Supreme Court New South Wales Medium Neutral Citation: National Australia Bank Ltd v Sayed (No 3) [2012] NSWSC 1470 Hearing dates: 22 October 2012 Decision date: 22 October 2012 Jurisdiction: Common Law Before: Rein J Decision: Settlement reached between the parties objectively included mutual releases of the bank itself and its servants and agents. Costs of the motion payable by the defendants as enforcement costs under the settlement agreement. Catchwords: CONTRACTS - general contractual principles - construction and interpretation of contracts - agreement in principle to settle proceedings to be later substituted by contract containing additional terms - where parties had agreed on mutual releases - whether such releases extended to their servants and agents Legislation Cited: Civil Procedure Act 2005 Cases Cited: AW Ellis Engineering Pty Ltd v Malago Pty Ltd [2012] NSWSC 55 Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 Grant v Binetter [2010] NSWSC 278 Godecke v Kirwan (1973) 129 CLR 629 National Australia Bank Ltd v Sayed [2011] NSWSC 1414 Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146 Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 Smith v Hughes (1871) LR6QB 597 Toll (FCGT) Proprietary Limited v Alphapharm Proprietary Limited [2004] HCA 52; (2004) 219 CLR 165 Troncone v Aliperti (1994) 6 BPR 13,291 Whitty v Fin Control Systems Pty Ltd [2000] NSWSC 332 Texts Cited: J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed (2007), LexisNexis Butterworths Category: Principal judgment Parties: National Australia Bank Ltd (Plaintiff) Bilal Sayed (First Defendant) Nicole Susan Sayed (Second Defendant) Representation: Counsel: G Lucarelli (Plaintiff) Solicitors: DibbsBarker (Plaintiff) First Defendant in person Second Defendant in person File Number(s): SC 2010/135614 ex tempore Judgment 1The notice of motion before the Court today concerns a settlement reached between the parties of proceedings brought by the plaintiff bank, National Australia Bank Ltd, against the defendants, Mr Bilal Sayed and Mrs Nicole Suzanne Sayed, who borrowed money from the bank in connection with a development project at Corrimal and who gave a mortgage over their own property at Woonona to support the loan. There was also a mortgage given over the Corrimal property. 2The proceedings were part-heard before Adams J on 20 - 23 August 2012. On 23 August 2012, the parties continued to conduct settlement negotiations and, by an exchange of correspondence, reached an agreement "in principle" which was reduced to writing and signed by the legal representative of the bank and by Mr and Mrs Sayed: see Exhibit D. Mrs Sayed was represented by both a solicitor and counsel at the hearing; Mr Sayed represented himself. 3The "in principle" agreement, as it was described on the document, had the following terms: "1. Binding but subject to formal deed that will contain further terms not inconsistent. 2. Defendants will pay the Settlement Amount by the Deadline. 3. Bank will accept the Settlement Amount in full and final accord and satisfaction of the Judgment Debt, if paid by the Deadline. 4. If the Settlement Amount is not paid by the Deadline, Bank will enforce the Writ and recover the Judgment Debt, plus interest on the Judgment Debt since 23 August 2012 plus enforcement expenses (on an indemnity basis). 5. Settlement Amount = $670,000 Judgment Debt = $700,000 Judgment (entered forthwith but stayed until Deadline) Writ = writ of possession over Woonona Property (stayed until Deadline) Deadline = 23 December 2012. 6. CRA terms per email Emma Hodgman to Andrew Luong dated 23 August 2012 sent at 12:31pm. 7. Settlement Amount and Judgment Debt includes amount owing on "Classic Account" (approx $26,000). " 4The Court was informed of the settlement on 23 August 2012 and Exhibit D was handed up. Justice Adams noted the agreement of the parties and vacated the balance of days set aside for the hearing. 5Mrs Sayed has now dispensed with the services of her solicitor, Mr A Luong, and barrister, Mr K D Ginges. Mr Ginges appeared this morning to advise the Court that Mr Luong's instructions had very recently been withdrawn. Mr G Lucarelli of counsel appears for the bank. 6The bank relies on the affidavits of Ms Danielle Kuti, a solicitor in the employ of DibbsBarker with conduct of the matter under the supervision of Ms Emma Hodgman. Ms Kuti's affidavit of 12 August 2012 was filed in the main proceedings and sets out the long procedural history of the matter. The Ms Kuti's principal affidavit of 5 September 2012 annexes the correspondence between her firm and Mr Luong and Mr Sayed both before and after the agreement in principle 7Mr Sayed this morning sought to tender two affidavits, one by himself and one by Mrs Sayed. The affidavits bear the date 8 October 2012 but were, according to Mr Sayed, only sworn last week and were provided to the plaintiff's counsel just before the hearing of the plaintiff's motion this morning. The affidavits were not served within the timetable set by the Court (which provided for any affidavits to be served by 10 September 2012) and were not even served when they had been prepared some two weeks ago or when they were sworn last week. The issues contained in the affidavits were never articulated by the defendants until today, even though the plaintiffs sought details of what had been said to be "other issues" mentioned by Mr Sayed in correspondence: see pp 211, 214 (all page references are to Exhibit A unless otherwise stated) and par 33 of Ms Kuti's affidavit of 5 September 2012. The affidavits raised issues relating to Mr Sayed's claimed medical condition on 23 August 2012 and made allegations of duress and coercion. Reliance on this late-served affidavit material was objected to by the bank. I refused to receive the affidavits given that the matter had been fixed for hearing some time ago, the defendants were given ample opportunity to file any evidence and to articulate any matters which they wished (Mrs Sayed's solicitor had on an earlier occasion indicated that her position was one of neither consent nor objection to the relief sought by the bank: see Associate to Adams J's record of proceedings on 6 September 2012) and it is not consistent with the dictates of justice (see ss 56 - 59 of the Civil Procedure Act 2005) that they be permitted to spring their allegations on the plaintiff at this late hour. I note, parenthetically, that in none of the correspondence from Mr Sayed after 23 August 2012 did he assert that he had been unwell or had not willingly signed Exhibit D: see pp 97, 110, 113, 157 and 177. 8The correspondence prior to the agreement in principle makes it clear that the parties envisaged that mutual releases would be given: see p 8. Mr Sayed was involved in those negotiations: see, for example, pp 8 (as "Bill.S" from "Spy City Support"), 14, 15, 18, 21 and 25. 9The correspondence after the agreement in principle saw a number of matters raised by both Mr Sayed and Mrs Sayed (through her solicitor, Mr Luong), all of which (bar cl 7(a)) were resolved in some cases by the bank agreeing to amend or withdraw terms which were not accepted. At the end of the chain of correspondence is a deed (pp 144 - 156) which reflects what the bank and Mrs Sayed had agreed and what Mr Sayed had sought or agreed to except for cl 7(a). Clause 7(a) is in these terms: "Upon exchange of this deed, Mr Sayed and Mrs Sayed (jointly and individually) immediately, unconditionally and absolutely release NAB, its employees, officers and agents, from all Claims which they now have or, but for this deed, might have had against NAB, its employees, officers and agents, or any other person, whether individually or jointly, in respect of the Woonona Loan, Woonona Mortgage, Corrimal Loan, Corrimal Mortgage, Corrimal Sale and the Proceedings." (emphasis added) 10The bank's case had these components: (1)In these proceedings, Mr and Mrs Sayed had raised allegations that the Corrimal sale had not been properly advertised, had been sold privately and not at auction and had been sold at an undervalue. Those claims can be seen both reflected in the amended first cross claim of Mr Sayed (Exhibit B) and the defence of Mrs Sayed (Exhibit C) and they are referred to in an earlier emanation of the pleadings in National Australia Bank Ltd v Sayed [2011] NSWSC 1414, the judgment of Davies J handed down in 29 November 2011. (2)The proceedings as at August 2012 had had a protracted history. (3)The parties had agreed on mutual releases. (4)It is clear that the parties regarded themselves as having entered a binding agreement - the document expressly states so. (5)The agreement in principle contemplated a more extensive formal document which would contain terms not inconsistent with the express terms of the agreement in principle and it therefore fell within the description of the fourth category of agreement described in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622, a decision of McClelland J (as his Honour then was); that is, using the words of Knox CJ and Rich and Dixon JJ in Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 311: "one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms." (6)The bank can only act by its servants or agents (see Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146) so it is entirely obvious that the release it would be seeking as part of the mutual release would be of its servants and agents. (7)Looking at the matter objectively, it is clear that what NAB wanted and expected was that settlement would bring an end to any litigation concerning the Corrimal and Woonona mortgages. If Mr Sayed's contention were upheld, then he could sue the real estate agent who acted for NAB who then could or might be expected to, as agent, bring a claim against NAB, as principal, to recover any amount obtained by Mr Sayed: see, in relation to the objective determination of the content of clauses that are yet to be finalised, Whitty v Fin Control Systems Pty Ltd [2000] NSWSC 332 at [26] per Young J and Grant v Binetter [2010] NSWSC 278 at [19], a decision of mine and, in relation to treating the promise of a release as being effective to achieve the outcome, Troncone v Aliperti (1994) 6 BPR 13,291 at 13,292 per Mahoney JA, with whom Priestley and Meagher JJA agreed. 11Mr Sayed raised several matters in answer to these contentions: (1)He claimed that he had not agreed to the agreement in principle being "binding" - that the document had been drafted by Mr Lucarelli and it had said "non-binding". (2)He claimed that he had not understood what "mutual release" meant. (3)He claimed that the emails after the settlement had not included him. (4)He said he was told that there would be a stay of execution of the judgment if he and his wife found a buyer. (5)He believed that the buyer had conspired with the bank (or its agent) to obtain the Corrimal property at a low sum. He wants to sue the agent and his former partner in the Corrimal project. (6)There was no agreement on the outstanding matters seen in the correspondence. 12In relation to subparagraph [11](1) above, it is quite irrelevant who drafted the agreement except in one sense, to which I will refer. The word "non" in "non-binding" has been struck through and the change initialled by both Mr and Mrs Sayed. I note that Ms Kuti has not initialled the change but no point was taken by Mr and Mrs Sayed about that and it is not the bank who disputes the binding nature of the agreement. Since the document was prepared by Mr Lucarelli and he has deleted the word "non", I think it can be objectively seen as the bank agreeing to that description. 13It is difficult to accept Mr Sayed's claim that he did not know what "mutual release" meant - the proposal came from his wife's solicitor (not the bank) and Mr Sayed noted in his email at p 8 that "I consent to the offer being made below with those conditions". His subsequent correspondence points to him having a degree of sophistication (see particularly pp 161 and 177 where he said: "a draft deed should have been supplied during negotiations so the contents could have been evaluated"). In any event, the objective theory of contract holds sway in Australia so that a party's misperception or misunderstanding are not relevant (see Toll (FCGT) Proprietary Limited v Alphapharm Proprietary Limited [2004] HCA 52; (2004) 219 CLR 165 at [40]; 179 per Gleeson CJ; see also Smith v Hughes (1871) LR6QB 597 at 607 per Blackburn J, cited and discussed in J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed (2007), LexisNexis Butterworths at 1.10) in construing a contract and is relevant to other relief only if induced by conduct of the other party or someone for whose conduct they are responsible. 14In relation to subparagraph [11](3) above, this claim is patently false - the emails did include Mr Sayed and he responded: see, for example, pp 113 - 117. 15In relation to subparagraph [11](4) above, there is no evidence before the Court of what he was told or by whom and in any event his reasons for signing the agreement are irrelevant for the same reason that I have already mentioned. 16There was, in relation to Mr Sayed, agreement on all of the outstanding matters except for the release: see pp 184 - 186, 187 and 206 - 207, because the bank indicated it was prepared to agree on all of the matters (other than cl 7(a)) that Mr Sayed was objecting to. In relation to Mrs Sayed, there was no outstanding area of disagreement: see pp 63, 78 and 182. 17The fact that there was disagreement between the bank and Mr Sayed on any of the terms of the deed does not produce the result that there was no agreement: cases such as Godecke v Kirwan (1973) 129 CLR 629 at 641 - 643, discussed in AW Ellis Engineering Pty Ltd v Malago Pty Ltd [2012] NSWSC 55, are examples of this and themselves refer to other cases of this kind. If the parties are not able to agree on the outcome, the Court needs to determine objectively whether the words in dispute are consistent with the agreement in principle (if not, they cannot be included) and, if not inconsistent, which of the competing versions more adequately represents and or is consistent with the stated or implicit considerations productive of settlement and, if relevant, is in accordance with practice. 18I have no doubt that the parties entered into a binding settlement agreement on 23 August 2012. The only issue is whether the release should include agents of the bank. There is no doubt that mutual releases were to be included. As I have said, that term was sought by the defendants and agreed to by the bank. I accept Mr Lucarelli's submissions that, objectively, it must have been envisaged by all parties that all matters relating to the proceedings were to be brought to finality by the settlement, including a release of the bank itself and its servants and agents in connection with the loan and the sale of the Corrimal property. 19The deed as now propounded through Ms Kuti's affidavit (see pp 193 - 205) actually includes the words "or any other person" in cl 7(a). Those words are not words that I would regard as reasonable or necessary to reflect the agreement reached between the parties and of their obvious desire to terminate any claims against each other in relation to the proceedings. Mr Lucarelli accepted that those words should not be included and they should not be included in the form of deed which I think must be executed by Mr and Mrs Sayed. 20Mr and Mrs Sayed should be required to execute the deed in the form, subject to deletion of "or other persons" in cl 7(a). In the event that they do not do so by 25 October 2012, I direct that the Common Law Registrar be authorised to execute the document on behalf of Mr and Mrs Sayed. 21Mr Lucarelli submitted that the costs of these proceedings should be payable as enforcement costs pursuant to the deed itself: see the deed at cl 1.1, which contains a definition of enforcement costs, and enforcement costs are referred to in cl 6.1(iii). Nothing was said by Mr and Mrs Sayed in opposition to that submission and I think it is appropriate, as is an order that they pay the bank's costs of the proceedings on the usual basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 November 2012