Supreme Court New South Wales

Case Title: Blazevic Holdings Pty Ltd v Warwick S Grave

Medium Neutral Citation: [2011] NSWSC 287

Hearing Date(s): 7 April 2011

Decision Date: 14 April 2011

Jurisdiction:

Before: Nicholas J

Decision: Par 43

Catchwords: CONTRACT - agreement to settle dispute between parties - deed of release – whether parties reached binding agreement

Legislation Cited: Building and Construction Industry Security of Payment Act 1999 Civil Procedure Act 2005 Cases Cited: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

Texts Cited:

Category: Interlocutory applications

Parties: Blazevic Holdings Pty Ltd - plaintiff

Warwick S Grave - defendant

Representation

- Counsel: Counsel:

M Seck - plaintiff

T Lynch - defendant

- Solicitors: Solicitors:

DibbsBarker - plaintiff

Swaab Attorneys - defendant

File number(s): 09/324672

Publication Restriction:

Judgment

1 By its notice of motion filed 10 March 2011 the plaintiff seeks a declaration that the parties reached a settlement agreement to finalise all matters between them as set out in the draft deed of release drafted by the defendant's solicitors. Alternative relief was also sought.

2 The plaintiff relied on the affidavit of Mr Mitch Lozina sworn 9 March 2011. Mr Lozina was the plaintiff's counsel in the main proceedings. He was not required for cross-examination.

3 The defendant's evidence was an ASIC search of Gradenco Pty Ltd (Gradenco) which showed that as at 5 April 2011 its directors and shareholders were the defendant and his wife, Julianne Grave.

Background

4 The origin of these proceedings is a dispute for payment for building work carried out by the plaintiff at the defendant's dental surgery in Castlereagh Street, Sydney. The relevant history of the litigation may be summarised as follows.

5 On 10 June 2009 judgment in default was entered in the District Court of New South Wales for the plaintiff against the defendant in the sum of $120,232.08. On 1 December 2009 the defendant's application to set aside the judgment was dismissed.

6 On 12 July 2010 Young JA, sitting in the Court of Appeal, heard the defendant's motion for a stay of the judgment pending the hearing of the appeal fixed for hearing on 8 October 2010. In his reasons, his Honour identified as the major issue before the Court the identity of the contracting parties because the defendant asserted that it was not him but his service company Gradenco Pty Ltd with which the plaintiff contracted to do the work. His Honour ordered a stay provided that by 31 July 2010 the defendant pay to the plaintiff the sum of $48,000 on the plaintiff's undertaking to repay that amount within a month of final judgment of the court setting aside the District Court judgment, and that there be a bank guarantee for the balance of $79,283 on the terms offered by the defendant. Ultimately, the appeal succeeded.

7 On 26 November 2010 this Court ordered that the question whether the defendant is a relevant party to the construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 was to be tried as a separate issue prior to any other issue in the proceedings, and fixed the matter for hearing on 13 December 2010.

8 By his notice of motion filed 30 November 2010 the defendant sought an order that the plaintiff provide security for costs in the sum of $50,530.14. The motion was listed for hearing on 3 December 2010.

The present application

9 A copy of the deed of release (the deed) and email correspondence between the parties' solicitors were annexed to Mr Lozina's affidavit. The affidavit also contains his account of the conversations with the defendant's legal representatives. It provides evidence of the following matters.

10 On about 1 December 2010 Mr John Garnsey QC, senior counsel for the defendant, telephoned Mr Lozina and proposed settlement of the proceedings. Proposals were discussed in telephone conversations that day and the next. Mr Lozina deposed as follows:

"4. We had a number of telephone conversations that went into the evening and the next day until we were able to have our respective clients agree on the following terms:

i. The Plaintiff to retain the $48,000 paid to him by the Defendant.

ii. The Defendant to pay to the Plaintiff a further $25,000 within 2 months

iii. Each part to bear its own legal costs

iv. The CTTT proceedings to be discontinued

v. A Deed of Release would be prepared by Swaab Attorneys

vi. The hearing dates for the Motion and Hearing would be vacated."

11 On 2 December 2010 Miss Jessica Bates, a solicitor with the firm Swaab Attorneys, acting for the defendant, sent Mr Lozina an email in these terms:

"We refer to the above proceedings and your telephone conversations with Mr Garnsey QC yesterday and today.

Please see attached deed of release that we have prepared to record the settlement that has been reached in this matter. Please have your client and Mr Blazevic execute the deed and deliver the original to us (with all 7 pages) as soon as possible. We propose that the motion and the proceedings be adjourned tomorrow to the first available Court date after the expiration of 2 months (ie a date in mid February 2011) after both payments have been made, with liberty to apply to file the short minutes prior to the Court date if appropriate.

Please let us know whether your client will consent to this adjournment."

12 The parties included in the deed are Blazevic Holdings Pty Limited ("Blazevic"), Josip Blazevic ("Mr Blazevic"), Dr Warwick Grave ("Grave"), and Gradenco Pty Ltd ("Gradenco").

The recitals include:

"J. On 26 November 2010, the Supreme Court proceedings were listed for hearing on 13 December 2010.

K. On 30 November 2010, Grave filed and served the Motion, which is returnable on 3 December 2010 at 9:15am.

L. Grave is defending the Supreme Court proceedings inter alia on the basis that Blazevic carried out the Fit Out Works at the Premises pursuant to an agreement with Gradenco and not Grave.

M. The parties have agreed to finalise all matters between them on the terms set forth below."

13 Clause 1 contained definitions including:

"First Payment means the sum of $12,500.00.

Fit Out Works means all building works carried out by Blazevic at the Premises.

Invoices means all invoices issued by Blazevic in respect of the Fit Out Works.

Motion means the notice of motion filed and served on 30 November 2010 in the Supreme Court proceedings seeking, inter alia, an order that Blazevic provide Grave with security for his costs of the Supreme Court proceedings.

Premises means Grave's dental surgery located at XXX XX Castlereagh Street, Sydney, NSW, 2000.

Second Payment means the sum of $12,500.00.

Statement of Claim means the Statement of Claim filed by Blazevic in the District Court proceedings on 5 May 2009.

Supreme Court Proceedings means Supreme Court of New South Wales proceedings no. 324672 of 2009 in which Blazevic is the plaintiff and Grave is the defendant."

14 Also included are the following provisions:

"2. Terms of Settlement

2.1 Gradenco shall pay and Grave shall procure that Gradenco shall pay to Blazevic, or as it directs, the First Payment within 30 days of the parties executing and exchanging this Deed.

2.2 Gradenco shall pay and Grave shall procure that Gradenco shall pay to Blazevic, or as it directs, the Second Payment within 60 days of the parties executing and exchanging this Deed.

2.3 Upon payment and receipt of the First Payment and Second Payment the parties shall do everything necessary on the part of each to procure that the orders annexed to this deed of release shall be filed in the Supreme Court proceedings and made by the Court.

2.4 Blazevic shall conditionally, upon the releases in clause 3 taking effect, be entitled to retain the sum of $48,000 paid to Blazevic by Gradenco on 26 August 2010.

2.5 Blazevic and Mr Blazevic shall not seek in any way to rely further on and shall not assist or procure any person or company to seek in any way to rely upon the Bankruptcy Notice the subject of the Federal Magistrates Court proceedings and shall, if requested by Grave, do all things necessary on their respective parts to procure withdrawal or discontinuance of the Federal Magistrates Court proceedings or any proceedings founded on the Bankruptcy Notice.

3. Releases

3.1 Upon payment to and receipt by Blazevic, or as it directs, of the First Payment and Second Payment:

(a) Blazevic and Mr Blazevic shall:

(i) Accept the First and Second Payments in full and final satisfaction of all Claims against Grave or Gradenco;

(ii) Make no further Claims against Grave or Gradenco; and (iii) Release each of Grave and Gradenco from all Claims.

(b) Grave and Gradenco shall:

(i) Make no further Claims against Blazevic and Mr Blazevic; and

(ii) Release Blazevic and Mr Blazevic from all Claims.

3.2 Nothing in this clause shall prevent the enforcement of the terms of this Deed or the obligations arising under it.

4. Bar to Further Proceedings

Each party is at liberty to plead this Deed in any court of law, arbitral tribunal or in any other proceedings in relation to, in connection with or arising out of the matters contained in this Deed as a bar to such proceedings."

15 Enclosed with the email was a document headed "Short Minutes of Order". It was annexed to the deed and referred to in cl 2.3. It contained the following:

"By consent and without admissions

(1) The proceedings be dismissed with no order as to costs.

(2) The defendant's motion filed 30 November 2010 be dismissed with no order as to costs.

(3) All existing orders for costs whether in the District Court or this Court or in the Court of Appeal on appeal from the District Court be vacated and set aside."

16 Mr Lozina replied by email the same day which said:

"The proposed orders with respect to the adjournment are satisfactory. Can you kindly mention my appearance and advise me of the orders made.

I will have Mr Blazevic execute the documents and forward same."

17 In her email in response, Miss Bates said:

"I confirm your client's consent to the proposed adjournment and will let you know what orders the Court makes tomorrow."

18 On 3 December 2010 Hammerschlag J ordered that the hearing date commencing 13 December 2010 be vacated, and that the proceedings be stood over for directions on 25 February 2011, with liberty to apply.

19 In her email of 3 December 2010 to Mr Lozina, Miss Bates said:

"I refer to the above proceedings.

I confirm I appeared before Hammerschlag J today for this matter and mentioned your appearance.

I informed His Honour that the whole of the proceedings had been settled.

I sought an adjournment to a date in February 2011 to allow for the payments to be made.

The Court made the following orders:

1. Matter stood over to 25 February 2011.

2. Liberty to apply on 3 days notice.

3. If consent orders are faxed to Hammerschlag J's chambers before 12 noon on 24 February 2011, the listing on 25 February 2011 will be vacated.

4. Hearing date of 13 December 2010 is vacated.

At this stage, we expect the exchange date for the counterparts of the deed to be next week sometime, after both parties have had the opportunity to execute a copy of the deed. I will touch base with you next week in this regard."

20 A copy of the deed was executed by Mr Blazevic for the plaintiff, and on his own behalf.

21 On 13 December 2010 Mr Lozina sent Miss Bates, by email, a scanned copy of the executed deed. The same day he prepared a letter to the defendant's solicitors enclosing two copies of the deed executed by the plaintiff, and requested arrangements be made for the defendant to execute the document and return a copy to him. He requested confirmation that, for the purposes of the deed, time would run from 14 December 2010.

22 On 11 January 2011 Mr Lozina had a telephone conversation with Miss Bates in which he asked what was happening with the matter. Miss Bates informed him that she did not know, and did not have any instructions.

23 On about 18 January 2011 Mr Lozina sent an email to Miss Bates in which he said:

"I note that at this stage your client has failed to sign the deed of release and otherwise honour the terms of the settlement agreement.

Accordingly, I have written to the court seeking that the matter be listed for mention. A copy of the letter is enclosed for your information."

He also wrote to the court and requested the relisting of the matter for mention for the purpose of obtaining a hearing date.

24 Also on 18 January 2011 Mr Lozina had a telephone conversation with Mr Sperber, of the defendant's solicitors. Mr Sperber informed him that he did not have any instructions from his client.

25 On 25 January 2011 Mr Lozina had a telephone conversation with Mr Sperber which included the following:

"ML: So what is happening then?

TS: We have written to him on a number of occasions and let him know of the consequences if he doesn't go ahead. He can be difficult to deal with.

ML: You are not telling me anything new based on what I have seen.

TS: Anyway, I know you have listed it for mention and I can understand why, but I've got some instructions in this matter and I can tell you that the reason the Deed wasn't signed was because one of the Directors of Gradenco has been overseas. She was overseas before the deed was ready to be signed. She is coming back and I am seeing her this Friday and you should have a signed contract you can rely on next week.

ML: We already have an agreement that we can enforce.

TS: Well that's one way of looking at it."

26 On 8 February 2011 Mr Lozina sent an email to Mr Sperber noting that he had not yet received a copy of the deed or had heard as to whether Mrs Grave had signed it. The defendant's failure to execute the deed has led to the present application.

27 The crucial question in this case is whether there was a binding agreement to settle the proceedings. In Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 (p 360) the High Court identified three classes to which a case may belong where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract. Dixon CJ, McTiernan and Kitto JJ (p 360) said:

"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. 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. 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. 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..."

28 It is well-settled that the question whether the parties intended to enter into a binding agreement must be determined objectively, with regard to the contents of the communications between the parties considered in the context of the circumstances in which they took place. In order to determine whether the parties intended to conclude a contract, their postcontractual conduct may be taken into account ( Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, par 25, per Heydon JA).

29 The power of the court to determine questions about compromise and settlements is under Civil Procedure Act 2005 s 73 which provides:

"73 Power of court to determine questions about compromises and settlements

(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 that the court may otherwise have in relation to the determination of any such question."

30 The plaintiff submitted that an agreement had been reached which fell into the first class of cases identified in Masters. It was put that, consistent with the description in Miss Bates' email of 2 December 2010, the terms of the deed recorded the matters earlier agreed between counsel. Likewise, it was put, the next day, in order to give effect to the agreement Miss Bates informed the court that the whole of the proceedings had been settled, thereby indicating that a binding agreement had been made which was not conditional upon the execution and exchange of the deed.

31 For the defendant it was submitted that the agreement was of the third class identified in Masters (p 360) i.e. that the agreement was not intended to have any binding effect unless and until the parties executed the deed. It was put that, assuming it was agreed between Mr Lozina and Mr Garnsey QC to resolve the Supreme Court proceedings, the CTTT proceedings, and the underlying building dispute, the preparation of the proposed deed of release was not a mere formality to record a complete agreement. In this respect, it was put that the subject matter of the deed was wider than the scope of the agreement as set out in par 4 of the affidavit thus indicative that more was be done than agreed upon by counsel.

32 It was put that comprehensive settlement required the proposed deed to release the plaintiff from liability for a final accounting under the construction contract, and to bind Gradenco. It was put that the evidence as to the conversations revealed no intention to settle unless and until the payment of $25,000 had occurred and a comprehensive deed had been executed.

33 The defendant also submitted that the effect of the terms set out in par 4 of the affidavit was that a deed of release should be prepared, and that the motion and the hearing, each unresolved and pending, be stood over, which indicated that no binding contract of settlement intended to be immediately effective had been made. It was submitted (T p 21, l 44 - p 22, l 1):

"... Here, the point about the conversation in Mr Lozina's affidavit is that it did provide for the provision of a Deed of Release and it did not provide for the immediate resolution of either the motion or the substantive hearing and that is paragraphs (iv), (v) and (vi)... those two circumstances in my submission objectively indicate no binding settlement until those contemplated events had occurred, the Deed of Release, payment of money and then there might be some disposition of the proceedings, but not earlier and not otherwise."

34 In short it was put that there was no agreement for the immediate disposition of either the motion or the proceedings at a final hearing. It was argued that the intention was that these matters be stood over to a date in February 2011 in contemplation of the execution of the deed and the making of the payments.

35 In written submissions with reference to the terms of the deed it was pointed out that it included parties who are not parties to these proceedings, and the assumption by Gradenco of the obligation to pay $25,000 rather than the defendant. It was also put that the deed envisaged Gradenco would make the first and second payments within periods calculated from the date of execution and exchange, following which mutual releases would be provided. Accordingly, so it was put, as neither the defendant nor Gradenco had executed the deed, and no payment has been made, there has been no settlement of the proceedings as envisaged by the deed. It was argued that, in the circumstances, the provision of the deed to the plaintiff was merely an offer to settle the matters therein referred to, and no binding agreement would arise before its execution by the parties.

Consideration

36 The evidence is that, following telephone conversations on 2 December 2010 between their counsel, the parties agreed on the terms set out in Mr Lozina's affidavit, par 4, which included preparation of a deed of release by the defendant's solicitor, and the vacation of the dates for hearing of the motion (3 December 2010) and for the hearing (13 December 2010).

There was no suggestion that there was something more to negotiate, or that the agreement was not complete. That it had been agreed at this time by the parties to finalise all matters between them is evidenced, in my opinion, by Miss Bates' email to Mr Lozina of 2 December 2010 with which she attached the deed "... prepared to record the settlement that has been reached in this matter". She also requested that the plaintiff and Mr Blazevic execute the deed as soon as possible, and proposed that the motion and proceedings be adjourned to mid-February 2011 to allow for the payments to be made within the agreed periods, but did not suggest that implementation of the agreement was conditional upon execution.

37 Mr Lozina consented to the orders for adjournment, and advised he would arrange for his client to execute the deed.

38 According to her email of 3 December 2010, Miss Bates informed the court that day that the whole of the proceedings had been settled. She sought, and obtained, an adjournment the purpose of which was to allow the payments to be made. The matter was stood over to 25 February 2011, and the hearing date was vacated. The court directed that if consent orders disposing of the proceedings were sent to the court by 24 February 2011 the listing on 25 February 2011 would be vacated. Her email concluded:

"At this stage, we expect the exchange date for the counterparts of the deed to be next week some time, after both parties have had the opportunity to execute a copy of the deed. I will touch base with you next week in this regard."

39 On 13 December 2010 Mr Lozina sent Miss Bates a copy of the deed executed by his clients. On several occasions in January 2011 he enquired of Miss Bates and Mr Sperber as to progress of execution by the plaintiff. Had it been the truth that the plaintiff denied any agreement, or that agreement was conditional upon the execution and exchange of the deed, it is reasonable to expect that Mr Lozina would have been so informed, but this did not happen. Indeed, the only explanation as given by Mr Sperber to Mr Lozina on 25 January 2011 was that Mrs Grave, a director of Gradenco, had been overseas but, as he was seeing her on her return, he

"... should have a signed contract you can rely on next week".

40 The evidence taken as a whole shows, and I find, that the parties intended to reach agreement prior to the hearing of the defendant's motion for security on 3 December 2010. The statements made to the court on that day by Miss Bates were completely inconsistent with the parties, or any of them, holding the view that the proceedings had not been settled. On her own account her statements were unqualified, and no use was made of phrases such as "settled in principle" or "settled subject to documentation".

I am satisfied that the defendant's solicitors drafted the deed in accordance with the agreement reached between counsel in their telephone conversations, just as Miss Bates' email of 2 December 2010 states. I find that the deed was intended to record this agreement, and that its execution by the parties was neither required nor intended before the agreement had binding effect. The subsequent failure of the defendant to protest the absence of agreement when there was ample opportunity to do so provides strong support for this conclusion.

41 Accordingly, I find that this case belongs to the first class of case identified in Masters. I am satisfied that when counsel agreed that a deed of release be prepared by the defendant's solicitors, it was intended to be the mechanism for the payment of the agreed amounts to the plaintiff, and for mutual releases of all claims including those in these proceedings. All that remained was for the preparation of a deed consistently with the agreement and, as Miss Bates' email shows, this was done.

42 In my opinion the defendant's submission that the deed should not be accepted as a record of the agreement reached between counsel because it relates to parties, and contains terms, which were not the subject of counsel's conversations cannot be upheld. The terms of the agreement were set out, in summary form, in par 4 of the affidavit. Miss Bates' email of 2 December 2010 referred to those conversations and presented the deed as a record of the settlement reached. As such, the deed was accepted by Mr Lozina who was a party to those conversations. The parties proceeded on that basis. There was no suggestion by anybody that the deed went beyond the subject matters of what had been agreed, or was intended to operate other than as the mechanism for performance of the agreement.

43 The plaintiff is entitled to a declaration as sought in par 1 of the notice of motion. I direct the plaintiff to bring in short minutes including of any consequential orders necessary to give effect to the declaration.

44 Prima facie, in my opinion, the usual costs rule should apply, and I propose an order that the defendant pay the plaintiff's costs. However if the question of costs is to be argued, arrangements to re-list the proceedings should be made by 4pm 21 April 2011 with my associate.

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