Hayes v Varga Group Investments No 8 Pty Limited S156/1995 [1996] HCATrans 173 (16 April 1996)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S156 of 1995

B e t w e e n -

GRAHAM EDWARD HAYES

Applicant

and

VARGA GROUP INVESTMENTS NO 8 PTY LIMITED

Respondent

Application for special leave to appeal

BRENNAN CJ

DAWSON J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 16 APRIL 1996, AT 11.07 AM

Copyright in the High Court of Australia

MR J.B. SIMPKINS: If the Court pleases, I appear for the applicant. (instructed by Helliars City)

MR D.M.J. BENNETT, QC: If the Court pleases, I appear for the respondent with my learned friend, MR M.J. HEATH. (instructed by Landerer & Co)

BRENNAN CJ: Yes, Mr Simpkins.

MR SIMPKINS: Your Honours, this is an appeal from a majority judgment of the Court of Appeal. The applicant was a guarantor of a purchaser's obligations under contract for sale. The vendor under that contract was the respondent. The purchase the subject of the contract for sale was not completed by the due date. There was a purported termination by the vendor and a purported forfeiture of the deposit. That contest resulted in equity proceedings being commenced by the vendor in which the vendor sought declarations as to the efficacy of the termination, the forfeiture, and the vendor also sought damages.

What brought about the current proceedings with which the leave application is concerned was that in December 1990 during the currency of those proceedings there was a meeting of the applicant which was attended by an officer of the respondent, Mr Varga, and by the real estate agent who had been responsible for the negotiation of the original purchase. It was the respondent's application and contention in the court below that what had occurred at that meeting which was attended by the parties without legal advisers or, alternatively, what had occurred in consequence of written communications which passed between the legal advisers subsequently was a binding agreement to settle the equity proceedings.

TOOHEY J: The dispute resolved itself, did it not, into two matters: when the first of the instalments agreed to be paid was to be made and, secondly, whether there was a period, and if so what period, of grace in relation to default.

MR SIMPKINS: There were three matters which, it was contended by the applicant, were not the subject of any consensus at the meeting.

TOOHEY J: Were those two of them?

MR SIMPKINS: The first two were the ones that your Honour Justice Toohey puts to me. The third was the manner of a resolution of the extant equity proceedings. So effectively it was contended at the trial that there were three critical matters upon which there had been no consensus reached at the meeting. In respect of the first two, namely the date of the instalment and the period of grace, there was a consensus reached in the later correspondence. So the real issue in relation to those two matters became - - -

DAWSON J: It is the disposal of the equity proceedings, but what does they matter? The agreement was to settle a dispute. It does not matter what happens to the equity proceedings. There would be nothing left if the dispute was settled.

MR SIMPKINS: The way in which that issue was resolved by the majority judges in the court below was different. The Chief Justice resolved the matter by regarding it as a matter of implication, taking the view that there were obviously intended benefits that would flow from the settlement, including the payment of the sum of $300,000, and that the court could imply what would then happen in order to give effect to those benefits and would imply some obligation as to the disposal of proceedings.

DAWSON J: But there is nothing to which the equity proceedings can attach once there is a settlement of the dispute.

MR SIMPKINS: The proceedings had been extant for several months at the time that the negotiations took place and, work having been done in connection with those proceedings, no doubt costs were incurred. It is to be reasonably inferred that a matter which was required to be resolved, either expressly or by a necessary implication, as the result of any settlement was the manner in which those proceedings would be disposed of. The point which was put to the trial judge and to the Court of Appeal was that there was no express agreement reached at the meeting, there was no express agreement reached in the correspondence which ensued between the legal advisers as to the manner in which those proceedings would be disposed of.

DAWSON J: What you are saying is the failure to agree on some method of disposing of the equity proceedings prevented there being a settlement of the dispute.

MR SIMPKINS: Certainly. There were - - -

DAWSON J: That is what you are saying.

MR SIMPKINS: Yes, I am not resiling from that at all. The issues at the trial were whether the parties had an intention to be immediately bound, either at the original meeting or at any time during the relevant correspondence.

TOOHEY J: That was resolved against you, was it not?

MR SIMPKINS: It was resolved against me in a way - one of the special leave questions relates to a particular complaint we have about the way the Chief Justice dealt with that matter, but the principal special leave questions are the first two and those first two address the second issue at the trial, which was whether agreement was reached on all essential matters, it being the contention of the applicant advanced previously and before your Honours today - - -

DAWSON J: What I am putting to you is that the Chief Justice may well be right. He probably is but, even if he were not right, it still would not follow that there was no settlement of the dispute because there was no agreement as to what was to be done with the equity proceedings, because the dispute is what underlies those proceedings.

MR SIMPKINS: The dispute is what underlies the proceedings but one cannot ignore the fact that the proceedings obviously relate in a very central way to the dispute. Indeed, that is the forum that the parties have chosen.

DAWSON J: What I am putting to you is they do not matter once you have settled the dispute, in simple terms.

MR SIMPKINS: They matter in the sense that they are an aspect of the dispute about which the parties would need to reach some accommodation. It can hardly be the intention of the parties, their having reached some consensus about the dispute, that nothing would be done in relation to proceedings.

DAWSON J: They should tidy them up, but that is what it amounts to.

MR SIMPKINS: Except that the way in which they were to be tidied up is a matter about which minds may differ very considerably. What the Chief Justice did was to infer that, as a result of the consensus reached at the meeting or as reached in the correspondence, it was intended by the parties that the vendor should have in effect all the benefits claimed in the proceedings. I do not seek before your Honours today to resile from that conclusion that the Chief Justice drew. But the fallacy that we contend which underlies it is that there are a variety of ways in which those benefits might have been properly accorded.

What the parties specifically adverted to at the meeting was the production in due course of some written agreement by their lawyers. Clearly what the parties had in mind at that time was that there would be an agreement, nothing being said about what would be done in relation to proceedings. What subsequently transpired in the correspondence was a reference to terms of settlement and no agreement, and ultimately what was produced very late in the process of correspondence were draft terms by the vendor which were never assented to by the purchaser.

DAWSON J: But you still come back to the position that everything was agreed except what was to be done with the equity proceedings.

MR SIMPKINS: And I am not seeking to resile from that. What I am seeking to persuade your Honours of is that that was an essential matter because it cannot have been intended by the parties that they would just resolve the dispute and leave the equity proceedings in a perpetual holding pattern.

TOOHEY J: Well, it may or may not. The parties may not have directed their attention to the question of what was to happen to the proceedings because they thought they had resolved the dispute. One could understand if the matter had been listed for trial and the trial was a short time off that something would have to be done - it would have to be adjourned or discontinued or some step taken - but, so far as a resolution of the dispute is concerned, why is it not enough that they agreed to resolve the dispute by payment of a sum of money or payment of various sums of money over a period of time? Once that had been achieved, no doubt if some problem had arisen, the applicant could have lodged a motion to have the action dismissed if the present respondent was not prepared to do anything about it. But it is not integral to the resolution of their dispute, is it?

MR SIMPKINS: That is really, with respect, the submission that we are putting, that it is an essential matter to the resolution of the dispute, for the reason that the dispute was not proceeding in isolation or in a vacuum; it was a dispute which had chosen its forum. The forum was the Supreme Court of New South Wales in which proceedings had advanced for some several months.

DAWSON J: But what would happen if the equity proceedings were brought on? It would simply be said to the court that the matter has been settled and there is nothing to which they can attach.

MR SIMPKINS: The question is, if that were said and there was some dispute as to the accuracy of the statement, your Honour is really hypothesising a situation where - - -

DAWSON J: We have established now, apart from equity proceedings the matter was settled.

MR SIMPKINS: Yes.

DAWSON J: So, if that was said to the court, that would be the end of the matter.

MR SIMPKINS: Except that if the parties were ultimately not in agreement as to what the court would be invited to order to give effect to that announced position, then - - -

DAWSON J: There is not much.....about what the court would order if it was said that the matter was settled, is there?

MR SIMPKINS: That is precisely the point, your Honour.

DAWSON J: In most other States it at least would be sufficient to say that the matter was settled. Is the position different in New South Wales?

MR SIMPKINS: I am going to endeavour to encourage your Honour to the view that it is different or certainly that a different position would prevail in this case. If one hypothesises - - -

BRENNAN CJ: Mr Simpkins, what is your special leave point?

MR SIMPKINS: The special leave point is - there are four special leave questions which have been formulated, the first to arise out of the issue that is currently the subject of debate. The first point is that agreement on the manner of resolution of the equity proceedings was an essential matter about which - - -

BRENNAN CJ: Why is that a special leave point? We are not concerned about the equity proceedings between private parties.

MR SIMPKINS: I had not quite finished my articulation of the issue, if your Honour pleases. It was a matter which is an essential matter to be agreed upon for there to be a binding settlement which was not the subject of express agreement - that is not a special leave point - but which his Honour the Chief Justice inferred was able to be the subject of an implication. That we contend to be our first special leave point, namely that in the circumstances relied upon by the Chief Justice about which there was nothing inherently unusual or peculiar. His Honour implied - - -

BRENNAN CJ: Can you express in terms of a general legal principle the proposition for which you contend?

MR SIMPKINS: Yes. The proposition that we say was embraced by his Honour and which is incorrect and which we seek leave for is that, as a matter of necessary implication, when parties agree to a settlement of a dispute which is the subject of legal proceedings, that agreement carries with it the consequence that the proceedings will be resolved by orders of the kind sought in those proceedings to the extent they are not otherwise inconsistent with the subject matter of the agreement. In effect, what the Chief Justice did in this case was to say the parties at the meeting agreed on a variety of essential matters, in particular the amount to be paid, that it followed by necessary implication that otherwise there was an agreement that the vendor should have the benefit of all other matters claimed in the proceedings.

His Honour then seems to have jumped, we say without justification, to the conclusion that that meant that orders could be made in the equity proceedings to give those benefits. The point we make is that those benefits might properly have been afforded either by orders made in the equity proceedings or by deed, that that is a matter about which the parties could hardly be expected to be indifferent and it was a matter about which they had to reach agreement in order for there to be a binding consensus reached upon all essential matters required in order for there to be a concluded agreement. So that is the first special leave question.

The second special leave question arises out of the way in which the then President of the Court of Appeal dealt with the matter. His Honour approached the matter differently regarding agreement on the resolution of the proceedings as being a mere mechanical or subsidiary issue about which the parties were not required to reach agreement. His reason for so doing seems to rest largely upon the proposition that if the matter had come to court and if the court had been told that the matter had been settled but there was some difference of opinion as to how that agreement could be implemented, the court could have worked out what the orders were in the proceedings.

The same point really arises. We say you cannot work out as a matter of necessary implication whether the parties would have resolved this by agreement, resolved it by order or chosen some other course of action. One knows from experience that that parties, often for very good reasons, are reluctant to have money judgments entered against them. Part of what was agreed was a money judgment payable by instalments. We say one cannot imply from any of the facts in this case, which are of themselves not peculiar or unusual, the manner of resolution in the equity proceedings. One cannot regard it as being new machinery. The question of special leave significance that we say arises upon the way in which the President dealt with the matter is that the conclusion reached by the learned President was that agreement on the manner of resolution of the equity proceedings was a non-essential matter. We say that whether or not that is a correct proposition or incorrect, it is a matter of general significance. It will considerably affect no doubt the binding force of many agreements concluded in relation to court proceedings not only in this State and elsewhere.

The third special leave really arises from the two points that your Honour Justice Toohey was putting to me as being matters which were not the subject of agreement at the meeting but the subject of later agreement, the correspondence. What the Chief Justice did was to make an express finding that there was an intention to enter into an immediately binding agreement at the meeting. That is the only finding that he made as to when the intention existed. In a later party judgment the Chief Justice came to turn to the undoubted fact that the evidence as to what transpired at the meeting was not consistent. The judge accepted two witnesses of fact - the vendor, Mr Varga, and the agent, Mr Lamont - and they have both given quite differing versions as to what had happened in terms of when the first instalment was due and as to what the period of grace was, a matter which the trial judge reconciled by ultimately looking for the consensus in the correspondence.

Ultimately, towards the end of his judgment, the Chief Justice embraced that conclusion and saw no error in it. What we say the error was is that an issue which arose in the case was whether the contractual intention existed not only at the meeting but at the date of the correspondence. Looking at the correspondence itself there were references in many of the letters to the fact that the terms being discussed were to be the subject of incorporation in terms of settlement and were required to be the subject ultimately of submission and approval. So the tenor of the correspondence rather tended to suggest that at least by the time the legal advisers had taken control of it, that negotiations were proceeding not upon the basis that there would be any immediately binding consequence flowing from the correspondence as opposed to what had happened at the meeting.

Yet the ultimate result of the Chief Justice's decision is a finding only of the relevant and necessary contractual intent at the meeting, no finding that it existed at the date of the letters. The terms of the letters we say are inconsistent with the existence of it. The special leave question that we have formulated is whether it is necessary, as we contend it to be, that the requisite contractual intention existed not merely at the time of the initial broad consensus but at the time all essential matters agreed upon, in particular whether it was necessary that the relevant consensus be demonstrated as at the date that the two outstanding matters were agreed in correspondence.

The last special leave question relates to the question of costs. We accept that we face a difficult task in persuading your Honours that there is a special leave question that arises in relation to costs. The approach that the dissenting judge, Mr Justice Powell, adopted was that costs which were awarded in this case by the trial judge on an indemnity basis could only have been properly awarded by the trial judge if there was an abuse of process. Inferentially it appears as if the trial judge acted upon that basis that there was an abuse of process for the reason, as the trial judge enunciated it, that the defendant before him, the applicant before this Court, ought properly to have realised that the defence which is being maintained was doomed to fail, as it were.

About that question we say two things. Firstly, if it be the case, as the trial judge found, that the defendant ought to have appreciated that the defence would fail, we say that that would not constitute an abuse of process. If a party does not put forward deliberately false evidence, does not put forward a deliberately false verification of a defence, a party is entitled to await the judicial determination of the court as to the way in which a dispute is resolved. So we say on those bare facts no abuse of process and we contend for the proposition that indemnity costs ought properly only be awarded where an abuse of process is demonstrated.

If we are wrong in that general proposition, then to the extent that the trial judge relied upon a finding that the defence was known to the defendant or ought to have been known to the defendant to be bound to fail, we say it was a finding not reasonably open to the trial judge, for the reasons that I have endeavoured to put to the Court in relation to our other special leave questions. Unless there was anything that the Court wished to hear from me further on, they are our submissions.

BRENNAN CJ: Thank you, Mr Simpkins. We need not trouble you, Mr Bennett.

The\is case does not involve any issue of general principle which requires consideration by this Court. It is merely a case in which settled principles were to be applied to the facts. The case is not of the kind for which this Court grants special leave. In any event, the result reached by the Court of Appeal is not attended with sufficient doubt to justify a grant of special leave. The question of costs is not one which warrants a grant of special leave. Accordingly, special leave will be refused.

MR BENNETT: Your Honour, I seek an order for costs. Bearing in mind that your Honours have refused on both grounds, I would submit it is an appropriate case for your Honours to make an order for indemnity costs.

BRENNAN CJ: The order will be that special leave will be refused with costs.

AT 11.27 AM THE MATTER WAS CONCLUDED