No. 96 Factory Bargains v Kershel [2003] NSWSC 421

New South Wales Supreme Court

CITATION : No. 96 Factory Bargains v Kershel [2003] NSWSC 421 HEARING DATE(S) : 13 May 2003 JUDGMENT DATE : 13 May 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Agreement reached for settlement of litigation. Order for specific performance of that agreement.

CATCHWORDS : CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - whether agreement reached for settlement of litigation - significance of statement to court that litigation settled LEGISLATION CITED : Trade Practices Act 1974 (Cth) CASES CITED : Masters v Cameron (1954) 91 CLR 353 PARTIES : No. 96 Factory Bargains Pty Ltd - Plaintiff Kershel Pty Ltd - Defendant FILE NUMBER(S) : SC 2473/03 COUNSEL : N Carney - Plaintiff/Respondent J T Johnson - Defendant/Applicant SOLICITORS : Clive Potts & Associates - Plaintiff/Respondent Macedone Christie Willis - Defendant/Applicant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

TUESDAY 13 MAY 2003

2473/03 NO. 96 FACTORY BARGAINS PTY LTD v KERSHEL PTY LTD JUDGMENT – Ex Tempore 1 HIS HONOUR: This is a dispute between the lessee and lessor of some premises which are used as premises for storage and sale of goods. There were disputes between those parties, which led to the lessee being in arrears of rent. The lessor served on it a statutory demand. In response to that statutory demand the lessee took proceedings under s 459G Corporations Act 2001 to set the demand aside. In those proceedings the lessee claimed that it had an offsetting claim, arising from alleged misrepresentations about the profits which the lessee would derive from carrying on its business in the leased premises. The lessee contended that this offsetting claim would entitle it to have the lease re-written under s 87 of the Trade Practices Act. 2 On 13 March 2003 the Court found that there was sufficient substance in those contentions of the lessee to justify the setting aside of the statutory demand. 3 The lessee did not commence proceedings to seek to make good the rights it claimed to have under the Trade Practices Act. By 17 April 2003 it was still in arrears of rent. On that day the lessor locked the lessee out of the premises. The lessee thereupon started the proceedings in which I am presently hearing this notice of motion. The proceedings were seeking orders under s 87 of the Trade Practices Act to amend the amount of rent payable under the lease and the amount of the bond payable under the lease. The proceedings also sought a declaration that the plaintiff was not in breach of the lease and, in the alternative, relief against forfeiture, damages, interest and costs. 4 That same day, 17 April 2003, the lessee also filed a notice of motion seeking immediate relief against its exclusion from the premises. On 17 April Palmer J granted that immediate relief to the lessee. Notwithstanding that Palmer J made the orders on the occasion when the initiating process was filed in court, the legal representatives for the lessor had come to hear of the lessee's intention to bring those proceedings, and were represented before Palmer J. His Honour granted the interlocutory injunction which was sought, but for a very limited period of time. The matter was stood over until 24 April 2003 and directions were given for the readying of the principal proceedings for hearing. 5 This caused the parties to start some settlement negotiations. The evidence before me begins with an exchange of correspondence between their respective solicitors on 22 April 2003, where terms for settlement were being negotiated. That exchange of correspondence shows that on that day there were some topics concerning which there was consensus, and some topics concerning which there was not consensus. 6 On 23 April 2003 there was, in the morning, a conversation between the respective solicitors. Mr Potts, solicitor for the lessee, gives evidence that he had a telephone conversation with Mr Prowse, solicitor for the lessor, as follows: "During the mid-morning work period on 23 April 2003 I had a phone communication with Prowse as follows: Me: 'My clients told me they will tough it out for the rest of the five-year lease period although they are not happy about the decision. Would your client be prepared to proceed on that basis and without any further penalty?' Prowse replied: 'I believe that in addition to bringing all of the arrears and other amounts they owe up-to-date, they will have to forego the benefit of the costs order against my client in the last proceedings. They could have made this decision months ago and avoided all the costs my client has had to incur.' Me: 'They want your client to do a few things.' I then said: 'I believe that the terms of settlement ought to be subject to the execution of a formal Deed of Agreement. My clients won't be bound until the agreement is signed.' Prowse replied: "It better be done quickly because we won't agree to extending the injunction where your client delays the matter any further. I will get some instructions and prepare an agreement.'" 7 Mr Prowse disputes some aspects of this conversation. He agrees that the first two paragraphs of direct speech set out in it were said, but disagrees with the rest. The cross-examination of Mr Potts resulted in his conceding he did not use the words, "My clients won't be bound until the agreement is signed." There were no contemporaneous file notes of the conversation tendered by either side. In all of those circumstances, I am not persuaded that the last three paragraphs of direct speech set out in Mr Potts' account occurred. I mention this for completeness only, as I doubt that it will make a difference to the eventual result. 8 Later in the day on 23 April, Mr Potts sent a letter to Mr Prowse as follows: "Further to our discussions today in relation to the revised settlement offer, we confirm our instructions as follows: 1. That the lease be reinstated in its terms without variation. 2. That No 96 discontinues its current application to the Court and foregoes once and for all its rights under the Trade Practices Act. 3. That No 96 pays by way of bank cheque the balance April 2003 rent, the bond and the outgoings as per invoice BUT subject to verification based upon invoices, et cetera." 4. That No 96 reimburses forthwith the lessor for stamp duty paid on the lease. 5. That No 96 foregoes its rights to require lessor to pay costs as ordered in the previous proceedings. 6. That each party will be responsible for its own costs in the current proceedings. 7. That No 96 tenders a Notice of Withdrawal from the current proceedings to which Kershel can consent. 8. That Kershel will repair and make good the ventilator system in the roof of the subject premises so as to put same in good working order and condition. 9. That Kershel will erect at its cost a cyclone wire fence along the front side boundary of the premises to divide 103 from 101 Cawarra Road and provide a proper secure environment in which our client may work. No 96 seeks that Mr Lowe enter 101 via the front gate should he require entry to 101. 10. That Kershel will ensure that the two fire escape doors within 101 ground floor area are unlocked so as to permit, in accordance with fire safety regulations, the escape of persons lawfully upon the demised premises when the lessee's business is open. 11. That all rights are reserved under the lease in relation to the lessor's compliance with any other regulatory matter. Given time constraints, it is suggested that payment of the amounts owing be delayed pending final agreement and the execution of appropriate documents. Perhaps the remainder of April rent and the bond could be paid this afternoon, with the balance of the moneys to be paid on execution of agreement. It is suggested that you draw up any appropriate agreement you feel would be in your client's interest to have signed. We await your advices." 9 To that, Mr Prowse replied on the same day: "I refer to your letter forwarded to me by facsimile at 13.46 today. My client agrees with all terms of settlement contained within that document. In order to demonstrate your client's preparedness to comply with the proposed terms, please have your client pay the outstanding rent and the bond to Warner Pane by 4pm this afternoon. I would anticipate that the proceedings will be adjourned for one week tomorrow, subject to the continuation of Order 4 of the short minutes dated 17 April 2003. I will then draft an appropriate deed of release for execution prior to the adjourned date." 10 Later on the afternoon of 23 April 2003 Mr Potts wrote to Mr Prowse attaching a receipt from the real estate agent who managed the premises evidencing payment of the outstanding rent and bond. Mr Potts continued: "We will advise shortly the name of the solicitor appearing on our behalf at tomorrow's 10am list." 11 Pursuant to Palmer J's orders, the matter came back before him on 24 April. On that date a typed document which was signed by the respective counsel for the lessor and the lessee was handed to the Court. The body of the document as signed by counsel said: "The Court notes that the matter has settled and by consent makes the following orders: 1. [An order extending the injunction until 4pm on 2 May 2003.] 2. The summons and notice of motion be stood over to 9.30am on 2 May 2003 for the purpose of enabling the parties to draw and execute terms of settlement; 3. There be no order as to costs." 12 His Honour made orders in accordance with those short minutes, after first amending the second order to make provision for the summons and notice of motion to be stood over before the Registrar on 2 May 2003 for the purpose of enabling the parties to draw and execute terms of settlement. 13 Mr Prowse sent to Mr Potts a draft deed of settlement. It was under cover of a letter saying: "I refer to my letter of 23 April 2003 and enclose for your attention a draft deed of settlement setting out the terms agreed on that date. Please let me have your comments."