Cyril v SERCO Australia Pty Ltd

Legal Principles (1)

Under our jurisprudence, a contract must be determined objectively. That is, whether a contract has been formed or not must be determined objectively. The only way of settling any case is by there being a contract which binds both parties to any compromise that has been reached.
For there to be a contract, there must be a number of elements. The first element is that each of the parties to the alleged contract must have the legal capacity to enter into the contract. The plaintiff was sui juris. He was legally competent to manage his own affairs. A company is always sui juris because it is always able to sue and be sued. A company is a legal fiction. It must act through, inter alia, its directors who are the controlling minds of the company.
The next item is there must an intention to create legal relationships. Where there are proceedings on foot in a court in which a plaintiff seeks damages, the idea of there being a settlement is to resolve the dispute between the parties. This is not some social enterprise such as the proverbial invitation to dinner, or lunch, or to pay a visit, and this was not such a social engagement, but rather a real live engagement requiring only entering into a legal relationship.
There must an offer which is capable of acceptance. Here, the offer was made by the defendant on Friday, 7 July 2023, at 9.35am, when Ms Lee wrote to Ms Rauf by email: "We are instructed to resolve the claim on the basis proposed below, but rather with a dismissal of proceedings and not a discontinuance together with the confidential deed relating to the pleaded incident. I will ask."
That was in response to an offer made by the plaintiff to settle the matter for $30,000 inclusive of costs on the basis of a deed that provided a release, discharge, and indemnity to Serco only in relation to the incident on 9 December 2016 and the filing of a notice of discontinuance. Clearly, that was accepted to an extent, but the defendant's offer of 7 July 2023 changed the mechanism for disposing of proceedings in Court from there being a notice of discontinuance to there being a dismissal of the proceedings.
That offer was eventually accepted by Ms Rauf on 9 July 2023, at 12.26pm, when she said, "We are content with the proposed orders. I will consent to them once they're entered into the [online court]". Those terms were entered into the online court by a solicitor from the defendant's solicitor's office, and were consented to, as I pointed out yesterday afternoon by Mr Peter O'Brien at 3.57pm, on 7 July 2023, thus perfecting the agreement reached.
In my view, there was a binding contract made on 7 July 2023 to settle these proceedings on the terms that there be a payment of $30,000 to the plaintiff, that the plaintiff enter into a deed releasing the defendant for its liability for what occurred on 9 December 2016, and that the proceedings were eventually to be dismissed once the deed had been entered into and the payment made.
The plaintiff submits that that is not the proper way of interpreting the correspondence, but rather an offer was made by Ms Rauf on 6 July 2023 at 5.51pm, but the defendant's offer on 7 July 2023 at 9.35am was merely a counteroffer because the mode of disposing of the proceedings was different. However, that overlooks the acceptance of the defendant's offer communicated to Ms Lee by Ms Rauf on 7 July 2023 at 12.26pm and the subsequent entry of consent orders in the online court registry. Really, the plaintiff's position is that Ms Rauf acted without his consent. That is a matter between him and Ms Rauf or O'Brien's solicitors and not a matter between the plaintiff and the defendant.

Legal Principles (2)

The legal principles which I have briefly mentioned earlier this morning are more fully set out in certain judgments of this court relying on much higher authority. As to the extent to which the plaintiff's solicitor had authority to bind him, I must refer to the decision of my learned colleague, Dicker SC DCJ, in Kerry Albert Pty Ltd trading as Kerry Albert & Co v Fuller [2018] NSWDC 254, where his Honour this between 63 and 69: "63. In Donellan v Watson (1990) 21 NSWLR 335 at 342, Handley JA stated as follows: "A solicitor retained to conduct litigation ordinarily has both implied and ostensible authority to bind his client to a compromise of those proceedings: see Chown v Parrott (1863) 14 CB NS 74; 143 ER 372; Prestwich v Poley (1865) 18 CB NS 806; 144 ER 662; Little v Spreadbury [1910] 2 KB 658 and Waugh v H B Clifford and Sons Ltd [1982] Ch 374 at 388. Any instruction from the client which restricts the solicitor's authority to compromise the proceedings will only affect the other party who is on notice of that restriction: see Thompson v Howley [1977] 1 NZLR 16 at 23-25 and the cases there cited. The authority of counsel briefed in the cause to bind his client to a compromise of the litigation is governed by the same principles: see Neale v Gordon Lennox [1902] AC 465 and Harvey v Phillips (1956) 95 CLR 235. In some cases however a solicitor may have no implied actual authority to compromise litigation without express instructions. The attitude and circumstances of the client known to the solicitor may be such that an implied term that the solicitor shall have actual authority to do so may not "go without saying": see Waugh v H B Clifford & Sons (at 387), and Thompson v Howley (at 25). A solicitor certainly has no actual authority to compromise litigation contrary to his instructions and if he does so he will be liable to the client for any damage sustained by the latter as a result of the unauthorised compromise: see Fray v Voules (1859) 1 El & El 839; 120 ER 1125; Butler v Knight (1867) LR 2 Exch 109 at 112; The Hermione [1922] P 162 and Thompson v Howley (at 23-26): see also Bullen and Leake, 3rd ed (1863) at 83-84, 275." 64. This passage was quoted with approval by Justice Darke in The Owners Strata Plan No 57164 v Yau [2016] NSWSC 1056 at [117]. The decision of Justice Darke was confirmed by the Court of Appeal: [2017] NSWCA 341. Beazley P stated as follows at [172]-[175]: "[172] The legal principles governing ostensible authority were not in issue. The Owners Corporation, in its submissions to the primary judge, acknowledged that: Both solicitor and counsel retained to conduct litigation ordinarily have ostensible authority to bind their client to a compromise of those proceedings. Any instruction from the client which restricts that authority will only affect the other party if it is on notice of the restriction: Donellan v Watson (1990) 21 NSWLR 335 at 342 [173] Whether or not a person has ostensible authority (also described at times as 'apparent authority') is a question of fact: see Geissler v Accro Motors Pty Ltd (1955) 73 WN (NSW) 31; CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 9 ANZ Insurance Cases ¶61-232 at 75,554. It usually involves an inference based upon a representation or representations made by the principal that the agent has authority to contract within the ambit or scope of the 'apparent authority': Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503. [174] As the Owners Corporation pointed out, ostensible authority is traditionally described in terms of estoppel by representation. Reliance is a necessary element of the estoppel: Freeman & Lockyer v Buckhurst Park Properties at 503; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72; [1975] HCA 49; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; [1990] HCA 32 at 200; G E Dal Pont, Law of Agency (3rd ed, 2014, LexisNexis) 460 [20-7]. [175] The question as to the extent of a solicitor's ostensible authority was discussed by this Court in Pavlovic v Universal Music Australia (2015) 90 NSWLR 605; [2015] NSWCA 313 at [150], where the Court adopted the statement of principle in Lucke v Cleary (2011) 111 SASR 134; [2011] SASCFC 118 of Stanley J, Gray and David JJ agreeing, at [61], that: … in the context of litigation, a legal practitioner has ostensible authority to bind his or her client to a contract which relates to and, in particular, compromises that litigation … (citations omitted)". 65. At paragraph 179, Beazley P stated as follows in relation to ratification: "[179] The relevant principle as to ratification was stated by Barrett JA in 2 Elizabeth Bay Road v Owners - Strata Plan 73943 at [57], as follows: There will be no ratification unless the subsequent actor has the necessary authority. Thus, if, in the company context, the usual division of authority between the directors and the members in general meeting prevails, purported ratification by the members in general meeting of something exclusively within the province of the directors will not be effective: Massey v Wales [2003] NSWCA 212; 57 NSWLR 718." 66. Leeming JA agreed with Beazley P except in relation to the point concerning ratification. Similar views were expressed by Emmett AJA. 67. In Cassar v New South Wales Crime Commission [2014] NSWCA 356; (2014) 87 NSWLR 383 the Court of Appeal in a joint judgment stated as follows at [56]-[59]: "[56] It is useful at the outset to understand the terminology. The terms apparent authority and ostensible authority are generally used as synonyms in the law of agency: see Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503 per Diplock LJ. Mr Cassar submitted that a person has apparent authority if held out by another as having authority to engage in conduct including the particular act in question. That submission states the law too narrowly. In general terms, the scope of an agent's apparent authority is that which the principal represents or holds out to third parties: G D Dal Pont, Law of Agency (3rd ed 2013, LexisNexis Butterworths), 8.1. [57] Apparent authority is to be contrasted with the actual authority of an agent. An agent's actual authority may include such authority as is implied by the nature and terms of the actual authority conferred on the agent by the principal. The scope of an agent's implied authority in a particular case will depend upon what is necessary or incidental to the performance of the express terms of the agency. An agent may, of course, have both implied and apparent authority. The implied and apparent authority of a legal practitioner was explained by Brightman LJ in Waugh v HB Clifford & Sons Ltd [1982] Ch 374 at 387 as follows: The law thus became well established that the solicitor or counsel retained in an action has an implied authority as between himself and his client to compromise the suit without reference to the client, provided that the compromise does not involve matter "collateral to the action"; and ostensible authority, as between himself and the opposing litigant, to compromise the suit without actual proof of authority, subject to the same limitation … [58] His Lordship added that a compromise, which contained a term the court could not have ordered, did not constitute a "collateral matter" for the purpose of the principle just stated. [59] Waugh v H B Clifford & Sons Ltd was cited by White J in Across Australia Finance v Bassenger [2008] NSWSC 799, where his Honour was also concerned with the extent of a solicitor's authority to compromise proceedings. His Honour, at [78], referred to the authority of a legal practitioner to compromise proceedings in the following terms: A solicitor or barrister retained to conduct litigation ordinarily has implied as well as ostensible authority to bind his or her client to a compromise of the proceedings provided that he or she does not act contrary to instructions, the circumstances do not otherwise indicate that express instructions are required, the compromise does not include matters collateral to the action, and the compromise is effected in a fair and reasonable manner so that it is fairly within the limits of authority (Donellan v Watson (1990) 21 NSWLR 335 at 342; Prestwich v PoleyWaugh v H B Clifford & Sons Ltd [1982] Ch 374 at 387). 68. In Feldman v GNM Australia Ltd [2017] NSWCA 107 Beazley P stated as follows at [99]-[102]: "[99] Whether or not a person has ostensible authority (also described at times as 'apparent authority') is a question of fact: see Geissler v Accro Motors Pty Ltd (1955) 73 WN (NSW) 31; CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 9 ANZ Insurance Cases 61-232 at 75,554. It usually involves an inference based upon a representation or representations made by the principal that the agent has authority to contract within the ambit or scope of the 'apparent authority': Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503. [100] The jurisprudential basis of ostensible authority is traditionally described in terms of estoppel by representation. Reliance is a necessary element of the estoppel: Freeman & Lockyer v Buckhurst Park Properties at 503; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 200; G E Dal Pont, Law of Agency (3rd ed, 2014, LexisNexis) 460 [20-7]. In a case such as the present, the party seeking to enforce the contract must prove a change of position to its detriment. [101] The question as to the extent of a solicitor's ostensible authority was discussed by this Court in Pavlovic v Universal Music Australia at [150], where the Court adopted the statement of principle in Lucke v Cleary (2011) 111 SASR 134; [2011] SASCFC 118 of Stanley J, Gray and David JJ agreeing, at [60]-[62], that: As a general proposition, a solicitor does not have ostensible authority to bind his or her client to a contract. That general proposition, however, is subject to the qualification that, in the context of litigation, a legal practitioner has ostensible authority to bind his or her client to a contract which relates to and, in particular, compromises that litigation … … in the context of litigation the practitioner's authority to bind his or her client to a contract is confined to a contract that actually and genuinely relates to the litigation. (citations omitted) [102] In Pavlovic v Universal Music Australia, the negotiations between the parties had not reached the stage where litigation had been commenced. Rather, at least whilst the negotiations were in train, "litigation was in fact not in contemplation": at [153]. As I stated at [154]: … to accept that a 'potentially litigious' dispute engages the ostensible authority of a solicitor to enter into an agreement is also not supported by authority. CIC Insurance v Bankstown Football Club does not extend the exception in Lucke v Cleary to such disputes. Rather, in CIC Insurance v Bankstown Football Club the solicitor was retained in relation to an insurance claim, and therefore had ostensible authority to deal with 'issues which reasonably and foreseeably arose in the pursuit of that claim' …" 69. McColl JA agreed with Beazley P's reasons."
As to the proper construction of the contract, I must refer to his Honour's discussion of the same matter in the same decision between 58 and 62: "58. In Yangdo Pty Ltd v Equiti Group Pty Ltd [2017] NSWDC 277 I stated as follows in paragraphs [24]-[29]: "[24] In Masters v Cameron (1954) 91 CLR 353, Dixon CJ, McTiernan and Kitto JJ stated as follows: 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. [25] In each of the first two cases referred to by the High Court, there is a binding contract. The third class is fundamentally different. There, the terms of agreement are not intended to have and therefore do not have any binding effect of their own. [26] Later cases have identified a fourth category of Masters v Cameron. However, it is clear that the categories identified in Masters v Cameron "are neither strict nor prescriptive". They are also not "exclusive nor necessarily exhaustive. Rather, they describe circumstances in which a finally binding contract may or may not have come into existence": Feldman v G&M Australia Ltd [2017] NSWCA 107 at [68] per Beazley P. [27] A useful summary of the various principles applicable to Masters v Cameron situations was set out by Beazley P in Feldman at [60]-[71]. [28] Beazley P also quoted the important passage of McHugh JA in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 where his Honour stated at 634-635 the following: … the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances. [29] That statement reflects the objective theory of contract which is the current law in Australia: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]." 59. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court stated the following at paragraph [35]: "[35] Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". 60. In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]: "[93] The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]-[52]." 61. In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 the majority stated as follows at paragraphs [16]: "[16] It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it." 62. Post-contractual conduct of the parties is admissible on the question of whether a contract has been formed: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163-164; Australian Medico-Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 at [70]."

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Cases Cited (29)