrospective ratification by them of the terms of the Deed, if the arguments as to actual or ostensible authority and the first category of Masters v Cameron are rejected. In my view, having regard to the timing of the payment and the circumstances in which it was made as is reflected in the correspondence relating to the payment, it was clear that it was a payment under the terms of the Deed. This was a clear adoptive act by the defendants. I accept the submission on behalf of the plaintiff that the only inference to be drawn in the circumstances is that the defendants were acting in accordance with the terms of the Deed in making the payment on 19 March 2018: written submissions paragraphs 32-33.

90. In my view, the evidence does not allow me to conclude that the acceptance of the benefit of the District Court proceedings being settled by the withdrawal of the plaintiff’s proof of debt also constituted retrospective ratification through clear adoptive acts as submitted by the plaintiff. The evidence in my view is simply not clear enough to come to this conclusion: see written submissions paragraph 34.

91. For all of the above reasons, in my view the plaintiff has established its case for relief. By not making the Second Settlement Payment, the defendants have breached the agreement reached entitling the plaintiff to the amount referred to annexure “C” to the Deed subject to giving credit for any amount paid: see clause 2.3.

92. It is not clear to me that this court has the power to make the declarations sought in paragraphs 1 and 2 of the Notice of Motion filed 19 July 2018. Section 73(1)(b) of the Civil Procedure Act 2005 (NSW) refers to the court making “such orders as it considers appropriate to give effect to any such determination”, being whether proceedings have been compromised or settled.

93. However, orders can be made for payment by the defendants of the sum sought by the plaintiff. Under the draft consent order which is Annexure C to the Deed, judgment was to be entered for the plaintiff in the sum of $283,566.31. However, the defendant should be given credit for the First Settlement Payment leaving the amount outstanding of $248,641.03. Interest will need to be added to that sum for the relevant period.

Disposition

95. For the above reasons, I make the following orders:

1. Judgment for the plaintiff against the defendants.

2. The parties are to bring in agreed Short Minutes of Order within seven days for the judgment amount together with any applicable interest.

3. The Notice of Motion filed 19 July 2018 is otherwise dismissed.

4. The defendants are to pay the plaintiff's costs of the Notice of Motion filed 19 July 2018 as agreed or assessed.

5. Leave is granted to the parties to apply to vary the costs order in paragraph (4).

6. The exhibit on the application is to be returned after 28 days.

7. Liberty to the parties to apply to the Associate to Dicker SC DCJ on three business days’ notice.

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Decision last updated: 14 September 2018