Vero Insurance Ltd v Tran

[2008] NSWSC 363

CITATION:	Vero Insurance Ltd v Tran [2008] NSWSC 363 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	18 – 22 February, 25 & 26 March, 10 & 18 April 2008
JUDGMENT DATE :	22 April 2008
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	No settlement agreement was concluded.
CATCHWORDS:	CONTRACTS [120], INTERPRETATION [12] - General rules of construction of instruments - Commercial and business transactions - Regard to relevant terms of agreement - Meaning to avoid commercial nonsense or inconvenience.
LEGISLATION CITED:	Contracts Review Act 1980 Fair Trading Act 1987 Home Building Act 1989
CATEGORY:	Principal judgment
CASES CITED:	Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Ell v Cisera (2000) 10 BPR 18,045 Film Bars Pty Ltd v Film Laboratories Pty Ltd (1979) 1 BPR 9,251 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Jones v Dunkel (1959) 101 CLR 298 Manly Council v Byrne [2004] NSWCA 123 Masters v Cameron (1954) 91 CLR 353 Prenn v Simmonds [1971] 1 WLR 1381 Reardon Smith Line Ltd v Hansen–Tangen [1976] 1 WLR 989 Rossiter v Miller (1878) 3 App Cas 1124 Westpac Banking Corporation v Tanzone Pty Ltd (2000) 9 BPR 17,521
TEXTS CITED:	Carter, Peden & Tolhurst, Contract Law in Australia (5th ed, 2007) 12 – 04 Macquarie Dictionary (Rev 3rd ed, 2001) Oxford English Dictionary (Online ed)
PARTIES:	Vero Insurance Limited (P) Minh Ai Tran (D1) Thi Nguyen Phan (D2) Full Brick Homes Pty Ltd (D3) Martin Barratt (D4) Maureen Barratt (D5) Ian Harley Bailey (D6)
FILE NUMBER(S):	SC 5172/06
COUNSEL:	T G R Parker SC and P J Bambagiotti (P) F C Corsaro SC and B C A Bradley (D1 & 2) Submitting appearances (D3-6)
SOLICITORS:	Mills Oakley Lawyers (P) Just in Case Legal (D1 & 2) Kennedys Law Firm (D3-5) Thomson Playford Lawyers (D6)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

TUESDAY, 22 APRIL 2008

5172/06 VERO INSURANCE LIMITED v MINH AI TRAN & ORS

JUDGMENT

1 HIS HONOUR: These are proceedings for the specific performance of an agreement to settle proceedings 1046 of 2006 in the District Court at Sydney (“the settlement agreement”). The first and second defendants denied that the settlement agreement came into existence and alleged that, if it did, it was frustrated. They also cross claimed to have the settlement agreement, if it subsists, set aside under the Contracts Review Act 1980 (“the CRA”). The other defendants filed submitting appearances except as to costs.

PRELIMINARY

2 The District Court proceedings arose out of a building contract dated 9 April 2002 (“the building contract”). By the building contract the third defendant in these proceedings, Full Brick Homes Pty Ltd, undertook to build a dwelling at 124A Hughes Street Cabramatta for the first and second defendants, Minh Ai Tran and Thi Nguyen Phan, who were then living together in a domestic relationship. In the District Court proceedings the third defendant sued the first and second defendants for the balance owing under the building contract and the first and second defendants cross claimed against the present plaintiff, the third defendant and the directors of the third defendant, Martin Barratt and Maureen Barratt, the fourth and fifth defendants respectively. The cross claim against the present plaintiff was in respect of alleged breaches of its indemnities as insurer of the first and second defendants under the Home Building Act 1989. The cross claim against the third defendant was for damages for alleged breaches of the building contract and also for misleading and deceptive conduct under the Fair Trading Act 1987 (“the FTA”). The cross claim against the fourth and fifth defendants was for their alleged involvement in the third defendant’s breaches of the FTA.

3 It was these District Court proceedings that were the subject of a mediation held on 22 August 2006 before Ian Harley Bailey SC, the sixth defendant, as mediator. The mediation lasted all day. No written agreement was ever entered into for the settlement of the District Court proceedings. But it is the plaintiff’s case that by the end of the day the parties had entered into a firm oral settlement agreement. The plaintiff’s claim is against all six defendants. The parties (except the mediator) are referred to throughout this judgment by reference to their roles in these proceedings.

THE ISSUES

4 The plaintiff claims a declaration that there is a binding contract between the plaintiff and the six defendants for the settlement of the District Court proceedings in terms contained in Annexure “A” to the statement of claim. It further claims by way of specific performance an order that each of the defendants execute a document in terms of Annexure “A”. In the statement of claim the plaintiff alleges that the settlement agreement was reached on 22 August 2006: par 9. The particulars appended to that paragraph specify that the settlement agreement was oral and was constituted by conversations among Stephen Aroney on behalf of the plaintiff; Sal Russo on behalf of the first and second defendants; David Kennedy on behalf of the third, fourth and fifth defendants; and the mediator; “and by the reading out of the agreed terms … by the mediator in the presence of the parties and their representatives.” Importance is placed on behalf of the first and second defendants on the fact that the settlement agreement propounded by the plaintiff in its pleading and relied on throughout the hearing was an oral agreement said to have been reached by the time the parties parted company on 22 August 2006.

5 The first and second defendants raised the following three defences, which, if sustained, would lead to the conclusion that there never was any enforceable contract for the settlement of the District Court proceedings:

(i) that there was no intention to create legal relations, because the parties did not intend to be bound unless and until a formal contract was drawn up and signed (ie, the situation falls into the third category in Masters v Cameron (1954) 91 CLR 353);

(ii) that the fourth and fifth defendants were not parties to the mediation agreement or the mediation;

(iii) lack of authority on the part of Mr Russo, the solicitor who represented the first and second defendants at the mediation.

6 The first and second defendants also contended that the contract, if formed, was frustrated. The Court on 22 February 2008 ordered that the defence of frustration be determined separately from and after all other questions in the proceedings.

7 The other issue, raised by the first and second defendants by their cross claim, was a claim that the settlement agreement, if it subsists, should be set aside under the CRA.

FACTS

8 The following facts (except where otherwise stated) are not in dispute or are easily found.

9 The mediation was conducted on 22 August 2006 pursuant to a written mediation agreement executed the previous day. The terms of the mediation agreement need not be set out, except as appears below. The parties to the present proceedings were parties to the mediation agreement, other than the fourth and fifth defendants. Their omission is curious, since their agreement was necessary to the complete settlement of the District Court proceedings. Furthermore, the evidence shows that they participated in the mediation as individuals, as well as directors of the third defendant. Mr Kennedy, solicitor, deposes that he acted on their behalf, as well as on behalf of the third defendant, at the mediation. There is no reason to doubt his word, which is in any event corroborated by the content of various documents created at the mediation.

10 The first and second defendants relied on the following terms of the mediation agreement as providing that there would be no agreement resulting from the mediation unless a settlement agreement had been reduced to writing and executed:

“9 The Mediation may be terminated:


(a) by agreement between the parties to terminate the mediation.

(b) upon execution of a Settlement Agreement in respect of the proceedings;

(c) by the Mediator giving written or oral notification to the parties if, after consultation with the parties, the Mediator forms the view that the Mediator will be unable for whatever reason to assist the parties to achieve resolution of the proceedings.

10 (a) In the event that one or more of the disputed issues is or are settled, as the case may be, either of the parties is at liberty to enforce the terms of the settlement agreement by judicial proceedings.

(b) In those proceedings the parties may adduce evidence of and incidental to the settlement agreement.”

11 Relevantly attending the mediation were, on behalf of the plaintiff, Mr Aroney, solicitor, and Mr Geoff Gleeson, chartered engineer and building consultant; the first and second defendants together with Dr Ronald Desiatnik of counsel, Mr Russo, solicitor, Mr Michael Cantali, engineer and Mr Frasca, structural engineer; Mr Kennedy, solicitor, and the fourth and fifth defendants on behalf of the third, fourth and fifth defendants; and, of course, the mediator. The mediation was held, as is customary, in premises where there was a large room in which all participants could assemble and also smaller “break out” rooms where the representatives of the various interests could gather.

12 There were throughout the day detailed discussions among the various parties as to the terms of a possible settlement. The terms discussed were complex and detailed, since they involved, in precise detail, works to be done to the dwelling. It is clear that it would have been anticipated by all parties that the negotiations and any possible settlement agreement would involve detailed provisions as to those works. There are in evidence notes taken during the day by various participants, both legal representatives and assisting experts. In view of the fact that it was alleged that the settlement agreement was formed at a time no later than and in the terms of notes read out by the mediator at the end of the day, the plaintiff did not purport to lead evidence actually supporting the formation among the parties of each and every term of the agreement propounded. The mediator’s notes were said on behalf of the plaintiff (whether accurately or not) to be the best evidence of what had been agreed.

13 The mediation began in the large room by each participant either introducing himself or herself or being introduced. There was some conflict in the evidence as to whether and in what form the second defendant was introduced, but, in my view, nothing turns on this. A number of those attending then spoke. The mediation continued with the plaintiff’s party, the first and second defendants’ party and the third, fourth and fifth defendants’ party based in separate “break out” rooms. Detailed discussions took place during the day. The person conducting the discussions on the part of the first and second defendants was Mr Russo. Dr Desiatnik did not participate in those discussions, although he remained present throughout the day.

14 As 5pm approached the mediator announced, according to Mr Aroney, that he had been keeping notes of matters that had been agreed, but that he needed to write those notes up, so that he could read them out to everyone. It took him about 15 minutes to do so. At about 5pm the mediator summoned those present back to the large room. It was at about this time that Mr Russo announced that he was required elsewhere and departed. In the large room the mediator made an announcement, the terms of which are disputed. According to some witnesses he congratulated the parties on reaching agreement. According to Dr Desiatnik he congratulated the parties “on what they have agreed on”, or some such verbal formula. He then read out the notes that he had written up as to the terms which had been agreed. He stated that on the following morning he would type up his notes and forward them to the parties. What precisely he said about the purpose of forwarding them is not agreed. Those remaining at the mediation then went their several ways.

15 During the course of the evening the first defendant first telephoned and then faxed the mediator announcing that the first and second defendants could “not accept the term and condition put to us by the cross defendants [sic]” and that it was their intention to continue with the District Court proceedings.

16 It is undoubted that on the following morning the mediator typed up the notes he had written up the previous afternoon with some interpolated comments. These were forwarded to the parties under cover of a letter dated and faxed on 23 August 2006. The body of that letter is as follows:

“I refer to the mediation of the District Court proceedings No 1046 of 2004.

At the conclusion of the mediation the parties and their legal representatives agreed that the whole of the proceedings and the claims made in them would be resolved in accordance with an extensive agreement. The agreement was recorded by me in writing. I undertook to have the agreement typed and to include in it for consideration by the parties, any matter which I thought was not adequately considered. The purpose being to ensure finality and enforceability.

Enclosed is a copy of the Interim Terms of Settlement prepared by me during the course and at the conclusion, of the mediation process. The matters which were not the subject of express agreement at the conclusion of the mediation are underlined or separately noted. The most important of these is paragraph 5.

On the evening of 22 August 2006, Mr Tran telephoned me and sent a fax to me, as attached, indicating that the owners ‘can not accept the terms and conditions put to us’. Notwithstanding this advice, I considered it appropriate to complete the exercise which I undertook.

I look forward to the advice of the parties as to whether the draft agreement accords with their understanding of the agreement made at the conclusion of the mediation.”

17 In view of the conclusion to which I come at [37] below, it is not necessary for me to make findings either as to what was said among the parties during the course of the mediation or to find precisely what was said by the mediator at the end of the day. I should, however, say that I should not be inclined on the evidence to find established the particular form of words contended for by the plaintiff.

CREDIT OF WITNESSES

18 Equally, the conclusion that I have come to does not depend on the degree to which particular witnesses are accepted. I should record, however, briefly, the views that I formed as to the credit of the witnesses who gave oral evidence.

19 Mr Aroney, the solicitor for the plaintiff, and Mr Kennedy, the solicitor for the third, fourth and fifth defendants, both appeared to me to be attempting to give the Court their best recollection of what occurred at the time. They had the advantage of contemporaneous notes, which are usually of great importance in establishing what occurred or was said on past occasions. However, in this case there was a serious reservation as to the usefulness of their notes, particularly in relation to what was said by the mediator at the end of the day. This is that their notes were in attenuated form, owing no doubt to the difficulty of keeping up with what was said by the mediator. Because of this, their evidence as to this matter was, in words that Mr Parker, of Senior Counsel for the plaintiff, used of Dr Desiatnik’s evidence, “reconstruction” rather than “recollection”, despite the assistance of notes. I also had the impression that both gentlemen had a limited recollection of what had occurred except by reference to their notes.

20 The evidence of Dr Desiatnik was strongly criticised by Mr Parker SC. He eschewed any suggestion that Dr Desiatnik did not give his evidence honestly, but he referred to what he called a “stream of consciousness” element in Dr Desiatnik’s evidence. This description was not entirely inapposite, as Dr Desiatnik gave in a musing way various accounts of events and conversations that he had participated in. This applied particularly to his efforts to recall just what it was that the mediator had said at the end of the day. I did not attribute this so much to vagueness or lack of reliability on Dr Desiatnik’s part, as to a process of attempting to recapture or refine his best recollection of the relevant matters. I formed the view that Dr Desiatnik was attempting to give the Court the best recollection he could muster of the events. I did not find his recollection inferior to that of other witnesses. Indeed, I found it rather better.

21 The first and second defendants were poor witnesses. Again, I do not attribute this to any dishonesty. The second defendant’s evidence was marred to the point of uselessness by her refusal or inability to engage with the questions actually put to her. Although her evidence was given in Vietnamese and translated, I thought this difficulty flowed from a particular bent of mind, rather than from any problem with language.

22 The first defendant was a rather better witness, but the value of his evidence was diminished, although to a lesser extent, by very fixed ideas about particular matters and a determination to give expression to those ideas. As an example, he absolutely refused to contemplate that he had authorised the participation in the mediation on the first and second defendants’ behalf of Mr Russo, although, on the evidence of Dr Desiatnik and on the inherent probabilities of the situation, I have no doubt that he did, however reluctantly, agree on the day to that course.

23 In view of the hostility between the first and second defendants and Mr Russo, the plaintiff did not submit that the first and second defendants were under any duty to call him as a witness or that any inference could be drawn against them arising from his absence under the principle in Jones v Dunkel (1959) 101 CLR 298. The plaintiff could and did rely on the lack of any denial by Mr Russo of what was said by other witnesses concerning what occurred at the mediation: see Manly Council v Byrne [2004] NSWCA 123 at [51] per Campbell J.

24 The mediator was not called as a witness by either side.

THE LAW: FORMATION OF INFORMAL CONTRACTS

25 A useful conspectus as to the law on the formation of informal contracts is contained in the judgment of McLelland J in Film Bars Pty Ltd v Film Laboratories Pty Ltd (1979) 1 BPR 9,251. His Honour said at 9,254 – 9,255:

“Questions of the relevance and probative value of evidence cannot properly be considered independently of what the relevant issue is. It is thus necessary to identify with some degree of precision what the relevant issue is, in the present case. This involves a consideration of what it is in point of fact that constitutes the making of an informal contract, in circumstances such as the present. In my opinion, in such circumstances, a contract is made by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance. ‘It is not the subjective thing known as meeting of the minds, but the objective thing, manifestation of mutual assent which is essential to the making of a contract.’ ( Williston on Contracts, 3rd ed, vol 1 para 21.)

…………

In determining whether the communications between the parties constitute a contract the court is not confined to a consideration of the terms or manner in which the communications were made: they must be interpreted by reference to the subject matter and the surrounding circumstances including, inter alia , the nature of, and the relationship between, the parties, and previous communications between them, as well as to standards of reasonable conduct in the known circumstances.”

26 Again, in a useful conspectus, Gleeson CJ, when Chief Justice of this Court, in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 said at 550 - 551:

“... The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications: Allen v Carbone (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.

The position is by no means so clear, however, in connection with internal memoranda... or statements as to subjective intention made by individuals in the course of giving evidence. As it happens, although the learned judge had a good deal of material of this kind put before him at the hearing, it was not particularly helpful even if admissible. In the first place, a great deal of it was equivocal and individual pieces of evidence were contradictory in effect. Some of the persons who participated in the negotiations in question were called to the witness box and vigorously examined as to what was going on inside their minds at particular times. This process in the end principally served to demonstrate what might have been expected to be the case, that is to say, that the witnesses, not being lawyers themselves, were in a state of considerable confusion about the issue that ultimately emerged as determinative of the rights of the parties…

…………

In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their ‘intention as expressed’ (cf Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant.”

27 In Masters v Cameron (1954) 91 CLR 353, I refer to what was said by the Court (Dixon CJ, McTiernan and Kitto JJ) at 361 - 362:

“ Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor &c of the Poor of Kingston-upon-Hull v Petch (1854) 10 Exch 610. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker (1950) 80 CLR 304 or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller (1878) 3 App Cas 1124. Lord O'Hagan said: ‘Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made’ at p 1149. And Lord Blackburn said: ‘parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement’ at p 1152. So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284 at p 289 in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.”

28 It was put on behalf of the plaintiff that Rossiter v Miller (1878) 3 App Cas 1124 was a conveyancing case, so that the words of Lord O’Hagan and Lord Blackburn are not apposite to a case such as the present. I do not agree. Whatever the context, their Lordships were stating general principles. In particular, Lord Blackburn was stating that if, on the evidence, it appeared that the intention of the parties was that they might retire from an oral agreement up to the execution of a formal written agreement, effect ought be given to that intention.

THE LAW: CONSTRUCTION OF COMMERCIAL AGREEMENTS

29 As to the meaning of clauses 9 and 10 of the mediation agreement, the question is one of pure construction, since there is no doubt of the existence of the mediation agreement. Every agreement must be construed in the matrix of facts within which it is created: Prenn v Simmonds [1971] 1 WLR 1381; Reardon Smith Line Ltd v Hansen–Tangen [1976] 1 WLR 989; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. As Lord Wilberforce said in Reardon Smith at 995:

“No contracts are made in a vacuum: there is always the setting in which they have to be placed.”

30 Furthermore, commercial contracts must be construed in a commercial way, taking a commonsense approach. As Kirby P said in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313 - 314:

“ Whoever may be the parties to the agreement, it is the fundamental rule, that a court should give the words of a written agreement the natural meaning that they bear. Subject to that rule, in giving meaning to the words of an agreement between commercial parties, courts will endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient. This is because courts will infer that commercial parties would not themselves normally agree in such a way.”

See also the judgment of the Court of Appeal in Westpac Banking Corporation v Tanzone Pty Ltd (2000) 9 BPR 17,521 at [20], [21] and my judgment in Ell v Cisera (2000) 10 BPR 18,045 at [20]; and see generally Carter, Peden & Tolhurst, Contract Law in Australia (5th ed, 2007) 12 – 04.

THE MEANING OF CLAUSE 9 OF THE MEDIATION AGREEMENT

31 The first and second defendants contended that the effect of clause 9(b) of the mediation agreement is that, to be effective, a settlement agreement resulting from the mediation must be in writing and executed by the parties. Their reasoning proceeded in this way. The word “may” in clause 9 (even if at first sight it appears a little strange) is to be understood as expressing a possibility: see Macquarie Dictionary (Rev 3rd ed, 2001), “may” meaning 3 and Oxford English Dictionary (Online ed), “may” meanings 5 and 7. When this is understood and the generality of the subclauses of clause 9 is appreciated, the proper conclusion is that the intent of clause 9 is to specify exhaustively the ways in which the mediation agreement may come to an end. The parties may agree to abandon it: clause 9(a). The mediator may bring it to an end on the ground of inutility: clause 9(c). Or it may be brought to an end by the conclusion of a settlement agreement between the parties: clause 9(b). In light of the exhaustive intent of clause 9, whilst the language is elliptical, clause 9(b) should be taken as specifying that, if a settlement agreement is to have the effect of bringing the mediation to an end, it should be executed, which it can only be if it is in writing.

32 Clauses 9 and 10 read together mean, where there are separate issues in a mediation, there may be a partial termination of the mediation agreement in relation to a separate issue or issues, with the mediation agreement continuing in force in relation to the remainder. But that does not derogate from the submission that the first and second defendants have put in relation to the construction of clause 9(b).

33 The plaintiff’s submission was that clause 9 of the mediation agreement does not affect the enforceability of the oral settlement agreement. The plaintiff contended that clause 9 on its face should be taken as dealing with one subject matter only and that is the termination of the mediation agreement. The mediation agreement and the settlement agreement are “quite separate contracts and they address quite separate matters.” Clause 9 goes only to “the existence or otherwise of the mediation agreement” and “has nothing to do necessarily with whether an agreement was made to settle.” The argument continued that clause 9(b) “is not dealing with the settlement agreement itself”. If a settlement agreement is made orally, clause 9(b) “does not say anything about the validity or otherwise of the agreement they have made orally.” Furthermore, the plaintiff put a submission that the “Settlement Agreement” with initial capital letters in clause 9(b) referred to an entity different from the “settlement agreement” with initial small letters appearing in two places in clause 10.

34 In my view, applying the principles as to construction set out above, although the language is spare, clause 9 is to be taken as covering the field as to the possibilities of termination of the mediation agreement and clause 9(b) should be taken as specifying that, where the termination is by the parties entering into a settlement agreement, the settlement agreement should not be taken to be concluded until reduced to writing and executed. That appears to me to be the commonsense and commercially sound meaning to be put upon the language. This conclusion is not in any way at odds with, but is supported by, the evidence of the surrounding circumstances. As I have already stated, it would have been clear to the parties that the negotiation and any settlement agreement flowing from it was likely to be complex and detailed. In these circumstances it would be sensible to provide an opportunity for a review of the terms by the parties in written form before they were finally committed to them. The plaintiff’s proposition that the intention evinced in clause 9(b) is to speak only of the mediation agreement and to say nothing concerning the settlement agreement appears to me to be contorted and unrealistic. The intention of the parties that I infer from the language is to require an executed written settlement agreement for the mediation to be brought to an end.

35 As the mediation agreement is not required by law to be in writing, it is correct, as contended by the plaintiff in the alternative, that the parties could vary the mediation agreement orally. They could have come to an agreement to the effect that the requirement of an executed written mediation agreement was waived and that they intended to be bound immediately by an oral settlement agreement that they had then reached. However, there is nothing in the evidence in this case that in my view could be construed as effecting such a variation of the terms of the mediation agreement.

36 In my view, therefore, clause 9(b) requires that, to be effective, any settlement agreement reached at the mediation must be written and executed by the parties.

WHETHER OR NOT A BINDING SETTLEMENT AGREEMENT WAS REACHED AT THE MEDIATION

37 The conclusion at [36] under the previous heading renders the decision of this question easy. It was the intention of the parties that, whatever was agreed orally at the mediation, there should be no binding contract among them until there was an executed written agreement. In this case, that intention does not have to be inferred from indirect evidence. The direct evidence is that there was an express stipulation to that effect among the parties in the mediation agreement. As no such written agreement was executed, there was no binding settlement agreement among the parties.

CONCLUSION

38 In these circumstances, the first and second defendants’ alternative defences need not be dealt with. The plaintiff’s claim fails and must be dismissed. The cross claim falls to the ground and must also be dismissed. It would seem that the plaintiff should be ordered to pay the first and second defendants’ costs, unless some submission is put to the contrary. The other defendants should be asked whether they wish to make any submissions as to costs.

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28/04/2008 - Junior Counsel for defendants omitted - Paragraph(s) Counsel