In a recent decision of the NSW Supreme Court in National
Australia Bank Limited v Sayed (No 3), the Court confirmed the
binding nature of an 'in principle' settlement agreement,
and held that disagreement as to terms did not mean that there was
The proceedings were commenced by NAB as mortgagee for
possession of land. The parties reached an agreement "in
principle" to settle the proceedings on day three of the
hearing. The agreement was reduced to writing and signed by the
legal representatives of NAB and by the defendants. A copy of the
agreement was handed up in Court, and the balance of the days set
aside for hearing vacated.
Following the agreement in principle, a deed was prepared by
NAB's solicitors. After some negotiation, the defendants agreed
with the terms of the deed, excluding a clause that the defendants
would "immediately, unconditionally and absolutely"
release NAB, "its employees, officers and agents" from
all claims. Although the defendants agreed to release NAB, they
would not agree to release NAB's agents.
As the matter could not be resolved by agreement, NAB filed a
motion seeking specific performance of the settlement
Arguments on hearing of the motion
NAB argued that:
the correspondence immediately preceding and following the
signing of the in principle agreement showed the parties had agreed
on mutual releases;
the agreement in principle contemplated a more extensive formal
document which would contain terms not inconsistent with the
express terms of the agreement in principle, therefore falling
within the description of the "fourth category of
agreement" described in Baulkham Hills Private Hospital
Pty Limited v GR Securities Pty Limited (1986) 40 NSWLR
NAB only act by its servants and agents (Northside
Developments Pty Limited v Registrar General  HCA 32),
so it was obvious that the release would be seeking release of
servants and agents; and
it was clear NAB expected that settlement would bring an end to
any litigation concerning the matter.
In response the defendants argued that:
they did not understand what "mutual release" meant;
there was no agreement on the outstanding matters raised in the
The Court found that the fact there was disagreement between NAB
and the defendants did not mean there was "no agreement"
(Godecke v Kirwan (1973) 129 CLR 629), and the Court needs
to determine objectively whether the words in dispute are
consistent with the agreement in principle.
The Court found there was "no doubt" that mutual
releases were to be included in any agreement. The Court accepted
NAB's submission that, objectively, it must have been envisaged
by all parties that all matters relating to the proceedings were to
be brought to an end by the settlement.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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