Lucke v Cleary - [2011] SADC 41

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
LUCKE v CLEARY & ORS
[2011] SADC 41
Judgment of Her Honour Judge Davey
31 March 2011
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT
The parties in this matter informed the Court that they had "settled the matter". Subsequently, the parties informed the Court that there was a dispute as to the alleged settlement. The defendants allege that an enforceable agreement exists. The parties agreed that there should be a trial as to whether there was an enforceable agreement as to settlement.
Held: There was an enforceable agreement, a concluded contract, after publication of the Deed of Settlement by the plaintiff's solicitors on 1 November 2010.
Masters v Cameron (1954) 91 CLR 353; Allen v Carbone (1975) 132 CLR 528; Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540; Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 9173; Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381; Humphris-Clark v Lazaridis [2010] NSWSC 318; RT & YE Falls Investments v The State of New South Wales & Ors [2001] NSWSC 1027; Pianta v National Finance & Trustees Ltd (1964) 38 ALJR 232; Lazaridis v Humphris-Clark [2010] NSWCA 349, considered.

LUCKE v CLEARY & ORS
[2011] SADC 41
Introduction

This is a trial of whether there is an enforceable agreement, a binding contract, arising from an alleged settlement between the plaintiff and the four defendants to the original proceedings. Those proceedings were in relation to a dispute about real property. On 18 October 2010 the parties informed the court that they had “settled the matter”.[1] On 15 December 2010 the parties informed the court that there was a dispute as to the alleged settlement but that they had agreed that there should be a trial as to whether there was an enforceable agreement as to settlement.[2]
[1] Transcript 18 October 2010 at 3
[2] Transcript 15 December 2010 at 2-7
The matter was listed for the trial of the original proceedings before His Honour Judge Soulio and, after being informed that there was a dispute as to settlement, he dealt with the issue of the allegation of an enforceable agreement arising from the settlement. It was agreed that this could be separately tried. A number of orders were made as to the manner in which that issue should be determined. This was done with the consent of all parties. The defendants jointly filed a Statement of Claim on this issue which is described as “On the Contract Issue”. The plaintiff filed a Defence. All parties agreed that no oral evidence was required. The defendants agreed to be dux litis on this trial.
A joint statement of Agreed Facts and Responses thereto were filed together with a number of documents in a book of documents which was tendered and marked D1. The first 66 pages of D1 comprise the pleadings in the original proceedings. The balance of the materials contained therein are the correspondence and attachments (generally by email) between the parties’ solicitors. I have heard argument based upon those documents together with the Agreed Facts and transcript of previous proceedings.
The original proceedings
The original claim by the plaintiff concerned land at 22 Wingfield Street Clovelly Park. The plaintiff and first defendant were in a de facto relationship and they became estranged. Their original intention had been to develop the property. After the relationship between them had broken down there had been a previous failed endeavour to resolve the issues between them by means of a Deed of Settlement. Subsequently, the third and fourth defendants acquired (or so they argued) an interest in the land. The original proceedings therefore had some complexity and involved a series of claims and cross-claims. Counsel for the plaintiff has helpfully summarised the original dispute in his Outline of Submissions and the defendants have agreed that that is a fair summary of the issues prior to 18 October 2010. I reproduce that summary:
“6. In summary:
6.1 the plaintiff sought orders:
6.1.1that it held an equitable interest in the land (either in fee simple or as transferee or equitable mortgagee) at 22 Wingfield Street Clovelly Park (the Land) arising out of a Deed of Settlement.
6.1.2that interest was in priority to any interest of the second, third and fourth defendants.
6.1.3alternatively, the plaintiff sought damages for breach of the Deed of Settlement.
6.2the first defendant in her defence:
6.2.1claimed that the plaintiff had breached the terms of the Deed of Settlement such that he had no claim for an equitable interest and had only a claim in damages.
6.2.2alternatively claims that the plaintiff agreed to the receipt of money under the Deed of Settlement rather than a transfer of the Land;
6.2.3that any claim for damages is subject to a series of adjustments to take into account inter alia payments made by the first defendant and rent received by the first plaintiff.
6.2.4claims that she transferred a one half interest in the Land to the third and fourth defendants.
6.3In its reply, the plaintiff claims:
6.3.1he was entitled to the use and occupation of the Land.
6.3.2there was no waiver or agreement that his interest in the Land be extinguished.
6.3.3he registered caveats which acted so as to give all persons claiming later interests in the Land notice of his interest.
6.4In its defence and counterclaim, the second defendant claims:
6.4.1the First Caveat lodged by the plaintiff (prior to the second defendant lodging its mortgage) was not maintainable and should be withdrawn or removed.
6.4.2the plaintiff was estopped from relying on the First Caveat because it relied upon an equitable interest arising under an agreement that was extinguished by the Deed.
6.4.3the plaintiff is liable in damages to the second defendant by reason of to failure to withdraw the First Caveat.
6.5the first defendant also brought an cross action against the second defendant seeking damages for a breach of duty and breach of agreement for releasing mortgage funds without ensuring a clear title.
6.6the third and fourth defendants brought a cross claim against the first defendant seeking damages for breach of agreement that the first defendant would provide clear title to the Land at settlement so as to enable the interest of the Third and Fourth Defendant’s to be lodged.
6.7the first defendant denied this claim and said that the first, third and fourth defendant jointly engaged Duncan Sande & Associates, conveyancers to act on the transfer of the Land and relied upon his expertise.
6.8the third and fourth defendants brought cross actions against the defendant seeking damages for breach of duty or agreement as a result of the second defendant releasing the mortgage funds without being provided documents that would enable the Mortgages to be registered over the Land.
6.9the second defendant brought a cross actions against the first, third and fourth defendants seeking indemnity and damages pursuant to the terms of its Loan Agreement with those parties.
6.10the third and fourth defendants lodged a defence cross claim against the plaintiff seeking priority over its interest in the Land and alternatively an order that the plaintiff account for monies paid at settlement and a charge to be registered over the Land.”
The dispute before me
The defendants seek a declaration that the parties reached a binding agreement to settle the dispute between them and consequential orders. The defendants argue that binding agreement was reached at two stages. Firstly agreement was reached by means of correspondence (emails) of 14 October 2010 wherein the third and fourth defendants proposed a settlement and all other parties agreed to that.[3] Subsequent to that correspondence the parties agreed to inform the court that the trial date would not be required.[4] The defendants submit that the agreement referred to in the correspondence was a binding agreement.
[3] Exhibit D1 at 76-80
[4] Exhibit D1 at 81-87
After the correspondence of 14 October 2010, there were further communications between the parties both as to the information to be provided to the court and as to the content of a Deed to be prepared. Several drafts were prepared. Eventually, a final form of the Deed was provided by the plaintiff to each of the defendants on 1 November 2010. Each of the defendants executed the Deed and returned it to the plaintiff. The plaintiff has never executed the Deed. This is the second alleged binding agreement.
Masters v Cameron[5] concerned parties who had been in negotiation and who had reached agreement upon terms of a contractual nature and also agreed that the matter should be dealt with by formal contract. The High Court considered such a case may belong to any of three classes:
“It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms re-stated 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 the 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.”
[5] (1954) 91 CLR at 353
As the High Court observed, in the first of these two classes there is a binding contract; in the third there is not. The High Court considered cases of the third class to be of a fundamentally different nature. In this case the defendants argue that the agreement reached on 14 October 2010 or at the latest, that reached by the plaintiff’s provision of the final format of the Deed on 1 November 2010, fall into the first or second category discussed by the High Court. The plaintiff denies that there was any enforceable agreement at either or any stage and says that the intention of the parties was in the third class, that there was no intention to make a concluded bargain unless and until they execute a formal contract.
As the High Court said in Masters v Cameron (referring to Lord Blackburn in Rossiter v Miller):[6]
“… the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, (my emphasis) show that they continue merely in negotiation.”
The court said that the third class of cases are different because the terms of the agreement are not intended to have any binding effect of their own. It may be that the parties contemplate that other matters other than the major matters will need to be dealt with or because they want to reserve a right to withdraw at any time until the formal document is signed. It is said that in the third category there is no enforceable contract ‘either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract’.[7]
[6] Masters v Cameron (supra) at 361
[7] Masters v Cameron (supra) at 361, 362
The parties agree that the determination of the issue depends on the intention disclosed by the words used by the parties and that is to be objectively assessed. In Masters v Cameron the High Court considered the terms ‘subject to contract’ and ‘subject to the preparation of a formal contract’ and that the use of such words ordinarily meant that there was nothing binding until the formal contract was made. In this case there is no express statement that the matter was subject to a formal contract or formal execution.
Masters v Cameron concerned an agreement for the sale and purchase of property. The agreement in that case was not part of a settlement process arising from proceedings as is the case before me.
The defendants’ position
The defendants argue that the plaintiff entered into an enforceable agreement at either of two stages namely, by their acceptance of the offer on 14 October 2010 and/or by proffering the final version of the Deed of Settlement for execution by the defendants on 1 November 2010. In support of the argument the defendants refer to various aspects of the relevant emails and transcript. I will not reproduce the correspondence in full but I will summarise the important aspects of the materials at the relevant times.
The defendants argue that at all relevant stages the plaintiff’s solicitors were acting with the ostensible authority of the plaintiff. Save for one exception, the plaintiff does not dispute this. The plaintiff argues that with respect to 1 November 2010, the plaintiff’s solicitors had no authority to actually execute the Deed or to bind their client to execution. I will return to this later.
In respect of their argument that there is an enforceable agreement as at 14 October 2010, the defendants rely principally on the email from Matthew Dorman, solicitor for the third and fourth defendants, sent to the other parties on 14 October 2010.[8] That email was as follows:
[8]    Exhibit D1 at 76-77
“Dear All
I refer to my clients’ offer dated 11 October 2010.
I have now received responses from all parties in respect of that offer.
Could all parties please confirm by return email their agreement to settle the matter on the following terms:
1.     The whole of land be transferred to our clients.
2.Our clients will become solely responsible for the mortgage/s to the Bank of Adelaide whose present payout figure is approximately $305,000.
3.Mortgages over the land reflecting our clients’ indebtedness in the sum of the mortgage payout figure referred to in 2 above will be registered over the land as part of the transfer referred to in 1 above.
4.At settlement, our clients will pay:
4.1The sum of $180,000 to the Plaintiff;
4.2The sum of $15,000 to the First Defendant; and
4.3The sum of $50,000 to the Second Defendant.
5.The parties agree between themselves and our clients to a discontinuance of all claims and cross claims with each party bearing their own costs.
6.As between the parties and our clients there will be mutual discharges and releases (save for our clients’ obligations under the mortgages referred to in 2 above) to be perfected in a Deed.
7.Settlement on the transfer of the land would occur within six weeks of execution by all parties of the Deed.
8.Our clients will pay the First Defendant a further sum of $35,000 and the Plaintiff a further sum of $20,000:
8.1Upon settlement of the sale of the last property developed by our clients on      the land; or
8.2Within sixteen (16) months from settlement of the transfer of the land to our    clients;
Whichever is the earlier.
If all parties confirm their agreement to the above, we will commence the preparation of the Deed.
Nadia, we also confirm that our clients’ valuer will require access to the property in the next couple of weeks.
We look forward to hearing from you as a matter of priority.
Without prejudice.”
Shortly thereafter all other parties including the plaintiff indicated that they agreed to the terms set out in the email.[9] The email from the plaintiff’s solicitor, Nadia Shivarev, sent at 2.02 pm on 14 October 2010 said:[10]
“Dear All
We confirm our client’s agreement to the terms set out in your email.
Regards.”
[9] Exhibit D1 at 77-80
[10] Exhibit D1 at 79
The defendants say that statement was made upon the ostensible authority of the plaintiff and it could be nothing other than agreement to the offer put in the email from Matthew Dorman. The defendants submit that the statement in Matthew Dorman’s email to the following effect:[11]
“Could all parties please confirm by return email their agreement to settle the matter on the following terms:”
was an offer to settle the matter. The defendants say that the email sent by Nadia Shivarev was an acceptance of that offer.
[11] Exhibit D1 at 76
Matthew Dorman’s email of 14 October 2010 sets out a number of terms. There is no doubt that the email contemplates, and indeed refers to, the preparation of the Deed necessary to effect the settlement. The plaintiff argues that a number of aspects of that email show that the agreement between the parties remained uncertain at that time. I will return to the submissions on behalf of the plaintiff shortly.
The defendants also point to the subsequent conduct of the parties and particularly that of the plaintiff to support the submission that the “offer and acceptance” of 14 October 2010 led to a binding agreement. The defendants point out that there was no “sticking point”; nothing was ever identified as a problem clause which caused the parties to reconsider their positions. There was no falling out or disagreement between the parties about the precise machinery that was to be used in perfecting the Deed. In fact, the plaintiff put forward the final Deed which was executed by the defendants.
The defendants submit that none of the correspondence or communications made by the plaintiff was ever expressed to be “subject to execution” or “subject to advice” or any other qualification. The defendants submit that even as at 1 November 2010 when the plaintiff published the last/final version of the Deed there was still no reservation expressed with respect to any of the terms nor any express qualification that the operation of the agreement was subject to execution by all parties.
The defendants also rely on the correspondence sent to the court with the permission of all parties informing the court that the trial would no longer be required. Andrew Mitchard, on behalf of the first defendant, proposed the content of the email and all parties had input.[12] Nadia Shivarev, on behalf of the plaintiff, responded on 15 October 2010 that the plaintiff consented to the proposed email with the insertion of the following words:[13]
“adjourn the matter to a time suitable to the court pending documentation of the agreement reached and giving effect to the terms of settlement which date can be abandoned if discontinuances are filed in the meantime.”
The email sent to the Registrar of the court[14] incorporated those words as requested. The defendants argue that the words requested on behalf of the plaintiff confirm the position that an agreement had in fact been reached. The defendants point to the words used and the absence of any other qualification. For example, there is no mention of “in principle agreement” or “agreement subject to the drawing up of a Deed or other formality”.
[12] Exhibit D1 at 81
[13] Exhibit D1 at 82
[14] Exhibit D1 at 86
The defendants argue that the events occurred against a background of the matter having apparently settled at the courtroom door, ie shortly before trial and when the parties were trying to resolve the proceedings. The defendants submit that the plaintiff was present in court at the time when his counsel informed the court that the matter had settled. All parties point to the statement made by counsel for the plaintiff on 18 October 2010 wherein he said:[15]
“We’ve settled the matter and the structure of the settlement is such that a Deed will be executed in the next couple of days. That provides a six week period for settlement and we wonder if the matter could be adjourned for 6 weeks for mention and, if everything has gone in accordance to plan, a Notice of Discontinuance will be filed.”
The defendants submit that this is an unequivocal statement of the plaintiff’s intention and the fact that a Deed was to be the mechanism used to effect settlement did not qualify the plaintiff’s agreement to a binding contract.
[15] Transcript 18 October 2010 at 3

The defendants argue that even if the parties sought to negotiate additional or other terms as part of the Deed that did not mean that there was not binding agreement reached on 14 October 2010. It was submitted that it may have the consequence that a court may not enforce those other terms as binding but it did not mean that there was no binding agreement as at 14 October 2010.
The defendants also point to the series of versions of the Deed document, the number of drafts, as all being consistent with an agreement reached on 14 October 2010. The defendants argue that the tone and content of the correspondence, particularly that emanating from the plaintiff, provide positive evidence of agreement or at the very least is consistent with an agreement having been reached. An email of 26 October 2010 sent by the plaintiff’s solicitor in response to an email of 25 October 2010 from Matthew Dorman is said to confirm the existence of the agreement.[16] In the email of 26 October 2010 Mark Kurtze says:[17]
“The process to settlement is mechanical only …”
Later in the email he refers to delay and the need to keep the matter moving. He said:
“It is now nearly 14 days since we agreed a settlement and we are not getting timely return drafts from you.”
Again, there is reference to an agreement without any qualification that that agreement is subject to some further act or event.
[16] Exhibit D1 at 198
[17] Exhibit D1 at 199
The email on 26 October 2010 from Mark Kurtze on behalf of the plaintiff is to the following effect:[18]
“Remove L and I think we are done. We can execute in counterpart. Your Deed contemplates counterpart but I suggest you state it in the Deed.”
The reference to “L” is a reference to Recital L in the draft Deed. Again it is argued that this correspondence does not in any way qualify whether or not an agreement was reached. It is consistent with an agreement having been reached.
[18] Exhibit D1 at 202
On 28 October 2010 Matthew Dorman sent an email to Nadia Shivarev on behalf of the plaintiff querying some amendments to the Deed and stating that:[19]
“They were not part of the settlement agreed between the parties.”
The defendants submit that the plaintiff did not demur from this suggestion that there was an agreement and that the next email, which was sent just over an hour later on 28 October 2010, was from Mark Kurtze on behalf of the plaintiff and to this effect:[20]
“I will circulate the Deed tomorrow and hopefully to finalise.”
[19] Exhibit D1 at 205
[20] Exhibit D1 at 207
The defendants also rely upon the email from Nadia Shivarev of 1 November 2010 at 2.54 pm which says:[21]
“An amended Deed is attached. We refer you to clause 2.10. The third and fourth defendants have agreed to give the plaintiff additional time to vacate the property after Settlement. The Deed otherwise remains as was sent by Mark Kurtze on Friday 29 October 2010.
Please confirm so that we can arrange execution on Tuesday.”
The defendants say that there was plainly an agreement and that at that stage there was no dispute at all between any of the parties.
[21] Exhibit D1 at 139
The defendants also point to the content of the Deed itself[22] including a recital “O” of the Deed which reflects that there is agreement.[23] The defendants submit that the conduct of the plaintiff after receiving the Deeds, which were executed by the defendants and sent back to the plaintiff, confirms that there was an agreement. The Deed was received by the plaintiff without complaint and at no relevant stage did the plaintiff allege that there was no agreement.
[22] Exhibit D1 at 140-148
[23] Exhibit D1 at 142
On 11 November 2010 Matthew Dorman sent an email to Nadia Shivarev:[24]
“Could you please advise when your client will be executing the Deed of Settlement.”
There was no response to that query and on 12 November 2010 the defendants were informed that the plaintiff’s solicitors ceased to act. The defendants say that all that they know is that the plaintiff will not settle the matter and they have no idea why that is so. There is no evidence as to this topic.
[24] Exhibit D1 at 186
The plaintiff’s position
I turn now to the plaintiff’s submissions, having regard to the various exhibits and documents, as to whether or not the parties had entered into an enforceable agreement on 14 October 2010 or 1 November 2010.
The plaintiff agrees that the determination of the parties’ rights is to be made objectively. The question is what each party, by words and conduct, would have led a reasonable person in the position of the other party to believe. The plaintiff agrees that the evidence of negotiations and subsequent communication may throw light on the question of whether the parties intended to be bound but submit that I must construe the correspondence objectively. Like the defendants, the plaintiff suggests that I look at the conduct of the parties before and after the relevant time. The plaintiff says that the first question is whether there was an intention to make a concluded contract and secondly whether the parties had reached agreement on the essential terms that would be necessary to bind them.
As I have mentioned, the plaintiff concedes that objectively viewed, the plaintiff’s solicitors had ostensible authority as at 14 October 2010 but argues that the main problem with a finding of a binding contract at that stage is uncertainty. The plaintiff submits that the dispute was of some complexity and that the parties would and did recognise that a Deed was necessary to effect settlement. It was submitted that the parties contemplated that an executed Deed was necessary to effect settlement and that by implication, unless and until execution was completed, there was no binding agreement. The plaintiff emphasised the necessity of execution; that the parties intended that a ceremony of execution was necessary, not simply an agreement. The use of a Deed as opposed to some other form is said to be significant as a Deed has particular formalities with respect to execution.
The plaintiff’s argument as to the 14 October 2010 emails[25] is that the nature of the underlying dispute was of complexity and the proposed settlement referred to in the correspondence was of relative brevity and did not deal with all aspects necessary to effect settlement (for example, the details of discharges) and it could not be said that the parties had reached a binding agreement.
[25] Exhibit D1 at 76-80
Notwithstanding that the plaintiff’s solicitors at some stages used the word “agreement” in correspondence, the plaintiff argues that the terms of the agreement were unclear and further negotiation as to the terms was plainly required. The plaintiff submitted that the term ‘agreement’ was not used in the sense that a binding contract had been agreed but rather that the parties had agreed to try to resolve the matter on generally expressed terms. The plaintiff relies on the process that occurred over a number of days until 1 November 2010 being the various draft Deeds that passed between the parties to support their argument that binding agreement had not been reached on 14 October 2010.
With respect to the transcript of the statements made by the plaintiff’s counsel on 18 October 2010, the plaintiff says that, whilst not denying the ostensible authority alleged, the statements made by the plaintiff’s counsel are indicative that there was no concluded agreement at that time. The plaintiff says that contrary to the defendants’ view, the position was at that time that there was nothing more than an agreement to reach an agreement. The plaintiff argues that, if there was a binding agreement at that stage, why was it necessary to adjourn the matter rather than finalise the matter at that stage. Judge Soulio referred to the possibility of relisting when he said:[26]
“If the settlement breaks down then there will need to be a relisting.”
The plaintiff submits that this statement (which was not contradicted by the parties) reflects that no final agreement had been reached and that procedure was accepted by all the parties. The plaintiff argues that all the correspondence between the parties is a reflection of the common understanding that whilst there was general agreement the parties had not entered into a binding agreement.
[26] Transcript 18 October 2010 at 3
The plaintiff concedes that the argument differs as at 1 November 2010. On that date, the plaintiff’s solicitors sent what was described as a final draft of the Deed to the parties for execution.[27] The plaintiff does not argue that the agreement was uncertain from that time but rather that the agreement included a requirement that the Deed be executed by all parties and submits that unless and until all parties (including the plaintiff) executed the Deed, there was no binding agreement. The plaintiff submitted that the ceremony of signing was required before there could be a binding agreement.[28]
[27] Exhibit D1 at 139-148
[28] Pianta v National Finance & Trustees Ltd (1964) 38 ALJR 232 at 234
Relevant principles and application of the law
I have already referred to the three classes of agreement discussed in Masters v Cameron. The plaintiff argues that this case falls into the third class. The defendants argue that it falls into the first or second class.
I turn now to a consideration of the relevant authorities.
Allen v Carbone[29] concerned an offer made by a real estate agent to the owner of real property to purchase the property on behalf of another for a stated price. The owner accepted the offer and signed a document whereby he authorised the agent to sell the property and agreed to enter into a contract in the form approved by the Real Estate Institute of New South Wales. In that case the High Court held that the parties did not agree to be bound to a contract until the formal contract was signed by them and exchanged by their solicitors. At p 532 the Court said:
“It is common ground that this informal agreement amounted to a limited consensus, but it is disputed that what then occurred amounted to a concluded contract. In resolving this dispute it is legitimate to ascertain the terms of the agreement then made by the parties, that is to say what the parties relevantly intended, by drawing inferences from their words and their conduct in the making of that agreement.”
[29] (1975) 132 CLR 528
That case did not concern the construction of a written contract or document but an informal agreement arising out of an oral conversation. The High Court had regard to the fact that the usual method of selling real estate in New South Wales was by means of the signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales. There was evidence before the court that the parties intended to become bound by a formal contract containing a number of terms in addition to the price which was the one matter upon which agreement had been reached. In the circumstances, the High Court found that the parties had come to a preliminary agreement which was not itself a binding contract.
ABC Corporation v XIVth Commonwealth Games Limited[30] concerned negotiations for the television broadcast rights for the Commonwealth Games. The parties had agreed on a price which was paid subject to a letter of intent. There were subsequent communications between the parties, both oral and draft agreements, but no contract was signed. The New South Wales Court of Appeal, like the High Court in Allen v Carbone, had regard to the commercial circumstances regarding the various communications and to the nature of the subject matter. Chief Justice Gleeson (with whom the others agreed) said:[31]
“The communications relied upon by the appellant as constituting a contract, construed with regard to the subject matter of the negotiations and the surrounding circumstances, and in the light of subsequent communications between the parties, do not appear to me to evidence an intention to make a concluded bargain. Rather, they show that, in a context where it was contemplated that there would be express agreement on a number of important matters which the parties had not yet got around to discussing, or in respect of which the discussions were still at a very incomplete stage, the parties had made an agreement on the most important subject of their transaction, that is, the price, in the confident expectation that they would in due course come to terms on the other issues that needed to be addressed. The important matters to which I refer include, in particular, the definition of the rights which they appellant was to have (that is to say the subject in respect of which the appellant stated its “expectations” following 13 June 1986) and the matter sometimes loosely referred to as the possibility of boycott.”
[30] (1988) 18 NSWLR 540
[31] ABC Corporation (supra) at 551
Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd[32] concerned whether the parties had reached a concluded agreement for a lease which was not executed. Most of the evidence was documentary and revealed the negotiations for the lease. A lease document was prepared by the plaintiff’s solicitors and executed by the intending lessee but the lessor declined to execute it. The lessor in that case said that they would not execute the lease until certain matters were dealt with. The court said:[33]
“In my opinion the correspondence admits of no such construction. Many contracts are made in an informal way when the parties have passed beyond the negotiating stage by reaching agreement upon all of the terms of the bargain. But there are other forms of negotiation in which the achievement of an agreement upon terms fails to produce a binding agreement because the parties contemplate that it is not the settlement of the terms but the completion of some ceremony which marks the stage at which a contract comes into existence (“arrangements preliminary to formal contracts” HK Lucke, The Adelaide Law Review, Volume 3 at 47). It is well understood that the exchange of contracts for the sale and purchase of land is such a ceremony without which a bargain of that kind cannot be struck (Eccles v Bryant ([1948] 1 CH 93 at 99). The terms of the correspondence between the solicitors already noted objectively evince an intention that neither client was to be bound by the Memorandum of Lease at the moment when all its terms had been settled by the solicitors. Some further ceremony was required whether it was to be the contemplated lodgement for registration of a memorandum duly executed by the lessor’s solicitors or the earlier ceremony whereby both lessor and lessee reciprocally bound themselves by a bilateral execution of a registrable memorandum of lease. The correspondence shows that some ceremony or other was contemplated whereby both clients agreed to be bound by the terms hammered out by their solicitors. Agreement on terms was insufficient without an agreement to be bound by them.”
The court continued:[34]
“Finally the alleged agreement founders for want of proof that the plaintiff’s solicitors had authority to make an agreement binding upon their client. It has been ruled that a solicitor retained to settle written terms for the sale of land has no authority to contract on behalf of his clients unless it be conferred expressly or by necessary implication (Pianta v National Finance and Trustees Limited (1964) 38 ALJR 232 at 234). The plaintiff’s solicitors had accordingly no general authority by virtue of their retainer to enter into an agreement for lease.”
The plaintiff relies on this case to support its argument that there could be no binding agreement unless and until the ceremony of execution by all parties was complete. However, in that case, the solicitors for the parties were continuing in their negotiations as to the terms of a formal lease. A draft lease had been executed by one of the parties but there were matters that remained outstanding and requiring agreement and that issue was important to the finding that there was no binding agreement for a lease. Also, the court found that the correspondence showed that some ceremony or other relating to execution was contemplated by the parties.
[32] (1981) 2 BPR at 9173
[33] Summit Properties (supra) at 9175
[34] Summit Properties (supra) at 9176
The defendants relied upon Ewing International LP v Ausbulk Ltd (No 2)[35] primarily as to the issue of ostensible authority. That case concerned (in part) the issue of whether the parties’ legal representative had authority to reach a binding agreement in the context of legal proceedings. Justice Layton observed[36] that generally a solicitor doesn’t have ostensible authority to bind his or her client to a contract. However she also observed that courts have been less cautious about finding such ostensible authority to bind a client in relation to an extant piece of litigation.[37] Such authority must be for a contract which genuinely relates to the litigation.[38]
[35] [2009] SASC 381
[36] Ewing International (supra) at [44]
[37] Ewing International (supra) at [45]
[38] Ewing International (supra) at [46]
The plaintiff does not generally dispute the ostensible authority of the previous solicitors for the plaintiff but does dispute that there was authority to bind the client to the execution of a Deed. The plaintiff distinguishes Ewing’s case for two reasons. First, that given the number of drafts in this case, there was no clear agreement. Secondly, and more significantly to the plaintiff’s argument, is the distinction on the plaintiff’s case that the parties had agreed to use the mechanism of a Deed. The plaintiff points to the distinction between the formality of a Deed and other forms of contract and submits that ostensible authority could not extend to execution of the Deed.
In essence the plaintiff argues that the requirement of a Deed is to the same effect that the agreement was “subject to contract” and that there was no intention to be bound before execution of the contract.
Humphris-Clark v Lazaridis[39] concerned whether parties to civil proceedings (a claim for negligent provision of dental services) had reached a binding agreement in satisfaction of the claims. It was argued that a statement by counsel for the plaintiff that “settlement moneys will be paid under a separate Deed of Release which the parties will need to enter into” was to the same effect as saying the agreement was “subject to contract”. Chief Justice (in Equity) Bergin found on the facts before her that the agreement that there would be a “separate” Deed was a mechanism for implementation of their agreement[40] and that this was not an agreement to agree at some time in the future.[41]
[39] [2010] NSWSC 318; appeal to Full Court refused 6 December 2010. See Lazaridis v Humphris-Clark [2010] NSWCA 349
[40] Humphris-Clark (supra) at [33]
[41] Humphris-Clark (supra) at [38]
In the case of R.T. & Y.E Falls Investments Pty Ltd v State of New South Wales & Ors[42] Palmer J made a number of observations which are helpful and generally relevant to these proceedings:
[42] (2001) NSWSC 1027 at [52] to [56]
“52It is, plainly, imprudent in the extreme for any organisation, whether in the public or the private sector, to enter into any substantial commercial transaction without documenting its terms clearly in a formal contract. This is well recognised in a community in which legal and accounting advice is readily available and is sought as a matter of course at all levels of business dealing, from the multi-million dollar merger of corporate empires to the purchase of the local newsagency business. There are exceptions, of course: for example, when merchants or traders deal every day in a particular commodity the ancillary terms of their contracts are usually supplied by trade usage or custom, so that everyone concerned knows what all the terms of a particular contract are without the need for anything more than the barest note of the agreed price, quantity and delivery date. But that type of contract is in a special and recognised category of its own.
53As a general rule, when parties have been negotiating a substantial commercial transaction in the common expectation that, at some stage, a formal contract will be brought into existence, the Court should be reluctant indeed 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. This is especially so when the terms of the alleged informal contract have to be pieced together or implied from various conversations, ill-recorded or not recorded at all, and from selective extracts from a concatenation of correspondence. 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.
54Experience teaches that cases within the first two categories in Masters v Cameron 91 CLR 353, at 360-361, are rarely encountered in modern commercial transactions. Where a formal contract is contemplated by parties in commercial negotiation, it is usually recognised as necessary because the transaction is sufficiently complex to warrant the involvement of lawyers on both sides. The lawyers would be expected to raise, and very often do raise, for the consideration of their clients new questions for negotiation which have emerged from the very process of drafting what the parties themselves thought were the straightforward terms of their agreement. That is why parties negotiating a commercial agreement in contemplation of a formal contract will most commonly intend that there will be no concluded bargain at all unless and until they execute the formal contract – that is, the case will be in third category referred to in Masters v Cameron.
55Because of the phenomenon that new issues of contention are often raised in the drafting of a commercial contract, it will be even more rarely found that parties intend to bind themselves immediately and exclusively to agreed terms of a commercial agreement while expecting to make a further contract in substitution for the first, containing by consent additional terms – the so-called fourth class of case additional to those referred to in Masters v Cameron: Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, at 317; Baulkham Hills Private Hospital Pty Ltd v G.R. Securities Pty Ltd (supra) at 628.
56There will doubtless be cases in which parties to a substantial commercial transaction will be found to have intended to make a binding informal contract prior to the execution of a contemplated formal contract. In such cases the evidence that the parties so intended will be clear and compelling. It will usually consist of documentary evidence – typically, a letter, memorandum or other document setting out the terms with some particularity so that it is readily seen what the terms were and that those terms were sufficiently capable of forming an immediately binding contract. Similarly, acceptance of the terms will usually be acknowledged in writing: see e.g. Rossiter v Miller (1878) 3 App Cas 1124; Filby v Hounsell (1896) 2 Ch 737; Branca v Cobarro [1947] KB 854; Niesmann v Collingridge (1920) 29 CLR 177; Baulkam Hills Private Hospital Pty Ltd v G.R. Securities Pty Ltd (supra).”

I agree that common sense has a part to play in this enquiry. I think that the evidence that the parties intended to make a binding agreement as at 1 November 2010 and prior to the execution of a formal contract is clear and compelling. The documentary evidence of the email correspondence together with the final form of the Deed published by the plaintiff are evidence of such an agreement. There is no express statement that agreement was subject to execution of the Deed. The Deed was, in my view, the mechanism to implement the agreement. The terms are readily apparent, there is no uncertainty and acceptance of the terms was made in writing. I agree with the plaintiff that there may have been some uncertainty as to the terms as at 14 October 2010 but there was no uncertainty at 1 November 2010. I am of the view that the Deed published by the plaintiff on 1 November 2010 reflected a binding agreement. The parties evidenced an intention to make a concluded bargain. The discussions were not at an incomplete stage. The plaintiff’s solicitors had ostensible authority to make a concluded bargain in the terms of the Deed published by them on 1 November 2010. In my view they had such authority by necessary implication.
Accordingly, I find for the defendants and declare that the parties by their solicitors reached a binding agreement and agreed the terms of a Deed of Settlement provided by the plaintiff’s solicitors, Corsers Lawyers, on 1 November 2010.
I will hear the parties on the consequential and costs orders required.