Mohareb v Jankulovski

Judgment 1THE COURT: On 11 December 2013, at the conclusion of argument, the Court ordered that the applicant's (Mr Mohareb's) summons seeking leave to appeal from two orders of the primary judge (Harrison AsJ) made on 27 June 2013 be dismissed with costs. The following are our reasons for making those orders. 2The applicant is a structural engineering consultant. He has brought proceedings alleging defamation and misleading or deceptive conduct against the first respondent (Mr Jankulovski) and the second respondent, a company controlled by the first respondent which provides computer software for use by engineers in the construction industry. Those claims are made as a result of two letters written by Mr Jankulovski on behalf of the second respondent to a client of Mr Mohareb which questioned the latter's professional competence as a structural engineer. 3Since those proceedings were commenced in 2012 there have been four attempts to settle them. Mr Mohareb maintains that his acceptance of a fourth offer, made to him by Mr Jankulovski on 4 February 2013, gave rise to a binding agreement to bring them to an end. 4By a notice of motion brought in the proceedings he sought an order for specific performance of that agreement. At the same time, the first respondent brought an application to strike out various paragraphs of Mr Mohareb's claim, and for an order for security for costs. The Court's jurisdiction to decide, on a notice of motion, whether proceedings have been settled is confirmed by s 73 of the Civil Procedure Act 2005. Prior to the enactment of that provision there had been doubt as to whether such an application had to be made by separate proceedings. That controversy is referred to by Campbell JA in Grave v Blazevic Holdings Pty Ltd [2012] NSWCA 329 at [3]-[5]. 5The primary judge dismissed Mr Mohareb's application for specific performance of the alleged settlement agreement, ordered him to provide $5,000 for security for costs within 14 days and stayed the proceedings until that security is given: Mohareb v Jankulovski [2013] NSWSC 850. 6Mr Mohareb sought leave to appeal from the order dismissing his application and from the order that he provide security. In the proceedings brought for damages for defamation and misleading or deceptive conduct each of those orders is an interlocutory order and Mr Mohareb requires leave to appeal under s 101(2)(e) of the Supreme Court Act 1970. Had Mr Mohareb brought the application to enforce the alleged settlement by separate proceedings he also would have required leave to appeal from any final order dismissing that application because it does not involve rights having a value to Mr Mohareb of $100,000 or more: cf s 101(2)(r). 7That being the position, it was necessary for Mr Mohareb as a starting point to show in relation to each order that there is a real question, in the sense of one going beyond being merely arguable, that the primary judge's decision was wrong; the relevant principles are discussed in Be Financial Pty Ltd v Das [2012] NSWCA 164 by Basten JA at [32]-[39]. Because the second order involved the exercise of a discretion on a matter of practice and procedure and does not involve any question of general principle it was also necessary for Mr Mohareb to show that substantial injustice would result if leave to appeal was refused, supposing that second decision to be wrong. 8In relation to the application for specific performance, the principal issue was whether, as Mr Mohareb contended, the parties intended to be bound immediately on their reaching consensus as to the essential terms of their settlement even though they also wished to record the terms of that settlement by a formal agreement. In this context what the parties are taken to have intended depends on what was objectively conveyed by their words and conduct in the circumstances in which that occurred: Masters v Cameron [1954] HCA 72; 91 CLR 353 at 362; ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549; Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; 209 CLR 95 at [25] (Gaudron, McHugh, Hayne and Callinan JJ). The primary judge correctly identified these principles, quoting Young CJ in Eq's summary of them in Helmoss Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 at [55]-[59]. 9Before considering whether her Honour is shown to have erred in the application of those principles it is necessary to record briefly the events of 4 February 2013 which were said by Mr Mohareb to have resulted in a binding agreement. Differing versions of those events were given by Mr Mohareb and Mr Jankulovski. They are set out by the primary judge between [10] and [36]. 10About mid-morning on 4 February 2013 Mr Mohareb attended the office of the second respondent to serve a notice of motion. He had a conversation with Mr Jankulovski as to the resolution of the dispute. In the course of that conversation consensus was reached as to the general terms on which the proceedings could be settled. Mr Jankulovski agreed to pay $20,000 as compensation and wrote a cheque in that amount, signed it and handed it to Mr Mohareb: [26]. Mr Jankulovski also agreed to provide software licences to Mr Mohareb and handed him two USB storage devices to which copies of that software had been transferred: [22]. 11At one point in the conversation Mr Mohareb maintained that Mr Jankulovski said (at [27]): "I think we've agreed on everything now including the letter of retraction and apology which we discussed previously. Can you take care of drafting the Settlement Agreement as we have just discussed and email me a copy so that I can send it back to you in time for you to take it to court for next Friday hearing. I'd like you to file it with the court and have this matter terminated once and for all." After the meeting had concluded there was a later telephone conversation in which, according to Mr Mohareb, Mr Jankulovski said (at [34]): "Could I please ask you not to bank the cheque until I've had the chance to receive from you the final wording of what we've agreed upon earlier today?" 12There was then an exchange of emails on the evening of 4 February 2013. In the first Mr Mohareb set out his understanding of the "broad outlines of the terms we both agreed upon". That email also described each of Mr Jankulovski's delivery of the cheque and the two USB devices as a "goodwill gesture on your part". The email concluded (at [37]): "As just discussed, I will not have a chance to draft the formal settlement agreement until Wednesday. In the meantime I'm happy to discuss any clarifications which you may have." Later that evening Mr Jankulovski sent an email informing Mr Mohareb that he was not going to proceed with the "proposed settlement agreement": [39]. 13Having referred to the evidence, the primary judge's conclusion was expressed in the following terms: "[56] I accept Mr Jankulovski's evidence that in the face-to-face discussions with Mr Mohareb on 4 February 2013, he felt embarrassed and intimidated and anxious to try and resolve the matter. I am of the view that while the writing of a cheque to Mr Mohareb may suggest a binding agreement had been reached, the discussions that took place on 4 February were still only 'in principle' discussions, as had been the previous settlement discussions. The difference this time was these discussions took place face-to-face rather than over the phone or via email. The act of writing the cheque was a demonstration of Mr Jankulovski's desire to, at that moment, make the whole matter, and Mr Mohareb, go away. [57] It is my view that while they agreed the broad terms of a settlement agreement, their intention was that there would be no concluded contract until a formal document was executed. Based on how both parties have conducted their negotiations previously, it is my view that they both wished to "reserve to themselves a right to withdraw at any time until the formal document is signed: Masters v Cameron at [11]. The agreement reached on 4 February 2013 falls within the third class in Masters v Cameron. Therefore, there is no binding contract. In the light of this finding, it is not necessary to cover duress." 14In his written and oral submissions to this Court Mr Mohareb contends that the primary judge erred in so concluding. He points out that the delivery of the cheque and handing over of the two USBs was consistent with performance of two of the principal obligations under the arrangement about which there was consensus. He submits that the fact that this occurred was consistent with there being a binding as distinct from in principle agreement. He also submits that the primary judge's finding that the parties did not intend to make a binding agreement was contrary to the evidence and acknowledgements of Mr Jankulovski that he subjectively intended to make an arrangement so as to bring the proceedings to an end. 15Neither of these submissions identifies an error on the part of the primary judge in the application of the relevant principles. Mr Mohareb's description of Mr Jankulovski's conduct in handing over the cheque and the USBs as "goodwill gestures" explains their delivery notwithstanding the absence of any binding agreement. If they were delivered in part-performance of an agreement already made there would be no reason to describe them as gestures of that kind. The fact that Mr Jankulovski may have intended or wished to make an agreement at that point in time is not relevant. What is relevant is what was said and done between the parties. 16The evidence of Mr Mohareb as to what he said to Mr Jankulovski (see [10] above) and the terms of the email exchange (see [11] above) record an expectation that there would be further negotiation and refinement of the matters which had been agreed in principle and that the outcome would be a signed formal settlement agreement. In the face of that evidence, and in the context of the earlier negotiations, which had been directed to the execution of a document but failed to achieve that objective, it was not shown on any seriously arguable basis that the primary judge's decision as to the absence of any binding agreement was wrong. In those circumstances there was no basis for granting leave to appeal from the order refusing to enforce such an agreement. 17Although it was open to Mr Mohareb to submit that a binding agreement had been reached in Mr Jankulovski's office, and that what happened thereafter was a repudiation of it by Mr Jankulovski, neither Mr Jankulovski's request not to bank the cheque, nor Mr Mohareb's response would, viewed objectively, have justified such a conclusion. 18In those circumstances, there was no basis for granting leave to appeal from the order refusing to enforce such an agreement. 19In relation to the order for security for costs, Mr Mohareb pressed the application for leave, but only faintly. The primary judge's power to make an order for security against a natural person was not in issue. Ordinarily, the circumstances which might justify such an order are exceptional: Rajski v Computer Manufacture & Design Pty Ltd [1983] 2 NSWLR 122. The primary judge made findings as to Mr Mohareb's conduct of the proceedings which were available on the evidence. Whilst there is a real question as to whether that conduct was of a nature sufficient to justify the exercise of the power in this case, the amount involved and the fact that there is currently an unsatisfied costs order in favour of Mr Jankulovski which exceeds that amount, justified a refusal of leave to appeal on that issue alone.