The plaintiff seeks payment of the sum of $13,889,392.23 from a number of defendants as guarantors in respect of loans made by the plaintiff to the borrower, a company now in liquidation.
By way of a cross-claim filed by the second defendant against the plaintiff, the second defendant maintains that the proceedings against him have been settled. The second defendant seeks a declaration as to the terms of the settlement agreement and an order that the plaintiff specifically perform and carry into execution the settlement agreement. The plaintiff also seeks damages arising out of the failure of the plaintiff to complete the settlement. The second defendant says that he has settled the claim against him for $100,000 with the plaintiff being required to enter into a deed of release, releasing him from any further liability.
The proceedings are listed for hearing for 7 days commencing 7 November 2022. As I understand the position, a number of the defendants are no longer involved in the proceedings. If the proceedings are settled between the plaintiff and the second defendant as the second defendant asserts, then he would play no further part in the proceedings.
[2]
The second defendant's case
The second defendant submits that the plaintiff and second defendant entered into a binding agreement on 14 February 2022 consequent upon an email from the solicitor for the second defendant of 14 February 2022 accepting an offer from the plaintiff forwarded by the solicitor for the plaintiff by email on 10 February 2022.
This exchange of emails followed a series of texts on the WeChat social media platform between Jeffery Tse Hung Lee as the second defendant and Nancy Wang on behalf of the plaintiff.
The principal submission of the second defendant is that this matter falls into the second category of cases referred to in Masters v Cameron. [1] That is, at least by 14 February 2022, the parties had agreed on the terms of their bargain but nevertheless had made performance of the terms conditional upon the execution of a formal document.
The second defendant's alternative position is that the parties entered into a binding agreement on 9 February 2022, being the day on which the parties exchanged text messages as to the amount that the second defendant would pay and the plaintiff would accept in settlement.
[3]
The plaintiff's position
The plaintiff disputes that there was a binding agreement. The plaintiff says that, although it is not necessary that the matter fall into any particular category in Masters v Cameron, the facts and circumstances of this matter are such that the parties did not intend that there would be any binding agreement until they had executed a formal document (being the deed of release) and agreed upon all of the terms (not just the money).
The plaintiff says that the parties were ultimately unable to agree on all of the terms to be included in the deed of release, that the deed was never executed and that in those circumstances there has been no concluded agreement.
[4]
Background circumstances
In accordance with the commercial loan agreement dated 15 March 2017, the plaintiff provided financial accommodation to Gordon Halhas Pty Ltd ACN 609 101 635 (Receiver and Manager Appointment) (In Liquidation) as trustee for Gordon Halhas Trust ABN 37 104 641 353 as the borrower by way of a cash advance facility up to a limit of $14 million.
On that same day, the borrower submitted a utilisation request to the plaintiff and the plaintiff advanced the sum of $14 million to the borrower in accordance with the agreement.
The plaintiff maintains that the borrower defaulted under the commercial loan agreement by failing to repay the full amount owing under the agreement by 15 March 2018. Further, the plaintiff maintains that the borrower is further in default under the agreement as:
1. A receiver and manager was appointed to the property of the borrower on 20 September 2018; and
2. Liquidators were appointed to the borrower on 30 November 2018.
The plaintiff maintains that, as at 21 December 2018, the amount owing by the borrower to the plaintiff under the agreement was $13,889,392.23.
The plaintiff maintains that the first defendant, second defendant and fourth defendant guaranteed, as a principal obligation, the payment to the plaintiff of all moneys owing at any time borrowed from the plaintiff in relation to the agreement. The plaintiff asserts that it has demanded payment of the debt from each of the first, second and fourth defendants, but each of those defendants has failed to pay moneys owing under the guarantees.
On 29 October 2021, the second defendant filed a third further amended defence to the principal claim. The second defendant raises a number of defences, including that:
1. It disputes the plaintiff's allegations as to the proper construction of the commercial loan agreement.
2. It denies that clause 10 of the commercial loan agreement (relied upon by the plaintiff) gives rise to an effective or enforceable guarantee from the second defendant.
3. It relies on the Contracts Review Act 1980 (NSW) and asserts that certain clauses of the commercial loan agreement were unjust.
4. It refers to a side agreement entered into between the plaintiff as lender and the borrower in relation to the accrual of interest under the agreement.
The matter was originally listed for hearing on 25 October 2021. The hearing was vacated after the second defendant was granted leave to rely on a third further amended defence which raised a new issue, being whether the guarantee could be avoided because of an agreement between the plaintiff and the borrower which increased the liability of the borrower.
Around the time of the adjourned hearing, there was an informal settlement conference between the parties. I am unaware of what happened at that settlement conference except that it did not achieve a settlement between the plaintiff and the second defendant.
In late 2021, Ms Wang on behalf of the plaintiff contacted the second defendant directly with a view to exploring any settlement opportunities. She continued to communicate directly with the second defendant through WeChat, even though she was represented by Dentons at the time. She hoped that, by communicating directly with the second defendant, her legal costs would be reduced. There is no dispute that Ms Wang had the authority to bind the plaintiff and it is not necessary to consider that point further.
Around February 2022, the parties communicated directly with each other and engaged in a series of text messages and conversations, again through the WeChat messaging service. These messages and conversations were in Chinese Mandarin but the messages and recordings have been translated for the purposes of these proceedings. The parties agree on the translations.
The issue for determination relates to the effect of the text message conversations and subsequent exchange of correspondence between the solicitors.
It is not in dispute (as is apparent from the text messages) that there was a process of discussion or negotiation between the second defendant and Ms Wang and that Ms Wang ultimately agreed to accept the payment of $100,000 from the second defendant. Having reached agreement as to the amount, the parties then referred the matter back to their solicitors, with Ms Wang suggesting that the second defendant's solicitors should prepare the deed as she did not want to spend any more money on legal fees in doing so.
The dispute arises out of the disagreement between the parties as to the terms of the deed of release; that is, the terms were never agreed upon, in particular, because of the differing views as to the obligations in respect of the statement of assets and liabilities which was initially referred to in an email from the solicitor for the plaintiff dated 10 February 2022 and also referred to in the email from the solicitor for the second defendant dated 14 February 2022.
As the second defendant says, he remains ready and willing to effect the settlement. However, the plaintiff says there is no settlement.
A solicitor, Mr Gao, appeared for the eleventh defendant on commencement of the hearing but sought and was granted leave to be excused as he wished to play no part in the hearing.
Patrick Knowles appeared for the plaintiff and David Smallbone appeared for the second defendant.
[5]
Evidence
The second defendant relied on the following affidavits:
1. Affidavits of the second defendant dated 15 July 2022 and 4 August 2022.
2. Affidavits of Ana Zhao dated 15 July 2022 and 4 August 2022 (an interpreter translating the WeChat messages).
3. Affidavits of Annette Leung dated 15 July 2022 and 4 August 2022 (the solicitor for the second defendant).
4. Affidavit of Ziguang Yao dated 4 August 2022 (another interpreter).
The plaintiff relies on:
1. An affidavit of Shiyi Ye dated 29 July 2022 (an interpreter).
2. Affidavits of Xinyu Wang dated 29 July 2022 and 8 August 2022.
3. An affidavit of Carl Ku dated 29 July 2022 (the solicitor for the plaintiff).
The only person who gave oral evidence was Ms Leung. She was cross-examined briefly on whether two emails which she had written in respect of the matters relating to the alleged settlement were drafted by Counsel (emails dated 9 and 22 June 2022). She believed that they were.
In addition to exhibiting the WeChat messages and other relevant correspondence, the second defendant identifies that he paid the sum of $100,000 into his solicitor's trust account in three instalments between 11 and 14 February 2022 for the purposes of payment of the agreed sum of $100,000 to the plaintiff. He also says that he instructed his solicitors regarding the deed of settlement and exchange of the deed and that he remains ready and willing to exchange the deed and perform its obligations.
His solicitor, Ms Leung, refers to the involvement of Ms Wang on behalf of the plaintiff at various stages of the proceedings (this is not in dispute). She also refers to the background, including the adjourned hearing and the earlier settlement conference. She then annexes the correspondence between the solicitors subsequent to the text message exchanges and the attempts made to finalise and exchange the deed of settlement. She also refers to the additional costs incurred in trying to convince the plaintiff to effect the settlement.
The affidavit evidence from the plaintiff is to the same effect. Ms Wang admits that she was responsible for giving instructions to Dentons as the solicitor for the plaintiff. She annexes to her affidavit the relevant documents. She specifically denies that she said to the second defendant words to the effect of "We had a binding agreement to resolve our dispute".
In the end, the text messages (as translated), audio files (as translated), emails and other correspondence speak for themselves. In the circumstances of this matter, any commentary (which is limited) as to what was happening or what was intended could only be relevant as background, having regard to the objective approach which must be applied.
[6]
Principles to be applied
Although the parties might have relied on different cases, there is really no dispute as to the principles to be applied in the determination of this dispute.
In Masters v Cameron, the Court said (at [360]):
"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."
The second defendant submits that there may be some controversy as to whether there really is a fourth category or merely a situation that may occur within the scope of one or more of the three categories mentioned in Masters v Cameron. It is not necessary to say anything further about that, although in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd, [2] the existence of the fourth category was accepted by the Court of Appeal.
The parties agree that it is not strictly necessary to bring a set of facts squarely within any particular one of the identified categories. [3] The issue remains whether, objectively assessed, the parties had the common intention to contract at the time they are said to have done so. [4]
In Michael Kuehn & Jennifer Kuehn v Masterton Homes (NSW) Pty Ltd t/as Masterton Homes (NSW) Pty Ltd, [5] Hammerschlag J (as his Honour then was) provided a useful summary of the principles to be applied in this type of dispute as follows:
"1. Whether an agreement has been entered into is to be objectively assessed. The objective intention of the parties is fact-based, found in all the circumstances, including by drawing inferences from their words and their conduct in their making of the agreement: Allen v Carbone (1975) 132 CLR 528 at 532; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 (ABC); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105 [25]; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [69] (Sagacious).
2. In ascertaining the intention of the parties, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract: Sagacious at [69].
3. The Court will not write a contract for parties who have failed to reach agreement. Failure to reach agreement includes where there is obscurity or incompleteness in the agreement: Sagacious at [73]; Feldman v GNM Australia [2017] NSWCA 107 at [60]-[61] (Feldman).
4. The existence of matters of importance on which the parties have not reached consensus in their informal agreement will render it less likely that they intended immediately to be bound before the execution of a formal document. That the terms have not been fully or well stated is material to whether a contract has been made. The more important the term, the less likely it is that the parties will have left it over for future decision, but there is no legal obstacle which prevents the parties agreeing to be bound now while deferring important matters: Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 97578 at 14,579; ABC at 548; Sagacious at [73]; Feldman at [60]-[61].
5. Regard may be had to the parties' subsequent communications to assess whether it was in their contemplation that they were not to be bound until all the essential preliminaries had been agreed to or until the formal contract had been drawn up embodying all the matters incidental to the transaction: ABC at 547-8 and the authorities cited there; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [25]; Howard Smith and Co Ltd v Varawa (1907) 5 CLR 68 at 78; B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9155; Sagacious at [99].
6. An agreement may contain an implied term requiring the parties to do all cooperative acts necessary to bring about the contractual result. A duty to cooperate may require parties to execute a formal instrument but does not apply to the negotiation of varied or additional terms: Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530; Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123 at [64]." (citations added.)
In Darzi Group Pty Ltd v Nolde Pty Ltd, [6] Emmett AJA (at [141]) observed:
" … the Court must ascertain the common intention of the parties, determined objectively from their conduct and the communications between them, having regard to the surrounding circumstances known to each of them. That question is different from the question of whether the parties had reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract, although the two questions may often be closely related. Thus, even though the parties may have reached consensus as to all of the terms of their bargain, they may nevertheless not have intended, at that point, to enter into legally binding relations …" (citations omitted.)
In Pavlovic, Bathurst CJ (at [15]) identified the task as follows:
"… In cases such as the present, which do not depend on the construction of a single document, what is involved is the objective determination of the question from the communications between the parties in their context and the parties' dealings over the time leading up to the making of the alleged contract. This involves consideration of the subject matter of the communications: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550. As was said by Mahoney JA and McHugh JA in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, that includes consideration of what the parties said or wrote (at 334, 337)."
[7]
Consideration of the communications between the parties
In his cross-claim, the second defendant pleads the following:
"1. By an agreement made on or about 14 February, 2022, between the cross claimant and the cross defendant it was agreed to settle the proceedings on the plaintiff's claim against the second defendant herein.
a. The agreement was comprised by exchange of social media (WeChat) text and audio messages on 8 and 9 February, 2022, followed by an exchange of emails letters between the solicitors for the parties, being an email from the cross claimant's solicitor on 9 February, 2022 at 9.29 am, an email from the crossdefendant's solicitor on 10 February, 2022 at 12.52 pm and an email from the cross-claimant's solicitor on 14 February, 2022 at 2.21 pm.
b. In the alternative it was comprised by the exchange of social media (WeChat) text and audio messages on 8 and 9 February, 20221 and the exchange of the said emails added further terms by agreement.
c. Notwithstanding that the agreement provided for a more formal instrument to be prepared to further regulate the subject matter of the agreement, it was the intention of the parties to be immediately bound. It was agreed that the solicitors for the cross claimant should prepare that more formal instrument and settle its content, subject to conforming with the terms otherwise agreed between the parties."
The case put by the second defendant is summarised in the introduction section of the second defendant's written submissions as follows:
"1. By Cross Claim filed 5 July, 2022, the second defendant, Mr Lee seeks specific performance of an agreement to compromise the plaintiff's claims against him in these proceedings, with damages and costs. The agreement was made in February. Mr Lee promised to pay $100,000 to settle the claims against him. Payment was to be made within 3 business days of exchange of a deed of settlement and release containing full mutual releases. The deed was to be prepared by Mr Lee's solicitor. Mr Lee was also to provide a statement of assets and liabilities.
2. Mr Lee got the money ready, his solicitors prepared and submitted a draft deed, and Mr Lee has provided two statements of assets and liabilities. The plaintiff however, has refused to complete the settlement. It says there is no agreement. The question is whether the parties manifested an intention to enter into an immediately binding agreement.
The relevant WeChat conversations as between the second defendant and Ms Wang (described as Jeff and Nancy respectively in the translation document) are set out in chronological order in a six-page document. This document contains all of the text and audio messages in English.
The discussions commenced with a text at 4.19am on 7 February 2022 as follows:
Date Person Conversation
7 Feb 2022 Jeff Hi, Nancy, I tried many ways these days, but I can only get 100k with my best ability. Can we settle it with 100k? It is really unnecessary to go to the court. I'm not going to pursue the legal fees I spent earlier either. For the money I have for now, it is the same for me to give it to you or the lawyer. If I give it to you, I can finish earlier and save myself some work. Can we settle it with 100k? My lawyer emailed me yesterday that there would be a hearing on 11 Feb. It will occur legal expenses again. Hope we can get an agreement before it and settle it. Ok?
4:19am
7 Feb 2022 Nancy I do not want to go to the court either.
11:32am
7 Feb 2022 Nancy Hope you can add a little, it is too low
11:36am
7 Feb 2022 Jeff I really cannot get more
11:37am
[8]
There followed continuing exchanges with Ms Wang asking for more, that is, $125,000 and the second defendant insisting that he could not pay anymore. These messages continued the next day, 8 February 2022. At 4.44pm after a further exchange about the actual amount, Ms Wang said:
"Besides, please let your lawyer make the agreement so that I can save some money"
There followed further exchanges in respect of whether the amount should be $100,000 or $125,000 and how and when it would be paid. At 5.16pm, the second defendant said:
"If we can reach agreement, I will let my lawyer draft it. Cannot afford the lawyer's fee."
Following a response from Ms Wang, he said at 6.21pm:
"After signing the contract, if I can get 100k at that time, we can settle immediately. If I cannot get 100k, I can pay 30k first, then pay 30k 6 weeks later, 35kk 4 weeks later, 30k 2 weeks later, is it ok?
In a 30-second audio message at 10.29pm, Ms Wang said:
"I've sent it to the lawyer to negotiate. It's, um, but my husband still wants to say that if you can pay 100,000 right away, for that 25,000, he would like to give you three months to pay us because 100,000 is indeed a bit too low. If you think about it, it was more than a million, and now a "0" is being taken off from that."
At 10.30pm, she said:
"I will let you know when I get my lawyer's reply tomorrow."
There followed further exchanges about the lawyer's advice and the second defendant maintaining his figure of $100,000 on the basis that he had no more money. Ms Wang continued to press him on higher amounts. The second defendant continued to respond essentially maintaining that he had no more money and she should take the $100,000.
Commencing at 11.41am, he sent three messages as follows:
Date Person Conversation
9 Feb 2022 Jeff Let's settle it with 100k, which has exceeded my limit. I am sincere and we will make this 14 million back later on.
11:41am
9 Feb 2022 Jeff Ok? Nancy?
12:38pm
7 Feb 2022 Jeff If it is an ok, I will let the lawyer continue
12:39pm
[9]
Following a further response from Ms Wang, the second defendant sent a further text at 4.11pm leading to the following exchange:
Date Person Conversation
9 Feb 2022 Jeff Nancy, we think we don't need to argue any more. I understand you so I have the same idea with you that do not want to fight further. Please understand me as well. First of all, it is not fair to me and secondly, I lost all the money I invested. It is really hard for me. I've had a hard time paying my legal fees over the years. Nancy, how about you just agree with the 100k and we make all the money back later on.
4:11pm Thank you!
9 Feb 2022 Nancy Ok, that will do. I trust you this time.
4:51pm
9 Feb 2022 Jeff Thank you!
4:51pm
9 Feb 2022 Jeff Please let your lawyer reply to my lawyer as we communicated before.
4:53pm
9 Feb 2022 Nancy You make the agreement first
4:55pm
9 Feb 2022 Nancy When it is ready, send it to the lawyer. Save the time
4:56pm They will ask (inform) me latter
9 Feb 2022 Jeff I have sent it.
4:58pm Now your lawyers are waiting for your confirmation.
9 Feb 2022 Nancy Have you done the agreement?
5:01pm
9 Feb 2022 Nancy Which bank account are you going to use to transfer your money from?
5:05pm
9 Feb 2022 Jeff Can you let your lawyer reply to my lawyer first, ok?
5:17pm
9 Feb 2022 Jeff Yes
5:21pm Australian bank account
9 Feb 2022 Nancy Personal or company account?
5:21pm
9 Feb 2022 Jeff Personal
5:22pm
9 Feb 2022 Nancy I Really feel like very painful in this case
5:30pm
9 Feb 2022 Jeff We can recall the process after settling it
5:43pm
[10]
These text and audio messages must be considered in conjunction with the emails between the solicitors, for example, at 9.45am on 9 February 2022, the second defendant sent a text message stating, "My lawyer has emailed to your lawyer". That must be a reference to an email from Ms Leung, sent at 9.29am that day, which was in the following terms (omitting non-critical parts):
"We are instructed that the parties have reached agreement to resolve the proceedings as follows:
1. Our client pays your client the sum of $100,000.00 in full and final settlement of the matter; and
2. The said sum will be paid within 3 business days upon the parties signing and exchanging a Deed of Settlement and Release.
If you could please confirm the above, we will proceed to drafting the Deed."
The parties had plainly not reached an agreement to resolve the proceedings on the terms set out in this email at that time. Indeed, the second defendant does not suggest that there was an agreement by that time.
In any event, the plaintiff through its solicitor responded to this email on 10 February 2022 at 12.52pm as follows:
"Dear Ms Leung,
We refer to your email of 9 February 2022, and our telephone conversation earlier today.
We confirm that our client is prepared to accept your client's offer of $100,000 payable within 3 days of an exchanged deed, subject to the following:
1. Your client providing our client with:
a. a consent judgment in the amount of $100,000 to hold in escrow, pending any default under the deed of settlement; and
b. a statement of assets and liabilities.
2. Full mutual releases to be provided in the deed of settlement.
You have indicated that you do not envisage any issues with our client's requirements, but that you will seek instructions from your client.
You have also indicated that you will prepare a deed of settlement in similar form to the one that we used to settle the costs application."
This email was sent at a time subsequent to any of the WeChat messages to which I have already referred. The second defendant's solicitor responded to this email on 14 February 2022 at 2.21pm as follows:
"Dear Ms Lee,
We refer to your without prejudice email dated 10 February 2022 (12:52pm) and our email dated 9 February 2022 (9:29am).
We confirm that in consideration of your client accepting the sum of $100,000 ("Settlement Sum") as full and final settlement to resolve the proceedings between our respective clients, our client is agreeable to the conditions proposed by your client, namely:
1. That our client will provide you with a consent judgment in the amount of $100,000 to be held in escrow by your firm, pending any default under the Deed of Settlement and returned to us upon payment of $100,000 (which we trust are in accordance with your intention); and
2. That our client will prepare a statement of assets and liabilities.
We also confirm that we will prepare a Deed of Settlement including terms of full mutual releases."
It is the second defendant's case that there was a concluded agreement at this time.
Three days later, the solicitor for the plaintiff wrote by email:
"Thank you for your email Ms Leung.
Can you please let us know when the draft Deed of Settlement will be available?
Kind Regards … "
A draft deed of settlement and release was then sent by the solicitor for the second defendant to the solicitor for the plaintiff by email on 22 February 2022 at 3.44pm. The deed contained a number of terms relating to payment and release (which might be viewed as standard) but made no mention of the statement of assets and liabilities which was referred to in the email from the solicitor for the plaintiff of 10 February 2022 at 12.52pm and the email from the solicitor for the first defendant on 14 February 2022 at 2.21pm.
In any event, the solicitor for the plaintiff did not respond immediately to the provision of the draft deed. The solicitor for the first defendant followed up by further email on 28 February 2022 at 9.41am.
On 28 February 2022 at 12.03pm, the solicitor for the plaintiff responded to the emails of 22 February 2022, raising issues both in respect of the statement of assets and liabilities and the deed of settlement. The plaintiff asserted that the statement of assets and liabilities was inadequate. It merely showed credit card debts of $80,000 and total assets comprising cash and furniture and effects of $2,000.
As the solicitor for the plaintiff pointed out in the email, in September 2021, the solicitor for the second defendant had informed them that the second defendant was defending matrimonial proceedings for property adjustment and parenting orders. Further, an ASIC search indicated that the second defendant was the holder of shares in a number of companies.
The plaintiff asserted that:
"It is a condition of the settlement that your client provide a satisfactory statement of its financial position."
Further, in respect of the deed of settlement, the plaintiff marked up a number of requested amendments, including:
"…
2. incorporated the requirement for the declaration of financial position in the deed, and provided you with the form of declaration required as Annexure C; and
3. amended the release provision such that, rather than providing your client with a 'release', our client will provide your client with a covenant not to sue. The reason for this amendment is that a 'release' of your client (who is a co-guarantor of the commercial loan agreement), may give rise to an argument by the remaining guarantors, that the release al extends to their liability under the guarantees provided to them.
Please let us know whether your client agrees with our proposed amendments."
The plaintiff thus requested changes to the draft deed including changes to the default provisions in respect of any failure by the second defendant to comply with any term, covenant, agreement or condition implied into the deed, including as follows:
"6. If any of the following events occur, an Event of Default will have occurred under this Deed:
(a) Mr Lee fails to comply with any term, covenant, agreement or condition in or implied in this Deed, including but not limited to the failure to pay, or cause to be paid, the Settlement Sum in accordance with Clauses 2 to 5 above;
(b) Any representation, warranty, or other information provide [sic] by Mr Lee to ATL in connection with this Deed, or the Legal Advice Declaration, is false, untrue, inaccurate, misleading or incomplete; or
(c) Any financial or other information provided by Mr Lee to ATL in connection with the Financial Position Declaration is false, untrue, inaccurate, misleading or incomplete."
Further, the plaintiff requested clauses relating to the second defendant's statement of financial position including:
17. Mr Lee has provided ATL with a signed and completed statement of financial position (Financial Position Declaration) in the form attached to this Deed as Annexure C.
18. Mr Lee represents and warrants to ATL that:
(a) The information contained in the Financial Position Declaration is true and correct; and
(b) Mr Lee is not aware of any fact or circumstance which will result in Mr Lee's financial position, as set out in the Declaration, materially changing in the foreseeable future
19. Mr Lee acknowledges that ATL has entered into this Deed in reliance on the Financial Position Declaration.
20. Mr Lee acknowledges and agrees that in the event that all or part of the Financial Position Declaration, or any one or more of the representations or warranties set out in clause 18 is not accurate, then the release contained in clause 13 is of no effect."
The plaintiff proposed an Annexure C to the deed, being a statutory declaration as to the assets and liabilities including income, expenses and employment details.
The solicitor for the second defendant responded immediately indicating that she would take instructions and revert as soon as possible. On 1 March 2022, the solicitor for the plaintiff followed up for a further response. On that same day (that is, 1 March 2002 at 2pm) the second defendant communicated directly with Ms Wang, referring to issues raised by the plaintiff's lawyer. Both the second defendant and Ms Wang maintained that they did not understand what the lawyers were doing. Reference was made to a conditional settlement. Ms Wang asked the second defendant to explain that she had communication difficulties with her solicitor and asked the second defendant to explain the conditions proposed by her lawyer to her.
In any event, on Tuesday 1 March 2022 at 9.03 pm, the solicitor for the second defendant wrote a further without prejudice email to the solicitor for the plaintiff rejecting some of the amendments to the deed proposed by the plaintiff, in particular, rejecting the proposal of a covenant not to sue in lieu of release and rejecting the proposition that the statement of assets and liabilities should be included as some sort of representation forming the basis of the plaintiff's entry into the deed.
Then on 2 March 2022, there was a further exchange of emails directly between the second defendant and Ms Wang, initiated by the second defendant. The second defendant said that he now understood what it was all about. He did not agree that the settlement agreement was based on the personal balance sheet (meaning the statement of assets and liabilities). He said that was not included in the verbal agreement that was reached. He said the only condition was that $100,000 would be paid in one go and that had been accepted. He has raised the money and he did not agree that the settlement agreement was based on the personal balance sheet. Ms Wang responded by saying, "You better follow the wording by my lawyer". The second defendant said, "I did not agree with this".
It is apparent that the second defendant was asserting at that time that there was a concluded agreement on 9 February 2022. This is inconsistent with the case he is now pursuing.
These emails (as translated) continued on an occasional basis until June. On 24 May 2022 the second defendant said:
"Nancy, I need a firm idea from you whether we proceed with settlement or continue with litigation, because my lawyer needs to get prepared if litigation is to continue."
The content of that email suggests that the second defendant was then proceeding on the basis that there was not a binding agreement at that time.
On 3 March 2022, there was a directions hearing before Johnson J in this Court. Mr Smallbone, on behalf of the second defendant, indicated to the Court that the plaintiff and second defendant had reached agreement with respect to the whole of the proceedings.
Mr Chan, on behalf of the plaintiff, stated, "Putting aside a difference of views about whether they will probably settle or not, I indicated it is very likely the matter will finish up shortly in the fairly recent near future".
Suffice to say that the parties continued to negotiate the terms of the deed.
[11]
Binding agreement?
The first time which it could be suggested that anything was agreed upon is 9 February 2022 at 4.51pm, as it was only at that time that Ms Wang agreed to the sum of $100,000 proposed by the second defendant. That is evident from her text message, "Okay, that will do. I trust you this time". However, the only thing that had been agreed at that time was that the second defendant would pay and the plaintiff would accept the sum of $100,000.
It follows that the email sent by the solicitor for the second defendant to the solicitor for the plaintiff on 9 February 2022 at 9.29am could not be reflective of any agreement between the parties. It may be that the second defendant instructed his solicitors that he thought agreement would be reached but no such agreement had been reached and the statement that "We are instructed that the parties have reached agreement to resolve the proceedings as follows …" was incorrect as at that time.
It is also apparent from the text messages that the basis on which the second defendant had been putting to the plaintiff that the plaintiff should accept $100,000 was that he could pay no more. This is evident from the text message at 4.11pm (see above at [51]) which led to the plaintiff's response to which I have already referred, "I trust you this time".
The commercial context in which the parties were negotiating was that the second defendant did not have the capacity to pay the amount claimed and indeed the amount he was offering was all he could pay.
The second defendant's initial response to the plaintiff's acceptance of his offer to pay $100,000 was, "Please let your lawyer reply to my lawyer as we communicated before".
I take that to be a reference to the email from the first defendant's solicitor of 9 February 2022 at 9.29am to which I have already referred. Ms Wang responded, "You make the agreement first". There followed further messages about the agreement.
Further, at 5.43pm on 9 February 2022, the first defendant said, "We can recall the process after settlement".
In my view, the parties had not at this point agreed on all the important terms of their bargain. They had merely agreed on one term, being the amount to be paid. Having negotiated the sum to be paid, they were both, in effect, handing the matter back to their lawyers to do what was necessary for the purposes of entering into a binding agreement.
Unlike in Geebung Investments Pty Ltd v Varga Group Investments No. 8 Pty Ltd [7] (a case in which there was agreement made by the parties without their lawyers for settlement of a Court case involving a large sum), whilst the agreement as to price may have been unambiguous, the agreement at that point was only as to price and was not sufficiently comprehensive so as to demonstrate a common intention to be bound to a settlement at that time. This is evident from the language used by both parties.
At the very least, they contemplated that more would need to be worked out before the litigation was settled. Indeed, this is consistent with the second defendant's primary case, although not his fallback position. To the extent that he submits as some sort of fallback position that there was a concluded agreement on 9 February 2022 constituted by the exchange of text messages, I disagree.
The next occasion on which it might be possible that a concluded agreement was reached was when the email of 10 February 2022 at 12.52pm was sent by the solicitor for the plaintiff to the solicitor for the second defendant. As I have highlighted earlier, in the opening of that email, the solicitor for the plaintiff refers to the original email from the solicitor for the second defendant of 9 February 2022 and an earlier telephone conversation.
However, whilst the solicitor for the plaintiff confirmed that the plaintiff was prepared to accept the offer of $100,000 payable within three days of an exchanged deed, that acceptance was subject to additional terms being:
1. The provision of a consent judgment to hold in escrow pending a default under the deed of settlement; and
2. A statement of assets and liabilities and she will meet full mutual releases to be provided in the deed of settlement.
The effect of the email was to convey that the plaintiff would accept the second defendant's offer of $100,000 payable within three days, subject to the conditions.
There was no concluded agreement at that time.
On 14 February 2022, the solicitor for the second defendant responded, purporting to confirm that the plaintiff would accept the sum of $100,000 and that the second defendant was agreeable to the conditions proposed.
It is notable that the parties contemplated and agreed that the provision of a statement of assets and liabilities would be a condition of the settlement. That is the language they used.
This is not a case in which the parties merely agreed on the sum to be paid, agreed on mutual releases and proposed that those terms (that is, payment of an agreed sum and mutual releases) would be reflected in a deed.
There were two additional conditions of significance, being:
1. The second defendant would provide a consent judgment which the plaintiff would hold and could act upon pending any event of default (there being no agreement as to what any event of default might be) at that time; and
2. The provision of a statement of assets and liabilities.
The agreement that the provision of a statement of assets and liabilities would be a condition of the settlement is of some significance. The context in which that condition was sought by the plaintiff and agreed to by the second defendant must be the text and audio messages from the second defendant leading up to the agreement on the settlement amount. The amount proposed and agreed to was reflective of the second defendant's insistence that he could pay no more.
Yet on the second defendant's case, the obligation to provide a statement of assets and liabilities was of no consequence. The second defendant's response (through his solicitor) to the proposed draft deed, including terms reflective of the importance of the statement of assets, was to reject the proposed terms. It must be implicit in the position adopted by the second defendant that the terms of any statement of assets and liabilities, whether the statement was accurate or genuine and what may flow from the content of the statement of assets and liabilities, would be of no consequence, provided that the second defendant supplied "a statement of assets and liabilities".
Further on 2 March 2022, the second defendant said directly to Ms Wang (by text) words to the effect that the provision of such a statement was never part of the agreement as the agreement was reached when they agreed on the amount. Such a statement is inconsistent with at least the primary case he now pursues.
As is evident from the email from the solicitor for the plaintiff of 28 February 2022 at 12.03pm, the plaintiff did not accept that the statement of assets and liabilities provided by the second defendant was satisfactory or fully disclosed the second defendant's financial position. The plaintiff asserted that "It is a condition of the settlement that your client provide a satisfactory statement of his financial position".
Further, in that same email, the plaintiff sought to incorporate the requirement for a declaration of financial position in the deed.
The solicitor for the plaintiff had not previously included the word "satisfactory" in the condition which they proposed in respect of the statement of assets and liabilities. Further, the email refers to a statement of financial position rather than merely a statement of assets and liabilities, albeit they might have been intending to describe the same thing.
Nevertheless, it is unsurprising that the parties would have contemplated that the statement of assets and liabilities would need to be "satisfactory". This is particularly so as the context in which the plaintiff had agreed to accept such a small proportion of the amount claimed against the second defendant was that she "trusted" what the second defendant was saying in terms of his ability to pay.
The email from the solicitor for the second defendant of 1 March 2022 at 9.03pm in paragraph 3 is particularly significant as follows:
"Our client does not agree to the statement of assets and liabilities being included as his representations forming the basis of your client's entry into the Deed. The agreement as struck between our respective clients were [sic] that your client accepts $100,000 on the condition that it is paid in one lump sum. Our client accepted the same and henceforth arranged for the amount to be paid into our trust account. It was not part of the parties' discussion that our client would provide a warranty in addition to paying $100,000 when then forms a potential basis for your client to re-institute proceedings."
The statement "The agreement as struck between our respective clients were [sic] that your client accepts $100,000 on the condition it is paid in one lump sum" was only correct insofar as it related to the monetary amount.
It is not necessary that I merely repeat what has been said in many other cases but it is important to emphasise that the task is to determine whether the parties intended to be contractually bound at any particular time.
As observed by Giles JA in Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd), [8] I am not being asked to determine whether there was a general intention on the part of the parties at some time to enter into a contract. It is the second defendant's case that the parties intended as at 14 February 2022 to make an immediately binding contract. That is, they were bound by their agreement to settle at that date with the only thing remaining being to enter into a document which reflected the terms of that agreement.
In determining the answer to that question in this matter, it is necessary to look not merely at the exchange of emails of 9, 10 and 14 February 2022 but the course of communications between the parties. That includes the text messages directly between the parties and the emails between the solicitors. It also includes the subsequent conduct of the parties, as regard can be had to that conduct to cast light on the meaning of the communications in question and whether the parties intended to be immediately contractually bound at some earlier time. [9]
By 14 February the parties had reached agreement on the sum to be paid and that there would be a deed of release with mutual releases. They had also reached agreement that the second defendant would provide a statement of assets and liabilities. That is of some significance, as it is plain from the subsequent correspondence that the parties took differing views as to the significance of the statement of assets and liabilities. The second defendant did not consider that there should be any mention of that statement of assets and liabilities in the deed, although that view was ultimately altered.
In my view it could not have been the common intention of the parties, objectively assessed, that they would be bound to a bargain as of 14 February 2022 in circumstances in which no statement of assets and liabilities had yet been provided. If it be to the contrary, there would be no utility in the provision of a statement of assets and liabilities.
The commercial context in which the parties had reached agreement as to the sum to be paid was that the second defendant could pay no higher amount. The parties then agreed that the second defendant would provide a statement of assets and liabilities It would make no sense for the plaintiff to intend to be bound to accept the sum of $100,000 irrespective of the content of any statement of assets and liabilities.
The proposition that there was a concluded agreement binding the plaintiff to accept $100,000 in full settlement, irrespective of when the statement would be provided or the content of the statement, seems commercially absurd.
On the second defendant's case, at the time that the parties intended to be bound by their agreement, the parties had not agreed on anything at all about the statement other than that one would be provided. As is evident from their subsequent conduct, the parties did not even agree that the statement of assets and liabilities would need to be "satisfactory".
In my view, as at 14 February 2022, the parties had not reached agreement as to all of the important terms of their bargain. Further they did not intend to be bound until they had reached agreement. Integral to their proposed agreement was the provision of the statement of assets and liabilities. Plainly there was no agreement as to the content of such a statement and its significance to the overall settlement.
They did reach agreement on some terms by 14 February 2022, but that does not mean that they intended to be contractually bound at that time.
In coming to a decision, it is necessary to go back to the famous passage in Masters v Cameron.
Contrary to what appears to be the effect of some of the submissions of the second defendant, the fact that the parties reached agreement on terms of a contractual nature at that point does not mandate that they intended to be bound at that point. Indeed, it is not suggested by the second defendant that this case falls into the first Masters v Cameron category.
Further, this case could not fall within the second category in Masters v Cameron as the parties had not completely agreed on all the terms of their bargain as of 14 February 2022. Alternatively, if they had agreed on all of the terms of their bargain, it must be that they did not intend to be bound until such time as there was a provision of a satisfactory statement of assets and liabilities.
In my view, what sets this matter apart from other cases which might fall into the second category of Masters v Cameron is that the settlement was conditional upon the provision of a statement of assets and liabilities.
Objectively assessed the parties must have intended either that the second defendant would provide a satisfactory statement and that there would be no binding settlement until he did or that there would be further important terms relating to the statement to be agreed and included in the deed.
Otherwise, the agreement of the second defendant to provide such a statement would be meaningless.
In all the circumstances, I do not consider that the parties had entered into a binding concluded agreement by 14 February 2022. They had merely agreed on what some of the terms of their agreement would be. They were ultimately unable to reach agreement on all of the important terms. In the circumstances, the second defendant is not entitled to the orders he seeks.
As the second defendant has not succeeded, it is not necessary to consider any damages issues.
[12]
Orders
1. The cross-claim is dismissed.
2. The second defendant is to pay the plaintiff's costs of the cross-claim.
[13]
Endnotes
(1954) 91 CLR 353; [1954] HCA 72.
(1986) 40 NSWLR 631.
Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [69] (Beazley P) ("Pavlovic"); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at 105.
Pavlovic at [15] (Bathurst CJ), [69] (Beazley P); G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd at 634-635 (McHugh JA); Feldman v GNM Australia Ltd [2017] NSWCA 107 at [68] (Beazley P).
Ibid at [69] (Giles JA).
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 29 September 2022