Wyzenbeek v Australasian Marine Imports Pty Ltd - [2022] FCA 201 - FCA 2022 case summary — Zoe

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Wyzenbeek v Australasian Marine Imports Pty Ltd

[2022] FCA 201

Federal Court of Australia|2022-03-11|Before: Mr J, Derrington J

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Source facts

Court

Federal Court of Australia

Decision date

2022-03-11

Before

Mr J, Derrington J

Source

Original judgment source is linked above.

Judgment (29 paragraphs)

[1]

Introduction 1 The Underwriters of Lloyds Syndicate 5000 TRV (Lloyds) applied for an order dismissing a cross-claim brought against it by Gold Coast City Marina Pty Ltd (GCCM), Dean Leigh-Smith, Ryan Leigh-Smith and Patrick Gay (collectively referred to as the "Marina parties"). The foundation for the order sought was an alleged compromise said to have been struck by an exchange of emails between the parties' respective solicitors on 7 and 8 November 2018. It is claimed that there was agreement to the making of an order dismissing the cross-claim and a further agreement that the Marina parties would not seek to disturb that order in a pending appeal by other parties in the litigation. By the cross-claim, the Marina parties claim indemnity from Lloyds in respect of any liability they have to the applicants in the main proceedings. The consideration for the alleged agreement to abandon the cross-claim was said to lie in Lloyds' agreement that, if the Marina parties' agreed to its dismissal for all time, it would not seek its costs in respect of the cross-claim. 2 The manner in which Lloyds' application was advanced lacked a degree of clarity. The order sought was for the dismissal of the Marina parties' cross-claim, although the actual foundation for that was not clear. No claim was made for specific enforcement of a prior agreement to approach the Court for the making of orders dismissing the claim and it was not said, at least expressly, that the Marina parties had compromised their claim for indemnity under the Lloyds' policy such that the cross-claim was now unfounded. As the following discussion makes clear, this uncertainty is derivative upon the apparent casualness by which the alleged agreement was entered into and the vagueness of the terms actually agreed. 3 For the reasons which follow the application should be dismissed. The exchange of emails did not amount to a compromise in respect of the cross-claim on the terms alleged by Lloyds. At best, all that occurred was that, to the extent to which they were able, the parties agreed on the terms of orders to finalise the first instance hearing for the purposes of the then pending appeal. It is not possible to detect any agreement to resolve the Marina parties' claim for indemnity under the Lloyds' policy for all time and for all purposes. In any event, the binding effect of any such agreement was conditional upon the Court making an order dismissing the cross-claim, and no such order was made. In the alternative, that agreement was conditional upon the Court making such an order within a reasonable time or prior to the determination of the appeal and each of those events lapsed without the order being made.

[3]

The relevant background 6 On 31 July 2015, proceedings were commenced in this Court by Mr and Mrs Wyzenbeek and another (collectively referred to as the "Wyzenbeeks") against, inter alia, the Marina parties in relation to the sale of a motor vessel. The claim was also advanced against a company, Australasian Marine Imports Pty Ltd (Australasian Marine Imports), although it was subsequently placed into liquidation. As that was the entity which had sold the vessel to Mr and Mrs Wyzenbeek, the claim in contract against it became somewhat secondary to the claims against the Marina parties under Schedule 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) in reliance upon alleged misleading or deceptive conduct which, it was alleged, caused the applicants to purchase the vessel. 7 In August 2016, two insurers, ACE Insurance Limited (Chubb) and Lloyds, were joined by the Wyzenbeeks as the sixth and seventh respondents to the action respectively. Those insurers had allegedly provided indemnities to Australasian Marine Imports and the Marina parties, and the Wyzenbeeks sought declarations as to the insurer's obligations to indemnify the policyholders. The joinder of the insurers to the proceedings was somewhat unnecessary and it is unclear why such a stratagem was adopted. Ultimately, it merely served to complicate the proceedings. 8 In any event, the Marina parties subsequently commenced a cross-claim against Lloyds, seeking indemnification of any liability which might be found to exist in relation to the Wyzenbeeks' claims. It was filed on 14 November 2016, pursuant to leave granted on 11 November 2016. A similar cross-claim was filed against another entity, Underwriting Risk Services Ltd at about this time, although it was not served, as that entity confirmed that it would indemnify GCCM subject to certain terms and conditions. 9 Although there was some dispute as to the maximum amount which might be recovered under the Lloyds' policy (assuming it responded to the claim), the parties generally accepted that it was between $1 million to $2 million. 10 On 21 February 2017, Rares J determined that the Wyzenbeeks' claim against Australasian Marine Imports and the Marina parties be determined ahead of any other claim, leaving the insurance claims in abeyance pending the determination of the primary claim. On 2 March 2017, the Wyzenbeeks' primary claim and an action by the first to fifth respondents against their insurance broker were set down for hearing on 3 October 2017. 11 The action against the insurance brokers was resolved by agreement on or about 8 September 2017. 12 The substantive trial in the matter was heard over a number of days in October 2017 and April 2018. The insurers participated in it to a small degree, although why that was either necessary or appropriate was not entirely clear. Judgment was delivered on 10 October 2018: Wyzenbeek v Australasian Marine Imports Pty Ltd (No 2) [2018] FCA 1517. The applicants secured a minor judgment against Australasian Marine Imports, however their claim as against GCCM, Dean Leigh-Smith, Ryan Leigh-Smith was dismissed. The claim as against the fifth respondent, a Mr Gay, had been dismissed at an interlocutory stage. No order was made at that time in relation to the Wyzenbeeks' claim against the insurers or, indeed, the cross-claims. Given the failure of the Wyzenbeeks' claim against the Marina parties, the latter's claim against Lloyds was now redundant. 13 Directions were made on 12 October 2018 for a further hearing to occur on 22 November 2018 in relation to the question of the costs of the action. Those directions required, inter alia, that the respondents file and serve their written submissions in relation to the question of costs ahead of the hearing. 14 By the end of October 2018, it was apparent to the other parties to the litigation that the Wyzenbeeks intended to appeal the first instance decision and, indeed, their solicitors had served an unsealed notice of appeal on their solicitors on 31 October 2018. It was not in dispute that a background fact known to the Marina parties and Lloyds at the relevant times was that the appeal either had been or was going to be filed. 15 On 7 November 2018, Mr Charles Street, then a solicitor in the employ of Norton Rose Fulbright Australia, the solicitors for Lloyds, sent an email to Mr Cameron McKenzie of Gadens, concerning the cross-claim against Lloyds. The subject line of the email was "Cadeau - Proposed Order re underlying claim" and it provided as follows: Cameron, Here is a draft order which we would like to be made in chambers. In relation to the cross-claim, our client is prepared to bear its own costs of the cross-claim on the basis that your clients agree that they will not seek to disturb the order dismissing the cross-claim in the appeal. Can you please confirm whether this can be agreed? Regards, Charlie 16 The attachment referred to in the email was a document entitled, "Short Minutes of Order", and contained proposed orders in the following terms: THE COURT ORDERS THAT: 1. The Applicants' claim against the Sixth and Seventh Respondent is dismissed (costs to be determined in accordance with Order dated 12 October 2018). BY CONSENT THE COURT ORDERS THAT: 2. The First to Fifth Respondents' Cross-Claim against the Seventh Respondent is dismissed. 17 It may be observed that the first of the proposed orders does not relate to the Marina parties' cross-claim. It appears to have been the subject of prior discussions between several parties as part of the process of finalising the orders to be made consequent upon the dismissal of the Wyzenbeeks' claim. As appears from the subsequent events, the parties accepted that if the Wyzenbeeks were successful in overturning the dismissal of their claim against the Marina parties, the order dismissing their claims against the insurers would be set aside. 18 By an email on 8 November 2018, Mr McKenzie replied to Mr Street's email as follows: Dear Charles, We agree with the proposed Orders. Kind regards 19 Mr McKenzie made no express comment in relation to the proposal as to Lloyds' costs of the proceedings, or the Marina parties' entitlement to disturb the order were the Wyzenbeeks to be successful on their appeal. 20 The hearing as to the appropriate costs orders in the Wyzenbeeks' proceedings occurred on 22 November 2018. In the course of it, a proposed order in a form similar to that which was the subject of the correspondence between Gadens and Norton Rose Fulbright on 7 and 8 November 2018 was handed to the Court. Relevantly, it included a consent order that the first to fifth respondents' cross claim against the seventh respondent be dismissed. Mr Sullivan QC, who appeared for Dean Leigh-Smith, Ryan Leigh-Smith and Patrick Gay, indicated that he had not seen that draft order and nor did he have instructions to agree to it. He asked that the Court not to deal with those orders at that stage. Counsel for Lloyds, Mr Robertson, acknowledged that the order in relation to the cross-claim against his client should not be made pending Mr Sullivan QC obtaining instructions, although he indicated that he understood that it had been agreed. Relevantly, Mr Donaldson SC for Chubb, against which the Marina parties had also brought a cross-claim, also indicated that his client opposed the making of such an order. In particular, he submitted: Can I just make clear that we don't consent to an order that the … cross-claim … is dismissed. It may ultimately impact on our entitlements if there's a successful appeal and there's some coinsurance issues, so I just need to make clear we don't consent to an order in those terms. 21 It is also relevant that counsel for the Wyzenbeeks, Mr Leopold SC, recognised the difficulties which might arise if the cross-claimants' claim against Lloyds was dismissed. He submitted: [I]f the appeal goes ahead and it's successful … the obligations as insurers of [Chubb and Lloyds] raise their heads, we shouldn't be seen to have sat by in silence as a consent judgement - as a consent dismissal occurs. Your Honour shouldn't make the dismissal. […] Your Honour ruled in the judgment … of October, that your Honour would deal with those issues later. We've said - and those cross claims, which are the very cross claims under the policies, they should remain extant. 22 It is apparent from those comments that the concern being expressed arose in the context of the appeal having been instituted and what may follow from its successful prosecution. In the end, there was no agreement on the proposed order dismissing the Marina parties' cross-claim against Lloyds and no such order was ever made. 23 Subsequent to the costs hearing, correspondence passed between the solicitors relating to the dismissal of the Wyzenbeeks' claim against the sixth respondent, Chubb, and the seventh respondent, Lloyds. A proposal was made that an email be sent to the Court asking for the claim against Chubb to be dismissed. That was agreed upon by the several parties and an order to that effect was subsequently made in chambers on 28 November 2018. 24 Subsequent to that correspondence Mr Street sent an email to Mr McKenzie on 26 November 2018, stating: Following on from the below emails, should we also provide a similar email to the Court seeking to have the cross-claim dismissed as per the settlement agreement? 25 It is worthy of comment that, whilst the emails relating to the dismissal of the Wyzenbeeks' claims against Lloyds and Chubb were apparently circulated amongst all of the relevant solicitors, this email was sent only to the solicitors for the Marina parties. Of course, all of the evidence surrounding this issue may not be before the Court, but it is nevertheless unusual that such an order would be proposed solely to the Marina parties when, only four days previously, Counsel for both the Wyzenbeeks and Chubb had strongly opposed its making. There is nothing in the material to suggest that those parties had changed their position in relation to the proposed order and, if the proposal had been accepted, there was a real risk that the order would have been made in chambers in defiance of their objections. 26 There was no response to that email, causing Mr Street to send a follow up email on 20 December 2018, again seeking the cross-claimants' consent to the dismissal of the claim against Lloyds by the making of an order in chambers. 27 Mr Street sent a further follow up email on 1 April 2019. This email attached a document entitled, "Consent Order", which contained a proposed order in the following terms: BY CONSENT BETWEEN THE FIRST TO FIFTH RESPONDENTS AND THE SEVENTH RESPONDENT THE COURT ORDER THAT: 1. The First to Fifth Respondent's Cross-Claim against the Seventh Respondent is dismissed. 28 Mr McKenzie responded to that email and asked Mr Street to call him to discuss the matter. There was no evidence as to whether any conversation occurred or, if it did, what was said. 29 On 3 April 2019, the decision relating to the costs of the Wyzenbeeks' proceedings was handed down: Wyzenbeek v Australasian Marine Imports Pty Ltd (No 3) [2019] FCA 439. In those reasons, the request by Lloyds' counsel to make an order dismissing the Marina parties' cross-claim was dealt with in the following manner (at [102]): At the hearing of the costs argument an issue arose as to whether the cross claims of the first to fifth respondents against the insurers, being the sixth and seventh respondents, should be dismissed. This arises because, when the matter came to my docket, a trial of certain issues had already been ordered or directed and it proceeded in that manner. However, the determination of those issues would not conclude all matters between the parties. Now the applicants have appealed against the orders made in Wyzenbeek (No 2), and the remainder of the issues in the action are yet to be dealt with. Mr Donaldson SC correctly observed that the dismissal of the cross-claims might have significant ramifications in the event the appeal is successful. That is a perspicacious observation and it is not appropriate that the orders sought be made until all questions which need to be determined are dealt with. 30 From that paragraph, it is apparent that the Court was refusing to make the proposed order handed to the Court by Lloyds' Counsel at the hearing on 22 November 2018. 31 No further attempt was made by Lloyds to have the Court make an order dismissing the cross-claim prior to the hearing of the Wyzenbeeks' appeal. 32 The appeal on the first instance decision was heard in May 2019, with judgment being delivered on 27 September 2019: Wyzenbeek v Australasian Marine Imports Pty Ltd (in Liq) (2019) 272 FCR 373. The Full Court held that the Marina parties save for Mr Gay, as respondents, were liable to the applicants on the claim for misleading or deceptive conduct under the Australian Consumer Law. Damages inclusive of interest were assessed in the amount of approximately $2.8 million, and the Marina parties, Chubb and Lloyds were ordered to pay the Wyzenbeeks' costs of the appeal. 33 The Full Court also set aside the dismissal of the Wyzenbeeks' claims against Chubb and Lloyds as a matter of course and remitted those claims and the cross-claim to the primary judge for determination. There was no objection to that order by Lloyds. 34 On 23 December 2019, the respondents, including the Marina parties, filed an application for special leave to appeal to the High Court, although it was refused with costs on 17 April 2020. 35 On 10 June 2020, the firm, Carter Newell, then acting for GCCM and Dean and Ryan Leigh-Smith, wrote to Lloyds seeking indemnity under the policy. 36 Correspondence then ensued between Norton Rose Fulbright for Lloyds and Carter Newell in relation to the matter but, on 14 August 2020, Norton Rose Fulbright asserted that the Marina parties' claim for indemnity against Lloyds had been settled by agreement. 37 Thereafter, the Marina parties indicated their intention to pursue the cross-claim in these proceedings and Lloyds maintained its position that their claim for indemnity had been compromised. 38 Points of Claim and Points of Defence in relation to the alleged settlement of the cross-claim were filed in accordance with the Court's directions of 17 June 2021. 39 Lloyds' Points of Claim is drafted in vague terms and the basis on which it is alleged that the Marina parties' claim for indemnity under the policy had been settled is opaque. It alleges the exchange of emails and asserts that, by those emails, a binding settlement agreement came into effect between the Marina parties and Lloyds, although its precise terms were not pleaded. It also alleges that Mr McKenzie had "ostensible authority" to enter into that agreement on behalf of the Marina parties. It then claimed relief to give effect to that agreement which seemed to be by way of specific enforcement by the making of an order dismissing the cross-claim. 40 By the Points of Defence, the Marina parties deny that there was any compromise of their claim for indemnity under the Lloyds' policy. They further alleged, inter alia, that: (a) on an objective assessment of the terms of the email exchange, there was no intention to form an immediately binding settlement agreement; and (b) the proposed order dismissing the cross-claim was subject to instructions before it could be made by the Court and such instructions were neither sought nor obtained. 41 In the alternative, it was alleged that the settlement agreement, if formed, was conditional upon the Court making the orders sought and no such orders were made. By yet a further alternative claim, they sought to have the Court exercise its discretion to refuse to dismiss the cross-claim in the interests of justice and/or on the grounds of mistake. 42 Pursuant to case management directions, the Marina parties filed material in relation to the circumstances of the alleged settlement of their claim against Lloyds. In essence, that material establishes that no instructions had been provided to Mr McKenzie or Gadens to settle or agree to the dismissal of the cross-claim against Lloyds in or about November 2018, or at all. Mr Dean Leigh-Smith deposed that he was not contacted about the proposed consent orders and nor did he give instructions, either on his own behalf or on behalf of GCCM, to agree with them. Mr Gay has given similar evidence and Mr Ryan Leigh-Smith provided additional supporting evidence to the same effect. 43 None of the above deponents were cross-examined on their affidavits. 44 There was no evidence from either of Mr Street or Mr McKenzie as to the circumstances of their email exchange of 7 and 8 November 2018. It is convenient to note here that Mr McKenzie left private practice in 2019 to take up a position as a Magistrate in Queensland and has not had any involvement in the present proceedings.

[5]

Did Mr McKenzie have authority to enter into the alleged agreement? 46 As a preliminary matter, it should be mentioned that one issue which arose on the Points of Claim and Points of Defence was whether Mr McKenzie had authority to agree to resolve the Marina parties' claim for indemnity on a permanent basis. The origin of this issue was the usual manner in which Lloyds pleaded its case in relation to the alleged settlement agreement. By paragraph 10 of its Points of Claim, it alleged that Mr McKenzie had ostensible authority to enter into the agreement on behalf of the Marina parties. It pleaded neither express nor implied actual authority. By the Points of Defence, the Marina parties admitted that Mr McKenzie was their solicitor on record at least until 29 October 2020, which covers the period during which the relevant conduct and communications occurred. However, they denied that he had ostensible authority to enter into the purported settlement agreement and alleged that instructions were neither sought nor obtained from them to do so. They also alleged that it would have been apparent to Mr Street that Mr McKenzie's authority did not extend to compromising a significant claim without instructions, although it was not alleged that Mr Street knew or ought to have known that Mr McKenzie lacked instructions to act as he did. 47 Prior to the hearing of its application, Lloyds issued a Notice to Produce to the Marina parties which required production of a wide range of documents relating to Mr McKenzie's actual authority to act on behalf of the Marina parties. The Marina parties applied to set it aside and that application was set down for hearing on 14 September 2021. It became apparent during the course of that hearing that the parties were not ad idem as to the issues in dispute in relation to Lloyds' application. In particular, Mr Redwood SC for the Marina parties indicated that the Marina parties were not raising any issue as to Mr McKenzie's actual authority. He said in explaining the nature of his clients' case: Now, we say in that regard that the fact that instructions were neither sought nor obtained before a consent order was made reinforces and supports that objective characterisation of the events. But we do not say - in other words, we are not saying, your Honour, that we are not bound by any settlement agreement because Mr Mackenzie acted without actual authority or in excess of his authority. We're saying we are not bound by the alleged settlement agreement because there was, in fact, objectively construed, no immediately binding unconditional agreement to settle. 48 Following that statement, Mr Emmett SC for Lloyds indicated that it may no longer be necessary for his client to pursue the Notice to Produce if actual authority was not in issue. In that regard, Mr Redwood SC described the Marina parties' position as follows: And we do not say - in fact, we positively pleaded at paragraph 3(a) of the points of defence that we admitted he was the solicitor on record, and with that carries the ordinary authority or the usual authority of a solicitor on record, so we do not say that we are not bound because of an absence of actual authority or, to the extent relevant, an absence of ostensible authority. 49 As a result of that exchange, the interlocutory application was dismissed with the agreement of the parties and the question of the costs of the application was reserved to a later date. 50 It might have been thought that the question of authority for the purposes of the present application was then settled. Unfortunately, that was not the case. During the hearing of this application, Mr Redwood SC raised an issue as to whether Lloyds could rely upon the actual authority of Mr McKenzie to enter into the agreement as opposed to merely his ostensible authority. Although that issue was not free from doubt, it should be accepted that, subsequent to the hearing on 14 September 2021, the parties proceeded on the basis that Lloyds were advancing a case that Mr McKenzie had actual or ostensible authority to enter into the alleged agreement with Mr Street. Whilst Lloyds' Points of Claim seemingly only advanced a case of ostensible authority, the discussion and concessions made in the course of that hearing had the result that the issue of actual authority was well and truly alive. Moreover, Mr Redwood SC explicitly conceded that the Marina parties did not dispute that Mr McKenzie had implied actual authority to enter into the alleged settlement agreement. Whilst that is not the usual manner in which issues in a dispute are crystallised, these proceedings, by which an alleged settlement is sought to be enforced in the proceedings in which it arose, are somewhat atypical. 51 It is necessary to mention that the issue of Mr McKenzie's authority attracted far more attention than was warranted in the circumstances. It was obvious that he was the solicitor for the Marina parties on the record in the Wyzenbeeks' proceedings and it would have been apparent to anyone that he had the usual implied authority to act for them in that manner. That would include authority to bind his clients to an agreement to settle the proceedings and the underlying claims: Donellan v Watson (1990) 21 NSWLR 335 at 342. It is not clear why the Points of Claim did not allege the same and merely relied upon his ostensible authority. In addition, given the circumstances of Gadens' retainer by the Marina parties, there has never been any real question of Mr McKenzie's actual or implied authority. 52 It follows that the Marina parties' allegation that it had not been established that Mr McKenzie had actual authority to enter into the agreement alleged by Lloyds cannot be sustained. 53 Had the matter been confined to Mr McKenzie's "ostensible authority", that is, his authority derived from the Marina parties having held him out as their solicitor in the conduct of the proceedings, it is quite possible that Lloyds claim would have failed for that reason. Such authority exposes a principal to liability under a contract entered into on their behalf despite the agent lacking actual authority to bind them. In circumstances such as those before the Court, that liability arises by way of an estoppel based upon the agent being held out in a position to which the authority to do the relevant act might be said to usually attach. However, the existence of such an estoppel depends on there being reliance upon the holding out of the agent in that position: see generally the customary instructive discussion by Professor dal Pont in Chapter 20 of Law of Agency (4th ed, LexisNexis, 2020). The difficulty here is that there was no evidence from Mr Street or any other person identifying any reliance on Mr McKenzie's position as the solicitor on the record as conferring upon him any authority to bind the Marina parties. It was also not a matter which was expressly pleaded by Lloyds in its Points of Claim.

[6]

Did a binding settlement agreement come into effect? 54 There were two bases for the Marina parties' claim that no binding agreement arose from the email exchange of 7 and 8 November 2018. First, they submitted that there was no acceptance of the offer in Mr Street's email by Mr McKenzie's responsive email. In that respect, the central issue is whether Mr McKenzie was merely agreeing to the proposed orders for the purposes of finalising the several interconnecting claims pending the determination of the Wyzenbeeks' appeal or the costs hearing or, as Lloyds contended, was agreeing to the terms on which the Marina parties' claim for indemnity would be settled for all time. Secondly, the Marina parties submitted that, if Mr McKenzie was accepting the offer in Mr Street's email, the parties did not intend to be immediately bound to its terms, but rather their binding effect was conditional upon either instructions being obtained, or the making of the orders to which he was expressing agreement. 55 As a preliminary matter, it should be acknowledged that the first basis relied upon by the Marina parties, being that there was no corresponding offer and acceptance, does not appear in their Points of Defence but was raised in their written submissions filed on 8 October 2021. It does not follow, however, that these proceedings to enforce the alleged settlement agreement cannot be determined on that basis. In the ordinary course, proceedings of this nature are brought in the extant proceedings by way of an interlocutory application and accompanying affidavits. Indeed, that was precisely the manner in which Lloyds initially proceeded. The unusual step was taken of having the parties file the Points of Claim and Points of Defence with a view to crystallising the factual issues in dispute. Unfortunately, that result was not entirely achieved and in various ways the parties' respective positions evolved from those set out in their pleadings. Importantly, Lloyds' written submissions, which were filed on 12 October 2021, do not object to the Marina parties raising the absence of a corresponding offer and acceptance despite that not being pleaded, nor was any objection raised at the hearing. This was, perhaps, because it too relied on matters not set out in its Points of Claim, including that Mr McKenzie had actual authority to enter into the alleged settlement agreement. Perhaps more significantly, there was no clear statement by Lloyds of the terms of that agreement either in its pleading or written submissions. It was only when pressed during the course of oral address that Mr Emmett SC for Lloyds articulated those terms for the first time. In those circumstances, it is tolerably clear that neither side was strictly confining itself to the matters which it had pleaded but were prepared to deal with the several issues advanced regardless of how they arose. There was, therefore, no impediment to determining the issue of whether Mr McKenzie's email constituted acceptance of the terms of the offer in Mr Street's email.

[7]

Relevant principles 56 The issue of contract formation, including whether there was an acceptance of an offer and a mutual intention to be immediately bound by its terms, is to be objectively assessed in the sense of asking what "would objectively be 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) 209 CLR 95 at 105 - 106 [25]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 613 [4]. There must be an external manifestation of assent to the relevant offer said to constitute the agreement, which is ascertained by asking whether "a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted": Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535. In this regard, the inquiry into whether an agreement came into effect embraces the same objective theory which governs contractual interpretation generally: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 - 462 [22]. Within this context is the fundamental issue of correspondence between the offer and any putative acceptance. The principles in relation to this issue are aptly summarised by Professor JW Carter in Carter on Contract (LexisNexis, 2021, 03-220) as follows: (1) In order for acceptance of an offer to create a contract it must correspond to the offer. (2) An acceptance corresponds to an offer if it is an unequivocal acceptance of the terms offered. (3) An acceptance is not an unequivocal acceptance of the terms offered if it deviates from the offer, even if that deviation is not material, unless the deviation is for the offeror. (4) Where an acceptance does not correspond to the offer it will usually amount to a counter offer. 57 Although the identification of an intention to be immediately bound is a matter of fact, both parties agreed that some guidelines by which that process can occur were correctly stated by Riordan J in The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2018] VSC 326. In that case, his Honour said (at [44] - [45]): 44 In any event, when undertaking the determination as to intention: (a) what is considered is that which is 'objectively … conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened'; and (b) what is not considered are the uncommunicated subjective motives or intentions of the parties, which are irrelevant. 45 The utility of presumptions has been strongly doubted; but matters that have been considered relevant in undertaking this determination have included the following: (a) Where the disputed agreement is in writing, the words used by the parties must be the strongest indicator of whether the parties intended to be legally bound. If, on proper construction of the document, it is sufficiently clear that the parties were content to be bound immediately, then the matter is resolved irrespective of the subject matter, magnitude or complexity of the transaction or whether the parties contemplated a further contract in substitution for the first contract. (b) Whether the informal agreement is expressed to be 'subject to contract' or the absence of such words. (c) The presence of the parties' signatures on a document said to contain the terms of the agreement suggests an intention to form binding relations; though the effect of the signature cannot, of itself, give rise to a binding agreement if the terms of the signed document do not otherwise support the characterisation of the agreement as binding. (d) The detail of the terms, to which the parties descended in the informal agreement, may indicate whether the parties did or did not intend to be immediately bound. As was stated by Powell JA in Liquorland (Australia) Pty Ltd v GYG Holdings Pty Ltd: In carrying out the task of determining … what was the relevant intention of the parties, a court may have regard, not only to the matters upon which the parties have reached their consensus, but also to the areas in respect of which they have failed to reach any consensus. (e) An informal agreement which deals with a transaction of great magnitude or complexity 'may suggest that the informal agreement was not intended to constitute a binding contract'. (f) The established or common practice with respect to agreements of the type in question may indicate that the parties did not intend to be finally bound until the completion of a formal contract. An example of such a practice is with respect to the sale of real estate. (g) The fact that the parties did not use solicitors for the informal agreement but proposed to do so for the formal contract, may be a factor indicating that the parties did not intend to be bound by the informal agreement. (Footnotes omitted).

[8]

Was there a corresponding offer and acceptance? 58 It is axiomatic that, in order for Lloyds to succeed, it must establish that the Marina parties accepted the terms which were proffered in Mr Street's email of 7 November 2018. Mr Emmett SC for Lloyds acknowledged that he needed to establish, not only an agreement that the cross-claim be dismissed by an order of the Court, but that the Marina parties would not seek to set aside that order were the Wyzenbeeks to be successful on their appeal. 59 It is, of course, necessary to identify the content of any offer as the first step in ascertaining whether any statement or conduct said to constitute its acceptance has occurred. This is of critical importance in this case where Mr Street's email had two constituent elements: first, the proposed orders including one dismissing the Marina parties' cross-claim against Lloyds and, secondly, an agreement as to costs and the imposition of a limitation on the Marina parties preventing them from seeking to set aside the order dismissing their cross-claim on appeal. 60 In the course of the hearing, Mr Emmett SC for Lloyds purported to identify the full terms of the agreement said to have been entered into as being: (a) the parties agreed that the orders in the draft would be made by the Court; being that the Wyzenbeeks' claims against the sixth and seven respondents be dismissed and the consent order that the Marina parties' cross-claim against Lloyds be dismissed; and (b) the Marina parties will not attempt to upset the consent order so made on the forthcoming appeal by the Wyzenbeeks. 61 No express assertion was made as to the issue of costs as between the parties to the cross-claim. As the terms of Mr Street's email indicates, he invited Mr McKenzie to confirm that Lloyds would bear its own costs on the basis that the Marina parties would not seek to disturb the order dismissing the cross-claim on appeal. It is not irrelevant that nothing was said as to the Marina parties' claim against Lloyds in relation to costs, although it might be assumed that any such entitlement would be negated by the dismissal of the proceedings. 62 There is some difficulty in accepting that the matters identified by Mr Emmett SC constituted a comprehensive statement of the terms of the offer in Mr Street's email. That email solicited the Marina parties' agreement to several procedural matters. First, by reference to the attachment, an order that the Wyzenbeeks' claims against Chubb and Lloyds be dismissed, although the question of costs would be the subject of submissions. It is apparent, albeit not stated, that this order was to be provisional in the sense that, if the Wyzenbeeks' appeal succeeded, it would be set aside as a matter of course. Secondly, an order that the Marina parties' claim against Lloyds be dismissed. The third matter, which was contained in the text of the email, was that if the Marina parties agreed not to seek to disturb the order dismissing the cross-claim on appeal, Lloyds would agree to bear its own costs of the cross-claim. 63 Although the terms of the offer were directed to procedural matters and there was no explicit mention of the resolution of the claim for indemnity pursuant to the Lloyds' policy, the substance of the agreement sought by Lloyds in respect of its liability was at least that: (a) the Marina parties would abandon their claim for indemnity under the insurance policy; (b) the abandonment of that claim would be for all purposes and not just for the purpose of finalising the outstanding issues following the first instance decision and, to that end, the Marina parties would not seek to revive the cross-claim if the Wyzenbeeks were successful on appeal; (c) the proceedings brought to enforce the indemnity claim, namely the cross-claim, will be dismissed; and (d) each party will bear their own costs of the cross-claim. 64 As is discussed below, there was an element of conditionality to the proposed agreement, but it was uncertain whether its binding effect was itself to be conditional upon the making of the consent order or, perhaps, upon Mr McKenzie obtaining instructions. Alternatively, it might have been intended that the agreement would have immediate binding effect but contained a further term that any settlement itself would be subject to the Court favourably exercising its discretion to make the dismissal order. The important distinction between the two was that the latter characterisation entailed an obligation enforceable by either party that they consent to the other approaching the Court to seek the making of an order that the cross-claim be dismissed. It is an obligation of that nature which Lloyds is attempting to enforce by the present action. There was no suggestion that the alleged settlement agreement had immediate effect in the sense that the dismissal of the cross-claim would merely give effect to an extinguishment of the underlying cause of action which was consequent upon the alleged acceptance of the offer. 65 As a further aside, it may be noted that Mr Street's email included the somewhat Delphic subject line of "Cadeau - Proposed Order re underlying claim". "Cadeau" was the name given to the vessel which the Wyzenbeeks had acquired and which became the subject of the litigation. The reference to "underlying claim" is not entirely clear. If it were intended to refer to the claim against Lloyds for indemnity, the content of the email does not bear that out. The subject heading may equally have related to the dismissal of the Wyzenbeeks' claim against the insurers. The position remained unclear. No written submissions were made in relation to the relevance of the subject heading and it was not referred to in any real sense in oral submissions, save by Mr Emmett SC in his reply submissions, although the point he sought to make was itself uncertain.

[9]

The alleged acceptance 66 The most significant obstacle for Lloyds in its attempt to establish that the Marina parties had agreed to abandon their claim for indemnity for all purposes, is that Mr McKenzie's email only referred to the proposed orders. The response, "We agree with the proposed Orders", was precise as to the subject of its intent. Conspicuously, it did not refer to the other issues raised and in respect of which a response was specifically sought; namely, the agreement not to seek to disturb the dismissal of the cross-claim on appeal in exchange for which Lloyds would bear its costs of the cross-claim. In this regard, this is not a case where Mr McKenzie's response did not "precisely correspond" with Mr Street's offer so as to attract the principle that any departure from the offer will result in the purported acceptance being ineffective: Tonitto v Bassal (1992) 28 NSWLR 564. Here, the omission to respond to the specific request for confirmation is significant if not pivotal. The silence in response to the request, "Can you please confirm whether this can be agreed?", can only be indicative of a refusal to accept those terms. Whilst no doubt there will be occasions when the failure to address a specific element of an offer will not prevent a determination that it was agreed to, that is not the inference which can be drawn in this case. Here, agreement was sought as to both the procedural orders and additional terms which would bind the parties outside of those orders. The request for confirmation of agreement immediately followed the latter, and the failure to respond to that request can only point to a declinature of that part of the proffered agreement. Necessarily, rather than being an agreement not to seek to disturb the order dismissing the cross-claim in the appeal, Mr McKenzie's response indicated a rejection of that part of the offer in Mr Street's email. 67 Mr Emmett SC submitted that there had been some implied acceptance with the proposed terms of the agreement, however, he did not identify how, in the circumstances, the express agreement in relation to the proposed orders should be taken to encompass agreement with those terms. It is possible that in similar circumstances it might be inferred that agreement to the orders carried with it agreement to the underlying terms on which they were proposed. If, for instance, it was clear that the offer was to the effect that acceptance of the form of the proposed orders would encapsulate agreement with some underlying terms, the response could be taken as acceptance of everything. However, here, where an express request was made that Mr McKenzie confirm agreement to the proposed terms as to costs and that no attempt would be made to disturb the orders on appeal and no response was made, that implication does not arise. It is not clear why Mr McKenzie did not respond to the express request, and it is not useful to speculate as to why that may have been, just as it is unhelpful to query why Mr Street did not inquire about the incomplete response. 68 The omission to agree to those additional matters is also consistent with the wider context in which the agreement was struck. That is discussed more fully below but, for present purposes, it suffices to observe that it included the following: (a) that due to the extant appeal by the Wyzenbeeks, the risk existed that the Marina parties may still require indemnity under the policy; (b) there was no prior negotiation between the parties as to the settlement of the indemnity claim; (c) the Marina parties derived little or no benefit from the agreement alleged by Lloyds; (d) the absence of any formal agreement with respect to the final resolution of the cross-claim in the context of complex litigation; and (e) that there were other parties interested in the Marina parties' claim against Lloyds and, in particular, the Wyzenbeeks who were not involved in the dealings. In that latter respect, Mr Emmett SC suggested that the Wyzenbeeks would have statutory rights against Lloyds if that occurred, but that was irrelevant as their actual claim against Lloyds was for a declaration that it was liable to indemnify the Marina parties' liability to them.

[12]

Was the efficacy of the agreed terms subject to a formality which did not occur? 71 This issue arose because the alleged settlement agreement was to be carried into effect by the making of a court order dismissing the cross-claim and, as the parties accepted, the court retained a discretion as to whether to make it. Mr Redwood SC, for the Marina parties, submitted that the making of such an order was the formal manner in which the agreement was to be perfected and, as no such order has ever been made, the agreement failed to materialise even if it be accepted that its terms were agreed. So the submission went, the unperfected agreement was not binding on the Marina parties and is, therefore, no bar to the further prosecution of the cross-claim. Alternatively, he submitted that the agreement was immediately binding, but the settlement embodied in its terms were subject to the Court making an order dismissing the cross-claim and that the condition precedent was never satisfied. This latter point falls to be determined below in relation to whether, if the alleged agreement did come into effect, it could still be enforced by Lloyds. 72 In support of the above, Mr Redwood SC relied upon the decision of the New South Wales Court of Appeal in Pavlovic v Universal Music Australia Pty Limited (2015) 90 NSWLR 605. That matter involved a multiparty deed which some parties wished to terminate. Negotiations took place by email and telephone, with the parties attempting to gain agreement to the execution of a deed of release. The solicitor for three of the parties indicated by email that one of the parties, who was the principal of the other two, would sign the deed, and later indicated that the signed documents would be provided after Christmas. When none of the parties whom the solicitor represented went on to execute the deed of release, the remaining parties asserted that agreement had been reached on the terms of the proposed deed. In relation to the issue of ascertaining whether contractual relations have arisen between parties, Beazley P (with whom Bathurst CJ generally agreed and Meagher JA agreed) held (at 616 - 617 [64] - [65]): 64 Where parties have reached agreement as to all the terms of a contract, but have also agreed that a further, formal agreement is to be executed, the question for determination is whether the parties intend to be immediately bound. That is to be determined objectively from the "outward manifestations" of the parties' intentions: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]; Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [59]-[61] (Sackville AJA; Macfarlan and Gleeson JJA agreeing); Taylor v Johnson (1983) 151 CLR 422 at 428 (Mason ACJ, Murphy and Deane JJ). 65 The question, therefore, is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe": see also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] (per curiam); Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (per curiam); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [81] (Heydon JA). An agreement that is incomplete will not give rise to an enforceable contract: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ). 73 Mr Redwood SC submitted that, applying the above, the exchange of emails on 7 and 8 November 2018 did not give rise to an immediately binding agreement, but that the parties can be objectively taken as agreeing only that the cross-claim would be dismissed if and when the Court made an order to that effect. The Court's order would amount to the formalisation of the agreement and it would become binding only at the time that formality occurred. 74 The conditional nature of the agreement was accepted to some degree by Mr Emmett SC for Lloyds. During his submissions, he said: … But when it says we agree to the proposed orders, plainly agreeing to something, we say, in circumstances where there was manifested an intention to be, to enter legal relations, albeit legal relations subject to the court's residual discretion, as I've accepted. … 75 The essential difference between the parties' respective positions lay in whether they accepted there was an intention that they be immediately bound to the terms of the agreement. The Marina parties' contended, in the first instance, that the binding effect of the agreed terms was conditional upon the making of an order by consent that the cross-claim be dismissed. Lloyds submitted, and the Marina parties accepted in the alternative, that it was intended that the terms be immediately binding, but the settlement itself would be conditional upon the Court favourably exercising its discretion to make the dismissal order. The practical difference in the latter position was, apparently, that Lloyds could compel the Marina parties to consent before the Court to the making of the order. 76 The difficulty for Lloyds is that, even if the condition was of the nature it proposed, it was nevertheless subject to the requirement that the condition occur within a reasonable time and, at the latest, prior to the hearing of the Wyzenbeeks' appeal. This emerges from a number of factors. First, that the proposed order in relation to the cross-claim was contained in the same draft order as that relating to the Wyzenbeeks' claim against Lloyds and Chubb which, as the circumstances reveal, was intended to be made for the purposes of the forthcoming costs hearing or, at the latest, prior to the appeal. The claims against the insurers needed to be finalised prior to the costs hearing so that relevant submissions could be made in relation to them. Alternatively, they needed to be finalised such that the appeal could deal with the Wyzenbeeks' finalised action. At the very least, the circumstances disclosed a temporal limitation on the condition that the Court make the orders which were the subject of the agreement. The second, and perhaps more significant indicia, is that one of the proposed terms in Mr Street's email was that the Marina parties agree to refrain from disturbing the order dismissing their cross-claim in the appeal. The necessary implication is that the consent order would be made prior to the conclusion of that appeal. Unless that was so, the term preventing the Marina parties from seeking to disturb the order would be redundant. 77 The alleged agreement was made in the context of on-going litigation and its terms referred to events which were to occur in it. Both the litigation itself and the express terms indicated that any court order dismissing the cross-claim would occur within a reasonable time and, at least, prior to the hearing of the appeal. No order was made and the Marina parties submission can be accepted that the condition (whether precedent or subsequent) was not satisfied with the consequence that the agreement was not perfected such that there is nothing to enforce. 78 Although Lloyds sought to secure the exercise of the Court's discretion to make the order on 22 November 2018, it was refused for the reasons then given. The proposed order would, if it had been made, have impacted the rights of other parties who opposed it. Further, at that time Mr Sullivan QC for the Marina parties did not have instructions to consent to its making. Despite that, Lloyds made no submission on this application that the Marina parties' failure to instruct their counsel to consent to the making of the dismissal order at the hearing on 22 November 2018, had any impact on the parties' rights. This was sensible given the refusal to make the proposed order at that time was based not only upon Mr Sullivan QC's objection, but also that of the Wyzenbeeks and Chubb through their respective counsel. 79 It follows that the event on which the alleged agreement was conditioned, being the order of the Court, did not occur within the time contemplated with the consequence that the agreement did not crystallise. It necessarily follows that there is nothing left to enforce and no order can now be made dismissing the cross-claim. Further, there is no evidence that all of the matters which prevented any order being made on 22 November 2018 have dissipated. The rights of several parties were connected and intertwined with the Marina parties' cross-claim, including any right of Chubb to claim contribution from Lloyds. It has not been shown that Chubb no longer retains any interest in the proceedings and, even if there were an agreement to enforce, the foundation for doing so is lacking.

[13]

Absence of negotiations to resolve the indemnity issue 80 A further contextual element which supports the above conclusion that the parties did not intend to be bound immediately to the full terms of Mr Street's email is that the exchange of emails was not preceded by any inter-party negotiations. Mr Redwood SC submitted that Mr McKenzie's response could not be taken as intending to convey an agreement that the Marina parties surrendered their rights to indemnity under the Lloyds policy despite there being no prior negotiation about that, or the terms on which it might occur. He further submitted that had such negotiations occurred it might have been more readily accepted that Mr McKenzie's stated agreement to the making of orders dismissing the cross-claim extended to the terms in the text of Mr Street's email. However, as that was not the case, this contextual matter should be taken to support the conclusion that Mr McKenzie's statement that he agreed with the orders, was intended to convey no more than that. 81 In support of the above Mr Redwood SC referred to evidence concerning an attempt by the Marina parties to settle with the Wyzenbeeks on 20 September 2017, being a letter from Clyde & Co purportedly on behalf of all respondents which made a formal joint offer of settlement. It evidenced that a formal mediation had occurred involving attempts to negotiate a resolution of the applicants' claims, the passing of formal correspondence, and the formal documentation of the offer to settle in a "notice of offer to compromise". This, so it was submitted, stood in stark contrast to the circumstances of the emails of 7 and 8 November 2018. Similarly, he referred to a similar joint offer made to the Wyzenbeeks by the respondents on 10 October 2017. Again, the letter of offer revealed the existence of the prior negotiations attempting a resolution of the claims in respect of which the settlement was sought and the making of a formal offer subject to certain terms and conditions. 82 As is discussed further below, it can be accepted that these letters of offer tend to exemplify the manner in which substantial claims might be negotiated and settled. They reflect a deal of formality and precision in relation to the resolution of substantive claims and highlight, by way of comparison, the relative casualness and apparent spontaneity of the alleged offer made by Mr Street in his email. Importantly, both the Marina parties and Lloyds were, by their solicitors, party to this prior conduct and the absence of any similar prior negotiations is a relevant contextual issue in ascertaining the consequences of the exchange of emails in question.

[14]

Relevance of other negotiations in relation to the settlement of the action 83 Mr Emmett SC for Lloyds submitted that the prior negotiations in 2017 between all of the parties to the litigation, supported the conclusion that Mr McKenzie's email of 8 November 2018 should be taken as a settlement of the claim for indemnity under the policy. So the submission went, there was a substantial similarity between the offers made to the Wyzenbeeks in September and October 2017 on the one hand and, on the other, that allegedly accepted by Mr McKenzie on 8 November 2018. In particular, it was submitted that each contemplated the resolution of the proceedings being completed by the making of consent orders. 84 The evidence in relation to these events is somewhat sparse but the correspondence sufficiently discloses the events which transpired. An unsuccessful mediation occurred between the parties on 19 September 2017 after which correspondence passed between them seeking to advance negotiations. In particular, the joint offer was sent by Clyde & Co to the Wyzenbeeks' solicitors under cover of the letter of 20 September 2017. That letter identified the occurrence of the mediation and reiterated what the respondents regarded as the Wyzenbeeks' uncommercial approach to the resolution of the proceedings. It then purported to identify the weaknesses of the applicants' position and emphasised the very significant costs which might be incurred in the proceedings. In light of the foregoing, the letter indicated that the respondents would make a further offer, the terms of which were attached and which provided: To the First, Second and Third Applicants (Applicants). The First to Seventh Respondents (Respondents) offer to compromise the whole of the proceedings as follows: 1. The Applicants' claim against the Respondents is dismissed. 2. The First to Fifth Respondents' cross-claim against the Seventh Respondent is dismissed. 3. Each party is to pay its own costs in connection with the proceedings. 4. The Respondents will pay to the Applicants AUD300,000 in total, inclusive of costs. This offer of compromise is open to be accepted for 14 days after services of this offer of compromise. The amount of the offer will be paid within 28 days after acceptance of this offer. This offer is made without prejudice. 85 Mr Emmett SC submitted that the making of this offer was a significant background fact because it disclosed the Marina parties' willingness to settle the proceeding with no order as to costs. It seemed to be further suggested that it disclosed that they were also prepared to resolve their claim for indemnity by the mere making of a consent order. It can be accepted that the form of the offer demonstrated that even complex litigation can be settled by relatively brief orders. It can also be acknowledged that the correspondence disclosed a willingness, at that time and in those circumstances, on the part of the Marina parties to resolve their litigation with Lloyds on the basis that they would bear their own costs. However, it is a mistake to take these matters out of context. The circumstances of that earlier proposed order were entirely different from those surrounding the offer relevant to the present application. In particular, if the earlier offer to the Wyzenbeeks had been accepted it would have resulted in the Marina parties being entirely free from any risk of liability in relation to the sale of the vessel. The same does not apply to the orders currently under consideration. Whilst it is true that, as at November 2018, the Wyzenbeeks had failed at first instance, they had appealed and the risk to the Marina parties in respect of which they sought indemnity from Lloyds remained extant. Had the offer been accepted and the Wyzenbeeks were successful on their appeal, the Marina parties would have faced incurring a substantial liability without recourse to any claim for indemnity under the policy. Further, the costs incurred in the proceedings as at October 2017 would have been substantially less than they were in November 2018 after the prolonged first instance trial. That would have made a substantial difference to the preparedness of the Marina parties to abandon their claim for indemnity at that later occasion. 86 Mr Redwood SC submitted that this evidence of the prior negotiations actually demonstrated the unlikeliness of the acceptance of the consent orders as being an instrument by which the Marina parties' claim against Lloyds was to be resolved. He submitted that the circumstances in 2017 exhibited the usual characteristics of dispute resolution including the existence of a formal negotiation process, such as a mediation, an express offer to compromise the extant claim including terms on which the compromise would take effect, and an explanation of the position of the party making the offer. It is true that whilst such accoutrements are not necessary for the settlement of any proceeding, they are a regular feature and, here the evidence discloses that they were an element of the parties' prior dealings. Mr Redwood SC's submissions have force and, in the circumstances of the present case, tend to render it less likely that the email exchange on 7 and 8 November 2018 was intended to finally resolve the Marina parties' claim against Lloyds. 87 A similar letter on behalf of all the respondents to the Wyzenbeeks was sent on 10 October 2017 in which a further offer was made. Again, the covering correspondence set out the basis of the proposed resolution of the matter, the respondents' position with respect to the claim made against them, and attached a draft order which was intended to resolve the litigation. That draft included a proposed order that the cross-claim against Lloyds be dismissed. The comments made in relation to the letter of 20 September 2017 apply equally in relation to this letter. Of particular relevance is the formality of the circumstances in which the offer was made and which did not exist in Mr Street's email of 7 November 2018. 88 These prior attempts at settling the litigation as a whole stand in contrast to the circumstances of the agreement advanced by Lloyds in this case. The existence of negotiations prior to the making of the offer is important as they provide a context in which the offer is to be considered. In the application presently being considered, the offer to resolve the claim for indemnity was not proceeded by any near contemporaneous negotiations, but was somewhat discordant or inconsistent with the surrounding events. Similarly, the making of the offer was at variance with the manner in which those earlier proposals to settle had been made. In particular, the offers in 2017 were accompanied by detailed correspondence identifying the rationale supporting them in the context of the on-going litigation. That is a frequent accompaniment to the making of offers of this nature and its absence in relation to the offer on which Lloyds relies undermines its claim that by the exchange of emails, the parties intended to enter into a binding agreement as to the Marina parties' claim for indemnity.

[17]

Absence of any formal written agreement 92 Mr Redwood SC further submitted that any objective analysis would give significant weight to the absence of any formal written agreement setting out the terms of the settlement alleged to have been reached. He submitted the Court could accept, as a matter of notoriety, that settlement of substantial insurance claims which have resulted in litigation would usually be the subject of a written agreement in which the rights of the parties are fully articulated. There is some force in that submission and it is well known that a regular feature of the resolution of substantial insurance litigation is the recording of the parties' agreement in a fulsome deed in which their rights and obligations inter se are expressed in clear terms. In the ordinary course, that will include an identification of any remaining rights of the insured under the subject policy and the granting of mutual releases in respect of claims which each may have against the other. The fact that the alleged agreement arose from the informal exchange of two very brief emails, does suggest that it was not intended to be other than an agreement made in the course of litigation concerning procedural matters surrounding its progress, rather than the settlement of the Marina parties' claim for indemnity in the amount of between $1 million to $2 million. 93 Further, the claim against Lloyds' should not be viewed in isolation. It was a constituent element of a broader proceeding with extant interlocking claims by and against other parties. It would have been readily apparent at the time of the alleged agreement that the final resolution of the Marina parties' claim against Lloyds would, or may, have ramifications for the proceedings by the Wyzenbeeks and the claim against Chubb. Such ramifications would be significant and it can be accepted that where an insured and insurer resolve an issue of indemnity in such circumstances they would usually and prudently seek to resolve those surrounding consequential issues as well and do so in a formal written agreement. In this context, Mr McKenzie's reply to the effect that the orders were agreed is less likely to be seen as an agreement to the resolution of the claim for indemnity as opposed to an agreement in relation to procedural matters. 94 Whilst it cannot be denied that even substantial litigation can be resolved by the briefest of agreements rather than by a formal deed, that is less likely where, as in the present case, the claim allegedly being resolved is part of a broader proceedings and is one in respect of which other parties to the proceedings have an interest.

[18]

No benefit derived by the Marina parties from the agreement 95 Mr Redwood SC further relied upon the contextual element known to both parties that, by the acceptance of Lloyds' offer, the Marina parties would have surrendered their claim for a substantial indemnity for very little in return. Whilst it must be the case that the apparent providence of an agreement is unlikely to often be a matter relevant to the parties' intention as to whether they intended to enter into an agreement, the circumstances of the present matter might well be such a case. Here, the issue is as to the nature of the alleged acceptance made in response to the offer. On the one hand Lloyds asserts that it went to the whole of the terms set out in Mr Street's email, including the effective resolution of the Marina parties claim for indemnity. Conversely, the Marina parties allege that it responded only to the making of the proposed orders for the purposes of the litigation. Where it is obvious to all parties that the former would result in a most imprudent agreement, it might be thought that the objective intention was that the response was in relation to the latter. 96 Mr Emmett SC submitted that in return for surrendering their claim for a substantial indemnity the Marina parties obtained the benefit of Lloyds abandoning any claim for costs in relation to the cross-claim. However, on any view that advantage was minimal and not significant. Although Lloyds had participated at the hearing of the Wyzenbeeks' action they were required to do so by reason of the direct claim against it as the seventh respondent. Given the result of the first instance decision, that claim would necessarily be dismissed, and it was likely that the Wyzenbeeks would become liable to pay the costs in relation to it, as indeed occurred. That would have resulted in there being very few remaining costs in respect of the cross-claim. Additionally, it was possible that, in any finalisation of the matter, the Wyzenbeeks would be required to pay the Marina parties' costs, including any costs which they were required to pay to Lloyds in the cross-claim proceedings. Certainly, that is the order they sought, even though it was not made. On that basis, any agreement that Lloyds would bear its own costs of the cross claim would be of marginal value to the Marina parties. As consideration it was negligible compared to the loss of the right to claim indemnity under the policy. 97 It follows that Mr Redwood SC's submission that this contextual element supports the conclusion that the parties did not intend to be legally bound to an agreement which compromised the Marina parties' claim for indemnity can be accepted. It can be added that this element is closely aligned to that of the absence of any prior negotiations concerning the compromise of the Marina parties' rights to indemnity. Had such occurred it might have been accepted that the Marina parties had reached a conclusion that their surrender, even for a negligible consideration, was appropriate and intended. Its absence indicates the contrary.

[19]

The absence of prior instructions from the Marina parties 98 Mr Redwood SC further submitted that the context in which the alleged agreement was struck included the fact that Mr McKenzie had not discussed the proposed settlement with any of the Marina parties prior to the alleged acceptance. It was not explained how such a factor, being something not known to those representing Lloyds, could be a relevant contextual matter which might be considered in the determination of whether an agreement was entered into or what were its terms. It is, with respect, pellucid that it is not. 99 Similarly, it was submitted that the relevant circumstances included the fact that on 24 October 2018, Mr McKenzie had served on Lloyds an affidavit by him for use by the Marina parties in the forthcoming hearing in relation to costs. In it he had deposed to having given advice to the Marina parties about the appropriateness of settling the proceedings which they had commenced against their insurance brokers and of having sent an email to his clients advising of the same. He annexed a copy of that letter to his affidavit. This was referred to in the present matter by the Marina parties for the purposes of supporting the submission that, as no such process of advice occurred on the occasion of the alleged settlement with Lloyds, it followed that any alleged agreement was not intended to be a settlement of the claim as opposed to a resolution of a procedural step. Conversely, Lloyds relied upon this affidavit as supporting the submission that Mr McKenzie had authority to settle parts of the proceedings on behalf of his clients. Putting that latter issue aside, the evidence has no relevance to the context in which to assess the actions of the parties allegedly resulting in the formation of an agreement. Whilst it might have been relevant if Lloyds' or its solicitors were aware that Mr McKenzie did not consult his clients on 7 or 8 November 2018 in relation to Mr Street's email, there was no evidence that such was the case. This evidence has no part to play in determining the issue in dispute.

[21]

Post-contractual conduct 101 A further issue was the extent to which "post-contractual conduct" was relevant and admissible in establishing whether a binding agreement had come into existence. In that regard, each party referred to what was said to be post-contractual conduct as supporting their opposing submissions as to the effect of the 7 to 8 November 2018 email exchange. Before considering this issue it should be noted that the words "post-contractual conduct" may also be referred to as "subsequent conduct" or "extrinsic evidence": see Seddon and Bigwood, Cheshire and Fifoot Law of Contract, 11th Aust ed (2017) at 448 [10.16]; Herzfeld and Prince, Interpretation, 2nd ed (2020) at 601 [29.150]. While nothing turns on the nomenclature adopted, these reasons refer to post-contractual conduct (consistent with the parties' submissions), although the words "subsequent conduct" would be more apt in the circumstances, given it does not presuppose the existence of a contract. 102 Although the nature and extent of post-contractual conduct which can be taken into account in ascertaining whether a contract came into existence was not the subject of detailed submissions, it is tolerably clear that, admissions apart, the parties' subjective statements are not particularly relevant to the issue. On the other hand, correspondence between them subsequent to the alleged entry into the contract may legitimately throw light on the issue of whether a binding agreement came into existence: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 163 - 164 [25]; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9,147 at 9,149, 9,154-9,156. In Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9,251, 9,255 McLelland J observed in this respect: However, consistently with what has already been said, the probative value of such subsequent communications must be found in the light they throw on the proper interpretation of the earlier communications alleged to constitute the contract. They may, for example, show that at the time of the allegedly contractual communications there were other, uncompleted, negotiations between the parties concerning matters omitted from the allegedly contractual communications, in the light of which the allegedly contractual dealings could not properly be interpreted as mutual assents to be bound. 103 More recently, Gordon J in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 [176] noted that a general principle of construction of contracts is that "it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made". Her Honour then helpfully collated various examples of when subsequent conduct may be admissible. Of particular relevance to this case, is her Honour's observation at [177] concerning the admissibility of subsequent conduct in determining when a contract was formed: Of course, the general principle against the use of subsequent conduct in construing a contract wholly in writing says nothing against the admissibility of conduct for purposes unrelated to construction, including in relation to: (1) formation - to establish whether a contract was actually formed and when it was formed … 104 The Marina parties relied upon the assertions by their counsel at the costs hearing on 22 November 2018, that he had no instructions to agree to orders dismissing the cross-claim as somehow evidencing that no contract had been entered into. However, that statement neither supports nor negates the existence of any contract. It merely indicated that Counsel then held no instructions. Similarly, the statement by Counsel for Lloyds at that hearing suggesting that orders that the cross-claim be dismissed had been agreed does not advance the matter. As Mr Emmett SC very properly conceded, it was not sufficient for his case that there was an agreement that the cross-claim be dismissed, it was necessary that the other matters in the 7 November email were also accepted. 105 Nevertheless, the submissions made at the costs hearing do establish the existence of some controversy between the parties as to the appropriateness of the making of orders in respect of the cross-claim. It is clear they were opposed by the Wyzenbeeks by their counsel, Mr Leopold SC, and even more vigorously opposed by Mr Donaldson SC on behalf of Chubb. For whatever else that might establish, the opposition supports the conclusion that, as the email exchange was between only the Marina parties and Lloyds when other parties had an interest in the outcome of those proceedings, it was not intended to create a binding and conclusive agreement as to the entitlement to indemnity under the policy. 106 Each party relied on the correspondence which followed the alleged agreement as supporting their respective positions. As has been set out earlier, subsequent to 18 November 2018, a number of emails were sent by Mr Street to Mr McKenzie seeking finalisation of the alleged agreement. They were sent on 26 November 2018, 20 December 2018 and 1 April 2019 and, in them Lloyds' solicitors sought agreement to sending proposed consent orders to the Court in accordance with the alleged agreement. Mr McKenzie did not respond to them and his omission to do so has not been explained. 107 Mr Emmett SC submitted that Mr McKenzie's failure to respond to the emails following the costs hearing indicated that he accepted that an agreement had been entered into. It was said that, "If Mr McKenzie or his clients regarded the email exchange as conditional or non-binding, it is to be expected that they would respond to Lloyds' correspondence accordingly." It was subsequently submitted that Mr McKenzie's silence was consistent only with acceptance of the existence of an agreement. Such a conclusion cannot be extrapolated from those omissions to respond to the communications. There may be many reasons for the lack of response. An obvious one may be that Mr McKenzie may have felt some unease about attempting to encourage the Court to make consent orders in Chambers without informing the other parties who had an interest in their making and who had just recently vigorously opposed them. Another may be that Mr McKenzie did not accept that a settlement agreement had been entered into as had been asserted in Mr Street's emails. He may have held the view that the parties had agreed to orders only finalising the cross-claim pending the appeal. 108 Mr Redwood SC submitted that an email from Mr Street of 1 April 2019, to Mr McKenzie can and should be relied upon as evidencing that no final agreement had been reached. It stated: We attach a proposed consent order giving effect to the settlement agreement reached on the Cross-Claim. Could you please let us know by midday tomorrow if you consider that any changes are required with a view to having the order made in court on Wednesday? 109 The attached order provided that "The First to Fifth Respondents' cross-claim against the Seventh Respondent is dismissed", which is in the same terms as the second order attached to Mr Street's email of 7 November 2018. Mr Redwood SC submitted that Mr Street's invitation concerning alterations to the terms of the order reveals that the parties had not yet reached final agreement as to the appropriate orders to be made. There is, perhaps, some force in that and especially so given that the only issue to which Mr McKenzie had indicated his assent was the terms of the order and he had not mentioned the existence of, or his agreement with any underlying settlement.

[23]

Conclusion as to whether the parties had the relevant contractual intention 111 In this case the context in which the exchange of emails occurred strongly support the conclusion that no agreement of the type alleged by Lloyds was entered into. In any event, the nature of the offer indicated that any binding agreement would be subject to the exercise of the Court's discretion. That contingency did not materialise and, in fact, the Court refused Lloyds request for the orders to be made. In addition, the terms on which the offer was made indicated that the making of the orders was to occur prior to the hearing of the Wyzenbeeks' appeal and that event came and went without any orders being made. 112 The conclusion that the parties did not enter into an agreement in respect of which they intended to be immediately bound is supported by the absence of any negotiations between them relating to the settlement of the claim for indemnity. There was an absence of any written or oral discussions between them as to the merits of their respective positions preceding the making of the offer. It would be most unusual for such a claim to settled by the casual exchange of emails in the absence of prior negotiations or any exchange of views between the parties as to their mutual rights and entitlements. This tends to support the conclusion that any agreement was merely as to the form of orders which should be made for the purposes of the costs hearing or the appeal, rather than as to the Marina parties' ongoing right to indemnity. The fact that the other parties to the litigation were not party to the alleged agreement in circumstances where their interests would or might be affected is a further matter of context which supports the Marina parties' position. 113 The absence of the proffering of any formal deed of settlement between Lloyds and the Marina parties also lends some support to the above conclusion. Whilst it can be accepted that no deed was required here where there were interconnecting claims and obligations, it might have been expected that if there was to be an agreement of the nature which Lloyds suggests it would be enshrined in a formal agreement. Further, it is sufficiently clear that the agreement alleged by Lloyds was extremely improvident as far as the Marina parties were concerned. If entered into they would surrender their claim for indemnity in respect of an extant risk of substantial liability in return for minimal consideration. Although the issue of the benefit which might be derived from an alleged agreement will not often be relevant to whether there was an intention to enter into an agreement, it is in the present case. 114 The submissions by the Marina parties that absence of the giving of any instructions to Mr McKenzie to settle the cross-claim is a relevant contextual matter must be rejected. That was undoubtedly not a background fact known to both parties which might be relevant to the formation of the alleged agreement. Nor is it possible to construe the agreement as being one which was subject to the obtaining of instructions. On no view of the authorities could these matters have been relevant and it is difficult to discern any purpose in their advancement other than to emphasise to the Court that, if the agreement was entered into, it was done so without instructions. 115 There is nothing in the post-contractual conduct of the parties which alters the conclusion that the parties did not have the intention of entering into the alleged agreement. 116 It necessary follows that the context in which the emails passed between Mr Street and Mr McKenzie in November 2018 supported the conclusion that no agreement as alleged by Lloyds was entered into. The context supports the conclusion that, at best, the emails were for the purposes of reaching consensus as to the form of orders which should be made to take the matter forward to the hearing on costs and the appeal. It does not support the existence of any intention that the parties agreed to compromise the Marina parties' claim for indemnity under the Lloyds policy. For these reasons also Lloyds' application should be dismissed.

[25]

Nature of the discretion to decline to enforce a compromise of litigation 118 In Australia, the discretion has been most authoritatively articulated by the High Court in its decision in Harvey v Phillips (1956) 95 CLR 235 (Harvey v Phillips). There, it was explained (at 242 - 243) that in a case where the assistance of a court is invoked to carry a compromise into effect which could not otherwise be enforced, the court may refuse that assistance by reason of the existence of grounds which would not be sufficient to invalidate a simple contract. The discretion to refuse assistance arises where a party's counsel or solicitor has entered into a compromise within their apparent authority or what would ordinarily be their implied authority, but in opposition to the party's instructions or in excess of some limitation that has been placed upon their authority. In such a case, until the order is entered and has been perfected, the court may refuse to give effect to or act upon the compromise. The power to so refuse is to be exercised as a matter of discretion when, in the circumstances of the case, it would involve an injustice to allow the compromise to stand in view of the restriction placed on the authority of the person who purported to bind the client. Importantly, the Court recognised (at 243) that the power did not exist where the compromise was made within the actual authority of the legal representative. In that sense, the discretion arises only where there is a lack of actual authority due to the party's instructions or a limitation which has been placed upon the authority of their counsel or solicitor. The grounds on which the discretion may be exercised were described as follows (at 243 - 244): The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like. 119 The operation of the discretion was more recently discussed by the Queensland Court of Appeal in Broadbent v Medical Board of Queensland [2010] QCA 352 (Broadbent). There, the client had instructed his solicitors to make an offer of compromise which they did. He then instructed its withdrawal but the solicitors failed to act. Subsequently, the other party to the litigation accepted the offer and later sought to enforce it. The Court of Appeal held that the discretion to refuse to enforce a compromise was enlivened in circumstances where the compromise was formed in defiance of the applicant's instructions to withdraw the offer: at [33] per Fraser JA (with whom McMurdo J agreed). That part of his Honour's reasons was relied upon by Mr Redwood SC as supporting the proposition that the discretion arose in circumstances where a legal representative had merely acted without instructions. However, Fraser JA said: … It is nonetheless clear that the compromise was made in defiance of the applicant's instructions. In this context I do not see a valid distinction between an offer to compromise litigation made without the client's express authority by counsel retained in the case and the inexplicable failure of the retained solicitors to give effect to clear instructions to withdraw an offer where there was no apparent difficulty in withdrawing the offer before it was accepted. The Court does have the power to refuse to give effect to the compromise in this case. 120 There is nothing in his Honour's reasons which suggests that the reference to a compromise made without express authority was intended to expand the circumstances in which the discretion existed beyond those identified by the High Court in Harvey v Phillips. That statement was not preceded by any discussion of the boundaries of the discretion in general or as the High Court had identified them. Later in his Honour's reasons, he returned to the topic and emphasised that a mere lack of actual authority (express or implied) to compromise an action does not constitute an injustice which justifies the exercise of the Court's discretion: at [37]. Further, his Honour observed that a compromise of litigation contrary to a client's instruction might always be regarded as involving an injustice but that will not always be sufficient. There is nothing in the reasons of the Court which suggests that the entry by a legal representative into a compromise without instructions (but with implied authority), as opposed to in opposition to or in defiance of instructions, is sufficient to enliven the discretion to refuse to enforce the compromise.

[27]

Unilateral mistake 124 In addition to the above factors, the circumstances suggest the possibility that if the agreement alleged by Lloyds had been entered into, it was the consequence of a mistake as to the nature of the offer made by Mr Street. Although the Marina parties were not able to secure Mr McKenzie to give evidence, nevertheless, on one view of the facts, the circumstances might indicate a mistaken appreciation of Mr Street's email of 7 November 2018. The absence of any prior negotiation or consultation with his clients weigh heavily in this analysis as would the improvidence of the alleged agreement. It is possible that Mr McKenzie regarded the second proposed order as being of a similar nature to the first, namely an order finalising the matters remaining consequent upon the dismissal of the Wyzenbeeks' claim and pending the appeal. That is underscored by his agreement to the orders and the omission to give assent to the terms in respect of which Mr Street sought specific agreement. 125 In the course of submissions, Mr Redwood SC for the Marina parties did not appear to rely upon the existence of any separate power to refuse to enter an order agreed upon because one party was mistaken. Although the question of unilateral mistake was raised in the Points of Defence it was advanced before the Court only on the basis that an apparent mistake by Mr McKenzie was a matter which should be taken into account in exercise of the discretion recognised in Harvey v Phillips. It would appear that this followed upon the inability to secure the attendance of Mr McKenzie to give evidence at the hearing. As matters turned out, the submission was that, at the least, there was "a real prospect Mr McKenzie was labouring under a mistake or confusion by his response to the Street email". Whilst that may be so, the evidence does not rise high enough to sustain a defence based on mistake alone. Nevertheless, reference was made to the decision in Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528, which was a case of unilateral mistake made in the course of entering into a compromise. Although it can be accepted that, if the agreement which Lloyds' alleges existed, there is a strong possibility that it would have been entered into by mistake, the authorities make it clear that relief arising from mistake in cases such as this is somewhat limited: MacDonald v Raupach [2011] NSWCA 320 [22]; Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2019] NSWSC 238 [120]; Mohamed v Farah [2004] NSWSC 482 [67].