Acceptance of that settlement offer on the part of Knox Street Developments Pty Limited insofar as its terms require its agreement.
Preparation of acceptable documentation consistent with the terms of the settlement.
13 It was not until Monday 27 June 2004 that Beswick wrote to LC, with a copy to TF, in the following terms:
We refer to your second without prejudice offer to Flexman dated 24 June 2004 and advise our client Knox Street Apartments Pty Ltd consents to the proposals therein.
14 TF wrote to LC on 29 June 2004 referring to TF's facsimile "accepting your client's settlement offer set out in your facsimile of 24 June 2004" and advised that it understood that Knox "has also conveyed acceptance of those terms." The letter continued:
Accordingly, we would appreciate it if you could proceed to prepare relevant documentation to give effect to the settlement and submit them to both our office and Beswicks for consideration and approval.
Meanwhile, in order that our client might formalise the Bank Guarantee, it will be necessary for his Bank to inspect the three apartments. We would appreciate it if you could enquire of your client as to how access might be made available to a Bank Valuer for that purpose.
15 On 8 July 2004 LC responded to TF's letter of 29 June 2004 in the following terms:
We refer to your letter dated 29 June 2004 and now enclose draft Consent Orders/Terms of Settlement for your approval.
We have also forwarded a copy of the draft Consent Orders/Terms of Settlement to Beswick Solicitors and Watson & Watson for their approval.
16 Although the draft Orders forwarded by LC to the other parties to the Second Cross-Claim on 8 July 2004 are not in evidence, it will be necessary to analyse the draft Orders that are in evidence in which Kimberley is referred to as "KSL" and Knox is referred to as "KSA". The earlier set of draft Orders (the earlier Orders) that are in evidence appear to have been circulated in August 2004. The final version as signed by all parties except Kimberley, were circulated on 30 September 2004 (the final Orders). Notwithstanding the discouragement by the Court of Appeal of appending cross-referenced Schedules to judgments, it seems to me that the most efficient manner in which to assist the necessary analysis in this case is to set out the earlier Orders in Schedule 1 and the final orders in Schedule 2 to this judgment: Digi-Tech (Australia) Ltd v B rand & 5 Ors; Digi-Tech (Australia) Ltd v Kelliher & 3 Ors; Kalifair Pty Ltd & 3 Ors v Digi-Tech (Australia) Ltd & 3 Ors; McLean Tecnic Pty Ltd & 1 Or v Digi-Tech (Australia) Ltd & 3 Ors [2004] NSWCA 58 at par 290.
17 On 13 July 2004 TF wrote to LC referring to the draft orders and advising LC that they considered that amendments were necessary "to give full effect to the agreement between the parties". That letter suggested that certain lots (66, 98 and 106) should be included in the Orders as they were the garages attached to the units. That amendment related to a proposed paragraph 1. The next amendment suggested by TF was to add to paragraph 2 the words "and execute and deliver to Flexman such consents as may be required in order that the Certificates of Title and Transfers to the units may be delivered by Knox to Flexman and in order that the said Transfers may be registered".
18 TF also suggested that paragraph 6 should be deleted and in its place the following paragraph should be substituted:
6. In proceedings 50049/02 upon the second cross claim there be Judgement for Flexman against KSA for damages for lost opportunity, loss of benefit of possession of the units and stamp duty on the contracts for sale dated 22 January 1999 together with interest agreed in the sum of $297,197.75.
19 TF suggested the insertion of the word "otherwise" after the word "be" in line 3 of paragraph 7 and that at the end of paragraph 10 there be added the sentence "In the event that KSL calls upon the bank guarantee, Flexman shall be at liberty to enter Judgement against KSA in the amount so called upon. In the event KSL fails to obtain Judgement against KSA in respect of the first cross-claim or third cross-claim then Flexman shall be at liberty to recall the bank guarantee".
20 TF suggested the deletion of the words "foregone rental income" in line 4 of paragraph 12, and the insertion of the words "loss of benefit of possession of the units". There was also the suggestion that lot numbers 66, 98 and 106 be included in line 5 of paragraph 12 with the addition at the end of line 5 of the words "and any amount paid or payable to KSL under the aforesaid bank guarantee".
21 TF also suggested amendments to paragraphs 13, 14 and 15. It was suggested that in paragraph 13 the words "save as provided by these terms" be inserted at the beginning of the paragraph. It was suggested that the words "save as provided by paragraphs 10 & 15 of these Terms" be inserted at the beginning of paragraph 14. Finally it was suggested that after the word "withheld" where it secondly occurred in line 3 of paragraph 15, there be inserted the words "and the outcome of those proceedings is not more favourable to Flexman than the provisions which would have been made by such compromise, then".
22 TF asked LC to consider the proposed amendments and to let them have a response at the earliest opportunity. TF also advised that a copy of their letter had been sent to Beswick and Watson.
23 On 14 July 2004 LC wrote to TF in terms including the following
Before we give consideration to the proposed amendments, we point out that the amendments to paragraphs 10 and 12 do not make sense.
In relation to the proposed amendment to paragraph 10, according to your proposed amendments to paragraphs 6 and 7, judgment is already being entered against KSA on the Second Cross-Claim and the Second Cross-Claim is otherwise dismissed against KSL and Esber. Also, the proposed amendment to paragraph 10 is unlikely to be ordered by the Court and therefore should be part of the agreement noted by the Court in Part B of the Consent Orders/Terms of Settlement.
In relation to the proposed amendment to paragraph 12, paragraph 12 relates to any judgment in favour of Knox Street Apartments against Kimberley Securities Limited and therefore the Bank Guarantee cannot be called upon.
In addition, whilst we are prepared to give consideration to the proposed amendment to paragraph 6 as an additional order, we are not prepared for same to be in lieu of and/or to delete the existing paragraph 6.
24 On 27 July TF responded to LC's letter of 14 July in the following terms:
1. The liberty to enter Judgment which is provided for by paragraph 10 is intended to be in addition to the judgment provided for in paragraph 6, as the sum of $297,197.75 does not include any amount to cover the head of liability which would arise in the event that the Bank Guarantee were called upon.
However, we are prepared to accept the suggestion that this provision be moved down to the agreement section. Accordingly the existing clause 12 and following clauses would be renumbered as clauses 13 and following and a new clause 12 would be inserted after the heading "B" in the following terms:
12. In the event that KSL calls upon the abovementioned bank guarantee, then Flexman shall be at liberty (notwithstanding paragraph 7 of these orders) to enter judgment against KSA for the amount so called upon, in addition to the amount provided for by paragraph 6 hereof.
The words,
"In the event that KSL fails to obtain a judgment against KSA in respect of the first cross-claim or third cross claim, then Flexman shall be at liberty to recall the bank guarantee"
should be added to paragraph 10 in order to ensure that the Flexmans do not encounter difficulty with their bankers in terminating the bank guarantee in the event that KSL fails to obtain a judgment against KSA on either of those cross claims.
2. In relation to your paragraph 6, we point out that the Flexmans are not parties to either of the first and third cross claims. We therefore do not appreciate what this clause is intended to achieve. It would assist us if you would explain its purpose. We would also point out that there are no pleadings in matter No 1212 of 2002, that matter having been commenced by Summons.
25 On 28 July 2004 TF requested from Beswick copies of the tenancy agreements of the subject apartments and details of the rental income. TF advised Beswick that its client was "currently putting in place the bank guarantee" and would contact Beswick once matters had been completed "to arrange a formal settlement". TF made a further request for the tenancy agreements and the detail of the rental income from Beswick on 30 July 2004. On the same day TF suggested to LC and Beswick a further amendment to paragraph 10 of the Consent Orders by the substitution of the word "of" for the words "not less than" in line 4 of that paragraph.
26 On 9 August 2004 TF once again wrote to Beswick advising that it had not received the tenancy agreements and rental accounting details. That letter included the following:
It is not surprising that our clients are becoming increasingly sceptical that the delay in arranging for release of those documents is deliberate and intended to withhold them. It is certainly hoped that such scepticism is unwarranted.
More importantly, we have been advised by Les Pozniak that he is to confer with counsel later today and expects to be able to sign off on the amendments to the terms of Settlement tomorrow. Will you please confirm your client's agreement to the Terms of Settlement as amended in accordance with correspondence between this firm and Landerer & Company.
Insofar as our clients are concerned the requisite bank guarantee is available and undertaking signed.
27 On 11 August 2004 TF wrote to LC requesting an "urgent response" in relation to proposed amendments following Mr Pozniak's (of LC) conference with his counsel Mr Sirtes the previous afternoon. On 12 August 2004 Beswick sought from TF clarification of which version of the Consent Orders they should be reviewing. On that date Beswick also provided to TF copies of the tenancy agreements and rent statements.
28 On 13 August 2004 TF sent executed Transfers in respect of the three apartments to Beswick under cover of a letter which stated:
Preparatory upon settlement of the Supreme Court proceedings will you please arrange to have the enclosed Transfers executed and thereafter confirm that such executed transfers will be held by you pending settlement.
29 On 17 August 2004 TF wrote to LC advising that counsel for the Flexmans, Mr Smallbone, had reported that he had called counsel for Kimberley, Mr Sirtes, on the previous Friday and that such call had not been returned. TF requested LC to assist by having counsel deal with the proposed amendments as a matter of urgency because the delay was "now unreasonable and unacceptable". The letter continued:
Insofar as our clients are concerned they are ready to proceed in that the bank guarantee is available subject to agreed Terms, availability of executed Transfers and Certificates of Title to the apartments.
It is now almost two months since the agreement to settle these proceedings insofar as our clients are concerned was made. With respect your client and the other parties have a duty to conclude the agreement without further delay.
30 On 18 August 2004 Beswick advised TF that its client would execute the Transfer upon settlement of the Consent Orders and advised that they "look forward to your proposed Orders as settled with Kimberley Securities Ltd".
31 On 20 August 2004 LC wrote to TF referring to TF's letter of 17 August 2004 and enclosing the further amended Consent Orders "for your approval and, if approved, for execution". It seems reasonable for me to conclude that the Orders enclosed with this letter were a form of the earlier Orders in Schedule 1 with some underlining. On 23 August 2004 TF forwarded those amended Consent Orders to Watson "for your approval" requesting any comments at the earliest opportunity. The Orders were also sent to Beswick on that day, with a request that they peruse the Orders and "confirm that they are in order to be settled and re-engrossed".
32 On 24 August 2004 TF wrote to Beswick in terms that included the following:
Given the period of time which has elapsed since the parties agreed to settle insofar as our clients are concerned, we would appreciate your prompt attention to considering and drafting the amendments contained in the faxed documents.
33 On 26 August 2004 TF wrote once again to LC advising that there was one notable omission from paragraph 7 being the words "damages for" to be inserted prior to the words "lost opportunity". It is obvious that the earlier Orders in Schedule 1 were prepared after that letter, as they have taken up that suggestion. It seems probable that the earlier Orders were forwarded to TF by LC under cover of its letter of 27 August 2004.
34 On 30 August 2004 TF requested an urgent response from Beswick in relation to the Terms of Settlement as they intended to "pursue finality of this aspect of the proceedings as they affect my clients during the course of this week". A similar facsimile was sent to Watson on 30 August 2004.
35 On 1 September 2004 Watson advised that the Terms of Settlement were "acceptable to our client". On 3 September 2004 Beswick advised that they would not be able to respond formally in relation to the Terms of Settlement until the following Monday by reason of their counsel's commitments.
36 On 6 September 2004 Beswick wrote to TF suggesting the following:
1. Add a further paragraph:
19. KSL and KSA agree that the parties' consent to the orders and terms in paragraphs 4, 5, 8, 9 and 17 is given without prejudice to the claims made in the first and third cross claims.
2. Paragraphs 6 and 10 - The objective of these paragraphs is not clear to us. Our client does not agree to paragraphs 6 and 10. Our client intends to rely upon the notifications of surcharges and falsifications filed and served by Flexman and may rely upon certain affidavit evidence already sworn. We do not see how you can 'withdraw' an affidavit.
3. Substitute the following for paragraph 13:
13. If KSL validly calls upon the Bank Guarantee, then, notwithstanding paragraph 8 and paragraph 16, Flexman shall be subrogated to KSL's rights under the judgment or amount payable by way of settlement/compromise secured by the Bank Guarantee.
4. In paragraph 18 substitute the words'KSL's and KSA's ' in place of the words 'successful party's' in line 5.
5. Delete paragraph 18. We would prefer to include something to this effect in your clients' collateral undertaking not to enforce the Judgment.
37 It is apparent that LC was unaware that Beswick had forwarded an identical letter to TF because LC forwarded a copy of the letter from Beswick to TF on 8 September 2004.
38 On 13 September 2004 TF responded to Beswick with a copy to LC and Watson, in the following terms:
Firstly, can we say that we cannot see the need for any of the amendments you seek to the Terms of Settlement. The agreement to be encapsulated in the Terms occurred nearly three (3) months ago and with respect should be concluded as a matter of absolute urgency. Your client is the only obstacle to this matter being concluded.
Numbered paragraph 1: Whilst we see no need for inclusion of the proposed clause our clients agree to its inclusion.
Numbered paragraph 2: If your objection to paragraphs 6 and 10 of the Terms specifically related to the matters referred to in your letter it seems to us that there is a simple alternative course for your client to take to overcome the difficulties you perceive.
Numbered paragraph 3: Our clients do not agree to alter the terms of paragraph 13 of the Terms.
Numbered paragraph 4: Whilst we cannot appreciate the need for amendment to paragraph 18 our clients will agree to what is sought.
Numbered paragraph 5: In light of the above the proposed deletion of paragraph 18 is incomprehensible and will not be agreed to.
A copy of this letter will be send to Landerer & Company and Watson & Watson.
We cannot emphasise enough that our clients are becoming increasingly impatient with your client and in particular its directors at the length of time it has taken for the formal Terms of Settlement to reach this point. Accordingly, we are instructed that unless your client agrees to sign Terms of Settlement in terms as set out in the draft as amended by the responses in this letter as a matter of urgency our clients intend to review their position. If as has previously been the case you need to further consult your Counsel we urge you to have your Counsel to confer with David Smallbone and Greg Sirtes forthwith. With respect, if this matter is not finally resolved without any further delay it is our view that your client and your firm may be judged to be guilty of unreasonably delay.
We also need to mention that in the almost three (3) months since the settlement was reached your client has continued to unwarrantedly benefit from the rental income from the apartments which our clients became entitled to by virtue of the settlement. It could well be implied that this is a motive for your client to delay this matter being concluded.
39 On 15 September 2004 Beswick advised TF as follows:
1. [In respect of the additional paragraph 19]. - The purpose of this amendment [is] to prevent the interpretation of the costs orders as some form of acknowledgement by our client that the amounts in the joint venture accounts pertaining to the legal costs of the litigation are properly included as a joint venture expense.
2. Paragraphs 6 and 10 - The objective of these paragraphs is not clear to us. Our client does not agree to paragraphs 6 and 10. Our client intends to rely upon the notifications of surcharges and falsifications filed and served by Flexman and may rely upon certain affidavit evidence already sworn. We do not see how you can 'withdraw' an affidavit.
Will your clients authorise the use of these documents and if called upon to do so, undertake to re-swear any affidavit evidence required by our client in the prosecution of its cross claim?
3. [As to the substitution of paragraph 13] - Our client presses this amendment in the interests of clarity of intent. We understand the existing clause to have the same intended effect. Please advise if you disagree.
4. Delete paragraph 18. We would prefer to include something to this effect in your clients' collateral undertaking not to enforce the judgment. Your clients are able to exert sufficient control over the settlement process in circumstances where their undertaking not to enforce the judgment is conditional upon their consent to any settlement.
Although your clients undertake to pay costs, what if the ultimate judgment between KSL and our client is less favourable to our client than the terms of settlement rejected by your clients? Will your clients also underwrite this type of loss?
We are surprised that you have seen fit to disclose and/or discuss with Kimberley the collateral agreement between our respective clients concerning the enforcement of the judgment.
40 Beswick advised that it understood the Flexmans' frustration with the slow progress but rejected any criticism of their client.
41 On 20 September 2004 TF advised Beswick that they were now instructed that the Flexmans were willing to amend the Terms of Settlement in the following way:
Par. 6. Omit the word 'affidavits'.
At the end of par 6, add the words,
"Provided that this clause does not prevent KSA from alleging, denying or not admitting in its own pleadings any fact alleged, denied or not admitted in the Flexmans' pleadings and provided that this clause does not prevent KSA from giving any notice on its own account or from relying on any notice which it has given or received, or from relying on any of the Flexmans's notices to the extent (if any) that such notices affected the rights of any person."
In view of the limited purpose of par. 6 and the drafting skill required to ensure that it achieves its intended purpose and no more, Flexman would prefer to omit the whole of par. 6. However, the above mentioned changes would be acceptable.
Par. 7. If this amendment has not already been made, insert the words 'damages for' immediately before the words 'lost opportunity'.
Par. 10. At the end, add the words,
"Provided that this clause does not prevent KSA from alleging in its own notices any or all of the same falsifications, surcharges and grounds, as those alleged in the Flexmans' notices."
In view of the limited purpose of par. 10 and the drafting skill required to ensure that it achieves its intended purpose and no more, Flexman would prefer to omit the whole of para. 10. However, the above mentioned changes would be acceptable.
Par 13. Delete the existing par. 13 and substitute a new paragraph 13 as follows:
"13. If KSL validly calls upon the Bank Guarantee, then, notwithstanding paragraph 8 and paragraph 16, Flexman shall be subrogated to KSL's rights under the judgment or amount payable by way of settlement/compromise secured by the Bank Guarantee, and Flexman shall be entitled to enforce any such judgment or agreement in favour of KSL against KSA and shall be entitled to recover the proceeds thereof to the extent of the amount paid under the Bank Guarantee and interest thereon, and KSA consents to any judgment necessary for such enforcement."
Par. 18. Delete Paragraph 18
Insert a new par. 18 as follows:
"18. KSL and KSA agree that the parties' consent to the orders and term in paragraphs 4,5,8, 8 and 17 is given without prejudice to the claims made in the first and third cross claims."
Will you please urgently confirm that the above amendments satisfy all your client's concerns and that the terms of Settlement can be re-engrossed accordingly subject to the solicitors for Kimberley Securities Limited having instructions to consent to the said amendments.
A copy of this letter is being forwarded to Landerer & Company.
42 Also on 20 September 2004 TF provided LC with a copy of its letter to Beswick with advice that its content represented a compromise, and requested LC to obtain urgent instructions as to whether Kimberley had any objections to those amendments. TF also provided a copy of that letter to Watson and sought an urgent response.
43 On 21 September 2004 LC wrote to TF in the following terms:
We refer to your letter dated 20 September 2004 and now enclose Consent Orders/Terms of Settlement in final form for execution.
Please note as follows:
1. the proposed amendments to paragraphs 6 & 10 are not agreed as they defeat the very purpose of those paragraphs; and
2. the proposed amendments to paragraphs 7, 13 & 18 are agreed subject to the word "validly" in the first line of substituted paragraph 13 being deleted.
44 On 23 September 2004 TF wrote to Beswick confirming the agreement that clause 6 be deleted; that clause 10 be amended to delete all the words after "withdrawn" and substituting the words "by the Flexmans"; that clause 7 and 13 as amended by Beswick be included; and the amendment to clause 13 be included subject to deleting the word "validly". That letter continued:
We understand that the only impediment to Terms of Settlement in this finally agreed form being executed by your client is obtaining instructions from one director who is presently overseas. Will you please endeavour to obtain those instructions by the most expeditious means available to you.
45 On 23 September 2004 Mr Pozniak of LC sent an email to Beswick, Watson and TF in the following terms:
Further to our letter dated 21 September 2004, we attach final form of Consent Orders/Terms of Settlement for execution.
Please note as follows:
1. The former paragraph 6 has been deleted altogether; and
2. The former paragraph 10 (now paragraph 9) has been amended.
Please now return orders/terms duly executed at your earliest convenience .
46 Also on 23 September 2004 TF wrote to Beswick advising that LC had informed them that Kimberley wished to add the words "and be taken off the Court file" after the word "Flexmans" in clause 10 of the orders. TF advised Beswick that they had no objection, and requested Beswick to include this amendment when obtaining instructions from the director of Knox who was, at that time, overseas.
47 On 24 September 2004 Mr Bagley of TF sent an email to Mr Pozniak in the following terms:
We are fine with the Terms except you need to amend para 12 by deleting 8 & 16 and substituting 7 & 15 (para re numbering).
I am pressing Tim Lynch to finalise his instructions today and signify his client's agreement to the latest draft.
48 On 27 September 2004 TF advised Watson that all parties other than the Esbers had signified agreement to the terms in the form emailed by LC on 24 September 2004. TF requested urgent confirmation of the Esbers' agreement in their "personal capacity" to sign the terms "so that this long running matter can be settled and brought to a final conclusion during the course of this week".
49 On 28 September 2004 TF wrote to Beswick referring to the terms of settlement signed on behalf of Knox and advising that the terms would be signed by the Flexmans that afternoon and then forwarded on to Watson for the Esbers to sign. The letter stated "the final step will [be] for them to be signed by or on behalf of Landerer & Company's clients". The letter continued "it will then enable the signed terms to be filed in the Registry simultaneously with carrying out of the steps necessary to give effect thereto". The letter also advised that in respect of the lots comprising the three apartments, TF would require to be handed to them three discharges of mortgage and four withdrawals of caveat. TF also advised LC of these requirements on 28 September 2004. On the same day TF advised Beswick that in addition to the discharges of mortgage and withdrawals of caveat they would require "to be handed over on settlement", transfers of the three lots, three residential leases and Notices of Attornment.
50 On 29 September 2004 TF sent four copies of the Consent Orders to Watson for signature and requested that after they were signed they be forwarded to Mr Pozniak for signature. That letter concluded:
Given the lengthy period of time that has transpired since the agreement to settle was reached, we would greatly appreciate your urgent attention in dealing in this matter.
51 The Orders that were circulated and signed by all parties other than Kimberley, the final Orders, are set out in Schedule 2 to this judgment.
52 On 30 September Mr Pozniak sent a further email to Beswick, Watson and TF. That email was in the following terms:
We refer to the letters from Thurlow Fisher dated 28 and 29 September 2004 and now advise that we are organising the discharge of mortgages 5843332 (Law Mortgages Queensland), 6448653 (Permanent Trustee Australia Limited) and 5865100 (Residential Housing Corporation Limited) together with the Withdrawal of Caveats 8588202 (Investmentsource Corporation), 8950455 (Josephine Bito-On) and 8311283 (Kimberley Securities).
In the meantime, we now enclose for execution copies of the following:
1. Consent Orders/Terms of Settlement in proceedings no. 1212 of 2002; and
2. Consent Orders/Terms of Settlement in proceedings no. 50049 of 2002.
53 On 19 October 2004 TF wrote to Beswick requesting an authority from Knox addressed to Bolzan & Dimitri authorising them to release Certificates of Title to TF upon payment of their costs to be held in escrow pending completion. TF requested a "settlement" be arranged for the following Thursday at a venue to be advised by Beswick. Further TF advised that upon the Flexmans' bank providing the relevant bank guarantee they would in return require the documents referred to earlier to be handed over to TF. On 20 October 2004 Beswick provided a completed authority for the handing over of the Certificate of Title.
54 The four Cross-Claims were listed for hearing on 22 November 2004. It is apparent that LC served a Motion on TF returnable before me on 5 November 2004 seeking the vacation of those hearing dates. In response to that service TF wrote to LC in the following terms:
Our clients are parties only to the Second Cross-Claim, which has been resolved and is the subject of executed Terms of Settlement currently held by you.
In order for our clients to formulate their response to your motion for vacation of the hearing dates, our client requires from your clients an unequivocal acknowledgement that the Second Cross-Claim has been settled as per the Terms of Settlement executed by all the parties to the proceedings and held by you.
If you are now of the view that the Second Cross-Claim has not been settled, which view would be contrary to that held by our client and contrary to the documentation exchanged between the parties, what is the reason for such a view?
Do you acknowledge that the parties have an agreement? If not, why do you assert there is no agreement?
Our client has at all times been ready willing and able to perform under the Terms of Settlement and remains so.
We have obtained a Guarantee and we seek from you an indication from you as to when you will be in a position to settle.
We note that settlement was agreed to take place prior to the scheduled hearing date.
In the event that your client declines to now perform the agreements, we are instructed to prepare an application for specific performance of the Terms of Settlement, which we will seek to file on Friday and have heard on an urgent basis.
In any event, our response to your Motion depends on your answers to the issues raised in this letter.
Please let us have your response to our queries as a matter of urgency.
55 On 4 November 2004 LC wrote to TF in the following terms:
We are not holding executed Terms of Settlement in relation to the Second Cross-Claim as alleged.
As the Terms of Settlement have not been executed and exchanged, we deny that the Second Cross-Claim has been settled as alleged.
Having regard to the action by the ATO in relation to the outstanding GST, it is plain that events have overtaken the parties negotiations in relation to settling the Second Cross-Claim.
Even if the parties had agreed to settle the Second Cross-Claim as alleged (which is not admitted), it is submitted that any such agreement is frustrated by the action of the ATO or can be avoided on the basis of an operative mistake. In this regard, we refer you to the decision of the High Court of Australia in " Taylor v Johnson (1983) 151 CLR 422 ".
In addition, to proceed with any such agreement (which is not admitted) having regard to the action by the ATO in relation to the outstanding GST, would:
1. result in your clients receiving from Knox Street Apartments Pty Limited ("KSA"), in respect of an unsecured debt that KSA owes to your clients, more than your clients would receive from KSA in respect of the debt if the settlement was set aside and your clients were to prove for the debt in the winding-up of KSA; and
2. constitute:
(a) an unfair preference pursuant to s588FA of the Corporations Act 2001 ("the Act")
(b) an insolvent transaction pursuant to s588FC of the Act; and
(c) a voidable transaction pursuant to s588FE of the Act.
Consideration
56 In the Fourth Cross-Claim the Flexmans sought a declaration that the agreement was made on or about 25 June 2004 or on or about 21 September 2004. With the benefit of a review of the materials the submission made by the Flexmans was that the agreement was made on about 27 June 2004 or alternatively no later than 30 September 2004. The Flexmans seek an order that the cross-defendants specifically perform and carry into execution that agreement. The defence filed on behalf of Kimberley contended that any agreement was void on the basis of common mistake. At trial Mr Coles QC informed the Court that the defence of mistake was abandoned and that the only issue is whether a concluded and binding agreement was reached.