Sarajan, Mahmoud v Nikfar, Vafar
[2009] VCC 831
•26 June 2009
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-08-01105
| MAHMOUD SARAJAN | Plaintiff |
| v | |
| VAFAR NIKFAR | First Defendant |
| and | |
| REGISTRAR OF TITLES | Second Defendant |
| and | |
| NAZANIN SHAMS | Third Defendant |
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| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 19 June 2009 |
| DATE OF JUDGMENT: | 26 June 2009 |
| CASE MAY BE CITED AS: | Sarajan, Mahmoud v Nikfar, Vafar; Registrar of Titles & Shams, Nazanin |
| MEDIUM NEUTRAL CITATION: | [2009] VCC 0831 |
REASONS FOR JUDGMENT
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Catchwords: Compromise agreement – no accord and satisfaction – unenforceable – Osborn v McDermott [1998] 3 VR 1 – Soufflet Beheer v AWB Ltd [2006] FCA 51 – El-Mir v Risk [2005] NSWCA 215
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Kirby | Aitken Partners |
| For the First and Third Defendants | Mr A Swanwick | M W Law |
| HIS HONOUR: |
1 This is the hearing of an application to determine whether a Deed of Settlement dated 13 March 2009 between the plaintiff of the one part and the first and third defendants of the other part (“the Deed”) is enforceable. The application is brought by the first and third defendants.
2 In this proceeding, the plaintiff, an Iranian resident, has sued the first defendant and his wife, the third defendant, alleging misuse of funds entrusted to the first defendant by him for investment in Australia. The second defendant, the Registrar of Titles, is a party to the proceeding since the plaintiff claims a share in a property at 75 The Grange, Templestowe, which is registered in the first defendant’s name. The plaintiff seeks an amendment of the Register.
3 Following negotiations and conference telephone calls between the plaintiff in Iran and the first and third defendants in Australia, with each having a friend to assist in mediating differences between the parties, the Deed was executed by the plaintiff and the first and third defendants. A copy of this Deed is annexed.
4 The first and third defendants seek to have the Deed enforced, which the plaintiff resists.
5 The defendants have not paid the monies due pursuant to paragraph 1 of the Deed. The plaintiff has not provided the “registered acknowledgement” pursuant to paragraph 7.
6 The law as to the enforcement of compromise agreements is clear enough. In Osborn v McDermott [1998] 3 VR 1, at 10 and 11, Phillips JA set out the three possibilities concerning compromise agreements and their consequences:
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“Thus, there are three possibilities, not two. First, there is the mere accord executory which, on the authorities, does not constitute a contract and which is altogether unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (but only when there is performance), the plaintiff's existing cause of action is discharged. Secondly, at the other end of the scale is the accord and satisfaction, under which there is an immediate and enforceable agreement once the compromise is agreed upon, the parties agreeing that the plaintiff takes in satisfaction of his existing claim against the defendant the new promise by the defendant in substitution for any existing obligation. Somewhere between the two, there is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance.
Where there is a mere accord executory, no suit can be maintained upon the compromise unless and until there has been performance, and then suit is ordinarily unnecessary. Upon default in performance, the plaintiff's existing cause of action continues unaffected. With accord and satisfaction, either party may sue upon the compromise, but only on the compromise and for nothing else: the original cause of action has gone. Where there is accord and conditional satisfaction, the plaintiff is bound to await performance and accept it if tendered, but if there be no performance, then the plaintiff may proceed according to general principles called into play when any agreement is repudiated: the plaintiff may either treat the agreement (the accord) as at an end and proceed on his original cause of action; or he may, at his option, sue on the compromise agreement, in place of the original cause of action. Thus, the consequence should there be default in performance varies according to the case and, as indicated by Murphy, J in Fraser at 401- 402, it would be surely in the best interests of the parties if their legal advisers saw to it, when settling litigation, that the intended consequence upon default was clearly expressed and not left to implication.”
7 The circumstances here are not dissimilar to what had occurred in Osborn. There, terms of settlement required payment of $18,000 by the owner to the repairer of $18,000 for repairs to a motor vehicle and simultaneous delivery up of the vehicle by the repairer. The Court held that there was a mere accord executory.
8 Cheshire and Fifoot’s Law of Contract (Eighth Australian edition) states, at page 184:
“A compromise agreement falls into two, or possibly three classes. The first is termed ‘accord executory’ which is in the form of a unilateral contract whereby the plaintiff promises to abandon a claim in exchange for the defendant doing something. The second type of compromise agreement is termed ‘accord and satisfaction’ whereby the plaintiff promises to abandon the claim in exchange for the defendant promising
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to do something. The significance of the distinction arises when the defendant fails to do what is required and the effect this has on the original cause of action or complaint that is being settled. In the case of an accord executory, where the defendant fails to perform the requested act, the plaintiff’s original rights continue on and can be enforced. In the case of an accord and satisfaction, the plaintiff has foregone his or her original rights and can only enforce the settlement agreement. There is the possibility of a third category whereby the parties make an accord and satisfaction that is conditional, that is, the plaintiff only abandons his or her rights so long as the defendant carries out her or his promise but, failing that, the plaintiff’s original rights can still be enforced.”
9 In Soufflet Beheer v AWB Ltd [2006] FCA 51, Kenny J, stated, at paragraphs 58 and 59:
“Phillips JA (with whom Winneke P and Charles JA agreed) provides an excellent outline of the relevant principles in Osborn v McDermott [1998] 3 VR 1 (‘Osborn’). As Phillips JA explains, the fundamental distinction between accord executory and accord and satisfaction is that ‘the former does not operate to discharge existing rights and duties unless and until the accord is performed, whereas the latter operates as a discharge immediately the accord (or agreement) is achieved’: Osborn at 7–8. Accord and satisfaction is the compromise of an existing cause of action in return for a promise while accord executory requires that something be done before the cause of action is compromised.
Somewhere between accord and satisfaction and accord executory ‘is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance’: Osborn at 10.”
10 In El-Mir v Risk [2005] NSWCA 215, McColl JA, with whom Handley and Ipp JJA agreed, stated, at paragraph 54:
“The question whether there has been an accord and satisfaction is one of fact . . . It turns upon determining the parties’ intentions, which may be discerned from the terms of any document said to constitute all or part of the agreement or in the surrounding circumstances.”
11 It is necessary then for me to determine whether there has been accord and satisfaction here. If not, the Deed is not enforceable.
12 In my view, generally for the reasons submitted by Mr Kirby, who appeared for the plaintiff, there has not been accord and satisfaction here. I rely on the following matters.
13 Firstly, paragraph 2 provides that the dispute between the plaintiff and the first
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and third defendants is only settled upon payment of the settlement monies. It cannot be said that on execution of the Deed “the original cause of action has gone”.
14 The same can be said for paragraph 3. This proceeding is still on foot, being adjourned until “after the due date for the payment of the last instalment of the settlement sum”. Presumably this refers to the sum of $25,000 referred to in paragraph 1(b), for which there is no “due date”.
15 Again, paragraph 4 requires payment of the settlement sum by the defendants before the matter is resolved. The same can be said for paragraph 5.
16 Paragraph 7, in my view, creates insurmountable problems for the plaintiff. The first defendant gave evidence that to obtain “a registered acknowledgement” the plaintiff would go to “a registered office” with the first defendant’s brother and sign a formal document there. This would act as a bar to any proceedings being brought in Iran. There is obviously uncertainty in determining precisely what is meant by “a registered acknowledgment” and therefore inappropriate to order specific performance with respect to the provision of such a document. In any event, it would seem pointless for the Court to order such specific performance since it could not supervise its enforcement in Iran.
17 In reaching the conclusion I have, I take account of the fact that the Deed was drawn by non-lawyers without legal assistance.
18 Mr Swanwick, who appeared for the first and third defendants, sought to rely upon principles of estoppel. In my view, these are not applicable here in the context of the principles applicable to compromise agreements and the breach by the first and third defendants in their failure to make payments required of them under the Deed.
19 Mr Swanwick indicated that he could probably obtain instructions to waive
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reliance by the first and third defendants on paragraph 7. It is too late to do
this. The Deed must be construed at the time of its execution.20 The application by the first and third defendants to enforce the Deed fails.
21 I will make directions for the further conduct of this proceeding.
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Annexed: Deed of Settlement dated 13 March 2009
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