RESOLUTION OF THE APPEAL
26 The appellant on appeal concentrated argument upon paras 11 and 12 of the letter of 13 March 2001 containing those items of the thirteen point plan. Para 11 was said to point to the Bank not treating itself as bound by any agreement but as contemplating that the only agreement that it would be bound by would be the formal deed referred to in para 11. It was then said that the deed there contemplated, insofar as it required "acknowledgments, releases, confidentiality and consent judgments" was necessarily referring to matters which required further agreement and not merely as to matters of mere formality. I do not agree. The deed which emerged in the September 2000 discussions makes clear what must have been understood by both parties in relation to the matters in para 11. First, the deed contains in somewhat idiosyncratic numbering what is called "acknowledgments". Clause 2.1 contains an acknowledgment by "the customers" that "they are liable to the Bank in respect of the Debts". Debts are in turn referred to as meaning "the amount owing from time to time by the customers to the Bank in respect of the accounts in schedule A, together with all interest, fees and charges that may accrue". Schedule A in turn contains a precise statement of the various accounts. Clearly enough, the amount in question constituting the debts would need to be calculated but that would be a mere mechanical process and does not require further agreement. The advantage of acknowledgment was simply that the borrowers were committed to an ultimate figure but that is all.
27 Then there is a reference in what is referred to as a "release" preceded by a paragraph reference to "13" but followed by a reference to clauses 7.1 and 7.2, with a cross-reference to clause 3 that appears to be non-existent. That said, one can eke out of clause 7.2 some content, namely that there would be a "deferred release" on payment being made of the amount owing to the Bank so as to "release and discharge the customers from all claims, actions, suits, demands, costs and expenses..."
28 The confidentiality provisions appear relatively boilerplate and are set out at (yet another) clause 12 of the draft deed.
29 The reference to "consent judgments" in para 11 of the 13 point plan finds its counterpart in the Deed under the heading "Proceedings" again preceded by the number twelve and this time followed by a sequence of two sub-clauses. They appear to contemplate that the customers shall not oppose and if requested consent to the entry of judgment in the proceedings which would be brought by the Bank. Importantly, clause 12.2 states "the Bank agrees it will not enforce those judgments before 31 December 2001 unless there is an Event of Default".
30 Not surprisingly, the evidence indicates that the respondents did not accept the deed as giving effect to what had transpired at the mediation; see Grey, 19-20. When one looks at the slipshod character of the deed that was not surprising. But it certainly does not justify any inference that the respondents would only contemplate themselves as being bound by a formal deed as distinct from the relative informality of the exchange of correspondence. Nor does it preclude the deed as illustrating what the parties had in mind more especially as a later deed (entered into as part of an interim arrangement) did state these matters with greater accuracy.
31 Thus a subsequent deed of release was entered into on 28 May 2001 which with greater precision does state the amount owing and provides for various releases including in clause 5.4 what I have described (at [27]) as the "deferred release". One may properly look at subsequent events to determine whether a binding contract pre-existed; (Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153) though self-serving letters, as here, are to be discounted more especially when they contradict each other. Thus the first letter dated 26 March 2001 does not dispute that an offer (referred to in the letter as "the Offer") had been made by the Bank, but says only that it had not been accepted; the second letter of the same date disputes that an offer had been made. Clearly, the second letter only demonstrates that the appellant had changed its mind.
32 The appellant submits that Amanda White, in using the phrase "prepared to offer" was not putting forward an offer capable of acceptance. In paragraph 15 of her affidavit sworn on 6 April 2001 (Red, 90-92), she states:
"At the mediation I made an offer on behalf of the Bank that it was prepared to enter into an agreement in accordance with the 12 point plan save that the time for repayment (point 10) was extended by 1 year and a concessional rate of interest was offered. That offer was rejected by the defendant."
33 This is evidence that "prepared to offer" was a phrase Ms White used when she intended to make an offer capable of acceptance. When confronted with the appellant's argument that this phrase in Ms White's letter dated 13 March 2001 (Red, 88) was evidence of an intention not to be bound, the trial judge correctly held that the phrase had to be read in the context of the letter; in other words, the correspondence as a whole (Red, 96). The passage he referred to from the Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR [97578] case is as follows:
"It is wrong to isolate any part of the correspondence from the rest in order to prove or disprove the existence of a binding agreement. The same approach should be taken to the analysis of words and phrases within the correspondence. Reference to an "agreement" having been reached does not necessarily prove the existence of a presently binding contract. Conversely, references to a "proposed" agreement, and similar expressions, will not necessarily mean that no agreement presently exists. It is a question of how the words are to be interpreted in their context, and in the light of the correspondence, viewed as a whole." [ Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR [97578] at 14,570, per Kirby P.]
34 The appellant contended that no agreement was reached between the parties on 23 March 2001 in terms of the thirteen point plan and in particular
· The evidentiary material will not sustain the inference drawn by the trial judge that an agreement was reached.
· Insufficient weight was given by the trial judge to the subject matter of the "contract" being a fundamental alteration of a security interest which was itself conferred by formal documentation.
· Insufficient weight was given to the character of the parties negotiating; in particular that it was highly improbable that either party intended to leave its mutual rights and obligations in a matter of considerable consequence to be spelled out of an exchange of letters. Previous negotiations, which had proceeded to draft deed stage, had terminated when the respondents rejected the draft deed.
· The arrangements proposed between the parties were not entirely simple; in particular the terms of the release were never spelled out. The only form of release which had passed between the parties had been in previous negotiations, and had been rejected by the respondents. The form of release embodied in a deed and signed on 28 May 2001 provided for no release by the appellant until the term of the deed had been performed by the respondents, but an immediate release of the appellants by the respondents.
· Matters of this nature were considered by this court in Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR [97629].
35 Much was made in argument on the fundamentality of these alterations and the intrinsic unlikelihood that they would be effected by informal documentation of the kind in question. The answer to that lies firstly in the fact that there is nothing to suggest that the Bank's documentation was other than standard. Nor is there anything to suggest that the alterations in question were themselves in any way out of the ordinary in conventional Bank dealing with a customer who gets into difficulties. One would imagine that every day of the week Banks enter into variations of this sort which are initially reflected in correspondence but are then made the subject of a formal detailed record by way of some deed or other formal agreement. Indeed, the Bank's own documentation points to this. Thus one finds at clause 9 of the formal document described as "ANZ business and investment facilities" that the Bank can merely by notice vary the conditions of the facility. There is no suggestion that the notice is not immediately effective without need for further more formal documentation. Here, that which is relied upon as stating the relevant agreement emanates from the Bank in just that manner.
36 The appellant sought to distinguish the present case from what I have described as conventional dealing between Bank and customer by contending that the informal documentation here contemplated a further deed. The answer to that contention is that one may contemplate a formal deed to give, as Masters v Cameron contemplates, a formal recording of the essential terms previously agreed. That is no way incompatible with the parties being bound until that point of time by that which records in summary form the essential terms of that agreement.
37 When one looks at those terms in the letter of 13 March 2001 there is nothing which indicates any lack of sufficient definition as would make a further deed essential for ascertainment of the parties' agreement.
38 I should refer briefly to Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR [97629] relied on by the appellant.
39 That case is wholly distinct from the situation before us in this appeal. There, in the words of the Full Court:
"The subject matter of a contract or the character of its parties or of a party may be such that a formal written contract offers such advantages as against a less formal agreement that, when it appears that the parties in fact contemplated the execution of a formal contract, it is inherently unlikely that they mutually intended to bind themselves by some earlier informal consensus. The disadvantages of having to depend upon the uncertainties inherent in informality, providing as they do fertile fields for dispute as to the existence of the contract or as to its terms where the rights of the parties have to be spelt out of conversations or correspondence or both, may assume substantial significance in some classes of contract or for some types of parties. This usually will be true of complex transactions such as a major construction project or a leasing transaction, such as the present one, involving provisions for change of areas leased and of conditions as to rent and otherwise during the term. It will also usually be true of a party whose operations are administered by a complex of persons and departments with different levels of authority, as in the case of governments, governmental bodies or large corporations. The practice of such bodies of entering into contracts of any substance by way of a formal contract is itself no formality. While an officer of the body of corporation may have substantial authority, including express authority to negotiate the terms of the contract and, arguably, by reason of his rank, implied authority to contract, the making of the contract by the formality contemplated may repose in more senior officers or a Minister the ultimate control of and the responsibility for the transaction and at the same time give the contract and its terms the certainty and notoriety desirable for its sure implementation. Hence, in such cases, it will not ordinarily be reasonable to infer that the parties, while contemplating a formal contract, intend to bind themselves prior to its execution."
40 Here, what is contemplated is, as I have said, a relatively standard set of variations which led to the correspondence.