Roger Percival Flexman v Knox Street Apartments

[2004] NSWSC 1154

CITATION:	Roger Percival Flexman & Anor v Knox Street Apartments & Ors [2004] NSWSC 1154
HEARING DATE(S):	22 November 2004
JUDGMENT DATE:	8 December 2004
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Bergin J
DECISION:	Binding agreement reached to settle Second Cross-Claim
CATCHWORDS:	[CONTRACT] - Condition precedent / contingency - time stipulated - whether failure to comply - whether parties reached a binding agreement to settle the second cross-claim
CASES CITED:	Cleary v Masterton [1999] NSWSC 207 Digi-Tech (Australia) v Brand & 5 Ors; Digi-Tech (Australia) Ltd v Kelliher & 3 Ors; Kalifair Pty Ltd & 3 Ors v Digi-Tech (Australia) Ltd & 3 Ors; McLean Tecnic Pty Ltd & 1 Or v Digi-Tech (Australia) Ltd & 3 Ors [2004] NSWCA 58 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Geebung Investments Pty Ltd v Vargar Group Investments No. 8 Pty Limited (1995) 7 BPR 14,551 Locnere Pty Ltd v Jakk's Bagel & Bread Co Pty Ltd [2003] NSWSC 1123 Love & Stewart Ltd v Instone & Co Ltd (1917) 33 TLR 475 McCann v By-Dezign Pty Ltd [2001] NSWSC 161 Masters v Cameron (1954) 91 CLR 353 Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 Tricontinental Corp Ltd v HDFI Ltd (1990) 21 NSWLR 689 United Dominions Trust (Commerical) Ltd v Eagle Aircraft Services Ltd [1968] 1 WLR 74
PARTIES :	Roger Percival Flexman (1st cross-claimant to the 4th cross-claim) Phillipa Margaret Flexman (2nd cross-claimants to the 4th cross-claim) Knox Street Apartments Pty Ltd (1st cross-defendants to the 4th cross-claim) Kimberley Securities Ltd (2nd cross-defendants to the 4th cross-claim) Jospeh Esber (3rd cross-defendant to the 4th cross-claim) Marcel Esber (4th cross-defendant to the 4th cross-claim)
FILE NUMBER(S):	SC 50049/02
COUNSEL:	Dr C. J. Birch SC / Mr D.A. Smallbone (Cross-Claimants to the 4th cross-claim) Mr T.G.R. Parker (1st Cross-Defendant to 4th cross-claim) Mr B.A. Coles QC / Mr G.A. Sirtes (2nd Cross- defendants to the 4th cross-claim) K. Gourlie, solicitor (3rd and 4th cross-defendants to the 4th cross-claim)
SOLICITORS:	Thurlow Fisher (Cross-claimants to the 4th cross-claim) Beswick Solicitors (1st cross-defendant to the 4th cross-claim) Landerer & Company (2nd cross-defendant to the 4th cross-claim) Watson & Watson (3rd and 4th cross-defendants to the 4th cross-claim)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

8 DECEMBER 2004

50049/02 ROGER PERCIVAL FLEXMAN & ANOR v KNOX STREET APARTMENTS & ORS

JUDGMENT

1 This judgment is in respect of the separate hearing of the Fourth Cross-Claim in proceedings which arose from disputation about a development of 58 apartments by Knox Street Apartments Pty Limited (Knox) at Knox Street, Chippendale in Sydney. The development commenced in 1997, and between 1997 and 1999 the Cross Claimants to the Fourth Cross-Claim, Roger Percival Flexman and his wife, Phillipa Margaret Flexman (the Flexmans), advanced to Knox $649,000 by way of an interest free loan, the consideration for which was the transfer to them of six nominated apartments upon the completion of the development.

2 A Deed of Agreement was entered into on 22 January 1999 and about the same time contracts for the six apartments were exchanged. Problems were encountered including litigation in the Land and Environment Court of New South Wales and the liquidation of the builder. Both difficulties caused an increase in costs and, after further discussion, the Flexmans agreed to reduce their entitlement from the transfer of six nominated apartments down to three nominated apartments in an effort to attract a joint venturer for the development.

3 On 29 November 2000 a further Deed of Agreement was entered into between the Flexmans, Knox and its principals, Joseph Esber and Marcel Esber (the Esbers). The Flexmans had originally lodged a caveat over the whole of the land prior to the registration of the relevant Strata Plan. They subsequently withdrew that caveat and lodged caveats on the titles to the three apartments.

4 A joint venturer, BJ Metro Pty Limited, was attracted to the development but that relationship was subsequently terminated. Ultimately Knox entered into a joint venture agreement with Kimberley Securities Limited (Kimberley) and a director of Kimberley, Nati Stolier, arranged for the sale of the apartments off the plan.

5 The main proceedings were between Investmentsource Corporation Pty Ltd (Investmentsource), Knox, Kimberley and the principals of Kimberley relating to a claim by Investmentsource for sales commission of $1.3 million. That claim was dismissed after the hearing of separate questions by Barrett J. There are four extant Cross-Claims. The First Cross-Claim brought by Knox against Kimberley and its principals, Nati Stoliar and Gabriel Michael Lorentz, seeks a declaration that the joint venture had been validly terminated and orders including the taking of accounts. The Third Cross-Claim brought by Kimberley against Knox and the Esbers is a claim for $2 million, apparently inclusive of the $1.3 million involved in the main proceedings (now dismissed), arising out of the joint venture.

6 The Second Cross-Claim brought by the Flexmans against Knox, Kimberley and the Esbers seeks specific performance of the three contracts for the apartments. The Flexmans claim that the Second Cross-Claim was settled and the Fourth Cross-Claim brought by the Flexmans against Knox, Kimberley and the Esbers seeks specific performance of the alleged agreement to settle the Second Cross-Claim. Knox and the Esbers do not take issue with the allegations made by the Flexmans in the Fourth Cross-Claim.

7 There are separate Equity proceedings, No. 1212 of 2002, brought by Knox and Kimberley against the Flexmans seeking, inter alia, an order that the Flexmans withdraw the three caveats that are registered on the title of the three apartments. On 2 October 2002 those proceedings were, by consent, stayed until the outcome of these proceedings.

8 The Fourth Cross-Claim was heard on 22 November 2004 when Dr CJ Birch SC leading Mr DA Smallbone appeared for the Flexmans and Mr BA Coles QC leading Mr GA Sirtes appeared for Kimberley. Mr TGR Parker appeared for Knox but withdrew after indicating his client’s position. Similarly Mr K Gourlie, solicitor, appeared for the Esbers and withdrew.

9 The real issue is between the Flexmans and Kimberly as to whether a binding agreement was reached to settle the Second Cross-Claim. That issue is to be determined from a review of the documents evidencing the parties’ conduct – in particular, their conduct between June and October 2004 (the relevant period). It is necessary to review the correspondence between the solicitors for the respective parties during the relevant period. Thurlow Fisher (“TF”) acted for the Flexmans, Landerer & Company (LC) acted for Kimberley, Beswicks acted for Knox and Watson & Watson (Watson) acted for the Esbers.

Facts

10 On 24 June 2004 LC, by fax at 5:03pm, wrote to TF in the following terms:

We refer to our letter dated 22 June 2004 and to our subsequent telephone conversation today.
We now confirm that our client would be prepared to consent to the following:-
1. Flexmans provide a bank guarantee from a reputable Australian trading bank securing payment of any judgment (excluding costs and interest) in favour of our client against Knox for an amount not less than $542,675.93 and maturing within sixty (60) days of any such judgment;
2. Knox and our client transfer Lots 27, 56 and 58 to your clients forthwith;
3. If our client fails to obtain a judgement against Knox then the bank guarantee referred to in 1 above mature upon the determination of the proceedings;
4. If Knox obtains a judgement against our client in respect of its claims, Knox to reimburse the Flexmans for their claims against Knox and the Esber brothers for lost opportunity, foregone rental income, stamp duty on Contracts for Sale and interest from the proceeds of that judgment;
5. All of the proceedings by and against the Flexmans by any other party and all such proceedings by the Flexmans against Knox, our client, Stoliar and Lorenz to be discontinued with no order for costs;
6. Any existing costs orders to be discharged with each party paying its own costs insofar as the Flexmans are concerned;
7. Knox and our client to sign releases in favour of the Flexmans in accordance with the terms of this proposed settlement. Flexman to sign releases in favour of Knox and our client in accordance with the terms of this proposed settlement.
8. Knox and our client to undertake to the Flexmans to do all things necessary to vigorously pursue the proceedings to a hearing on the earliest available date;
9. Knox and our client to further undertake to the Flexmans not to enter into a compromise settlement of their respective claims against each other without the consent of the Flexmans, such consent not to be unreasonably withheld;
10. The agreement created by acceptance of this proposed settlement may be pleaded in bar as a defence to any further proceedings involving issues in the proceedings;
11. This settlement offer is contingent on acceptance by both Knox and the Flexmans within the time stipulated in paragraph 14; and
12. This settlement offer shall remain open for acceptance until 5:00pm Friday 25 June 2004.

11 LC wrote to Beswicks, by fax at 5:04pm, on 24 June 2004 enclosing what was described as a copy “of our further without prejudice counter-offer to Thurlow Fisher dated today”. The enclosure was a copy of the letter sent to TF at 5:03pm.

12 At 5:00pm on Friday, 25 June 2004 TF sent a letter, by facsimile, to LC in the following terms:

We are instructed that our clients accept the settlement offer set out in your facsimile dated 24 June 2004 subject to:

Acceptance of that settlement offer on the part of Knox Street Developments Pty Limited insofar as its terms require its agreement.
Preparation of acceptable documentation consistent with the terms of the settlement.

13 It was not until Monday 27 June 2004 that Beswick wrote to LC, with a copy to TF, in the following terms:

We refer to your second without prejudice offer to Flexman dated 24 June 2004 and advise our client Knox Street Apartments Pty Ltd consents to the proposals therein.

14 TF wrote to LC on 29 June 2004 referring to TF’s facsimile “accepting your client’s settlement offer set out in your facsimile of 24 June 2004” and advised that it understood that Knox “has also conveyed acceptance of those terms.” The letter continued:

Accordingly, we would appreciate it if you could proceed to prepare relevant documentation to give effect to the settlement and submit them to both our office and Beswicks for consideration and approval.
Meanwhile, in order that our client might formalise the Bank Guarantee, it will be necessary for his Bank to inspect the three apartments. We would appreciate it if you could enquire of your client as to how access might be made available to a Bank Valuer for that purpose.

15 On 8 July 2004 LC responded to TF’s letter of 29 June 2004 in the following terms:

We refer to your letter dated 29 June 2004 and now enclose draft Consent Orders/Terms of Settlement for your approval.
We have also forwarded a copy of the draft Consent Orders/Terms of Settlement to Beswick Solicitors and Watson & Watson for their approval.

16 Although the draft Orders forwarded by LC to the other parties to the Second Cross-Claim on 8 July 2004 are not in evidence, it will be necessary to analyse the draft Orders that are in evidence in which Kimberley is referred to as “KSL” and Knox is referred to as “KSA”. The earlier set of draft Orders (the earlier Orders) that are in evidence appear to have been circulated in August 2004. The final version as signed by all parties except Kimberley, were circulated on 30 September 2004 (the final Orders). Notwithstanding the discouragement by the Court of Appeal of appending cross-referenced Schedules to judgments, it seems to me that the most efficient manner in which to assist the necessary analysis in this case is to set out the earlier Orders in Schedule 1 and the final orders in Schedule 2 to this judgment: Digi-Tech (Australia) Ltd v B rand & 5 Ors; Digi-Tech (Australia) Ltd v Kelliher & 3 Ors; Kalifair Pty Ltd & 3 Ors v Digi-Tech (Australia) Ltd & 3 Ors; McLean Tecnic Pty Ltd & 1 Or v Digi-Tech (Australia) Ltd & 3 Ors [2004] NSWCA 58 at par 290.

17 On 13 July 2004 TF wrote to LC referring to the draft orders and advising LC that they considered that amendments were necessary “to give full effect to the agreement between the parties”. That letter suggested that certain lots (66, 98 and 106) should be included in the Orders as they were the garages attached to the units. That amendment related to a proposed paragraph 1. The next amendment suggested by TF was to add to paragraph 2 the words “and execute and deliver to Flexman such consents as may be required in order that the Certificates of Title and Transfers to the units may be delivered by Knox to Flexman and in order that the said Transfers may be registered”.

18 TF also suggested that paragraph 6 should be deleted and in its place the following paragraph should be substituted:

6. In proceedings 50049/02 upon the second cross claim there be Judgement for Flexman against KSA for damages for lost opportunity, loss of benefit of possession of the units and stamp duty on the contracts for sale dated 22 January 1999 together with interest agreed in the sum of $297,197.75.

19 TF suggested the insertion of the word “otherwise” after the word “be” in line 3 of paragraph 7 and that at the end of paragraph 10 there be added the sentence “In the event that KSL calls upon the bank guarantee, Flexman shall be at liberty to enter Judgement against KSA in the amount so called upon. In the event KSL fails to obtain Judgement against KSA in respect of the first cross-claim or third cross-claim then Flexman shall be at liberty to recall the bank guarantee”.

20 TF suggested the deletion of the words “foregone rental income” in line 4 of paragraph 12, and the insertion of the words “loss of benefit of possession of the units”. There was also the suggestion that lot numbers 66, 98 and 106 be included in line 5 of paragraph 12 with the addition at the end of line 5 of the words “and any amount paid or payable to KSL under the aforesaid bank guarantee”.

21 TF also suggested amendments to paragraphs 13, 14 and 15. It was suggested that in paragraph 13 the words “save as provided by these terms” be inserted at the beginning of the paragraph. It was suggested that the words “save as provided by paragraphs 10 & 15 of these Terms” be inserted at the beginning of paragraph 14. Finally it was suggested that after the word “withheld” where it secondly occurred in line 3 of paragraph 15, there be inserted the words “and the outcome of those proceedings is not more favourable to Flexman than the provisions which would have been made by such compromise, then”.

22 TF asked LC to consider the proposed amendments and to let them have a response at the earliest opportunity. TF also advised that a copy of their letter had been sent to Beswick and Watson.

23 On 14 July 2004 LC wrote to TF in terms including the following

Before we give consideration to the proposed amendments, we point out that the amendments to paragraphs 10 and 12 do not make sense.
In relation to the proposed amendment to paragraph 10, according to your proposed amendments to paragraphs 6 and 7, judgment is already being entered against KSA on the Second Cross-Claim and the Second Cross-Claim is otherwise dismissed against KSL and Esber. Also, the proposed amendment to paragraph 10 is unlikely to be ordered by the Court and therefore should be part of the agreement noted by the Court in Part B of the Consent Orders/Terms of Settlement.
In relation to the proposed amendment to paragraph 12, paragraph 12 relates to any judgment in favour of Knox Street Apartments against Kimberley Securities Limited and therefore the Bank Guarantee cannot be called upon.
In addition, whilst we are prepared to give consideration to the proposed amendment to paragraph 6 as an additional order, we are not prepared for same to be in lieu of and/or to delete the existing paragraph 6.

24 On 27 July TF responded to LC’s letter of 14 July in the following terms:

1. The liberty to enter Judgment which is provided for by paragraph 10 is intended to be in addition to the judgment provided for in paragraph 6, as the sum of $297,197.75 does not include any amount to cover the head of liability which would arise in the event that the Bank Guarantee were called upon.
However, we are prepared to accept the suggestion that this provision be moved down to the agreement section. Accordingly the existing clause 12 and following clauses would be renumbered as clauses 13 and following and a new clause 12 would be inserted after the heading “B” in the following terms:
12. In the event that KSL calls upon the abovementioned bank guarantee, then Flexman shall be at liberty (notwithstanding paragraph 7 of these orders) to enter judgment against KSA for the amount so called upon, in addition to the amount provided for by paragraph 6 hereof.
The words,
“In the event that KSL fails to obtain a judgment against KSA in respect of the first cross-claim or third cross claim, then Flexman shall be at liberty to recall the bank guarantee”
should be added to paragraph 10 in order to ensure that the Flexmans do not encounter difficulty with their bankers in terminating the bank guarantee in the event that KSL fails to obtain a judgment against KSA on either of those cross claims.
2. In relation to your paragraph 6, we point out that the Flexmans are not parties to either of the first and third cross claims. We therefore do not appreciate what this clause is intended to achieve. It would assist us if you would explain its purpose. We would also point out that there are no pleadings in matter No 1212 of 2002, that matter having been commenced by Summons.

25 On 28 July 2004 TF requested from Beswick copies of the tenancy agreements of the subject apartments and details of the rental income. TF advised Beswick that its client was “currently putting in place the bank guarantee” and would contact Beswick once matters had been completed “to arrange a formal settlement”. TF made a further request for the tenancy agreements and the detail of the rental income from Beswick on 30 July 2004. On the same day TF suggested to LC and Beswick a further amendment to paragraph 10 of the Consent Orders by the substitution of the word “of” for the words “not less than” in line 4 of that paragraph.

26 On 9 August 2004 TF once again wrote to Beswick advising that it had not received the tenancy agreements and rental accounting details. That letter included the following:

It is not surprising that our clients are becoming increasingly sceptical that the delay in arranging for release of those documents is deliberate and intended to withhold them. It is certainly hoped that such scepticism is unwarranted.
More importantly, we have been advised by Les Pozniak that he is to confer with counsel later today and expects to be able to sign off on the amendments to the terms of Settlement tomorrow. Will you please confirm your client’s agreement to the Terms of Settlement as amended in accordance with correspondence between this firm and Landerer & Company.
Insofar as our clients are concerned the requisite bank guarantee is available and undertaking signed.

27 On 11 August 2004 TF wrote to LC requesting an “urgent response” in relation to proposed amendments following Mr Pozniak’s (of LC) conference with his counsel Mr Sirtes the previous afternoon. On 12 August 2004 Beswick sought from TF clarification of which version of the Consent Orders they should be reviewing. On that date Beswick also provided to TF copies of the tenancy agreements and rent statements.

28 On 13 August 2004 TF sent executed Transfers in respect of the three apartments to Beswick under cover of a letter which stated:

Preparatory upon settlement of the Supreme Court proceedings will you please arrange to have the enclosed Transfers executed and thereafter confirm that such executed transfers will be held by you pending settlement.

29 On 17 August 2004 TF wrote to LC advising that counsel for the Flexmans, Mr Smallbone, had reported that he had called counsel for Kimberley, Mr Sirtes, on the previous Friday and that such call had not been returned. TF requested LC to assist by having counsel deal with the proposed amendments as a matter of urgency because the delay was “now unreasonable and unacceptable”. The letter continued:

Insofar as our clients are concerned they are ready to proceed in that the bank guarantee is available subject to agreed Terms, availability of executed Transfers and Certificates of Title to the apartments.
It is now almost two months since the agreement to settle these proceedings insofar as our clients are concerned was made. With respect your client and the other parties have a duty to conclude the agreement without further delay.

30 On 18 August 2004 Beswick advised TF that its client would execute the Transfer upon settlement of the Consent Orders and advised that they “look forward to your proposed Orders as settled with Kimberley Securities Ltd”.

31 On 20 August 2004 LC wrote to TF referring to TF’s letter of 17 August 2004 and enclosing the further amended Consent Orders “for your approval and, if approved, for execution”. It seems reasonable for me to conclude that the Orders enclosed with this letter were a form of the earlier Orders in Schedule 1 with some underlining. On 23 August 2004 TF forwarded those amended Consent Orders to Watson “for your approval” requesting any comments at the earliest opportunity. The Orders were also sent to Beswick on that day, with a request that they peruse the Orders and “confirm that they are in order to be settled and re-engrossed”.

32 On 24 August 2004 TF wrote to Beswick in terms that included the following:

Given the period of time which has elapsed since the parties agreed to settle insofar as our clients are concerned, we would appreciate your prompt attention to considering and drafting the amendments contained in the faxed documents.

33 On 26 August 2004 TF wrote once again to LC advising that there was one notable omission from paragraph 7 being the words “damages for” to be inserted prior to the words “lost opportunity”. It is obvious that the earlier Orders in Schedule 1 were prepared after that letter, as they have taken up that suggestion. It seems probable that the earlier Orders were forwarded to TF by LC under cover of its letter of 27 August 2004.

34 On 30 August 2004 TF requested an urgent response from Beswick in relation to the Terms of Settlement as they intended to “pursue finality of this aspect of the proceedings as they affect my clients during the course of this week”. A similar facsimile was sent to Watson on 30 August 2004.

35 On 1 September 2004 Watson advised that the Terms of Settlement were “acceptable to our client”. On 3 September 2004 Beswick advised that they would not be able to respond formally in relation to the Terms of Settlement until the following Monday by reason of their counsel’s commitments.

36 On 6 September 2004 Beswick wrote to TF suggesting the following:

1. Add a further paragraph:
19. KSL and KSA agree that the parties’ consent to the orders and terms in paragraphs 4, 5, 8, 9 and 17 is given without prejudice to the claims made in the first and third cross claims.
2. Paragraphs 6 and 10 – The objective of these paragraphs is not clear to us. Our client does not agree to paragraphs 6 and 10. Our client intends to rely upon the notifications of surcharges and falsifications filed and served by Flexman and may rely upon certain affidavit evidence already sworn. We do not see how you can ‘withdraw’ an affidavit.
3. Substitute the following for paragraph 13:
13. If KSL validly calls upon the Bank Guarantee, then, notwithstanding paragraph 8 and paragraph 16, Flexman shall be subrogated to KSL’s rights under the judgment or amount payable by way of settlement/compromise secured by the Bank Guarantee.
4. In paragraph 18 substitute the words’KSL’s and KSA’s ‘ in place of the words ‘successful party’s’ in line 5.
5. Delete paragraph 18. We would prefer to include something to this effect in your clients’ collateral undertaking not to enforce the Judgment.

37 It is apparent that LC was unaware that Beswick had forwarded an identical letter to TF because LC forwarded a copy of the letter from Beswick to TF on 8 September 2004.

38 On 13 September 2004 TF responded to Beswick with a copy to LC and Watson, in the following terms:

Firstly, can we say that we cannot see the need for any of the amendments you seek to the Terms of Settlement. The agreement to be encapsulated in the Terms occurred nearly three (3) months ago and with respect should be concluded as a matter of absolute urgency. Your client is the only obstacle to this matter being concluded.
Numbered paragraph 1: Whilst we see no need for inclusion of the proposed clause our clients agree to its inclusion.
Numbered paragraph 2: If your objection to paragraphs 6 and 10 of the Terms specifically related to the matters referred to in your letter it seems to us that there is a simple alternative course for your client to take to overcome the difficulties you perceive.
Numbered paragraph 3: Our clients do not agree to alter the terms of paragraph 13 of the Terms.
Numbered paragraph 4: Whilst we cannot appreciate the need for amendment to paragraph 18 our clients will agree to what is sought.
Numbered paragraph 5: In light of the above the proposed deletion of paragraph 18 is incomprehensible and will not be agreed to.
A copy of this letter will be send to Landerer & Company and Watson & Watson.
We cannot emphasise enough that our clients are becoming increasingly impatient with your client and in particular its directors at the length of time it has taken for the formal Terms of Settlement to reach this point. Accordingly, we are instructed that unless your client agrees to sign Terms of Settlement in terms as set out in the draft as amended by the responses in this letter as a matter of urgency our clients intend to review their position. If as has previously been the case you need to further consult your Counsel we urge you to have your Counsel to confer with David Smallbone and Greg Sirtes forthwith. With respect, if this matter is not finally resolved without any further delay it is our view that your client and your firm may be judged to be guilty of unreasonably delay.
We also need to mention that in the almost three (3) months since the settlement was reached your client has continued to unwarrantedly benefit from the rental income from the apartments which our clients became entitled to by virtue of the settlement. It could well be implied that this is a motive for your client to delay this matter being concluded.

39 On 15 September 2004 Beswick advised TF as follows:

1. [In respect of the additional paragraph 19]. - The purpose of this amendment [is] to prevent the interpretation of the costs orders as some form of acknowledgement by our client that the amounts in the joint venture accounts pertaining to the legal costs of the litigation are properly included as a joint venture expense.
2. Paragraphs 6 and 10 – The objective of these paragraphs is not clear to us. Our client does not agree to paragraphs 6 and 10. Our client intends to rely upon the notifications of surcharges and falsifications filed and served by Flexman and may rely upon certain affidavit evidence already sworn. We do not see how you can ‘withdraw’ an affidavit.
Will your clients authorise the use of these documents and if called upon to do so, undertake to re-swear any affidavit evidence required by our client in the prosecution of its cross claim?
3. [As to the substitution of paragraph 13] – Our client presses this amendment in the interests of clarity of intent. We understand the existing clause to have the same intended effect. Please advise if you disagree.
4. Delete paragraph 18. We would prefer to include something to this effect in your clients’ collateral undertaking not to enforce the judgment. Your clients are able to exert sufficient control over the settlement process in circumstances where their undertaking not to enforce the judgment is conditional upon their consent to any settlement.
Although your clients undertake to pay costs, what if the ultimate judgment between KSL and our client is less favourable to our client than the terms of settlement rejected by your clients? Will your clients also underwrite this type of loss?
We are surprised that you have seen fit to disclose and/or discuss with Kimberley the collateral agreement between our respective clients concerning the enforcement of the judgment.

40 Beswick advised that it understood the Flexmans’ frustration with the slow progress but rejected any criticism of their client.

41 On 20 September 2004 TF advised Beswick that they were now instructed that the Flexmans were willing to amend the Terms of Settlement in the following way:

Par. 6. Omit the word ‘affidavits’.
At the end of par 6, add the words,
“Provided that this clause does not prevent KSA from alleging, denying or not admitting in its own pleadings any fact alleged, denied or not admitted in the Flexmans’ pleadings and provided that this clause does not prevent KSA from giving any notice on its own account or from relying on any notice which it has given or received, or from relying on any of the Flexmans’s notices to the extent (if any) that such notices affected the rights of any person.”
In view of the limited purpose of par. 6 and the drafting skill required to ensure that it achieves its intended purpose and no more, Flexman would prefer to omit the whole of par. 6. However, the above mentioned changes would be acceptable.
Par. 7. If this amendment has not already been made, insert the words ‘damages for’ immediately before the words ‘lost opportunity’.
Par. 10. At the end, add the words,
“Provided that this clause does not prevent KSA from alleging in its own notices any or all of the same falsifications, surcharges and grounds, as those alleged in the Flexmans’ notices.”
In view of the limited purpose of par. 10 and the drafting skill required to ensure that it achieves its intended purpose and no more, Flexman would prefer to omit the whole of para. 10. However, the above mentioned changes would be acceptable.
Par 13. Delete the existing par. 13 and substitute a new paragraph 13 as follows:
“13. If KSL validly calls upon the Bank Guarantee, then, notwithstanding paragraph 8 and paragraph 16, Flexman shall be subrogated to KSL’s rights under the judgment or amount payable by way of settlement/compromise secured by the Bank Guarantee, and Flexman shall be entitled to enforce any such judgment or agreement in favour of KSL against KSA and shall be entitled to recover the proceeds thereof to the extent of the amount paid under the Bank Guarantee and interest thereon, and KSA consents to any judgment necessary for such enforcement.”
Par. 18. Delete Paragraph 18
Insert a new par. 18 as follows:
“18. KSL and KSA agree that the parties’ consent to the orders and term in paragraphs 4,5,8, 8 and 17 is given without prejudice to the claims made in the first and third cross claims.”
Will you please urgently confirm that the above amendments satisfy all your client’s concerns and that the terms of Settlement can be re-engrossed accordingly subject to the solicitors for Kimberley Securities Limited having instructions to consent to the said amendments.
A copy of this letter is being forwarded to Landerer & Company.

42 Also on 20 September 2004 TF provided LC with a copy of its letter to Beswick with advice that its content represented a compromise, and requested LC to obtain urgent instructions as to whether Kimberley had any objections to those amendments. TF also provided a copy of that letter to Watson and sought an urgent response.

43 On 21 September 2004 LC wrote to TF in the following terms:

We refer to your letter dated 20 September 2004 and now enclose Consent Orders/Terms of Settlement in final form for execution.
Please note as follows:
1. the proposed amendments to paragraphs 6 & 10 are not agreed as they defeat the very purpose of those paragraphs; and
2. the proposed amendments to paragraphs 7, 13 & 18 are agreed subject to the word “validly” in the first line of substituted paragraph 13 being deleted.

44 On 23 September 2004 TF wrote to Beswick confirming the agreement that clause 6 be deleted; that clause 10 be amended to delete all the words after “withdrawn” and substituting the words “by the Flexmans”; that clause 7 and 13 as amended by Beswick be included; and the amendment to clause 13 be included subject to deleting the word “validly”. That letter continued:

We understand that the only impediment to Terms of Settlement in this finally agreed form being executed by your client is obtaining instructions from one director who is presently overseas. Will you please endeavour to obtain those instructions by the most expeditious means available to you.

45 On 23 September 2004 Mr Pozniak of LC sent an email to Beswick, Watson and TF in the following terms:

Further to our letter dated 21 September 2004, we attach final form of Consent Orders/Terms of Settlement for execution.
Please note as follows:
1. The former paragraph 6 has been deleted altogether; and
2. The former paragraph 10 (now paragraph 9) has been amended.
Please now return orders/terms duly executed at your earliest convenience .

46 Also on 23 September 2004 TF wrote to Beswick advising that LC had informed them that Kimberley wished to add the words “and be taken off the Court file” after the word “Flexmans” in clause 10 of the orders. TF advised Beswick that they had no objection, and requested Beswick to include this amendment when obtaining instructions from the director of Knox who was, at that time, overseas.

47 On 24 September 2004 Mr Bagley of TF sent an email to Mr Pozniak in the following terms:

We are fine with the Terms except you need to amend para 12 by deleting 8 & 16 and substituting 7 & 15 (para re numbering).
I am pressing Tim Lynch to finalise his instructions today and signify his client’s agreement to the latest draft.

48 On 27 September 2004 TF advised Watson that all parties other than the Esbers had signified agreement to the terms in the form emailed by LC on 24 September 2004. TF requested urgent confirmation of the Esbers’ agreement in their “personal capacity” to sign the terms “so that this long running matter can be settled and brought to a final conclusion during the course of this week”.

49 On 28 September 2004 TF wrote to Beswick referring to the terms of settlement signed on behalf of Knox and advising that the terms would be signed by the Flexmans that afternoon and then forwarded on to Watson for the Esbers to sign. The letter stated “the final step will [be] for them to be signed by or on behalf of Landerer & Company’s clients”. The letter continued “it will then enable the signed terms to be filed in the Registry simultaneously with carrying out of the steps necessary to give effect thereto”. The letter also advised that in respect of the lots comprising the three apartments, TF would require to be handed to them three discharges of mortgage and four withdrawals of caveat. TF also advised LC of these requirements on 28 September 2004. On the same day TF advised Beswick that in addition to the discharges of mortgage and withdrawals of caveat they would require “to be handed over on settlement”, transfers of the three lots, three residential leases and Notices of Attornment.

50 On 29 September 2004 TF sent four copies of the Consent Orders to Watson for signature and requested that after they were signed they be forwarded to Mr Pozniak for signature. That letter concluded:

Given the lengthy period of time that has transpired since the agreement to settle was reached, we would greatly appreciate your urgent attention in dealing in this matter.

51 The Orders that were circulated and signed by all parties other than Kimberley, the final Orders, are set out in Schedule 2 to this judgment.

52 On 30 September Mr Pozniak sent a further email to Beswick, Watson and TF. That email was in the following terms:

We refer to the letters from Thurlow Fisher dated 28 and 29 September 2004 and now advise that we are organising the discharge of mortgages 5843332 (Law Mortgages Queensland), 6448653 (Permanent Trustee Australia Limited) and 5865100 (Residential Housing Corporation Limited) together with the Withdrawal of Caveats 8588202 (Investmentsource Corporation), 8950455 (Josephine Bito-On) and 8311283 (Kimberley Securities).
In the meantime, we now enclose for execution copies of the following:
1. Consent Orders/Terms of Settlement in proceedings no. 1212 of 2002; and
2. Consent Orders/Terms of Settlement in proceedings no. 50049 of 2002.

53 On 19 October 2004 TF wrote to Beswick requesting an authority from Knox addressed to Bolzan & Dimitri authorising them to release Certificates of Title to TF upon payment of their costs to be held in escrow pending completion. TF requested a “settlement” be arranged for the following Thursday at a venue to be advised by Beswick. Further TF advised that upon the Flexmans’ bank providing the relevant bank guarantee they would in return require the documents referred to earlier to be handed over to TF. On 20 October 2004 Beswick provided a completed authority for the handing over of the Certificate of Title.

54 The four Cross-Claims were listed for hearing on 22 November 2004. It is apparent that LC served a Motion on TF returnable before me on 5 November 2004 seeking the vacation of those hearing dates. In response to that service TF wrote to LC in the following terms:

Our clients are parties only to the Second Cross-Claim, which has been resolved and is the subject of executed Terms of Settlement currently held by you.
In order for our clients to formulate their response to your motion for vacation of the hearing dates, our client requires from your clients an unequivocal acknowledgement that the Second Cross-Claim has been settled as per the Terms of Settlement executed by all the parties to the proceedings and held by you.
If you are now of the view that the Second Cross-Claim has not been settled, which view would be contrary to that held by our client and contrary to the documentation exchanged between the parties, what is the reason for such a view?
Do you acknowledge that the parties have an agreement? If not, why do you assert there is no agreement?
Our client has at all times been ready willing and able to perform under the Terms of Settlement and remains so.
We have obtained a Guarantee and we seek from you an indication from you as to when you will be in a position to settle.
We note that settlement was agreed to take place prior to the scheduled hearing date.
In the event that your client declines to now perform the agreements, we are instructed to prepare an application for specific performance of the Terms of Settlement, which we will seek to file on Friday and have heard on an urgent basis.
In any event, our response to your Motion depends on your answers to the issues raised in this letter.
Please let us have your response to our queries as a matter of urgency.

55 On 4 November 2004 LC wrote to TF in the following terms:

We are not holding executed Terms of Settlement in relation to the Second Cross-Claim as alleged.
As the Terms of Settlement have not been executed and exchanged, we deny that the Second Cross-Claim has been settled as alleged.
Having regard to the action by the ATO in relation to the outstanding GST, it is plain that events have overtaken the parties negotiations in relation to settling the Second Cross-Claim.
Even if the parties had agreed to settle the Second Cross-Claim as alleged (which is not admitted), it is submitted that any such agreement is frustrated by the action of the ATO or can be avoided on the basis of an operative mistake. In this regard, we refer you to the decision of the High Court of Australia in “ Taylor v Johnson (1983) 151 CLR 422 ”.
In addition, to proceed with any such agreement (which is not admitted) having regard to the action by the ATO in relation to the outstanding GST, would:
1. result in your clients receiving from Knox Street Apartments Pty Limited (“KSA”), in respect of an unsecured debt that KSA owes to your clients, more than your clients would receive from KSA in respect of the debt if the settlement was set aside and your clients were to prove for the debt in the winding-up of KSA; and
2. constitute:
(a) an unfair preference pursuant to s588FA of the Corporations Act 2001 (“the Act”)
(b) an insolvent transaction pursuant to s588FC of the Act; and
(c) a voidable transaction pursuant to s588FE of the Act.

Consideration

56 In the Fourth Cross-Claim the Flexmans sought a declaration that the agreement was made on or about 25 June 2004 or on or about 21 September 2004. With the benefit of a review of the materials the submission made by the Flexmans was that the agreement was made on about 27 June 2004 or alternatively no later than 30 September 2004. The Flexmans seek an order that the cross-defendants specifically perform and carry into execution that agreement. The defence filed on behalf of Kimberley contended that any agreement was void on the basis of common mistake. At trial Mr Coles QC informed the Court that the defence of mistake was abandoned and that the only issue is whether a concluded and binding agreement was reached.

57 The plaintiffs submitted that the starting point of any analysis of the facts in this case is the decision of the High Court in Masters v Cameron (1954) 91 CLR 353 in particular in the Judgment of Dixon CJ, McTiernan & Kitto JJ at 360:

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 classes. It may be one in which the parties have reached finality in arrangement 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 of 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.

58 There has been identified in the authorities a fourth class of case additional to those mentioned above. That was recognised by Knox C. J., Rich J. & Dixon J. in Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317 as "one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms". Their Honours referred to the speech of Lord Loreburn in Love & Stewart Ltd v Instone & Co (1917) 33 TLR 475 in which his Lordship said at 476:

It was quite lawful to make a bargain containing certain terms with which one was content with, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, nonetheless that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.

59 The plaintiffs submitted that the present case is a stronger instance of an intention to create an immediately binding contract than either of the first two categories referred to in Masters v Cameron.

60 In Geebung Investments Pty Ltd & Anor v Vargar Group Investments No. 8 Pty Limited (1995) 7 BPR 14,551, the vendor and purchaser agreed to settle a pending equity suit. At the meeting at which the alleged agreement was reached the parties did not have their lawyers present, but it was common ground that those present “contemplated that the solicitors would draw up terms of settlement”. It was also common ground that there was no conversation about the formalities involved in the disposal of the pending equity suit. That case was, as Gleeson CJ said, “fairly simple”. The Chief Justice also said at 14,552:

In a case such as the present, there are two, sometimes related questions which require to be considered. The first is whether the parties to the putative contract intended to make a concluded agreement.
The second is whether they succeeded in doing so. The answer to the second question may depend upon a number of factors, including whether the parties have reached agreement upon all the terms necessary, in the circumstances, to constitute a contract. In that connection, an implication of terms, or resort to considerations of reasonableness, may assist the conclusion that a contract has been made. (See Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548).
As the decision in the Australian Broadcasting Corp case illustrates, the fact that parties to negotiations have agreed upon the major matter under discussion, confidently believing that the remaining matters to be decided will be sorted out later between them or their lawyers, without any difficulty, can sometimes create a misleading appearance of consensus. Such parties may well believe that they have a “deal” or a “bargain”, and speak and act accordingly, whilst at the same time knowing and intending that further and more detailed agreement is necessary. For that reason, conduct such as shaking hands, or using the language of agreement, can be ambiguous. The resolution of the ambiguity may require more detailed factual and legal analysis.

61 This case requires factual analysis not for the resolution of any real ambiguity, but for the determination of whether the parties entered into a binding agreement as claimed by the plaintiff. Although Mr Coles QC referred me to a number of cases: Film Bars Pty Ltd v Pacific Film Laboratories PtyLtd (1979) 1 BPR 9251; Cleary v Masterton [1999] NSWSC 207; McCann v By-Dezign Pty Ltd [2001] NSWSC 161; and Locnere Pty Ltd v Jakk’s Bagel & Bread Co Pty Ltd [2003] NSWSC 1123 this case, as so many others involving the well trodden principles of Masters v Cameron, requires analysis of its particular facts.

Contingency/Condition Precedent

62 There was nothing pleaded by way of defence in respect of the time stipulation. However Mr Coles QC submitted that the contingency or condition precedent was not satisfied because Knox did not accept the terms until Monday 27 June 2004. Once this argument was raised during the trial, Dr Birch submitted that, notwithstanding the stipulation, the defendant waived any requirement for acceptance by 5:00pm on 25 June 2004 evidenced by (i) the absence of any complaint that such time stipulation had not been complied with; and (ii) the conduct of Kimberley post 27 June 2004 in drafting the terms of settlement to reflect the agreement reached as at 27 June 2004 when Knox accepted the terms.

63 The relevant paragraphs of the letter of 24 June 2004 on this aspect of the matter are as follows:

11. This settlement offer is contingent on acceptance by both Knox and the Flexmans within the time stipulated in paragraph 14.

12. This settlement offer shall remain open for acceptance until 5:00pm Friday 25 June 2004.

64 In Tricontinental Corp Ltd v HDFI Ltd (1990) 21 NSWLR 689 Samuels JA said at 703:

A condition precedent, on the other hand, need not be promissory in nature. It is a stipulation in an agreement upon the fulfilment of which the existence of a contract, or of a principal obligation under an existing contract, is made contingent. The stipulation may involve the occurrence of an event that is independent of both parties, or it may require a unilateral act: See Halsbury’s Laws of England, 4th ed, vol 9, par 511 at 353 .
If the condition precedent is the performance of some act by one party, it is not necessary to inquire whether the failure to do the act was also a breach of contract unless the party promised to do the act which is the condition precedent.

65 Samuels JA referred to the observations made by Diplock LJ in United Dominions Trust (Commercial), Ltd v Eagle Aircraft Services, Ltd [1968] 1 WLR 74 at 84 and continued at 704:

Similarly, it has been said that if a provision is expressed in terms of a condition precedent, this of itself gives it the character of essentiality: Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 554 per Mason J. Implicit in his Lordship’s remarks is the proposition that a condition precedent is strictly construed. So where a provision lays down an act by one party as a condition precedent to the existence of an obligation on the part of the other party, the condition precedent will not be fulfilled until the former party does an act that strictly matches that described in the contract.

66 The “contingency” in the letter of 24 June 2004 was the acceptance of the offer by both the Flexmans and Knox by 5pm on Friday 25 June 2004. The letter stated that the offer “shall remain open for acceptance” until that time. Mr Coles QC submitted that that there is no such thing as substantial compliance with a condition precedent to the formation of a binding contract. He submitted that there was a failure to comply with the condition precedent (although perhaps inaptly described), that is, there was no acceptance in compliance with the time stated in the letter, and therefore there was no agreement.

67 The contingency was imposed by Kimberley for its own benefit and it was well within its province to change the time within which it allowed its offer to remain open, so long as it did not attempt to do so after there had been acceptance within the time stipulated. In my view it is clear that Kimberley decided to extend the time within which the acceptance of the offer could occur. After Knox advised that the terms of the offer were acceptable to it on 27 June 2004, TF wrote to LC on 29 June 2004 referring to the Flexmans’ “acceptance” of the offer and advising of their understanding that Knox had “conveyed acceptance of those terms”. TF also requested LC to “prepare relevant documentation to give effect to the settlement” for “consideration and approval”.

68 On 8 July 2004 LC wrote in precise and very short terms to TF. They were: “we refer to your letter of 29 June 2004 and now enclose draft Consent Orders/Terms of Settlement for your approval. We have also forwarded a copy of the draft Consent Orders/Terms of Settlement to Beswick Solicitors and Watson & Watson for their approval”. This was in clear response to what TF had written without demur and with no suggestion that there had not been acceptance of the offer because the acceptance was out of time. I am of the view that Kimberley decided to let the offer remain open until 27 June 2004 when Knox accepted it. In all the circumstances I am not satisfied that there was a failure to comply with a condition precedent or contingency.

Binding agreement?

69 Mr Coles QC submitted that the conduct of the parties reflected by the solicitors’ correspondence is indicative of parties negotiating to see if they were able to reach agreement in respect of what he described as “multipartite” and complex litigation in contrast to the simple equity suit in Geebung Investments Pty Ltd & Anor v Vargar Group Investments No. 8 Pty Limited. It is true that there were more matters for consideration in this litigation than there were in Geebung. Complexity is not a bar to agreement having been reached, however it is necessary to scrutinise the parties’ conduct in more detail where such complexity exists.

70 The draft Orders and the subsequent correspondence require analysis in ascertaining whether they are: (a) indicative of an embarkation on the process of negotiating towards a possible agreement; or (b) reflective of a binding agreement having been reached no later than 8 July 2004 or 30 September 2004.

71 Paragraphs 1, 3 and 4 of the letter of 24 June 2004 were in the following terms:

1. Flexmans provide a bank guarantee from a reputable Australian trading bank securing payment of any judgment (excluding costs and interest) in favour of our client against Knox for an amount not less than $542,675.93 and maturing within sixty (60) days of any such judgment.
3. If our client fails to obtain a judgement against Knox then the bank guarantee referred to in 1 above mature upon the determination of the proceedings.
4. If Knox obtains a judgement against our client in respect of its claims, Knox to reimburse the Flexmans for their claims against Knox and the Esber brothers for lost opportunity, foregone rental income, stamp duty on Contracts for Sale and interest from the proceeds of judgement.

72 The plaintiff submitted that the following paragraphs of the earlier Orders are reflective of those paragraphs:

7. Judgment for Flexman against KSA on the Second Cross-Claim in proceedings no. 50049 of 2002 [between Flexman as cross-claimants and KSA, KSL and Joseph Esber and Marcel Esber (“Esber”) as cross-defendants] for damages for lost opportunity, loss of benefit of possession of units 27, 56 and 58 and stamp duty on the contracts for sale dated 22 January 1999 together with interest agreed in the sum of $297,197.75;
11. Flexman tender to KSL a guarantee from a reputable Australian trading bank securing payment of any judgment (excluding costs and interest) or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 for an amount of $542,675.93 and maturing within sixty (60) days of any such judgment, final determination of proceedings no. 50049 of 2002 or settlement/compromise, whichever is the latter (“the Bank Guarantee”);
13. In the event that there is a judgment or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 and KSL calls upon the Bank Guarantee, notwithstanding order 7 above Flexman shall be at liberty to enter judgment against KSA for the amount so called upon in addition to the amount provided for by order 7 above;

14. In the event that KSL fails to obtain a judgment or settlement/compromise against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, Flexman shall be at liberty to recall the Bank Guarantee upon the final determination of proceedings no. 50049 of 2002;
15. In the event that there is a judgement in favour of KSA against KSL in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, from the proceeds of any such judgment KSA to reimburse Flexman in respect of Flexman’s judgement against KSA referred to in Order 7 above;

73 Order 7 provides for the entry of judgment by the Flexmans against Knox in the amount of $297,197.75. That matter is not the subject of express statement in the letter of 24 June 2004. However the letter provides for the transfer of the apartments to the Flexmans (par 2) and requires Knox to “reimburse” the Flexmans from the proceeds of any judgment Knox obtains against Kimberley for “for their claims against Knox and the Esber brothers for lost opportunity, foregone rental income, stamp duty on Contracts for Sale and interest “(par 4). There is also the discontinuance and the mutual releases in paragraphs 5 and 7 of the letter. These paragraphs are indicative of the parties’ clear intention that Knox agreed it was liable to the Flexmans for the latter’s claims for damages thus the reference to “reimbursement”. Dr Birch submitted that after the letter of 24 June 2004 and the acceptances of 25 and 27 June 2004, Knox and the Flexmans agreed on a figure in respect of the claims referred to in paragraph 4 and that detail was included in the draft Orders.

74 Paragraphs 11, 13, 14 and 15 are a more detailed version of paragraphs 1, 3 and 4 of the letter of 24 June 2004 and set out what is to happen to the bank guarantee in the alternative outcomes of the First and Third Cross-Claims. If Kimberley is unsuccessful against Knox and there is entry of judgment for Knox against Kimberley, the Flexmans are entitled to recall the guarantee and Knox is required, from the proceeds of any judgment against Kimberley, to reimburse the Flexmans in respect of their judgment against Knox (pars 14 and 15).

75 If Kimberley is successful against Knox either by way of judgment or compromise and calls on the bank guarantee, the Flexmans are entitled to enter judgment against Knox in the amount in paragraph 7 of the earlier Orders together with the additional amount of the bank guarantee.

76 The final Orders reflective of those paragraphs of the letter are as follows:

6. Judgment for Flexman against KSA on the Second Cross-Claim in proceedings no. 50049 of 2002 [between Flexman as cross-claimants and KSA, KSL and Joseph Esber and Marcel Esber (“Esber”) as cross-defendants] for damages for lost opportunity, loss of benefit of possession of units 27, 56 & 58 and stamp duty on the contracts for sale dated 22 January 1999 together with interest agreed in the sum of $297.197.75.
10. Flexman tender to KSL a guarantee from a reputable Australian trading bank securing payment of any judgment (excluding costs and interest) or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 for an amount of $542,675.93 and maturing within sixty (60) days of any such judgment, final determination of proceedings no. 50049 of 2002 or settlement/compromise, whichever is the latter (“the Bank Guarantee”); and
12. In the event that there is a judgment or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 and KSL calls upon the Bank Guarantee, notwithstanding paragraph 8 and paragraph 16, Flexman shall be subrogated to KSL’s rights under the judgment or amount payable by way of settlement/compromise secured by the Bank Guarantee, and Flexman shall be entitled to enforce any such judgment or agreement in favour of KSL against KSA and shall be entitled to recover the proceeds thereof to the extent of the amount paid under the Bank Guarantee and interest thereon, and KSA consents to any judgment necessary for such enforcement.
13. In the event that KSL fails to obtain a judgment or settlement/compromise against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, Flexman shall be at liberty to recall the Bank Guarantee upon the final determination of proceedings no. 50049 of 2002.

14. In the event that there is a judgment in favour of KSA against KSL in respect of the First Cross-Claim and/or the Third Cross-claim in proceedings no. 50049 of 2002, from the proceeds of any such judgment KSA to reimburse Flexman in respect of Flexman’s judgment against KSA referred to in Order 6 above.

77 The reference to paragraphs “8” and “16” in paragraph 12 was pointed out in correspondence to require correction to accommodate the change in numbering as the various amendments occurred, notwithstanding that such correction did not occur prior to the parties (other than Kimberley) signing the final Orders (Exs. C & D). Otherwise the final Orders reflect what might reasonably be described as a more sophisticated version of the earlier Orders.

78 There is provision in paragraph 12 for the Flexmans to be subrogated to Kimberley’s rights to the limit of the amount of the bank guarantee. Mr Coles QC submitted that this is something quite new and would lead to the conclusion that the parties had not reached a binding agreement at all. I disagree. This is refinement of the machinery provisions for the agreement in paragraphs 1, 3 and 4 of the letter that had been the subject of paragraph 15 of the earlier Orders.

79 Paragraph 2 of the letter of 24 June 2004 provided:

2. Knox and our client transfer Lots 27, 56 and 58 to your clients forthwith.

80 The plaintiff submitted that paragraphs 1 to 3 of the Orders as set out below (in this instance there is no difference between the earlier and final Orders) are reflective of that paragraph:

1. Knox Street Apartments Pty Limited (”KSA”) transfer to Roger Percival Flexman and Philippa Margaret Flexman (“Flexman”) title of units 27, 56 and 58/11-21 Rose Street, Chippendale and 5-5A Knox Street, Chippendale (being the whole of the land in Folio Identifiers 27 & 66/SP67022, 56 & 98/SP67022 & 58 & 106/SP67022)) (“units 27, 56 and 58”) free of encumbrance.
2. Kimberley Securities Limited (“KSL”) withdraw caveat no. 8311283 and execute and deliver to Flexman such consents as may be required in order that the Certificates of Title and Transfers to units 27, 56 & 58 may be delivered by KSA to Flexman and in order that the said Transfers may be registered.
3. KSA withdraw caveat no. 8714266.

81 Paragraph 1 of the Orders is clearly reflective of paragraph 2 of the letter. Paragraphs 2 and 3 of the draft Orders are the “machinery” provisions to facilitate the transfer of the properties referred to in paragraph 2 of the letter.

82 Paragraphs 5 and 7 of the letter of 24 June 2004 provided:

5. All of the proceedings by and against the Flexmans by any other party and all such proceedings by the Flexmans against Knox, our client, Stoliar and Lorenz to be discontinued with no order for costs.
7. Knox and our client to sign releases in favour of the Flexmans in accordance with the terms of this proposed settlement. Flexman to sign releases in favour of Knox and our client in accordance with the terms of this proposed settlement.

83 The plaintiff submitted that the following paragraphs of the earlier Orders are reflective of those paragraphs:

4. Proceedings No. 1212 of 2002 (between KSA as plaintiff and Flexman as defendants) be otherwise dismissed with no order as to costs (to the intent that each of the parties bear its own cost of the proceedings);

6. The pleadings, affidavits and notices of the defendants (Flexman) in proceedings no. 1212 of 2002 be withdrawn and cease to be relied upon in respect of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002;

8. The Second Cross-Claim in proceedings no. 50049 of 2002 be otherwise dismissed as against KSL and Esber with no order as to costs (to the intent that each of those parties bear its own cost of the Second Cross-Claim);

10. The Notice of Falsifications and the Notice of Surcharges filed and served by the cross-claimants (Flexman) in respect of the Second Cross-Claim in proceedings no. 50049 of 2002 be withdrawn and cease to be relied upon in respect of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002;
16. Save as provided by these terms, Flexman releases KSA, KSL, Esber, Nati Stoliar (”Stoliar”) AND Gabriel Michael Lorentz (“Lorentz”) from all claims, demands, suits, actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002.
17. Save as provided by these terms, KSA, KSL, Esber, Stoliar and Lorentz release Flexman from all claims, demands, suits, actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002.

84 The relevant paragraphs of the final Orders are as follows:

4. Proceedings No. 1212 of 2002 (between KSA as plaintiff and Flexman as defendants) be otherwise dismissed with no order as to costs (to the intent that each of the parties bear its own cost of the proceedings);
7. The Second Cross-Claim in proceedings no. 50049 of 2002 be otherwise dismissed as against KSL and Esber with no order as to costs (to the intent that each of those parties bear its own cost of the Second Cross-Claim);
9. The Notice of Falsifications and the Notice of Surcharges filed and served by the cross-claimants (Flexman) in respect of the Second Cross-Claim in proceedings no.50049 of 2002 be withdrawn by Flexman and removed from/taken off the Court file;
15. Save as provided by these terms, Flexman releases KSA, KSL, Esber, Nati Stoliar (“Stoliar”) and Gabriel Michael Lorentz (“Lorentz”) from all claims, demands, suits, actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002.
16. Save as provided by these terms, KSA, KSL, Esber, Stoliar and Lorentz release Flexman from all claims, demands, suits actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002.

85 The difference between the earlier Orders and the final Orders are in my view once again a refinement to reflect the contents of the letter of 24 June 2004. The fact that paragraph 6 of the earlier Orders is not in the final Orders does not mean that agreement had not been reached that those pleadings would not be relied upon. Paragraph 4 dismissing proceedings 1212 of 2002 had the same effect on those pleadings and affidavits as if paragraph 6 had been retained. It seems to me that all that was done in this regard was the removal of an otiose paragraph as the document was refined. The change is not indicative of the parties still searching for agreement.

86 The differences between the terms of paragraph 10 of the earlier Orders and its equivalent paragraph 9 of the final Orders are but small adjustments by way of either refinement or clarification and the final Orders are to the same effect as the earlier Orders and the paragraphs of the letter of 24 June 2004.

87 Paragraph 6 of the letter of 24 June 2004 provided:

6. Any existing costs orders to be discharged with each party paying its own costs insofar as the Flexmans are concerned.

88 The plaintiff submitted that the following paragraphs of the earlier Orders are reflective of that paragraph:

5. All existing unpaid costs orders in proceedings no. 1212 of 2002 be vacated;

9. All existing unpaid costs orders in respect of the Second Cross-Claim in proceedings no. 50049 of 2002 be vacated;

89 Those two paragraphs were included in the same terms in the final Orders as paragraphs 5 and 8 and I agree are reflective of the contents of paragraph 6 of the letter of 24 June 2004.

90 Paragraph 8 of the letter of 24 June 2004 provided:

8. Knox and our client to undertake to the Flexmans to do all things necessary to vigorously pursue the proceedings to a hearing on the earliest available date.

91 The plaintiff submitted that the following paragraphs of the earlier Orders are reflective of that paragraph:

12. The proceedings be stood-over to Monday 22 November 2004 for hearing of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002.

92 Paragraph 11 of the final Orders was in identical terms. The listing of the relevant Cross-Claims on 22 November 2004 “for hearing” is in my view pursuing them “vigorously” and reflective of the contents of the letter of 24 June 2004.

93 Paragraph 9 of the letter of 24 June 2004 provided:

9. Knox and our client to further undertake to the Flexmans not to enter into a compromise settlement of their respective claims against each other without the consent of the Flexmans, such consent not to be unreasonably withheld.

94 The earlier Orders contained the following paragraph:

18. KSA and KSL not to compromise the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 without the consent of Flexman, such consent not to be unreasonably withheld, and if withheld, if the outcome of the said proceedings is not more favourable to Flexman than the provisions which would have been made by such compromise, Flexman to undertake to the Court to pay the successful party’s reasonable costs, fees and expenses (as agreed or as otherwise assessed) of continuing with the proceedings to a final hearing and determination and to indemnify the successful party in respect of same.

95 The final Orders did not include this paragraph or an equivalent. As can be seen from the recitation of the contents of the relevant correspondence above, the parties appear to have included the undertaking in paragraph 9 of the letter in what was referred to as the Flexmans’ “collateral undertaking”. The fact that they chose that method rather than its inclusion in the final Orders does not mean that it was not part of the agreement reached, or that agreement was not reached.

96 I have dealt with paragraphs 11 and 12 of the letter of 24 June 2004 above in relation to the question of contingency/condition precedent. That leaves only paragraph 10 of the letter which provided:

10. The agreement created by acceptance of this proposed settlement may be pleaded in bar as a defence to any further proceedings involving issues in the proceedings;

97 The final Orders contained the following paragraph:

17. KSA and KSL agree that the parties’ consent to the orders and terms in paragraphs 4, 5, 7, 8 & 16 is given without prejudice to the claims made in the First Cross-Claim and the Third Cross-Claim.

98 Paragraph 17 of the final Orders is a refection of what the parties intended by paragraph 10 of the letter. The only matters kept alive were the issues in the First and Third Cross-Claims.

99 Mr Coles QC submitted that the fact that Mr Pozniak was conferring with counsel in relation to the amendments to the draft orders, although equivocal, favoured an interpretation that the parties were still in negotiating mode. I disagree. These were important matters in which the issues in the First and Third Cross-Claims were still extant and in which Kimberley had an intense interest to ensure remained extant, notwithstanding its settlement of the Second Cross-Claim. The orders to reflect the agreement reached needed careful drafting, and the fact that Mr Pozniak sought counsel’s advice does not suggest that agreement had not already been reached.

100 Mr Coles QC also highlighted some of the language used by the solicitors for the respective parties in the correspondence in support of his submission that the parties were still in negotiating mode and had not reached a binding agreement. One such instance was the words in the letter of 13 August 2004 from TF to Beswick enclosing Transfers for execution “preparatory upon settlement of the Supreme Court proceedings”. I do not construe those words as suggesting that the parties had not agreed to settle the proceedings. Rather, in the context of all that happened prior to that date, they suggest that the parties were doing the very things to facilitate what they had already agreed to do – to transfer the properties to the Flexmans and this was to happen at the same time as the formal orders reflecting their agreement were made by the Court.

101 Mr Coles QC also placed some emphasis upon the fact that section B of the draft Orders provided for the Court to note the Agreement of the parties. This does not support a finding of an absence of an agreement. It is, as the analysis earlier demonstrates, a reflection of what was agreed to in the letter of 24 June 2004 with refinement and recognition that some of the paragraphs are appropriate for Orders and others are for notation of agreement.

102 It was also submitted that the parties clearly intended that each of them sign the Orders, evidenced by the provision for those signatures at the end of the document, and that such provision in the light of all the correspondence evidenced an intention that there would be no binding agreement until each of the parties signed the document. I agree that the parties sent the document to each other for signature, but I am not satisfied that the fact that they were going to sign the terms meant that they had not already reached a binding agreement. Reliance was also placed upon the letter from TF to Beswick dated 28 September 2004 referring to “the final step” for them to be signed “on behalf of Landerer & Company’s clients” to “enable the signed terms to be filed in the Registry simultaneously with carrying out of the steps necessary to give effect thereto”. The latter reference to “the steps giving effect thereto” was, in my view, the presentation of the discharges of mortgage and the withdrawals of caveat and the handing over of the transfers. The fact that the parties were waiting until a document was filed with the Registry to take those steps does not mean that they had not already reached a binding agreement that such steps were to be taken.

103 Mr Pozniak’s email of 30 September 2004 in which he advised that “we are organising” the discharges of mortgage and the withdrawals of caveats is, in my view, not indicative of a tentative negotiation position but of a party’s solicitor “organising” and facilitating what the client knew it had already agreed to, which agreement included the transfer of the properties in the settlement of the Second Cross Claim.

104 The rather protracted process of finalising the document is also relied upon to suggest that no binding agreement had been reached. Mr Coles QC submitted that “some things have come in and gone out” and some things that seemed important, such as the old paragraph 6 in relation to the pleadings in matter no 1212 of 2002, “dropped out”. It is certainly true that the document took some time to be finalised, but finalised it was by the time Mr Pozniak wrote to the parties by email on 30 September 2004 enclosing “execution copies” of it. I am of the view that the care with which the parties attended to the finalization of the document is more indicative of ensuring that the document reflected the agreement they had reached rather than attempting to reach an agreement.

105 The evidence establishes that there was consensus and binding agreement as at 8 July 2004 at the latest in the terms of the letter of 24 June 2004 when, as requested in TF’s letter of 29 June 2004, LC sent them the document requested “to give effect to the settlement”. Five days later when, by letter dated 13 July 2004, TF suggested that the draft Orders required amendment to “give full effect to the agreement between the parties”, there was no suggestion made by Kimberley that “agreement” had not been reached. To the contrary, the parties proceeded to amend the Orders. Similarly on 17 August 2004 when TF advised LC that it was “almost two months since the agreement to settle the proceedings insofar as our clients are concerned was made”, LC responded on 20 August 2004 enclosing further amended Orders “for your approval, and if approved, for execution”. If, as is now suggested, Kimberley was of the view that no such agreement had been reached, this was a most appropriate opportunity to say so. It did not. The first claim that agreement had not been reached came on 4 November 2004. That claim, in my view, is without foundation.

106 The parties contemplated that a more formal document would be prepared, reflecting their agreement and including any other terms by consent. Thus the figure reached as between TF on behalf of the Flexmans and Beswicks on behalf of Knox was included in the earlier Orders and the final Orders.

107 The Cross Claimants to the Fourth Cross-Claim are entitled to the Orders they seek in the Fourth Cross Claim. The parties are to bring in Short Minutes of Order at 9.30 on 14 December 2004 together with an order for costs. If the parties are unable to agree on a costs order I will hear argument at that time.

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SCHEDULE 1
“EARLIER ORDERS”
BY CONSENT AND WITHOUT ANY ADMISSIONS OF LIABILITY:

A: THE COURT ORDERS THAT :-
1. Knox Street Apartments Pty Limited (”KSA”) transfer to Roger Percival Flexman and Philippa Margaret Flexman (“Flexman”) title of units 27, 56 & 58/11-21 Rose Street, Chippendale and 5-5A Knox Street, Chippendale (being the whole of the land in Folio Identifiers 27 & 66/SP67022, 56 & 98/SP67022 & 58 & 106/SP67022) (“units 27, 56 & 58”) free of encumbrance;
2. Kimberley Securities Limited (“KSL”) withdraw caveat no. 8311283 and execute and deliver to Flexman such consents as may be required in order that the Certificates of Title and Transfers to units 27, 56 & 58 may be delivered by KSA to Flexman and in order that the said Transfers may be registered;
3. KSA withdraw caveat no. 8714266;
4. Proceedings No. 1212 of 2002 (between KSA as plaintiff and Flexman as defendants) be otherwise dismissed with no order as to costs (to the intent that each of the parties bear its own cost of the proceedings);
5. All existing unpaid costs orders in proceedings no. 1212 of 2002 be vacated;
6. The pleadings, affidavits and notices of the defendants (Flexman) in proceedings no. 1212 of 2002 be withdrawn and cease to be relied upon in respect of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002;
7. Judgment for Flexman against KSA on the Second Cross-Claim in proceedings no. 50049 of 2002 [between Flexman as cross-claimants and KSA, KSL and Joseph Esber and Marcel Esber (“Esber”) as cross-defendants] for damages for lost opportunity, loss of benefit of possession of units 27, 56 & 58 and stamp duty on the contracts for sale dated 22 January 1999 together with interest agreed in the sum of $297,197.75;
8. The Second Cross-Claim in proceedings no. 50049 of 2002 be otherwise dismissed as against KSL and Esber with no order as to costs (to the intent that each of those parties bear its own cost of the Second Cross-Claim);
9. All existing unpaid costs orders in respect of the Second Cross-Claim in proceedings no. 50049 of 2002 be vacated;
10. The Notice of Falsifications and the Notice of Surcharges filed and served by the cross-claimants (Flexman) in respect of the Second Cross-Claim in proceedings no. 50049 of 2002 be withdrawn and cease to be relied upon in respect of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002;
11. Flexman tender to KSL a guarantee from a reputable Australian trading bank securing payment of any judgment (excluding costs and interest) or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 for an amount of $542,675.93 and maturing within sixty (60) days of any such judgment, final determination of proceedings no. 50049 of 2002 or settlement/compromise, whichever is the latter (“the Bank Guarantee”); and

12. The proceedings be stood-over to Monday 22 November 2004 for hearing of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002.
B. THE COURT NOTES THE AGREEMENT OF THE PARTIES AS FOLLOWS:-
13. In the event that there is a judgment or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 and KSL calls upon the Bank Guarantee, notwithstanding order 7 above Flexman shall be at liberty to enter judgment against KSA for the amount so called upon in addition to the amount provided for by order 7 above;
14. In the event that KSL fails to obtain a judgment or settlement/compromise against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, Flexman shall be at liberty to recall the Bank Guarantee upon the final determination of proceedings no. 50049 of 2002;
15. In the event that there is a judgement in favour of KSA against KSL in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, from the proceeds of any such judgment KSA to reimburse Flexman in respect of Flexman’s judgment against KSA referred to in Order 7 above;
16. Save as provided by these terms, Flexman releases KSA, KSL, Esber, Nati Stoliar (”Stoliar”) and Gabriel Michael Lorentz (“Lorentz”) from all claims, demands, suits, actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002;
17. Save as provided by these terms, KSA, KSL, Esber, Stoliar and Lorentz release Flexman from all claims, demands, suits, actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002; and
18. KSA and KSL not to compromise the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 without the consent of Flexman, such consent not to be unreasonably withheld, and if withheld, if the outcome of the said proceedings is not more favourable to Flexman than the provisions which would have been made by such compromise, Flexman to undertake to the Court to pay the successful party’s reasonable costs, fees and expenses (as agreed or as otherwise assessed) of continuing with the proceedings to a final hearing and determination and to indemnify the successful party in respect of same.

SCHEDULE 2
“FINAL ORDERS”
BY CONSENT AND WITHOUT ANY ADMISSIONS OF LIABILITY:-
A. THE COURT ORDERS THAT :-
1. Knox Street Apartments Pty Limited (“KSA”) transfer to Roger Percival Flexman and Philippa Margaret Flexman (“Flexman”) title of units 27, 56 and 58/11-21 Rose Street, Chippendale and 5-5A Knox Street, Chippendale (being the whole of the land in Folio Identifiers 27 & 66/SP67022, 56 & 98/SP67022 & 58 & 106/SP67022) (“units, 27, 56 & 58”) free of encumbrance;
2. Kimberley Securities Limited (“KSL”) withdraw caveat no. 8311283 and execute and deliver to Flexman such consents as may be required in order that the Certificates of Title and Transfers to units 27, 56 & 58 may be delivered by KSA to Flexman and in order that the said Transfers may be registered;
3. KSA withdraw caveat no. 8714266;
4. Proceedings No. 1212 of 2002 (between KSA as plaintiff and Flexman as defendants) be otherwise dismissed with no order as to costs (to the intent that each of the parties bear its own cost of the proceedings);
5. All existing unpaid costs orders in proceedings no. 1212 of 2002 be vacated;
6. Judgment for Flexman against KSA on the Second Cross-Claim in proceedings no. 50049 of 2002 [between Flexman as cross-claimants and KSA, KSL and Joseph Esber and Marcel Esber (“Esber”) as cross-defendants] for damages for lost opportunity, loss of benefit of possession of units 27, 56 & 58 and stamp duty on the contracts for sale dated 22 January 1999 together with interest agreed in the sum of $297.197.75.
7. The Second Cross-Claim in proceedings no. 50049 of 2002 be otherwise dismissed as against KSL and Esber with no order as to costs (to the intent that each of those parties bear its own cost of the Second Cross-Claim);
8. All existing unpaid costs orders in respect of the Second Cross-Claim in proceedings no. 50049 of 2002 be vacated;
9. The Notice of Falsifications and the Notice of Surcharges filed and served by the cross-claimants (Flexman) in respect of the Second Cross-Claim in proceedings no.50049 of 2002 be withdrawn by Flexman and removed from/taken off the Court file;
10. Flexman tender to KSL a guarantee from a reputable Australian trading bank securing payment of any judgment (excluding costs and interest) or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 for an amount of $542,675.93 and maturing within sixty (60) days of any such judgment, final determination of proceedings no. 50049 of 2002 or settlement/compromise, whichever is the latter (“the Bank Guarantee”); and
11. The proceedings be stood-over to Monday 22 November 2004 for hearing of the First Cross-Claim and the Third Cross-Claim in proceedings no. 50049 of 2002.
B. THE COURT NOTES THE AGREEMENT OF THE PARTIES AS FOLLOWS:-
12. In the event that there is a judgment or settlement/compromise in favour of KSL against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002 and KSL calls upon the Bank Guarantee, notwithstanding paragraph 8 and paragraph 16, Flexman shall be subrogated to KSL’s rights under the judgment or amount payable by way of settlement/compromise secured by the Bank Guarantee, and Flexman shall be entitled to enforce any such judgment or agreement in favour of KSL against KSA and shall be entitled to recover the proceeds thereof to the extent of the amount paid under the Bank Guarantee and interest thereon, and KSA consents to any judgment necessary for such enforcement.
13. In the event that KSL fails to obtain a judgment or settlement/compromise against KSA in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, Flexman shall be at liberty to recall the Bank Guarantee upon the final determination of proceedings no. 50049 of 2002.
14. In the event that there is a judgment in favour of KSA against KSL in respect of the First Cross-Claim and/or the Third Cross-Claim in proceedings no. 50049 of 2002, from the proceeds of any such judgment KSA to reimburse Flexman in respect of Flexman’s judgment against KSA referred to in Order 6 above.
15. Save as provided by these terms, Flexman releases KSA, KSL, Esber, Nati Stoliar (“Stoliar”) and Gabriel Michael Lorentz (“Lorentz”) from all claims, demands, suits, actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002.
16. Save as provided by these terms, KSA, KSL, Esber, Stoliar and Lorentz release Flexman from all claims, demands, suits actions or proceedings arising out of or relating to the claims, the subject of proceedings no. 1212 of 2002 and the Second Cross-Claim in proceedings no. 50049 of 2002.
17. KSA and KSL agree that the parties’ consent to the orders and terms in paragraphs 4, 5, 7, 8 & 16 is given without prejudice to the claims made in the First Cross-Claim and the Third Cross-Claim.

Last Modified: 12/15/2004