Federal Court of Australia

Wong v Wong [2022] FCA 78

ORDERS

THE COURT DECLARES THAT:

1.    A binding and enforceable agreement was made between the applicant and the second respondent as contained in the letter of offer sent by Jason Li Lawyers and dated 29 July 2021 and accepted by the letter sent by Drayton Sher Lawyers and dated 2 August 2021.

THE COURT ORDERS THAT:

2.    The interlocutory application otherwise be dismissed.

3.    If the parties are unable to agree orders by 23 February 2022 with respect to the payment of their costs of and incidental to the hearing of the second respondent’s interlocutory application dated 24 August 2021, each party should by no later than that date file and serve a copy of their proposed orders as to costs, together with an outline of written submissions in support not exceeding two pages in length.

4.    Costs orders will then be determined on the papers and without a further oral hearing.

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

REASONS FOR JUDGMENT

HALLEY J:

Introduction

1    By an interlocutory application dated 24 August 2021, the second respondent (Samuel Piscopo, as trustee of the bankrupt estate of the first respondent) (Trustee) seeks a declaration that, by an exchange of letters between the solicitors for the applicant (Mr Wong) and the solicitors for the Trustee, a binding and enforceable agreement was made to settle these proceedings as between Mr Wong, the first respondent (Ms Wong) and the Trustee (Agreement).

2    The Trustee also sought an order in the interlocutory application that Mr Wong do all such acts and execute all such documents as may be necessary to give effect to the Agreement, including entering into a deed annexed to an affidavit of the solicitor of the Trustee, Ms Alison Drayton, within 7 days of the order being made (Executory Order).

3    The interlocutory application is opposed by Mr Wong.

4    The third respondent (Bankwest) did not wish to be heard on whether the Agreement was binding and enforceable but opposed the making of the Executory Order. The fourth and fifth respondents did not wish to be heard on the interlocutory application.

5    During the course of the hearing on 6 October 2021 of the interlocutory application Mr Glasson, who appeared for the Trustee, indicated that the Trustee did not consider that it was strictly necessary to seek the Executory Order at this time.

6    In the light of that change of position, after hearing preliminary submissions directed at that issue, at the conclusion of the hearing on 6 October 2021 I made orders for supplementary written submissions to be filed by Bankwest and the Trustee to provide them an opportunity to consider the issue more definitively. A short further hearing was conducted on 15 December 2021 following the exchange of the supplementary submissions and the filing of cross claims by both Bankwest and the fourth respondent. The matter was initially only listed for case management on 15 December 2021 but it subsequently transpired that substantive submissions were made on that day with respect to the question of relief by Mr Glasson for the Trustee and Ms Mirzabegian SC, who appeared for Bankwest on that occasion.

7    For the reasons that follow I am satisfied that the Agreement is binding and enforceable and that it is appropriate for the Court to make a declaration to that effect.

Evidence

8    The Trustee relied on two affidavits of Ms Drayton, the first dated 24 August 2021 and the second sworn on 1 October 2021. Ms Drayton gave evidence of conversations that she had had with the Trustee and she annexed and exhibited, respectively, to her affidavits correspondence between the parties and the Trustee’s reports to creditors. She was not cross examined.

9    Mr Wong relied upon an affidavit from his solicitor, Mr Jason Li, affirmed on 19 September 2021. Mr Li gave evidence of his communications with the Trustee and Ms Drayton, and annexed copies of emails evidencing such communications. He was not cross examined.

10    Bankwest relied on an affidavit from its solicitor, Ms Felicity Healy, of Corrs Chambers Westgarth, sworn on 30 September 2021. Ms Healy gave evidence of her communications with the legal representatives of Mr Wong and Ms Wong, and a mortgage and related loan agreements that Bankwest had entered into with Mr Wong, his late wife Mrs Jiu Mei Wong (Mrs Wong), and Ms Wong. She was not cross examined.

Background Facts

11    Mr Wong and his estranged daughter, Ms Wong, are currently registered as tenants in common of the property located at 19 Boyce Road, Maroubra, New South Wales (Maroubra property).

12    In the period between 1988 and 17 March 2020 Mr Wong, Mrs Wong and Ms Wong were registered as joint tenants of the Maroubra property.

13    Relevantly for present purposes, in or about the first half of April 2015, Bankwest paid out loans from the Australia and New Zealand Bank secured against the Maroubra property.

14    On or about 13 April 2015, Bankwest entered into a document entitled “Bankwest Home Loan Contract” that purported to be with Mr Wong, Mrs Wong and Ms Wong (First Bankwest Home Loan). The amount outstanding under the First Bankwest Home Loan as at 28 September 2021 was $1,057,906.72.

15    On or about 24 July 2015, Bankwest entered into a document also entitled “Bankwest Home Loan Contract” that purported to be with Mr Wong, Mrs Wong and Ms Wong (Second Bankwest Home Loan). The amount outstanding under the Second Bankwest Home Loan as at 28 September 2021 was $369,542.57.

16    The amounts outstanding under the First Bankwest Home Loan and the Second Bankwest Home Loan are secured by a mortgage over the Maroubra property that was registered on or before 5 May 2015 (Bankwest mortgage). The Bankwest mortgage secures all indebtedness of Mr Wong, Mrs Wong and Ms Wong to Bankwest.

17    On 13 July 2021, Mr Wong commenced these proceedings in which he seeks, inter alia:

(a)    a declaration that Ms Wong holds or has at all times prior to her bankruptcy held, and the Trustee has, since his appointment as the trustee of the bankrupt estate of Ms Wong, held her legal interest in the Maroubra property upon a constructive or resulting trust for Mr Wong (and also prior to her death, Mrs Wong);

(b)    a declaration that each of the loan agreements between Bankwest and Ms Wong (both in her name and purportedly in the names of Mr Wong and Mrs Wong) are unenforceable, void and of no force or effect, and Mr Wong is entitled to a discharge of the Bankwest mortgage;

(c)    an order that Ms Wong transfer to Mr Wong the whole of her interest in the Maroubra property registered in her name, or alternatively a one sixth interest in the Maroubra property (being one third interest of her interest in the Maroubra property), if the Court were to determine that Mr Wong was entitled to a two thirds interest in the Maroubra property, on the basis that Ms Wong’s beneficial interest in the Maroubra property at all times up to her bankruptcy was limited and subsequently the Trustee’s vested interest has also been limited to a one third interest in common in the Maroubra property;

(d)    an order that the Trustee withdraw his caveat over the Maroubra property and do all things necessary to ensure the legal interest in the property registered in Ms Wong’s name be transferred to Mr Wong in accordance with the Court’s declarations as to Mr Wong’s beneficial entitlement;

(e)    an order pursuant to ss 178 or 179 of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) to compensate Mr Wong for loss or damage suffered or likely to be suffered from contraventions of the NCCP Act by Bankwest and/or the fourth respondent; and

(f)    damages against the fifth respondent for any amounts payable by Mr Wong and the estate of his late wife pursuant to loan agreements between them and Bankwest.

18    On 19 July 2021, Ms Drayton wrote to Mr Li confirming that she acted for the Trustee and referred to previous correspondence between the Trustee and Mr Wong in September 2020. Ms Drayton stated in her letter to Mr Li that:

In the response sent by our client he concluded by suggesting that it would be more beneficial to your client to attempt to reach a negotiated settlement with him as Trustee than embark on complex and costly litigation. You would doubtless agree with that proposition. That is in fact what we regular [sic] advise our clients in dispute – to attempt to resolve the dispute on a commercially sensible basis.

19    Ms Drayton noted that the Trustee had been led to believe that Mr Wong was prepared to come to a reasonable settlement with respect to the Maroubra property and concluded by requesting that Mr Li:

In the circumstances, please provide us with a written proposal, taking account of the matters referred to in our client’s letter of 11 September 2020, which fairly accounts to our client for her interest in the Maroubra property.

20    On 29 July 2021, Mr Li wrote to the Trustee making a settlement offer in the following terms (29 July Offer):

We refer to our open letter of today and offer to agree to a settlement of the dispute between our client and the bankrupt estate on the basis, that:

a)    the property is sold as soon as possible under the instruction of our client;

b)     out of the net proceeds of sale of the property, the bankrupt estate is to receive an amount sufficient to cover the unsecured debts and estimated costs of the estate set out in your report to creditors of 15 April 2020 (after realisation of the other assets disclosed), being approximately $220,000; and

c)     the balance of the net proceeds of sale of the property are paid to our client.

This offer is open for acceptance for 7 days, following which it will be withdrawn and in the event, that the result of the proceedings is no less favourable to our client, will be relied upon to seek an order that our client’s costs of the proceedings as against yourself are paid on the indemnity basis.

Any settlement between our client and yourself as trustee of the bankrupt estate has no effect upon any claim against any other party to the proceedings or any claim our client may have through any party or directly against any non-party, to recover the compromise amount to be paid to the estate or any other amount and has no effect upon the threat made by us in our open letter to make a complaint to the Inspector-General or any other appropriate entity (if our client deems fit).

21    By a letter dated 2 August 2021, Ms Drayton responded to the 29 July Offer (2 August Response) in these terms:

We refer to the Without Prejudice letter dated 29 August 2021 [sic] sent to our client, Mr Piscopo.

We are instructed to advise that our client accepts the offer made that:

1.     the Maroubra property is to be sold as soon as possible under your client’s instruction;

2.    the amount of $220,000 be paid to the Bankrupt Estate of Mei Ru Leung from the net proceeds of sale; and

3.     the balance of the net proceeds of sale are to be retained by your client.

A draft Deed of Settlement will be sent to you for review shortly.

22    On 3 August 2021, Ms Drayton sent a without prejudice email in these terms to the solicitors for Mr Wong:

We refer to the agreement between our mutual clients and now attach for your consideration draft Deed of Settlement.

Please let us know (by marking up on the document) any changes that you are instructed to request.

23    The draft deed of settlement attached to Ms Drayton’s 3 August 2021 email (Draft Deed) relevantly provided that:

(a)    Mr Wong is to pay a settlement sum of $220,000;

(b)    Ms Wong’s title in the Maroubra property is to be transferred to Mr Wong;

(c)    the Trustee agreed that Mr Wong is entitled to negotiate a sale of the Maroubra property with Bankwest without consulting him;

(d)    Mr Wong is responsible for the payment of any insurances on the Maroubra property;

(e)    Mr Wong is to indemnify the Trustee in respect of any capital gains tax payable on the sale of the Maroubra property; and

(f)    Mr Wong is to release and discharge the Trustee from any actions, suits, causes of action, claims, proceedings, accounts, demands, costs and expenses in respect of the subject matter of these proceedings or the Maroubra property.

24    On 6 August 2021, Ms Drayton sent a further email to the solicitors for Mr Wong in which she asked them to let her know if they “would like any amendments made to the draft Deed?”

25    On 11 August 2021, Ms Dayoon Lah of Mr Wong’s solicitors sent an email to Ms Drayton in the following terms:

Please be informed that our client considers the Deed of Settlement as a counter-offer which has proposed a different and unacceptable sale arrangement rather than an acceptance of our client’s offer.

Therefore we wish to advise that our client’s offer is no longer available.

26    On 12 August 2021, Ms Drayton provided the following response to Ms Lah’s email:

We refer to the email below which purports to withdraw an unconditionally accepted offer.

Please see attached letter.

We look forward to hearing from you regarding the amendments that you seek to have made to the draft Deed.

Was the Agreement binding and enforceable?

Legal principles

27    The principles governing whether parties have entered into a binding and enforceable agreement, where terms have been agreed and those agreed terms will be dealt with in subsequent formal documentation, are well settled.

28    The High Court in Masters v Cameron (1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ) identified the following categories of cases in which parties have agreed on terms, but also agreed that those terms will be dealt with by subsequent formal documentation:

(a)    a case 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;

(b)    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; and

(c)    a case in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

29    In the first two categories there is a binding contract, but in the third there is not: Masters v Cameron at 360-1.

30    In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 4 NSWLR 622, McLelland J made the following observation at 628:

There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich J and Dixon J, in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317, namely, “…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”.

31    The Masters v Cameron classifications are no longer, if there ever were, applied as strict categories into which such cases must fall: Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605 (Pavlovic) at [69] (Beazley P), citing Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at 105.

32    Rather, as McHugh JA stated in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634:

… the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 638; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 ay 332-334, 337.

33    The relevant principles were recently summarised by Sackville AJA (with whom Macfarlan and Gleeson JJA agreed) in Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 (Mushroom Composters) at [59]-[63]:

59     First, in Australia the “objective” theory of contract has been accepted: see, most recently, Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]. Consequently, in determining whether a binding contract has been concluded, the law is concerned not with the parties’ subjective intentions, but with “the outward manifestations of these intentions”: Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 428 (Mason ACJ, Murphy and Deane JJ). Thus what matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (per curiam); Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 at [40]-[41] (per curiam). In a case where the ordinary process of offer and acceptance has taken place, the court inquires as to what a reasonable person would infer or deduce from observing the exchanges between the parties: NC Seddon, RA Bigwood and MP Ellinghaus, Cheshire & Fifoot Law of Contract (10th Aust ed 2012, LexisNexis Butterworths) at [3.4].

60     Secondly, it is not necessary, in determining whether a contract has been formed, to identify a precise offer or acceptance; nor is it necessary to identify a precise time at which an offer or acceptance can be identified: Ormwave Pty Limited v Smith [2007] NSWCA 210 at [68] and authorities cited at [68]-[75] (Beazley JA, Santow and Ipp JJA agreeing). The questions to be asked are:

“in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the [plaintiff] and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?”

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [81] (Heydon JA).

61     Thirdly, an agreement that is incomplete will not give rise to an enforceable contract. As was said in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ):

“It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future.”

62     An alleged contract will fail for incompleteness if, even though the parties have used clear language, a term which is regarded as essential as a matter of law has not been agreed: J W Carter, Carter on Contract (2014, LexisNexis) at [04-120]. The principle was stated by Viscount Dunedin in May and Butcher Ltd v The King [1934] 2 KB 17 n at 21:

“To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties.”

63     If the parties have not agreed on all essential terms, for example because they have left one such term to be settled by future agreement, the contract is incomplete no matter what the parties themselves may think: G. Scammell and Nephew Ltd v H.C. and J.G. Ouston [1941] AC 251 at 260 (Lord Russell of Killowen); O’Brien v Dawson [1942] HCA 8; 66 CLR 18 at 37 (Willams J, Rich J agreeing); Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 170 (Tadgell J); Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19; 190 FCR 364 at [123]-[124] (Keane CJ); at [212] (Emmett J); at [223]-[227] (Finkelstein J) (an appeal to the High Court was allowed, but not on this point: Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486).

34    The acceptance must correspond with the offer and must be clear and unqualified, and will fail to take effect if it attempts to vary the offer or add new terms: Lark v Outhwaite [1991] 2 Lloyd’s Rep 132 (Lark) at 139 (Hirst J); Precision Pools Pty Ltd v Commissioner of Taxation (1992) 37 FCR 554 at 560 (Spender J); see also Brookfield Australia Investments Ltd v Lucas Stuart Pty Ltd [2012] NSWSC 1130 at [34] (Stevenson J); Quadling v Robinson (1976) 137 CLR 192 (Quadling) at 201 (Gibbs J).

35    Whether a communication accepts the terms of an offer without modification, or instead varies its terms, is a question of construction: Quadling at 201.

36    Amendment of an offeror’s offer by the offeree in a material respect is a counter-offer, not acceptance: Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) (2009) 255 ALR 632; [2009] FCA 522 (Olivaylle) at [23] (Logan J); see also Outer Suburban Property Ltd v Clarke [1933] SASR 221 (Outer Suburban Property) at 225-6 (Angas Parsons and Napier JJ).

37    However, a variation in the alleged acceptance which favours the offeror is not treated as a material variation: Ex parte Fealey (1897) 18 LR (NSW) 282 (Ex parte Fealey) at 290 (Owen J, BG Simpson J agreeing); Boreland v Docker [2007] NSWCA 94 (Boreland) at [76]-[78] (Beazley JA, with whom Mason P and Ipp JA agreed); see also Quadling at 197 (Barwick CJ) and 201 (Gibbs J).

38    Normally an apparent variation in the acceptance of the terms in the offer, or the introduction of some additional term, will prevent the purported acceptance from being an acceptance. Instead, if it relates to the subject matter of the offer, it may be a counter-offer, operating as a rejection of the original offer, revocable at any time before its acceptance but capable of creating a contract if the original offeror accepts it: see Mulcaire v Newsgroup Newspapers Ltd [2012] Ch 435; [2012] EWHC 3469 (Mulcaire) at [27] (Sir Andrew Morritt C).

39    A reply which propounds a new term is not an acceptance: Jackson v Turquand (1869) LR 4 HL at 312; R A Brierley Investments Limited v Landmark Corporation Limited (1966) 120 CLR 224 at 233-4 (Barwick CJ, Kitto and Windeyer JJ); see also Grainger v Vindin (1865) 4 SCR (NSW) 32.

Submissions of Mr Wong

40    It is convenient to first outline the submissions advanced by Mr Wong.

41    Mr Wong submits that both the 2 August Response and the Draft Deed are inconsistent with the 29 July Offer and therefore there has not been an acceptance of the 29 July Offer. He submits that the 2 August Response and the Draft Deed reduce the net benefit in the 29 July Offer at additional expense to him, give additional benefits to the Trustee, and their provisions are impractical. Mr Wong relied on the following matters in support of those propositions.

42    First, the 29 July Offer provided for the payment of an amount to the Trustee sufficient to cover the “unsecured debts and estimated costs of the estate set out in your report to creditors of 15 April 2020”, following realisation of the other assets disclosed, being a net amount of “approximately $220,000”, not the payment to the Trustee of a fixed net sum of $220,000.

43    Second, the 29 July Offer did not make any reference to the entry into a deed, rather “it expected simple co-operation by all concerned in the sale” of the Maroubra property and disposal of the proceeds after the “realisation of the other assets to meet the disclosed debts of the estate”.

44    Third, by necessary implication, the 29 July Offer was subject to agreement also being obtained from Ms Wong and Bankwest, without whose authority no transfer or sale of the Maroubra property could be made, whereas the only necessarily implied condition of approval by another party in the acceptance and the Draft Deed was that of the Court.

45    Fourth, rather than simply providing for the sale of the Maroubra property as soon as possible under the instructions of Mr Wong, the Draft Deed provided:

(a)    for a transfer of Ms Wong’s interest in the Maroubra property to Mr Wong in circumstances where her consent to that transfer had not been obtained and the Trustee agreed that he had no right to assert an equitable interest in the property (Transfer of Title Condition);

(b)    Mr Wong was required to pay all the costs incurred with respect to that transfer and the proposed subsequent transfer on sale under his name, including stamp duty and any capital gains tax and all other rates, insurances and taxes (All Transfer Costs Condition);

(c)    Mr Wong was merely “entitled to negotiate with Bankwest” without consulting the Trustee, as if he had no entitlement without that agreement and had to account to the Trustee for the sale process for the Maroubra property (Bankwest Negotiation Condition);

(d)    the Trustee would obtain a secured interest in the Maroubra property, clear of Mr Wong’s rights, supported by a caveat for the settlement amount (Secured Interest Condition); and

(e)    the Trustee would obtain a full release from liability to Mr Wong in connection with the Maroubra property and these proceedings (Release Condition).

46    Fifth, the net proceeds of the sale of the Maroubra property and the amount paid to Mr Wong under the alleged acceptance and the Draft Deed are unascertainable, but “bound to be significantly less, than anticipated by the offer”.

47    Sixth, the terms offered and purportedly accepted could not be performed without the approval of each of Ms Wong and Bankwest which had not been obtained. Further, any settlement was contingent on Court approval that could not be given in the absence of the assent of the other registered proprietor, Ms Wong.

48    Seventh, Ms Drayton did not have any authority to accept the 29 July Offer because she had denied authority to accept service on the Trustee in these proceedings. She had not filed a notice of acting at the time of the purported acceptance of the offer and had not given any evidence in her affidavit of a retainer or other authority at that time to accept a settlement offer on behalf of the Trustee in relation to the proceedings.

49    In addition, Mr Wong submits that in the context of the alleged misconduct of the Trustee in seeking to pressure him into accepting a compromise favourable to the Trustee, and improperly refusing to co-operate in the mitigation of his ongoing losses, the Court “cannot be satisfied, that the offer was fair, let alone its purported acceptance” and that any enforcement of the “purported settlement would not be a ‘just determination’ of the proceedings to that extent”.

50    The alleged misconduct of the Trustee advanced by Mr Wong included allegations that the Trustee had taken an “improperly partisan, obstructive position”, responded “obstructively” to Mr Wong’s requests for co-operation including with respect to the sale of the Maroubra property, had made threats against Mr Wong, denigrated Mr Wong’s solicitors and purported to give legal advice that was “supportive” of Ms Wong for the improper purpose of influencing Mr Wong to “make concessions to him and the bankrupt.”

Submissions of the Trustee

51    The Trustee contends that the 29 July Offer was expressly and unambiguously accepted by the provision of the 2 August Response and the terms of the offer made it plain that it was intended to be capable of giving rise, on acceptance, to an immediately binding agreement. He advances the following principal submissions in support of that contention.

52    First, the provision of the Draft Deed was not and could not properly be construed to be a counter-offer. It was only provided as a draft and expressly invited Mr Wong’s solicitors to advise Ms Drayton of any changes that “you are instructed to request”.

53    Second, any alleged inconsistencies between the Draft Deed and the 29 July Offer were irrelevant because the Draft Deed was not “incorporated” into the acceptance of the offer pursuant to the 2 August Response. It was not referred to in the 2 August Response. Nor was the settlement made conditional on entry into a deed.

54    Third, the difference between the reference in the 29 July Offer to “approximately $220,000” and the acceptance in the 2 August Response of “$220,000” was not material. The provision of the 2 August Response plainly and obviously intended to be an acceptance of the 29 July Offer, “which reasonable persons would read as an offer of $220,000”. This was confirmed by using the figures from the Trustee’s 15 April 2020 report to creditors (Report to Creditors) for unsecured debts, estimated costs and realisations, which added up to $219,102.38. In any event, he submitted that it is not necessary to identify a precise offer or acceptance, relying on Pavlovic at [110].

55    Fourth, the mere fact that a deed is discussed does not indicate that no immediately binding agreement was intended or made, citing Lucke v Cleary (2011) 111 SASR 134; [2011] SASCFC 118 (Lucke).

56    Fifth, as Ms Wong is a bankrupt, any rights that she had in the Maroubra property are vested in the Trustee pursuant to s 58 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and her consent to any settlement is therefore not required.

57    Sixth, Mr Wong’s allegations that the Trustee had acted improperly were irrelevant to the issues to be determined and can safely be ignored, even if relevant could not be determined on an interlocutory application, and are “manifestly without basis”.

Consideration

58    I am satisfied that the Agreement was a binding and enforceable agreement that was made between Mr Wong and the Trustee by the provision of the offer contained in the 29 July Offer and the acceptance of that offer in the 2 August Response. I have reached that conclusion for the following reasons.

59    First, the 29 July Offer represents, without qualification, that it was an “offer to agree to a settlement of the dispute between our client and the bankrupt estate”. I note the 2 August Response incorrectly referred to a letter dated “29 August 2021” but in context this was clearly a reference to the 29 July Offer.

60    The 29 July Offer contained an offer to settle on the following basis:

a)    the property is sold as soon as possible under the instruction of our client;

b)    out of the net proceeds of sale of the property, the bankrupt estate is to receive an amount sufficient to cover the unsecured debts and estimated costs of the estate set out in your report to creditors of 15 April 2020 (after realisation of the other assets disclosed), being approximately $220,000; and

c)    the balance of the net proceeds of sale of the property are paid to our client.

61    The 2 August Response contained a purported acceptance of that offer, expressed in these terms:

1.    the Maroubra property is to be sold as soon as possible under your client’s instruction;

2.    the amount of $220,000 be paid to the Bankrupt Estate of Mei Ru Leung from the net proceeds of sale; and

3.    the balance of the net proceeds of sale are to be retained by your client.

62    There can be no question that the first and third terms in the 29 July Offer were accepted without any qualification.

63    The acceptance of the second term was in terms that provided for the payment of a fixed sum, rather than the acceptance of a formula that was stated would determine an amount equivalent to that fixed sum. I accept that it is possible by a process of addition and subtraction by reference to the figures contained in the Report to Creditors to arrive at a figure of $219,102.38.

64    The divergence in expression in the second term of the Agreement did not entail a difference in substance: see Ex parte Fealey at 292 (Cohen J); Boreland at [76]-[78].

65    Nor did it give rise to a material amendment to the 29 July Offer or the imposition of a new term that might constitute an offer to enter into an additional contract on that term: Olivaylle at [23]; see also Mulcaire at [27]; Outer Suburban Property at 225-6.

66    I do not consider that a reasonable person would view the 2 August Response as introducing a new term into the bargain or constituting only a qualified acceptance of the offer: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [81] (Heydon JA).

67    I am satisfied that a reasonable person would believe that a concluded bargain had been reached between the parties to the agreement: Mushroom Composters at [60] (Sackville AJA).

68    Second, it is also readily apparent that the 29 July Offer was intended to operate as a Calderbank letter: see Calderbank v Calderbank [1975] 3 WLR 586. The 29 July Offer included the following statement:

This offer is open for acceptance for 7 days, following which it will be withdrawn and in the event, that the result of the proceedings is no less favourable to our client, will be relied upon to seek an order that our client’s costs of the proceedings as against yourself are paid on the indemnity basis.

69    The submission made by Mr Wong that the 29 July Offer was conditional on obtaining consents from Ms Wong and Bankwest is very difficult to reconcile with an offer that on its face was sought to be relied upon as a Calderbank letter.

70    Third, the addition of a reference in the 2 August Response to the provision of a draft Deed of Settlement that “will be sent to you for review shortly” did not relevantly qualify the acceptance in the 2 August Response of the offer made by Mr Wong in the 29 July Offer. The acceptance of the offer was not stated to be subject to ant entry into a deed.

71    I am satisfied that the terms of the Draft Deed viewed objectively did not materially detract from or vary the settlement terms that were the subject of the Agreement. In substance, they addressed matters that sought to give effect to or were otherwise incidental to the agreed terms.

72    The Transfer of Title Condition was advanced as a mechanism by which to effect the sale of the Maroubra property. If Mr Wong considered an alternative mechanism was more desirable to effect the sale of the property, in order to reduce or avoid the payment of transactional costs in connection with a sale of the Maroubra property, this could have been raised in response to the Draft Deed.

73    Mr Wong’s concern with the Bankwest Negotiation Condition is not readily apparent. It appeared to be a term that would facilitate the sale of the Maroubra property “as soon as possible under your client’s instruction” in that it was confirming that Mr Wong could negotiate with Bankwest independently of any involvement or interference from the Trustee.

74    Each of the All Transfer Costs Condition and the Release Condition were consistent with, and it was at least reasonably arguable that they were necessarily implied by, the terms of the Agreement. The settlement figure was to be paid out of the “net proceeds of the sale of the property” being an amount sufficient to pay the unsecured debts and estimated costs of the bankrupt estate as “set out in [the Trustee’s] report to creditors of 15 April 2020”. The Trustee had agreed to a net payment of $220,000, not an amount of $220,000 less any outstanding insurances on the Maroubra property, capital gains tax payable on the sale of the Maroubra property and any claims in respect of the Maroubra property. Moreover, the Release Condition was an unexceptional formalisation of the practical effect of a commercial resolution of contested proceedings.

75    The basis of the complaint directed at the Secured Interest Condition is also not readily apparent given the agreement to pay the settlement amount of $220,000 out of the net proceeds of the sale of the Maroubra property. It was not an amount that was subject to any variation, including any discount or reduction if the net proceeds of the sale of the Maroubra property were less than anticipated. Any caveat to be placed on the Maroubra property would only extend to the agreed settlement amount of $220,000 which was to be paid out of the net proceeds of the sale of the Maroubra property. It was not inconsistent with the terms of the Agreement and it did not relevantly give rise to any detriment or prejudice to Mr Wong. Given the terms of the Agreement it would appear uncontroversial that the Trustee would have a caveatable interest in respect of the settlement amount given that Mr Wong had agreed it was to be paid out of the net proceeds of the sale of the Maroubra property.

76    Fourth, Mr Wong’s concern that by reason of the alleged acceptance and the provisions of the Draft Deed the net proceeds of the sale of the Maroubra property payable to him are “bound to be significantly less, than anticipated by the offer” is misconceived. I am satisfied that the provisions of the Draft Deed only seek to preserve the payment of the settlement sum in the amount agreed. It was clearly the intention of the parties that the settlement sum was to be paid in an amount that was sufficient to meet all of the unsecured debts and costs of the bankrupt estate of Ms Wong, as identified in the Report to Creditors. The relevant question was the amount that was agreed to be payable to the Trustee, not the net amount that Mr Wong might subsequently realise from the sale of the Maroubra property.

77    Fifth, as submitted by the Trustee, Ms Wong is a bankrupt and thus any rights that she has in the Maroubra property are vested in the Trustee; her consent is not required for the sale of the property.

78    Sixth, while the payment of the settlement sum from the net proceeds of the sale of the Maroubra property could only occur following the sale of the Maroubra property, and that sale could only be achieved with the consent of Bankwest, it does not follow that any acceptance of the 29 July Offer could not give rise to a binding and enforceable agreement until such consent had been provided by Bankwest.

79    Seventh, I am satisfied that Ms Drayton had both actual and ostensible authority to accept, on behalf of the Trustee, the offer made in the 29 July Offer. Her actual authority to act for and on behalf of the Trustee in connection with the resolution of the dispute with Mr Wong with respect to the Maroubra property is made clear from the following communications:

(a)    on 1 July 2021, the Trustee informed Mr Li that he would be giving instructions to his solicitor who would be able to “get back” to him soon;

(b)    on 9 July 2021, in response to Mr Li pressing for an answer, the Trustee stated that his solicitor would get back to Mr Li shortly because he had to “finalise my instructions with her”. Mr Li replied by imposing a deadline to file the Application without further notice if he did not “hear from your lawyer or you by COB next Friday”;

(c)    on 19 July 2021, Ms Drayton informed Mr Li that she was acting for Mr Piscopo: “We act for Samuel Piscopo in his capacity as Trustee of the bankrupt estate of Mei Ru Leung and understand that you act for her estranged father, Koon Hing Wong”. In that letter, Ms Drayton also noted that the Trustee had “been led to believe that your client is prepared to come to a reasonable settlement with regards to the Maroubra property”;

(d)    on 23 July 2021, Ms Lah sent the Originating Application and other documents to Ms Drayton by email which commenced with the words “We understand that your firm acts for [the Trustee]”;

(e)    on 23 July 2021, Ms Drayton informed Mr Li that “While we act generally for [the Trustee] we are not instructed to accept service of any court documents”;

(f)    on 24 July 2021, Ms Drayton sent a further letter to Mr Li noting that he had not made an offer but that an agreement had been reached between the Trustee and Mr Wong’s grandson; and

(g)    on 29 July 2021, in an open letter emailed by Mr Li to the Trustee at 4.23 pm, Mr Li noted that the Trustee had a solicitor, Ms Drayton, “acting in relation to our client’s claims, confirmed by her own letter of 19 July 2021” and also referred to Ms Drayton’s letter of 24 July 2021 which had advised of instructions “in relation to an aspect of the matter given by you”. Mr Li also referred to Ms Drayton as the Trustee’s “non-solicitor” as well as “your supposedly un-instructed solicitor”. Notwithstanding these criticisms in that letter, 23 minutes later Mr Li emailed the offer to the Trustee.

80    As for Ms Drayton’s ostensible authority, it is well settled that in a litigious or potentially litigious context, a solicitor has ostensible authority to bind his or her client to a contract that is actually and genuinely related to the litigation: Lucke at [60]-[62] (Stanley J, Gray and David JJ agreeing), citing CIC Insurance Ltd v Bankstown Football Club Ltd (1994-1995) 8 ANZ Insurance Cases 61-232 (Kirby P). I am satisfied, not least by reason of the express reference to “CASE NUMBER: NSD682/2021” in the subject line of the 29 July Offer, that the contract created by the acceptance of the 29 July Offer and the 2 August Response was a contract that “actually and genuinely relates to the litigation”: Lucke at [62].

81    Finally, I do not accept that the alleged misconduct of the Trustee is relevant to a determination of whether the Agreement was binding and enforceable. Mr Wong did not allege that the Agreement was entered into by mistake or duress. Moreover, Mr Wong was legally represented at all relevant times and the 29 July Offer was made by his solicitor, Mr Li, notwithstanding the alleged misconduct of the Trustee. This alleged misconduct would appear to have been at the forefront of Mr Li’s mind at the time the 29 July Offer was made, as is apparent from the allegations made in Mr Li’s open letter of 29 July 2021 to the Trustee and the final paragraph of the 29 July Offer in which it was stated that the offer of settlement:

has no effect upon the threat made by us in our open letter to make a complaint to the Inspector-General or any other appropriate entity (if our client deems fit).

What relief should be granted?

Legal principles

82    The standing of a third party to a contract to seek declaratory relief in relation to the interpretation of the contract was recently considered by the Full Court in Clarence City Council v Commonwealth of Australia (2020) 280 FCR 265; [2020] FCAFC 134 (Clarence) (Jagot, Kerr and Anderson JJ). Special leave to appeal was granted on 12 February 2021, the matter was argued before the High Court on 12 October 2021 and the Court’s decision is currently reserved.

83    The Full Court stated (at [7]) that the question of standing does not raise the privity doctrine but rather it is to be determined, in particular by:

the constitutional and statutory requirement for a “matter”, and the test for standing applicable to claims for declaratory relief. In the present case, these matters centre on, first, the existence and quality of the controversy regarding the Councils’ claim to declaratory relief and, second, the quality or character of the Councils’ interest in that relief.

84    Their Honours stated (at [8]) that the third party Councils did have standing to seek declaratory relief because they were “participants and beneficiaries” under the terms of the contracts in which they sought declaratory relief, being commercial leases. Therefore they had:

a sufficient interest in the declaratory relief sought, which, if granted, would be of real commercial and practical importance to the Councils.

85    Their Honours recognised (at [143]-[144]) that a consequence of their reasoning was that it might enable a third party to seek to intrude upon and threaten the interpretation that the parties might subjectively have agreed between themselves and otherwise give rise to a justiciable controversy, but stated at [144]:

Although it remains within the power of the contracting parties, by varying or replacing their contract, to remove any basis for a third party’s “interest” in the contract (in the broad sense), and thereby deny any opportunity for the third party to seek declaratory relief in respect of the contract, we nonetheless recognise that courts should be wary to permit interference by a third party to a contract as to the meaning and effect of that contract. However, there are safeguards in this respect. In the context of declaratory relief, the manner by which impermissible interference is distinguished from permissible interference is by reference to the quality of the third party’s interest in obtaining the relief sought.

Submissions of Bankwest

86    In its written submissions, prior to the oral hearing of the interlocutory application, Bankwest had characterised the Executory Order as in effect a mandatory injunction and an order for specific performance. The Executory Order was in the following terms:

[T]he Applicant shall do all such acts and execute all such documents as may be necessary to give effect to the Agreement, including the Deed which is Annexure AD-3 to the affidavit of Alison Drayton affirmed 24 August 2021, within 7 days of this order being made.

87    Bankwest submitted prejudice and hardship to be suffered by third parties are relevant considerations for the exercise of the discretion to grant injunctive relief, citing Samsung Electronics Co Limited v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156 at [66]. It further submitted that a decree of specific performance may be refused if hardship or detriment would be caused to a third party having a relevant interest, citing Colyton Investments Pty Ltd v McSorley (1962) 107 CLR 177 at 185-6. It referred to the following statement by Issacs J in Gall v Mitchell (1924) 35 CLR 222 at 230-1:

Hardships of third persons entirely unconnected with the property are immaterial. But I do not think that rule excludes the case of third persons so connected with the defendant that, by reason of some legal or moral duty which he owes them, it would be “highly unreasonable” for the Court actively to prevent the defendant from discharging his duty. The circumstances of such a case might, in my opinion, be properly weighed for the purpose of determining the discretion of the Court.

88    Bankwest also submitted that the enforcement of a settlement agreement is subject to the court’s procedures and may be refused if the court considered its terms unjust, citing Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528 at 538-9. Justice Finlay stated at 538:

What I perceive to be the relevant principle in the category of cases into which this matter falls is that in an appropriate case, especially before judgment is made, the overriding interests of justice and the court’s concern over its own procedure may mean that the court will not enforce a contract. Of course, contracts made during the court’s process to settle, if they are bona fide and not affected by any error, will normally be enforced. But I repeat my previous observation that whenever parties agree to a compromise of litigation they do so subject to the procedures of the court which include the possibility that the court may consider it unjust to enforce the terms of settlement or that it is in the interests of justice that the matter proceed to trial.

89    Bankwest acknowledged that courts have only declined to enforce settlement agreements where the compromise was the result of a mistake or without authority, but submitted that there was no reason in principle to refuse approval on grounds other than mistake, where enforcement of the agreement would otherwise cause injustice to a party.

90    Bankwest submitted that the effect of the Agreement was that it would prematurely reduce Mr Wong’s return on the sale of the Maroubra property to $220,000 in circumstances where none of the third to fifth respondents have had an opportunity to file cross claims, including by Bankwest seeking to recover any amounts payable to Mr Wong from the bankrupt estate of Ms Wong, on the basis of culpable conduct by Ms Wong, by cross claiming against Ms Wong (pursuant to leave under s 58(3) of the Bankruptcy Act) and the Trustee.

91    In its supplementary written submissions following the hearing on 6 October 2021, Bankwest maintained that it would suffer the following prejudice and detriment if a declaration was made that the Agreement was binding and enforceable, even if the Executory Order was no longer pressed at this stage:

(a)    it would have to lodge a proof of debt before the final determination of any cross claim because the Trustee has indicated that he will immediately disburse the settlement proceeds to creditors and payment of his own fees and expenses, and such proof of debt would need to include an estimate of the value of the debt not secured by the Bankwest Mortgage;

(b)    even if the Trustee were to await the final determination of the proceedings before making any distributions, there is no evidence to suggest that there would be sufficient funds to meet any obligations that Ms Wong may have to Bankwest (and other creditors) if Bankwest is ultimately successful in a cross claim against Ms Wong and/or the Trustee;

(c)    the Agreement has the effect off prematurely reducing Ms Wong’s interest in the Maroubra property to an amount of $220,000, and would effectively convert Bankwest’s interest from that of a secured creditor to an unsecured creditor before it can properly formulate and have cross claims determined against Ms Wong and/or the Trustee; and

(d)    the prejudice to Bankwest is obvious in that it will be unable to recover any sums against the bankrupt estate of Ms Wong if Mr Wong is successful against Bankwest and Bankwest is successful against Ms Wong.

92    Given the Executory Order is no longer being sought by the Trustee at this time, Bankwest submits that there is no utility in making a declaration in circumstances where no order for specific performance is sought, and if the Court ultimately declined to make an order for specific performance because of the prejudice that would be suffered by Bankwest, then the making new of a declaration to the effect that the Agreement was enforceable would be contrary to the subsequent decision of the Court not to enforce the Agreement.

Submissions of the Trustee

93    The Trustee advanced the following principal submissions in support of its claim for declaratory relief.

94    First, Bankwest does not have a sufficient interest in the Agreement to oppose the making of declaratory relief. He submits that there is no relevant distinction between standing to seek declaratory relief and standing to oppose declaratory relief, the reasoning of the Full Court in Clarence is equally applicable to both situations. Further he submits unlike the position in Clarence:

(a)    the Agreement contains no promise, express or implied, to Bankwest so that it is not a direct “participant” in nor “beneficiary” of the contract;

(b)    Bankwest is a contingently unsecured creditor with statutory rights to prove in the estate and thus is a true “outsider” to the Agreement with no greater interest than any other unsecured creditor of the estate, which rights to prove are imposed equally on all creditors by the statutory scheme;

(c)    the prejudice asserted to be the basis for the opposition to the declaratory relief is highly contingent and may well never happen so that there is a good chance that there is no and will never be any consequence, or a positive consequence, for Bankwest if the Agreement is declared to be a binding contract;

(d)    Mr Wong, as a party to the Agreement, is the person obliged to pay the $220,000 and that from his share of the net proceeds of sale; and

(e)    in all those circumstances, any interference by Bankwest is impermissible interference.

95    Second, Bankwest has cited no authority to the effect that the Court could exercise any discretion to decline to recognise or enforce an otherwise binding contract made between third parties to which Bankwest is not a party and in which no promise was made for the direct benefit of Bankwest, and where the prejudice relied on is hypothetical and entirely contingent. Nor he submitted, has Bankwest cited any authority in support of the proposition that the fact a binding agreement was entered into does not require the Court to grant declaratory relief.

96    Third, he submitted that there is a real distinction between an “executory judgment” (which is coercive and can be enforced by the courts) and a “declaratory judgment” (which simply pronounces on what is the legal position), citing Clarence at [90].

97    Fourth, it is not appropriate for Bankwest to seek to be heard on the declaration but in reality to be seeking a form of restraint which interferes with contractual freedom and the performance of an otherwise binding agreement to which it is not a party. He submits that in order to obtain an interlocutory injunction, Bankwest would be required to identify a legal or equitable cause of action on the basis of which final relief would be sought, citing Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199; [2001] HCA 63. Despite that, the Trustee submits, Bankwest merely asserts potential (not certain or inevitable but speculative) prejudice and appeals to discretion, and has otherwise not (and cannot) identify any such legal or equitable cause of action.

98    Fifth, Bankwest is seeking a constraint but offering no undertaking as to damages, which is a significant issue as one consequence of Bankwest’s position on the application is the loss of $220,000 to the bankrupt estate and unsecured creditors.

99    Sixth, Bankwest seeks, in effect, to disrupt the statutory scheme relating to the payment of unsecured creditors. That scheme specifically permits contingent creditors to prove all debts and liabilities, and stays proceedings unless leave is granted, citing ss 58(3) and 82(1) of the Bankruptcy Act. Bankwest as a contingent unsecured creditor has a statutory right to prove in the bankruptcy but that does not give it any actual rights as against the Trustee personally or beyond those of all unsecured creditors.

Consideration

100    Bankwest’s fundamental concern is that Mr Wong may ultimately succeed in obtaining the relief that he seeks in these proceedings against Bankwest and Bankwest would thereby lose the benefit of its current status as a secured creditor over the Maroubra property. In that scenario it could then, subject to any cross claims it might have against third parties, only seek to recover its loss and damage by proving as an unsecured creditor in the bankruptcy of Ms Wong.

101    Bankwest is concerned that the effect of the Agreement, if it were found to be binding and enforceable, is that the amount available to Ms Wong’s creditors would be reduced from a half share in the Maroubra property, less expenses incurred in connection with its sale, to a fixed amount of only $220,000. This is an amount that, according to the Trustee’s 15 April 2020 report to creditors, would only be sufficient to meet the unsecured debts and estimated costs of the estate as set out in the report, being unsecured debts that did not include any proof of debt that Bankwest might lodge as a contingent unsecured debtor.

102    Having found that the Agreement is binding and enforceable in accordance with its terms, I am satisfied that it is appropriate to make a declaration to that effect. A declaratory judgment is a judicial pronouncement of a legal state of affairs and does not need to be accompanied by an enforceable order provided that the controversy involves some right, duty or liability that is capable of subsequent enforcement by the Court: Clarence at [90], [139]-[140] citing Palmer v Ayres (2017) 259 CLR 478 at [26]-[27] (Kiefel J, as she then was, Keane, Nettle and Gordon JJ); Ruhani v Director of Police (2005) 222 CLR 489; [2005] HCA 42 at [45] (McHugh J); Direct Factory Outlets Pty Ltd v Westfield Management Ltd (2003) 132 FCR 428; [2003] FCA 1095 at [14] (Cooper J); Ashmere Cove Pty Ltd v Beekink (No 2) (2007) 244 ALR 534; [2007] FCA 1421 at [36] (French J, as he then was).

103    Here the relevant rights, duties or liabilities that are the subject of the claims made in the controversy to be addressed by the declaration are the respective entitlements of Mr Wong and the bankrupt estate of Ms Wong to the net proceeds of the sale of the Maroubra property. The timing and precise mechanism by which that sale is to take place will be determined by the steps that Bankwest takes with respect to the enforcement of its security interest and the determination of the claims made by Mr Wong against Bankwest in these proceedings.

104    I am not persuaded that Bankwest has established that it has a sufficient interest in the Agreement to have standing to oppose the making of the declaration, particularly in the light of its decision not to file any cross claim against Ms Wong or the Trustee. It is not a party to the Agreement nor is any promise made for its benefit, it is not a direct “participant” and nor is it a “beneficiary” of the Agreement. It has no greater interest in the Agreement than any other unsecured creditor of the bankrupt estate of Ms Wong.

105    Further, and in any event, even if I had found that Bankwest had a sufficient interest to oppose the making of the declaration sought by the Trustee, I am not satisfied that the hypothetical prejudice identified by Bankwest is a matter that would cause me to determine not to make the declaration, for the following reasons.

106    First, Bankwest does not seek to be heard on whether the Agreement was binding and enforceable and does not point to any prejudice or detriment that it might suffer if it were to be found that the Agreement was binding and enforceable. Rather the prejudice or detriment is alleged to arise only if a declaration to that effect were to be made. The distinction in terms of prejudice to Bankwest between a finding that the Agreement was binding and enforceable and a declaration to that effect is not apparent. The asserted prejudice and detriment would crystallise on making a finding that the settlement terms were binding and enforceable. In effect, Bankwest has taken a contradictory position. It does not wish to be heard on whether the Agreement was binding and enforceable but does wish to submit that any declaration to that effect would cause it prejudice and detriment.

107    Second, the Court might well reach a different conclusion on prejudice and detriment if an order for specific performance of the Agreement is sought, not because of any hypothetical prejudice now advanced by Bankwest but rather because of the Bankwest Mortgage and Bankwest’s interests as a secured creditor. That prejudice or detriment has not yet arisen because no order for specific performance is currently being sought.

108    Third, the weight that can be given to the alleged detriment and prejudice is materially reduced because Bankwest has now filed a cross claim against the fourth respondent seeking an indemnity in the event that it suffers any loss or damage as a result of the claims advanced by Mr Wong against Bankwest in these proceedings, and at the same time has chosen not to advance any cross claim against Ms Wong or the Trustee.

109    I do not accept that it would not have been possible for Bankwest to have formulated a cross claim against Ms Wong and/or the Trustee on the information currently available to it. Many of the material facts alleged in the statement of claim, if established by Mr Wong, could be relied upon for the purpose of propounding a cross claim seeking an indemnity against Ms Wong for losses suffered by Bankwest. These include serious allegations about Ms Wong’s involvement in the execution of the Bankwest Mortgage and the related loan agreements.

110    Fourth, a finding or declaration that the Agreement is binding and enforceable does not have the effect of converting Bankwest from being a secured creditor to an unsecured creditor. The Agreement does not purport to extinguish Bankwest’s security over the Maroubra property. Any loss of its status as a secured creditor turns on the outcome of the various claims that Mr Wong seeks to advance in these proceedings against Ms Wong, the Trustee and Bankwest. The only practical loss of its status as a secured creditor that could be attributable to the Agreement would arise if Mr Wong was unsuccessful in seeking a transfer of Ms Wong’s interest in the Maroubra property to himself and was successful, but only partially successful, in setting aside the Bankwest Mortgage (that is, only with respect to his interests in the Maroubra property).

111    Fifth, I am satisfied that any hypothetical prejudice and detriment to Bankwest if a declaration were made that the Agreement was binding and enforceable is outweighed by the actual prejudice to the existing unsecured creditors of the bankrupt estate of Ms Wong if the Court did not make the declaration sought, in circumstances where the Court was otherwise satisfied that a binding and enforceable agreement had been reached between Mr Wong and the Trustee.

Disposition

112    For the reasons outlined above, a declaration in the form sought in the interlocutory application is to be made and the interlocutory application is otherwise to be dismissed.

113    In the ordinary course, costs would follow the event. However, different considerations may arise as a result of, first, the late withdrawal of the application for the Executory Order, and second, the different positions taken by the parties to the substantive question of whether there was a binding and enforceable agreement and the relief that should be granted. The parties will be given an opportunity to advance short written submissions on costs in the event that costs orders cannot otherwise be agreed.

Associate:    

Dated:    8 February 2022