[2002] SASC 417
Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570
(2019) 100 NSWLR 367
Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2
Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396
[2019] NSWCA 210
Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
[1978] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7
Source
Original judgment source is linked above.
Catchwords
[2002] SASC 417
Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570(2019) 100 NSWLR 367
Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2
Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396[2019] NSWCA 210
Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423[1978] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7(2014) 251 CLR 640
Elpis Maritime Co Ltd v Marti Chartering Co Inc [1992] 1 AC 21
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8(2010) 271 LSJS 326
Homburg Houtimport BV v Agrosin Ltd (The Starsin) [2004] AC 715[2003] UKHL 12
Internaut Shipping GmbH & Anor v Fercometal Sarl [2003] EWCA Civ 81215 BPR 29,465
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70(2001) 210 CLR 181
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633(1954) 91 CLR 353
Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35(2004) 218 CLR 451
Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313[2022] VSCA 272
Quadling v Robinson [1976] HCA 31[2003] UKHL 62
Singh v De Castro [2017] NSWCA 241
South Australia v Commonwealth [1962] HCA 10
(2004) 219 CLR 165
Trueman v Loder (1840) 11 Ad & El 589
Judgment (23 paragraphs)
[1]
n Ltd (The Starsin) [2004] AC 715; [2003] UKHL 12
Internaut Shipping GmbH & Anor v Fercometal Sarl [2003] EWCA Civ 812; [2003] 2 Lloyds LR 430
London County Council v Agricultural Food Products Ltd [1955] 2 QB 218
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303; 15 BPR 29,465
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184
Manicaros v Commercial Images (Aust) Pty Ltd (in liq) [2024] QCA 40
Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313; (2015) 90 NSWLR 605
Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673
Pugwall Pty Ltd v Arthur McKenzie Investments Pty Ltd (2022) 68 VR 559; [2022] VSCA 272
Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192
Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909
Shogun Finance Ltd v Hudson [2004] 1 AC 919; [2003] UKHL 62
Singh v De Castro [2017] NSWCA 241
South Australia v Commonwealth [1962] HCA 10; (1962) 108 CLR 130
Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Trueman v Loder (1840) 11 Ad & El 589; 113 ER 539
Vuletic v Contributory Mortgage Nominees Ltd (2006) 7 NZCPR 552
Young v Lamb [2001] NSWCA 225
Young v Schuler (1883) 11 QBD 651
Texts Cited: JD Heydon, Heydon on Contract (Thomson Reuters, 2019)
NC Seddon, Seddon on Deeds (2nd edition, Federation Press, 2022)
Category: Principal judgment
Parties: 2023/259476
Fiona Leanne Sinclair (First Appellant)
Fiona & John Sinclair Pty Ltd (Second Appellant)
Ashod Balanian (First Respondent)
Launch Partners Pty Ltd (Second Respondent)
[2]
2023/259477
Fiona & John Sinclair Pty Ltd (Appellant)
Burns Bay Services Pty Ltd (Respondent)
Representation: Counsel:
[3]
T Brennan SC with T Crispin (Appellants)
A Cheshire SC (Respondents)
[4]
AR Conolly & Company Lawyers (Appellants)
Kerrs (Respondents)
File Number(s): 2023/259476
2023/259477
Publication restriction: Nil
Decision under appeal Court or tribunal: Supreme Court
Jurisdiction: Equity
Citation: [2023] NSWSC 789
Date of Decision: 07 July 2023
Before: Henry J
File Number(s): 2021/00209242
[5]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[6]
HEADNOTE
[This headnote is not to be read as part of the judgment]
These appeals turn on whether a document described as a deed, and executed only by three companies, is effective as a contract which was binding with immediate effect, including on three individuals. The appellants are Mrs Fiona Sinclair (for herself and as representing her now deceased husband) and the company she owned with Mr Sinclair. The respondents are Burns Bay Services Pty Ltd, one of its directors and shareholders Mr Ashod Balanian, and another of Mr Balanian's companies, Launch Partners Pty Ltd.
A dispute between the parties progressed to mediation. The parties agreed to a settlement which the mediator set out in a document referred to as "the Deed". The Deed was poorly drafted. The execution page, signed by the parties, designated the companies but not the individuals. The Deed also contained a clause permitting execution by counterparts. The appellants argued that the Deed was only intended to take effect if and when properly executed as a deed. The respondents accepted that the Deed was not effective as a deed, but argued that a valid and binding contract had been formed and that the contract extended to encompass Mrs Sinclair, Mr Sinclair's estate and Mr Balanian (the individuals) in their personal capacities. At first instance Henry J accepted the respondents' arguments.
There were four issues on appeal: (1) whether the parties intended to be contractually bound by their agreement even though not completed as a deed; (2) whether the parties intended that the individuals personally be bound; (3) whether the Deed only took legal effect, binding on the individuals, when a counterpart execution page was exchanged; (4) whether the primary judge erred by addressing conduct subsequent to agreement being reached on the terms of the Deed.
The Court (per Kirk JA, Leeming JA and Payne JA agreeing, with additional observations by Leeming JA) dismissed both appeals and held:
As to the first issue:
Parties can intend that a document expressed as a deed take effect as a contract, whether or not they also intend that it operate as a deed. While the appellants point to manifestations of an intention that the document take effect as a deed, this does not of itself establish a further, negative intention that the document does not otherwise take effect as an agreement. There are numerous indications within the Deed that it was intended to be binding as an agreement. None of the operative clauses are premised on the guarantee having legal effect as a deed, and the execution block made no provision for the individuals to execute the document in their own capacity in the manner that would have been expected of a deed. These factors militate in favour of finding an intention that the Deed operate contractually. Surrounding circumstances can be taken into account in considering whether the parties intended to create contractual relations. Those circumstances strongly support that conclusion: at [88]-[104].
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353; Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309; Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95; Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313; (2015) 90 NSWLR 605; Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102, applied.
Commonwealth Dairy Produce Equalisation Committee Ltd v McCabe (1938) 38 SR (NSW) 397; Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141; Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2; Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2023] NSWCA 280, considered.
As to the second issue:
[7]
JUDGMENT
LEEMING JA: The principal issue in these two appeals is whether the document dated 8 April 2022 was effective to bind all six named parties, and in particular whether it was effective to bind Ms Fiona Sinclair and Mr Ashod Balanian, both of whom signed it expressly as directors. (There was at one stage a separate issue concerning the status of the estate of Ms Sinclair's husband, but following a representation order it was accepted that if she were bound, then so too was the estate).
I agree with Kirk JA that the appeals should be dismissed. I agree with his reasons, and I do not consider that anything hereafter qualifies those reasons. I agree with his Honour that that conclusion may be reached without regard to the "post-contractual" conduct, but wish to add the following concerning the evidence available to be used in resolving the principal issue.
First, on any view of the matter, evidence of surrounding circumstances was relevant and admissible to determine whether Ms Sinclair and Mr Balanian were bound. The document was replete with infelicities. Some do not greatly matter, such as the two clauses numbered 18, or the unnumbered clause between them. It is difficult to resist the conclusion that no attention was paid to the difference between a deed and a simple agreement: there are slightly more references to the document being 'this agreement' (see cll 10, 11, 12, 13, 14, 15, 16, 17) than 'this deed' (see cll 1, 6, 8, 9), but the coversheet, introductory words and execution page all refer to it being a deed. I mention these because to the extent that the question is one of construction, the mode of drafting is relevant. "Legal meaning should not turn on arguments based on semantic exactitude where it is plain that the parties have recorded their bargain in loose, ungrammatical language": Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [98].
Secondly, there were numerous inconsistencies on the face of the document which directly bore on who and in what capacity those executing the document were bound:
1. The coversheet identifies two separate proceedings in the Supreme Court, by their number and the parties to those two proceedings are listed as the parties to the document, yet only two of the parties to the document are described as "plaintiff" and "defendant".
2. Clauses 8 and 9 provide that "The defendants [sic] hereby releases [sic] the plaintiff [sic]" in cl 8 and "The plaintiffs [sic] hereby releases [sic] the defendant [sic]" in cl 9. The difficulty is not merely the consistently plural subjects of consistently singular verbs, but the fact that in consecutive clauses, "plaintiff" and "defendant" are expressed to be both singular and plural, thereby adding to the basal obscurity at the commencement of the document, where five parties are listed, but only two are defined as "plaintiff" and "defendant" despite the identification of two distinct legal proceedings, of which the document recites that "[t]he parties wish to settle all disputes between them".
3. The first reference in cl 2 is to a "plaintiff", followed by "plaintiff's" with an erroneous apostrophe, then a reference to "plaintiffs" before cl 3 returns to a singular "plaintiff".
4. In cl 2 there are two references to a singular "defendant" and four to a plural "defendants". Similarly, defendant is singular in cll 7 and 9 but plural in cll 3, 4 and 8.
[8]
Facts
This summary of the facts is drawn substantially from Henry J's findings (at [23]-[81]), which were not disputed on appeal.
[9]
The parties and the two proceedings
Mr Sinclair was a mortgage broker who had worked alongside Mrs Sinclair until his death in 2021. They were the sole shareholders and directors of FJS. Mr Sinclair died on 23 November 2021, after which Mrs Sinclair became the sole director of FJS.
Mr Balanian has a background in cryptocurrencies. He was introduced to Mr Sinclair in 2017 through Mr Ellison, who had known Mr Sinclair for a long period.
In 2018 a digital commodity investment fund business, known as the Digital Commodity Assets Fund (DCAF), was formed. It was managed by BBS, with each of Messrs Balanian, Ellison and Sinclair involved. Digital Commodity Assets Pty Ltd (DCA) was the corporate trustee. Mr Balanian and Mr Ellison are directors and shareholders of BBS and DCA. FJS is a shareholder of BBS and Mr Sinclair was a shareholder of DCA.
Mr Sinclair had been a director of BBS and DCA until 21 December 2019, when the parties had a falling out. In June 2021 the Sinclairs and FJS commenced the first of its two proceedings in the Supreme Court alleging misleading and deceptive conduct by Mr Balanian and Launch Partners in relation to DCAF (the Balanian Proceedings). They sought to recover investment funds of $250,000, which they asserted were held on trust for FJS. They also sought damages equating to the value of the cryptocurrency and cash in a digital wallet which they could no longer access. In July 2021 FJS initiated the second Supreme Court proceedings, this time against BBS seeking an order that it be wound up (the BBS Proceedings).
In due course Mr Balanian and Launch Partners conceded that the Sinclairs were owed $250,000 (less amounts for tax paid), but otherwise denied or did not admit the allegations made against them. The Sinclairs sought summary judgment for that amount in September 2021.
The BBS Proceedings and the Sinclair parties' summary judgment application in the Balanian Proceedings were listed for hearing in early December 2021, but that was vacated due to Mr Sinclair's death in November. Rees J then made orders appointing Mrs Sinclair as the representative of Mr Sinclair's estate for the purpose of the Balanian proceedings pursuant to r 7.10(2)(b) of the Uniform Civil Procedural Rules 2005 (NSW) and listed the BBS and Balanian Proceedings for directions in March 2022. For completeness, I note that a similar order appointing Mrs Sinclair the representative of Mr Sinclair's estate was made by this Court on the date of the hearing of the appeals.
[10]
Organisation of a mediation
Mr Chris Wakeford was a "corporate advisor" who had known Mr Sinclair and Mr Ellison for about 25 years. Prior to his death, Mr Sinclair had asked Mr Wakeford to do whatever he could to look after Mrs Sinclair.
In late 2021, Mr Wakeford contacted Ms Terry Zabetakis, a solicitor and the principal of a legal and alternate dispute resolution practice known as The Resolution Hub. She is an accredited mediator who has practised as such since about 2016 or 2017. Mr Wakeford informed her of the disputes between the parties, and told her that they might be interested in a mediation. From December 2021 onwards Ms Zabetakis had numerous interactions with Mr Wakeford, Mr Balanian, Mr Elision and Mrs Sinclair about the dispute and the possibility of a mediation. Henry J found Ms Zabetakis was a witness of truth.
Notably, on 29 March 2022 Ms Zabetakis had a one hour video call with Mrs Sinclair in which Mrs Sinclair indicated the following: she was happy to continue the conference without her solicitor (Mr Alan Conolly) being present; her solicitor knew about the mediation but she did not want or need him at the mediation; she wanted to speak to her solicitor before sending documents about the dispute to Ms Zabetakis; she intended to bring Ms Penny Richards to the mediation who she described as a friend, Mr Sinclair's executor and trustee, who she said had to be present to sign any documents and approve any agreements on behalf of the estate; she was willing to attend the mediation and explore the issues; she was comfortable for the mediation to be conducted by Ms Zabetakis; she had read the affidavits of Mr Balanian and Mr Ellison and was "appalled" by them, referring to an allegation Mr Sinclair had engaged in hacking and had locked Mr Ellison out of his account; she wanted to finish the matter out of Court; if there was any chance of a reasonable settlement then she would try it; her solicitor believed that she could be awarded at least $15 million; $5 million would be her best case scenario although she thought that was probably unrealistic; she had been speaking with her accountant and would speak to her solicitor before the mediation; and she wanted the mediation to be done before Easter, with 8 April 2022 the most suitable date (Good Friday was on 15 April 2022).
On 1 April 2022 Ms Zabetakis received a call from Mrs Sinclair's solicitor, Mr Conolly, which lasted for approximately 21 minutes. Ms Zabetakis told Mr Conolly that she had requested details from the participants and had received information from them (mainly verbally) but had not been provided with the pleadings or affidavits, which she would like to review. She asked Mr Conolly to provide copies of these documents. He said he would do so by 4 April.
[11]
The mediation
The mediation took place on 8 April 2022 between about 10:00am and 7:30pm at Mr Wakeford's office in North Sydney. It was run by Ms Zabetakis. The others in attendance were Mr Wakeford, Mr Balanian, Mr Ellison, Mrs Sinclair and Ms Richards (although she was absent for some of the afternoon). The parties' lawyers and accountants were not present.
The mediation followed the course set out in what Ms Zabetakis referred to as her "Mediation Script". Ms Zabetakis wrote notes on the script as the day progressed.
Prior to the first joint session, Ms Zabetakis had a private session with Mrs Sinclair and Ms Richards during which she asked whether they were happy to proceed with the mediation without lawyers or accountants present, and they confirmed that they were. She testified that Mrs Sinclair said to her:
I don't want this going on anymore. If we can resolve it today, I will get my life back. I know what I am doing and I'm very clear about what I want to achieve here. If I don't get what I want I won't settle.
Ms Zabetakis' notes record that at the outset of the first joint session Ms Zabetakis (again) confirmed with all participants that they still wished to proceed without lawyers present, and that all participants strongly expressed that they were in the "right head space to proceed and wanted to do so without lawyers … they had received advice from lawyers and just wanted to do it without their interference". Ms Richards confirmed that she was present as Mrs Sinclair's friend and as the executor of Mr Sinclair's estate. During the opening joint session Ms Zabetakis indicated that neither solicitor had provided her with the documentation she had asked for, which meant that she had not included the correct details on the documents to be signed, including the "Agreement to Mediate".
The parties began with opening statements. Ms Zabetakis described Mrs Sinclair as appearing upset and emotional during the opening session but as calm and composed for the remainder of the day. After openings, Ms Zabetakis asked the parties to identify the key issues, which she then listed on a whiteboard. The parties discussed these issues together before holding private discussions in breakout rooms with Ms Zabetakis. During the first private session with Mrs Sinclair and Ms Richards, Mrs Sinclair indicated that she would be willing to settle for "around $2.5 million to maybe $3 million but it depends on how willing they are to write to Rodney". She was referring to Rodney Forrester, who was the accountant for the Fund. Mrs Sinclair believed that Mr Sinclair's reputation had been harmed in the eyes of Mr Forrester by the respondents. It is apparent that this was a significant cause of distress to her. She described the repair of that harm as "one of my biggest things".
[12]
The Deed
The Deed is eight pages long including its cover and execution pages. On the cover page it is entitled "Deed of Release & Indemnity" with a subheading "Settlement of Proceedings". Above that heading it includes two pairs of names: FJS and BBS (both with their ACNs listed), and identifies the BBS Proceedings, and then refers to Mr and Mrs Sinclair and "Ashod Balanian & Launch Partners Pty Ltd", after which it identifies the Balanian Proceedings.
The second page of the agreement begins "THIS DEED dated 8th day of April 2022". It then lists the parties as follows:
BETWEEN Fiona & John Sinclair Pty Ltd of [address] (Plaintiff)
AND Burns Bay Services Pty Ltd (ACN 628 360 083) of [address] (Defendant)
&
BETWEEN John Gregory Sinclair & Fiona Leanne Sinclair
AND Ashod Balanian & Launch Partners Pty Ltd
That delineation implicitly refers, again, to first the BBS Proceedings and then the Balanian Proceedings, with the parties being correctly identified for each.
There are then "recitals" which state:
A. On or abouts 2017 to 2018 the parties entered into a business partnership.
B. In or abouts 2020 a dispute arose between the parties in relation to the partnership management and structure.
C. The parties contend that certain issues arose regarding directorship, director loans, ICO's, shareholder issues, tax returns and the breakdown in partnership relations.
D. In or abouts 2021 the plaintiff commenced proceedings no. 2021/209242 & 2021/00179061 in the Supreme Court of New South Wales (the proceedings).
E. The parties wish to settle all disputes between them arising out of the issue of the proceedings (the dispute).
There is no definition of "plaintiff", but that label is attached after the reference to FJS on that page. Read in the context of the references to the two proceedings, the natural construction is that the Sinclairs also fell within that term. That conclusion is supported by the fact that cll 2(b)(i), 2(b)(ii) and 9 employ the plural "plaintiffs", and cl 2(a) uses an inappropriately possessive "plaintiff's". Similarly, cl 2 of the Deed (quoted below) refers to "the defendant", which is also not defined other than being a label attached after the reference to BBS. Senior counsel for the appellants accepted that the usage in cl 2 would sensibly be construed as referring to all of the defendants in the two proceedings. Again, that conclusion is supported by use of the plural term in cll 2(a), 2(b), 3, 4 and 8.
[13]
Events after the mediation
Henry J summarised events after the mediation in her judgment at [94]-[117]. It suffices to note the following. The solicitors for the respondents (Kerrs) sent a letter to Mr Conolly, acting for the appellants, on 22 April 2022 saying that in circumstances "where the Deed appears to be missing some important elements, we are in the process of preparing a more comprehensive version which will of course reflect the terms of settlement reached". Mr Conolly responded saying:
We are unhappy with the circumstances in which the mediation occurred, in which we were not involved. We do not at this time concede that the deed that resulted is effective to terminate the proceedings.
Mr Conolly did not identify who the "we" was who was said to be unhappy; it would appear to have been his own unhappiness, given his client's clear, oft-repeated decision to exclude him. Kerrs said in answer that its clients contended that there was a binding final settlement reached between the parties reflected in the Deed. The two Supreme Court proceedings were adjourned more than once as the parties interacted. Kerrs drafted a more detailed proposed draft deed but the parties could not agree on its terms. The negotiations reached their nadir on 1 August 2022 when Mr Conolly sent an ill-founded letter to Kerrs asserting, amongst other things, that "[i]t seems there was a conspiracy … between Mr Balanian, Mr Ellison and Mr Wakeford, to achieve a mediation without Mrs Sinclair being represented or advised".
Shortly thereafter the appellants filed an interlocutory process in each of the Supreme Court proceedings seeking a declaration that the Deed was void and unenforceable. Points of claim and defence were exchanged. It was those applications which came before Henry J.
[14]
The proceedings before the primary judge
FJS and Mrs Sinclair had asserted in their points of claim that the Deed was void and unenforceable due to the conduct of Mr Balanian and Mr Ellison which was said to be unconscionable (at equity and under statute), and conduct by them and Mr Wakeford was said to be misleading and deceptive. In the end these points were not pressed before the primary judge. Nor did the appellants argue that the Deed was insufficiently certain or complete to operate.
What they did argue, notably, was that the Deed was only intended to take effect if and when properly executed as a deed, which it had not been. They focused in particular on the counterparts clause in the Deed in that regard (cl 13). The respondents accepted that the Deed was not effective as a deed, but argued that a valid and binding contract had been formed, and that the contract extended to encompass Mrs Sinclair and Mr Balanian (and implicitly Mr Sinclair's estate) in their personal capacities.
Henry J upheld the respondents' arguments. Her Honour noted that there was no dispute that the Deed did not comply with the execution requirements of s 38 of the Conveyancing Act 1919 (NSW) (at [147]). She said that the evidence of what occurred at the mediation, together with the terms of the Deed itself, objectively indicated that the parties intended immediately to be bound by the terms of the Deed as a contract, and they signed it at the end of the mediation as an act of recording their binding agreement, including in their personal capacities (at [148]-[182]). As regards the latter point, Henry J noted:
[165] Mrs Sinclair, Mr Sinclair and Mr Balanian are identified as parties to the Deed in their personal capacities based on their status as natural person parties to the Balanian Proceedings. The Deed recites that, as parties, they wished to settle all disputes between them arising out of the issue of the proceedings (recital E) and relevantly provides that the Deed was entered into by them (cl 1), they would execute consent orders (cl 6) and they had the benefit or burden of terms as either a "plaintiff" party or a "defendant" party.
With regard to the execution block, her Honour said that the absence of separately identifiable signature blocks for Mrs Sinclair, Mr Balanian and the estate of Mr Sinclair to sign in their personal capacities made the failure of the Deed to identify that they were bound personally less significant than usual (at [166]-[167]). She addressed the counterparts clause at [170] (which is quoted below at [140]). Her Honour considered some of the post-agreement conduct of the parties (at [183]-[185]), finding that this was not inconsistent with an acceptance that the Deed was binding.
[15]
Issue 1: Was the Deed intended to be binding even if not executed as a deed?
A deed is a document which is generally said to have three characteristics: it is signed and sealed by the party whom the deed places under a liability; it is delivered to or for the benefit of the party to whom the liability has been incurred; and it transfers an interest in property, or creates a right or an obligation, or confirms an act pursuant to which an interest in property has already passed or pursuant to which a right or obligation is created: Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 368-369; NC Seddon, Seddon on Deeds (2nd edition, Federation Press, 2022), 6 [1.3]; JD Heydon, Heydon on Contract (Thomson Reuters, 2019), 185 [6.10]. As Seddon has warned, however, definitions of deeds run the risk of being over-inclusive or under-inclusive given the complexity of the subject: at 6 [1.3].
The law of deeds is an amalgam of common and statutory law. The execution of deeds by companies is addressed, non-exhaustively, by s 127 of the Corporations Act 2001 (Cth); see also Conveyancing Act, s 51A. More generally, s 38 of the Conveyancing Act in this State relevantly provides, first, that every deed shall be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed (subs (1)); and, secondly, that every instrument expressed to be a deed or to be sealed, and which is signed and attested in accordance with the section, shall be deemed to be sealed (subs (3)).
As noted, the primary judge recorded at [147] that there was no dispute that the Deed "does not comply with the execution requirements of s 38". It appears that this refers, at the least, to the fact that the Deed had not been signed by Mrs Sinclair and Mr Balanian and attested. Even if the execution page was taken to have been signed by them in their personal capacities, their signatures were not witnessed.
The primary position of the appellants was that the Deed would be effective as a deed if and when the two individuals duly executed a counterpart deed. They argued that the Deed was only intended to operate as a deed, if and when executed as such. They say it was not intended to operate as a contract.
For the Deed to take effect as a deed it would be necessary for the parties to intend that the document take effect as such: note Seddon on Deeds, 54 [2.5]. But that is not the current question. Parties can intend that a document expressed as a deed take effect as a contract, whether or not they also intend that it operate as a deed: see eg Commonwealth Dairy Produce Equalisation Committee Ltd v McCabe (1938) 38 SR (NSW) 397 at 403; Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 at [56]-[63]; Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2 at [85]-[89]; Seddon on Deeds, 149 [2.34].
[16]
Issue 2: Did the parties intend that the individuals be parties to the Deed?
The Deed has not been signed by Mrs Sinclair and Mr Balanian in their personal capacities, there having been no execution block prepared for them to do so. It has been executed only by the three companies. Given that fact, it might have been thought that the question of whether it was intended that they personally be bound would be disputed. Yet that was not so, at least not on the appellants' primary case. Indeed, the contrary is true. They argued that the common intention was as follows: Mrs Sinclair and Mr Balanian (and presumptively also Mr Sinclair's estate) were to be parties to the Deed; the Deed would not be binding on any of the parties, including the three companies, unless and until the individuals bound themselves to the Deed; and that would only occur if and when they executed the Deed in their personal capacity.
Senior counsel for the applicants did flirt with the idea of making an alternative case, after being asked about why the companies were not immediately bound by the Deed given some queries that had been raised from the bench about the application of the counterparts provision in cl 13 to the facts. The following exchange indicates that this argument was not really pressed:
BRENNAN: I think your Honour's question does indicate there is a case in the alternative and that's this. If it be that there could not be a counterpart with a separate execution page, so every other aspect of the document being identical but with a separate execution page, then, of course, there could be no work to be done by cl 13, in which case the document would be immediately binding and effective as a deed as between the three companies.
KIRK JA: Which is contrary to lots of other parts of the document which you are implicitly relying upon for your first point to say, "No, the companies aren't immediately bound because it was clear it was an attempt to resolve the whole dispute between all named parties as identified on [the second page of the Deed]."
BRENNAN: Yes. I accept that if I go to that case I have real problems in construction.
For the avoidance of doubt it is appropriate to address the issue. It is clear from the Deed that the common intention was indeed that Mrs Sinclair and Mr Balanian, along with Mr Sinclair's estate, would be parties to the Deed and personally bound by it, despite the absence of provision for them to sign in their personal capacity.
[17]
Issue 3: Did the Deed only take legal effect when executed by the individuals in their capacity as such?
The core of the appellants' argument rested on the counterparts provision in cl 13 of the Deed. They said that "the effect of the counterparts clause, on its terms, was that FJS having signed would not become bound unless and until Mrs Sinclair delivered her counterpart". They argued that the primary judge had erred by focusing on the surrounding circumstances rather than giving effect to the terms of the Deed itself. They asserted that her Honour's conclusion turned on her "erroneous reading out of the counterparts clause". These arguments should not be accepted.
[18]
The nature of the question
Both sides accepted that the Deed would only become legally binding once all of the intended parties, including the individuals, had bound themselves to its terms. The question here is whether or not the Court should conclude that the individuals should be taken to have done so, despite having only signed in their identified corporate capacities.
Is that a question of construction of the Deed or a question of formation of the contract? The appellants argued orally that it was the former; the respondents asserted the latter. The appellants suggested that there were two points which depended on the characterisation of the question. First, they argued that surrounding circumstances are of lesser significance for a contractual construction issue than for a formation one. Secondly, the appellants said that post-contractual conduct would not be admissible on a construction question but would or might be on a formation question. It is not necessary to consider the relevance of such conduct here for reasons explained below when addressing ground 5.
There is a third matter, relating to whose intention is being ascertained. It is useful to address this point first, because it throws some light on the characterisation issue. A construction question turns on what the parties are taken to have agreed by reference to what a reasonable person in the position of the parties would have understood the terms to mean: see eg Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35]. That is a matter of ascertaining objectively the common intention of the parties to the contract.
Whether or not an offer has been accepted such as to form a contract is also determined objectively but the focus is subtly different. What matters "is what each party by words and conduct would have led a reasonable person in the position of the other party to believe": Toll at [40]; see also eg Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-550. For formation, thus, the focus is on objective ascertainment of the intention of the relevant person as assessed by a reasonable person in the position of the other party or parties (see Heydon on Contract, 28 [2.40]). For construction the focus in construing the contract is on objective ascertainment of the parties' common intention.
[19]
The counterparts clause
The clause is as follows:
13. Counterparts
This agreement may be executed in any number of counterparts each of which will be an original but such counterparts together will constitute one and the same instrument and the date of the agreement will be the date on which it is executed by the last party.
There was no necessity for the Deed to be executed by counterparts. The parties who were intended to have been bound could all have executed the same document. The appellants suggest, however, that given that in fact Mrs Sinclair, Mr Balanian and Mr Sinclair's estate did not sign the Deed in those capacities, there was provision for them to do so by way of signing a counterpart. And in that circumstance, they said, the "date of the agreement" would be the date of execution of the last party to do so. An implicit premise, which may be accepted, was that the reference to the "date of the agreement" in cl 13 meant the date the Deed took effect.
The primary judge said this of the argument:
[170] Considered objectively, the clause was included as a boilerplate provision and was not intended by the parties to have any real work to do given that all the parties to the Deed were in attendance and signed one document at the end of the mediation. There is nothing in the evidence to suggest that Mrs Sinclair or Mr Balanian, when signing as directors, intended not to be bound personally and were waiting to consider whether to sign as individuals and return a counterpart, such that the Deed would only then become binding. To the contrary, in my view, the objective evidence indicates that they intended to be personally bound notwithstanding the qualification on their signatures in the Deed. There is also no apparent logic, and it makes no commercial sense, for Mrs Sinclair to have signed as a director and bound FJS but, at the same time, reserved her right to execute the Deed personally.
The appellants argue that this conclusion draws improperly on the surrounding circumstances, in particular the evidence that the parties did intend to conclude their agreement on that day. That argument wrongly presupposes that the surrounding circumstances have little relevance. In any event, there is such evidence from the Deed itself.
To begin with, as the respondents argued, cl 13 is facultative. It does not say that the Deed must or will be executed in counterparts, simply that this may be done. It is then significant that there is simply no provision in the Deed for Mrs Sinclair, Mr Balanian and Mr Sinclair's estate to execute it in their personal capacity. A "counterpart" naturally means a copy or duplicate that is identical: note Seddon on Deeds, 13 [1.6]. For the individuals to have executed another copy indicating that they were executing it in their capacities as such would be to execute a copy with additional words identifying who was signing and in what capacity, being words of significance. As senior counsel for the appellants accepted, this would be "a different document". The absence of provision for the individuals to sign in that capacity indicates that they were not envisaging that the Deed would be executed in counterparts and, rather, suggests that the need for the individuals to bind themselves in terms had been overlooked.
[20]
Surrounding circumstances and conclusion
The surrounding circumstances offer strong reinforcement to the conclusion that a reasonable person in the position of the corporate parties would conclude that the individuals intended to bind themselves personally when signing the Deed on 8 April 2022. The appellants only weakly argued to the contrary, that being the very reason for their attempts to set those circumstances aside.
It is quite clear that all of the parties wished to resolve their dispute, including both proceedings, and they meant to do so in a binding and effective fashion on that day (see above at [103(1)]). That involved the individuals being immediately bound. Further, the Deed was drafted in less than ideal conditions, by a person who was a solicitor but relevantly acting as a mediator, working under time pressure, and where the parties had chosen not to involve their own solicitors, despite the repeated suggestions of Ms Zabetakis that they might wish to do so.
There is nothing to suggest that any of the parties turned their minds to the need to address the individuals in their capacity as such. That point does much to explain why the execution page was not drafted to address that issue. The absence of careful thought on the topic is illustrated by the fact that Ms Richards purported to sign on behalf of FJS as though she was standing in the shoes of Mr Sinclair as a director of that company. She was not - she had not obtained probate, and even if she had that would not have rendered her a director of FJS. As the primary judge noted at [172], the Supreme Court had authorised Mrs Sinclair to act for the estate in the conduct of the proceedings, which extended to the settlement of those proceedings; if anyone was to sign on behalf of the estate it was her.
In cross-examination Ms Zabetakis accepted that she did not ask the participants if they understood that they were entering the Deed personally and on behalf of the companies. She said she did ask the parties if they knew their roles as directors, and if Ms Richards knew her role as an executor and trustee. But that evidence did not indicate that Ms Zabetakis was suggesting that the parties were not agreeing to the Deed in their personal capacities. The appellants also sought to rely on the fact that Ms Zabetakis told the parties that she would email a copy of the Deed to their lawyers. The claimed significance of that bland and unsurprising statement is illusive.
[21]
Issue 4: Did the primary judge err in considering post-contractual conduct?
The appellants' ground 5 complained that Henry J erred in referring to evidence of subsequent conduct in construing the Deed at [183] and [185], but also erred at [184] in "discounting evidence of subsequent conduct" said to favour the appellants' case. The latter challenge was withdrawn at the hearing when the inconsistency with the appellant's argument about the irrelevance of evidence of subsequent conduct was pointed out.
There is no doubt that conduct may be relevant insofar as acceptance of an offer is said to be manifest by that conduct. But that is not the issue here, where the acceptance by the individuals was manifest by their signature. In light of the conclusions above, it is unnecessary to address whether evidence of conduct subsequent to the mediation could be relevant to considering whether the Deed took effect as a contract. That is so because I have concluded that it did, with immediate effect. And it is so regardless of subsequent conduct. At highest, the primary judge's references to subsequent conduct at [183]-[185] were directed to showing that the conduct identified was not inconsistent with the conclusion she had already reached. Even if her Honour erred in going that far (a point it is not necessary to resolve), it makes no difference to the result.
[22]
Orders
In each matter the appeal should be dismissed with costs.
[23]
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: 07 June 2024
It is clear that the common intention was that the individuals would be parties to the Deed and personally bound by it, despite the absence of provision for them to sign in their personal capacity. Several parts of the Deed identify the two proceedings and the parties to those proceedings, which include the individuals. The settlement of the proceedings and the execution of the consent orders required the participation and agreement of all parties to the litigation, including the individuals. The absence of provision for Mrs Sinclair and Mr Balanian to sign in their personal capacities is less surprising than it might otherwise be in circumstances where the Deed was drafted quickly, in less than ideal conditions and without review by the parties' lawyers: at [107]-[114].
As to the third issue:
In relation to the issue of whether the Deed only took legal effect (binding upon the individuals) when a counterpart execution page was exchanged, a question arose as to whether this is a question of construction or formation. The focus is on whether the individuals manifest that they intended to be bound personally when executing the Deed on behalf of the companies. That points to a question logically prior to construction: have the terms been agreed by the individuals in their capacity as such? This is an issue of formation: [115]-[121]. It is permissible to take account of the surrounding circumstances in ascertaining whether an offer was accepted. This task will involve construction of the terms of the acceptance of the offer. That may involve construing the terms of the contractual document itself. That the contractual document is being construed does not mean that this issue is one of construing the terms of the parties' agreement: [123]-[137].
Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192; Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909; Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673; Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Young v Lamb [2001] NSWCA 225; Harris v Burrell & Family Pty Ltd [2010] SASCFC 12; (2010) 271 LSJS 326; Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396; (2011) 82 NSWLR 665; Singh v De Castro [2017] NSWCA 241, considered.
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640; Pugwall Pty Ltd v Arthur McKenzie Investments Pty Ltd [2022] VSCA 272; (2022) 68 VR 559; Manicaros v Commercial Images (Aust) Pty Ltd (in liq) [2024] QCA 4, noted.
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165; BH Australia Constructions Pty Ltd v Kapeller [2019] NSWSC 1086; (2019) 100 NSWLR 367, distinguished.
The appellants' reliance on the counterparts clause rises no higher than saying that there was a way that the individuals could have executed the Deed, namely by signing a counterpart. Yet there was a simpler way that they could have done so, that is by executing the same copy of the document which they themselves had executed for the corporate parties. Both of those possibilities suffer from the same problem: there was no provision for the individuals to do so. Reference to the counterparts clause does not advance the argument: [138]-[147]. The surrounding circumstances offer strong reinforcement to the conclusion that a reasonable person in the position of the corporate parties would conclude that the individuals intended to bind themselves personally when signing the Deed. There is nothing to suggest that any of the parties turned their minds to the need to address the individuals in their capacity as such, which does much to explain the form of the execution page: [148]-[152].
Per Leeming JA: The distinction between "existence" and "construction" is elusive when the issue relates to the capacity in which a natural person is bound. Once it is accepted that whether a contract is "ambiguous" or has a "plain meaning" is a conclusion which can only be reached after regard is had to surrounding circumstances, rather than being a gateway to surrounding circumstances, and once it is accepted that the construction of a commercial contract requires consideration of the language used by the parties and the surrounding circumstances, there is no need for some exception permitting recourse to extrinsic evidence when the identity of a party is in issue. This also bears on rules about post-contractual conduct, since whether or not a person is bound to contractual relations by some jural act is conceptually distinct from the content of the contractual rights and obligations in a wholly written contract: [10]-[15]. It is clear that natural persons who sign explicitly in their capacity as directors may nonetheless bind themselves personally, and extrinsic evidence can be used to determine this question irrespective of the presence of ambiguity in the document: [16]-[32].
Trueman v Loder (1840) 11 Ad & El 589; 113 ER 539; London County Council v Agricultural Food Products Ltd [1955] 2 QB 218; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622; Elpis Maritime Co Ltd v Marti Chartering Co Inc [1992] 1 AC 21; Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398; Homburg Houtimport BV v Agrosin Ltd (The Starsin) [2004] AC 715; [2003] UKHL 12; Internaut Shipping GmbH & Anor v Fercometal Sarl [2003] EWCA Civ 812; [2003] 2 Lloyds LR 430; Shogun Finance Ltd v Hudson [2004] 1 AC 919; [2003] UKHL 62; Vuletic v Contributory Mortgage Nominees Ltd (2006) 7 NZCPR 552; Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640; Darzi Group Pty Ltd v Nolde Pty Ltd (2019) 100 NSWLR 394; [2019] NSWCA 210; TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147; Manicaros v Commercial Images (Aust) Pty Ltd (in liq) [2024] QCA 40, discussed.
As to the fourth issue:
There is no doubt that post-contractual conduct may be relevant insofar as acceptance of an offer is said to be manifest by that conduct. But that is not the issue here, where the acceptance by the individuals was manifest by their signature. It is unnecessary to address whether evidence of conduct subsequent to the mediation could be relevant to considering whether the Deed took effect as a contract, as it would not affect the result: [153]-[154].
Turning from text to purpose, the document only makes sense if the obligation to execute consent orders applied to both proceedings, notwithstanding that it is only the parties to the Corporations List proceeding who are defined as "plaintiff" and "defendant", and the obligation to file consent orders is only imposed upon the "defendant".
The execution clause is to be approached in light of those considerations. It is best to follow the course taken by the primary judge at [92] and reproduce the entirety of that page:
This page presents some minor infelicities. The words "Executed by" precede Fiona & John Sinclair Pty Ltd and Burns Bay Services Pty Ltd, but not Launch Partners Pty Ltd, and it is difficult to see why that course was taken. Likewise, why is the latter company included in the same box as Burns Bay Services Pty Ltd? Why are there two rather than one, or three, boxes?
But far more important than the foregoing, which reflect the casual or haphazard approach to drafting seen throughout the document, is the fact that despite the layout of the execution page, with the natural persons all expressed to sign in their capacities as directors, the document also identified on its coversheet, and at the commencement of the first page, each of Mr John Sinclair, Ms Fiona Sinclair and Mr Balanian as parties. This clash between the identification of parties at the front of the document and the absence of space for all of them to execute the document raises the question whether the signatures of the natural persons in the only place allowed for them to sign was also in their personal capacity. The position was the opposite of the document considered by the New Zealand Court of Appeal in Vuletic v Contributory Mortgage Nominees Ltd (2006) 7 NZCPR 552 (a decision to which I shall return), of which it was said at [25] that:
the whole format of the agreement would have led the objective observer to conclude that there were only two parties to the sale agreement and the mortgage back agreement and that whoever executed the agreement on Harris Road's behalf would be executing solely in that capacity.
The document is thus one which is highly ambiguous on its face in respect of whether Ms Sinclair and Ms Richards signed only in their capacity as directors, or in their personal capacity. If they signed only as directors, then the execution clause failed to include anywhere for the natural persons identified as parties on its coversheet and at the commencement of its first page to sign the document. And little comfort can be drawn from the fact that the company for which Ms Sinclair and Ms Richards were signing is defined as the "plaintiff", given the mishmash of singular and plurals throughout.
On any view of the matter, regard may be had to surrounding circumstances. As the primary judge and Kirk JA have explained, when that is done, it is readily concluded that Ms Sinclair and Ms Richards are to be taken to have bound themselves in their own capacities. Accordingly, nothing turns on what follows, which I add only because similar issues will recur.
I think there is a threshold question as to the applicable principles, which turns on a question of characterisation. Conventionally, different approaches apply to resolving whether a contract is in existence as opposed to determining its meaning. But most distinctions in law have blurred boundaries, and the distinction between "existence" and "construction" is elusive when the issue relates to the capacity in which a natural person is bound. Examples occur when a natural person may be bound either in his or her own right or as trustee or in both capacities, or when a person's signature as a director of a company is an act which binds the company, or the person himself or herself, or both.
The safer approach is to eschew general propositions, recognising that issues of the type presented by this appeal arise in a wide range of circumstances, and to focus attention more precisely on the particular issue which is presented.
I should explain what I mean by starting with a simpler case. It may be clear that there is a contract, but the only question is as to the identity of one of the parties. Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 provides an example. A company described as "Hospital Corporation Pty Ltd" formally accepted an offer to purchase land, doing so on letterhead signed by a man described as its managing director. But at the time, a company of that name had changed its name to HCA Holdings Pty Ltd and was in the process of changing the name of its wholly-owned subsidiary to "Hospital Corporation Pty Ltd". Having regard to that extrinsic evidence, which was found to have been known to the natural persons acting on both sides of the transaction, McLelland J had no difficulty in determining that the purchaser was the subsidiary, rejecting a submission that it was not possible to go beyond the terms of the contract into the surrounding circumstances. McLelland J noted at 627 that extrinsic evidence of mutually known facts is always admissible "to identify the meaning of a descriptive term", citing DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429; [1978] HCA 12, and said that this had long been accepted. An appeal to this Court was dismissed, where it was held that extrinsic evidence of mutually known facts is admissible and relevant to determine the identity of a party to a contract: G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 636-637.
One of the authorities assembled by McLelland J was the decision of Lord Denman CJ that parol evidence "is always necessary to shew that the party sued is the person making the contract and bound by it": Trueman v Loder (1840) 11 Ad & El 589 at 594-595; 113 ER 539 at 541-542.
The submission rejected by McLelland J and by this Court turned on a rule which limited regard to extrinsic evidence in construing a written contract to cases of ambiguity. Once it is accepted that whether a contract is "ambiguous" or has a "plain meaning" is a conclusion which can only be reached after regard is had to surrounding circumstances, rather than being a gateway to surrounding circumstances, and once it is accepted that the construction of a commercial contract requires consideration of "language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract" (Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]), there is no need for some exception permitting recourse to extrinsic evidence when the identity of a party is in issue. In short, a better understanding of how language works sidesteps the need for an exception framed in terms of ambiguity. It is of the nature of contractual words which identify a party that they are apt to be "clear and unambiguous" on their face until extrinsic evidence shows that they are not. In short, contractual words which identify a party are a prime example of the fact that ambiguity is a conclusion which can only be reached after regard to surrounding circumstances. That conclusion accords with the result reached by Besanko J, with whom Doyle CJ and Mullighan J agreed, in Abram v AV Jennings Ltd (2002) 84 SASR 363; [2002] SASC 417 at [44] and [50].
The question of characterisation also matters for the purposes of a separate rule concerning "post-contractual" conduct. Speaking generally, it is sometimes said that "post-contractual" conduct is admissible to determine whether a contract exists, but inadmissible to determine its construction: see Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35]. But the rule is more nuanced. Although it is commonly formulated in general terms, it is clear that it applies only to contracts which are wholly written, and it does not extend to admissions: see Lym International Pty Ltd v Marcolongo [2011] NSWCA 303; 15 BPR 29,465 where the authorities are considered extensively. There is also the point made by Basten JA in Darzi Group Pty Ltd v Nolde Pty Ltd (2019) 100 NSWLR 394; [2019] NSWCA 210 at [50] (footnotes omitted):
It is often said that "post-contractual conduct is relevant to the question of whether a contract exists, although not to the question of what it means". The term "post-contractual" is unintentionally circular: the principle was better expressed by Beazley P in Pavlovic v Universal Music Australia Pty Ltd by reference to "subsequent conduct of parties to determine whether, at an earlier juncture, the parties intended to enter into a binding agreement".
I am inclined to doubt that whether a defendant is a party to a contract is a question of construction for the purposes of a rule about subsequent conduct. Instead, it is a question of fact (or perhaps a mixed question of fact and law), and evidence including evidence of subsequent conduct is admissible on that question. That is because whether or not a person is bound to contractual relations by some jural act is conceptually distinct from the content of the contractual rights and obligations in a wholly written contract. The latter is treated as a question of law which does not turn on evidence.
To return to the narrower legal proposition which is at the heart of these appeals, rather than asking whether the question is one of "construction" as opposed to "existence" of a contract, it is better to ask whether by a single signature the person has bound himself or herself personally as well as binding the company. It is clear that natural persons who sign explicitly in their capacity as directors may nonetheless bind themselves personally. One recurring situation is where the document purports to bind the company as a party and its director as a guarantor. That was the case in Young v Schuler (1883) 11 QBD 651, where Brett MR referred to cases where the execution of a document might be "taken as a double signature" - namely, a signature on the person's own behalf and a signature as agent for a company. That conclusion was assisted by the fact that Mr Schuler had signed the document "PPA John Abrahams & Co, J Otto Schuler" and the court proceeded on the basis that "PPA" was an abbreviation for "per power of attorney".
One of the judges in the Queen's Bench Division (Grove J) said at 653:
Schuler signs "John Abrahams & Co" and then signs his own name in addition. Under these circumstances, in the absence of evidence, I should say that Schuler signed both for Abrahams & Co and for himself.
That is not self evident. The writing of the agent's own name after that of the principal which is being bound has been said to be a desirable practice: see London County Council v Agricultural Food Products Ltd [1955] 2 QB 218 at 222-3. However, the Court of Appeal approached the matter more generally. The Master of the Rolls said at 654-655:
But the questions whether a person has signed his name at the foot of a document, and if so, for what purpose, are questions of evidence, and any evidence on the subject which does not contradict the document is admissible. … Evidence then is given of such admissions made by him at the time as plainly show that he intended it to be a double signature. This evidence does not contradict anything on the face of the document, and is, in my opinion, clearly admissible.
Cotton LJ reasoned to the same effect at 655, and Bowen LJ agreed.
In Pugwall Pty Ltd v Arthur McKenzie Investments Pty Ltd (2022) 68 VR 559; [2022] VSCA 272 the Victorian Court of Appeal said that "there are many examples where a director has been found to be personally liable under a guarantee, despite a submission that he/she had only executed the relevant document in a limited capacity (as a director)". The examples provided included the decision of Edelman J in Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 at [46]-[66] and of the Victorian Court of Appeal in TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147 at [52]-[59].
Lord Brandon speaking for the House of Lords reviewed Young v Schuler in detail in Elpis Maritime Co Ltd v Marti Chartering Co Inc [1992] 1 AC 21 at 28-31, and although it was distinguished in that appeal, his Lordship evidently endorsed the holding that extrinsic evidence of Mr Schuler's intention when signing was admissible, and that having regard to it, he was to be regarded as being bound personally as guarantor.
I would respectfully agree with Lord Millett's analysis in Homburg Houtimport BV v Agrosin Ltd (The Starsin) [2004] AC 715; [2003] UKHL 12 at [175]:
The identity of the parties to a contract is fundamental. It is not simply a term or condition of the contract. It goes to the very existence of the contract itself. If it is uncertain, there is no contract. Like the nature and amount of the consideration and the intention to create legal relations it is a question of fact and may be established by evidence. Such evidence is admissible even where the contract is in writing, at least so long as it does not contradict its express terms, and possibly even where it does: see Young v Schuler (1883) 11 QBD 651, Chitty on Contracts 28th edn, vol 1, para 12-112, p 633. But bills of lading are transferable documents of title, and the claimants are holders of the bills by endorsement. Consequently the evidence must be found within the four corners of the bills themselves.
That passage was endorsed by Rix LJ writing for the Court of Appeal in Internaut Shipping GmbH & Anor v Fercometal Sarl [2003] EWCA Civ 812; [2003] 2 Lloyds LR 430 at [55].
Arguably contrary to the foregoing is the decision of Shogun Finance Ltd v Hudson [2004] 1 AC 919; [2003] UKHL 62, notably the speech of Lord Phillips of Worth Matravers who said "[t]here is a substantial body of authority that demonstrates that the identity of a party to a contract in writing falls to be determined by a process of construction of the putative contract itself" and proceeded to give examples: at [154]-[166]. The proposition may be accepted, at least in an attenuated form. As Lord Millett went on to observe in The Starsin, "construction" is itself a term which is used in a variety of ways. Lord Millett explained at [176] how the execution block, which is apt to state the identity of the parties and the capacity in which they have signed:
may require interpretation, and to this extent the process may without inaccuracy be described as a process of construction. But it is not of the same order as the process of construing the detailed terms and conditions of the contract. These describe the incidents of the contract and the nature and extent of the parties' obligations to each other. But the identity of the parties themselves is not an incident of the contract. Where a signature is accompanied by a description of the capacity in which the signatory has appended his signature the description is not a term or condition of the contract. It is part of the signature and so part of the factual evidence of the identity of the party which is undertaking contractual liabilities under the contract.
Regrettably, it seems that no reference was made in Shogun Finance to Elpis Maritime.
Another way in which a person may execute a document in dual capacities may be seen in Manicaros v Commercial Images (Aust) Pty Ltd (in liq) [2024] QCA 40. A director signed the director's declaration on the company's annual accounts, which included an entry that she owed the company money. No doubt she did so in the performance of her duties as director, and her signature stated that capacity. Nonetheless, her signature also amounted to an acknowledgement for the purposes of ss 35 and 36 of the Limitation of Actions Act 1974 (Qld). Buss AJA, writing for the Queensland Court of Appeal, concluded that she signed the document "both in her personal capacity and for and on behalf of [the company]": at [174]. His Honour expressed the applicable principles at [158]:
Where a person signs an agreement in which a corporation is named as a party and the person's status as a director of the corporation is stated in the agreement next to his or her signature, the person will invariably be held to have signed the agreement in his or her capacity as a director of the corporation for the purpose of binding the corporation. See Trotter v Avonmore Holdings Ltd. A person may, however, sign an agreement in a dual capacity. Although there is a presumption that, if a person purports to sign on behalf of a corporation, he or she is signing solely in that capacity, the presumption may be displaced by the clear words of the agreement or by extrinsic evidence from which the person's intention, when attaching his or her signature, may be inferred objectively. See Young v Schuler; Elpis Maritime Co Ltd v Marti Chartering Co Inc; Doughty Pratt Group Ltd v Perry Castle; Vuletic v Contributory Mortgage Nominees Ltd. [citations omitted]
The New Zealand decisions cited are illuminating. Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398 closely resembles the present case. The agreement had listed the directors (Messrs Lennan and Wyllie) as parties in their natural capacities. Hardie Boys J writing for the New Zealand Court of Appeal said at 404:
On these facts, the case comes squarely within Young v Schuler if not Elpis Maritime. Messrs Lennan and Wyllie knew they were giving a guarantee and they initialled it. Furthermore, their execution of the agreement may properly be taken to have been done in a dual capacity. They were bound by the guarantee.
In Vuletic v Contributory Mortgage Nominees Ltd (2006) 7 NZCPR 552 the New Zealand Court of Appeal reaffirmed those principles, stating at [13]:
No one disputes that it is possible for a person to sign a contract once but in a dual capacity. But there is a presumption that, if the signer purports to sign on behalf of a company or another, he or she is signing only in that capacity. Such presumption may be displaced by clear words within the contract or by extrinsic evidence from which may be inferred the signer's intention when affixing his or her signature.
I respectfully agree with what was said by the Court of Appeal in Young v Schuler, the House of Lords in Elpis Maritime, Lord Millett in The Starsin and the decisions of the Queensland and New Zealand Court of Appeal reproduced above. Those authorities confirm the position which in my view is correct in principle, which is that whether a person executes a written document in one or more capacities is not a question of construction, but a question of fact in respect of which extrinsic evidence, including evidence of subsequent events, is admissible, irrespective of the presence of ambiguity in the document.
For those reasons, although it is unnecessary to rely upon them in the present case because the document was replete with ambiguity, I am of the view that (a) the main issue presented in these appeals is whether the signatures of Ms Sinclair and Mr Balanian, although styled as directors of their companies, should be found to have been made in a dual capacity, (b) extrinsic evidence was admissible on that issue irrespective of any question of ambiguity, (c) such evidence included evidence after the date of the document, (d) that evidence confirmed that they were doing so in their personal capacities as well as in their capacities as directors. That reasoning is sufficient to resolve grounds 1, 2 and 3 of each appeal (which correspond with "Issue 2" and "Issue 3" as formulated by Kirk JA).
PAYNE JA: I agree with Kirk JA.
KIRK JA: These appeals turn on whether a document described as a deed, and executed only by three companies, is effective as a contract which was binding with immediate effect, including on three individuals. The primary judge, Henry J, held that it was. Her Honour's conclusion was correct.
The appellants are Mrs Fiona Sinclair (for herself and as representing the estate of her now deceased husband Mr John Sinclair) and the company she owned with Mr Sinclair, namely Fiona & John Sinclair Pty Ltd (FJS). The respondents are Burns Bay Services Pty Ltd (BBS), one of its directors and shareholders Mr Ashod Balanian, and another of Mr Balanian's companies, Launch Partners Pty Ltd (of which Mr Balanian was sole director).
There are two appeals before the Court, from two proceedings heard together in the Supreme Court. For the most part it is not necessary to distinguish between the two cases. Those proceedings had been commenced by the Sinclairs and FJS in mid-2021 over a disagreement involving an investment fund business in which Mr Sinclair, Mr Balanian, Mr John Ellison, FJS and BBS were all involved. There was also a dispute over money advanced to Mr Balanian for cryptocurrency investments in 2018.
The proceedings eventually progressed to mediation, attended by Mr Balanian, Mr Ellison, Mrs Sinclair and Ms Penny Richards (the executor of Mr Sinclair's estate, although she had not yet obtained probate). The parties agreed on a resolution, including that the proceedings be dismissed. The mediator drafted a document titled "Deed of Release & Indemnity - Settlement of proceedings" to formalise this agreement (the Deed). It was imperfectly drafted. Relevantly, although styled as a deed there is no dispute that the document does not satisfy the requirements for being such. Further, the execution block provided for it to be executed by the three companies - FJS (by Mrs Sinclair and Ms Richards), BBS (by Mr Balanian and Mr Ellison) and Launch Partners (by Mr Balanian). It did not provide for Mrs Sinclair or Mr Balanian to execute it in their personal capacities, nor did it provide that Mr Sinclair's estate was to be bound (I will refer to Mrs Sinclair and Mr Balanian in their personal capacities, along with Mr Sinclair's estate, as "the individuals").
Mrs Sinclair and FJS subsequently disputed that they were bound by the Deed. The primary judge concluded that the parties, including the individuals, had intended to be immediately bound by the Deed when it was signed, and that all of them entered into a binding contract on the terms of the Deed: Fiona & John Sinclair Pty Ltd v Burns Bay Services Pty Ltd [2023] NSWSC 789. On that basis her Honour dismissed the appellants' two proceedings.
The appellants dispute her Honour's conclusion. They advanced five grounds of appeal. The first four grounds overlapped. Rather than addressing the grounds separately, a more useful way to proceed is to identify the issues which arise on the appeal, being as follows:
1. Did the parties relevantly intend to be contractually bound by their agreement even though not completed as a deed (raised by grounds 1 and 4)? The answer is that they did (see below at [88]-[104]).
2. Did the parties relevantly intend that the individuals personally be bound? It is implicit in the appellants' (primary) case that this point is not in dispute. Nevertheless, it is best to address it. Again, the answer is that they did (see below at [105]-[114]).
3. Did the Deed only take legal effect, binding the individuals, if and when a counterpart execution page completed by them was exchanged (raised by grounds 2 and 3)? The answer is no. The Deed took immediate effect even though the individuals did not sign it in their personal capacities (see below at [115]-[152]).
4. Did the primary judge err at [183]-[184] by addressing conduct subsequent to agreement being reached on the terms of the Deed (raised by ground 5)? It is not necessary to address this issue as it does not affect the conclusion on the matters in dispute (see below at [153]-[154]).
The appeals should thus be dismissed with costs. These issues will be addressed in turn, after first outlining the material facts.
On 4 April 2022 Ms Zabetakis had a call with Mrs Sinclair during which she confirmed that the mediation would take place on Friday, 8 April 2022. Mrs Sinclair said that her solicitor would not be present. On the same day Ms Zabetakis had a pre-mediation conference with Mr Balanian and Mr Ellison. They indicated that they did not think it was necessary for their solicitor to be present unless Mrs Sinclair's solicitor would be present.
During the next joint session the following occurred:
1. Mr Balanian and Mr Ellison agreed to write to Mr Forrester to rectify the harm caused to Mr Sinclair's reputation.
2. Mr Ellison said that the company tax debt (about $670,000) had to be factored into the settlement amount. This was mostly the result of tax not being paid on salaries, for which tax all of the directors were personally liable (thus including Mr Sinclair's estate). He also referred to a company loan owed by Mr Sinclair.
3. Mr Ellison made an offer of $500,000 which Mrs Sinclair rejected as too low. Mr Ellison indicated that they could give her a higher amount if it was payable over some years and made another offer of $1 million payable over four years.
4. Mrs Sinclair said she wanted a total of $2 million, with $250,000 to be paid immediately. She also said she wanted monthly repayments if the remainder was to be paid over four years.
5. Mr Ellison proposed a halfway figure of $1.5 million, less what Mr Sinclair owed for the company loan and his share of the tax debt (which worked out to be around $200,000 after deducting what Mr Balanian owed on his private investment with Mr Sinclair). Mrs Sinclair accepted that offer on the basis that she received a payment of $250,000 up front and the balance was payable by monthly repayments on the 25th day of each month over four years.
Ms Zabetakis then summarised the agreement and asked the parties whether they were content to proceed on that basis. Each of Mrs Sinclair, Ms Richards, Mr Balanian and Mr Ellison indicated that they were.
Ms Zabetakis then tried to prepare a document recording the settlement, which she referred to as "the deed". She ran into some technical difficulties in getting internet access to her office system. She suggested "maybe this can go over to another day" but the parties indicated that they wanted to continue to sign a document that day. She told the parties that they could take the deed to their lawyers if they wanted. Mrs Sinclair, Mr Ellison and Mr Balanian said words to the effect of "no, we want to finalise and settle the deed now". Ms Zabetakis proceeded to type up the document. The technical difficulties may explain some of the oddities of the documents, such as the use of different styles for the clause headings.
After typing up the Deed, Ms Zabetakis sat with Mr Balanian and Mr Ellison privately to review it, before repeating this process privately with Mrs Sinclair (Ms Richards being absent at that point). During that process Ms Zabetakis said words to the effect of "Do you understand that term? Does this accurately reflect the agreement you have reached?", and each of them said to her words to the effect of "yes" as each side went through it.
Ms Zabetakis' handwritten notes on the Mediation Script at this stage record the following: the internet kept disconnecting; the parties wanted to sign as it was late; the formatting was not great or as she would have liked; Mrs Sinclair became annoyed at Ms Zabetakis for continually suggesting and recommending she call Mr Conolly, with Mrs Sinclair stating she "knew what she was doing and understood everything clearly"; when asked whether they would consider a clause that "it is in full and final settlement of the dispute", all parties vehemently agreed that they wanted this to be included; Ms Zabetakis went through the repercussions of the deed for the parties; and she went through the deed with each of them.
The Mediation Script notes also record that Ms Zabetakis checked with the parties about them signing the deed without their solicitors present or involved; she reiterated that she was happy to stand it over while they at least called their solicitors about it, to which all parties said "no"; and when Ms Zabetakis went through the deed with Mrs Sinclair to ensure she was happy with it, Mrs Sinclair insisted that she "really was" and that "she didn't expect to get so much".
Ms Richards had left the mediation at around 4.15pm, and when she returned Ms Zabetakis took her through the draft and asked her if she wanted to make any amendments. She said words to the effect of "No, if [Mrs Sinclair] is happy with it, I'm more than happy with the terms … I know what all the terms means and understand them … it is a good result for the estate and [Mrs Sinclair]".
Prior to Mr Balanian, Mr Ellison, Mrs Sinclair and Ms Richards signing the Deed, Ms Zabetakis said to them all words to the effect of "The deed is full and final in nature. Once you sign it, it will be a binding agreement", in response to which they each said "yes" or that they understood.
Ms Zabetakis accepted in cross-examination that she did not say to the participants at any point "do you understand you are entering into this deed personally and on behalf of the companies". However, she did give evidence that, before they signed the deed, she had asked them if they knew their roles as directors and had asked Ms Richards if she knew what her role as an executor and trustee of the estate was.
The parties then signed the Deed. Ms Zabetakis said words to the following effect:
Please take your copy of the deed to your lawyers. I will also email them a copy this weekend so that they can also have a digital version. They will need to finalise the monthly payment schedule for the 4-year period and some other matters so that they can file it with the Supreme Court and have proceedings dismissed, as you have agreed.
The heading after the recitals reads "Operative Part". The first thirteen clauses provide as follows:
1. This deed is entered into by the parties without admissions of any kind.
2. The defendant will pay to the plaintiff the sum of $1.5 million in full and final settlement of the dispute between them in the following manner:
a. The parties agree that this sum is to be reduced to an amount of $1.3 million noting that the defendants agree to carry the burden of any and all outstanding tax liabilities payable by the plaintiff's to the Australian Tax Office (ATO) and to be paid by the defendant Burns Bay Services Pty Ltd;
b. The defendants agree to pay the sum of $1.3 million in accordance with the following payment structure:
i. The defendants shall pay the plaintiffs an initial lump sum component (initial payment) of $250,000.00, within 28 days of the date that the orders for consent are filed with the Supreme Court in any and all proceedings;
ii. Thereafter, the parties have agreed that the residual component of $1,050,000.00 shall be paid by the defendants to the plaintiffs over the following four (4) year period, no later than the 25th of each month, with such payments to commence a month after the initial payment.
iii. The parties have agreed that all payments are to be made in a tax effective manner suitable to all parties.
iv. In the event of late payment the parties have agreed to a default interest rate of 8% payable on a per annum basis.
3. The plaintiff agrees to transfer any shares presently in their name to the defendants within 14 days of the date of the orders for consent being entered.
4. The defendants agree to email their accountant, Rodney Forester within 14 days of the date of the orders for consent being entered to clarify and rectify any reputational harm that may have been caused to the reputation of John Sinclair.
5. Each party to pay their own costs.
6. The parties will execute consent orders in the proceedings in the form of schedule 1 to this deed (the consent orders). [The schedule to the Settlement deed identifies orders by consent that the proceedings be dismissed with each party to pay their own costs].
7. The defendant undertakes to file the consent orders within 7 days of their execution by the plaintiff and receipt of an executed copy by the defendant's solicitors, Kerr Partners.
8. The defendants hereby releases the plaintiff from all claims, actions, suits, demands, costs, damages and expenses which it may have had but for the execution of this deed by reason of or arising from the dispute.
9. The plaintiffs hereby releases the defendant from all claims, actions, suits, demands, costs, damages and expenses which it may have had but for the execution of this deed by reason of or arising from the dispute.
10. An amendment or variation to this agreement is not effective unless it is in writing and signed by all the parties.
11. Confidentiality
The parties must keep confidential any information identified in this agreement as confidential information, save for any necessary disclosure to their respective legal and financial advisers, or as otherwise required by law.
12. Costs
Each party will pay their own costs in relation to this agreement
13. Counterparts
This agreement may be executed in any number of counterparts each of which will be an original but such counterparts together will constitute one and the same instrument and the date of the agreement will be the date on which it is executed by the last party.
Clause 14 is headed "Interpretation" and relevantly provides that words denoting the singular include the plural and vice versa; words denoting individuals or persons include bodies corporate and vice versa; references to a party are intended to bind their heirs, executors, administrators, successors and assigns; and obligations under the agreement affecting more than one party bind them jointly and each of them severally. Clause 15 substantially repeats clause 11 on confidentiality.
Clause 16 is headed "Entire agreement" and reads:
This agreement is the entire agreement and understanding between the parties on everything connected with the subject matter of this agreement, and supersedes any prior understanding, arrangement, representation or agreements between the parties as to the subject matter contained in this agreement.
Clause 17 is headed "Amendment" and repeats verbatim cl 10.
The final three clauses - the first and last of which are numbered 18, with the clause in between not numbered - are boilerplate type clauses which deal respectively with dispute resolution, waiver, and events beyond reasonable control. There is then a page headed "Schedule", which sets out "Orders by consent", being "Proceedings dismissed" and "Each party is to pay own costs".
The final page is titled "Execution page", above the words "Executed as a deed". It then has two separate boxes. In the first box it says "Executed by Fiona and John Sinclair Pty Ltd (ACN 105 184 343)" above two signature lines. The first line has beneath it "Director - Fiona Sinclair" and is signed by Mrs Sinclair. The second has beneath it "Director - John Sinclair by his trustee and executor - Penny Richards" and is signed by Ms Richards.
The second box is headed "Executed by Burns Bay Services Pty Ltd (ACN 628 360 083) by". Underneath, the first signature line is labelled "Director: John Alexander Ellison" and bears Mr Ellison's signature. The second line is labelled "Director: Ashod Balanian" and bears Mr Balanian's signature. Below these two signatures within the box is a third signature space for a signature, labelled "Launch Partners Pty Ltd by", and below that "Director: Ashod Balanian". Mr Balanian has signed between these denotations.
In each case Henry J subsequently made declarations that the proceedings had been settled in accordance with the Deed, dismissed the appellants' interlocutory processes with costs, and (consistently with the Deed) dismissed the proceedings generally with each party to pay their own costs.
The issue of whether the Deed operates as a contract depends on whether it meets the requirements for operating as such. There are three core requirements: agreement on the terms of and parties to the contract (conventionally but not exclusively described in terms of offer and acceptance); consideration; and intention to create legal (contractual) relations. Here, it is not disputed that there was consideration passing between the parties. As for agreement, there is an issue relating to whether the Deed was meant to take effect immediately, in a way that bound the individuals, or rather was only meant to take effect upon a counterpart execution page being completed and provided by all of the parties, including the individuals. That issue is addressed below. Beyond that, there is no dispute as to the terms of the agreement or the parties to it (although, for the avoidance of doubt, I address as Issue 2 below the question of the identity of the intended parties).
The remaining requirement is that there be an intention to create contractual relations - that is to say here, an intention to create binding legal relations not limited to relations created by valid execution of the Deed as a deed. Thus the current issue is not whether the parties intended that the Deed operate as such, but whether they intended to be contractually bound, recognising that they may not have intended to be contractually bound if they intended only to be bound if and when the document was validly executed as a deed.
Whether or not the parties intended to create binding legal relations is a question assessed objectively, that is to say, by assessing what intention is "conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened": Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at [25]; see also Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 362; Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313; (2015) 90 NSWLR 605 at [15]; Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 at [64]. That assessment can take account not only of the terms of the agreement, but "the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances": Ermogenous at [25]; note also South Australia v Commonwealth [1962] HCA 10; (1962) 108 CLR 130 at 154 per Windeyer J. As McHugh J said in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 338:
In principle, I see no reason why the intention to create a legal relationship cannot be proved by material outside the document, including the statements of the parties. As Corbin points out (Contracts, s 577, vol 3 at 385) "we need not begin excluding parol evidence until we know a contract has been made".
Here, the primary judge was correct to conclude at [173]-[178] that the parties did intend to create contractual relations by executing the Deed.
Starting with the terms of the Deed, the appellants submit that the document is "unambiguous" in manifesting the parties' intention it be a deed. They point to the fact that the document is entitled "Deed of Release & Indemnity"; that it begins with the words "THIS DEED dated 8th day of April 2022"; that it is referred to as a deed in clauses 1, 6, 7, 8 and 9; and that the execution page says "executed as a deed", and was drafted in terms which would have been sufficient for it to be executed as such by the corporate parties in line with s 127 of the Corporations Act. The appellants are correct to argue that these points weigh in favour of finding an intention that it take effect as a deed.
However, manifestation of an intention that the document take effect as a deed does not of itself establish a further, negative intention that the document does not otherwise take effect as an agreement. The appellants' submissions tended to assume that the options were mutually exclusive: contract or deed. Yet a document drafted as a deed can still be binding as a contract, as the cases referred to at [92] illustrate.
Despite its references to being a deed, the Deed also repeatedly describes itself as an "agreement", doing so in cll 10, 11, 12, 13, 14, 15, 16, 17, 18 and the unnumbered clauses headed "Waiver" and "Events beyond control". For example the counterparts provision in cl 13, which is central to the appellants' case (see Issue 3 below), states that "[t]his agreement may be executed in any number of counterparts". Clause 14 states that "[t]his agreement is governed by the laws of New South Wales". Clause 16 is an "entire agreement" clause. And cll 11 and 17 each provide that "[a]n amendment or variation to this agreement is not effective unless it is in writing and signed by all parties". That clause does not refer to the need for any amendment or variation to be effected by a deed, meeting the requisite formalities thereof. At common law (as opposed to equity) a deed could not be varied by a simple contract: note Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2023] NSWCA 280 at [71].
None of the operative clauses are premised on the guarantee having legal effect as a deed. Further, as the primary judge noted at [177], and as the appellants accepted, there was no need for the parties to use a deed for their settlement. Doing so is nevertheless a common practice. As Seddon observes (Seddon on Deeds, 29 [1.11], citation omitted):
Lawyers almost invariably use deeds for settlements, release or compromise agreements. This is a puzzle because, for any settlement of a dispute, there is no doubt that a contract will suffice. A compromise of forbearance is good consideration.
Furthermore, the execution block made no provision for the individuals - whom the appellants accept were intended to be bound (see Issue 2) - to execute the document in their own capacity. It did not contain an execution block for them to do so which provided for their signatures to be witnessed and which stated that it was sealed and delivered by them, as would ordinarily be expected if it was intended to take effect only as a formal deed.
These factors militate in favour of finding an intention that the Deed operate contractually. The numerous references to the parties' "agreement" constitute significant evidence manifesting the parties' intention to be legally bound, regardless of whether or not the Deed was effective as a deed. That understanding is reinforced by the form of the execution block. And there is no manifestation in the Deed of an intention to the contrary.
The surrounding circumstances point strongly towards the same conclusion:
1. All parties were very keen prior that the proceedings be settled, and that the agreement be finalised at the mediation. Ms Zabetakis had repeatedly referred to the possibility of the parties seeking input from their solicitors to finalise the arrangement, or standing the matter over. They continually declined to do so. Indeed, Mrs Sinclair became annoyed at how often this cautious approach was reiterated by Ms Zabetakis. The parties were keen to resolve their differences immediately. And they want to do so in a binding and comprehensive manner. All parties "vehemently" told Ms Zabetakis that they wanted the Deed to include a clause saying that "it is in full and final settlement of the dispute". It is apparent that their shared driving desire was to have an immediate, legally binding resolution of their dispute such as to bring the two proceedings to an end. That tells against any suggestion that they intended the agreed resolution to be effective only if executed with exactitude as a deed. It also meant, incidentally, that all parties to the proceedings needed to be parties to the Deed - including the individuals.
2. There is no evidence that anything was said by any participant in the mediation suggesting that it was important, necessary or even desirable that the settlement be implemented by a deed as opposed to a contract. Consistently with the confused wording of the Deed itself, it appears that the parties drew no particular distinction between the two notions. The drafting was left to Ms Zabetakis, and it can be inferred she was working off some precedent document/s.
3. When Ms Zabetakis explained the Deed to the parties she drew no distinction between an agreement and the Deed, and told them it would be a binding agreement. For example, when taking each side through each term she said "Does this accurately reflect the agreement you have reached". Prior to them finally signing the Deed she said words to the effect of: "The Deed is full and final in nature. Once you sign it will be a binding agreement" (emphasis added). Each of Mrs Sinclair, Ms Richards, Mr Ellison and Mr Balanian responded to the effect that they understood or agreed.
There is no real doubt that on an objective assessment of the terms of the Deed, its subject matter (settling the two proceedings), and what was conveyed by the parties in the circumstances leading up to its execution, it should be concluded that the parties intended to be legally bound, whether or not the Deed was effective as a deed.
To begin with, the cover page identifies the two proceedings and the parties to those proceedings, which include Mrs Sinclair (and Mr Sinclair) along with Mr Balanian. That identification of the parties is repeated on the second page of the Deed, in identifying who it is "between" (see above at [69]).
Recital D states that "the plaintiff commenced" the two identified proceedings. As explained above at [72], the reference to "plaintiff" is naturally construed in context so as to include the Sinclairs, who were the plaintiffs in the Balanian Proceedings. Consistently with that understanding, cl 2 states that "the defendant will pay to the plaintiff the sum of $1.5 million in full and final settlement of the dispute between them in the following manner …". The reference to "defendant" would naturally be construed to include all defendants to the two proceedings, as the appellants accepted.
It is evident that the Deed was intended to settle the dispute manifest in the two proceedings, to which Mrs Sinclair and Mr Balanian were parties, along with the three companies (FJS, BBS and Launch Partners). Thus, for example, recital E states that "[t]he parties wish to settle all disputes between them arising out of the issue of the proceedings". There is no definition of "parties" but it naturally refers to the parties to the proceedings. Consistently with that understanding, cl 6 provides for "the parties" to execute consent orders providing for the proceedings to be dismissed. The settlement of the proceedings and the execution of the consent orders required the participation and agreement of all parties to the litigation, including the individuals.
The Deed stood to benefit Mrs Sinclair (and the estate of Mr Sinclair) personally, and to burden Mr Balanian personally. That was so in part because the payment was to be from the "defendant" to the "plaintiff", which includes all of them. More specifically, the Deed includes an agreement in cl 2(a) that the defendants would "carry the burden of any and all outstanding tax liabilities payable by the plaintiff's [sic] to the Australian Tax Office (ATO) and to be paid by the defendant Burns Bay Services Pty Ltd". This would address an amount for which Mr Sinclair's estate would otherwise share liability (see above at [58(2)]). It was thus in the interests of Mr Sinclair's estate - and, presumptively, Mrs Sinclair - that both the estate and Mr Balanian be bound by the Deed. Similarly, the Deed includes a promise in cl 4 that "the defendants" - including thus Mr Balanian - would email Mr Forrester "to clarify and rectify any reputational harm" potentially caused to Mr Sinclair's reputation.
Each of Mrs Sinclair, Ms Richards, Mr Balanian and Mr Ellison in fact signed the Deed, albeit the execution page provided for them to do so in their capacities as company directors (with Ms Richards, based on a misconception, supposedly signing for Mr Sinclair in his capacity as a director of FJS).
The absence of provision for Mrs Sinclair and Mr Balanian to sign in their personal capacities is less surprising than it might otherwise be in circumstances where the Deed was drafted quickly, in less than ideal conditions and without review by the parties' lawyers. There are numerous infelicities of drafting and formatting which illustrate those characteristics of its genesis.
It is unnecessary to reinforce this conclusion by reference to surrounding circumstances, to the extent relevant, but suffice it to say that those circumstances make very clear that the parties intended to resolve their disputes in a manner that was full, final and binding upon all.
Here, the appellants addressed their submissions to whether or not the Court should conclude that the individuals manifest that they intended to be bound in their personal capacity. For example, they argued that:
it is common ground that this appeal turns on whether the primary Judge was correct [at [164]] in finding that "when the Deed is considered as a whole and in the circumstances in which it was made, I am satisfied that Mrs Sinclair and Mr Balanian intended to be personally bound when they signed the Deed notwithstanding the qualifications attaching to their signatures".
That reference to the manifest intention of the individuals, as opposed to the common intention of the parties, is correct and points to the character of the issue. It is not an issue of construing the terms agreed. It is a question logically prior to construction: have the terms been agreed by the individuals in their capacity as such? That is an issue of formation. Put in terms of offer and acceptance, it is an issue of whether the individuals, in their capacities as such, communicated their acceptance of the offer set out in the terms of the Deed.
The issue here is different from cases where it is clear that a contract has come into existence but the identity of the contracting parties is disputed (eg where there is an issue as to which company in a group was party to the contract): cf BH Australia Constructions Pty Ltd v Kapeller [2019] NSWSC 1086; (2019) 100 NSWLR 367 at [53]. The issue here is whether the contract has come into effect at all. Specifically, it is whether the words and conduct of each of the individuals would have led a reasonable person in the position of the other parties to conclude that they were agreeing, immediately, to be bound in their personal capacities. The issue is also distinct from the point at issue in Toll. That case concerned whether a party to a contract was bound by incorporated written terms where its representative had signed but not read the document referring to those terms. In holding that the party was bound the High Court noted that "[l]egal instruments of various kinds take their efficacy from signature or execution" (at [47]). Here there is no dispute as to the terms of the agreement, nor as to the fact that the signatures on behalf of the companies conclusively connoted the companies' consent. Rather, the issue is whether those signatures should also be understood to communicate the individuals' agreement to be bound.
What, then, of surrounding circumstances? In Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 this Court had to determine whether a document should be taken to be an effective exercise of an option to renew a lease. Kirby P explained the issue, relevantly, as follows (at 677):
The appropriate question to be asked is what anybody who received the letter, subsequently said to amount to the exercise of the option, would fairly have understood to be the meaning of it, in all the circumstances of its receipt: cf Carter v Hyde (1923) 33 CLR 115 at 126; adapting Romer J in Jones v Daniel [1894] 2 Ch 332 at 335. The addition by Isaacs J of the phrase 'in the circumstances of its receipt', adds instruction that the consideration which will govern the meaning to be ascribed to the letter is not to be judged in isolation, weighing only the words used. It is to be judged against the background of the dealings between the parties: cf Braham v Walker (1961) 104 CLR 366 at 376 and Lamont v Heron (1970) 126 CLR 239. The parties did not dispute that this Court could look to those dealings, at least up to the time for the exercise of the option had expired.
His Honour went on to take account of the nature of the parties and other circumstances in considering how the letter exercising the option should be construed (see at 679). This statement of principle has subsequently been approved by this Court: Young v Lamb [2001] NSWCA 225 at [24]; Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396; (2011) 82 NSWLR 665 at [69]. There is no reason to limit this approach to cases involving the exercise of options. The point is a broader one about ascertaining whether an offer should be taken to have been accepted. It is permissible to take account of the surrounding circumstances - the "circumstances of its receipt" - in considering that issue.
In doing so, some sources may be of greater significance than others in the particular case, reflecting how a reasonable person in the position of the parties would evaluate the situation. When construing a written communication purporting to accept an offer, generally the primary focus will be on what that written communication says. In cases such as the present, where the parties have gone to the effort of seeking to document their agreement, a reasonable person in the position of the parties would no doubt accord great significance to the terms in which they have done so. But that record of agreement would still be understood in its context, which may include the circumstances in which the document was drafted and executed, the nature of the parties, their prior dealings, and the subject matter of the contract.
Let it be supposed here, for example, that just after they all executed the Deed in the manner that they did one of the parties had said, "I just want to check that this Deed will bind all of us personally", to which everyone else said "yes". There could be no question then that they would be so bound - not as a matter of estoppel, but because they had expressly communicated acceptance of the terms of the Deed in their personal capacities (see eg Young v Schuler (1883) 11 QBD 651, discussed below). The Deed does not specify any particular way in which acceptance must be communicated. The example illustrates that a document setting out the terms of an agreement may not be definitive or exhaustive as to who is bound by it.
It can be accepted that this task will involve construction of the terms of the acceptance of the offer: note Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192 at 201; Heydon on Contract, 30 [2.60] and 51 [2.300]. And, in cases such as this, that may involve construing the terms of the contractual document itself. That the contractual document is being construed does not mean that this issue is one of construing the contract, that is to say, construing the terms of the parties' agreement. As explained, the issue of formation is a logically prior one, relating to whether an agreement has been reached. In any event, it is highly doubtful that surrounding circumstances would be ignored even if the issue was seen as one of contractual construction. However, it is not necessary to address that issue here.
The appellants invoked one first instance and three appellate decisions to seek to support their position. In fact, those decisions undermine their arguments. First, chronologically, the appellants relied on McHugh JA's judgment in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909, being a case in which a new insurance agent signed up with an insurer through his corporate entity, but the personal indemnity in the agency contract had also been executed by that corporate entity. A majority of this Court held the agent was nevertheless personally liable on the indemnity. McHugh JA said (at 923-924):
The formation of a contract does not depend upon the actual intention of the parties. A contract exists because the law attaches rights and obligations to the external conduct of the parties, one at least of whom has expressly or impliedly made a promise. …
The present case, therefore, depends on what the parties did and not on what they intended to do when they signed the Indemnity and the Agency Agreement. And what they did depends on the construction to be placed on the documents which they signed. A commercial document, however, must be construed in its commercial setting - in accordance with the surrounding circumstances known to the parties: Codelfa Constructions Pty Ltd v SRA of NSW (1982) 149 CLR 337 at 352-353. This is so whether the issue concerns construction in the strict sense or whether, as here, the issue concerns the capacity in which a person signs a document. … In some cases the contents of a document may indicate that the signatory is bound even though a qualification attaches to his signature. Expressly or by implication the body of the document may make it plain that the signatory is a party to the contract. … In other cases, however, the qualification to the signature may be overcome by the terms of the document and the surrounding circumstances. In the end the decision must depend upon the terms of the document including the qualification attaching to the signature together with the surrounding circumstances. This is a question of fact, not of law.
Read as a whole, it is evident that his Honour was treating the issue as one of formation, where that involves construing the commercial document in question in context, including the surrounding circumstances.
Secondly, the appellants invoked the first instance decision of Giles J in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160. His Honour there held that two directors who executed a factoring agreement in their capacity as such did not thereby make themselves liable as guarantors under the agreement. After consideration of various cases, his Honour said (at 174):
I conclude that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.
This quotation does not rule out referring to surrounding circumstances, but does not expressly address the reason or the extent to which that might be done. That was because the issue that was of concern to his Honour was a perceived difference in prior cases between (at 167-168):
asking whether from the words qualifying the execution alone and without reference to the entirety of the document a personal undertaking by the signatory is negatived, and asking whether on the construction of the document as a whole it should be concluded that the signatory was intended to incur no personal liability.
As noted, he considered the focus was not just on the qualification. His Honour did go on to refer to a circumstance beyond the terms of the document in question, being the terms of an agency agreement which was handed over at the same time as the proposed factoring agreement (at 175).
Thirdly, the appellants cited Harris v Burrell & Family Pty Ltd [2010] SASCFC 12; (2010) 271 LSJS 326. There, a loan agreement included a clause that the director "of the borrowing entities also acknowledges personal liability for all debt remaining …". The agreement was only executed on the borrower side by the corporate borrower, signed by the director, and was not executed by the director in his personal capacity. The Court nevertheless held the director personally liable. Doyle CJ, speaking for the Court, quoted what McHugh JA said in Scottish Amicable (at [16]). Then his Honour quoted the High Court in Toll at [40], before saying that "[t]hese observations by the High Court apply to a case like the present, where the issue is whether a person has made himself liable under a contract, as much as they apply to the construction of a contract" (see at [16]-[17]). His Honour thus implicitly accepted that the issue was one of formation, not contractual construction, contrary to the submissions of the appellants here. At [20] he quoted the approach adopted by Giles J in Kiyose Holdings (as set out above at [130]), saying that it was consistent with the approach of McHugh J in Scottish Amicable. Doyle CJ did then take account of surrounding circumstances beyond the terms of the loan agreement, namely that it was prepared without legal advice on either side, that it had replaced previous loan agreements, and that the principals on either side were friends (at [21]-[30]).
Fourthly, the appellants referred to this Court's decision in Singh v De Castro [2017] NSWCA 241, in which there was some ambiguity as to whether a director had signed only in his capacity as such and/or had signed in his personal capacity as a guarantor. This Court upheld the conclusion that he was personally bound. Sackville AJA, writing for the Court, quoted the approach adopted by Giles J in Kiyose Holdings (at [86]), noted that that approach was not in dispute (at [88]), and also referred to Scottish Amicable and Harris. His Honour did not restate the principles. Whilst he gave emphasis on the facts of that case to the terms of the agreement, nothing he said indicated any departure from Scottish Amicable and Harris as regards how the issue is to be understood or the relevance of surrounding circumstances. On the contrary, he noted without disapproval that Doyle CJ had taken such circumstances into account (at [93]).
There have been many cases where questions have arisen as to whether a person has signed an agreement or other legal document in a dual capacity: see eg, recently, Pugwall Pty Ltd v Arthur McKenzie Investments Pty Ltd [2022] VSCA 272; (2022) 68 VR 559; Manicaros v Commercial Images (Aust) Pty Ltd (in liq) [2024] QCA 40. The cases just discussed are consistent, for example, with the 1883 decision of the English Court of Appeal in Young v Schuler. In that case there was an agreement for the supply of goods between two companies. The agreement specified that Mr Schuler guaranteed payment to the supplier. Mr Schuler executed the agreement on behalf of the purchaser pursuant to a power of attorney, but he did not sign it in his personal capacity. He had made statements at the time of execution that he intended to sign on his own behalf as well as that of the company. It was held that that evidence was admissible, and that Mr Schuler was bound as guarantor. Brett MR said that "the questions whether a person has signed his name at the foot of a document, and if so, for what purpose, are questions of evidence, and any evidence on the subject which does not contradict the document is admissible" (at 654).
The High Court has addressed the issue in terms consistently with the above, in a case to which neither side referred (to be fair, the respondent had little notice of this line of argument by the appellants): Giliberto v Kenny (1983) 57 ALJR 283. A brief contract was hurriedly drafted for the sale of a property to (the Court found) a married couple. The husband did not sign the contract. The wife signed it without identifying that she was signing in anything other than her personal capacity. Gibbs CJ, speaking for the Court, stated (at 284):
Extrinsic evidence was admissible to show, as it did, that Mrs Kenny, in agreeing to buy, was acting as agent for her husband as well as herself. As authority for that proposition it is sufficient to refer to Phipson on Evidence, 12th ed., par. 1907, where it is said:
"Where, however, it is doubtful whether A signs a document as agent for B, or as charging himself as well, extrinsic evidence … may be given, such evidence going really to the factum of the instrument."
In sum, the appellants' arguments that the issue is one of contractual construction and not one of formation, and that surrounding circumstances are of very limited utility, are inconsistent with principle and authority and cannot be accepted. The primary judge was correct to state that "determining whether a signatory to a contract is personally bound where a qualification to their signature exists requires an objective enquiry as to whether there is such an intention based on the construction of the document as a whole and in light of the surrounding circumstances" (at [163]).
The appellants' reliance on the counterparts clause rises no higher than saying that there was a way that the individuals could have executed the Deed, namely by signing a counterpart. Yet there was a simpler way that they could have done so, that is by executing the same copy of the document which they themselves had executed for the corporate parties. Both of those possibilities suffer from the same problem: there was no provision for the individuals to do so. Reference to the counterparts clause does not advance the argument. That is effectively what the primary judge concluded. It is thus incorrect to state, as the appellants did, that she "subtracted from, varied and contradicted the language of the written instrument". For the same reason, the appellants' argument that the entire agreement clause "meant that the counterparts clause was to be given effect on its terms and without regard to any prior understandings" misunderstands the significance of cl 13.
It is also relevant that at the start of the Deed, after the cover page, it says "THIS DEED dated 8th day of April 2022". Of course, legal documents sometimes have dates on them which do not reflect when they become operative, because in fact execution is only completed later. Even so, the singular dating of the Deed in this way is here one, limited indicator of an intent that all parties would immediately be bound.
Further, her Honour was correct to state that there was "no apparent logic, and it makes no commercial sense, for Mrs Sinclair to have signed as a director and bound FJS but, at the same time, reserved her right to execute the Deed personally". The appellants' position on this statement was odd, saying that it was "a proposition with which the Appellants agree while pointing to the counterparts clause to say that is not what was done". The appellants also argued that "why the document was in the form in which it was when signed is besides the point". That a particular intent does not appear logical or commercially sensible is, of itself, an (objective) indicator weighing against concluding that that was the person's intent.
The position would have been different if the Deed had provided separately for execution by the individuals. If that had been so, and Mrs Sinclair had executed it on behalf of FJS but declined to execute it herself on the day, it would have tended to indicate that she was thereby reserving herself a right to further consider whether or not she agreed to the Deed coming into effect. Yet there was no indication in the terms of the Deed that any consideration had been given to the need for individual execution. In that context, Henry J was right to refer to the lack of logic or sense in the individuals executing it in their corporate capacities without intending it to come into effect.
The counterparts clause does not bear the weight that the appellants seek to place upon it. It does not establish that it was intended that the individuals would execute the Deed separately. The Deed, read as a whole, suggests the contrary.
In light of the form of the Deed, along with the circumstances in which it was drafted and executed, Henry J was correct to conclude that the individuals should be taken to have communicated that they would be bound by the Deed immediately in their relevant personal capacities, despite having only formally executed the Deed in their corporate capacities.