Martinez v Park Trent Properties Group Pty Limited

Supreme Court of NSW|2016-09-28|Before: Schmidt J

Judgment

HWL Ebsworth Lawyers acted for Park Trent Property Group Pty Limited in a matter in which proceedings were finally brought against it by the Australian Securities and Investment Commission in this Court. Afterwards, a dispute arose over Ebsworth's costs, which eventually resulted in both it and Park Trent pursuing applications under the Legal Profession Act 2004 (NSW) for assessment of those costs, as well as the pursuit of various proceedings in this Court. In issue now is whether a settlement was reached, on which Ebsworth is entitled to rely.
By its 27 April motion, Ebsworth sought declarations under s 73 of the Civil Procedure Act 2005 (NSW) in relation to the claimed settlement of the proceedings. The other orders sought in the amended motion of 27 June, were: "1 … 2 An order that the Defendant carry out and otherwise discharge terms 3 and 6 of the Terms of Settlement. 3 In the alternative to prayers 1 and 2 above, pursuant to section 73 of the Civil Procedure Act, 2005 a declaration that the plaintiff and defendant have compromised or, alternatively, settled Supreme Court of New South Wales Proceedings 2016/14475 and 2016/50219 on the basis of Deed of Settlement referred to in the letter from the Defendant's lawyer to the Plaintiff dated 22 March 2016 and sent on 23 March 2016 at 10:33am (the Alternative Terms of Settlement). 4 An order that the Defendant carry out and otherwise discharge the Alternative Terms of Settlement. 5 Further or alternatively, an order restraining the Defendant from conducting itself contrary to the Terms of Settlement or the Alternative Terms of Settlement (as the case may be). 6 Such further or other order as the nature of the case requires. 7 Costs."

Issues

In issue between the parties at the hearing was thus whether they had ever entered a binding contract as to the claimed settlement. Park Trent contended that the parties had not intended to be legally bound, until they had executed a deed and that even if they had intended earlier to be bound, that agreement was contrary to the Legal Profession Act and thus void for illegality. That, too, was in issue.

Was a legally binding contract entered on 2 March 2016?

In issue is firstly, whether the parties' communications evidenced an intention to enter a binding contract and secondly, whether they intended to be immediately bound to perform the terms there specified, as Ebsworth contends; or whether, as Park Trent contends, they intended not to be bound unless and until they had executed a deed.

The applicable principles

There was no issue between the parties as to the applicable law, which is that discussed in Pavlovic v Universal Music Australia Pty Limited (2015) 90 NSWLR 605; [2015] NSWCA 313 by reference to earlier authorities including Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 and Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622.
What is decisive in the case of a dispute as to whether or not a settlement has been arrived at, which is contractually binding, is the intention of the parties, objectively ascertained from the relevant documents, they being read in the context of the surrounding circumstances, including the commercial context of the parties' dealings. The parties' subsequent conduct may also shed light on their earlier intentions.
Whether a binding contract has been entered depends not only on the parties' intentions, but also on whether they have reached agreement on the terms legally necessary to constitute a contract. An incomplete agreement, including an agreement to agree at some time in the future, cannot give rise to an enforceable contract (see Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604; [1982] HCA 53 at [7]).
The parties' intentions must be determined objectively, in light of the language which they used (see Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 at 362). Where, as here, the terms of the contract are claimed to comprise more than one document, to ascertain the parties' intentions, consideration must be given not only to the subject matter of their communications. The objective determination of their intentions also requires that their communications be considered in their context, in light of "the parties' dealings over the time leading up to the making of the alleged contract" (see Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313 at [15]).
What must be considered is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe" (see Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165; [2004] HCA 52 at [40]). Consideration may also be given to the parties' subsequent conduct to determine whether, earlier, they intended to enter into a binding agreement (see Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547 - 548).
Even if agreement has been reached on terms, if, as here, the parties also agree that a further, formal agreement is to be executed, the question which must then be considered is whether they intended, nevertheless, immediately to be bound. In a contract entered between commercial parties, its terms must be determined by what a reasonable businessperson would have understood them to mean (see Electricity Generation Corporation v Woodside Entergy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]. That requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purpose or objects to be secured by the contract.
A binding agreement can come into existence even where parties have completely agreed upon all the terms of their bargain, but have made performance conditional on the execution of a formal document, which would include terms additional to those already expressed, "provided that the additional terms did not depend on further agreement between the parties" (see Godecke v Kirwan (1973) 129 CLR 629; [1973] HCA 38; per Gibbs J at 648; [7]).
The example there given was the option agreement considered in Goodwin v Temple (1956) 180 CLR 68; [1957] St R Qd 376, which contained a condition that the purchaser should enter into a written agreement of purchase "embodying all usual conditions". That was found not to render the agreement uncertain. The agreement in question in Godecke contemplated additional covenants and conditions "if the solicitors reasonably require". That, it was concluded, did not mean that the parties had not reached complete agreement on terms intended to have binding force and to give rise to legal rights and duties.

The claimed contractual documents and surrounding circumstances

It is relevant that the parties had entered into a number of costs agreements during the course of Ebsworth's retainer and that it had rendered a number of fee memoranda, not all of which had been paid. The parties' communications about the settlement were pursued at a time when the various proceedings and applications which I have earlier outlined, were on foot. The discussions took place during the adjournment of Park Trent's application for orders staying these proceedings to allow it to have Ebsworth's entire costs assessed and for orders setting aside the first judgment Ebsworth had obtained.
Ebsworth claims that the binding settlement agreement which bound the parties is evidenced by an exchange of emails with Park Trent's legal solicitor on 2 March 2016. Those emails and the surrounding circumstances are as follows.
At 8.13am, Mr McGregor of Ebsworth wrote to Mr Adams, Park Trent's solicitor: "Tried calling you yesterday evening. If Park Trent has an offer to make please email it to me so I can get instructions. Whilst it is a matter for Park Trent, I suggest that they put their bottom line offer. The appetite to negotiate here is very low."
At 10.05am, Mr McGregor advised others at Ebsworth: "I received a call from Park Trent lawyers who want to make a without prejudice offer. From Wednesday next week to pay $10,000 per week until refinance arranged (4-6 weeks) at which point all costs would be paid off. Refinance could take longer than 4-6 weeks but was well advanced Park Trent wanted to reserve rights to complain about bills I said that I would need to get instructions but raised the following: What security was offered? First payment of $10,000 seemed very low If Park Trent defaulted what was being offered' What about the costs we have incurred? Regarding the second assessment, how can Park Trent complain about a bill that has already gone to assessment - the second assessment was for around $100,000. The lawyer was going to discuss these with client and come back to me. We are in court today so I expect there will be further movement today so we may want to be able to crunch a deal on short notice I will let you know as soon as I hear anything further"
At 2.44pm, Mr Adams conveyed Park Trent's offer to Mr McGregor: "I refer to our "without prejudice" discussion by telephone this morning. I have obtained further instructions from ParkTrent. ParkTrent have agreed to settle the matter on the following basis: 1. That the payment schedule of $10,000 per week for a period of 3 months to allow ParkTrent to refinance the business. On settlement of the refinance, any residual amount will be paid in full. The first payment to be made on Wednesday 9 March will be for the sum of $20,000. 2. Consent orders be made in the 2 motions in Supreme Court proceeding 2016/14475 (seeking to stay enforcement of, and set aside, the judgment) that on a without admissions basis the motions be dismissed with no order as to costs. 3. Consent orders be made in Supreme Court proceeding 2016/50219 that the statutory demand be set aside, ParkTrent to pay Ebsworth's costs. 4. ParkTrent will consent to the Deed of Settlement creating a charge on a commercial property in Corrimal that is valued at approximately $600,000 and has a debt of Approximately $180,000 as security for the amount owed to HWL Ebsworth. We look forward to your response."
At 2.50pm, Mr Adams further advised Mr McGregor: "Just to confirm the amendment to "Without Prejudice" offer below: ParkTrent will agree to pay the reasonable costs of HWL Ebsworth in the matters listed."
Ebsworth did not accept this offer. At 3.15pm Mr McGregor responded, enquiring whether a settlement on different terms would be acceptable to Park Trent: "I am seeking confirmation that HWLE will agree on a without prejudice basis to resolve the current dispute on the following basis: 1. ParkTrent agrees to pay the judgment debts outstanding pursuant to the Judgments dated 15 January 2016 and 22 February 2016; 2. The Statutory Demand referred to in Supreme Court Proceedings No. 2016/50219 to be set aside. 3. The Supreme Court Proceedings No. 2016/14475 and No. 2016/50219 to be dismissed on a without admissions basis and with an order that ParkTrent is to pay HWL Ebsworth's costs 4. The amounts referred to in paragraphs 1 and 3 (being the costs) to be paid as follows: a. $20,000 on Wednesday 9 March 2016; b. $10,000 per week thereafter until the earlier of: i. 3 months; or ii. the date of refinance, at which date ParkTrent must pay the remaining balance in ML 5. ParkTrent will consent to the Deed of Settlement creating a charge on a commercial property in Corrimal that is valued at approximately $600,000 and has a debt of approximately $180,000 as security for the amount owed to HWL Ebsworth. 6. ParkTrent to discontinue its Application by Client for Assessment of Costs No. 2016/45018 and its Application to Review Assessment No. 2016/227253 and it agrees to not seek to challenge costs charged by HWL Ebsworth. Please advise if this is acceptable to ParkTrent."
At 3.39pm Mr Adams advised: "I have just received instructions to confirm the terms of settlement detailed below. Our Counsel is now informing the court that the matter has settled in principle and requesting the matter be stood over for a week to allow for documents to be drafted."
The terms "detailed below" were those appearing in Mr McGregor's 3.15pm email. Those terms were accepted by Ebsworth, Button J being advised on 3 March that the matter had settled "in principle". On 3 March at 2.08pm Ms Liu of Ebsworth asked Mr Adams: "Further to our discussions of yesterday, could you please provide to us a copy of the Certificate of Title for the commercial property in Corrimal. We confirm we will provide you with a draft Deed of Settlement for your review shortly."
The title information for the property "provided as security to be included in Deed of Settlement" was provided by Mr Adams on 7 March by email. It was a property at Woonona, owned by a third party. Ebsworth raised no issue about that. On 8 March a draft deed was sent to Mr Adams "for your review and consideration" and he was asked to appear before Registrar Bradford at the next day's direction hearing, to "adjourn the matter for a further week to allow the parties to finalise terms of settlement".
The draft deed had three parties: Ebsworth, Park Trent and the registered proprietor of the Woonona property, Rhymney Pty Limited. It contained terms additional to those dealt with in the 2 March emails. For example, provision was made for Rhymney to execute a mortgage in terms annexed to the deed and to procure the Commonwealth Bank's consent to its registration. It also dealt with the consequences of Rhymney's default, as well as default by Park Trent. It contained a non disparagement clause, a release in wide terms, as well as a warranty provision.
While Park Trent had concerns about the drafting of the deed, it commenced making the agreed payments. Mr McGregor and Mr Adams spoke, and on 10 March Ms Liu wrote to Mr Adams, enquiring about the execution of the Deed. He advised at 4.29pm: "The deed has expanded the terms that were agreed into considerably more complex and onerous terms. I am getting instructions from Ron Cross sometime overnight as he is in the UK working for the next 10 days. This will give us ample time to agree on the appropriate drafting of the Deed as he won't be in a position to execute it until after about the 20 March. In the meantime I attach a remittance advice confirming payment of the first instalment of $20,000. Following receipt of instructions I will forward suggested amendments to the deed that more accurately reflect the agreement made for your consideration."
It is relevant that in this email, at the time of Mr Adams' first response to the draft deed, he spoke about amendments necessary to be made to the deed to "more accurately reflect the agreement made".
On 11 March Mr McGregor wrote, seeking further discussions. On 14 March, Mr Adams wrote at 7.35am advising: "As you are aware there are a few issues in the deed of agreement that need further discussion and for which our client will be requesting minor amendments. The proposed agreement is of course still agreed in principle. It would envisage that we could have the amendments, if agreed, drafted into the deed of agreement during the If course of the next few days with and then on Mr Cross's is[sic] return from the UK early next week our client will be then in a position to execute the deed."
On 15 March Mr Adams advised at 10.55am that: "I am drafting details of the few terms that ParkTrent do not agree with and should have them to you later today so that we can then discuss them by telephone. I am having some difficulties getting proper instructs[sic] from ParkTrent. As you are aware Ron Cross is in the UK until next Monday and Sandra Mangan has broken her arm in 2 places and is now off work for some time. I have spoken to Shane in the ParkTrent office this morning to ensure that the next payment of$10,000 is paid tomorrow."
On 16 March at 9.18am Ms Liu wrote to Mr McGregor advising: "I met and spoke to Christopher Adams before the directions hearing this morning. He firstly apologised for missing the directions hearing on Monday. Apparently the only issue Park Trent has with the Deed is the waiver of rights. He's on his way back to Wollongong now and asked me to mention his appearance. We agreed to stand the matter over for two weeks to allow the Deed to be settled. I am now waiting in court."
At 12.30pm that day Ms Liu advised Mr Adams that: "We confirm we appeared before Registrar Bradford in the Supreme Court of New South Wales and mentioned your appearance. The Court made the following orders: 1. The matter be stood over on 30 March 2016. 2. Should Term Settlement, Consent Judgment or Notice of Discontinuance disposing of the matter be filed prior to 30 March 2016, then 30 March 2016 is vacated. Further to our discussions before the matter was heard, could you please give Roberta call on (02) XXXX XXXX to confirm your client's position in relation to the Deed. I mentioned the waiver issue to Robert who advised that the waiver was always part of the deal and that was critical and this had not changed."
On 23 March Mr Adams emailed a letter dated that day, in which he referred to the terms of his 2 March email; the deed sent on 8 March, which he said contained additional terms which had not been earlier discussed and differed considerably from the earlier offer; AND that the deed was considered to be a "counter offer", which Park Trent was willing to accept "almost entirely in its current form but requests your consideration for two amendments". A rationale for those amendments was provided. They related to the consequences of the ASIC proceedings. The amendments to the Deed sought were: "1. That the total amount of the debt payable by Park Trent to HWL Ebsworth be capped at $250,000. The term for repayment or refinance be extended from 90 days to 120 days."
The email response sent to Mr Adams by Mr Webeck on 24 March at 3.17pm was that: "There are a number of items that are disputed in your letter of 22 March 2016 (received 23 March 2016) including the proposition that in some unorthodox manner, the Deed of Settlement as submitted constitutes a "counter-offer*. That said: 1. We are prepared to "cap" liability at $380,000. 2. We would agree with the requested extension provided the $ 10,000 per week is maintained. We will keep the above position open to 5pm Tuesday 29 March 2016."
By email of 29 March at 10.12am Mr McGregor enquired as to a "missed payment" of $10,000 expected the preceding week and sought a response "regarding the most recent proposal". At 3.25pm, Mr Adams conveyed an apology for the payment which had not been made "on time" and advised: "Since our letter of 22 of March at client has sought further advice from Counsel. Our client appreciates your consent to extend the time for payment to either 120 days or on completion of the refinance and at the reduction 41 of the total debt by capping the total amount to $380,000. However, our client still takes issue with clause 7. The agreement of terms reached during both email correspondence and telephone conversations between the writer and yourself did not include such an extensive and wide-ranging release clause. Our client has agreed to pay your fees and costs by instalment to prevent the winding up of ParkTrent. It was agreed to withdraw the application for review on existing costs determinations as well as withdrawing ParkTrent's application for an assessment of the remaining costs. It was also agreed that Park Trent would withdraw court proceeding 2016/14475. Our client has agreed to pay your fees and thus should be allowed its rights under the uniform legal profession law with regard to any other issues that may exist either now or in the future with regard to any other matter connected to the costs agreement not associated with costs assessment. Our client requests either that clause 7 be removed or amended to reflect the terms agreed within the email dated 2 March 2016. Our client instructs that agreement has been reached in principle but for this clause. We propose that our firm appears by consent for both parties in matter 2016/14475 on 30 March and on matter 2016/50219 on 31 March and requests both matters to be stood over for two weeks in order that the final content of the Deed of Settlement be agreed and executed. We have also been instructed that our client's related entity has placed seven properties on the market to inject some cash back into the business operated by ParkTrent It may well be that funds become available the payout the balance of your fees prior to any refinance arrangement being completed. We will keep you informed of any developments and likelihood of an early payout. We look forward to your response."
Again, Mr Adams' referral on 29 March to the "[t]he agreement of terms reached during both email correspondence and telephone conversations between" he and Mr McGregor is pertinent, notwithstanding the suggestion on 23 March that the 8 March deed was a "counter offer".
On 30 March Mr Webeck advised at 10.05am: "It is clear from the email exchange of 2 March (our email at 3.15pm / your email at 3.39pm) that ParkTrent (is) to discontinue its Application by Client for Assessment of Costs No. 2016/45018 and its Application to Review Assessment No. 2016/22 7253 and it agrees to not seek to challenge costs charged by HWL Ebsworth. We would therefore propose the attached amendments to clause 7 which we will assume to be the final amendment. Subject to your concurrence, we will circulate an execution version for final review. In file meantime, can you (a) forward to us any valuation (kerbside or otherwise) concerning the security property at Corrimal and (b) let us know the outcome from this morning's matter in Court?"
The amendments proposed were to the release clause of the Deed. On 1 April at 9.29am Mr Adams advised that the proceedings had been adjourned, the Court being advised that "settlement had been agreed in principle and that the final terms of the Deed of settlement were still being negotiated". In Mr McGregor's 9.36am reply, he asked whether Mr Adams considered that the revised clause 7 addressed the concerns he had raised and if not, sought alternative wording. He also sought evidence of the net equity position of the property being provided as security.
In a further email sent at 12.44pm, Mr McGregor provided an updated deed, asked about an outstanding payment and proposed that payments made before execution be dealt with by way of letter, acknowledging the payments made as being in accordance with the deed.
On 5 April, Mr Adams advised at 3.20pm that the outstanding payment had been made and that the next was due the following day. He then said: "I am instructed that the payment due last Wednesday has been made and I attach the remittance advice provided by our client. I have reminded our client of the repayment terms of the draft Deed of Settlement and that another payment of $10,000 is due tomorrow. When our client completes tomorrow's payment, they will have paid $60,000 off your firms invoices. That should be a clear indication of our client's intentions to honour the agreement to pay the judgement debt. Our client is currently arranging an appraisal of the value of the property the subject of the security attached to the draft Deed of Settlement and we will forward that to you when it becomes available. Further we refer to your draft deed of release in this matter. Our client has sought advice from Counsel and we are instructed as follows: As we have stated previously in our correspondence dated this draft deed is very much different from the basis upon which we indicated to you on 2 March 2016 by email that our client was prepared to settle. You have changed the basis upon which you wish to settle. In particular, your draft deed inserts a series of matters which were not referred to in the relevant emails (for example the last part of paragraph 3.3 regarding liability for costs, and paragraphs 3.4,4.1-43,5 6.1,7.1 other than (a), 7.2, and 8). Further, you have not stated on the proposed consent orders the nature of the orders being made as being on a without admissions basis. In addition, you now seek that our client release you from every possible claim, although you only wish to release our client from costs liability. Our client is confused about why there has been such a change of position, as are we. Our client needs an explanation of why you have now changed the basis upon which you wish to settle. We would be grateful if you could please explain why each of the above mentioned new matters and omissions is necessary. We look forward to hearing from you soon."
Mr McGregor responded at 5.16pm, seeking a mark-up of suggested changes to the deed and advising that the "wording you propose regarding adding 'without admission' to the orders and carve outs to the non disparagement" were to be considered.
On 7 April Mr Adams advised: "I have also received instructions that ParkTrent has had a loan approval and will anticipate repaying any outstanding amount of the judgement debt to your firm by Wednesday of next week. That will of course negate any requirement for the Deed in its current form. In anticipation of payment in full next week, I will attend to filing a notice of discontinuance for matter number 2016/50219 on Tuesday 12 April."
Park Trent made the final payment on 12 April. By letter of that day Mr Adams wrote proposing consent orders in relation to the statutory demand. Those proceedings were later dismissed by consent.
On 11 April, Mr Dwyer, the costs assessor, wrote to Ebsworth as to outstanding submissions on Park Trent's costs assessment application. On 12 April, Mr Webeck responded, attaching the 2 March email communications, advising: "Dear Costs Assessor Thank you for your letter dated 11 April 2016. As well be seen from the email exchange below, the Costs Applicant has agreed to: discontinue its Application by Client for Assessment of Costs No. 2016/45018 and its Application to Review Assessment No. 2016/227253 and it agrees to not seek to challenge costs charged by HWL Ebsworth"
On 13 April, Mr Adams wrote to Mr Dwyer, disputing that any agreement had been reached between the parties and advising that Park Trent intended to pursue its assessment and review applications. He also said, amongst other things, that no final agreement had been reached; that the last proposed terms made by Ebsworth had not been accepted; that all of its invoices had now been paid "including those which have not yet been assessed purely as a commercial matter to dispose of court proceedings relating to a statutory demand issued by the cost respondent and to avoid any similar further court proceedings being necessary in the future." Mr Adams also annexed copies of other email exchanges.
On 13 April, Mr Webeck wrote to Mr Dwyer, asking that the application be suspended, pending enforcement of the settlement agreement reached on 2 March at 3.39pm. That application is presently in abeyance, pending resolution of these proceedings.
On 18 May Park Trent was given the additional time it had earlier sought, to lodge its out of time review application of Ebsworth's first costs assessment, for reasons then given by the Court's Manager Cost Assessment. They included the amount of the delay, the resulting prejudice to both parties and the view that Park Trent should not be prejudiced for what appeared to have been lack of action on its lawyer's part, in relation to the first costs application.
On 31 May a review panel was appointed. Neither the review nor Park Trent's costs application was then pursued, pending determination of the 27 April motion.
On 10 June Button J listed Park Trent's motions for further hearing on 16 June. That day Park Trent did not further press its motions and by consent, they were then dismissed, with no order as to costs.

Did the 2 March communications evidence the parties' intention to enter a binding contract?

While both Mr McGregor and Mr Adams swore affidavits which were in evidence, in which they outlined their discussions earlier in the day, their affidavits did not deal with the 2 March emails which evidenced the agreement, I am satisfied that the parties reached that day. They were thus not required for cross-examination.
Contrary to the case advanced for Park Trent, even though the parties later pursued protracted, but finally unsuccessful negotiations about a settlement of their disagreement over the drafting of the deed, I am satisfied that they intended to enter into a binding contract on 2 March 2016, thereby settling all aspects of their dispute over Ebsworth's costs and all of the proceedings they had each initiated, that is: the judgment debts outstanding under the 15 January and 22 February 2016 judgments (matter numbers 2016/14475 and 2016/50219); the statutory demand the subject of the proceedings in matter number 2016/50219; and the applications brought by Park Trent for assessment of all of Ebsworth's costs in matter number 2016/45018; and for review of Ebsworth's costs' assessment in matter number 2016/227253.
Objectively considered, the parties' communications on 2 March reveal not only the course of the negotiations pursued that day by this law firm and its commercial client, through its then solicitor, about the settlement of the matters lying between them. The 2 March emails also evidence that the parties each intended, that day, to enter into a binding contract which would settle the entirety of their dispute over all of the matters referred to in Mr McGregor's 3.15 email.
The words which were used in the email exchange on 2 March, when considered in light of the parties' respective conduct that day, would, I consider, have led a reasonable person in the position of each party, to believe that the other also intended to enter into a binding agreement, even though it was described as having been an agreement "in principle".
It was at 2.44pm that Park Trent's solicitor, Mr Adams made its first offer, which Ebsworth did not accept. Contrary to Park Trent's case, Mr McGregor's 3.15 response cannot be understood as Mr McGregor conveying a counter-offer from Ebsworth to Park Trent to settle on the terms there outlined. Nor did he indicate that he had authority to make an offer on such terms. Rather, he advised that he was seeking "confirmation" from Ebsworth, that it was prepared to settle on the terms he outlined and asked whether such terms would be acceptable to Park Trent.
The advice given by Mr McGregor at 3.15pm was thus, in its terms, not an offer capable of being accepted by Park Trent. That was not unusual. In settlement negotiations it is not uncommon for one party's solicitor to enquire of the other, whether particular terms of settlement would be acceptable, before instructions to offer them are obtained. What Mr McGregor told Mr Adams in his email was that he was "seeking confirmation that HWLE will agree" to a settlement on the terms he outlined and he asked Mr Adams to obtain instructions as to whether such terms would be "acceptable to Park Trent".
Instructions having been sought from Park Trent, Mr Adam's response at 3.29pm was to "confirm" settlement on those terms. That, it must be accepted, in the circumstances of these exchanges, comprised a second offer made by Park Trent that day, to settle on the terms Mr McGregor had specified in his 3.15pm email. That offer was accepted by Ebsworth with the result that on 3 March, Button J was informed of the settlement and the hearing of Park Trent's motions was adjourned.
Despite the parties' failure to execute a deed, eventually both its application to set aside the statutory demand and its motions were dismissed by consent.

Did those communications evidence an intention to be immediately bound?

Whether these communications evidenced an intention to be bound immediately, is a little more difficult to resolve, but I consider that the better view is that Ebsworth's acceptance of Park Trent's second offer brought into existence a binding contract, both parties then intending immediately to be bound upon its acceptance.
It was not suggested that a settlement agreement described as one reached "in principle" is not, as the result of the use of those words alone, incapable of having already bound the parties. Whether or not a binding agreement came into existence depends on all of the words which the parties used at the time the offer was made and accepted, and what their respective conduct reveals as to their then intentions. How they have later conducted themselves can either confirm, or detract from the conclusion that the parties intended earlier to be bound by their agreement.
There are, it must be accepted, some aspects of the parties' conduct, which point in different directions. For example, the deed which Ebsworth provided on 8 March undoubtedly introduced new matters which had not been the subject of discussion or agreement on 2 March, about which further negotiations ensued. It contained, for example, an "entire understanding provision", but there is nothing, conceptually, which would preclude parties who have already entered into a binding agreement, from later entering into a deed, which they then agree, captures the entirety of their agreement. The correct view, I consider, is that contrary to Mr Adams' assertion on 23 March, the deed did not comprise a counter offer. The parties were then already bound by the terms of the 2 March agreement, which came into existence after Park Trent's second offer that day was accepted.
On 2 March, Park Trent had offered to consent to the Deed creating a charge on a commercial property in Corrimal that was valued at approximately $600,000 and had a debt of approximately $180,000 as security for the amount it agreed that it would pay Ebsworth. As it transpired, it was apparently not in a position to provide that security. Instead, it proposed that it be provided by another company.
For its part Ebsworth was prepared to accept what was, in truth, a variation to the 2 March agreement, with the result that Rhymney Pty Limited was made a party to the draft deed provided to Park Trent on 8 March. That does not detract from the conclusion that on 2 March the parties intended to enter into a binding contract on the terms then offered by Park Trent. Rather, it evidences that Park Trent, which was in financial difficulty, took steps to deal with its inability to provide the security it had offered, which Ebsworth was prepared to accept. Ebsworth also accommodated its financial difficulties in other ways.
The parties' later conduct was consistent not only with the existence of a mutual intention on 2 March to be bound, but also an understanding from that time that they were bound. That persisted on Park Trent's part, until Park Trent resiled from its agreement on 13 April, when Mr Adams wrote to Mr Dwyer. Its conduct beforehand was almost entirely consistent with an understanding that on 2 March it had entered into a binding agreement with Ebsworth, there not having been, on that day, any failure to achieve a meeting of minds on the terms of that agreement, as Park Trent finally contended at the hearing.
That conduct included Park Trent's adherence, apart from the security it transpired it could not provide, to what it had agreed to do on 2 March. On occasions it did fail to make the agreed payments when they fell due, but then it offered not only apologies and explanations, but made the agreed payments, albeit late, which Ebsworth accepted. Its conduct reveals that it certainly did not regard itself as free not to make the promised payments, pending execution of the deed.
For its part, Ebsworth proposed terms in the 8 March draft deed which, it must be accepted, departed from what had been agreed in the 2 March email exchanges. It was not contractually entitled to insist on such terms. Its preparedness to negotiate about them, was also consistent with the coming into existence on 2 March of a binding agreement, which the deed was to document.
There were various other relevant "outward manifestations" of the parties' understanding from 2 March that they were already bound by their agreement, even before execution of the deed.
Those manifestations include the advice given by Mr Adams on 10 March, in response to the draft deed provided on 8 March, that he would suggest "amendments to the deed that more accurately reflect the agreement made". That advice was entirely consistent with an understanding, at that time, that the parties had entered into a legally binding agreement on 2 March, which the deed was to document.
Consistent with that advice was another powerful outward manifestation of the existence of a binding agreement between the commercial parties who had made the 2 March agreement, in the face of Park Trent's precarious financial position, to which reference was made at various points in the ongoing correspondence. Even though there were ongoing discussions after 10 March about the terms of the deed, the payments made by Park Trent to Ebsworth finally satisfied the entirety of what Ebsworth was prepared to accept in payment of its outstanding costs. That was an important manifestation of the parties' agreement, because had Park Trent not made the payments it was given time to make, Ebsworth was free to pursue its statutory demand, Park Trent's proceedings to have it set aside, having been dismissed by consent.
Thus when, at times, Park Trent fell behind in making the agreed payments, it never denied having an obligation to make them. To the contrary, in his 29 March email, for example, when responding to Mr McGregor's enquiry about the payment "expected" last week, Mr Adams conveyed Park Trent's apology, provided an explanation and advised that Park Trent was aware that "a further payment is due tomorrow". In that letter Mr Adams also referred to "the agreement of terms reached during both email correspondence and telephone conversations" on 2 March, which he said had not included "such an extensive and wide-ranging release clause" as that contained in the draft deed. He also said that: "Our client has agreed to pay your fees and costs by instalment to prevent the winding up of ParkTrent. It was agreed to withdraw the application for review on existing costs determinations as well as withdrawing ParkTrent's application for an assessment of the remaining costs. It was also agreed that Park Trent would withdraw court proceeding 2016/14475. Our client has agreed to pay your fees and thus should be allowed its rights under the uniform legal profession law with regard to any other issues that may exist either now or in the future with regard to any other matter connected to the costs agreement not associated with costs assessment. Our client requests either that clause 7 be removed or amended to reflect the terms agreed within the email dated 2 March 2016. Our client instructs that agreement has been reached in principle but for this clause."
That conduct and the advice there given is also entirely consistent with an understanding on Park Trent's part that an agreement had come into existence on 2 March, which bound it, despite the concern then expressed that the release clause in the deed had been drafted in terms wider than the agreement reached that day. At that point, all that precluded execution of the deed which the 2 March agreement contemplated would be executed, was the drafting of the release clause, which went beyond the terms discussed that day.
Consistent with this understanding was that on 29 March, in response to another enquiry about a late payment, Mr Adams said, amongst other things that "[w]hen our client completes tomorrow's payment, they will have paid $60,000 off your firms invoices. That should be a clear indication of our client's intentions to honour the agreement to pay the judgement debt".
That advice is also entirely consistent with an understanding that Park Trent was then bound to make the payments, in accordance with the terms agreed on 2 March. As Mr Adams there explained, it had entered that agreement to prevent Ebsworth winding it up. He also there confirmed the "agreement" to withdraw the review application and the assessment application, but disputed, understandably, that Park Trent had also agreed to give up its rights in future to pursue other claims it might have against Ebsworth, in relation to matters not the subject of the 2 March agreement. Thus an amendment was proposed to the release clause of the deed, said to be the only remaining issue.
Ebsworth then invited, but did not receive, proposed amendments to that clause. It was not until 5 April, however, that Park Trent's position was revisited, but even then Mr Adams described the payment of $60,000 to be "a clear indication of our client's intention to honour the agreement to pay the judgment debt". That was yet another acknowledgment that it was bound by the agreement of 2 March.
It was only after this that Park Trent moved from the only matter in issue as to the deed being the wording of clause 7, to raising other clauses of the deed. On 7 April, following payment of the entirety of the outstanding costs, Mr Adams advised that "any requirement for the deed in its current form had thereby been negated". But still he did not suggest that Park Trent was no longer bound by the 2 March agreement.
That position was taken by Park Trent on 13 April, after Ebsworth had written to Mr Dwyer. Mr Adams then disputed Ebsworth's advice that Park Trent had agreed to discontinue its applications for assessment of costs and the review of Ebsworth's costs assessment.
In giving his advice to Mr Dwyer, Mr Adams did not refer to the email exchange of 2 March, contending simply that no agreement had then been reached and that "the parties were still very much in negotiations as to the terms of a proposed settlement". That advice did not accord with what had been agreed on 2 March as the result of Ebsworth's acceptance of Park Trent's second offer; the advice then given to the Court that agreement had been reached; or to the earlier repeated acknowledgements to Ebsworth, that Park Trent accepted that it was bound by the agreement which it had entered with Ebsworth on 2 March; and the steps it had taken to satisfy its obligations under that agreement.
The advice Mr Adams gave Mr Dwyer was disingenuous in all of those circumstances, to say the least.

A binding contract was entered on 2 March 2016

In the result, it must be accepted that despite the parties' failure to agree on the terms of the deed which they intended would document the agreement they had reached on 2 March, they did enter into a binding contract that day, by which they both intended to be bound and from which Park Trent was not entitled later to resile, as it sought to do.

Was the 2 March agreement void under the Legal Profession Act 2004 (NSW)?

During the time that Ebsworth acted for Park Trent, the parties entered a number of costs agreements, in accordance with requirements of the Legal Profession Act. Park Trent's case was under that legislative scheme, it was not legally possible for the parties to enter into any agreement which prevented it from utilising the cost assessment process provided under that Act. Accordingly, both the 2 March agreement and any deed which might have recorded it, was void for illegality and thus unenforceable.
I am satisfied that Park Trent's submissions may not be accepted.
A "costs agreement" was defined in s 302 of the Legal Profession Act to mean "an agreement about the payment of legal costs". "Legal costs" was defined in s 4 to mean "amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest".
Section 322(5) provided that except in the case of "sophisticated clients" such an agreement "cannot provide that the legal costs to which it relates are not subject to costs assessment under Division 11". Section 327(1) provides that a costs agreement that contravenes, or is entered into in contravention of that provision, amongst others, is void.
These sections, it should immediately be observed, are not concerned either with agreements about the settlement of applications for assessment of costs brought under the Legal Profession Act, or with agreements about the settlement of applications for review of such a costs assessment.
In construing a statute, consideration must be given both to the purpose of the legislative scheme and the consequences of giving a particular meaning to a provision (see Statutory Interpretation in Australia, seventh edition, Pearce and Geddes at [2.38] - [2.39]). As discussed in Public Transport Commission (NSW) v J Murray-More (NSW) Pty Ltd (1975) 132 CLR 336; [1975] HCA 28 at 282, even where two meanings are open, "it is proper to adopt that meaning that will avoid consequences that appear irrational and unjust." In this case, on any view, the meaning Park Trent seeks to give to the provisions of the Legal Profession Act which arise for consideration, are not fairly open.
On the evidence, the 2 March agreement was not a "costs agreements" as defined in s 302. That agreement did not contain a term that Ebsworth's legal costs "are not subject to costs assessment". To the contrary, before the agreement was made, some of its costs had already been assessed; judgment in respect of them had been entered; and Ebsworth was pursuing their enforcement. Park Trent had also brought both a further application for costs assessment, a review application and an application to set aside Ebsworth's statutory demand.
What the parties thus negotiated over and agreed on 2 March, was the terms on which all of the proceedings which they had each initiated in pursuit of their respective rights under the Legal Profession Act, as well as the applications which Park Trent had brought to have Ebsworth's statutory demand set aside, would be settled.
Thereby the parties had acted in accordance with the duty imposed upon them by s 56(3) of the Civil Procedure Act 2005 (NSW), to assist the court to further the overriding purpose specified in s 56(1), namely to "facilitate the just, quick and cheap resolution of the real issues" in the various proceedings they were then involved in. That is a duty which must be observed (see McMahon v John Fairfax Publications Pty Ltd [2010] NSWCA 308 at [26] - [30]). One obvious way in which that may be done, is by the parties' pursuit of a settlement of the dispute which brought them to court.
Brereton J's judgment in Amirbeaggi & 2 ors v Business in Focus (Australia) Pty Ltd & 5 ors [2008] NSWSC 421 does not lead to the contrary view. There his Honour had to deal with an application for orders requiring specific performance of terms of a deed which recited an agreement to provide legal services in respect of five matters; the rendering, part payment and outstanding balance of legal costs; that the clients wished to acknowledge the outstanding amount as a debt owed to the solicitors; and that the parties had agreed to enter into the deed to secure the payment obligations of the clients on the terms it contained.
The claim failed, his Honour concluding that this deed was a "costs agreement" as defined in s 302, which was void under s 327(1). His Honour there took the view that it was not open for a solicitor and client (other than a sophisticated client), so to contract out of or to waive the right given by the Legal Profession Act, to pursue a costs assessment.
The circumstances of this case are quite different. Here the parties' settlement was arrived at in circumstances where there had already been two costs assessments of Ebsworth's costs, it having exercising its rights under the Legal Profession Act. It was entitled to enforce those assessments, as it did, by the proceedings it brought in this Court. Park Trent had also exercised its right under the Act, by making an application for a costs assessment, although it is difficult to see that it had the right on that application, to have the costs which had already been assessed on Ebsworth's two applications, assessed again. That explains why Park Trent also made an out of time review application in respect of the first of those costs assessments, in which it had not appeared.
The parties' agreement thus did not provide that Ebsworth's costs were "not subject to costs assessment". Assessment applications had already been made by both parties. It was rather concerned with the terms on which all of the issues lying between them over those applications and all of the other matters lying between them in the various proceedings they had each brought, would be resolved. Unlike the deed which arose for consideration in Amirbeaggi, the agreement which they made on 2 March thus did not involve the parties in unlawfully contracting out of Park Trent's right to seek a costs assessment under the Legal Profession Act. It had already exercised that right.
Contrary to the submissions advanced for Park Trent, while the Legal Profession Act precludes such parties from agreeing that costs rendered under costs agreements which they enter with each other "are not subject to costs assessment", it cannot sensibly be construed as precluding them from later settling their differences over applications which they have each made under the Legal Profession Act, for assessment of such costs, let alone review of such assessments.
Nor does the Legal Profession Act preclude such parties, after costs assessment; entry of judgment in this Court; steps taken to pursue its enforcement; and further proceedings brought in this Court to set aside both the judgment and a statutory demand, pursued to enforce the judgment, from agreeing to settle their dispute. Those are matters with which the Legal Profession Act is not concerned. Such an agreement cannot preclude the legal costs to which it relates from being assessed under the Legal Profession Act, they having already been assessed.
Those conclusions, I note, accord with the approach taken in Beba Enterprises Pty Ltd v Gadens Lawyers [(2013) 41 VR 590; 2013] VSCA 136 at [75] and GLS Goodman Group Pty Ltd [2015] VSC 627, in relation to the similar provisions of the Legal Profession Act 2004 (Vic). There it was also concluded that settlement of a dispute over outstanding legal costs did not involve a breach of the Legal Profession Act, but rather exemplified accord and satisfaction, not contrary to the provisions of that Act.

Accord and Satisfaction

The concept of accord and satisfaction was considered in El-Mir & 1 Or v Risk [2005] NSWCA 215, where it was observed at [48] - [52]: "48 The "essence of accord and satisfaction 'is the acceptance by the plaintiff of something in place of his cause of action', … the accord is the agreement or consent to accept the satisfaction … upon provision of the satisfaction, there is a discharge which extinguishes the cause of action": Federal Commissioner of Taxation v Orica Ltd [1998] HCA 33; (1998) 194 CLR 500 per Gummow J at [116] citing Dixon J in McDermott v Black at 183 - 185; see also British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd [1933] 2 KB 616 at 643 per Scrutton LJ. In Thompson v Australian Capital Television Pty Ltd and Other [1996] HCA 38; (1996) 186 CLR 574 at 610, Gummow J emphasised that accord and satisfaction "requires acceptance of something in place of the full remedy to which the recipient is entitled". (emphasis added) 49 Where there is an agreement to accept a promise in satisfaction of the cause of action, "the original cause of action is discharged from the date when the promise is made": McDermott v Black per Starke J (at 176); Dixon J (at 183 - 185); see also British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd (at 644) per Scrutton LJ. 50 The consequences of the discharge of the original cause of action by accord and satisfaction were explained by Phillips JA (with whom Winneke P and Charles JA agreed) in Osborn & Bernotti t/as G04 Productions v McDermott t/as RA McDermott & Co & Karmine Pty Ltd [1998] 3 VR 1 at 8, in a passage referred to with apparent approval by Gummow and Hayne JJ in Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635 at [56]. Phillips JA said: "Where there is an accord and satisfaction, the agreement for compromise may be enforced, and indeed only that agreement may be enforced , because ex hypothesi the previous cause of action has gone; it has been 'satisfied' by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise of other benefit." (emphasis added) 51 In other words, the role of an accord is to replace the former contract with a new one (eodem modo quo oritur, eodem modo dissolvitur): Professor Brian Coote, Common Forms, Consideration and Contract Doctrine, (1999) 14 Journal of Contract Law 116 at 123. Accord and satisfaction provides the means whereby a cause of action which a plaintiff has can be rendered unenforceable: Illawong Village Pty Ltd v State Bank of New South Wales [2004] NSWSC 18, at [262] - [263] per Campbell J. 52 If the promisor fails to perform the promise, the promisee's only remedy is to sue for breach of the promise. There cannot be a return to the original obligation or claim: see Anson's Law of Contract, 27th Ed at 492; see also Koutsourais & Anor v Metledge & Associates [2004] NSWCA 313 at [49] - [51] per Bryson JA (Hodgson JA, with whom Beazley JA concurred, agreed (at [7]) with Bryson JA's consideration of the issue of accord and satisfaction, although disagreeing with his Honour's ultimate conclusion)."
Here, what Ebsworth agreed to accept on 2 March in place of its right to enforce the judgments it had obtained, the accord, was the payments Park Trent was given time to make, the security it agreed to provide and its agreement not to pursue its cost assessment and review applications. That was the satisfaction which Park Trent promised to give.
That the parties had these proceedings stood over by consent, while negotiations were pursued over the terms of the deed which documented their agreement, does not alter the fact that in accordance with the settlement agreement, Ebsworth forbore from enforcing its judgment debts. It gave Park Trent the agreed time to pay, in return for Park Trent not pursuing the applications it had brought in this Court and under the Legal Profession Act. That later Park Trent sought to resile from the agreement not to pursue its costs assessment and review applications, is not a basis on which the relief to which Ebsworth is also entitled on the basis of accord and satisfaction, can now justly be refused.

Orders

For those reasons, the declaration sought by Ebsworth must be made.
The usual order under the Uniform Civil Procedure Rules 2005 is that costs follow the event, which would in this case be an order in favour of Ebsworth for cost as agreed or assessed.
Ebsworth should file the orders which reflect the conclusions I have reached, within 7 days. I will hear the parties on the question of costs, if there is any disagreement.

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: 28 November 2016

Legal Profession Act 2004(NSW)

Legal Profession Act 2004(Vic)

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