FEDERAL COURT OF AUSTRALIA

Eckford v Six Mile Creek Pty Ltd [2019] FCA 982

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application dated 13 June 2019 be dismissed.

2.    The applicant pay the respondent’s costs of the interlocutory application as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JAGOT J:

1    The issue in this matter is whether the parties entered into a binding contract to settle the proceedings on certain terms. Because the hearing was scheduled to start on Monday, 17 June 2019 and this aspect of the matter was heard on Friday, 14 June 2019, I agreed to the request of the parties to determine the issue on 14 June 2019 and provide my reasons for judgment at a later time.

2    On 14 June 2019, I dismissed the applicant’s interlocutory application seeking a declaration that a binding settlement agreement had been reached. My reasons for doing so follow.

3    The applicant, Derek Eckford, owns lot 10 in survey plan 158710, being 10 Shanagolden Court, Yaroomba, Queensland. He purchased lot 10 from the first respondent, referred to as SMC. The second respondent, Daniel McLaughlin, is a director of SMC.

4    Derek Eckford is 83 years old and his son Jason Eckford has been assisting him with the proceedings. In the proceedings, Derek seeks damages from the respondents relating to alleged misrepresentations.

5    Negotiations for settlement commenced on 3 June 2019. Importantly, the communication came from Mr McLaughlin directly to Jason and Derek Eckford and not through the lawyers for the parties. The email sent on 3 June 2019 said that the respondents would like to discuss a “without prejudice” out of court settlement and had been told by their lawyers that they were within their rights to make direct contact. On 4 June 2019, Jason Eckford responded by trying to call and then emailed Mr McLaughlin. On 5 June 2019, following a discussion, Jason Eckford wrote to Mr McLaughlin referring to a discussion they had had, saying that Derek was prepared to discuss figures if they agreed in principle to a structure for the settlement as follows:

1.    “Daniel McLaughlin and SMC purchase the property from Derek within 28 days (at a price which would not trigger a CGT implication, namely being the price of the land plus the building costs). Daniel can stipulate the contract price which may be beneficial from a tax benefit to offset future CGT liabilities

2.    Daniel McLaughlin and SMC pay a certain some [sic] of money being the difference between the settlement sum and property purchase price (if the property purchase price is less than the settlement sum);

3.    Daniel McLaughlin and SMC provide Derek a consent judgment for the full amount of claim in the proceedings which will be held in escrow, pending the sale of the property and receipt of monies. If purchase proceeds and monies paid, this will be returned, if not, it will be filed in the proceedings.

4.    The settlement sum be inclusive of costs (noting that a Derek's costs currently exceed $500,000)

5.    All of the above to be documented in a Deed of Settlement or Terms of Settlement.”

6    Mr McLaughlin responded on the same day saying:

We will agree in principle to the below structure, subject to both parties agreeing to the settlement sum.

If you could please provide a settlement sum, so we can commence negotiations.

7    On 6 June 2019 Jason Eckford and Mr McLaughlin exchanged a number of emails about the settlement sum. The emails culminated in one from Mr McLaughlin at 2.42pm on 6 June 2019 saying that the final offer was in the amount of $2,350,000, with a confidentiality clause to be included and that “[w]e have reached our limit and are going against Legal advice” (sic). At 3.49pm on 6 June 2019 Jason Eckford sent a reply stating:

We refer to our emails over the past day.

We confirm that Derek will agree to settle on the following basis:

1.    You and/or SMC purchases the property (Lot 10) from Derek within 28 days of the date of this offer (with time being of the essence) for the sum of $2,350,000;

2.    The proceedings be adjourned for directions to a date after 8 July 2019;

3.    You and SMC provide to Derek a Consent Judgment for the full amount of the proceedings plus costs as agreed or assessed, which will be held in escrow pending the receipt of the monies referred to paragraph 1 above. Should you fail to make the payment of the monies referred to at paragraph 1, Derek will be at liberty to file the Consent Judgment in the proceedings.

4.    Should the payment referred to in paragraph 1 above, be paid in accordance with this offer, the parties will then dismiss the proceedings with no order as to costs;

5.    The above agreement is to be documented in a Deed of Settlement and Release which shall include a confidentiality regime;

6.    The Deed of Settlement and Release is to be signed, sealed and delivered by no later than 11 am, tomorrow (07.06.2019).

Would you please confirm your agreement to the above. Assuming that we will have your agreement, given your email yesterday agreeing in principle to the above structure, we will immediately instruct our lawyers to commence preparing the Deed of Settlement and Release.

8    Jason Eckford called Mr McLaughlin at about 4.15pm on 6 June 2019 and they had this conversation:

I said:    “Hi Danny. Derek has told me to accept your offer of $2,350,000 on the terms we agreed. I have a power outage and cannot access email. Have you received the email from me outlining the terms agreed yesterday, but including the confidentiality regime?”

Danny said” [sic]    “Yes, I got it.”

I said:    “Do we have an agreement. I need to know before I tell Derek's solicitor to draft it.”

Danny said:    “Yeah, yeah, all good.”

I said:    “I will tell my solicitor to start drafting the documents.”

9    The applicant contends that a binding agreement came into existence at that time. According to the applicant, everything after this time is post-contractual conduct.

10    Later in the evening of 6 June 2019 at 7.52pm Jason Eckford emailed Mr McLaughlin saying:

Bartier Perry contacted Cronins and they were in the uninformed.

I have been asked to request written confirmation of your verbal agreement to the below terms so that documents can be drafted ASAP tomorrow.

We will also need you to elect the property contract price first thing tomorrow so as to finalise deed.

11    Jason Eckford sent another email at 7.51am on 7 June 2019 to Mr McLaughlin saying:

Please provide confirmation of your agreement to the terms of settlement with Derek (as set out in the below).

Please respond by 8.30 am this morning so that the documents can be drafted.

12    Ms Sutton, Mr McLaughlin’s daughter, emailed back at 9.07am on 7 June 2019 saying:

Have confirmed and instructed Cronin solicitor last night…

13    The applicant contends that if a binding agreement was not concluded in the conversation at 4.15pm on the previous day, 6 June 2019, then it was concluded on receipt of this email. According to the applicant, everything after this alternative time is post-contractual conduct.

14    Jason Eckford sent an email back to Ms Sutton saying:

Confirmation noted.

Can you please ensure Danny is available to sign by 11.00am as per the agreement.

Derek does not want incur the costs associated with filing the court book this afternoon.

15    The solicitors then got involved. They discussed the structure of the purchase price on 7 June 2019 and the drafting of the deed of settlement. The applicant’s solicitor said in one conversation that:

If the Deed is not signed today the deal will be off the table. Our client is going to incur costs of trial preparation in the next couple of days. We can't guarantee that they will be willing to settle on the terms as discussed after they have incurred those costs.

16    This was followed by an email saying:

We refer to the above matter.

We have taken instructions from our client following our telephone conversation.

Our client will not confirm that the offer to resolve this matter will remain on the table following close of business today.

We trust you will get your client's urgent instructions.

17    The respondents’ solicitor responded by email saying:

We are taking instructions in respect of the proposed settlement deed.

There is no binding agreement until such time as a finalised deed has been executed by the parties.

18    On 10 June 2019 the respondents’ solicitor wrote to the applicant’s solicitor saying:

We refer to our discussions with you on Friday 7 June 2019 in respect of the proposed settlement.

As noted in our correspondence to you on 7 June 2019, the terms of that settlement were negotiated directly between our respective clients and there is no binding settlement until such time as an agreement had been executed by the parties.

We have advised our clients that the proposed settlement was entirely uncommercial. We have now received instructions to withdraw the offer and cease reviewing your proposed deed.

Whilst our clients are committed to now proceeding to trial, if your client was minded to negotiate on a commercial basis, such negotiations are to be via the parties' solicitors.

19    There was no dispute about the relevant principles.

20    In Archer Capital 4A Ltd as Trustee for the Archer Capital Trust 4A v Sage Group PLC [2015] FCA 960 Farrell J provided the following summary:

[126] It is uncontroversial that in determining whether the parties have reached a binding agreement, the Court must ascertain the “objective intention” of the parties. It is not enough that the parties reached a consensus; they must have intended that the consensus arrived at will be legally binding, enforceable by a court: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 326, 329 per Mahoney JA. If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction: G R Securities [Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622] at 634 per McHugh JA (with whom Kirby P and Glass JA agreed). In that case, the use of the words “legally binding agreement in principle” demonstrated an intention to be bound immediately even though there was an expectation that a further contract would be substituted for it.

[127] Determining objective intention is a fact based inquiry. Although judges are wont to formulate guiding “principles” or “propositions”, those “principles” and “propositions” are subservient to the fact-specific objective finding of the parties’ intention: Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 (“Sagacious”) at [66] per Giles JA (with whom Hodgson and Campbell JJA agreed). See also Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 at [26] per Glass JA (McColl JA and Young CJ in Eq agreeing).

[128] Intention may be found in a series of communications or a single document. It is the intention that a reasonable person would discern that the parties had concerning the subject-matter of the alleged contract if that reasonable person had the parties’ knowledge of the words and actions communicated to each other and of the surrounding circumstances: Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at 655 per Campbell JA (with whom Mason P and Tobias JA agreed).

[129] I do not accept that there is any presumption in favour of an intention to create legal relations in a context such as this. It is a factual inquiry. I endorse the comments of Tadgell J in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 177 that:

No intention to make a promise can be imputed to a person whose words and conduct, objectively considered, do not lead to the inference that he intended to make one. Negotiations, no matter how heavily commercial in character, are no substitute for such an intention ... when the question is whether the legal effect of the transaction is promissory, there is no presumption that it is ...

[130] It is uncontroversial that labelling a document “subject to contract” is not determinative of whether the parties intended to be bound before the execution of a formal agreement. However, the use of the phrase usually creates a presumption that the parties did not intend that document to be binding, but rather the basis for a future contract. The applicants rely on Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 at [73] per Young CJ in Eq (as he then was) for the proposition that the presumption may be weaker outside the context of contracts for the sale of land. However, Young CJ in Eq made no finding to that effect and the issue is always one of intention determined objectively.

[131] The conduct of the parties after the time the alleged contract arose may be relevant for the purpose of casting light on the meaning of communications and whether the parties intended to be legally bound: Sagacious at [69]; see also [105]-[106] in relation to the probative value of subsequent inter partes and internal communications.

21    In Masters v Cameron (1954) 91 CLR 353 at 360 this was 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. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v. Miller (1878) 3 App Cas 1124 when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: " . . . as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed" (1878) 3 App Cas, at p 1151

22    There are a number of factors which lead me to the conclusion that the parties did not intend to be contractually bound unless and until a deed of settlement had been executed and delivered.

23    The context was negotiations directly between parties who both had legal representation. From the outset the parties stipulated that the agreement had to be documented in a deed of settlement.

24    The offer made at 3.49pm on 6 June 2019 contains two indications that Derek Eckford would not consider himself bound if Mr McLaughlin accepted the offer. The first is that the email says “Derek will agree to settle on the following basis”. The basis incudes the agreement being documented in a Deed of Settlement and Release and, importantly, that the Deed of Settlement and Release is to be signed, sealed and delivered by no later than 11am on 7 June 2019. The use of the future tense (“Derek will agree to settle…”) indicates that Derek Eckford did not see the agreement as becoming binding immediately upon acceptance of the offer. The fact that the required Deed of Settlement and Release had to be signed, sealed and delivered by no later than 11am on 7 June 2019 indicates that Derek Eckford anticipated that the parties would be bound by that deed and at that time, if the offer was accepted. If it had been intended that the acceptance of the offer would immediately bind the parties then there would have been no urgency to the signing, sealing and delivering of the Deed of Settlement and Release because the parties would have been bound immediately on acceptance of the offer, enabling the hearing to be vacated. The fact that there was urgency for the Deed of Settlement and Release to be signed, sealed and delivered is objectively consistent with the offeror not intending to be bound by mere acceptance of the terms of the email but, rather, by entry into the Deed of Settlement and Release.

25    The conversation at around 4.15pm on 6 June 2019 does not change the objective circumstances of the terms of the offer. Rather, it confirms that the offeror, Derek Eckford through the agency of his son, needed agreement to the terms before the solicitor would be instructed to draft the documents. Again, the objective fact of perceived urgency to draft the Deed of Settlement and Release is consistent with an intention for the parties to be bound only when that agreement was executed.

26    The same conclusion applies to the email of 7.52pm on 6 June 2019. The email was a request for written confirmation of the verbal agreement so that documents could be drafted “ASAP tomorrow”. If the verbal agreement was intended by both parties to be binding, there was no reason to obtain written confirmation before the document drafting could commence. The same email also identified a matter which the parties had not yet agreed; the property contract price (as opposed to the actual purchase price or settlement sum). The fact that the property contract price had not yet been nominated and agreed indicates that at that time not all terms had been agreed. While the applicants submitted that the capacity for Mr McLaughlin to nominate the contract purchase price was no part of the offer, which is correct, it was the offeror who was raising that price as a matter which had to be dealt with in the deed. In other words, both parties apparently considered that aspect of the deal to be necessary to be agreed so the Deed of Settlement and Release could be drafted.

27    The same conclusion also applies to the email from Jason Eckford at 7.51am on 7 June 2019. The written confirmation being sought is so the documents can be urgently drafted but if the parties had entered into a binding agreement at 4.15pm on 6 June 2019 then there was no need for written confirmation and no urgency in the drafting of the Deed of Settlement and Release. The urgency existed because the parties may be inferred to have intended that they would only be bound once the Deed of Settlement and Release had been signed, sealed and delivered.

28    The response at 9.07am on 7 June 2019 “Have confirmed and instructed Cronin solicitor last night” takes the matter no further. In context, this is a conformation that they agreed to the terms that had been identified at that stage and that the solicitors were drafting the necessary Deed of Settlement and Release. It was known by both parties, however, that the contract price had to be nominated by Mr McLaughlin and agreed to by Mr Eckford.

29    The subsequent conduct of the parties is consistent with the conclusion that they did not intend to be bound until the Deed of Settlement and Release had been signed, sealed and delivered. Jason Eckford’s email of 9.16am on 7 June 2019 asked for Mr McLaughlin to be available to sign “by 11.00am as per the agreement”. While on its face this might suggest a binding agreement, the request again highlights the urgency of the signing of the Deed of Settlement and Release because, I infer, at that time the parties intended they would be bound.

30    In their conversation at around 9.10am on 7 June 2019 the lack of agreement about the contract purchase price, and the potential importance of that term, is exposed. I do not infer that because that matter did not appear in the email of 3.49pm of 6 June 2019 it simply was not intended to be part of the deal at all. Rather, the email did not identify all essential terms of the agreement.

31    It is also apparent that Mr Eckford’s solicitor, on what must be inferred to be instructions from Mr Eckford, also held the view that his client was free to walk away from the deal unless the Deed of Settlement and Release was executed on 7 June 2019. It is apparent that no contention was ever made that Mr McLaughlin, by not signing, sealing and delivering the Deed of Settlement and Release was thereby in breach of contract. Rather, in the conversation between the solicitors at about 2.55pm on 7 June 2019, Mr Eckford’s solicitor said that the deal will be off the table if the Deed of Settlement and Release was not signed that day and he could not guarantee that Mr Eckford would be willing to settle on the terms discussed if he had to incur more legal expenses. This is a clear indication that Mr Eckford’s solicitor, who may be inferred to have taken instructions, did not consider that there was a binding contract which Mr McLaughlin was now in breach of by failing to sign, seal and deliver the Deed of Settlement and Release by 11am.

32    A subsequent email from Mr Eckford’s solicitor, stated to be on the basis of Mr Eckford’s instructions, said that Mr Eckford would not confirm that the “offer to resolve this matter will remain on the table following the close of business today”. This is another indication that Mr Eckford did not believe himself bound on the verbal or written acceptance of the terms put in the email of 3.49pm on 6 June 2019.

33    The email and letter from the respondents’ solicitor to the effect that there was no binding settlement until such time as an agreement had been executed by the parties reflected the same position as the communications, on instructions, from Mr Eckford’s solicitor.

34    For these reasons, I am not satisfied that the facts of this matter place it in the first class of Masters. Rather, the facts, objectively considered, place the matter in the third class of that case.

35    It follows that the interlocutory application should be dismissed with costs.

Associate:

Dated:    21 June 2019