Ciszek v Enterprise Financial Solutions Pty Limited

CATCHWORDS : APPEAL AND NEW TRIAL - appeal - practice and procedure - appeal from Local Court - sections 39 and 40 of the Local Court Act 2007 - whether judgment appealed against was an interlocutory judgment requiring leave - leave required on appeal from interlocutory judgment, even when raising questions of law - leave granted - whether Magistrate erred in conclusion reached as to the effect of an alleged settlement agreement - whether Magistrate further erred in failing to determine that a binding agreement had been reached - section 73 of the Civil Procedure Act 2005 - nature of agreement - whether evidence established agreement reached - binding agreement established - appeal upheld - costs

Civil Procedure Act 2005 LEGISLATION CITED : Local Court Act 2007 Trade Practices Act 1974 (Cth)

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 293 CLR 175 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 Bagumya v Kakwano [2010] NSWSC 600 Campbelltown City Council v Vegan [2006] NSWCA 284; (2006) 67 NSWLR 372 CASES CITED : GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Laycock v Putty Community Association Incorporated [2006] NSWSC 900 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 Sanofi v Parke Davis Pty Ltd (No 1) [1982] HCA 9; (1982) 149 CLR 128 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Whitty v Fin Control Systems Pty Ltd [2000] NSWSC 332

PARTIES : Plaintiff - Richard Michael Ciszek Defendant - Enterprise Financial Solutions Pty Limited ACN 101 737 204

COUNSEL : Plaintiff - Mr A Henskens Defendant - Mr S Bell

SOLICITORS : Plaintiff - O'Sullivan Saddington Lawyers Defendant - SR Law

• 24 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION SCHMIDT J

2010/227775 RICHARD MICHAEL CISZEK v ENTERPRISE FINANCIAL SOLUTIONS PTY LIMITED

JUDGMENT 1 HER HONOUR: Pursuant to s 39 of the Local Court Act 2007 by amended summons filed in September 2010, the plaintiff appeals from a judgment and orders made by the Local Court on 9 June 2010. The proceedings arose out of the alleged breach of a telephone equipment rental contract. Damages of some $34,599 plus interest were claimed. The defendant denied liability and brought a cross claim seeking relief under the Trade Practices Act 1974 (Cth) in relation to various allegations, including misleading, deceptive and unconscionable conduct. 2 By notice of motion the plaintiff sought a finding under s 73 of the Civil Procedure Act 2005 that a binding settlement agreement had been entered between the parties, as well as orders to give effect to that agreement. The matter was decided on the basis of affidavit evidence, without witnesses being cross examined. The plaintiff's case was rejected. 3 On appeal the plaintiff contended that the Magistrate had erred in the conclusion reached as to the effect of an alleged agreement reached on 1 February 2010. It was also complained that his Honour had further erred in failing to determine whether a binding agreement had been reached between the parties before that date. 4 Section 39 of the Local Court Act gives a party the right to appeal to this Court 'but only on a question of law'. Section 40(2) provides that an appeal from an interlocutory judgment or order requires leave. 5 At issue between the parties was whether or not the judgment appealed against was an interlocutory judgment requiring leave. It was conceded that some of the grounds of appeal on which the plaintiff relied raised a question of law, but in the most part it was the defendant's case that they were concerned with either mixed questions of fact and law, or questions of fact, or the exercise of a discretion. The case advanced was that given the nature of the interlocutory judgment in question, the leave required would not be granted.

The judgment appealed against 6 The judgment given was so short that it is convenient to reproduce it in its entirety. His Honour held:

"1 Notice Of Motion Mr Ciszek has filed a notice of motion seeking an order that the proceedings have been settled, and an order that the parties execute a deed of release; or alternatively, and order that Mr Ciszek retain title in the equipment that is the subject of the proceedings and judgement be entered for Enterprise Financial Solutions Pty Ltd in the sum of $500, inclusive of costs.

2 The Court's Power The court has power to determine questions in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been settled between them, and to make appropriate orders.

3 Law relating to Negotiations Where parties reach an agreement and intend to enter a formal contract, the case may fall into one of four categories. The parties have reached finality in arranging all the terms of the 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 that will be fuller or more precise but not different in effect. 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. The intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. The parties have made a provisional contract intending to be bound by it but assuming that in due course a further contract will be made between them containing both the agreed terms and further terms that they will both agree upon. Mr Ciszek submits that the parties reached finality in their negotiations, and intended to be immediately bound by the terms of their bargain. Enterprise Financial Solutions Pty Ltd submits that the parties did not intend to make a concluded bargain.

6 On 27/01/10, Mr Tsai received instructions from Chrabel Rizk, the director of Enterprise Financial Solutions Pty Ltd to settle the matter on the basis that each party bears its own costs. Mr Tsai conveyed the offer to Ms Elms, secretary for Mr Crameri, solicitor for Mr Ciszek.

7 Ms Elms conveyed to Mr Tsai that Mr Ciszek "accepts the offer", but later contacted Mr Tsai to ask him whether Enterprise Financial Solutions Pty Ltd wanted the equipment returned. Mr Tsai told Ms Elms that Enterprise Financial Solutions Pty Ltd wanted the equipment returned, and she told him that Mr Ciszek said that the four plasma televisions were offered as an inducement to enter into a contract. Mr Tsai corresponded with Mr Crameri confirming the settlement, enclosing a notice of discontinuance, and stating a requirement to return the equipment.

8 On 01/02/2010, Mr Tsai later spoke to Mr Crameri about Mr Ciszek keeping the televisions for a payment of $1,500, but Mr Crameri said that Mr Ciszek would not pay, and the matter will go to hearing. Later in the same day Mr Crameri had a letter sent to Mr Tsai offering to settle on the basis that; the parties discontinue the proceedings, each party pays its own costs, and Mr Ciszek pay $500 for the televisions.

9 There is a note on the bottom of the letter stating: "Charbel has instructed that we accept the offer". Acceptance was conveyed to Ms Elms. On 01/02/10, Mr Tsai then wrote a letter to solicitors for Mr Ciszek confirming acceptance and stating that a deed of settlement and release would be provided. The deed was provided the following day. On that day, Mr Crameri wrote to Mr Tsai requesting that he forward the deed by 11:30 am "so that we can obtain instructions".

10 Ms Elms sent an email to Mr Tsai stating that Mr Ciszek would not agree to clause 5 and wanted the amount of the debt changed from $35,771.23 to $500. Clause 5 is a non-disparagement clause. Mr Tsai notified Ms Elms that the matter was to proceed if Mr Ciszek did not agree to the amended deed.

11 Mr Crameri then sent a letter to solicitors for Enterprise Financial Solutions Pty Ltd stating that offer from Mr Ciszek of 01/02/10 had been accepted by Enterprise Financial Solutions Pty Ltd by virtue of the letter sent by Mr Tsai on 01/02/10.

12 The Notice of Motion pleads that the agreement was reached in writing between the parties on 01/02/10; can the applicant assert that agreement was reached on 29/01/10? The answer is no. The respondents have been notified through the pleadings that the applicant asserts that agreement was reached on 01/02/10 and have come to court to meet that case. The applicants have not sought to amend the pleadings. It is a matter for procedural fairness to the respondents for the issue to be determined on the basis of the pleadings.

13 The agreement made between the parties on 01/02/10 was that the parties discontinue the proceedings, each party pays its own costs, and Mr Ciszek pay $500 for the televisions. The acceptance was conveyed as follows: "I confirm that we are instructed to accept the offer and will be providing you(sic) client with a deed of Settlement and Release.

14 Since the issue before the court is whether an agreement was made on 01/02/10, there is a no issue about whether the negotiations regarding the equipment was a central or non central issue between the parties, since the agreement of 01/02/10 incorporates an agreement about equipment.

15 The acceptance of the offer is based upon Mr Ciszek signing a deed of release. Mr Crameri responded by sending a letter stating the solicitors would obtain instructions in relation to the draft deed.

16 The correspondence between the parties regarding the deed of release makes it apparent that the parties did not intend to make an agreement at the time of the correspondence, but had agreed to some parts of the agreement, sufficient for a deed of release to be drafted and sent to the other party. Issues raised by Mr Ciszek regarding the draft deed are in terms of a continuing of the negotiations between the parties.

17 No agreement was reached between the parties on 01/02/10.

20 The applicant is to pay the respondents costs of the motion. Costs are to be assessed on an ordinary basis under the Legal Profession Act, unless within fourteen days from the day of judgment, a party give the other party seven days notice of an intention to apply for a costs hearing, and then makes an application to the Registry."

Was this an interlocutory judgment? 7 In my view it was. Section 73 of the Civil Procedure Act provides: " 73 Power of court to determine questions about compromises and settlements (1) In any proceedings, the court: (a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and (b) may make such orders as it considers appropriate to give effect to any such determination. (2) This section does not limit the jurisdiction that the court may otherwise have in relation to the determination of any such question." 8 While his Honour's decision finally determined the parties' rights under s 73, that was a conclusion on a matter arising during the course of the proceedings, which did not finally dispose of the rights of the parties (see Sanofi v Parke Davis Pty Ltd (No 1) [1982] HCA 9; (1982) 149 CLR 128 at 152 and Laycock v Putty Community Association Incorporated [2006] NSWSC 900 at [22], where Hoeben J took the view that a decision on jurisdiction was interlocutory.) The result of the dismissal of the plaintiff's motion was that the matter is proceeding in the Local Court. It is listed for hearing in November. 9 It follows that leave to appeal is necessary, under s 40(1), if the plaintiff's complaints are to be entertained. It was also argued however, that there was a tension between ss 39 and 40 of the Local Court Act, which requires determination. Sections 39 and 40 provide:

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

(2) A party to proceedings before the Court sitting in its Small Claims Division who is dissatisfied with a judgment or order of the Court may appeal to the District Court, but only on the ground of lack of jurisdiction or denial of procedural fairness.

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

(2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court: (a) an interlocutory judgment or order,

(b) a judgment or order made with the consent of the parties,

10 In Bagumya v Kakwano [2010] NSWSC 600, Rothman J raised the possibility that there may be some tension lying between ss 39 and 40(2), in the event of an error of law arising in an interlocutory judgment. Notwithstanding the seeming breadth of s 39, it seems to me that the scheme of the Act is to require leave, in a case where a party seeks to appeal an error of law arising in an interlocutory judgment or order. Section 39 must be read as being subject to the particular provisions made in s 40(2), in the case of interlocutory judgments. Were that approach not adopted, there would be no necessity for interlocutory judgments to be dealt with separately as they are in this statutory scheme. Each section must be given the work which it is seemingly intended to do. That will not be achieved if the view is taken that leave to appeal is not required, if an error of law arises in an interlocutory judgment or order.

Should leave be given? 11 In so far as leave was necessary, the plaintiff's case was that it would be granted, given the narrow compass of the dispute lying between the parties; the fact that the appeal was brought on uncontentious facts; that the questions of law raised by the appeal went to the construction of the terms of a contract; the failure to give adequate reasons for the decision reached; and the denial of procedural fairness raised on the appeal. It was also argued that the overriding purpose of the Civil Procedure Act favoured the grant of the leave sought, because it would avoid further hearings and would do justice between the parties, in relation to an important new jurisdiction granted by s 73 of that Act. 12 The defendant opposed leave being granted, given the interlocutory nature of the decision, notwithstanding the errors of law which it was acknowledged that the appeal raised. It was argued that in a case such as this, leave should only be granted when rights may be irrevocably affected or where the appellant might not be able to get a fair trial. Neither factor was present here. 13 I am satisfied that the case is one in which leave should be granted, notwithstanding the interlocutory nature of the decision made. 14 Section 73 imposes an important power on a court, permitting it to determine whether or not parties have settled their litigation by agreement. Given the overriding purpose of the Civil Procedure Act, 'just, quick and cheap' litigation, the importance of that power is apparent. 15 The necessity to give adequate reasons for a decision has been repeatedly discussed in the authorities (see for example Campbelltown City Council v Vegan [2006] NSWCA 284; (2006) 67 NSWLR 372, where the Court of Appeal explained the importance of reasons, in the context of a judicial decision maker by reference to Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257 (Kirby P), 268-269 (Mahoney JA) and 278-279 (McHugh JA)). 16 In this case the question of whether a binding settlement agreement had been reached turned on a consideration of the four possible categories of agreement discussed by the High Court in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360 and the Court of Appeal in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634. The reasons given by his Honour are, as the plaintiff argued, brief to the point where clarity of reasoning, in the light of largely agreed facts, is absent. The conclusions expressed appear to contradict each other and do not come to grips with the cases advanced as to the issue which arose, namely whether there had been a binding agreement reached between the parties. 17 In all of these circumstances, I am satisfied that the leave sought must be granted.

The evidence 18 The evidence was documentary. There was uncontested affidavit evidence as to the course which the discussions took and the documents which were exchanged. No witness was required for cross examination. 19 In short, on 27 January the plaintiff, Mr Ciszek, instructed his solicitor, Mr Tsai, that the matter could be settled on the basis that each party walk away bearing their own costs. Mr Tsai sought to convey that offer to the defendant's solicitor, Mr Crameri. A Ms Elms telephoned Mr Tsai and the offer was conveyed. Various discussions and emails followed over the ensuing days, which it is not necessary to recount. On 1 February, Mr Crameri sent the plaintiff's solicitor an offer by facsimile in these terms:

"We advise that we have receive instructions from our client to offer to settle this claim on the following basis:

3 The sum of $500.00 is paid by our client in return for title to the equipment.

This offer remains open until 9.30 am tomorrow, Tuesday 2 February 2010 and will be relied upon as a Calderbank offer."

20 A handwritten note on the letter records that the plaintiff had "instructed that we accept this offer" and that Mr Tsai "spoke to Jane, told her we are instructed to accept. Will forward the Deed of Settlement over. '' 21 The same day Mr Tsai responded by facsimile for the plaintiff:

"I refer to your client's offer by way of facsimile dated 1 February 2010.

I confirm that we are instructed to accept the offer contained therein and will be providing your client a Deed of Settlement and Release by COB tomorrow."

22 Mr Crameri asked for the deed, so that instructions could be obtained, it could be available the next day so that they could be filed. Mr Tsai forwarded a deed and notice of discontinuance on 2 February which contained two terms not earlier discussed, to which the defendant objected. The email provided:

"Please find attached a copy of the Deed of Settlement and Release and Notice of Discontinuance for the abovementioned matter.

I look forward to hearing from you and it would be most desirable that the Notice of Discontinuance be executed and faxed back to us by 4pm today.

Once it's done, please reply so I can mention your appearance tomorrow in court."

23 Mr Crameri and Mr Tsai spoke. Their discussion was:

"MC: "I have received your Deed or Settlement and Release and there are two issues about it."

MC: "The first issue is that the definition of Debt is $500 not $35,000.00."

Me: "Mark, by our client agreeing to a settlement sum of $500.00 does not mean that our client will forego its pre-existing claim of $35,000.00. If there is no issue of paying the $500.00, there is not(sic) point in arguing over the $35,000.00 because once the $500.00 is paid, the entire debt is wiped out."

MC: "That's not the terms of the offer we put forward to you and that's not the basis of your acceptance The debt should be $500.00."

MC: "Our client will not agree to the non-disparagement clauses and wants it to be taken out."

MC: "Because your client knows that we will never agree to a non-disparagement clause."

MC: We have dealt with your client in another matter and we have had a lengthy and heated debate on that particular clause with your client and I am not going to repeat myself here. Your client should know our position. In that matter and the Deed of Settlement and Release entered into, the non-disparagement clause were removed."

Me: "Are you sure that is the case? Can you please send me a copy of that Deed of Settlement and Release so that I can see it for myself?"

Me: "Mark, I don't' understand why your client wants to remove the non-disparagement clauses. Are you telling me that it is because your client wants to go out there and talk about his dealings with our client?"

MC: "Yes, our client wants to go out there and tell the world what a bastard your client is."

Me: "But Mark, in our last conversation, I foreshadowed to you that the parties are to enter into a Deed of Settlement and Release!"

MC: "Yes I know that but non-disparagement clauses are not part of terms of settlement offered to your client."

Me: "Ok, please fax me a copy of the Deed you were talking about and I will seek our client's instruction on what you have just raised."

24 The earlier deed was provided to Mr Tsai under cover of an email which said:

" Enclosed is the Deed in the Hospitality & Business Promotions matter executed by the parties.

Our client confirms that he will not agree to Clause 5 and insists that the debt referred to in the Deed should be $500.00 ." 25 There was a further email provided by Mr Crameri which said:

"We confirm that we require the following amendments to the Deed of Settlement, which was only raised yesterday:

As discussed, the agreement this matter was that our client would pay your client $500.00 and the matter would be discontinued. There was no agreement as to non-disparagement or to your client being entitled to $35,000.00-odd in the event that the $500.00 was not paid. In any event, we should have our client's cheque available with our Barrister tomorrow." 26 The defendant's solicitor Mr Saddington advised Mr Tsai on 2 February 2010 that the defendant believed an agreement had been reached, as reflected in the exchange of correspondence, which he would seek to enforce. Mr Tsai sought instructions and advised Mr Saddington that:

"... I have sought instructions from our client and as it stand the parties cannot agree on the terms of settlement and our client insists on the clauses to stay. There is no settlement and my instructions are that the matter is to go into hearing tomorrow." 27 Ms Elms made a file note of a conversation with Mr Tsai on 2 February in which he advised that the plaintiff had made a commercial decision and if the defendant insists on the amendments, his instructions are to go to hearing. Mr Saddington wrote to Mr Tsai advising of his view that the written offer and acceptance constituted a binding contract, which the plaintiff would rely on. 28 At the hearing below it was announced that the defendant was ready to pay the agreed $500. That was not accepted. An adjournment was sought and obtained, so that a motion could be filed and the question of whether a binding settlement agreement had been reached could be determined. 29 The motion filed for the defendant annexed a deed which excluded the disputed terms. The orders sought were:

"1. An order pursuant to Section 73 of the Civil Procedure Act 2005, that the proceedings hereto have been settled, pursuant to the agreement reached in writing between the parties on 1 February 2010.

2. An order pursuant to Section 73 of the Civil Procedure Act 2005, that the parties execute the Deed of Release in the form attached and marked "A".

3. In the alternative: (a) an order that the Defendant retain title to the equipment that is the subject matter of the proceedings hereto; and

(b) judgment in favour of the Plaintiff in the amount of $500.00 inclusive of costs. 4. Any further or other order that the nature of the case requires.

Did the evidence establish that any agreement was reached? 30 For reasons which I will explain, it is apparent that his Honour erred in the conclusion reached on the evidence that no binding agreement was made. The plaintiff's complaint as to the inadequacy of the reasons must also be accepted, with the result that the appeal must be upheld. The inadequacy of the reasons given can readily be seen. While at [13] of the judgment it was concluded that an agreement had been reached in February 2010 and at [14] it was said that the agreement incorporated an agreement about equipment, these conclusions were contradicted by the findings at [15], where it was said that acceptance of the offer was based on a deed being signed. The written acceptance of the offer contained no such condition, nor did the handwritten note recording the oral acceptance of the offer. Those communications were couched in unconditional terms. At [15] it was further concluded that subsequent correspondence made it apparent that the parties had not intended to make an agreement, but had only agreed to some parts of the agreement, sufficient for a deed to be drafted. That conclusion also contradicted the earlier findings and is not fairly open on the evidence, for reasons which I will explain. 31 The four possible categories of agreement here in issue were conveniently described by Young J as he then was in Whitty v Fin Control Systems Pty Ltd [2000] NSWSC 332 at [12] as:

"(i) the parties intend to be bound at once though they will later restate their terms more formally and precisely;

(ii) the parties consider that their contract is only to come into force when a condition precedent is fulfilled, such as the exchange of a more formal document;

(iv) the parties have made a provisional contract intending to be bound by it but assuming that in due course a further contract will be made between them containing both the agreed terms and further terms which they will both agree upon." 32 Young J also referred to what was discussed in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 by Gleeson CJ, observing at [15] to [18]:

"15 In the Commonwealth Games case at 548 to 549, Gleeson CJ said, after noting that the question was whether the intention of the parties was to make a concluded bargain: "Cases which typically give rise to problems of the kind presently under consideration are cases in which there is no doubt that the parties had a common intention that at some stage, and by some means, they would enter into contractual relations. They have entered into negotiations for that specific purpose. The problem which arises is that they have exchanged communications which, on the one hand, use the language of agreement but, on the other hand, disclose an expectation that at some future time a document embodying the terms of their contractual arrangement will be brought into existence. Where, as in the present case, the communications which the parties have exchanged are in writing, the question of their 'intention' is, prima facie, to be resolved objectively, and as a matter of construction of the relevant documents."

16 One is assisted in deriving the intention of the parties not only by looking at the document which they have signed, but also to the commercial circumstances surrounding the making of the document in question, the communications between the parties and also the communications between the parties subsequent to the making of the document; see Allen v Carbone (1975) 132 CLR 528, 531 to 532 and the Commonwealth Games case at p 550.

17 In Geebung Investments Pty Limited v Varga Group Investments (No 8) Pty Limited (1995) 7 BPR 14,551 at 14,553 Gleeson CJ again directed his mind to the particular question of intention and noted that there may be contracts made even involving a large amount of money without the intervention of lawyers, but if the nature of the contract requires resolution of certain points: " ... then failure to agree on such points cannot be ignored by a court in the supposed interests of giving effect to the expectations of the parties. That would be to disregard their intentions."

18 Kirby P, at 14,569 to 14,570, gave a list of eight factors derived from the authorities which guided courts in this sort of case to reaching a conclusion; the eight factors included the size, importance and complexity of the subject matter, the conduct of the parties before and after the making of the contract and whether the informal agreement showed that the parties had reached consensus on all matters of importance, not just on the main matters of importance." 33 Having these matters in mind and considering what the evidence here reveals, it is apparent that these parties had already been involved with each other in other litigation which they had compromised. Shortly before the hearing in the Local Court, the parties' solicitors exchanged emails on 1 February 2010 and spoke with each other. That it was their solicitors who conducted the negotiations is a relevant matter to consider. The language used in their letters reveal that the defendant's solicitor had instructions to offer a settlement comprising 3 elements: the proceedings be discontinued; each party bear their own costs and the defendant pay the plaintiff $500 in return for title to the equipment. That offer was accepted in writing by the plaintiff's solicitor, with advice that a deed and a notice of discontinuance would be provided by the plaintiff. Mr Tsai's handwritten note on the offer letter confirms that unconditional acceptance was also conveyed orally. That is evidence of an agreement falling into the first class discussed in Masters v Cameron, namely that a settlement had been reached, which the parties intended would be evidenced by a deed. What was neither offered by the defendant, nor in contemplation when the offer was accepted for the plaintiff, was that the deed would contain the two terms to which the defendant later objected, when a deed was provided by the plaintiff. The deed was intended to document the agreement which had already been reached. The parties were not then intending that further terms required negotiation between them. 34 The defendant objecting to the two new terms later proposed can have been no surprise to the plaintiff. The defendant had already refused to agree to a non-disparagement clause in the earlier settlement of the other litigation in which the parties were involved, for the reasons his solicitor explained. That there would be a requirement to pay some $35,000 claimed in the proceedings, in the absence of the payment of the $500 agreed, also flew in the face of what had been already offered and accepted. The introduction of those new terms by the plaintiff did not reveal that an agreement had not already been reached. Rather it reveals a dispute as to what the deed which documented the agreement already reached could contain, about which the plaintiff purported to make a commercial decision. At that point it was too late for the plaintiff to seek to impose new terms on the defendant, having already accepted the offer which had been made. 35 It is apparent that while there was a concern to have prompt payment and a notice of discontinuance filed, given the proximity of the hearing, matters which could readily be dealt with between the solicitors, execution of a deed by the parties to the agreement was not required immediately. That, too, underscored that an agreement had been reached and that the deed was but intended to formally record that agreement. 36 The evidence simply does not leave open the conclusion which was finally reached in the proceedings below, that the parties had merely agreed to agree and were still negotiating the terms of their agreement. The language used by the solicitors in their email exchange was expressly that of the making and unconditional acceptance of an offer. The reference to a deed which would formally reflect the agreement was not expressed to be a counter offer. That it was intended to be a conditional acceptance or a counter offer was not apparent from either what was said, or what was done. 37 The problem which arose was the later introduction of terms which had not been discussed and were not agreed and which the plaintiff decided to insist on, after having already accepted the defendant's offer. That acceptance was unconditional. It was not subjected to the terms of a deed being negotiated or agreed. When the dispute as to the terms of the deed later arose, the parties were no longer negotiating the terms of their agreement, but whether or not the deed accurately reflected what had already been agreed. The stance taken by the plaintiff was not open. He was already bound by the agreement which had been made.

Denial of procedural fairness 38 It was the plaintiff's case that his Honour erred in the conclusion that because the motion had not raised as an issue the question of whether an earlier binding agreement had been reached between the parties before 1 February, that the plaintiff was not entitled to have that issued determined. 39 I cannot accept that aspect of the appeal, even though it would have been preferable had the matter raised been resolved. The facts on which the plaintiff's argument rested, had at least in part been put in evidence by the defendant. The argument was pressed at the hearing without leave to amend the motion being sought, even after the defendant submitted that the plaintiff was bound by the issues he had raised in the motion. That being so, the plaintiff was not entitled to proceed on the basis of an assumption that the defendant's objection would not be accepted. In Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 it was observed by Mason CJ and Gaudron J: "18. The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In Liquidation) [1916] HCA 81; (1916) 22 CLR 490, per Isaacs and Rich JJ. at p 517. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, for example, Browne v. Dunn , at p 76; Mount Oxide Mines , at pp 517-518.

19. Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference. ..." 40 Brennan J observed:

"In Thorp v. Holdsworth (1876) 3 Ch D 637, at p 639, Jessel M.R. stated the object of pleadings: "The whole object of pleadings is to bring the parties to an issue, and the meaning of the rules of Order XIX. was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing." When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings (as to which, see the observations in London Passenger Transport Board v. Moscrop (1942) AC 332, at pp 340,347,351,356). The rule is clearly laid down in the judgment of this Court in Dare v. Pulham [1982] HCA 70; (1982) 148 CLR 658, at p 664: "Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings ( Gould and Birbeck and Bacon (v. Mount Oxide Mines Ltd. (In liq.) [1916] HCA 81; (1916) 22 CLR 490, at pp 517, 518); Sri Mahant Govind Rao v. Sita Ram Kesho ((1898) LR 25 Ind App 195, at p 207))." 41 Dawson J observed at [7] and [15] :

"7. … The basic function of pleadings was described by Isaacs and Rich JJ. in Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In Liquidation) [1916] HCA 81; (1916) 22 CLR 490, at p 517: "Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest."

15. It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings: Dare v. Pulham [1982] HCA 70; (1982) 148 CLR 658, at p 664; Water Board v. Moustakas [1988] HCA 12; [1988] HCA 12; (1988) 62 ALJR 209, at p 211; [1988] HCA 12; 77 ALR 193, at p 197; Leotta v. Public Transport Commission (N.S.W.) (1976) 50 ALJR 666, at p 668; 9 ALR 437, at p 446; Maloney v. Commissioner for Railways (N.S.W.) (1978) 52 ALJR 292, at p 294; 18 ALR 147, at p 151."
16. Toohey J observed:

"16 In In re Robinson's Settlement; Gant v. Hobbs (1912) 1 Ch 717, at p 728, Buckley L.J. said of the English rule comparable to r.13: "The effect of the rule is, I think, for reasons of practice and justice and convenience to require the party to tell his opponent what he is coming to the Court to prove. If he does not do that the Court will deal with it in one of two ways. It may say that it is not open to him, that he has not raised it and will not be allowed to rely on it; or it may give him leave to amend by raising it, and protect the other party if necessary by letting the case stand over. The rule is not one that excludes from the consideration of the Court the relevant subject-matter for decision simply on the ground that it is not pleaded. It leaves the party in mercy and the Court will deal with him as is just."

17. There can be no quarrel with Buckley L.J.'s exposition and in the ordinary situation of one plaintiff and one defendant a trial judge will readily determine the proper course to be followed." 42 In this case there was no agreement to any departure from the issues raised on the motion. To the contrary, even though the defendant put some short submissions, in the event that his objection to the course which the plaintiff sought to pursue was not accepted, the objection was pressed. True it is that the defendant had not immediately risen to object when the plaintiff raised the issue at the hearing, but only pressed the objection in submissions. What may not be overlooked, however, is that this objection did not engender an application for the plaintiff to amend the motion, an application which could have been dealt with under s64 of the Civil Procedure Act and would have then been determined in accordance with the High Court's approach in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 293 CLR 175, where French CJ observed, for example:

[14] There is a distinction between the discretion of a court to allow a party to amend its pleading on that party's motion and the requirement to make all such amendments as may be necessary to determine the real questions in controversy. That requirement engages with the authority conferred on the court to make amendments of its own motion [An example of this kind of case is Nottage v Jackson [1883] 11 QBD 627 at 638.]. The point was made in 1887 by the Full Court of the Supreme Court of Victoria in Dwyer v O'Mullen [ Dwyer v O'Mullen (1887) 13 VLR 933] in relation to O XXVIII r 1 of the 1875 Rules. Higinbotham CJ said of the last clause of the rule that it [(1887) 13 VLR 933 at 939, and 940 per Williams J and Kerferd J]: "makes an amendment mandatory. The judge is under the obligation of making an amendment, but only for a certain purpose and in certain cases - for the purpose of determining the real question in controversy between the parties - that being expressed in many cases to be the question which the parties had agitated between themselves, and had come to trial upon." The position is different where a party seeks to set up, by amendment, a new case at trial.

43 It was not a matter for his Honour to urge an application to amend the motion in order to introduce a new issue upon the plaintiff. I can find no error in his Honour's approach to the question lying between the parties. Plainly he could have taken a different and more proactive approach to the issue which had arisen, by urging the plaintiff to make an amendment application. Had amendment been sought, his Honour may have granted leave. That would have depended on what the parties respectively advanced in relation to that application. Even without active urging by his Honour, it was well within the plaintiff's capacity to take the steps necessary to put the new matter which he sought to agitate before the Court, by seeking leave to amend the motion, but he failed to do so, even when squarely put on notice of the defendant's position. 44 In the result there was an issue between the parties as to whether or not the plaintiff was entitled to take the course pursued, which fell to his Honour to decide. He concluded that in the circumstances the plaintiff was bound by his pleadings. In my view that conclusion was fairly open in the circumstances. 45 While indemnity costs orders were formally sought, the orders were not pressed. I can see no basis for departure from the usual rule that costs should follow the event. In the circumstances justice demands that the plaintiff must have an order in respect of the motion below, as well as on appeal.

Leave to appeal is granted and the appeal upheld.

The judgment of the Local Court given on 9 June 2010 is set aside.

I note the terms of the agreement reached between the parties in settlement of the proceedings in the Local Court, namely that the defendant is to retain possession of and have title to 4 plasma television sets upon payment of the agreed sum of $500.

The plaintiff is to pay the defendant's costs of the motion of 26 February 2010, as agreed or assessed.

The proceedings in the Local Court are to be discontinued with no order as to costs.

The defendant is to pay the plaintiff's costs of this appeal, as agreed or assessed. **********

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