Sayed v National Australia Bank Limited

[2013] NSWCA 304

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Sayed v National Australia Bank Limited [2013] NSWCA 304

Hearing dates:

20 August 2013

Decision date:

17 September 2013

Before:

McColl JA at [1];
Emmett JA at [2];
Tobias AJA at [75].

Decision:

The Court orders that:

1. The appellant be granted leave to file its proposed further amended notice of appeal filed as a draft on 5 August 2013 with the deletion of ground 6.

2. The further amended notice of appeal be filed within 7 days of the date of these orders.

3. The appeal be allowed.

4. The orders made by the primary judge on 22 October 2012 for specific enforcement of the deed of release and settlement attached to an email sent by Ms Danielle Kuti on 30 August 2012 at 1:57pm be set aside.

5. The consent judgment that was entered pursuant to the orders of the primary judge, which was signed on behalf of Mr and Mrs Sayed on 22 October 2012, be set aside.

6. In lieu of the orders of 22 October 2012, the following orders be made:

(1) The plaintiff's motion of 5 September 2012 be dismissed.

(2) The plaintiff pay the defendant's costs of that motion.

7. The first respondent pay the appellant's costs of the appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

CONTRACT - identification of contract terms - where offers and counter-offers by email, with no final agreement, preceded written "in principle agreement" - where written agreement subject to formal deed that may contain further terms not inconsistent - where written agreement amended to be "binding" - where written agreement made no reference to term providing for mutual release mentioned in email exchange - where written agreement incorporated terms of an email by specific reference - where subsequent deed not executed amidst disagreement as to term of release - whether release term incorporated or to be implied into "in principle agreement" - whether "in principle agreement" not capable of specific performance as an accord executory

Legislation Cited:

Civil Procedure Act 2005, s 73

Cases Cited:

McDermott v Black [1940] HCA 4; (1940) 63 CLR 161

Category:

Principal judgment

Parties:

Bilal Sayed - appellant
National Australia Bank Limited - first respondent
Nicole Susan Sayed - second respondent

Representation:

Counsel:
Solicitors:

No solicitor for the appellant or second respondent.
DibbsBarker - first respondent

File Number(s):

2013/86768

 Decision under appeal 

Citation:

N/A

Date of Decision:

2012-10-22 00:00:00

Before:

Rein J

File Number(s):

2010/135614

Judgment

1. McCOLL JA: I agree with Emmett JA's reasons and the orders his Honour proposes.

1. EMMETT JA: This appeal is concerned with the alleged settlement of proceedings brought by the first respondent, National Australia Bank Limited (the Bank), against the appellant, Mr Bilal Sayed, and the second respondent, Mrs Nicole Sayed. By the proceedings (the principal proceedings), the Bank sought recovery of a debt owed by Mr and Mrs Sayed to the Bank and possession of a property situated at Woonona (the Woonona property), which was mortgaged to the Bank to secure repayment of the debt to the Bank (the Bank's debt). At the instance of the Bank, orders were made by Rein J for specific performance of an alleged agreement to settle the proceedings.

1. Mr Sayed has now appealed from those orders. Mrs Sayed was originally joined as an appellant but subsequently, by consent, she was removed as an appellant and joined as a respondent. She has submitted to such order as the Court is disposed to make, except as to costs.

The Principal Proceedings

1. By its amended statement of claim in the principal proceedings, the Bank claimed judgment for possession of the Woonona property, leave to issue a writ of possession to enforce such judgment and judgment for the sum of $488,881.32 together with interest. The Bank alleged that Mr and Mrs Sayed granted a mortgage of the Woonona property to secure moneys owing by them to the Bank and that they were in default under the terms for repayment of the secured moneys.

1. By a cross-claim filed in the principal proceedings, Mr Sayed claimed a declaration that the conduct of the Bank in exercising a power of sale over land at Corrimal owned by Mr and Mrs Sayed (the Corrimal land), which also secured the Bank's debt, involved a breach of the Bank's duty to act in good faith. Mr Sayed relevantly made the following allegations in the cross-claim:

• From May 2009 to February 2010, the Bank had control over the sale process of the Corrimal land as mortgagee exercising a power of sale.
• In the circumstances, the Bank owed an equitable duty to Mr Sayed to act in good faith in exercising its power of sale.
• On 19 February 2010, the Bank sold the Corrimal land to Realta Enterprises Pty Limited for $545,545.45.
• The fair market value of the Corrimal land on 19 February 2010 was $750,000 and, in the premises, the Corrimal land was sold at a gross undervalue.
• The Bank wilfully and recklessly sacrificed the interests of Mr and Mrs Sayed as mortgagors of the Corrimal land, in that it failed to take reasonable precautions to obtain a proper price for the Corrimal land.
• The Bank's actions were not in good faith and breached its equitable duty to act in good faith in the exercise of its power of sale.
• The Bank's failure to take reasonable precautions to obtain a proper price for the Corrimal land was unconscionable and in breach of its equitable duty to act in good faith.
• By reason of the above conduct on the part of the Bank, Mr and Mrs Sayed suffered loss and damage.

1. The principal proceedings were fixed for a hearing to commence on 20 August 2012 before Adams J. The trial began on that day and continued part heard on 21 and 22 August 2012. On 23 August 2012, a handwritten document was signed on behalf of the Bank and by Mr and Mrs Sayed, recording an agreement settling the principal proceedings (the In Principle Agreement). By notice of motion dated 5 September 2012 (the Bank's Motion), the Bank sought a declaration that the parties to the proceedings had entered into a binding agreement and sought orders that Mr and Mrs Sayed specifically perform that agreement. After a hearing on 22 October 2012, Rein J made the orders claimed in the Bank's Motion.

1. Before dealing with the questions raised by the appeal, it is necessary to describe in some detail the course of negotiations that led to the signing of the In Principle Agreement and the subsequent communications of the parties that led to the Rein J's orders. The communications were all written. However, there is considerable contention between the parties as to the extent to which various communications constituted contractual instruments. The primary question is whether a binding and enforceable contract was reached between the Bank, on the one hand, and Mr and Mrs Sayed, on the other hand and, if so, on what terms.

The Negotiations that led to the In Principle Agreement

1. From 13 August 2012 to 23 August 2012, when the In Principle Agreement was signed by the parties, a series of email exchanges took place between Mr Andrew Luong, solicitor, acting for Mrs Sayed, and Ms Danielle Kuti and Ms Emma Hodgman, of Dibbs Barker, solicitors, acting for the Bank.

1. At 8.08pm on Monday 13 August, Mr Luong sent an email to Ms Kuti confirming that he was instructed by Mrs Sayed, with the consent of Mr Sayed, to make an offer of settlement as follows:

(1)   The Bank be given judgment for possession of the Woonona property.

(2)   The judgment for possession be stayed for four calendar months to enable Mr and Mrs Sayed to market and sell the Woonona property.

(3)   Mr and Mrs Sayed pay the Bank the sum of $550,000 from the proceeds of sale of the Woonona property.

(4)   Upon payment, the judgment be set aside and the proceedings be dismissed with each party to pay their own costs upon payment of the sum of $550,000.

The offer was stated to be open for acceptance until 4pm on 15 August 2012. By email on Tuesday 14 August 2012 at 2.26pm from Ms Kuti to Mr Luong, the offer was rejected.

1. At 5.09pm on Sunday 19 August 2012, Mr Luong sent another email to Ms Kuti confirming that he was instructed by Mrs Sayed, with the consent of Mr Sayed, to make a further offer of settlement. The terms were as follows:

(1)   The Bank be given judgment for the possession of the Woonona property.

(2)   The judgment for possession be stayed for four calendar months to enable Mr and Mrs Sayed to market and sell the Woonona property.

(3)   Mr and Mrs Sayed pay to the Bank the sum of $615,000 from the proceeds of sale of the Woonona property.

(4)   The sum of $615,000 be paid in full and final satisfaction of all claims, interests and costs by the Bank in the proceedings.

(5)   If the Woonona property has not been sold after four months, then the Bank would be entitled to take possession and to claim interest on the sum of $615,000 and all enforcement costs.

(6)   The parties would enter into mutual deeds of release upon payment of the sum of $615,000.

1. The hearing before Adams J commenced on 20 August 2012 and continued on the following day. When the hearing was adjourned on 21 August 2012, Mr Sayed was being cross-examined before Adams J. At 6.21am on 22 August 2012, Mr Luong sent an email to Ms Kuti confirming the Bank's rejection of the offer made at 5.09pm on 19 August 2012 on behalf of the Sayeds. Mr Luong referred to a counter-offer by the Bank to resolve the matter for the sum of $705,000 and asked for confirmation that the Bank's offer would remain open until the cross-examination was finished, as those representing Mrs Sayed preferred to wait until Mr Sayed had finished being cross-examined before obtaining his consent to the Bank's counter-offer.

1. At 9.40am on Wednesday 22 August 2012, Ms Hodgman sent an email to Mr Luong indicating that the fact that Mr Sayed was being cross-examined should not prevent Mr Luong from conveying the counter-offer to Mr Sayed and obtaining his response. Ms Hodgman said that, in any event, the Bank would leave its counter-offer of $705,000 open for acceptance until the conclusion of Mr Sayed's cross-examination on that day.

1. At 10.51am on Thursday 23 August 2012, Ms Hodgman sent another email to Mr Luong. After referring to the Sayeds' offer of $615,000 made at 5.09pm on 19 August 2012, which had already been rejected by the Bank, Ms Hodgman noted that, at the conclusion of the hearing on 22 August 2012, Mr Luong had restated the Sayeds' offer in response to the Bank's counter-offer of $705,000, except that the amount offered by the Sayeds was now $660,000, instead of $615,000. Ms Hodgman said that she understood that Mr and Mrs Sayed also offered that, if the $660,000 were not paid within four months, the Bank could recover $700,000 plus interest.

1. In her email of 10.51am, Ms Hodgman put the following counter-offer, which was to remain open for acceptance for one hour:

(1)   Judgment for possession of the Woonona property in favour of the Bank, together with judgment for the Bank against Mr and Mrs Sayed in the sum of $680,000.

(2)   Judgment to be stayed for four months to allow Mr and Mrs Sayed to sell the Woonona property, on the basis that the contracts for sale were to be approved by the Bank prior to exchange.

(3)   If Mr and Mrs Sayed failed to pay $680,000 within four months, then the Bank could immediately take possession and exercise its power of sale and the Bank would be entitled to recover the sum of $680,000 plus interest from 23 August 2012 to the date of settlement at court interest rates and would also be entitled to recover all of its enforcement costs, including the costs of sale, on an indemnity basis.

(4)   The parties would enter into a deed of settlement and release, which would include the above terms.

1. At 11.11am on Thursday 23 August 2012, Mr Luong sent a further email to Ms Hodgman saying that Mr and Mrs Sayed were considering the offer made in the email sent by Ms Hodgman at 10.51am. Mr Luong's email clarified two matters. The first was that the reference to "enforcement costs" was only to those enforcement or sale costs incurred after the date of settlement. He also said that he assumed that the settlement and release included approximately $26,000 owing by Mr Sayed on his "classic account". Mr Luong also said that Mr Sayed would like the Bank, upon payment of the settlement sum, to take all reasonable steps to remove any adverse credit rating placed by the Bank against Mr and Mrs Sayed's names. Mr Luong said that he was obtaining instructions on the basis of those assumptions. Ms Hodgman responded by email at 11.28am on 23 August 2012, saying that the assumptions were correct and that the Bank was not presently aware of any adverse credit listing but was checking that matter.

1. At 11.43am on 23 August 2012, Mr Luong sent an email to Ms Hodgman confirming a conversation he had had with Ms Kuti. He said that he was instructed to agree to the Bank's proposal, subject to the settlement figure being reduced to $670,000. That is to say, Mr Luong was proposing that the sum of $680,000 put forward in the email of 10.51am be reduced to $670,000. Otherwise the counter-offer contained in the email of 10.51am would include paragraph 4, which provided for a deed of settlement and release.

1. Ms Hodgman replied by email at 12.31pm on 23 August 2012, saying that the Bank accepted the amount of $670,000 but on the basis that, if that amount were not paid by 23 December 2012, the Bank would be entitled to recover from the sale proceeds $700,000, plus interest at court rates from 23 August 2012 to the date of settlement, in addition to all enforcement costs incurred, on an indemnity basis, including costs of sale after 23 August 2012. Ms Hodgman said that her instructions were that the Bank had not made any credit listing in respect of the loans to Mr and Mrs Sayed secured on the Corrimal land and the Woonona property and would not make any express disclosure in relation to the debts owing under either of those loans. The email ended by saying that, if Mr and Mrs Sayed agreed to the above, Ms Hodgman would forward a deed of settlement.

1. At 1.51pm on 23 August 2012, Mr Luong sent a further email to Ms Hodgman saying that "[w]e are very close to settling this matter". He said that "[o]ur client" would accept the general terms of the offer made, except that either:

(1)   The judgment amount was to be $670,000, which was also the amount to be payable within four months, in accordance with the earlier offer made at 11.43am; or

(2)   The terms proposed in Ms Hodgman's 12.31pm email would apply, but the amount payable if the Woonona property is sold within four months would be $660,000.

Mr Luong asked Ms Hodgman to let him know her instructions so that the matter could be settled "when we return to Court at 2pm".

1. Clearly, as at 1.51pm no agreement had been reached. There had been a series of offers and counter-offers, without final accord being reached. Against that background, the In Principle Agreement was signed at some time during the afternoon of 23 August 2012.

The In Principle Agreement

1. The In Principle Agreement is handwritten. It is dated 23 August 2012 and is headed "In principle agreement". The writing contains seven clauses and is signed at the foot by Mr and Mrs Sayed, and by Ms Kuti on behalf of the Bank. The terms of the In Principle Agreement can be transcribed as follows:

"1 Non- b Binding but subject to formal deed that will contain further terms not inconsistent.

2 Defendants will pay the Settlement Amount by the Deadline.

3 Bank will accept the Settlement Amount in full and final accord and satisfaction of the Judgment Debt, if paid by the Deadline.

4 If the Settlement Amount is not paid by the Deadline, Bank will enforce the Writ and recover the Judgment Debt, plus interest on the Judgment Debt since 23 August 2012 plus enforcement expenses (on an indemnity basis).

5 Settlement Amount = $670,000

Judgment Debt = $700,000 Judgment (entered forthwith but stayed until Deadline)

Writ = writ of possession over Woonona Property (stayed until Deadline)

Deadline = 23 December 2012.

6 CRA terms per email Emma Hodgman to Andrew Luong dated 23 August 2012 sent at 12.31pm.

7 Settlement Amount and Judgment Debt includes amount owing on 'Classic Account' (approx $26,000)."

[emphasis added]

1. It is of considerable significance that, before the word "binding", the word "non" was crossed out and the word "but" was interposed between the word "binding" and "subject". Mr Sayed and Mrs Sayed initialled those alterations.

1. Apart from clause 1, the effect of the In Principle Agreement might be summarised as follows:

• judgment for the Bank in the sum of $700,000 will be entered forthwith against Mr and Mrs Sayed;
• that judgment will be stayed until 23 December 2012;
• judgment for possession of the Woonona property will be entered in favour of the Bank and a writ of possession will be issued forthwith;
• that writ of possession will be stayed until 23 December 2012;
• Mr and Mrs Sayed will pay the settlement sum of $670,000 by 23 December 2012;
• if the settlement sum of $670,000 be paid by 23 December 2012, the Bank will accept that sum in full and final accord and satisfaction of the judgment debt of $700,000;
• if the settlement sum of $670,000 be unpaid by 23 December 2012, the Bank will be entitled to enforce the writ of possession and the judgment debt of $700,000, and will be entitled to recover interest on the judgment debt from 23 August 2012, together with enforcement expenses, on an indemnity basis;
• the terms of the email concerning credit listing sent at 12.31pm on 23 August 2012 will be observed; and
• the settlement sum of $670,000 and the judgment debt of $700,000 both include any amount owing by Mr Sayed in respect of his "classic account" with the Bank.

1. The words "subject to formal deed that will contain further terms not inconsistent" in clause 1 are of critical importance as to the question of whether the parties had reached a binding and enforceable contract when the In Principle Agreement was signed. Clause 1 could be construed as evidencing an intention of the parties that there would be a contract subject to a condition precedent, being that the terms of a formal deed be subsequently agreed. On that construction, in the absence of subsequent agreement, there would be no enforceable contract as the condition precedent would not be satisfied.

1. Alternatively, the words could be construed as a statement by the parties that they intended to formalise their contract by a deed but that, whether or not such a deed was made, they intended nevertheless to be bound unconditionally by the terms of the In Principle Agreement. Even if no such deed were agreed upon, the In Principle Agreement was still enforceable according to its terms.

1. The Bank contends that the terms of certain of the emails in the exchanges described above should be incorporated into the In Principle Agreement, as terms of a binding contract between the parties. Specifically, the Bank contends that the term specified in the email sent at 10.51am on 23 August 2012, that the parties are to enter into a deed of settlement and release, should be incorporated as a term of a binding and enforceable contract entered into on 23 August 2012 when the parties signed the In Principle Agreement. That contention leaves unanswered the question of the specific content of such a deed of settlement and release. That is to say, the reference in the email sent at 10.51am on 23 August 2012 to entering into a deed of settlement and release may itself be void for uncertainty. Questions may then arise as to whether that term, assuming it were incorporated into the In Principle Agreement, would be severable so as to leave the balance of the contract on foot. It is unnecessary to resolve those questions.

1. It is significant that one of the terms of the In Principle Agreement specifically incorporates the terms of the email sent at 12.31pm on 23 August 2012. In circumstances where the terms of one email were expressly incorporated into the In Principle Agreement, it is difficult to see why the term of another email that was not mentioned, namely, the term concerning a deed of settlement and release contained in one of the Bank's counter-offers in the email sent at 10.51am on 23 August 2012, should also be treated as being part of the contract.

1. The better view is that the email exchanges were no more than negotiations that ultimately led to the In Principle Agreement. None of the email exchanges can fairly be regarded as a contractual document, except to the extent that it is expressly incorporated by specific reference to it in the In Principle Agreement. It is clear enough that the parties were intending to make a binding contract when they signed the In Principle Agreement. The terms of that contract, without clause 1, are clear and precise and are capable of specific performance. However, clause 1 contemplated further negotiations. As contemplated by clause 1, the parties then embarked, after signing the In Principle agreement, on negotiations as to the terms of a "formal deed".

The Subsequent Negotiations

1. It appears that Adams J was informed in the afternoon of 23 August 2012 that the principal proceedings had settled. At 8.44am on Friday 24 August 2012, Ms Kuti sent to Mr Luong and to Mr Sayed, at his personal email address, a draft deed of settlement and release "for your approval". Ms Kuti asked for confirmation of Mr and Mrs Sayed's consent to the deed attached to the email as soon as possible, so that "a time to exchange" could be arranged. Ms Kuti observed that Adams J had requested that the parties provide him with consent orders on the morning of 24 August 2012.

1. At 4.14pm on 24 August 2012, Mr Luong sent an email to Ms Kuti attaching a copy of the draft deed with amendments highlighted. Mr Luong asked Ms Kuti to indicate the Bank's position by return. At 5.51pm on 24 August 2012, Ms Kuti sent another email to Mr Luong and to Mr Sayed, saying that the Bank consented to their amendments, subject to a minor correction. The email attached a form of the draft deed incorporating the amendments. Ms Kuti asked that the deed be signed over the weekend but not dated. She proposed exchanging counterparts of the deed at 3pm on Monday 27 August 2012.

1. It may be that, as a consequence of the email of 5.51pm from Ms Kuti, the parties were ad idem as to the terms of the proposed deed of settlement and release. That is to say, Ms Kuti had accepted the amendments proposed on behalf of Mr and Mrs Sayed up to that time. However, Ms Kuti also clearly evinced an intention that there would be no binding contract until exchange of counterparts had taken place on the following Monday. In any event, the Bank has not suggested that a binding contract came into existence at that point.

1. At 6.44pm on Friday 24 August 2012, Mr Luong sent an email to Ms Kuti, noting that the proposed deed referred to the parties' obtaining independent legal advice before signing it. Mr Luong said that, given the circumstances, Mr Sayed ought to obtain such advice independently of Mrs Sayed, before signing the proposed deed of settlement and release. In those circumstances, Mr Luong said, Mr Sayed may require more time.

1. At 12.53pm on Monday 27 August 2012, Ms Kuti sent an email to Mr Sayed asking if he required any amendments to the proposed deed of settlement and release. At 4.26pm on 27 August 2012, Mr Sayed sent an email to Mr Luong and to Ms Kuti, attaching a copy of the proposed deed of settlement and release, on which he had made some changes. He said that he did not agree to some of the terms and conditions contained in the draft. At 5.44pm on 27 August 2012, Mr Sayed sent another email to Mr Luong and Ms Kuti outlining proposed amendments to, or deletions of, some 13 clauses of the proposed deed of settlement and release.

1. At 2.39pm on Tuesday 28 August 2012, Ms Kuti sent an email to Mr Sayed and Mr Luong referring to Mr Sayed's recent emails regarding proposed amendments. Ms Kuti responded to each of the amendments proposed. The Bank did not consent to most of the amendments. A further amended version of the proposed deed of settlement and release, reflecting Ms Kuti's response, was attached to the email.

1. At 3.22pm on Tuesday 28 August 2012, Mr Sayed responded, indicating that he accepted some of the responses to his amendments but did not accept other responses. At 8.54am on Wednesday 29 August 2012, Ms Kuti sent a further email to Mr Sayed and Mr Luong indicating the Bank's attitude to the various amendments. A further draft of the proposed deed of settlement and release was attached to the email reflecting Ms Kuti's comments. She referred specifically to clause 7(a) and said that that term was not negotiable.

1. Clause 7(a) of the draft deed of settlement and release is in the following terms:

"7 Releases

(a) Upon exchange of this deed, Mr Sayed and Mrs Sayed (jointly and individually) immediately, unconditionally and absolutely release NAB, its employees, officers and agents, from all Claims which they now have or, but for this deed, might have had against NAB, its employees, officers and agents, or any other person, whether individually or jointly, in respect of the Woonona Loan, Woonona Mortgage, Corrimal Loan, Corrimal Mortgage, Corrimal Sale and the Proceedings.

(b) Mr Sayed and/or Mrs Sayed acknowledge and agree that this deed may be pleaded and tendered by NAB as a complete and absolute bar and defence to any Claims made by Mr Sayed and/or Mrs Sayed in respect of any of the matters the subject of the above releases.

(c) Provided:

(i) no event of default occurs and subject to NAB's receipt of the Settlement Sum in full and cleared funds by the Settlement Date; or

(ii) if an event of default occurs and NAB recovers the Judgment Sum, plus interest (calculated in accordance with clause 6.1(iii) above) plus Enforcement Costs, on an indemnity basis,

NAB releases Mr Sayed and Mrs Sayed from all Claims in respect of the Woonona Loan, Corrimal Loan, Corrimal Mortgage, Woonona Mortgage, Classic Account and the Proceedings."

[emphasis added]

1. A number of the terms in clause 7(a) are defined elsewhere in the deed. It is not presently necessary to deal with that detail. The significance of clause 7(a) is the reference to "agents" and to "any other person".

1. At 9.20am on Wednesday 29 August 2012, Mr Sayed responded to Ms Kuti, saying that he would never have agreed to a settlement if he had known of the full terms of the proposed deed of settlement and release. He asserted that a draft deed should have been supplied during negotiations, so that the contents could have been evaluated. He said that, instead, he was handed a handwritten note that was hardly legible "to say the least". He said that, since they were negotiating a settlement from 10am to 3pm on 23 August 2012, a draft deed could have been given to him.

1. Significantly, Mr Sayed said that one of the deciding factors in agreeing to a settlement was that he would be able to recover his losses through proceedings against other parties, including the estate agent who had acted in connection with the exercise of the power of sale over the Corrimal land. Mr Sayed repeated that there were seven clauses in respect of which he did not accept the position of the Bank, including clause 7(a). At 11.09am on 29 August 2012, Mr Luong sent another email to Mr Sayed and Ms Kuti. He asked whether, since the persons whom Mr Sayed wished to exclude were not officers, servants or agents of the Bank, there was a compromise for Mr Sayed in excluding them specifically from the release clauses. That was a reference to the terms of clause 7(a).

1. At 1.57pm on Thursday 30 August 2012, Ms Kuti sent a further email to Mr Sayed setting out "the maximum to which [the Bank] is prepared to compromise on the terms of the deed of settlement and release". She said that she was instructed that, if Mr Sayed did not consent to what followed, she was to make an immediate application to the Court for specific performance of the agreement. Ms Kuti said that the Bank would consent to removal of several paragraphs but would not consent to the proposed amendment to clause 7(a). She said that it was always the mutual intention of all parties that any settlement would include mutual releases and that that was confirmed in the email sent at 5.39pm on Sunday 19 August 2012, in which Mr Sayed had said that he consented to the offer made by Mr Luong's email sent at 5.09pm on 19 August 2012.

1. In her email of 1.57pm on 30 August 2012 Ms Kuti strongly recommended to Mr Sayed that he obtain independent legal advice in respect of the proposed deed. She said that if he did not consent to the terms of the deed of settlement and release attached, the Bank would rely on s 73 of the Civil Procedure Act2005 if it made an application for specific performance of the agreement to provide mutual releases.

1. Mr Sayed responded at 2.08pm on 30 August 2012, saying that he had already written to the court asking "to be heard on this matter". Ms Kuti responded by email at 2.44pm asking whether she should assume from Mr Sayed's response that he intended to continue to dispute clause 7(a). She noted that that clause was the only one still in dispute and said that, if he intended to continue to dispute that clause, she agreed that the matter should be urgently listed before the court. Ms Kuti said that the Bank would seek specific performance of the agreement that the Bank be released and would also seek its costs against Mr Sayed on an indemnity basis. Mr Sayed responded at 11.24am on Friday 31 August 2012 saying that there were other issues but that he agreed that they needed to go back to court. He said that he had emailed the Court but had not received an attendance notice as at that time.

1. Clause 3.1 of the draft deed of settlement and release provided that, upon exchange, Mr and Mrs Sayed must provide to the Bank "the original signed Consent Judgment" and that the Bank was entitled to file the consent judgment in the proceedings immediately. The consent judgment, a form annexed to the deed, provided judgment by consent for the Bank against Mr and Mrs Sayed in the sum of $700,000 and judgment for the Bank against Mr and Mrs Sayed for possession of the Woonona property. The consent orders also provided for the granting of leave to the Bank to issue a writ of possession to enforce the judgment and provided for Mr Sayed's cross-claim against the Bank to be dismissed.

The Specific Performance Proceedings

1. On 5 September 2012, the Bank filed the Bank's Motion in the principal proceedings. The Bank claimed a declaration that the parties to the proceedings had entered into a binding settlement agreement on the terms contained in the deed of release and settlement attached to the email sent by Ms Kuti at 1.57pm on 30 August 2012. The Bank's Motion claimed orders and directions that Mr and Mrs Sayed specifically perform the deed of release and settlement by executing it, together with the consent judgment.

1. The Bank's Motion was listed for hearing on 22 October 2012. Mr Sayed had no legal representation at the hearing. At its commencement, he sought leave to rely on two affidavits dated 8 October 2012, one sworn by himself and one by Mrs Sayed. Directions had been given for any affidavits to be served by 10 September 2012. The Bank objected to the affidavits on the ground that they had only been provided to the Bank on the morning of the hearing. No satisfactory explanation was given by Mr Sayed for the failure to serve copies of the affidavits on the Bank or its legal advisors in compliance with the orders of the Court, particularly when they were apparently sworn some two weeks before the day of the hearing. The primary judge refused leave to rely on the affidavits. For reasons given ex tempore on 22 October 2012, the primary judge made a declaration in terms of the prayers contained in the Bank's Motion.

The Appeal

1. By notice of appeal filed on 20 March 2013, Mr and Mrs Sayed appealed from the orders made on 22 October 2012. The grounds of appeal were that the primary judge exhibited bias, wrongly rejected affidavit evidence tendered on behalf of Mr and Mrs Sayed and erred in finding that a binding contract had been made. Subsequently, Mr Sayed obtained the assistance of counsel acting pro bono publico and applied for leave to file a further amended notice of appeal. By the proposed further amended notice of appeal, Mr Sayed abandoned the ground of bias, reformulated the other two grounds and added several further grounds. At the commencement of the hearing of the appeal, the Court indicated that it would hear argument on all of the proposed grounds and would rule on amendment at the time of giving judgment.

1. The grounds of appeal propounded in the proposed further amended notice of appeal may be summarised as follows:

(1)   The primary judge erred in construing the In Principle Agreement as unconditionally binding when it provided that it was to be binding subject to a formal deed that had not been agreed or resolved at the time of making the In Principle Agreement.

(2)   On its true construction, the In Principle Agreement:

• incorporated a condition subsequent, namely, entry into a formal deed containing further terms, which meant that it amounted to an agreement to agree;
• did not impose any obligation to agree or accept terms that released independent contractors and other persons who were not party to the principal proceedings;
• did not identify a standard or mechanism whereby bona fide differences about the terms of the proposed deed could be resolved;
• did not establish a contractual regime under which the Court could adjudicate further terms if the parties failed to agree;
• did not authorise the Court to infer that the settlement included a term that any release went beyond what would be necessary to bring the principal proceedings to finality.

(3)   Upon failure of the parties to agree the further terms, the condition subsequent operated to discharge the accord comprised in the In Principle Agreement.

(4)   The In Principle Agreement was a "mere accord executory" that was not capable of being specifically enforced or, alternatively, was an immediately binding agreement under which satisfaction and discharge of existing obligations was deferred pending performance and rendering the discharge conditional on an event that had not occurred.

(5)   The primary judge erred in not finding that the In Principle Agreement had been unfairly obtained and was oppressive and should have received the rejected evidence about the circumstances in which Mr Sayed came to initial the alteration to the In Principle Agreement by changing the words "Non-binding" to "Binding but".

(6)   In the alternative to grounds 1 - 4:

• the Bank was at all material times in breach of the In Principle Agreement by stipulating for a release under which Mr Sayed released all agents of the Bank and any other person;
• Mr Sayed's interest in the settlement was prejudiced by reason of the Bank's failure to proffer a clause that gave effect to the agreement;
• no offer to enable Mr Sayed to make up for the lost time and additional future accrued interest arising because of the delay was made at the hearing; and
• the Bank was not itself willing to perform the In Principle Agreement and failed to offer to do equity upon seeking equitable relief.

Grounds 1, 2 and 3

1. The first three grounds of the proposed further amended notice of appeal are, in substance, no more than a reformulation of the third ground of appeal originally proposed by Mr Sayed. They raise questions as to whether there was a binding contract between the parties and, if so, its terms. They are questions of law and would not involve any further factual inquiry, notwithstanding that those issues were not expressly formulated before the primary judge. I would grant leave to Mr Sayed to rely on those grounds.

1. It is clear that, prior to the signing of the In Principle Agreement, there was no binding contract between Mr and Mrs Sayed and the Bank. The emails exchanged were no more than a series of offers and counter-offers, none of which was finally accepted.

1. The Bank contends that two terms expressly agreed in the course of the email exchanges should be treated as incorporated in the In Principle Agreement. First, it says that "mutual releases" was a term required by both parties, and that that was to be expected given the object and purpose of the compromise being negotiated, namely, to bring to an end protracted and part-heard litigation. Secondly, the Bank says that it was agreed that any contract for the sale of the Woonona property by Mr and Mrs Sayed was to be approved by the Bank prior to exchange of contracts.

1. The Bank contends that the course of the email exchanges demonstrates that, prior to signing the In Principle Agreement, the following had been agreed:

• There was to be a period of grace within which Mr and Mrs Sayed were to pay an agreed amount to the Bank.
• The period of grace was to be four calendar months from the date of any agreement.
• There was to be immediate judgment for possession of the Woonona property, with the judgment to be stayed during the period of grace.
• There was to be immediate judgment against Mr and Mrs Sayed for a default amount to be agreed, such judgment also to be stayed during the period of grace.
• Contracts for sale of the Woonona property were not to be exchanged without the Bank's prior approval.
• The parties would release each other from any further claims.

1. The Bank argues that, prior to the signing of the In Principle Agreement, all of those terms and that structure had been agreed, in the sense that if the outstanding question as to the agreed amount and the default amount could be agreed, the binding contract would include all of the above terms and would follow that agreed structure. The Bank says that the parties then reached agreement as to the amounts. That is to say, the Bank agreed to accept $670,000 as the agreed amount and $700,000 as the default amount.

1. Thus, the Bank says, the In Principle Agreement served to capture and record consensus on those matters that, up to that time, had not been agreed or with respect to which prior agreement was not sufficiently clear. It says that, upon the signature of the In Principle Agreement, the parties had agreed to all terms necessary to resolve completely the litigation and all other claims between them. The Bank says that, upon signature of the In Principle Agreement, the parties had expressly agreed upon all essential terms.

1. Accordingly, the Bank contends, three conclusions may be drawn as follows:

• The provisions of clause 1, that the agreement was binding but subject to formal deed that would contain further terms not inconsistent, had legal effect, since all essential terms had at that point been agreed: there was no impediment to giving effect to that common intention for any want of certainty or lack of agreement on any essential matter.
• Having agreed on all essential terms, but wishing to record that agreement in a formal deed, the arrangement was binding, being one where the parties had made a provisional contract intending to be bound by it but assuming that, in due course, a further contract would be made between them containing both the agreed terms and further terms that they might both agree upon.
• Because the parties had agreed to all essential terms and wished those terms to be set out in a formal deed, their agreement to include "further terms not inconsistent" meant no more than that the parties intended to include such further incidental or consequential terms as might be appropriate, but not inconsistent with those upon which they had agreed.

1. There is a great deal to be said for the Bank's contentions, except for its reliance on the incorporation of terms from the email exchanges. Apart from the express reference to one of the emails in clause 6 of the In Principle Agreement, there is no reference to any of the other emails. There is no basis for treating any of the emails that constituted the negotiations that led to the In Principle Agreement as being part of any contractual arrangement between the parties, other than the one expressly mentioned, which did not refer to mutual releases. That is to say, there was a binding contract, but its essential terms were set out exhaustively in the In Principle Agreement.

1. The Bank says, however, that in order to give commercial efficacy to the parties' arrangements, mutual releases were essential so as to bring their disputation to finality. Clearly enough, in the course of negotiations, the parties contemplated that there would be mutual releases. However, for whatever reason, perhaps oversight, no reference was made to mutual releases in the In Principle Agreement. That may have resulted from the change of heart that appears to have occurred at the last moment to make the In Principle Agreement binding subject to a formal deed, rather than non-binding subject to a deed.

1. When the handwriting of the In Principle Agreement was first produced, containing in clause 1 the words "Non-binding", the parties did not intend it to be a binding contract. Perhaps the question of mutual releases was intended to be dealt with in the proposed deed. However, there was a change of heart. The parties agreed that the In Principle Agreement would be a binding contract. Hence the deletion of the word "Non". One might draw the inference that they wished to have a binding contract so as not to risk the compromise they had reached by further negotiations as to the terms of the proposed deed, which would include mutual releases. The parties were prepared to commit themselves in the expectation that the terms of such a deed would be agreed in the fullness of time. In those circumstances, commercial efficacy did not require the implication of a term for mutual releases. The parties were prepared to accept the limited finality afforded by the In Principle Agreement, in the expectation that they would agree later on the terms of mutual releases. Unfortunately, that expectation was not fulfilled.

1. It is clear that the parties never reached accord as to the terms of the proposed deed of settlement and release. It may well be that, in the end, only one clause was in dispute, namely, the terms of clause 7(a). However, there can be no doubt that Mr Sayed was not prepared to enter into a deed of settlement and release that contained clause 7(a), at least in the broad terms in which it was drafted. On the other hand, it is equally without doubt that the Bank was not prepared to enter into a deed of settlement and release that did not contain clause 7(a).

1. There are cogent grounds for concluding that the parties intended that the In Principle Agreement was to be an immediately binding contractual arrangement. First, the In Principle Agreement was signed when the proceedings before Adams J were still part-heard. The parties clearly intended that, by signing the In Principle Agreement, the proceedings before Adams J would come to an end immediately. Secondly, and more significantly, the fact that the parties deleted the word "Non" before the word "binding" is very compelling evidence of their intention to enter into a legally binding arrangement immediately.

1. The In Principle Agreement provided for payment of the sum of $670,000 by 23 December 2012. The consequence of payment was to be that the sum of $670,000 would be accepted in "full and final accord and satisfaction" of the proposed judgment debt of $700,000. While there was a promise by Mr and Mrs Sayed to pay that sum by that date, Mr and Mrs Sayed did not make the payment promised. The Bank has not sought to enforce the promise to pay, although it has obtained orders as contemplated by the In Principle Agreement. However, those were obtained by consent. Rather, they were entered following the orders made by the primary judge for specific performance of a deed of settlement and release in the form attached to the email sent at 1.57pm on 30 August 2012.

1. The Bank did not seek specific performance of the In Principle Agreement. That may well because of the absence in it of any provision for mutual releases. That is to say, the Bank was only prepared to enforce the contract if it obtained a release from Mr and Mrs Sayed that it regarded as satisfactory. For example, there is no reference in the In Principle Agreement to disposition of the cross-claim. On one view, the effect of the In Principle Agreement was to confer the benefit of a compromise on Mr and Mrs Sayed, without any real benefit for the Bank, other than finality and certainty in being able to obtain possession of the Woonona property and to enforce the security that it has over that property. The Bank may well prefer to pursue its original causes of action, rather than accept a reduced payment in full satisfaction without any release of the claims made in the cross-claim.

1. The date for payment of the sum of $670,000 has long since passed, without any offer on the part of Mr and Mrs Sayed to pay the sum. The Bank has made no effort to enforce any contractual obligation to pay the sum. In the circumstances, it may be appropriate to conclude that neither party wishes to have the In Principle Agreement enforced and that both parties have effectively abandoned it.

1. The draft deed of settlement and release that was attached to the email sent by Ms Kuti at 1.57pm on 30 August 2012 was not part of any contractual arrangements between the parties. The primary judge erred in making a declaration that it was and in ordering Mr and Mrs Sayed to execute such an instrument together with the consent judgment referred to in it. It follows that the orders made by the primary judge should be set aside. In addition, the judgments entered pursuant to the orders made by the primary judge should be set aside. In lieu of those orders, there should be an order that the Bank's Motion be dismissed with costs.

Ground 4

1. It is not strictly necessary to deal with the other grounds. However, I propose to say something about them.

1. The essence of ground 4 is that the In Principle Agreement is executory and so cannot be the subject of an order for specific performance. That is to say, it is a mere accord executory, rather than an accord and satisfaction. An accord executory is a settlement agreement in which the parties agree that the cause of action will be extinguished if something occurs, such as a party performing a promise. That something will not have occurred at the time the settlement agreement is formed, so the cause of action is not extinguished by formation of the settlement agreement. The agreement is only executed, and the cause of action extinguished, when that something subsequently occurs. On the other hand, an accord and satisfaction is a settlement agreement in which the parties agree that the cause of action is extinguished upon formation of the settlement agreement, as the consideration for extinction of the cause of action is the promise itself, rather than performance of it.

1. The logic of the distinction is that if there is an agreement to accept a promise in satisfaction of a liability, the discharge of the liability is immediate upon the promise being made. However, if the agreement is to accept the performance of a promise in satisfaction, then there is no discharge unless and until the promise is actually performed (McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at 184-185).

1. Those principles are not inconsistent with the enforcement of an executory agreement to compromise a claim. So long as the terms of the promises are clear and are capable of specific performance, there is no reason why an entirely executory settlement agreement cannot be the subject of an order for specific performance.

1. There does not appear to be any question in the appeal as to whether any part of the promises made in the In Principle Agreement have been performed. Thus, it appears to be common ground that neither party has performed any part of the In Principle Agreement, which remains wholly executory. In the circumstances, I consider that there is no reason why Mr Sayed should not be permitted to rely on ground 4. However, I would reject the ground.

Ground 5

1. The fifth ground was raised in the notice of appeal originally filed on behalf of Mr Sayed. Leave should be granted to rely on the ground. However, I consider that it fails.

1. Following the filing of the Bank's Motion, directions were given for the filing of evidence upon which the parties wished to rely. There was no suggestion made to the primary judge that Mr Sayed did not understand the directions or that he had any difficulty in complying with them. The affidavits upon which he sought to rely had been sworn some two weeks before the day fixed for the hearing. No explanation was offered as to why the affidavits had not been filed and served in accordance with the directions. In the circumstances, there was no error on the part of the primary judge in the exercise of his discretion in not permitting Mr Sayed to rely on the affidavits.

Ground 6

1. Ground 6 is relied upon as an alternative to grounds 1 to 4, on the basis that, contrary to Mr Sayed's primary contention, there is a binding contract. The questions raised by ground 6 involve further factual inquiries. Had those questions been raised before the primary judge, the Bank may well have been able to adduce further evidence in relation to the questions. Leave should be refused to rely on this ground.

Conclusion

1. It follows from the above that the appeal should be allowed. The orders made by the primary judge should be set aside. In lieu of those orders, there should be an order that the Bank's Motion be dismissed. The appropriate order is that the Bank pay Mr Sayed's costs of the appeal and of the Bank's Motion before the primary judge.

1. In the hearing before the primary judge, Mr Sayed appeared in person. Mrs Sayed was originally represented by Mr Luong and counsel, Mr K D Ginges. Mr Ginges appeared before his Honour to inform him that Mr Luong's instructions had been withdrawn very recently. Thus, Mrs Sayed was in effect unrepresented, although Mr Sayed's arguments were advanced in her interests as well as his own. Thus, it is unclear whether Mr and Mrs Sayed incurred any costs in relation to the proceedings on the Bank's Motion. Nevertheless, the appropriate order is for the Bank to pay Mr and Mrs Sayed's costs of the Bank's Motion.

1. Mr Sayed was not represented by lawyers before the primary judge but, on the appeal, he was represented by Mr J E Thomson of counsel, who appeared pro bono publico upon reference under the Court's scheme. The Court is indebted to Mr Thomson for undertaking to represent Mr Sayed and for the submissions advanced by him.

1. Accordingly, I propose the following orders:

(1) The appellant be granted leave to file its proposed further amended notice of appeal filed as a draft on 5 August 2013 with the deletion of ground 6.

(2) The further amended notice of appeal be filed within 7 days of the date of these orders.

(3) The appeal be allowed.

(4) The orders made by the primary judge on 22 October 2012 for specific enforcement of the deed of release and settlement attached to an email sent by Ms Danielle Kuti on 30 August 2012 at 1:57pm be set aside.

(5) The consent judgment that was entered pursuant to the orders of the primary judge, which was signed on behalf of Mr and Mrs Sayed on 22 October 2012, be set aside.

(6) In lieu of the orders of 22 October 2012, the following orders be made:

(1)   The plaintiff's motion of 5 September 2012 be dismissed.

(2)   The plaintiff pay the defendant's costs of that motion.

(7) The first respondent pay the appellant's costs of the appeal.

1. TOBIAS AJA: I agree with the orders proposed by Emmett JA for the reasons he has expressed.

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Decision last updated: 19 September 2013