Local Court of New South Wales CITATION: Wende, Wende and Lloyd trading as Berghofen Nurseries v Giles Finney trading as C.B.D. Law [2007] NSWLC 27 JURISDICTION: Civil PARTIES: Herbert Wende, Margaret Wende and Mark Lloyd trading as Berghofen Nurseries Giles Finney trading as C.B.D. Law FILE NUMBER: 4445/07 PLACE OF HEARING: Downing Centre DATE OF DECISION: 08/10/2007 MAGISTRATE: Magsitrate B A Lulham CATCHWORDS: Settlement of litigation by "Heads of Agreement" - whether definite, concludable and enforceable agreement LEGISLATION CITED: Uniform Civil Procedure Act Toll v Alphapharm (2004) 219 CLR 165 Masters v Cameron (1954) 91 CLR 353 CASES CITED: Owners Corporation Strata Plan 62285 & Ors. v Betona Corporation (NSW) Pty Ltd & Ors. (2006) NSWSC 216 Thompson v Macedon Ranges Shire Council (1999) VSC 338 Carr v J.A. Berriman Pty Ltd (1953) 89 CLR 327 Mr H. Wende and Mr M. Lloyd in person REPRESENTATION: Solicitors for Defendant: C.B.D. Law Counsel for Defendant: Ms Hill ORDERS: Judgment for the plaintiff in the sum of $5,000. The defendant is to pay interest on the judgment debt from 20 April 2007. Reasons for Decision 1 The plaintiffs sued the defendant, a solicitor, alleging negligence in the conduct of a District Court matter and originally sought to recover $3,200. That claim was heard in the Small Claims Division of the Local Court at Gosford. The learned Magistrate found in favour of the defendant. The plaintiff appealed to the Supreme Court. An Assistant Registrar of the Supreme Court dismissed the appeal. The plaintiffs lodged a further appeal which was heard by His Honour Judge Howie on 16 September 2005 in proceedings Herbert Wende and Ors. V Giles Finney (2005) NSW SC 927. The appeal was allowed and the proceedings were sent back to the Local Court at Gosford for re-hearing. 2 On 31 July 2006 the plaintiffs filed an Amended Statement of Claim seeking an amount of $60,000. It would appear that the only alteration to the pleading was that in relation to the particulars of damage, additions were made to the particulars so that the particulars in the Amended Statement of Claim provide as follows: ' Costs as per 3. above $3,200.00 Expenses $25,361.00 Loss to District Court case per Mr Finney $611,000.00 Part of Undecided Total $60,000.00' 3 The matter came on for hearing at the Local Court at Gosford on 22 March 2007. Mr A. Combe of Counsel appeared for the plaintiffs and Mr R. De Meyric of Counsel appeared for the defendant. Agreement was reached for settlement and a "Heads of Agreement" document (hereinafter referred to as the Heads of Agreement) was prepared and signed by Counsel and the parties other than Margaret Wende. The defendant filed a Motion which came on for hearing before me on 12 July seeking, inter alia, the following orders: 1. The court determine that the proceedings hereto have been settled. 2. The court order the parties to execute the Deed of Release in the form attached and marked 'A'. 3. Alternatively, the court enter judgment in favour of the plaintiffs in the amount of $5,000 inclusive of costs. The matter has not been resolved in accordance with the 'Heads of Agreement'. The plaintiffs opposed the making of those orders and seek that the matter proceed to hearing on a defended basis. THE AGREEMENT REACHED AT GOSFORD 4 I propose to set out in full the document entitled Heads of Agreement which was signed by the parties at Gosford on 22 March 2007: 'Heads of Agreement Between: Herbert Wende, Margaret Wende and Mark Lloyd (the plaintiff) And: Giles Finney trading as C.B.D. Law (the defendant) 1. The defendant to pay the plaintiffs the sum of $5,000 in full satisfaction of Local Claim No. 1035 of 2003 within 28 days of today. Such figure to be including any claim for costing contingent upon receipt by the defendant of an executed Deed pursuant to paragraph 2 below. 2. The defendant to forward to the plaintiffs a Deed of Release in respect of the claims in Local Court Claim No. 1035 of 2003 within 7 days of today. 3. The parties to executive a Deed of Discontinuance in Local Court Claim No. 1035 of 2003 after the payment to the plaintiff of $5,000 by the defendant and after the execution of any Deed of Release in respect of the claims in Local Court No. 1035 of 2003. 4. Proceedings in the Local Court Claim No. 1035 of 2003 to be stood over pursuant to the order of the court. 5 The Heads of Agreement were signed by Andrew Combe, Counsel for the plaintiffs and by Herbert Wende and Mark Lloyd. It was not signed by Margaret Wende. The agreement was signed by Mr De Meyric, Counsel for the defendant and the defendant, Giles Finney. 6 I should point out that the proceedings before me 4445/07 are the same proceedings which were before the court at Gosford. On transfer to the Downing Centre the proceedings, having been given a different file number. 7 On the hearing of the Motion, Ms Hill for the defendant, relied upon affidavit of John Hamish Giles Finney sworn 31 May 2007. 8 Mr Giles deposed in paragraph 4 that he forwarded a Deed of Release to the plaintiffs within seven days of 22 March 2007. That does not appear to be so as the Deed was not forwarded until 12 April 2007. The Deed of Release forwarded with Mr Giles letter appears to be in the usual form. It recited that the releasors engaged the releasees to act on their behalf from approximately July 2001 until June 2003 in relation to proceedings commenced by them in the Gosford District Court against Peter Fischer and Sharon Millyard (being matter number 106 of 2000) (hereinafter referred to as 'the Gosford District Court proceedings'). 9 The Deed of Release did however include as additional releasees Victor Ranzetta, January Worland and Anthony Kemp who were partners of Giles Finney during part of the time that Giles Finney was instructed by the plaintiffs. In this respect the Deed of Release did not conform strictly with the 'Heads of Agreement" but no objection was taken by the plaintiffs on that basis. 10 Mr Lloyd replied to Mr Finney's letter of 12 April by letter of 23 April. Mr Lloyd pointed out that the Deed was not provided within seven days. He also pointed out that the release document did not mutually release the parties and was therefore not acceptable. 11 Mr Finney replied on 26 April pointing out that the agreement for settlement only provided for a release by the defendant and requested that the Deed be signed and returned. 12 Mr Lloyd replied on 1 May regretting that the defendant did not wish to settle the matter by a mutual release. He said the plaintiffs were not prepared to settle under the proposed Deed of Release whereby the defendant would be able to make claims against the plaintiffs but the plaintiffs would not be able to make any further claims against the defendant and therefore restricting the plaintiffs' ability to defend themselves. Mr Wende contended that the defendant had breached the agreement. 13 Further correspondence took place. Mr Finney pointed out that the Deed only related to the Gosford Local Court claim number 1035/2003 and not other Local Court proceedings, which were apparently on foot. Mr Finney also forwarded a revised Deed which was between the plaintiffs and himself, as releasee and not his former partners and therefore conformed with the 'Heads of Agreement". He indicated that if the Deed was not signed and returned that he would file an application with the court seeking to have the court determine that the matter has been settled and seeking costs. 14 I am satisfied, based on the Heads of Agreement form, that such agreement required a Deed of Release in respect of the claims in the current Local Court proceedings. The only claims in these proceedings were the plaintiffs' claims alleging negligence by the defendant in the conduct of the Gosford District Court proceedings. In the current Local Court proceedings there is no Cross Claim or set off or counterclaim by the defendant against the plaintiffs. I am therefore satisfied that the only release which could be required was: 'in respect of the claims in Local Court claims number 1035 of 2003' and therefore in respect to claims by the plaintiffs against the defendant arising out of the Gosford District Court proceedings. 15 I am satisfied, based on the words of the Heads of Agreement, and giving those words and the Agreement the meaning according to the test of what a reasonable man would understand by such words in according to the principles in Toll v Alphapharm (2004) 219 CLR 165 that the agreement required a release by the plaintiffs, but not a mutual release by the defendant. CONSIDERATION OF LEGAL PRINCIPLES Can the court determine the Motion in these proceedings? 16 Prior to the introduction of the Uniform Civil Procedure Act there were different views as to whether a settlement agreement could be enforced in the original proceedings. That conflict was resolved by the introduction of s 73 of the Act which provides as follows: 'S 73 Power of court to determine questions about compromises and settlements S 73 1. In any proceedings, the court; (a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and (b) may make such orders as it considers appropriate to give effect to any such determination. 2. This section does not limit the jurisdiction the court may otherwise have in relation to the determination of any such question. 17 I am therefore satisfied that I have the power to determine the Motion in the original proceedings which are also now before this court. 18 However, s 73 could not give the Local Court jurisdiction which it otherwise does not have. I am not satisfied that this court has power to declare the proceedings settled or to order the parties to execute a Deed of Release. The court does not have power to make declaratory orders or orders in the nature of specific performance. 19 I am therefore not satisfied that the court has power to make the orders sought in Order No. 1 requiring a determination that the proceedings have been settled, or Order No. 2 requiring the court to order the parties to execute the Deed of Release. Despite the relatively small amount of money involved, it would seem to me that those orders would have to be sought in a court exercising equitable jurisdiction. 20 Those findings may have resolved this matter except that in paragraph 3, the defendant sought to order as follows: 'Alternatively the court enter judgment in favour of the plaintiff in the amount of $5,000 inclusive of costs.' 21 In seeking that order, I understand that the defendant seeks that I find that there was an agreement for the settlement of the matter for payment of the sum of $5,000 and that the defendant is prepared to waive the requirement for a Deed of Release in his favour, and that on such basis this court would have jurisdiction to consider and determine the Motion on the alternate basis set out in Order No. 3. 22 I was concerned to ensure that my understanding of the order sought on the alternate basis in Order No.3 was correct. I therefore caused the Registrar to write to the defendant's solicitors seeking confirmation that the alternate Order No. 3 is sought on the basis that the defendant waives the requirement for a Deed of Release to be executed by the plaintiffs pursuant to Order 2 in the Motion. A copy of the letter was forwarded to the plaintiffs. The court received a reply from the defendant confirming that if Order 3 was made, then the defendant would waive the requirement for a Deed of Release to be executed by the plaintiffs. 23 I am satisfied that this court does have power to determine the matter on that basis. The clause requiring the Deed of Release was for the protection of the defendant only. That being the case, according to the usual rules of contract construction, the clause at the option of the defendant would be severable and the court would be entitled to determine the rights arising out of the contract on the basis that the defendant waives compliance with the clause requiring the Deed. I propose to do so and that will require the court to determine whether the parties entered into a binding legal agreement by entering into the 'Heads of Agreement' document and whether that agreement should be enforced in settlement of the proceedings. CONSIDERATION OF CONTRACTUAL ISSUES 24 I should point out that I did not receive any written submissions from Ms Hill for the defendant. She did helpfully refer me to a case relating to principles on time being of the essence. She did not refer me to any authorities relating to the contractual issues. I received a document headed 'Speech 12th July' from Mr Lloyd on behalf of the plaintiffs. Much of it referred to factual matters, but it did include a submission that I did not have power to order the parties to execute the Deed of Release. I have agreed with that submission. The submission further submitted that the Heads of Agreement was an agreement on how to proceed. He submitted that the Heads of Agreement included a further agreement with unknown terms, no doubt referring to the Deed of Release and that the agreement could not therefore be enforced. Mr Wende submitted that the plaintiffs required a fairer Deed of Release. I will return to those submissions. MASTERS v CAMERON 25 In Masters v Cameron (1954) 91 CLR 353 at 360-361 the High Court, in an often quoted passage, identified three different situations in which parties in negotiation reach agreement that the terms of their negotiation should be dealt with by a formal contract: "(1) It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. (2) Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. (3) Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract, In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution… Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own." 26 Mr Lloyd's written submissions in effect submitted that this case fell within the third category and that therefore no binding agreement had been entered into. No doubt the submission was based on the assertion that there was no agreement as to the terms of the release. 27 I do not accept that submission. I am satisfied that this case comes within the first or second category, and probably the second. I am satisfied that the parties completely agreed upon all the terms of their bargain, but nevertheless made performance of one or more of the terms conditional upon the execution of a formal document. That formal document was a Deed of Release. The form of release which the defendant finally required the plaintiff to sign is a simple straight forward release which accords with the terms of the Heads of Agreement. It does not contain any unusual or special clauses. In accordance with the Heads of Agreement document, the Deed of Release requires the plaintiff to release the defendant from all future claims arising out of the Gosford District Court proceedings. That was the bargain which the plaintiffs agreed to in the 'Heads of Agreement'. 28 I am satisfied that the agreement evidenced by the Heads of Agreement form is not void for uncertainty. The same principles apply here as were applied in Meehan v Jones (1982) 149 CLR 571. The High Court in that case held that a contract which was subject to finance 'on satisfactory terms and conditions' was not void for uncertainty. 29 The plaintiffs now contend that the agreement is not fair, because there is no mutual release by the defendant of claims against the plaintiffs arising out of the Gosford District Court proceedings. There is no mutual release because it was not provided for in the 'Heads of Agreement'. At the time the agreement was signed, the plaintiffs were represented by Mr Combe of Counsel. He signed the Heads of Agreement document on behalf of the plaintiffs. There is no evidence from the plaintiffs that they were mislead or that Mr Combe did not properly explain the effect of the agreement to them. They make no complaint at all. They do not allege any misrepresentation on the part of the defendant. They say that the absence of mutual releases makes the document unfair. 30 I am satisfied that in a factual situation such as this, the principles to be applied are clearly set out in the High Court decision in Toll v Alphapharm (2004) 219 CLR 165. The High Court said at (45-47): "It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief." The principles that the High Court have set out as to the importance of parties being bound by their written signature, must apply even more strongly, when at the time that the document was signed the party had the benefit of their own legal advice and make no complaint in relation to that legal advice. EFFECT OF NON-SIGNATURE BY MARGARET WENDE 31 Mr Lloyd filed an affidavit of Margaret Wende sworn 10 July 2007 in which she deposed that she was not present at the Gosford Local Court on 22 March 2007 - "but was represented by Counsel Mr Andrew Combe when an offer of compromise document entitled Heads of Agreement was drawn up and signed by the first and third plaintiffs and the defendant." She deposed that she was not asked for consent to the offer of compromise and did not sign nor give her consent. She deposed - "I will not consent to any offer of compromise unless I am consulted first and agree on terms." 32 On the hearing of the Motion before me only Mr Herbert Wende and Mr Mark Lloyd appeared. They indicated they were appearing on behalf of Margaret Wende. 33 I am not satisfied that the plaintiffs can rely on the non signature of the Heads of Agreement by Margaret Wende to escape their obligations under the agreement. In Owners Corporation Strata Plan 62285 & Ors. v Betona Corporation (NSW) Pty Ltd & Ors. (2006) NSWSC 216 His Honour Justice Gzell made reference to and approved the following statement of law: '47. In Donellan v Watson (1990) 21 NSWLR 335 at 342, Handley JA noted that a solicitor retained to conduct litigation ordinarily had both implied and ostensible authority to bind the client to a comprise of those proceedings, and any instruction from the client that restricted the solicitor's authority to comprise the proceedings would only affect the other party if on notice of that restriction." 34 As in that case, there is no suggestion in this case, that the defendant or his counsel was aware of any restriction on Counsel Mr Combe's ability to compromise the proceedings. 35 I come to the same view as did His Honour Justice Gzell in that case. I see no reason to depart from the ordinary rule that Mr Combe had the ostensible authority to bind Margaret Wende to the agreement. THE PARTNERSHIP ARGUMENT 36 After I had adjourned the matter to prepare a written judgment, the defendant sought leave to file submissions in reply to the proposition that the agreement was not binding because it had not been signed by Margaret Wende. I agreed to allow further submissions on the basis that the plaintiffs could file further submissions in reply. 37 Ms Hill submitted that the plaintiffs, Herbert Wende, Margaret Wende and Mark Lloyd brought the proceedings on the basis that they traded under the name of Berghoften Nurseries. She submitted that under s 5 of the Partnership Act 1892, every partner in a partnership is an agent of the partnership and the acts of every partner bind the partnership and the other partners. She therefore submitted that the acts of Mr Wende and Mr Lloyd in signing the Heads of Agreement on behalf of Berghofen Nurseries, binds Berghofen Nurseries and all three partners. Ms Hill submitted that Margaret Wende would also be liable as a partner pursuant to s 6 of the Partnership Act and under s 9 of the Partnership Act. 38 Mr Lloyd submitted that himself, Mr Wende and Mrs Wende were not in partnership and that Berghofen Nurseries is operated by Mr Lloyd only. That factual submission would appear to be contrary to the Amended Statement of Claim filed in these proceedings on 31 July 2006, which details the plaintiffs to be Herbert Wende, Margaret Wende and Mark Lloyd trading as Berghofen Nurseries. 39 Whilst there would appear to be considerable substance in the submissions made by Ms Hill based on the Partnership Act, I do not propose to make a finding in view of the factual matter in relation to the partnership being in dispute. CONSIDERATION OF PLAINTIFF'S FURTHER SUBMISSIONS 40 In their written submissions Mr Lloyd referred to a finding against himself and the other two plaintiffs in a case involving Horvath Ltd which related to an accountant's report obtained in the Gosford District Court proceedings when Giles Finney was acting for them. Mr Wende stated that the case was decided in favour of the accountants and indicated an intention to claim the amount payable in those proceedings from the defendant in these proceedings. The matters to which he referred all arose subsequent to the signing of the Heads of Agreement on 22 March 2007. Those matters cannot now form a basis to not otherwise enforce the settlement in the 'Heads of Agreement'. 41 Mr Lloyd made further submissions pursuant to the leave granted. I have taken all of the additional submissions into account. WHETHER TIME WAS OF THE ESSENCE 42 Mr Lloyd submitted that the plaintiffs were not bound by the agreement contained in the Heads of Agreement because of the defendant's failure to submit the Deed of Release within the time provided in the Heads of Agreement. Ms Hill referred me to a decision of His Honour Beach J in Thompson v Macedon Ranges Shire Council (1999) VSC 338. In that case the party seeking to avoid the Terms of Settlement relied on the fact that the payment had not been made by the due date. His Honour Judge Beach stated that the law relating to the question as to whether or not time is of the essence of a contract was clearly stated by Fullagar J in Carr v J.A. Berriman Pty Ltd (1953) 89 CLR 327 at p348-349 as follows: "Where a contract contains a contract contains a promise to do a particular thing on or before a specified day, time may nor may not be of the essence of the promise. If time is of the essence, and the promise is not performed on the day, the promisee is entitled to rescind the contract, but he may elect not to exercise this right, and an election will be inferred from any conduct which is consistent only with the continued existence of the contract. If time is not of the essence of the promise, the promisee is not entitled to rescind for non-performance on the day. If either (a) time is not originally of the essence, or (b) time being originally of the essence, the right to rescind for non-performance on the day is lost by election, the promisee can, generally speaking, only rescind after he has given a notice requiring performance within a specified reasonable time and after non-compliance with that notice." 43 In accordance with those principles I am satisfied time was not made of the essence in this matter and was not made of the essence by the plaintiffs before the Deed of Release was forwarded out of time. In any event, it is clear from the plaintiffs' submissions that they would not have signed the Deed of Release in the form in which it was forwarded (even though in accordance with the agreement) whether it was forwarded on time or not. 44 These proceedings were commenced in the Small Claims Division of the Local Court on 24 November 2003. They have already had two hearings in the Supreme Court. 45 I am satisfied that the parties did enter into a legally binding agreement to settle the matter in accordance with the terms set out in the Heads of Agreement document. In this court I would not be able to direct the plaintiffs to sign the Deed of Release. The defendant now waives compliance for the requirement for such Deed of Release. The clause is severable and the defendant is entitled to do so. For the reasons already given I am satisfied that the Notice of Motion should succeed and that there should be judgment in favour of the plaintiffs in the sum of $5,000. Despite the position adopted by the plaintiffs because of the delay in the defendant submitting the Deed of Release, I think it reasonable that the plaintiffs should be entitled to interest in accordance with the Heads of Agreement. 46 I make the following orders: 1. Judgment for the plaintiff in the sum of $5,000. 2. The defendant is to pay interest on the judgment debt from 20 April 2007. 47 I would propose the following costs order: Costs follow the event. The plaintiffs are to pay the defendant's costs of the Motion in the sum of $700.00 within 28 days. 48 I shall hear from the parties in relation to the proposed Costs Order. B.A. LULHAM 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.