Owners Corporation Strata Plan 62285 & Ors v Betona Corporation

A material difference between the regime under the former legislation and that under the Civil Procedure Act 2005 is the subjection of the embargo to the operation of s 29(2). 16 The Civil Procedure Act 2005, s 29(1) replaces the Supreme Court Act 1970, s 110N(1). It provides that the court may make orders to give effect to any agreement or arrangement arising out of a mediation session. Section 29(2) is a new provision, no doubt designed to overcome the problem that arose in Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 and in Wentworth v Rogers [2004] NSWCA 109 to which reference will be made later in these reasons. It is in the following terms: "On any application for an order under this section, any party may call evidence, including evidence from the mediator and any other person engaged in the mediation, as to the fact that an agreement or arrangement has been reached and as to the substance of the agreement or arrangement." 17 It was submitted on behalf of the Owners Corporation and the residents that even if Betona's argument that the agreement reached between Mr Sachs and Mr Russo occurred in the course of the follow-up of the mediation hearing and therefore within the mediation session as defined, the Civil Procedure Act 2005, s 29(2) entitled them to adduce evidence of the agreement. 18 If the provisions of the Civil Procedure Act 2005 apply, I am of the view that that must be the result. 19 The Civil Procedure Act 2005, Sch 6, cl 10(a) is relied upon by Betona for the submission that the Supreme Court Act 1970, s 110P applies to the agreement reached between Mr Sachs and Mr Russo. It provides: "Subject to this Schedule and the regulations: (a) anything begun before the commencement of this Act or the uniform rules under a provision of the old legislation for which there is a corresponding provision in this Act may be continued and completed under the old legislation as if this Act had not been enacted."

In my view that provision does not apply to the instant circumstances. Its application is subject to the Schedule and the Schedule contains cl 5(1). But more significantly, cl 10(a) enables the continuation to completion of a step under the Supreme Court Act 1970. In this case completion has already occurred. The mediation hearing concluded in April 2005 and, even if the mediation session continued until the 21 October 2005 discussion between Mr Sachs and Mr Russo, there is now no step with respect to the mediation session that is to be continued and completed. There is no incomplete action with respect to the mediation session to which cl 10(a) can apply. 20 In my view, therefore, the evidence tendered by the Owners Corporation and the residents of the marking up of the deed with their variations, of the agreement of the Owners Corporation and the residents to pay all but $1,500.00 of the Gleeson fee, and the conversation between Mr Sachs and Mr Russo of 21 October 2005 are admissible. Supreme Court Act 1970 21 If, as I think, the Civil Procedure Act 2005 applies, it is unnecessary for me to determine the arguments that the Supreme Court Act 1970 rendered the evidence inadmissible. But if I be wrong in my view, I express my opinion on this issue as well. 22 In support of its submission that the Supreme Court Act 1970, s 110P(4) and s 110P(5) rendered the conversation between Mr Sachs and Mr Russo, the emails and the marked up deed inadmissible, reference was made to Rajski v Tectran Corporation Pty Ltd [2003] NSWSC 476 in which Palmer J rejected the tender of a number of documents relating to the conduct of a mediation. 23 Reference was also made to Wentworth in which Hodgson JA rejected the tender of a document signed by the parties during a mediation. At [28] his Honour indicated that such a document might express or imply consent that it be admitted into evidence in proceedings taken with a view to enforcing an agreement contained in the document. His Honour concluded, however, that the document contemplated the drawing up of a later deed so that whether it was immediately binding raised issues of the kind discussed in Masters v Cameron (1954) 91 CLR 353. 24 The documents in question in both those cases arose, or related to events, at a mediation hearing. The documents and conversation here in question occurred well after the completion of the mediation hearing. 25 Betona submitted that the documents in question and the conversation took place in the follow-up of the mediation hearing and were consequently made in the mediation session as defined, with the result that the exclusionary provisions in s 110P(4) and s 110P(5) of the Supreme Court Act 1970 applied. 26 Somewhat inconsistently, senior counsel for Betona tendered in evidence Mr Sachs' history of his dealings with Betona between 8 April 2005 and 23 August 2005, but then submitted that that evidence was inadmissible. He submitted that it would be artificial to determine admissibility in the absence of that history. 27 On 8 April 2005, Mr Sachs sent an email to a number of recipients, including Mr Russo, stating: "I enclose a further discussion draft of Heads of Agreement. This is based on the version that Malcolm Davies distributed, but incorporates what I understand to be the balance of the agreement achieved at the mediation."

On 26 May 2005, Mr George said: "Betona agrees that the mediation resulted in an agreement that only required documentation". It was submitted that agreement had been reached at the mediation subject only to a little "tinkering". It was submitted that these exchanges confirmed that the other evidence was in the course of the follow-up of the mediation and, in consequence, inadmissible. 28 In my view, the extent of the variations in the marked up deed could not be described as mere "tinkering". The history of Mr Sachs' dealings with the representatives of Betona show considerable exchanges in developing the terms with which the parties ultimately agreed. 29 Notwithstanding the expressions by Mr Sachs and Mr George that agreement had been reached at the mediation, later events show that that was far from the case and considerable negotiation took place thereafter. Those negotiations did not have their origin in agreement reached at the mediation hearing. They arose in the course of subsequent negotiations as to the appropriate terms of the deed. The fact that negotiations as to appropriate terms continued well after the mediation hearing concluded, indicates that no agreement as to those terms occurred at the hearing. 30 To follow-up connotes something done to reinforce or develop an initial action. I would not have thought that the process of negotiating appropriate terms of the deed, subsequent to the conclusion of mediation hearing, constituted a follow-up of action taken at the mediation hearing. No doubt it might be said that an agreement to agree was reached at the mediation hearing. But the process of arriving at final agreement constituted, in my view, a set of new negotiations between the parties. They did not hark back to the mediation session. When Mr Sachs and Mr Russo spoke on the telephone they were not referring back to terms agreed at the mediation session. They were seeking to finally resolve amendments to earlier heads of agreement proposed by the Owners Corporation and the residents and excluding amendments proposed by other parties. 31 In the absence of some form of reference back to the events of the mediation hearing, I am of the view that the conversation between Mr Sachs and Mr Russo could not be described as something said in steps taken in the course of the follow-up of the mediation hearing. Nor could the emails and the marked up deed be described, in my view, as documents prepared for the purposes of, in the course of, or as a result of steps taken in the course of the follow-up of the mediation hearing. 32 In consequence, I am of the view that neither the emails and the deed were made for the purposes of, in the course of, or as a result of a mediation session, nor the telephone conversation between Mr Sachs and Mr Russo was made in a mediation session in terms of the Supreme Court Act 1970, s 110P(1) and the embargoes against the giving of that evidence in s 110P(4) and s 110P(5) do not apply. 33 I am fortified in this decision by earlier authority under the Farm Debt Mediation Act 1994, s 15(1) which provided that evidence of anything said or admitted during a mediation session and a document prepared for the purpose of, in the course of, or pursuant to, a mediation session was not admissible in any proceedings in a court or before a person or body authorised to hear and receive evidence. Section 15(2) contained a definition of a meditation session in the like terms to the Supreme Court Act 1970, s 110P(1). 34 In State Bank of New South Wales v Freeman, unreported, NSWSC, 31 January 1996, Badgery-Parker J at 17 expressed the opinion, as an obiter dictum, that a document prepared at the conclusion of a mediation recording an agreement reached at the mediation was to be regarded as one that came into existence after the mediation session had concluded.

35 In Commonwealth Bank Australia v McConnell, unreported, NSWSC, 24 July 1997, Rolfe J at 28 agreed with Badgery-Parker J because otherwise a party could reach an agreement at a mediation and later refuse to abide by it and preclude the agreement from being tendered. 36 These sentiments are consistent with what Hodgson JA said in Wentworth about implied consent to a final written agreement reached during a mediation hearing being admitted into evidence in proceedings taken with a view to enforcing the agreement contained in the document. 37 In Gain, one argument sought to be raised was that no reasonable administrator in the position of the New South Wales Rural Assistance Authority could have concluded that a satisfactory mediation had taken place. That argument depended, however, upon evidence of what had occurred during the meditation. The Court of Appeal concluded that the Farm Debt Mediation Act 1994, s 15 rendered that evidence inadmissible, notwithstanding, as Cole JA observed at 262, that the effect of s 15 was to severely restrict any capacity to mount successfully a challenge by way of judicial review because it excluded the tendering on such a challenge of the material referred to in that section. That is not the situation in the instant circumstances where what was sought to be tendered occurred months after the mediation hearing had concluded. 38 In Bell v Mediate Today Pty Ltd, unreported, NSWSC, 29 October 1998, Barr J was concerned with a notice to produce documents in relation to a mediation. Having referred to Freeman and McConnell his Honour said at 6: "Bearing in mind the purposes of the Act and the section, namely to make attendance at meditation in appropriate circumstances a condition precedent to the enforcement of a farm debt and, in order to further the parties' chances of agreeing at mediation, to preserve the confidentiality of things said and written, I think that their Honours' approach is correct. I acknowledge the difficulty referred to by Badgery-Parker J about what subs (2) means in its reference to steps taken "in the course of the follow-up of a mediation session", but I do not think that that expression includes the preparation of heads of agreement or terms of settlement. That is because by the time that step is taken, the mediation session has come to an end. The preparation of such documents does not "follow-up" the mediation session. Such documents are not prepared pursuant to a mediation session. I think that to construe the section so as to exclude from evidence terms of a settlement reached at a mediation would go beyond the purposes of the Act and might even defeat them, as Rolfe J has observed." 39 It was submitted that his Honour's decision was wrong. I reject that submission and endorse what his Honour said. He was dealing with a document brought into existence after the conclusion of the mediation hearing. 40 Macready AJ allowed in evidence correspondence concerning a proposed settlement engaged in after the meditation had concluded, in ANZ Banking Group Ltd v Ciavarella [2002] NSWSC 1186. His Honour held that the documents were not a follow-up to a mediation session. 41 Counsel for Betona sought to tender position papers prepared before and for use at the mediation hearing. In my view those papers came into existence as steps taken in the course of making arrangements for the mediation session in terms of the definition in the Supreme Court Act 1970, s 110P(1) and are inadmissible in terms of s 110P(5). 42 There was some suggestion in written submissions on behalf of Betona that a mediation agreement for the purposes of the administration of the mediation, setting out the basis for the appointment of the mediator, his functions, the conduct of the meditation and other relevant matters would be tendered in evidence. That tender did not, however, occur. Had it, I would have rejected the document as one prepared for the purposes of, or in the course of, a mediation session. 43 There was some suggestion that the document was admissible under the Supreme Court Act 1970, s 110Q. But that section is confined to disclosure of information by a mediator. 44 The consequence is, that had I to consider the matter under the Supreme Court Act 1970, I would have admitted the emails, marked up deed and evidence of the conversation between Mr Sachs and Mr Russo as not falling within the exclusionary provisions of the Supreme Court Act 1970, s 110P(4) and s 110P(5) but would have excluded the position papers under s 110P(5) and also the mediation agreement had it been tendered. Solicitor's Authority 45 Bernard Geoghegan was the sole director of Betona. He swore in an affidavit that at no time did he instruct his lawyers to agree to undertake any rectification work to the unit 13 patio, and at no time did Betona agree to undertake any rectification work to unit 13. The marked up deed required Betona to carry out that work. 46 Mr Russo signed consent orders on 25 August 2005 in which it was noted that matters that were not resolved at the mediation had since been resolved. Mr Geoghegan said he would not say that Mr Russo lacked instructions to sign that document. 47 In Donellan v Watson (1990) 21 NSWLR 335 at 342, Handley JA noted that a solicitor retained to conduct litigation ordinarily had both implied and ostensible authority to bind the client to a comprise of those proceedings, and any instruction from the client that restricted the solicitor's authority to comprise the proceedings would only affect the other party if on notice of that restriction. There was no suggestion that Mr Sachs or anyone else on behalf of the Owners Corporation and the residents were aware of any restriction on Mr Russo's ability to compromise the proceedings. 48 Betona sought to rely upon Harvey v Phillips (1956) 95 CLR 235 at 243 where the High Court contrasted the situation before it with a case where a comprise had been agreed upon by counsel acting only in pursuance of his apparent or implied authority from his client but, owing to a mistake or misapprehension, in opposition to his client's instructions or in excess of some limitation that had been expressly placed on his authority. In such a case, in all events until the judgment or order embodying comprise had been perfected, authority existed in the court to refuse to give effect to, or act upon the compromise and, perhaps, to set it aside. 49 But Mr Russo did not give evidence and no basis was established for any mistake on his part. I see no reason to depart from the ordinary rule that Mr Russo had the ostensible authority to bind Betona to the agreement. Masters v Cameron 50 In Masters v Cameron (1954) 91 CLR 353 at 360-361 the High Court, in an often quoted passage, identified three different situations in which parties in negotiation reach agreement that the terms of their negotiation should be dealt with by a formal contract: "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. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution… Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own." 51 In Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628, McClelland J suggested a fourth class additional to the three mentioned in Masters as recognised in Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317: "One in which the parties are content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms." 52 Betona submitted that the case fell within the third category. Locnere Pty Ltd v Jakk's Bagel & Bread Co Pty Ltd [2003] NSWSC 1123 was cited. In that case, following a conciliation conference in the Industrial Commission, Schmidt J noted: "1. Proceedings have been compromised between the parties. 2. Subject to the entry by the parties into a mutually agreeable Deed, the Applicant to file a Notice of Discontinuance. 3. Liberty to apply on three days' notice."

It was submitted that the case fell within the first category of Masters . Palmer J rejected that submission. There was no evidence as to the terms that were actually agreed at the conciliation conference and, more importantly, the note taken by Schmidt J indicated that what was done at the conciliation conference was not regarded as final and effective to resolve the dispute between the parties. 53 In my view the contrary is the case in the instant circumstances. The terms of the marked up deed had been agreed by the Owners Corporation and residents subject to the variation with respect to the Gleeson fees. The conversation between Mr Sachs and Mr Russo, which was not challenged in cross-examination, made it clear, not only that as between the Owners Corporation, the residents and Betona, finality had been reached in agreeing upon all the terms of the bargain, but also that those terms were accurately stated in the deed of settlement and release when the two further amendments were made to it. 54 In my view, on 21 October 2005, Betona became bound by the terms of the deed of settlement and release as further amended on that day regardless of whether it executed that document. Discretion 55 Betona submitted that I should not order specific performance of the agreement as it was contrary to the undisputed evidence of Betona that it never agreed to the inclusion of the rectification work on unit 13. It was submitted that it would unfairly operate to create an injustice to Betona and, rather then put an end to the litigation, it could potentially operate to create further litigation. It was further submitted that it would be contrary to the express intentions of all parties as documented in the mediation agreement. I have already mentioned that that agreement was not in evidence. 56 In National Benzole Co Ltd v Gooch [1961] 1 WLR 1489, a defendant agreed to abandon an appeal. His solicitors drew up a document requesting that the appeal be dismissed and struck out of the list. There were added in writing the words: "with no orders as to costs". The defendant's solicitors endorsed the document: "we consent" for the solicitors for the plaintiff. Subsequently, the defendant wished to restore the appeal. The Court of Appeal held that the appeal remained on foot until the formal order was drawn up and entered. Until that point was reached, the court had a discretion to withdraw its previous instructions in relation to the order and make such orders as it thought fit. But because the matter was not a mere consent, but a contract between the parties, consideration for which was no order as to costs, in the absence of grounds on which it could be alleged that the agreement was void or voidable, it was not a proper case for the court to exercise its discretion to restore the appeal. At 1494, Diplock LJ said: "Here, as my Lords have pointed out, there was an agreement entered into between the parties for good consideration similar to an agreement compromising an action. It was conceded by Mr Percival that there were no grounds on which it could be alleged that that agreement was either void or voidable. It was one which would stand. While I agree with my Lords that this court has a full discretion as to what it will do until the final order is drawn up, I find it difficult to conceive of any case where it would be a judicial exercise of that discretion to allow a party to go on with an appeal after having entered into a binding contract for good consideration not to do so." 57 That passage was cited with approval by Kirby P with whom the other members of the Court of Appeal agreed in Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 at 579-580. 58 In the instant circumstances there was an agreement of compromise for valuable consideration and I see no appropriate basis upon which to exercise a discretion against making an order for specific performance. Conclusion 59 In my view, the Civil Procedure Act 2005, Sch 6, cl 5(1) and not cl 10(a) applies to the proceedings and the emails, the marked up deed of settlement and release and the conversation between Mr Sachs and Mr Russo of 21 October 2005 are admissible under s 29(2). The agreement reached between the solicitors on that day was not, in my view, in the course of the follow-up of the mediation and did not occur in the mediation session as defined in the Supreme Court Act 1970, s 110P(1) and would not have been excluded from evidence had s 110P(4) and s 110P(5) applied. Mr Russo had ostensible authority to agree to the terms of the deed of settlement and release and there was no evidence of any mistake or misapprehension on his part that would enliven what was said in Harvey v Phillips (1956) 95 CLR 235 at 243. In my view the agreement falls within the first category in Masters v Cameron (1954) 91 CLR 353 at 360-361. I do not see any basis for exercising a discretion against ordering specific performance. 60 I will order that the deed of settlement and release as amended by agreement on 21 October 2005 be specifically performed. I will hear the parties on the appropriate terms of such relief and I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons.

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