Buildum Construction Pty Ltd v Pile & Bucket Pty Ltd [2017] NSWSC 1260

Supreme Court New South Wales

Medium Neutral Citation: Buildum Construction Pty Ltd v Pile & Bucket Pty Ltd [2017] NSWSC 1260 Hearing dates: 15 September 2017 Date of orders: 15 September 2017 Decision date: 15 September 2017 Jurisdiction: Equity - Commercial List Before: Parker J Decision: Agreement found to be binding and enforceable, and specific performance ordered Catchwords: Contracts – oral settlement agreement – enforceability – ostensible authority to enter agreement – prior judgment and garnishee proceedings – deed drafted but not executed – no requirement for execution of deed – no requirement for agreement on mode of payment or on setting aside of judgment Legislation Cited: Civil Procedure Act 2005 (NSW), s 73 Cases Cited: Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 Category: Principal judgment Parties: Buildum Construction Pty Ltd (Plaintiff) Pile & Bucket Pty Ltd (First Defendant) Christopher Jacques Nel (Second Defendant) Representation: Counsel: H Grace (Plaintiff) M Jaireth (First Defendant)

Solicitors: One Group Legal Pty Ltd (Plaintiff) CCS Legal Pty Ltd (First Defendant) File Number(s): 2017/168468 Publication restriction: Nil

Judgment – EX TEMPORE

(Revised AND ISSUED 19 SEPTEMBER 2017) 1. These proceedings arise out of an adjudication pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW). 2. The first defendant in the proceedings made a claim under the Act for a progress payment pursuant to a subcontract with the plaintiff. The claim was for approximately $75,000. Subsequently, the first defendant was successful in obtaining an adjudication determination in its favour for the amount claimed. 3. The first defendant then had the adjudication certificate registered as a judgment in the Local Court and issued garnishee notices to various parties, by way of an attempt to obtain payment. 4. The plaintiff responded by bringing these proceedings, challenging the adjudication determination and seeking orders to have it declared void or set aside. In the course of these proceedings, an amount of approximately $70,000 was paid into Court. 5. On 14 July, the parties attended an informal settlement conference. The plaintiff was represented by Mr Ali Ibrahim, who is the sole director of the plaintiff and controls its affairs, and also by its solicitor, Mr Michael Ayache. The first defendant was represented by Mr Alan Paterson, who is its principal, and by its solicitor Mr Simon (also known as "Sam") Madison Wilson. 6. Following the conference, the parties exchanged drafts of a deed of settlement but that was not signed. What occurred at that settlement conference is a matter of dispute. The plaintiff contends that a binding and enforceable settlement agreement was reached under which the first defendant was to be paid $40,000 out of the moneys which had been paid into Court in these proceedings, with the balance to be released to the plaintiff, and the proceedings were to be disposed of with no order as to costs. The first defendant disputes that any binding or immediately enforceable agreement was reached at the settlement conference. 7. Analysing the case in terms of the well-known tripartite classification adopted in Masters v Cameron (1954) 91 CLR 353, the plaintiff contends that this is a case in the first class, namely where the parties agreed on all essential terms of a bargain, albeit contemplating that a formal deed would later be drawn up to give effect to those terms and perhaps other non-essential terms. Alternatively, the plaintiff contends that the case is one in the second class, namely that the parties agreed to be bound to terms reached at the settlement conference, albeit that enforceability of those terms was conditional upon the execution of a deed. The first defendant contends that the case falls into the third class, namely one where the parties had agreed that they would not be bound unless a deed was agreed. 8. Each of Mr Ibrahim, Mr Ayache, Mr Paterson and Mr Wilson gave evidence before me and was cross-examined. Each witness had previously provided an affidavit or affidavits, but those affidavits did not purport to set out what had occurred at the critical moments of the settlement conference in direct speech; rather, they paraphrased statements that were made or, in some cases, expressed conclusions about the ultimate effect of what had happened. Neither party objected to this approach, but the result is that there is no clear evidence in direct speech of exactly what happened. 9. The most useful evidence is that in the affidavit of Mr Ibrahim. Mr Ibrahim said that, after an initial discussion about issues in dispute and possible terms of settlement, he: ...offered to settle our dispute on the following terms: (a) Alan [referring to the first defendant] be paid $30,000 from moneys paid into court by me [meaning the plaintiff]; (b) The Supreme Court matter would be dismissed and each party would be responsible for their own legal fees; (c) The judgement [sic] and the garnishee in the Local Court would be removed; and (d) The Local Court proceedings would be dismissed and each party would be responsible for their own legal fees. 1. Mr Ibrahim was not challenged on this evidence and, although it is not in the form of direct speech, I understand it as evidence that an oral offer, in these terms, was put forward. 2. Mr Ibrahim continued that Mr Wilson requested some time alone with Mr Paterson and, after this, a counter-offer was made. Mr Ibrahim said: The counter offer was that Alan agreed to all of my terms but wanted $50,000 from the moneys paid in to the Court by the plaintiff. 1. According to Mr Ibrahim, he rejected this counter-offer and, after a further period for negotiation, Mr Wilson returned and said words to the effect of: Alan is being very difficult. It took me a lot of convincing, but he will agree to accept $45,000. 1. Mr Ibrahim said that he responded: I will agree if that means he will get $40,000 because he has already got $5,000 from the garnishee. 1. Mr Wilson agreed to seek instructions and returned shortly after saying words to the effect of: I may have lost a long term client, but he's agreed. 1. There was no evidence from Mr Paterson or Mr Wilson which directly contradicted this version of events. In cross-examination, Mr Wilson was asked about the final two statements attributed to him. He accepted that he had said, on his client's behalf, words to the effect that the client had agreed to $40,000. He also accepted that he had said words to the effect that he might have lost a long-term client. 2. Mr Wilson then asked to have the terms recorded in a formal deed of settlement. 3. Shortly afterwards, Mr Ayache had someone at his firm prepare some draft consent orders, both for the Local Court and the Supreme Court proceedings. Three sets of orders were prepared. The first was for the Local Court, then a few minutes later for the Supreme Court and then a further version of the Local Court orders was sent because part of the form had been left out. Each of these was emailed to Mr Ayache and, in each case, Mr Ayache forwarded the email to Mr Wilson. The evidence of Mr Ibrahim and Mr Ayache was that the orders were shown to Mr Wilson on Mr Ayache's mobile phone and that Mr Wilson orally approved the orders. According to Mr Ayache, this happened before anyone had left the settlement conference. Mr Wilson's evidence was that Mr Paterson had left and that he too left before the emails were sent to him. He said that he received them after having reached his office in Crows Nest, which he recollected as having happened by 1.00pm, the journey having taken him around half an hour or so. 4. Counsel for the plaintiff pressed Mr Wilson in cross-examination about his evidence and submitted to me that I should find, despite Mr Wilson's evidence, that the version of events of Mr Ibrahim and Mr Ayache was correct. 5. Counsel sought to draw support from the wording of the emails which Mr Ayache had sent, forwarding the drafts to Mr Wilson. The first of those, which was sent at 12.39pm on 14 July said: As discussed, please see attached consent orders in the Local Court. Supreme Court consent orders to follow. I confirm that you will prepared [sic] the Deed of Release. 1. Counsel argued that the form of Mr Ayache's email supported the conclusion that Mr Wilson had already agreed orally to the terms of the consent orders. I cannot agree. To my mind, the form of the email and the succeeding emails is equally, if not more, consistent with what one would expect if Mr Wilson had already left, but the parties (as seems to have been the case) had agreed that Mr Ayache would prepare some consent orders for consideration. I can see no reason why, if Mr Wilson had already orally approved the orders, it was necessary to send them on at all, let alone to send them on with what I consider to be an implicit invitation for comment. 2. In saying this, I do not, of course, mean to suggest that Mr Ibrahim or Mr Ayache misrepresented the position in their evidence. It is just that I think that they may be mistaken and, taking the evidence as a whole, I am not sufficiently satisfied to make an affirmative finding that events transpired in the way that they described. 3. Later that afternoon, Mr Wilson sent a draft deed to Mr Paterson. The draft deed provided, in substance, for the payment by the plaintiff of the sum of $40,000 within five business days, for consent orders to be made for the discontinuance of both the Local Court and Supreme Court proceedings, for orders that the Local Court judgment be set aside and that the moneys held in Court be released to the plaintiff, and for the garnishee orders to be set aside. It also contained a provision for mutual releases and various other standard form clauses. 4. Mr Paterson responded the following Monday morning. There were a number of aspects of the deed which he was unhappy with. Eventually, on Thursday 20 July, Mr Wilson sent to Mr Ayache an amended version of the deed which he had drafted. This was put forward on the basis that if its terms were agreed, an executed counterpart would be forwarded. 5. The deed was little changed from that which had been submitted to Mr Paterson, but the reference to the Local Court judgment being set aside had been deleted. This provoked a response from Mr Ayache's firm. In substance, the counter proposal only differed in that rather than providing for any provisions for settlement, to which I have already referred, Mr Ayache's firm's draft provided for the parties to agree to have the consent orders in the form submitted by Mr Ayache made by the Local Court and by this Court. However, as I have mentioned, discussions then broke down. 6. The present application has been made pursuant to the Civil Procedure Act 2005 (NSW), s 73 to have the Court make orders to enforce the alleged agreement. 7. In resisting the application, counsel for the first defendant contended that there were two essential points of difference between the plaintiff and the first defendant which had not been agreed and that, as a result of the failure to agree on those two points, there had been no final and binding settlement reached at the settlement conference. 8. The first point was the method of payment. The consent orders put forward by the plaintiff provide for the $40,000 to be paid by releasing the monies paid into Court. The first defendant's position is that the payment has to be made separately by way of bank cheque. 9. The second point of difference relates to the judgment obtained in the Local Court. The plaintiff's position is that the judgment should be set aside. The first defendant's position is that the judgment should remain in place, although the first defendant accepts that it will not be able to enforce payment of anything more than the $40,000 agreed. 10. There is no evidence that these particular differences were discussed at the settlement conference. I understand the first defendant's contention to be that these matters are essential to the resolution of the dispute between the parties so that the failure to deal with them renders the settlement agreement relevantly incomplete. 11. In evaluating the submission, I must take account of the context. The parties were business people. The critical issue, so far as they are concerned, would have been the amount of money paid. The amount was quite small and, although matters such as payment method could sound, in theory, in interest, that is insignificant in the context of a dispute concerning $40,000. 12. In my opinion, the suggested differences between the parties are too small to be regarded as essential and the failure to agree them, therefore, is not a defence to the plaintiff's application. Having said that, I do not accept that the question of the Local Court judgment was not addressed. The passage that I have quoted from Mr Ibrahim's affidavit shows that he expressly referred to the Local Court judgment being set aside and this, indeed, is reflected in the initial draft prepared by Mr Wilson for Mr Paterson. The fact that Mr Paterson apparently now does not wish to concede that particular point does not, in my view, alter the fact that the agreement made between the parties on the day specifically referred to the Local Court judgment being set aside. Similarly, the passage from Mr Ibrahim's affidavit refers to payment of the $40,000 out of the monies held in Court. 13. Mr Paterson gave evidence that he had never authorised Mr Wilson to settle the proceedings finally and, as I mentioned, it is clear, from his response to the draft, that there were aspects of the draft put forward by Mr Wilson which Mr Paterson found unsatisfactory. However, the first defendant accepted that whether or not Mr Wilson had actual authority to communicate his client's acceptance of the offers being put forward and to make counter-offers, he had ostensible authority to do so. Accordingly, it is not necessary for me to determine the scope of any actual authority Mr Paterson may have given Mr Wilson. 14. In saying this, I do not wish to encourage the thought that Mr Wilson did otherwise than act in accordance with the instructions that he had received. On the evidence before me, both the setting aside of the Local Court judgment and the payment of monies out of Court were part of the proposal as initially put by Mr Ibrahim to Mr Paterson and Mr Wilson, and would have been understood by all parties to be a continuing aspect of the offers and counter-offers exchanged thereafter, unless specifically the subject of some form of reservation. 15. In my opinion, in putting the case forward as one in the first or second category of Masters v Cameron, the plaintiff's analysis makes the case more complicated than it needs to be. As I have noted, the requirement for a deed was one that was mentioned only after the parties had agreed on the figure and the other terms. In my opinion, a binding settlement agreement came into existence at that point. Although the agreement did not, on Mr Ibrahim's evidence, explicitly refer to a release, it was probably implicit in the offer figure, which was less than the amount claimed and, in any event, the effect of the orders, once made by the Local Court and by this Court, would be to prevent future claims being made, either as a matter of res judicata or abuse of process. In my opinion, it was not an element of the agreement that any deed be prepared at all, although no doubt the plaintiff, at the time, was happy to enter one in accordance with the first defendant's request. 16. For these reasons I conclude that, when the $40,000 figure was agreed, the parties reached a binding and enforceable settlement agreement for their settlement of the disputes, on payment of the sum of $40,000 to the first defendant and on the basis that the Local Court judgment would be set aside along with any further garnishee proceedings and that proceedings in both courts would be dismissed or discontinued, with each party to bear its own costs. 17. The effect of my decision is that the plaintiff is entitled to specific performance of the agreement, which I have found to exist. There is now no need to execute the deed, because it is not an essential element of the agreement for any such deed be executed. The Court can proceed to make the necessary orders in these proceedings. However, the Court cannot make orders in the Local Court. Accordingly, I propose to order that the first defendant execute the consent orders which were prepared for the purpose of the Local Court proceedings, so that the plaintiff can, if considered necessary, have the necessary orders made by that Court. The plaintiff has succeeded in this application and I think that costs should follow the event. However, I will now hear counsel for the parties on the form of orders and costs, should they wish to make any further submission. (Counsel addressed) 1. The orders of the Court are: 1. I declare that there is a binding and enforceable contract between the plaintiff and the first defendant for the settlement of the disputes in these proceedings and in Local Court proceedings number 2017/138839 on the following terms: 1.1 the plaintiff to pay the first defendant the sum of $40,000 out of the monies paid into the Supreme Court; 1.2 the Supreme Court proceedings be dismissed with each party to bear its own costs; 1.3 the judgment dated 9 May 2017 in the Local Court proceedings in the sum of $79,821.15 be set aside; 1.4 the Local Court proceedings be dismissed with each party to bear its own costs. 2. I order that the contract be specifically performed and carried into execution; and in particular I order that: (A) within 7 days the first defendant execute a form of consent order for the Local Court proceedings reflecting declaration paragraphs 1.3 and 1.4 above. (B) the sum of $40,000 be forthwith paid out of Court to the first defendant. (C) the balance of monies in Court be forthwith paid out to the plaintiff. 3. I order that the first defendant pay the plaintiff's costs of the Notice of Motion dated 1 September 2017.