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  • contract

    Is it a done deal?

    When does pre-settlement correspondence constitute a binding agreement?

    A recent New South Wales Court of Appeal case, Feldman v GNM Australia Ltd,[1] considered whether correspondence between parties, prior to the execution of a formal settlement deed constitutes a binding agreement.

    The case concerned defamation proceedings brought by Rabbi Feldman against GNM Australia Pty Limited (GNM), the publisher of the Guardian newspaper.

    In February 2015, a number of articles were published on the Guardian’s website about Feldman and evidence he gave to the Royal Commission into Institutional Responses to Child Sexual Abuse. Feldman served a concerns notice on GNM pursuant to section 14(2) of the Defamation Act 2005 (NSW) (Concerns Notice). In response, GNM through its solicitors sent an email offering to remove the articles from its website and publish a statement made by Feldman, if Feldman agreed to release GNM of all liability. The email stated that “[a]n agreement reflecting the above would be documented in a Deed of Release which would also include obligations of confidentiality”.

    Subsequent correspondence passed between the parties. On 30 April 2015, GNM’s solicitors confirmed GNM’s acceptance of settlement terms outlined in the parties’ correspondence in an email attaching “a draft deed of release documenting the parties agreed terms”. Neither GNM nor Feldman executed any settlement deed. Further correspondence between the parties ensued, largely relating to the confidentiality requirements under the agreement.

    On 7 July 2015, Feldman’s solicitors wrote that their client had withdrawn “his offer to settle the matter”. Feldman subsequently commenced defamation proceedings against GNM and the author of the articles. GNM sought a permanent stay of proceedings, contending that the parties had a concluded settlement agreement as at 30 April 2015. The primary judge, McCallum J found in favour of GNM.

    Feldman sought leave to appeal. The key questions answered on appeal were whether:

    1. there was a binding agreement between the parties as at 30 April 2015; and
    2. a solicitor has ostensible authority (also called apparent authority) to bind a client to a contract where litigation is not on foot.

    Did the email correspondence constitute a binding agreement?

    A contract will fail for incompleteness if an essential or important term is not agreed.[2] Feldman submitted that as at 30 April 2015, the parties did not have a binding agreement because the following terms were incomplete:

    1. Time frame: The correspondence did not specify any timeframe for the performance of the obligations. This contrasted with the terms of the draft deed which detailed when specific steps had to be completed. GNM argued that a Court could and would imply reasonable time frames.
    2. Confidentiality obligations: No terms had been agreed as to the obligations of confidentiality. GNM argued that the nature of the correspondence and the generic confidentiality clause in the draft deed indicated that the obligation of confidentiality was not considered by the parties to be essential. Further, GNM submitted that the confidentiality obligations were not part of the agreement as at 30 April 2015, but were an “optional extra”, to be agreed on later.

    Generally, where negotiating parties decide on terms of a contractual nature and agree that the subject of their negotiation is to be dealt with in a formal contract, the agreement will fall into one of the following four categories:

    1. First Category: the parties decide on all the terms in their agreement and intend to be immediately bound, but also intend to have the terms restated in a form which will be more complete or precise, but of the same effect.
    2. Second Category: the parties agree on all the terms of their arrangement, they intend no departure from these terms, but performance of one or more terms is conditional upon a formal contract being executed.
    3. Third Category: the parties do not intend to be bound unless and until a formal contract has been executed.[3]
    4. Fourth Category: the parties are content to be bound immediately and exclusively by the terms which they have agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.[4]

    In Feldman, Beazley P highlighted that the above categories “are neither strict nor prescriptive. Nor are they exclusive nor necessarily exhaustive. Rather, they describe circumstances in which a finally binding contract may or may not have come into existence.”[5]

    GNM submitted that the contract between the parties as at 30 April 2015 fell into the First Category or Fourth Category.

    The Court held:

    1. There was nothing in the correspondence stating expressly, or indicating that the parties intended to be bound immediately if the terms offered were accepted (First Category). Nor did the communications evince an intention to be immediately bound by some of the terms specified in the emails and to then have a substitute contract with additional agreed terms (Fourth Category).
    2. GNM’s reliance on the First Category was inconsistent with its argument that a reasonable time would be implied for the performance of obligations. The absence of any confidentiality obligations in the alleged agreement further supported this. Objectively viewed, the correspondence made it apparent that the parties intended their agreement to contain a confidentiality clause. That the obligations of confidentiality were to be contained in the proposed deed indicated the parties intended to be bound to the agreement only after the deed was finalised and executed. The significance of obligations of confidentiality were further supported by the commercial context of the negotiations.
    3.  For essentially the same reasons, the Court held that the circumstances did not fall within the Fourth Category.
    4. Conduct after the date of an alleged agreement can inform whether a contract has been formed.[6] In Feldman, the nature of the subsequent correspondence and the failure of GNM to take steps to implement the agreement indicated that the parties did not believe they were already bound.

    In summary, the email correspondence did not constitute a binding agreement.

    Do solicitors have ostensible authority to bind a client to a contract where litigation is not on foot?

    Determining whether or not a person has ostensible authority usually involves an inference based on a representation made by the principal (in this case the client) that the agent (in this case the solicitor) has authority to contract within the ambit or scope of the ‘apparent authority’.[7]

    As a general rule, solicitors do not have ostensible authority to bind their clients to contracts. An exception to this rule is in the context of litigation. In the context of litigation, a legal practitioner has ostensible authority to bind their client to a contract provided that the contract “actually and genuinely relates to the litigation”.[8]

    In this case, a majority of the Court held that Feldman’s solicitors did not have ostensible authority to bind their client to a contract. Three key factors informed this decision:

    1. Feldman had not made any representation that his solicitors had authority to enter into a binding agreement on his behalf.
    2. The concerns notice made it clear that if Feldman’s demands were not met, legal proceedings would be commenced. The agreement was not ‘in the context of litigation’.
    3. The correspondence between the parties’ respective solicitors indicated that it was Feldman himself who would enter into the deed. For example, the email of 30 April 2015 from GNM’s solicitors stated “[c]ould you please let me know if your client has any comments” and asked that, if not, arrangements be made for Feldman to sign the deed.

    Feldman has since been cited with approval by:

    1. the Victorian Court of Appeal in Nurisvan Investment Ltd v Anyoption Holdings[9] handed down on 16 June 2017; and
    2. the Supreme Court of Western Australia in Marindi Metals Ltd v Kidman Resources Ltd[10] handed down on 7 July 2017.

    Key Points

    1. The question of whether parties intend to bind themselves to a contract is determined objectively, having regard to the intention conveyed in the language used by the parties.[11]
    1. If you are negotiating a settlement agreement and wish to be bound immediately upon an offer being accepted, it is best practice to:
    • expressly state that this is your intention;
    • ensure that both parties agree on all important terms; and
    • actively take steps to implement the agreement after the agreement has been reached.
    1. If you do not wish to be bound immediately upon agreement of terms in the absence of a written contract, expressly state (ideally in writing) that this is your intention.
    1. If you do not hold your solicitors out to have authority to bind you to a contract and no litigation is on foot, as a general rule, your solicitors will not have ostensible authority to enter into a contract on your behalf.
    [1] [2017] NSWCA 107.
    [2] J W Carter, Contract Law in Australia (LexisNexis, 6th ed, 2013) 91 [4-01].
    [3] Masters v Cameron (1954) 91 CLR 353, 360 (Dixon CJ, Mc Tiernan and Kitto JJ).
    [4] Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 317; Sinclair, Scott & Co v Naughton (1929) 43 CLR 310, 317 (Knox CJ, Rich and Dixon JJ).
    [5] Feldman v GNM Australia Ltd [2017] NSWCA 107, [68] (Beazley P).
    [6] See eg, Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 547-548 (Gleeson CJ, Hope and Mahoney JJA agreeing).
    [7] Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, [503].
    [8] Lucke v Cleary (2011) 111 SASR 134, [62].
    [9] [2017] VSCA 141, [77], [103], [106], [109].
    [10] [2017] WASC 189, [60] – [62].
    [11] Masters v Cameron (1954) 91 CLR 353, 362.
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  • Indeed, sign away: do you need a deed to seal the deal?

    Do you need a deed to seal the deal?

    What is a deed of settlement?

    A deed is a special type of contract. It sets out the legal obligations that the parties agree to be bound by; in short, what the parties can and cannot do to finalise a dispute (of any kind) and/or ensure a future dispute does not arise. A deed of settlement is used to bring an end to a litigious matter or current court proceedings on clearly defined terms. A deed of release is often used in an employment context to ensure the parties’ rights and obligations are recorded in a document.

    One of the key differences between a normal contract or agreement and a deed is the issue of consideration. Consideration is an essential element in a contract. It means something for something, and is variously defined as “the price for which the promise of the other is bought[1] or “a price in return for the promisor’s promise or a quid pro quo. The price can be in the form of an act, forbearance of promise.[2] It can include the act of performing a term or terms of an agreement in the reliance or expectation of all other terms being satisfied. Consideration is not required for a deed. This is because a deed is intended to record the parties’ solemn intentions to be bound by its terms and that in itself is sufficient.

    Some basic similarities with contracts will still be applied, especially in relation to construing its terms. A court will usually interpret the deed using the plain, everyday meaning of the words used in the document in the event there is a dispute.

    Sign away?

    Consider the following two situations:

    1. You have negotiated a good settlement of the long-running legal issues (whether or not court proceedings are on foot) with a business supplier. They will pay you $50,000 “at some point” to settle the accounts and “sort the details out” later. You usually operate on handshake agreements, but the specifics are hazy and you really want to get this one right. Do you contact a lawyer to instruct them to put the agreement into writing? Will it be worth getting a lawyer at the end of the matter?
    2. You have agreed to accept a voluntary redundancy from your employer. The redundancy is, however, on the condition the parties “enter into a deed of release”. Your employer then sends you a draft deed containing detailed clauses and it all appears to be in order. Should you sign the deed? Should you have even agreed that the redundancy be subject to a deed in the first place?

    In order to answer these questions, we explore what a deed is and what you can expect it to contain, and some words of caution when you may be in a position to need one.

    Usual formalities

    Most law firms and lawyers will rely on their pro forma deeds, amended as necessary to fit the situation. However, the below are some key elements which can be found in most deeds of settlement.

    Parties: Who agrees to be subject to the deed and bound by its terms. Whilst it may seem obvious in some circumstances as to who the parties should be, sometimes it is not so simple. Should the directors of a company be parties to the deed, even if the directors personally weren’t part of the court proceedings? Can the other side demand that all of your subsidiary companies be included when the dispute wasn’t specifically about them? This will depend on a case by case basis.

    Recitals: A brief background to the dispute set out in dot points. This section should set out succinctly and usually chronologically any facts the parties agree are relevant for the purposes of the deed. If it is to settle a current court case, it may include expressly that the parties have agreed to enter into the deed “without any admissions” and to avoid the time and cost of further litigation.

    Definitions: The key words or phrases used throughout the deed to ensure consistency and readability. A common definition is “Business Day”, which is usually a day on which trading banks are open for ordinary business in the chosen state or territory. Whilst some definitions are straightforward, care needs to be taken to define any settlement sums clearly, including whether they are inclusive of GST or any other taxes, interest, legal costs and disbursements.

    Settlement/ Release/ Indemnity: The terms the parties actually agree to do (or not do) from the moment of exchange. These terms are sometimes used interchangeably, however, as their names suggest, they mean very different things. Deeds may have one or all of these components.

    As stated above, a settlement will usually be used for a disputed matter. Key terms will include who will do what, and when they will do it; for example, Party A will pay Party B the “Settlement Sum” (which should be set out in your definition section) within ten business days of the date of the deed. Party B will agree to never commence court proceedings or any type of claim in respect of the circumstances which gave rise to the payment.

    A release means that past, present and future claims will be limited or discharged in some way; usually they are ruled out in their entirety. In an employment context, if an employee accepts a voluntary redundancy, the employer will want to be released from any liability including, for example, unfair dismissal. By the same token, an employee could require a release from any actions arising from their employment such as negligence.

    An indemnity is a type of insurance for future loss or damage. One party agrees to take on the risk of the other party for damage that may occur as a result of a certain event occurring. Be careful that you are not indemnifying a party for acts or events entirely outside your control well into the future.

    Default: What happens when a party does not adhere to the terms of the deed. A good default clause will include a detailed process that needs to be followed in the event a party fails to fulfil its obligations, starting from giving notice of the default. An example for non-payment of an instalment agreement is that the balance of the amount becomes due and payable immediately. The consequences of a default will necessarily be different for each party, so any possible contingencies will need to be considered.

    Confidentiality: The parties cannot disclose the terms of the deed unless required by law. Most deeds will include a standard confidentiality clause. Depending on how widely it is drafted, it may range from being unable to discuss the exact terms or even as far as being unable to disclose the existence of the deed itself. An exception to confidentiality includes when a party sues for breach of deed in the event of default.

    Applicable laws: The jurisdiction to interpret and adjudicate the terms of the deed. An ACT matter where both parties reside in the Territory and the facts all arose in Canberra will usually nominate ACT laws and courts to hear any dispute relating to the deed. This can become complicated when there are national or even international issues which played a part.

    Entire agreement: The terms set out in the deed comprises the full conditions by which the parties agree to be bound. This means any prior negotiations and agreements will be superseded, and this is why you want someone with serious drafting skills to capture all the necessary components without making it an overly onerous document.

    Execution: The official signing of the deed, usually prefaced with a statement to the effect that it is “executed by the parties as a Deed”. A company will need to execute a deed in accordance with the Corporations Act 2001, by its directors or a director and company secretary.[3] An individual will need to “sign, seal and deliver” the deed, which nowadays means signed before a witness who is not a party to the deed.

    Exchange: One party’s executed deed is given to the other party/parties, and vice versa. A deed may be executed in counterparts and this is usually provided for expressly. This means the parties will sign separate but identical copies of the same deed, which together form a single binding document. These days, lawyers often exchange deeds electronically, by sending scanned copies of the signed deed by email. You should ensure that the copies exchanged are identical documents, rather than a previous version which has since become redundant.

    Some notes of caution

    • Get it right from the negotiation stages. If you intended to settle a directors’ dispute but not the shareholders’ claim, this should be made clear from the beginning. Otherwise, you may be locked into a settlement that you never wanted or anticipated, resulting in those terms being locked into a deed.
    • Ensure you read and understand all the terms of the deed prior to signing and returning it. Once it is exchanged, it is a legally binding document. For example, if the deed contains a confidentiality clause, depending on the wording, it is unlikely you will be able to talk to the media about the deed or the even the circumstances of the case.
    • A cause of action founded on a deed has a 12 year limitation period in the ACT, rather than the usual six years for a contractual claim.[4] This means if a party breaches the deed, the non-breaching party will have 12 years from the date of the breach to commence a court claim to have it rectified. Keep in mind the limitation period varies in each state and territory.
    • Make sure you keep an exchanged copy for your records. The deed sets out the rights and obligations of all parties, so it is the key document to refer to going forward. In the event a party breaches the deed, you will need to refer to it (including any default provisions) to seek redress.

    To collectively answer the questions posed in the opening scenarios, as shown above, a deed is a complicated document which can have serious legal consequences. When used properly, it can be a valuable document for any party. It is always worth getting a lawyer’s opinion early on, or even to review the terms of a deed to ensure that you are not signing away your rights.

    If you need legal advice or require assistance in drafting a deed, please contact us.

    [1] Pollock on Contracts (8th ed, 1911), p 175.

    [2] Beaton v McDivitt (1987) 13 NSWLR 162, 168.

    [3] Section 127.

    [4] Limitation Act 1985 (ACT) sections 11 and 13.

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  • fair_work_act

    A Guide to Compliance with the Fair Work Act

    Bradley Allen Love offers a range of seminars and workplace training tools which can be tailored to your workplace and interests. Gabrielle Sullivan, Director – Employment & Workplace Relations,  recently spoke at the Australian Medical Association equipping practice managers and HR professionals with the fundamentals of employment law, noting that even large corporations manage to get the basics wrong.

    Click here to view the presentation:  A Guide to Compliance with the Fair Work Act

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  • Property Market update – ACT

    METH: Ruining Lives and Properties

    It goes without saying that when you are hired to market a property, you will find out as much as you can about it to ensure you can find a buyer or a tenant — whether that is information about the house’s design and construction, an understanding of its location and potential price or insider knowledge about the neighbourhood.

    One thing that might not be considered is whether the house has been used for illegal activities and whether these activities have had a lasting impact on the property. Attention to these factors has become important recently with the rise in the creation and consumption of a drug called methamphetamine, which has almost tripled since 2011.

    Methamphetamine (also called ice or meth) is a highly addictive drug that is made or ‘cooked’ inside properties, which leads to contamination. This contamination has considerable consequences for any current and prospective inhabitants, as well as the condition of the property itself. For example, in 2016 the Courier Mail reported that a family who had purchased a house in rural Victoria had discovered their six year old son had the same levels of methamphetamine in his body as an adult drug abuser, just by living in the house. The family sued the local council for not disclosing the activities.

    The chemical fumes that are a by-product of the drug seep into plaster, paint, carpet, the walls, furnishings and the floor, and it is very difficult to remediate — properly decontaminating the house can require completely gutting a property to a shell and in some cases it can be cheaper to demolish. In New Zealand, meth contamination has become such a problem that home insurers like IAG have recently increased premiums and excess levels.

    WHAT DOES THIS MEAN FOR YOU?

    All agents need to be aware of what kind of property they are marketing and whether they need to disclose that some kind of illegal activity — such as meth cooking — has taken place in the property.

    A failure to disclose methamphetamine contamination may result in an agent being liable for misleading or deceptive conduct. Indeed, in 2016 in New Zealand a family sued an agent who sold them a meth contaminated house. It is likely that methamphetamine contaminated houses will be seen as ‘stigmatized properties’ — if an agent sells such a property without disclosure they may be open to large fines.

    Finding out that a house is being used for illegal activities is likely to be difficult. Some signs of meth contamination can include burns, rust in unusual places like doors and windows, strange smells and stains, and yellowed walls. It may also be prudent to include a section regarding awareness of illegal activities on a client questionnaire when you are first engaged. It may then be necessary to make further enquiries to ensure no misrepresentations are made.

    It is clear that smoking meth ruins lives, but the cooking of meth ruins houses.

    If you are concerned about what you should or should not disclose, please contact our office for advice.

    First published in REIACT July Newsletter

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  • bonus time - paying for performance

    Bonus Time: Paying for Performance

    A short case study video on the pitfalls around employee salary review and bonuses.

    Tips for employers:

    1. Make sure you are not capricious, arbitrary or irrational in awarding discretionary bonuses;
    2. Note that sometimes employees who are terminated before receipt of a bonus may be entitled to a portion of that bonus; and
    3. Be wary that workplace policies can sometimes have contractual force
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  • Disputes over Burial and Cremation - who has the last say?

    Disputes over Burial and Cremation - who has the last say?

    There is little doubt that that we still live in “death denying” community where talking about death is considered an uncomfortable and taboo topic.

    Consequently, too few people express their wishes with regards to their burial during their lifetime. Add into the mix the highly emotional time following the death of a loved one and it is only natural that disagreements and disputes arise between family members over a loved one’s burial plans.

    Disagreements and disputes can vary from where the person is to be buried, whether they are to be buried or cremated, and who is to be invited (or uninvited) from the memorial service. Disputes are more likely to arise where:

    • The deceased is of indigenous descent;
    • In cross cultural families;
    • In blended families;
    • In families of where the deceased was lesbian, gay, bisexual, transgender or intersex;
    • In families where there is or has been conflict.

    Disputes regarding the disposal of body are unique in that there is usually no “compromise” that could satisfy all parties.

    Where does the Law stand with regard to disposal of body?

    A testator cannot dispose of something which he or she does not own. A corpse is not considered “property” (Williams v Williams (1882) 20 Ch D 659) and therefore cannot be subject to property offences such as being seized or stolen.

    Contrary to common belief, wishes and directions set out in a Will regarding burial or cremation are precisely wishes. They are not binding on the testator’s executor or enforceable at law. At best, they offer guidance to the executor and to the family and are morally binding.

    Where then does the law stand with regard to the disposal of body?

    Where there is a Will , the executor (and if there is more than one, then the executors jointly unless contrary intention is expressed in the Will) has the right and responsibility to arrange for the disposal of the deceased person’s body.

    Where there is no Will, then the person with the highest rank to apply for a Grant of Representation in that jurisdiction has the same rights as an executor. This of itself might cause disputes as there may be disagreement as to who ranks has priority ranking to apply for a Grant of Representation (say for example, in the situation where the children of a deceased person deny that the deceased’s girlfriend was his legal “de facto” partner).

    The principles regarding the disposal of body were discussed in a fairly recent case of Darcy v Duckett in the NSW Supreme Court. This case had to consider both the principles in law, and also traditional Aboriginal law.

    Mr Darcy died intestate leaving 4 children from one relationship and another 4 children with his de facto partner. He was born in Gulargambone (NSW) and was part of the Aboriginal Weilwan tribe. He had also been living on and off with his de facto partner at Bowraville (NSW). Ms Darcy’s sister insisted that he be buried on Weilwan country and his de facto partner wanted him buried in Bowraville.

    The common law principles regarding the right to dispose of a body were summarised by the Court (referring to the case of Smith v Tamworth City Council (1997) 41 NSWLR 680):

    1. A person named as an executor in the deceased’s will has the right to arrange for the burial of the deceased’s body.
    2. Apart from appointing an executor, a person may not dictate what will happen to his or her body.
    3. The person responsible for the burial of the body is expected to consult with other stakeholders, but is not legally bound to do so.
    4. If no executor is named, the person with the highest right to apply for a grant of administration will have the same right regarding disposal of the body as a named executor.
    5. The right of the surviving spouse or de facto spouse will be preferred to the right of the deceased’s children.
    6. Where more than one person has an equal right to disposal, the practicalities of burial without unreasonable delay will prevail.

    The Court had regard to the views of the indigenous community. The Court ultimately held that de facto partner had a superior claim for administration of Mr Darcy’s estate and also had superior right based on Indigenous laws and traditions.

    Different rules apply to persons who are members of the defence force or armed services who die while on service. Special rules also apply for deceased destitute.

    Further, where the deceased has expressed or implicitly requested not to be cremated, those wishes must be taken into account (s 20 Cemeteries and Crematoria Act 2003 (ACT)).

    There are two takeaway point from the Darcy case:

    • It is important to put a Will in place that validly appoints an executor who can take care of your affairs and burial/cremation once you die; and
    • It is important to talk about and express your wishes with regard to your burial/cremation during your lifetime.

     

    The best way avoid a dispute is to make sure you have a valid will in place that clearly sets our your wishes. Please contact our Estate Planning team to learn more.

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