Locnere Pty Ltd v Jakk's Bagel & Bread Co Pty Ltd

[2003] NSWSC 1123

CITATION:	Locnere Pty Ltd & Anor v Jakk's Bagel & Bread Co Pty Ltd [2003] NSWSC 1123
HEARING DATE(S):	21 November, 2003
JUDGMENT DATE:	21 November 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Summons dismissed, no order as to costs.
CATCHWORDS:	CONTRACT - Parties agree on terms for compromise of proceeds - terms to be as in Deed to be exchanged - whether later correspondence results in binding informal contract - COSTS - Defendant agrees on all terms of contract but reneges on agreement before contract becomes binding - Defendant's conduct not illegal but unmeritorious - Defendant deprived of costs order.
CASES CITED:	Masters v. Cameron (1954) 91 CLR 353
PARTIES :	Locnere Pty LTd - First Plaintiff Fabian Sutton - Second Plaintiff Jakk's Bagel and Bread Co Pty Ltd - Defendant
FILE NUMBER(S):	SC 4879/03
COUNSEL:	R.I. Goodridge - Plaintiffs R.A. Parsons - Defendant
SOLICITORS:	Employment Lawyers - Plaintiffs Tsolakis Solicitors - Defendant

Ex tempore

1    The Plaintiffs seek a declaration that there has been a binding agreement made between them for the settlement of proceedings in the Industrial Relations Commission of New South Wales. By their Summons, the Plaintiffs seek an order for specific performance directing the Defendant to do all things necessary to execute the Deed of Release. 2    The circumstances maybe briefly recounted. The Plaintiffs commenced proceedings in the Industrial Commission on 22 September 2002. Various interlocutory steps occurred thereafter. On 19 June 2003 a conciliation conference was conducted by Schmidt J. On that day, directions were made by Schmidt J in accordance with a document signed by the solicitor for the applicants and counsel for the respondents in the following terms.

“The court notes:

1. Proceedings have been compromised between the parties.

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

3. Liberty to apply on three days' notice.”
3    On 24 June the Plaintiffs’ solicitors sent to the Defendant's solicitors a draft Deed of Mutual Release. There is no document in evidence, nor is there any other evidence before the Court, as to what were the terms of compromise which had been agreed on 19 June 2003. It may be inferred, however, that the draft Deed of Mutual Release, which was sent to the Defendant's solicitors on 24 June, encompassed at least some of the terms which had been discussed and agreed between the parties on 19 June. Which of the terms in the document had been agreed and which were new does not appear from the evidence. The Plaintiffs’ solicitors thereafter pressed the Defendant's solicitors for execution and return of the Deed of Release. 4    On 28 August 2003, the Defendant's solicitors wrote to the Plaintiffs’ solicitors advising that their client had informed them of changes which it required to the Deed. A copy of the Deed was sent by the Defendant's solicitors to the Plaintiffs’ solicitors by e-mail on 28 August 2003, that copy of the Deed showing by notations and other marking-up what amendments to the Deed were required by the Defendant. 5    By an e-mail sent from the Plaintiffs’ solicitors to the Defendant's solicitors on 29 August 2003, the Plaintiffs’ solicitors stated:

“We have considered the changes your client requires as per the attachments and accept same.

Please have your client execute the Deed in duplicate and ensure they are brought with you to the mention of this matter on Monday, 1 September 2003.

We shall be seeking a costs order as a result of your client failing to comply with the Commission's directions.”
6    The directions referred to were apparently directions made by the Court in the intervening period between 19 June and 29 August. 7    The Plaintiffs submit that there is a presently binding and enforceable agreement between the parties on the following grounds. Firstly, it is submitted that on 19 June 2003 an immediately binding and effective agreement, or compromise, came into effect between the parties, which is within what is said to be the fourth category of Masters v. Cameron ((1954) 91 CLR 353), i.e. that the parties agreed immediately to be bound while acknowledging that a further document would be produced which would incorporate the agreed terms and might incorporate additional terms. The fact that the subsequent document is not executed does not affect the immediate binding effect of the agreement earlier concluded. 8 I am not able to accept that submission. Firstly, there is no evidence as to the terms that were actually agreed on 19 June 2003, although it maybe inferred that something of what appears in the Draft Deed of Release later forwarded, was agreed in principle on 19 June. But, most importantly, the terms of the note signed by the parties on 19 June make it clear, in my opinion, that what was done on that day was not regarded as final and effective to resolve the dispute between the parties. 9 The note provided that a Deed was to be executed, the terms of which were to be mutually agreed. It was only if the terms of the Deed were agreed and the Deed was executed that the parties contemplated that a Notice of Discontinuance would be filed. In the meantime, the proceedings were kept alive, as appears from paragraph 3 of the directions. 10 It seems to me, therefore, that all that happened on 19 June 2003 was that the parties had agreed in principle to compromise the matter but that the agreement would not become binding until the Deed referred to had been executed in a satisfactory form. Only at that point would the parties give up their rights and their respective positions in the litigation between them. 11 It is next said by the Plaintiffs that, regardless of whether a binding agreement came into effect on 19 June, a binding agreement came into effect on 29 August 2003, when the Plaintiffs’ solicitors, by their e-mail, agreed on behalf of their clients to the amendments which the Defendant had proposed to the Draft Deed of Release. 12 In short, the submissions must proceed along these lines: there having been no previous binding agreement, the Draft Deed of Release sent by the Plaintiffs’ solicitors to the Defendant's solicitors constituted an offer for settlement of the proceedings. The amendments which were made to the Deed, which were notified by the Defendant's solicitors, constituted a counter-offer. That counter-offer was accepted by the Plaintiffs’ solicitors on behalf of their clients by their e-mail of 29 August so that all terms had been agreed and the parties evinced an intention to be bound immediately by their agreements. 13 I am unable to accept that submission. In my opinion there is not sufficient evidence to satisfy the Court that the parties, by their conduct, evinced an intention to be bound immediately upon confirmation of acceptance of amendments to the Deed, rather than by formal execution and exchange of counterparts of the Deed, as had been contemplated. From the very beginning of discussions for compromise on 19 June 2003, the parties could have specified some means of evidencing a concluded agreement other than by Deed, which is a formal and solemn document. But for some reason they chose not to do that. 14 Thereafter, formal drafting of a Deed and its despatch with a request for execution and delivery by return, seems really to confirm that both parties regarded the agreement between them as one which should be attended by the formality entailed in execution and delivery of counterparts of a Deed. This is evident even in the acceptance by the Plaintiffs’ solicitors of the amendments to the Deed in their e-mail of 29 August. The e-mail makes it quite clear that the Plaintiffs’ solicitors still insisted upon execution of the Deed in duplicate and required that the Deed be brought to the next hearing of the matter on Monday, 1 September 2003, no doubt in order that the proceedings might then be finally disposed of after formal delivery of executed counterparts of the Deed had taken place. 15 In short, I can find nothing in the evidence as to the conduct of the parties which persuades me that they evinced an intention that a binding and enforceable agreement between them would come into existence by an exchange of e-mails rather than by exchange of executed Deeds, as they had previously stipulated. 16 For those reasons, I am of the view that the Plaintiffs are not entitled to the relief claimed in the Summons. 17 I have dismissed the Plaintiffs’ Summons on the ground that the Plaintiffs have failed to establish in law that they have a binding and enforceable contract with the Defendant. However, as I have indicated, in the course of discussion with Mr Parsons, Counsel for the Defendant, the evidence before me suggests that the Defendant has behaved in this matter in what can only be described as an unmeritorious fashion. The proceedings were said to be compromised in June of this year. The Plaintiffs were prompt in sending to the Defendant a draft Deed encapsulating what was, no doubt, thought in good faith to be agreed terms. The Defendant for a long time delayed even in responding to the Plaintiffs’ solicitors' enquiries about execution of the Deed. Then, when the Defendant put forward amendments, they were promptly accepted by the Plaintiffs. But, for reasons unexplained, the Defendant reneged upon the agreement in principle, thereby occasioning not only the application to this Court but apparently further expense in the proceedings in the Industrial Commission. The Defendant was legally entitled to renege but no explanation for its conduct has been given. 18 I think that I am entitled to pay regard to the conduct of the Defendant in making a costs order. Although the Plaintiffs have failed, I do not think that they should bear the Defendant's costs of these proceedings. For that reason I will make no order as to costs of the Summons, leaving each of the parties to bear their respective costs of these proceedings. 19 It may be that some other and greater measure of redress in terms of costs can be given by the Industrial Relations Commission in the disposition of the proceedings which are apparently still alive before it and, in particular, in relation to costs incurred since 19 June 2003. I do not wish to say anything further about what the Commission may do in that respect. 20 The orders of the Court will therefore be:

a) the Plaintiffs’ Summons is dismissed;
b) no order as to costs.

– oOo –

Last Modified: 12/04/2003