Sarb Management Group Pty Limited v Responsive Prospects Pty Limited

[2016] NSWSC 1486

Supreme Court

New South Wales

Medium Neutral Citation:	Sarb Management Group Pty Limited v Responsive Prospects Pty Limited [2016] NSWSC 1486
Hearing dates:	17 October 2016
Date of orders:	18 October 2016
Decision date:	18 October 2016
Jurisdiction:	Equity
Before:	Darke J
Decision:	Order made that proceedings have been settled on certain terms.
Catchwords:	CONTRACT – formation – whether agreement made to settle proceedings – offer for settlement of proceedings accepted – whether parties intended to be contractually bound upon acceptance – whether agreement liable to be set aside because unconscionable – Civil Procedure Act 2005 (NSW) s 73
Legislation Cited:	Civil Procedure Act 2005 (NSW) s 73
Cases Cited:	Masters v Cameron (1954) 91 CLR 353
Category:	Principal judgment
Parties:	Sarb Management Group Pty Ltd (Plaintiff) Responsive Prospects Pty Ltd (First Defendant) Jimmy Yu (Second Defendant) Peter Tej (Third Defendant)
Representation:	Counsel: Mr Byrne (Plaintiff) Mr Yu (First and Second Defendant – in person) Mr Tej (Third Defendant – in person)   Solicitors: Somerville Legal (Plaintiff)
File Number(s):	2016/281871
Publication restriction:	None

Judgment

1. These proceedings were commenced by Summons on 20 September 2016. On that day, orders for short service were made by Rein J and the matter was listed before the Duty Judge on 28 September 2016.

2. By its Summons, the plaintiff sought interlocutory and final relief in respect of alleged breaches of duty concerning confidential information pertaining to a database known as the IncNet database.

3. The defendants are, respectively, a company and two individuals who are or have been employed by the first defendant, namely Mr Yu and Mr Tej.

4. The plaintiff claims that an agreement to settle the proceedings was made on 27 September 2016 between the solicitors acting for the respective parties to the dispute. This is not accepted by the defendants. The plaintiff, by Notice of Motion filed on 11 October 2016, seeks an order under section 73 of the Civil Procedure Act 2005 (NSW) to the effect that the proceedings have been settled on certain terms. Section 73(1) provides:

In any proceedings, the court:

(a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and

(b) may make such orders as it considers appropriate to give effect to any such determination.

5. The motion was referred to the Duty List for hearing yesterday. Mr Byrne of counsel appeared for the plaintiff. The second defendant, Mr Yu, and the third defendant, Mr Tej, appeared in person in their own interests. Mr Yu also appeared for the first defendant. Mr Yu is the sole director and shareholder of the company. The solicitor who had earlier acted for the defendants has filed a Notice of Ceasing to Act.

6. On the hearing of the Notice of Motion the plaintiff read an affidavit sworn by its solicitor, Mr Adam Cutri, on 10 October 2016. The defendants read affidavits sworn by Mr Yu on 13 October 2016 and Mr Tej on 12 October 2016. There was no cross-examination.

7. The salient facts may be summarised as follows. The Summons and other documents were served upon the defendants on about 21 September 2016. This was five days after the death of Mr Yu's mother. It was an emotionally stressful and difficult time for him.

8. The defendants were able to engage the services of a solicitor, Mr Seomangal, the principal of YS Lawyers. On 23 September 2016 Mr Seomangal sent an e-mail to Mr Cutri which contained an offer of settlement in full and final settlement of the matter on a without admissions basis. The offer involved:

1. the first defendant immediately ceasing its current business and then becoming deregistered;

2. the destruction of the “RP database”, or alternatively the sale to the plaintiff of the "RP database" for $4,950;

3. each party bearing its own costs of the proceedings; and

4. mutual releases.

9. The offer was stated to be an offer made in accordance with the principles in Calderbank v Calderbank. The offer was expressed to be open until 5:00pm on 26 September 2016. In an annexure to the offer, reference was made to various matters including the recent death of Mr Yu's mother. It was stated that acceptance of the offer would avoid the need for Mr Yu to seek an adjournment of the matter on 28 September 2016, the date of his mother's funeral.

10. Mr Cutri sent a response to the offer on 26 September 2016. In this response, Mr Cutri stated that the defendant's offer was rejected but in a final attempt to reach settlement the plaintiff had instructed him to make a counter-offer. The counter-offer involved:

1. the defendants consenting to judgment in accordance with orders 8 to 13 of the Summons;

2. the defendants selling the "RP database" to the plaintiff for $1 and selling all other aspects of their business to the plaintiff for $4,950;

3. the defendants giving certain warranties and indemnities; and

4. the parties entering into a binding deed of settlement and release to be executed and exchanged no later than 4:00pm on 27 September 2016.

The counter offer was stated to be open until 6:00pm on 26 September 2016.

11. Mr Cutri deposed that after he sent the counter-offer he had numerous telephone conversations with Mr Seomangal (on both 26 September and 27 September) in relation to the counter-offer. Mr Cutri deposed that in one of the conversations Mr Seomangal asked him if the offer could be varied by removing the requirement for orders 10 and 11 in the Summons. Mr Cutri asked Mr Seomangal whether his clients would then agree to the offer and Mr Seomangal said that they had indicated that they would. Mr Cutri then obtained instructions to delete the requirement for orders 10 and 11.

12. Mr Cutri deposed that at about 4.30pm on 27 September 2016 he had a conversation with Mr Seomangal to the following effect:

Mr Cutri:   I have spoken with my client. They have agreed to vary the offer by removing 10 and 11 from the final orders which essentially makes this settlement on a non-admissions basis. My client is making this offer on the basis that this matter is settled today.

Mr Seomangal:   Ok. I will seek my clients’ urgent instructions.

Mr Cutri:   If your clients accept the offer, we can prepare some Short Minutes of Order for tomorrow agreeing to Order 1 of the interlocutory relief and reserving costs. We can stand the matter over for a week to finalise the consent judgment.

Mr Seomangal:   That sounds good. I will come back to you.

13. Mr Cutri further deposed that at about 5.30pm on 27 September 2016 he had another conversation with Mr Seomangal which was to the following effect:

Mr Seomangal:   My clients accept the offer to settle. On the basis of the settlement, they have already removed the website and it now displays 404 error, they have sent an email cancelling the serviced offices and have set up an auto response to emails stating that for unforeseen circumstances the directors are unable to continue trading.

Mr Cutri:   Ok great. Would you please send me an email to confirm this so that I can provide a copy to Counsel and we will prepare some Short Minutes of Order for tomorrow?

Mr Seomangal:   I will send you an email within 30 minutes.

14. At 5.45pm on 27 September 2016 Mr Seomangal sent an e-mail to Mr Cutri which was in the following terms:

I have been instructed by my clients to agree to your client’s offer of 26 September 2016 subject to orders 10 and 11 of the Summons being deleted. My clients agree to order 1 and they have also instructed that they have actioned the following items:

url of now displays “404 Page not found” (see attached). They will shortly take down the site.

email sent to Serviced Office to cancel virtual office

email of [email protected] now shows auto reply of “Due to unforseen circumstances, the business partners are unable to continue trading. Please email [email protected] for more details.” (see attached)

I agree that we appear tomorrow and adjourn for one week, and that costs be reserved.

15. On 28 September Mr Cutri met with Mr Seomangal at Court. Mr Cutri produced a copy of some Short Minutes. The terms of these were agreed and the Short Minutes were executed. Orders were made by consent by Hallen J in accordance with paragraphs 1 and 2 of the Short Minutes. His Honour noted that the parties "have resolved in principle these proceedings" and directed that in the event that the matter was finally resolved Short Minutes of Order reflecting the resolution be delivered to his Chambers by 4 October 2016. The proceedings were stood over to the Duty List on 5 October 2016.

16. Later on 28 September 2016 Mr Cutri sent a letter to Mr Seomangal in the following terms:

We refer to our previous correspondence in relation to the above matter and your client’s acceptance of our clients’ offer to settle the proceedings dated 26 September 2016.

In accordance with that agreement, please find attached a copy of the draft Deed of Settlement and Release.

Would you please obtain your client’s urgent instructions in relation to this document as our client requires the deed to be exchanged (in counterparts) by no later than 4:00pm tomorrow. Should you wish to discuss this matter, please do not hesitate to contact Adam Cutri of this office.

17. By 5 October 2016 the defendants had made it known that they were not willing to proceed to enter into the Deed of Settlement and Release. On that day, Stevenson J made a direction for the filing of a motion by the plaintiff seeking an order under section 73 of the Civil Procedure Act.

18. Mr Yu deposed to a telephone conversation involving Mr Cutri, Mr Seomangal and himself on about 26 September 2016 during which Mr Cutri stated that if the matter did not settle the plaintiff would bankrupt him. Mr Yu said that this caused him great fear and confusion.

19. Mr Yu received the plaintiff's counter-offer from Mr Seomangal in the evening of 26 September 2016. Mr Yu deposed that there was very little time to consider the plaintiff's counter-offer. It seems that he and Mr Tej met at about noon on 27 September 2016 to discuss the counter-offer. At about 12.30pm on that day, Mr Yu sent an e-mail to Mr Seomangal in which he stated that he and Mr Tej, whilst understanding the potential risks if a Court found against them, would rather present a defence "instead of the offers previously discussed (unless and until acceptable compromise is reached)". An instruction was given to Mr Seomangal to attend Court on 28 September 2016 and accept the interlocutory injunction as sought by the plaintiff. It appears from the e-mail that the defendants had already taken steps to cease trading. Mr Yu stated in the e-mail that he would be attending his mother's funeral on 28 September 2016.

20. Mr Yu deposed that on 27 September 2016 between about 3.14pm and 4.06pm there was a telephone conference involving Mr Cutri, Mr Seomangal, Mr Tej and himself, during which Mr Seomangal suggested an amendment to a term of the plaintiff's counter-offer. Mr Yu further deposed that during the conversation there was some mention of agreeing to the counter-offer if the term was so amended. Mr Yu further deposed that at about 4.40pm on 27 September 2016 Mr Seomangal informed Mr Tej and himself that the proposed amendment was not accepted by the plaintiff. Evidence to an effect similar to that set out above was given by Mr Tej in his affidavit.

21. The conversation said to have taken place between 3.14pm and 4.06pm on 27 September 2016 is not specifically referred to in Mr Cutri's affidavit. In any event, as noted earlier, at 5.45pm on 27 September 2016 Mr Seomangal sent the e-mail to Mr Cutri in which he stated that he had been instructed by his clients to agree to the plaintiff's offer of 26 September 2016 subject to orders 10 and 11 of the Summons being deleted.

22. The plaintiff submits that a binding agreement to settle the proceedings was then made on the terms set out in the 26 September 2016 letter of offer, subject to judgment being in accordance with orders 8, 9, 12 and 13 of the Summons instead of orders 8 to 13 of the Summons.

23. On Mr Cutri's version of events, and on the version of events given by Messrs Yu and Tej, there was discussion on the afternoon of 27 September 2016 between the parties and their legal representatives concerning the terms of the plaintiff's counter-offer made on the previous day. Whilst that offer was expressed to remain open until only 6:00pm on 26 September 2016, the parties continued to negotiate after that time by reference to its terms. It is also the case on either version that there was discussion about an amendment or variation to those terms. The versions differ as to the nature of the amendment or variation under discussion and as to whether it was acceptable to the plaintiff. However, the e-mail sent by Mr Seomangal at 5.45pm on 27 September 2016 constitutes an apparent acceptance of the terms of the counter-offer subject only to the deletion of the reference to orders 10 and 11 of the Summons. The terms of the e-mail in that respect are clear and provide support to Mr Cutri's version of events. The terms of the e-mail also support Mr Cutri's version of events in so far as the e-mail refers to interlocutory order 1 and the adjournment of the proceedings for one week.

24. Conversely, the terms of Mr Seomangal's e-mail are inconsistent with the suggestion made in the affidavits of Messrs Yu and Tej that instructions were not given to Mr Seomangal in accordance with what is contained in his e-mail. It must be considered unlikely that Mr Seomangal as a solicitor would proceed to send an e-mail in the terms of his e-mail of 27 September 2016 unless he had obtained such instructions.

25. In these circumstances, I consider that Mr Cutri's version of events should be accepted as an accurate account of the substance of the conversations that occurred between the parties on 26 September 2016 and 27 September 2016 concerning the plaintiff's counter-offer, including the conversations which Mr Cutri said occurred at about 4.30pm and about 5.30pm on 27 September 2016.

26. The e-mail sent by Mr Seomangal at 5.45pm on 27 September 2016 should, in my view, be regarded as the conveying by the defendants of an acceptance of the terms of the plaintiff's counter-offer, subject only to the deletion of the reference to orders 10 and 11 of the Summons. In my opinion, viewing the conduct of the parties objectively, it should be concluded that a binding agreement to that effect was made when the e-mail was received by Mr Cutri. It is a situation where the parties should be taken to have intended to be contractually bound upon acceptance of the terms even if they also intended that the terms would be encapsulated in a deed to be entered into later which would also include releases (see Masters v Cameron (1954) 91 CLR 353 at 360).

27. Even if Mr Seomangal did not in fact have instructions to so accept the plaintiff's counter-offer, the plaintiff (through Mr Cutri) was entitled to rely upon Mr Seomangal's ostensible authority to effect a compromise of the proceedings on that basis. Mr Seomangal had told Mr Cutri earlier that afternoon that he would seek his clients' instructions for such a compromise, and he later told Mr Cutri that his clients had accepted the offer to settle.    

28. The terms of the counter-offer under discussion were plainly intended to bring about a final resolution of the dispute. That is made clear by the term for judgment in accordance with various orders for final relief as sought in the Summons, and the term for the parties to enter into a deed of settlement and release.

29. The defendants made the point that paragraph 6 of the counter-offer required such deed to be executed and exchanged by 4:00pm on 27 September 2016 and that such time had passed by the time Mr Seomangal sent his e-mail. However, the context of the negotiations on the afternoon of 27 September 2016 (including after 4:00pm) make it plain that the parties were not proceeding on the basis that the contemplated deed had to be entered into by that time, or that no binding agreement would come into existence unless the deed was entered into by that time.

30. The defendants made various points which, so it was said, showed that any agreement made was unconscionable and liable to be set aside. These arguments focused upon Mr Yu's state of mind in the period following his mother's death, and the short time the defendants had to deal with the evidence served by the plaintiff in support of its case and the plaintiff's counter-offer which was itself said to contain unconscionable terms. There was also a complaint about pressure being exerted by Mr Cutri, particularly in referring to the plaintiff taking bankruptcy proceedings. It was also suggested that their solicitor was out of his depth.

31. I accept that Mr Yu was in a most distressing situation when faced with his personal loss coupled with the emergence of these proceedings. I further accept that the plaintiff remained steadfast in its pursuit of the relief it sought. The proceedings were brought on quickly and the defendants had little time to come to grips with the matter. Nevertheless, by 23 September 2016 (only two days after service was effected), the defendants' solicitor had made a detailed offer of settlement in full and final settlement of the matter which would involve the cessation of the first defendant's business and operations. That solicitor then engaged in negotiations with the plaintiff's solicitor on 26 September 2016 and 27 September 2016 following the making of the plaintiff's counter-offer. There is nothing in this conduct to suggest to the plaintiff that the defendants (who had the assistance of a solicitor) were unable to adequately look after their own interests in relation to this commercial dispute.

32. I accept that the plaintiff was aware of the death of Ms Yu's mother and may be taken to know that this event coupled with the proceedings themselves may place great pressure on Mr Yu. However, I do not think that the vigorous pursuit of the proceedings by the plaintiff in these circumstances can be said to amount to unconscionable conduct such as might afford a ground to set aside the agreement to settle the proceedings made on 27 September 2016. Further, it has not been shown that the plaintiff's insistence upon the terms of the counter-offer was unconscionable in the circumstances. The suggestion that there are grounds to set the settlement agreement aside has not been made out on the evidence.

33. The Court will proceed to make an order under s 73 of the Civil Procedure Act to the effect that the proceedings have been settled on certain terms. The form of order sought reflects the terms of the settlement agreement that I have found was made on 27 September 2016, save that the order should state that the parties have also agreed to enter into a deed of settlement and release which encapsulates the agreed terms and includes releases.

34. Accordingly, the Court will make an order in terms of paragraph 1 of the plaintiff's Notice of Motion filed on 11 October 2016 as amended to include such a statement. The Court will also make orders 2, 3, 4 and 5 in the Short Minutes of Order document that I initial, date today's date and place with the papers. Those orders seem to me to reflect that part of the settlement agreement which provides for judgment in accordance with orders 8, 9, 12 and 13 of the Summons. The defendants should pay the plaintiff's costs of the Notice of Motion.

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Decision last updated: 23 April 2018